"Who Is John Galt?"

IN a recent, good natured Twitter tête-a-tête with renowned personal finance journalist Paul Lewis I posited the view that an article he had tweeted a link to was not "interesting"; rather it was nonsensical. Paul responded that he would like to see my reasoned critique for such a view.

Given that Twitter limits one's musing to 140 characters a reasoned critique is a toughie, so a quick blog seems appropriate. For the record, this is as reasoned as I get; I am not an economist (an A-Level from 1987 doesn't really cut the mustard) but I am a passionate defender of capitalism, which seems to get a constant shoeing these days.

Paul's link was to an article by Sam Pizzigati, on the website of Senator Bernie Sanders. Senator Sanders is - according to Wikipedia (I know, I know) - proud to be a socialist. As they say in sitcoms, "he's got every right to be."

It might be easier (for me as much as anyone else) if I just quoted parts of the article and then let rip, so here goes:

"Once upon a time in America, back a century ago, our nation's rich paid virtually nothing in taxes to the federal government. And that same federal government did virtually nothing to better the lives of average Americans."

The opening paragraph is absolutely spot-on; exactly a century ago America was enjoying the greatest explosion of economic growth the world has ever seen (or perhaps ever will). Literally millions of people emigrated to the New Country in the knowledge that, whilst they would be the poorest of the poor in their new home, they would be immensely wealthier than they had been in Palermo, Dublin, Liverpool, Naples, Budapest (insert Scorsese / Coppola  Old Country cliché of choice).

By the second paragraph the wheels have started to come off:

"But those average Americans would do battle, over the next half century, to rein in the rich and the corporations that made them ever richer. And that struggle would prove remarkably successful. By the 1950s, America's rich and the corporations they ran were paying significant chunks of their annual incomes in taxes - and the federal projects and programs these taxes helped finance were actually improving average American lives."

Note the language, the mindset: taxes are good, government knows best how to spend your money and State / Federal projects funded by your money are nothing but a pure joy to behold in their efficacy. After all, the last thing a country needs are rich, successful corporations: let's go into "battle", Brother, and let the "struggle" commence.

A few lines later we have the gem "Today, the rich and their corporations no longer bear anything close to their rightful share of the nation's tax burden. The federal government, given this revenue shortfall, is having a harder and harder time funding initiatives that help average working families."

Got to love it when the "rightful share" chestnut make an appearance. Who decides what is "rightful"? One man's rightful is another's wrongful. Note how the real problem is never addressed: namely the enormous tax burden built up over the last 50 years on the back of the gazillions spunked by politicians on "initiatives" that have done little discernible good to anyone other than those in the machinery of State.

"If corporations and households taking in $1 million or more in income each year were now paying taxes at the same annual rates as they did back in 1961, the IPS researchers found, the federal treasury would be collecting an additional $716 billion a year."

No, the corporations and households would have fled to more favourably taxed havens (see: UK c.NOW).

"Our political system is failing to tax the rich because the rich have fortunes large enough to buy off the political system. Again, some numbers can help us better visualize that plutocratic big picture."

Failing? Failing? It's failed. Since the time of FDR onwards politicians and lobby groups have corrupted the body politic, drooling to get their slice of the ever increasing tax pie. Endless legislation gets passed to ensure marginal constituency voters get that special bundle of funding, that factory employing thousands of now loyal voters, that freeway built (oh to be alive in 1960 and owning a concreting business, here or the USA). And all the while the politicians have their snouts in the trough.

In a largely free-market capitalist economy one would expect that the very rich would be much richer in real terms than they were 50 years prior; that's how it works, see? It doesn't follow that their taxes should have risen correspondingly: remember, politicians create no wealth at all; they take other peoples and spend it till it's gone (see: UK 1997-2009).


Pizzigati's article - and moronic body UK Uncut - ignores a truth that shouldn't need stating: corporations exist for one reason only: to deliver a profitable service / product. They do NOT exist to generate corporation taxes or employment for millions of people (themselves paying various taxes on the incomes and products these corporations generate); these are by-products.

Atlas Shrugged? You bet.