A Lesson in the Evil of Socialism.

[SUPDOG]

An economics professor at Texas Tech said he had failed very few students but had, once, failed an entire class. That class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said, "Ok, we will have an experiment in this class on socialism."
"All grades will be averaged and everyone would receive the same grade meaning, obviously, no one will receive an A." They all agreed to this. After the first test the grades were averaged and everyone got a C. The students who studied hard were upset and the students who studied little were happy.
But, as the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too, so they studied little. The second test average was a D! No one was happy. When the 3rd test rolled around the average was an F.
The scores never increased as bickering, blame and name calling all resulted in hard feelings and no one would study for the benefit of anyone else. To their great dismay the professor failed them all. Then he sent all of them this note: "A socialistic government will also ultimately fail - because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed."

[Gtrght77]

I think its more that people are evil and no matter what form the Economy is there are going to be the few who own most of everything and pull most of the strings.


Neither in their pure form can succeed anyways. It takes a little from each theory to make it work well.

[TheRealist]

I think its more that people are evil and no matter what form the Economy is there are going to be the few who own most of everything and pull most of the strings.


Neither in their pure form can succeed anyways. It takes a little from each theory to make it work well.

There is a massive difference between people who rightfully attain their wealth as opposed to government officials squandering wages and "pulling ALL the strings".

If we're talking about keeping those in power in power for long periods, then I can think of no other way to do that than by placing over-burdening restrictions on the top marginal rate. It seems irrational, but let's face it...when taxes go up, the wealthy already have the upper hand because they already have amassed a pool of wealth while the poor basically live on very limited stores of wealth (if any).

Now, when you increase the top marginal rates...rich people aren't stupid. Instead of working to attain a higher income, they simply become less productive and more complacent with what they already have. You can tax the hell out of that STILL, but again...they sit on a pool of wealth so much greater relatively to that of the average guy, that aims at wealth distribution effectually does nothing to change income distribution.

Why is that?

Because of the way the system works. High risks=high reward...while failure sucks. A millionaire today could lose it all tommorrow and a slumdog today can become a millionaire tomorrow. (sorry, had to use the analogy)

Yes...people do inherit money and some are set for life. Greater tragedies have occured however...at least we have been given a shot at this thing called life in the first place. If I spend my time arguing how others had it better, then I'm going to miss out on MY chance to BECOME better.

Nothing pisses me off more than the Paris Hilton's type people in this world, but are their type guaranteed to thrive forever? My subjective opinion is no.

It always seems as if the few who do nothing give a bad name to the many who do everything...Bill Gates, Warren Buffett, Michael Dell, Paul Allen, Sergey Brin, Sheldon Adelson...anyone? I think it's time that America looks at the successes of these men before surrendering their minds and dreams to the trust babies of the world.

What we've seen recently is not an entirely "true" free market system, I agree. It is my hope that one day we can take down the barriers we've created that have made it this way instead of restricting market principles all together.

Random bit...

Education is the most important factor when it comes to wealth/income. Stay in school at ANY and ALL costs.

[fatbaby52]

I'm new here, so please forgive this if I misunderstood what you guys wrote. I do have a couple things to say regarding socialism.

First of all, sup, I think your story is an accurate portrayal of pure socialism. That definitely does not exist in the US (which I'm guessing you were implying). If it did, we would have a flat tax of 100%. Obama has spoken about raising the top marginal tax rate, but not by some crazy amount. Suggesting that the super-rich will stop working is ignoring that there are two forces at work when you mess with wages (which you are by messing with the tax rate). First, there's the substitution effect (leisure is "cheaper", so you work less); there's also an "income effect". Personally, I think that it's just as likely that a super-successful person will work a little more to make up the difference in income due to increased taxes (to buy that next boat, etc...) as it is that he will enjoy a little more free time.

[resnor]

When socialism comes, it comes in little by little. For the record, super successful people aren't going to continue to be super successful if they aren't keeping the rewards of their success.

[Gtrght77]

When socialism comes, it comes in little by little. For the record, super successful people aren't going to continue to be super successful if they aren't keeping the rewards of their success.

And the War on the Middle class isnt going to help anyone be successful. We saw how the last 8 years worked, or didnt. Trickle down economics is a flawed theory and does not work other then making the rich richer and the poor poorer.

[fatbaby52]

When socialism comes, it comes in little by little. For the record, super successful people aren't going to continue to be super successful if they aren't keeping the rewards of their success.

I think we might be about to enter a loop. I don't agree or disagree with the statement that socialism comes in little by little, but I do disagree that it's happening right now. I've lost a pound and a half in the past week but I'm not becoming skinny.

I also agree that super-successful people wouldn't continue to work if they were not going to keep the rewards of their success, but once again, I think that we're talking a jump of a little more than 35% to a little less than 40% marginal tax rate at the very top. I don't think that either of us is qualified to say for sure what the effect of that tax increase will be. I stand by the idea that a person who was taking home $2M and will now be taking home around $1.75 by putting in the same amount of work might very well put in another few days at the office or hours per day to get his income back to $2M.

Also, this is a minor point, but I used the term super-rich, you changed it to super-successful. I don't have a problem using that term, but they don't necessarily mean the same thing.

[resnor]

If you guys think that imposing taxes on the super-rich, or super-successful, only affects them, you're living in fantasy land.

