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Friday, May 09, 2014

Paul Krugman: Now That’s Rich

"Myths about who the rich really are and how they make their money":

Now That’s Rich, by Paul Krugman, Commentary, NY Times: Institutional Investor’s latest “rich list”..., its survey of the 25 highest-paid hedge fund managers, is out..., let’s think about ... about how their good fortune refutes several popular myths about income inequality...
First, modern inequality isn’t about graduates. It’s about oligarchs. Apologists for soaring inequality almost always ... talk about the rising incomes of college graduates, or maybe the top 5 percent. The goal of this misdirection is to soften the picture, to make it seem as if we’re talking about ordinary white-collar professionals who get ahead through education and hard work.
But many Americans are well-educated and work hard. ... Yet they don’t get the big bucks. ...
Second, ignore the rhetoric about “job creators”... Conservatives want you to believe that the big rewards in modern America go to innovators and entrepreneurs, people who build businesses and push technology forward. But that’s not what those hedge fund managers do for a living; they’re in the business of financial speculation...
Once upon a time, you might have been able to argue ... that all this wheeling and dealing was productive.... But, at this point, the evidence suggests that hedge funds are a bad deal for everyone except their managers... More broadly, we’re still living in the shadow of a crisis brought on by a runaway financial industry. ...
Finally, a close look at the rich list supports the thesis made famous by Thomas Piketty... — namely, that we’re on our way toward a society dominated by wealth, much of it inherited, rather than work. ...
But why does all of this matter? Basically, it’s about taxes.
America has a long tradition of imposing high taxes on big incomes and large fortunes, designed to limit the concentration of economic power as well as raising revenue. These days, however, suggestions that we revive that tradition face angry claims that taxing the rich is destructive and immoral — destructive because it discourages job creators from doing their thing, immoral because people have a right to keep what they earn.
But such claims rest crucially on myths about who the rich really are and how they make their money. Next time you hear someone declaiming about how cruel it is to persecute the rich, think about the hedge fund guys, and ask yourself if it would really be a terrible thing if they paid more in taxes.

    Posted by on Friday, May 9, 2014 at 12:48 AM in Economics, Income Distribution | Permalink  Comments (77)

          


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