Brad Wardell's views about technology, politics, religion, world affairs, and all sorts of politically incorrect topics.

Since no one will stand up for greedy evil capitalists these days, I'll take a stab at it.

I support outsourcing.  That's right. I love it.  I would have its babies if I could.  I love a globalized economy. The more globalized the better. The more free trade there is, the better. I feel sorry for countries that don't have the amount of free trade we have here in the United States. Even with the dollar at an all time low, products and services here are incredibly cheap. I love working with people from around the world. I don't care where you're from.

So why do I love globalization and outsourcing? Because it's the only check against federal government power.  For the first 150 years of the republic, the federal government stayed largely out of the economics of the country. Instead, the states competed vigorously with one another for the best, brightest, and most productive Americans.  But over the last 50 years (and in particular the last 20 years) the federal government has greatly reduced the differences between doing business in one state versus another.

Now, the federal government is the driving force on minimum wage. States can still have their own but it's only if they want to make them higher than the federal minimum wage.  If you're making a widget trying to compete on the global market costs matter. And Americans are incredibly neutral about buying things made wherever.  So Americans push for minimum wage but buy goods made in countries without them. Result, companies ship jobs to those countries.

Similarly, there's an ever increasing effort to have the top 1% pay more and more of the taxes than ever before. Even today, the top 1% pay 20% of the taxes.  And in a democracy, who is to argue what is "fair"?  If 51% think it's "fair" that 1% pay 20% or 30% or 50% of the taxes, the 1% are basically screwed right? Not so in a globalized economy.

Who are "the rich"?  80% of them are small business owners. Most people don't realize that. But that's how you get rich. You start a successful business. And in a globalized economy, they can take their skills anywhere they want.

I've seen politicians argue that outsourcing is unpatriotic. That's a ridiculous argument since outsourcing is just another way of saying "shopping based on price". If Americans buy things based on price, why shouldn't employers hire based on price? It's the same thing. An employer is no more unpatriotic for outsourcing jobs than the consumer who buys something made in China. They are, in effect, both doing the same thing.

If Americans want to vote in politicians who think it's okay to steal from the most productive to give to the least productive with nothing in return, then those people, thanks to outsourcing and globalization, have the freedom to distribute the burden imposed on them as well.

In the long run, it's a good thing for our society as it will require the citizens of the country to take more seriously the consequences of the policies of panderers. If a vote for Obama or Hillary Clinton is likely to result in the loss of your job or that of your spouse, you might rethink whether "change" is always good.

Now, if you don't mind, I have some baby's blood to drink.

 

Further reading: Who pays taxes


Comments (Page 2)
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on Mar 02, 2008

My impression of reality is that small business owners make up about 35% of the top 0.01% (many of these having sold their businesses in that calendar year), and about 5% of the top 10%, most of whom make their incomes being doctors, CEOs, investment bankers, celebrities, college presidents, what have you. But I could be persuaded I was wrong. Last time I crossed you on the prevalence of small businesses in the economy I found they were more important than I thought. But I haven't seen any evidence either way. If I had, I would have bookmarked it because it's hard to search out.

Your impression would be wrong. Next time I come across the stat I'll post a link but I dn't feel like digging it up again.

But the vast majority of people in the top 1% are small business owners. 

on Mar 03, 2008

Okay, I decided to dig in myself and see if I could find out what you were talking about.  I googled "top 1%" "small business owners" and found a news report citing this claim:

The Tax Foundation, a nonprofit organization devoted to studying the tax code, claims 75 percent of the taxpayers in the highest income tax bracket are small business owners or farmers.


That sounds like it might be the source of  your claim.  There are hardly any farmers in America so that basically says 75 percent are small business owners.  So I looked around on the Tax Foundation's web site and found the PDF <a href="http://www.taxfoundation.org/files/dba37618d9c2d2df02f24766ac4cc39d.pdf">"Putting a Face On America's Tax Returns". </a> I browsed it (chart 2 on page 6 is pretty insightful btw) and finally found this paragraph that I think is the source of your claim:

Overall, as is shown in Chart #8, 43
percent of taxpayers in the top 20 percent
have business income, twice the percent-
age of those in the middle income group.
Of those taxpayers in the top 1 percent –
those earning more than $300,000 and
subject to the highest marginal tax
rates – nearly three quarters have busi-
ness income.
And for taxpayers with
incomes above $1 million per year, nearly
83 percent have business income.



So that clears it up for me.  When I heard you say, "the vast majority of the people in the top 1% are small business owners," what I thought you meant was "80% of the rich got that way by starting small businesses."  I'm pretty sure that's what the Tax Foundation wanted people to assume when they came up with that carefully worded spin line.  But the literal truth is that "80% of the rich report some income from small businesses."  Kind of the way 50 million Americans own stock, but only half own more than $50,000 worth so their stock portfolios represent an unimportant percentage of their income.