Example: let's say Bill Gates has his taxes increased. In your theory, Gates just eats the upped taxes, and works a little more to offset the taxes. Problem #1: the more he works, the more he gets taxed, so it's not as simple as working a couple more days to earn back that money. Problem #2: the increased tax burden is actually put onto the consumer. Gates isn't going to simply pay the extra taxes himself, rather, he's going to raise the prices on his products. So, the consumer, which is mostly middle class, are going to pay higher prices for computers and software. Gates ends up making the same amount, but not working anymore. That goes for any business. If you own a restaurant, and your taxes go up, well, you're going to raise the prices on your meals. Extra costs ALWAYS get passed on to the consumer.

Gtrght...

Trickle down doesn't work, huh? Yet that's exactly the model that got the stimulus packages passed. Bail out the rich, so that the poor and middle class don't get hosed. In other words, give the top people money, and it will trickle down to the other people. Can't have it both ways, dude. Either it works, or it doesn't.

[resnor]

I think we might be about to enter a loop. I don't agree or disagree with the statement that socialism comes in little by little, but I do disagree that it's happening right now. I've lost a pound and a half in the past week but I'm not becoming skinny.

I also agree that super-successful people wouldn't continue to work if they were not going to keep the rewards of their success, but once again, I think that we're talking a jump of a little more than 35% to a little less than 40% marginal tax rate at the very top. I don't think that either of us is qualified to say for sure what the effect of that tax increase will be. I stand by the idea that a person who was taking home $2M and will now be taking home around $1.75 by putting in the same amount of work might very well put in another few days at the office or hours per day to get his income back to $2M.

Also, this is a minor point, but I used the term super-rich, you changed it to super-successful. I don't have a problem using that term, but they don't necessarily mean the same thing.

Yet, you ARE becoming skinny. The fact that you're losing weight means that you are getting skinnier. In America, socialism will come in little by little, and it is. Government controlling businesses? Socialism. Government controlling banks? Socialism. Government setting wages? Socialism. Government controlling health system? Socialism...and it's right around the corner. Socialism is here, in small parts, and that's how it works.

[sideoutshu]

And the War on the Middle class isnt going to help anyone be successful. We saw how the last 8 years worked, or didnt. Trickle down economics is a flawed theory and does not work other then making the rich richer and the poor poorer.

What is this "war on the middle class" that you speak of. Who is fighting it? That phrase is largely just another set of liberal buzzwords.

[Gtrght77]

What is this "war on the middle class" that you speak of. Who is fighting it? That phrase is largely just another set of liberal buzzwords.


You are for one.

[MonoxideChild]

I think there's too much worry about buzzwords and socialism, and not enough concern for our basic freedoms which have been, and continue to be under fire.

[fatbaby52]

If you guys think that imposing taxes on the super-rich, or super-successful, only affects them, you're living in fantasy land.

Example: let's say Bill Gates has his taxes increased. In your theory, Gates just eats the upped taxes, and works a little more to offset the taxes. Problem #1: the more he works, the more he gets taxed, so it's not as simple as working a couple more days to earn back that money. Problem #2: the increased tax burden is actually put onto the consumer. Gates isn't going to simply pay the extra taxes himself, rather, he's going to raise the prices on his products. So, the consumer, which is mostly middle class, are going to pay higher prices for computers and software. Gates ends up making the same amount, but not working anymore. That goes for any business. If you own a restaurant, and your taxes go up, well, you're going to raise the prices on your meals. Extra costs ALWAYS get passed on to the consumer.

Gtrght...

Trickle down doesn't work, huh? Yet that's exactly the model that got the stimulus packages passed. Bail out the rich, so that the poor and middle class don't get hosed. In other words, give the top people money, and it will trickle down to the other people. Can't have it both ways, dude. Either it works, or it doesn't.

Two things: First of all, you're right that, in a sales tax context, it doesn't really matter what side a tax is imposed- consumers will feel it (as will sellers). If a seller were able to just raise prices to combat the tax (and maximize profits that way), they should have raised the price before the tax. Following standard assumptions (downward sloping demand, upward sloping supply), a sales tax increase will effectively shift down the supply curve, raising the price paid, but lowering the quantity, and the effective price received by the seller.

Secondly, income tax is different from sales tax. It is imposed directly on to Bill Gates. There is an argument that it slows investment (less money to invest plus worse returns with the same level of risk), but, like above, Bill Gates doesn't have the power to shift the burden entirely onto consumers.

One bonus point- physics is very easy if you live in a world with no friction or gravity. (introductory physics, for example) However, once you start introducing those relatively complicated, but unavoidable, forces, physics becomes pretty hard. Economics is the same way. If you have a simplistic model (perfect information, perfectly rational participants, incentives trump all, maximizing total wealth, regardless of distribution, etc...), then pure capitalism is perfect. However, once you start introducing "friction" (irrationality, imperfect information, the idea that maximizing societal wealth is not necessarily better than some amount of risk-pooling), then the answers aren't quite as easy.

[fatbaby52]

Also, I'm not sure what you mean by "the more he works, the more he is taxed." I'm pretty sure that Bill Gates is firmly in the highest bracket- the next dollar he makes will be taxed at the same rate as the last one.

[MonoxideChild]

Also, I'm not sure what you mean by "the more he works, the more he is taxed." I'm pretty sure that Bill Gates is firmly in the highest bracket- the next dollar he makes will be taxed at the same rate as the last one.

Neither does he.