The Two Conflicting Agendas of the Super-Rich
I have talked about this before, but now I want to be highly specific. I want to spell out what I regard as exceedingly good news.
Most of the multibillionaires who express a public opinion on their social and political views are leftists. Peter Thiel is not. Charles Koch is not. But most of them are.
THE PUBLIC AGENDA
To the extent that we hear anything of their agendas for the world, we hear some echo of Klaus Schwab's "great re-set". These people think they are smarter than the rest of us. They think they are smarter than the free market. They want the state to intervene in order to push people around for good causes.
The interesting thing here is that the average citizen shares most of their views. The super-rich want to control education, and they want the education to be public for the masses. So do the masses. The super-rich would oppose the idea of de-funding the public schools. So do the masses. Everybody wants to control the public schools, but almost nobody wants to shut them down. So, in principle, the super-rich and the voter next-door are in agreement.
What about the welfare state? The super-rich would certainly not shut down the Social Security system. They would not shut down Medicare and Medicaid. If pressed, they might offer some reform to make these programs more universal, but nobody who attends Davos meetings would be in favor of de-funding Social Security, Medicare, and Medicaid. They share exactly the same view with virtually all American voters. The voters do not want these programs de-funded. If asked, the voters would be in favor of expanding these programs. So, the super-rich and the masses are in agreement on the modern welfare state. These programs constitute over 50% of the federal budget.
The political appeal of the liberal/leftist has always been this: soak the rich. The super-rich say they believe in this, but they hire lawyers who make certain that the agenda of the Left in this regard is never implemented in the United States. In fact, the super-rich pay far lower rates of taxation than the average middle-class worker. The middle-class worker never figures this out. He never figures out that by voting for the Democrats, the super-rich are still going to get richer. The super-rich are content with voting for Democratic Party candidates who articulate some version of soak the rich. The super-rich know that, once in Congress, these people are not going to vote for anything remotely resembling taxation that threatens the lifestyle and capital of the super-rich.
The super-rich know that they can dodge the taxation bullet. The masses are dumb enough to believe that Congress is going to extract large quantities of wealth from the super-rich. So, the masses keep voting for politicians who do not threaten the expansion of the American welfare state.
THE PERSONAL AGENDA
The personal agenda has been visible ever since John D. Rockefeller, Senior started the Rockefeller Foundation. There are multiple Rockefeller foundations. They have been operating for about 120 years. They preceded the federal income tax of 1913.
The vast majority of Americans are in favor of charity. We are a charitable people. There has been no serious opposition to the creation of 501(c)(3) charitable foundations. The big foundations support the personal agendas of the super-rich. They support modern art, which most Americans despise but are content to ignore. They support medical research, which most Americans favor. They support private higher education, which most Americans favor. There is no organized constituency against nonprofit foundations.
The super-rich all have foundations. In their personal financial strategy, they have learned to combine nonprofit entities that support their personal agendas with their own profits. They keep their money away from the tax collectors by creating boards of trustees that they control. The public accepts this.
Because of the Pareto distribution of wealth, something in the range of 1% of Americans own about half of the capital. Virtually all of this capital will be transferred to foundations at the death of the people who own the corporate shares. So, the super-rich are going to preserve their capital from the voters. They are going to see to it that people who hold their ideas, namely, graduates of the best universities, administer the vast fortunes which they have amassed over a lifetime. Their money will continue to support their personal agendas.
There is a fundamental schizophrenia here. The super-rich talk the welfare state line. They talk about the benefits of big government. But, in their personal lives, they have arranged their affairs so that virtually none of their money will ever get into the hands of state bureaucrats who would otherwise implement the various programs that Congress has enacted and some President has signed into law.
Meanwhile, the super-rich through their public statements and through their foundations, support the ethics of the welfare state. They verbally support the idea that it is legitimate to use the power of civil government to redistribute wealth. They verbally support the idea of the graduated income tax. In other words, they verbally support the idea of soak the rich. But then they arrange their affairs so that they cannot be soaked.
The growth of the unfunded liabilities of Social Security, Medicare, and Medicaid are such that they will bankrupt the United States government. There is no way that the political promises can be fulfilled. These are the promises that the super-rich have publicly supported. The super-rich have put at least some of their money behind books and publications that promote the welfare state. They encourage the typical voter to elect candidates who promise to soak the rich. The super-rich know full well that none of this soaking will be implemented in their lives. Their lawyers have been able to avoid most taxation during their lives and all taxation after they die. The inheritance tax of 55% will be imposed only on a tiny fraction of the wealth that the super-rich leave to their children.
The unfunded liabilities of the federal government are now in the range of $200 trillion. These unfunded liabilities may be much higher. The government no longer reports the statistics in such a way that Professor Kotlikoff can estimate the extent of the unfunded liabilities for the various federal programs.
Because the naïve voters actually believe that the rich will pay for most of the benefits, this has made it possible for the welfare state to expand its operations over the last half-century. Put differently, the voters have supported programs that will bankrupt the federal government even faster. These programs have had the full verbal and ideological support of the super-rich. It is no sweat off their brows. Their heirs are not going to pay the taxes required to fulfill the promises.
CONCLUSION
We have here a delicious irony. The philosophy of "soak the rich" is a perverse philosophy. It is a denial of the biblical principle of the rule of law.
Ye shall do no unrighteousness in judgment: thou shalt not respect the person of the poor, nor honor the person of the mighty: but in righteousness shalt thou judge thy neighbour (Leviticus 19:15).
The masses have bought into this philosophy. They have believed that the super-rich are going to be skinned alive, or close to it, in order to provide all the wonderful benefits that the politicians have promised the voters. The masses have been led into a gigantic lobster trap of their own creation.
The super-rich have encouraged the masses to believe such a perverse philosophy of justice. They have also taken great pains to avoid the tax collectors. The tax collectors are not going to be able to secure enough money to pay for the programs. The Pareto distribution guarantees this outcome. The only people with sufficient income to be able to fund the unfunded liabilities have created nonprofit foundations that are immune to the tax collectors.
The voters really believe that they have set a trap for the super-rich. They have in fact set a trap for themselves.
We will see the fulfillment of this nursery rhyme.
Old Mother Hubbard
Went to the Cupboard,
To give the poor Dog a bone;
When she came there,
The Cupboard was bare, And so the poor Dog had none.
Congress is old mother Hubbard. The voters are the retirees who supported the programs.