That fits just perfectly with my Piketty and Saez chart (which I have now <a href="http://noumignon.livejournal.com/37706.html">put up on my blog</a>).  Most of the top 1% gets most of its income from wages and only the top 0.01% shows even 30% of its income coming from small business.

I took the trouble to look all of this up because I felt disrespected.  You repeated that you were right when you didn't feel like looking up your source and you knew I disagreed.  When I wanted to disagree with you, I used language like "my impression is," because contradicting someone without providing backup is basically like saying, "I'm right because I'm smarter than you."  Since your impression turned out to be based on a talking point from an anti-tax think tank, being more cautious about asserting it would have been a good idea.

on Mar 03, 2008

Is there an edit link any more?  I don't see one.  The box that pops up when I click the hyperlink anchor is completely blank in Firefox, so I was hoping to add the links in on edit.

on Mar 03, 2008
Most of the top 1% gets most of its income from wages and only the top 0.01% shows even 30% of its income coming from small business.

They don't make "wages" or earn a "salary" from their business? Please let me know where I can find jobs with "wages" like that paid by someone else. Is that in your citation?

All you have to do to understand you are wrong is walk down a city street, glance through your local yellow pages, check the local BBB or CofC roster. Remember, a McDonald's franchise is a small business.
on Mar 05, 2008

Income reported to the IRS as "business, farm, partnership, and small corporations (S corporations) income" was counted as "entrepreneurial income."  Income reported as "wages, salaries, pensions, and annuities" was counted as wage income.  So work for a C-corp, you have no small business income by that measure.  Work for an S-corp you have all small business income.  Of course a lot of rich people have S-corps for tax shelters on the side. 

I do not have the business knowledge to know whether that makes any sense or not.  I could not even find out whether McDonald's franchises are S corps or not.  Could be.  I wonder what income percentile owning a McDonald's franchise puts you into?

I could definitely be persuaded still.  I don't have the perfect statistics, I just picked on that one statistic I knew was bad because it made me feel good.  Walking down a city street is not going to convince me though.  Why don't you walk down the street in Manhattan and ask yourself how many of those cigar shops in the yellow pages it would take to pay the rent on one of those apartments.

on Mar 05, 2008

The stat you researched says 83% of people make income from businesses they own.

I'm curious, how do you think the top 1% make their money?

on Mar 05, 2008
The tax treatment of revenue/income is simply not the measure or the issue. Business income gets divvied up in a variety of ways now. I am technically a leased employee of the PEO that our business uses for staff leasing, paid just over minimum wage in order to qualify for PEO benefits. That "income" gets reported as W-2 income, when in truth it is business income channeled through a different funnel. LLC's are probably the largest segment of small businesses now and that revenue is all personal (reported on Schedule C). A more telling statistic might be the number or percentage of tax returns which report Schedule C income. When I was incorporated, it was as a C-corp, not S - I suspect, but don't know, that C-corp small businesses may be more prevalent than S-corps.
on Mar 06, 2008
A few things about outsourcing... When jobs go overseas, the money to pay those workers flows out of the country and doesn’t come back. When jobs are created domestically, the money to pay those workers is put back into our economy.

We had a somewhat protectionist economy until Reagan did away will almost all the tariffs. Because of that, it’s more difficult for US companies to compete globally – thus the need to outsource jobs.
on Mar 06, 2008

Benmeister
A few things about outsourcing... When jobs go overseas, the money to pay those workers flows out of the country and doesn’t come back. When jobs are created domestically, the money to pay those workers is put back into our economy.We had a somewhat protectionist economy until Reagan did away will almost all the tariffs. Because of that, it’s more difficult for US companies to compete globally – thus the need to outsource jobs.

All very true. However, if my customer base is international (which it is) then I don't really need to worry about whether money to pay workers is flowing out of the US economy and into a foreign economy.

If American voters choose politicians based on their promise to loot from me, I certainly owe no allegiance to them in return.

on Mar 06, 2008
Benmeistercomment 23A few things about outsourcing... When jobs go overseas, the money to pay those workers flows out of the country and doesn’t come back. When jobs are created domestically, the money to pay those workers is put back into our economy.We had a somewhat protectionist economy until Reagan did away will almost all the tariffs. Because of that, it’s more difficult for US companies to compete globally – thus the need to outsource jobs.
All very true. However, if my customer base is international (which it is) then I don't really need to worry about whether money to pay workers is flowing out of the US economy and into a foreign economy.
If American voters choose politicians based on their promise to loot from me, I certainly owe no allegiance to them in return.


I don't think anyone wants to do anything to hurt small businesses. Hell, I've been considering outsourcing some work. The big problem is large corporations outsourcing jobs overseas -- especially manufacturing jobs.
on Mar 06, 2008
Because of that, it’s more difficult for US companies to compete globally – thus the need to outsource jobs.

