Brad Wardell's views about technology, politics, religion, world affairs, and all sorts of politically incorrect topics.
The unintended consequences of tax and spend policies
Published on October 25, 2007 By Draginol In Democrat

Democrats, in general, are extremely ignorant about economics. It's difficult to even find a Democrat with any serious experience in running a business or having actually produced anything at all. Elected Democrats tend to be lawyers. At best, lawyers help honest business men and individuals settle a dispute. At worst, lawyers are parasites on society.

It is usually without irony that Democrats decry how much doctors make and how health care costs need to be controlled while ignoring that it is because of greedy lawyers and their lawsuits that have a major impact on the cost of health care.

I rarely hear Democrats complain about how much lawyers make. Democratic Presidential candidate, John Edwards had a net worth of over $60 million.  Consider that. John Edwards doesn't produce anything. He makes no products or goods.

And it is because Democrats are so rarely involved in producing anything that they have such a lack of understanding in economics.

For example, Democrats always seem to fixate on earned income when it comes time to "tax the rich".  Yet they seem oblivious to the implications of their policies. When you tax the earned income of the rich, you are really hurting the most vulnerable Americans. The "rich" who are earning their income simply pass on that tax to their least productive workers in the form of lost jobs and lower wages.

According to the New York Times (that right wing rag..) the richest Americans are:

  • Mostly self employed
  • Mostly run businesses

So what happens when you increase their taxes? You increase their expenses. And what happens if you increase expenses? You either have to make more money or cut other expenses. Most companies have "fat" they can trim -- employees whose employment are tenuous.  There's basically a layer of the American workforce that I'd say is only borderline employable. During the good times, they have jobs because their marginal productivity is still worth it.  But when times are tough, they're the first to get cut.

Raising taxes on the rich simply adds to the bottom line cost and it is those at the bottom that suffer first.  Yet Democrats never seem to get this even though it's been demonstrated time and time again.  It is one of the reasons why lowering taxes increases government revenue. It isn't due to "trickle down" economics but rather because the cost of doing business for the bulk of employers goes down allowing them to hire more people and invest more which in turn generates income at a greater rate than inflation.  It's not rocket science -- unless you're a Democrat I guess.


Comments (Page 6)
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on Oct 30, 2007
OK. Entrepreneur. Someone who makes "new stuff" in the economy. Starts a new Pizza Hut, brings the microwave oven to market, etc. Takes personal risk. Contrast with "labor" -- someone the entrepreneur hires to execute his vision.

You're saying most of the wealth in the economy is created by entrepreneurs. In one sense that's very true. Suppose you ascribe all economic growth to entrepreneurs. Then our economy, which is like who knows, twenty times the size it used to be, is 95% "new stuff" that came from entrepreneurs at one point. Like railroads and light bulbs.

But the entrepreneurs don't continue getting all the money or wealth that's generated by their inventions. Eventually railroads is not entrepreneurial any more. You hire people to run the railroad just about the way it was last year. Sure they add some new lines and upgrade the cars, but that's not entrepreneurship. It's management -- labor.

Microsoft is not far from this point. Bill Gates is gone. Professional managers have been hired. A country with no entrepreneurs at all could walk into Microsoft, copy its org chart, and make their own version churning out copies of Copycat Windows using just labor and capital. Although Microsoft still has room for the entrepreneurial inventions like the X-Box.

Does that match your idea of an entrepreneur?
on Oct 30, 2007
This March I started putting 43% of my pay in the 401(k), so my withholding is down to 1/6 of my check for real now...


Very smart thing to do. You will be pleased with the results in the long term.


It's the first year I've done it. You wouldn't want to do it before you got some spendable savings built up, but if I can max out my 401(k) for one year, I can get my taxable income down below the level for the Saver's Credit. Then I'll get $200, $400, or $1000 off my taxes. I was shooting for $1000, but my job started scheduling me 20-26 hours of mandatory overtime a week and I'll be lucky to get the $400 now.
on Oct 30, 2007

You're saying most of the wealth in the economy is created by entrepreneurs. In one sense that's very true. Suppose you ascribe all economic growth to entrepreneurs. Then our economy, which is like who knows, twenty times the size it used to be, is 95% "new stuff" that came from entrepreneurs at one point. Like railroads and light bulbs.

It's true in every sense. If you remove the entrepreneural class you remove the businesses they create and hence the jobs that they create.

Most people, right now, work for a small company and nearly all small companies are being run by their founders still.

on Oct 30, 2007

As for the precise definition of an Entrepreneur, there's no consensus on it. Believe me on that one.

My definition is an entrepreneur is someone who starts a company. 

Bill Gates is an entrepreneur. Steve Jobs is an entrepreneur.  The chairman of GM or IBM is not.

on Oct 31, 2007
My definition is an entrepreneur is someone who starts a company.



you count as one too.
on Nov 03, 2007
If Draginol didn't count as an entrepreneur they'd have to take the word out of the dictionary. It turns out that we don't differ on the definition of entrepreneur (both using the economics one) but the composition of the American economy -- whether "most people work for entrepreneurs." I was remembering how my old economics textbook stressed that large employers made up a small fraction of employers, but a large fraction of output. But I misremembered the fraction and thought it was as big as the disparity in the stock market (where large caps have 70% of the market cap and small caps have 9%). In fact small businesses make up about half of the economy, by employees and GDP.

I'm still not quite sure whether you can statistically show that most people work for entrepreneurs or how big a share of the economy they are. You'd need statistics too because availability bias and media attention are going to go to the big companies, not the entrepreneurs. Plus there are all these little entrepreneur-supplied parts and services going into the products branded by the big guys.
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