From the January 2011 issue of Investment Advisor • Subscribe!

Eat the Rich

Why are those on the lower rungs of the socioeconomic ladder clamoring so hard to get higher, and why are you in the business of helping them get there?

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Flashback: A report from 1985 in Rolling Stone magazine commemorating the 15th anniversary of the Kent State shootings included the odd note that the university’s president was sipping martinis on his balcony as it all “went down.” The obvious inference was that an uncaring establishment was chomping cigars and laughing maniacally as the horror unfolded. Whether or not a dry Tanqueray was in play, does any mature adult really think this to be the case?

I was reminded of this while watching Socialist Bernie Sanders (I-Vt.) attack the tax-cut deal (not a slight; he is a member of the Socialist Party who registers as an Independent and usually votes with the Democratic caucus). The fat-cat, cigar chomping, guttural laugh imagery was once again invoked, as if those who are well-off really want to rape the land, poison the water, dirty the air and let children starve. I couldn’t help but notice the glaringly obvious contradiction of the Kennedys in Sanders’ own (adopted) party; “liberal lions” who never met a personal tax reduction strategy they didn’t like. Or John Kerry, who parked his $7 million yacht in neighboring Rhode Island to avoid a $500,000 sales tax.

I shouldn’t have to say this, but I will: Rich people, by definition, are not evil. If it were the case, why are those on the lower rungs of the socioeconomic ladder clamoring so hard to get higher, and why are you in the business of helping them get there? Sanders is a smart guy. I remember him as the mayor of Burlington when I attended the University of Vermont; a likeable politico who hit all the right notes in the liberal college town. So much of his act is just that. He’s taking up the flag for the far-left to jump and bray at a president he feels that, what … has become too appropriately moderate? The total cost of the hotly debated tax package is estimated at $880 billion, more than the stimulus, but with little stimulus effect. So what’s left? Another expansion of government, something a guy like Sanders has to be happy with. Combine it with the repeal of the estate tax and the extension of unemployment benefits and he should be ecstatic—which, truth be told, I think he is. So, as with the incident in O-hi-o, does any mature adult think Sanders’ argument is really the case? If not, whose motives should we really impugn?

It’s true the so-called “job creators” aren’t creating a whole lot of jobs, all the while sitting on mountains of cash. But the reason is oh-so-obvious: uncertainty, or rather market uncertainty created by government. As I write this on Dec. 14, we still do not know what taxes we’ll be paying in two weeks’ time. No matter the eventual rate, corporate and individual investment will take place in 2011. The only question is, once settled, will it be lower taxes and more investment, or higher taxes and less?

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