The problem is they weren't competing globally - they were sitting fat & sassy with no incentive to operate leanly, thanks to protectionist policies (tariffs) that artificially inflated the cost of their competition. Once those protectionist barriers came down, everyone was suddenly surprised the emperor had no clothes. We had been conducting business in Wonderland for too long.
on Mar 14, 2008

<I>The stat you researched says 83% of people make income from businesses they own.</i>

I believe that a similar study classifying the top 1% as "farmers" if they "make income from farms they own" would show an inflated percentage as well -- it would include <a href="http://www.msnbc.msn.com/id/19174311/">Scottie Pippen</a>, as well as a bunch of Washington lobbyists and oil billionaires.  Rich people have much more diversified sources of income than us job-and-index-fund types.  Also, that statistic just reeks of propaganda.  I'm surprised you can't smell it now after I've turned it up with my shovel.

 <i>I'm curious, how do you think the top 1% make their money?</i>

I'm sorry, I wish I had a better answer for you.  I don't think anybody in America really knows.  It's certainly not something you can just Google up.  We're talking about 1.5 million people here.  So you can look at very small niches, like the Forbes 400, The Millionaire Next Door, and Russ Prince's book surveying people who own private jets.  But it's not representative.  You can imagine different types of people in the 1%, but I did that in my post above and "Washington lobbyist" never even crossed my mind, for example.  I tried reading the book "The Clustered World" but it didn't help.

Piketty and Saez use IRS data.  But that's all anonymized, deferred, sheltered, and hacked.  For example, the Reagan tax cuts made the "top 1%" look a lot richer as they took all their money out of tax shelters and just took it as income with the new low rates.  Rich people really don't want their income known, because of privacy and because it would build resentment, and because it would get taxed.  One of the ways to control politics without having to win elections is to make sure that people are counting only the things you want them to pay attention to.  That's why it's easy to look up the date Social Security goes insolvent, and hard to look up the date that, say, government employee pension plans go insolvent. 

I really don't think it's possible for anyone to find out how the top 1% make their income.  I've been keeping an eye out for clues for a long time.  My general sense from all of that is that you get there by owning and managing large income-producing properties, because the large ones are where the money is.  You can also get close by joining one of the professional cartels like doctors and lawyers, that set their own rules to keep competition away.  Or you can take the entrepreneur path, which is fraught with difficulties and obstacles and probably the toughest way to do it, since you have to fight the status quo all the way up.  Unless you're the kind of entrepreneur who specializes in getting government contracts from your buddies, which is a pretty big slice of entrepreneurs with the government the size it is.

on Mar 14, 2008

Forgot to mention in my list of things I'm keeping an eye on: the Wall Street Journal's Wealth Report blog.  You'll probably find him objectionable at times, but there's a lot of good stuff there and hey, it's all about you (or at least your companions in the top 1%).

on Mar 15, 2008

I'm curious, how do you think the top 1% make their money? I'm sorry, I wish I had a better answer for you. I don't think anybody in America really knows. It's certainly not something you can just Google up. We're talking about 1.5 million people here. So you can look at very small niches, like the Forbes 400, The Millionaire Next Door, and Russ Prince's book surveying people who own private jets. But it's not representative. You can imagine different types of people in the 1%, but I did that in my post above and "Washington lobbyist" never even crossed my mind, for example. I tried reading the book "The Clustered World" but it didn't help.

The Millionaire Next Door, for example, does indeed go along with the consensus that the vast majority of the top 1% are employers -- business owners.

Probably not surprisingly, I know quite a few people in that top 1% and they too tend to be business owners. 

Anyway, the reality is, whether people want to accept it or not, is that when you raise taxes on "the rich" you're basically just eliminating American jobs.  I wouldn't think twice about outsourcing American jobs overseas if my taxes went up.  If the American people are so greedy as to demand I pay ever increasing amounts to the government to be redistributed to them, then I owe them no employment allegience.

on Mar 15, 2008
I believe in the free market. Outsourcing makes sense in many ways. Minimum wage is wrong. Sure, a family can not subsist on a minimum wage job but those jobs are not meant for adults. Mature adults aren't meant to be serving burgers at a drive thru restaurant. If you gotta do it, you gotta do it, but that doesn't mean that you should get paid more than the labor is worth.

I do find it kinda funny how it's mostly the liberals who are against outsourcing. I mean, aren't they the ones that claim to be so concerned about the plight of starving people in 3rd world countries? Their against the free market taking these jobs overseas. They say we're exploiting those people, yet in reality it is the exact opposite. This is even evidenced by the fact that China is beginning to do outsourcing now that they've gotten themselves a middle class. I guess there is something to be said for trickle down economics afterall, eh?
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