Outside the Beltway

All Hail the Virtue of the Oligarchs

Steven L. Taylor
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“Wealthy folks have no need to steal or engage in corruption.”  Larry Kudlow, in regards to Trump’s cabinet.

I am not even sure where to begin.  One thought is that both Plato and Aristotle would have found this a laughable proposition–both thought that being governed by the wealthy would lead to ruin.  Beyond that, history hardly shows that once one reaches a certain level of wealth that this translates into some sort of transcendental level of virtue.

The rest of the column is not much better, insofar as it is just magical thinking about the economic boon that will be the Trump administration.  We shall see on that count (and, for that matter, on the corruption issue).

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18 responses to “All Hail the Virtue of the Oligarchs”

  1. Mr. Prosser Avatar
    Mr. Prosser

    Kudlow also believes in the Laffer Curve, ‘nuf said.

  2. Mr. Bluster Avatar
    Mr. Bluster

    “Wealthy folks have no need to steal or engage in corruption.”

    HA! HA! HA! HA! HA! HA! HA! HA! HA!

    I know Barret Rochman. On Sundays forty years ago when we were all hippies I went out to The Bird Farm that he rented out to some freaks to play volleyball, smoke dope, drink, and go skinny dipping and screw in the woods.
    He was a millionaire slumlord then.

    Carbondale Man Sentenced in Madison County Tax Sale Scheme
    March 2014
    Evidence argued at the sentencing hearing established that Rochman participated in a price fixing scheme orchestrated by former Madison County Treasurer Fred Bathon. Bathon structured the Madison County tax sale to permit the tax buyers to charge distressed homeowners inflated interest rates from 2005 to 2008 in exchange for campaign contributions.
    Rochman was sentenced to 16 months in prison, to serve three years’ supervised release, and to pay a $30,000 fine and a special assessment of $100. The sentence was the maximum sentence recommended by the United States Sentencing Guidelines. Former Treasurer Fred Bathon, along with tax buyers Scott McLean and John Vassen, have all been previously sentenced to federal prison for their roles in this scheme.
    https://archives.fbi.gov/archives/springfield/press-releases/2014/carbondale-man-sentenced-in-madison-county-tax-sale-scheme

    Rochman pleads to anti-trust charge
    October 2013
    Rochman and two Metro East tax buyers previously pleaded guilty to violating the Sherman Antitrust Act by participating in noncompetitive tax sales. The three were involved in the scheme with former Madison County Treasurer Fred Bathon who also pleaded guilty to violating the antitrust act.
    Bathon was convicted of structuring Madison County property tax sales in a way that eliminated competition and increased interest rates for Rochman and the other tax buyers in exchange for campaign contributions.
    http://thesouthern.com/news/local/rochman-pleads-to-anti-trust-charge/article_26218bfe-37ad-11e3-9db8-0019bb2963f4.html

    1
  3. Mr. Bluster Avatar
    Mr. Bluster

    The Biggest Stock Scams Of All Time
    Apparently Larry Kudlow was born yesterday and has not heard of these scandals involving wealthy citizens committing crimes to fill their personal coffers with loot!

    ZZZZ Best Inc., 1986
    Centennial Technologies Inc., 1996
    Bre-X Minerals, 1997
    Enron, 2001
    WorldCom, 2002
    Tyco International, 2002
    HealthSouth, 2002
    Bernard Madoff, 2008

    http://www.investopedia.com/articles/00/100900.asp

    If I can find his eMail maybe I should send him the link?

    1
  4. James Pearce Avatar
    James Pearce

    Wealthy folks have no need to steal or engage in corruption.

    This statement is so stupid I have to think it was produced for word count reasons rather than to advance, you know, an argument.

  5. Just 'nutha ig'rant cracker Avatar
    Just ‘nutha ig’rant cracker

    There’s also the sticky problem that the fact that there might not be any need to steal or engage in corruption will not have any bearing on an inclination to do so. Not every criminal is forced by the exigencies of life to engage in crime–some are simply evil people or people who imagine themselves to be apex predators. (or was that redundant?)

  6. M. Bouffant Avatar
    M. Bouffant

    “Behind every great fortune is a great crime”, which pretty much puts the lie to that idiot.

    Kudlow’s mind was no doubt destroyed by his cocaine problem. Hey, isn’t using cocaine a crime? Just asking.

  7. Argon Avatar
    Argon

    The statement is true. When the wealthy and well-connected do it, it’s called standard practice.

    How many people went to jail for the massive mortgage fraud collapse of 2008?

  8. Rick Zhang Avatar
    Rick Zhang

    The general drop in trust in our institutions has the potential to herald a steady decline of the American economy: http://www.samefacts.com/2016/12/woolgathering/the-economic-value-of-trust/

  9. Ben Wolf Avatar
    Ben Wolf

    Here is fixed investment from 1950:
    https://fred.stlouisfed.org/graph/fredgraph.png?g=cged

    We can see private investment permanently fell from its post-war average once Reagan’s supply-side takeover was full in effect after 1983.

    Here is GDP growth over the same period:
    https://fred.stlouisfed.org/graph/fredgraph.png?g=cgej

    Again, notice that since supply-side measures and monetarism displaced Keynesian economics as the dominant paradigm, GDP growth has permanently fallen, rarely reaching a 3% annualized rate depending upon how it is measured.

    This is after the corporate tax rate was reduced to 28% from 70% during the Reagan Administration.

    Furthermore, the tax reform plan Kudlow pushes is incoherent. The so-called corporate tax holiday can have no appreciable effect on the U.S. economy because dollar profits are already on deposit at the Federal Reserve and foreign currency profits are used to sustain overseas business operations. I’m not sure why multinationals would want to transfer those profits back to the U.S. and cripple themselves. Nor would anyone not a fool think corporations will spend or increase wages solely due to a tax cut.

  10. al-Alameda Avatar
    al-Alameda

    “Wealthy folks have no need to steal or engage in corruption.” Larry Kudlow, in regards to Trump’s cabinet.

    But, Larry … they often do steal or engage in corruption. They are not, by virtue of their wealth, somehow superior moral beings, or if you want to leave morality out of this, averse to unethical or illegal behavior.

    Pardon me taking off on a tangent here but, has Larry Kudlow, since the 2008 economic crash, been right, correct, or accurate on any of his predictions concerning the economy since Obama was inaugurated back in 2009?

  11. Hal_10000 Avatar
    Hal_10000

    @Mr. Prosser:

    The Laffer Curve exists — government revenue does not peak at a 100% tax rate. What doesn’t exist is the idea that tax cuts “pay for themselves”. This only happens if the marginal rate is very high (e.g., 97% when Kennedy cut taxes) and/or the tax code has lots of complicated loopholes so that you can eliminate a lot of deadweight loss.

    @Ben Wolf:

    First plot doesn’t show anything. And the second plot shows a small dip that correspond to a hundred things (e.g., globalization, aging populace, maturation of the economy, etc.)

    This is after the corporate tax rate was reduced to 28% from 70% during the Reagan Administration.

    That’s the personal income tax rate. And the wealthy ended up paying more in taxes after that because loopholes were removed. Do try to keep up.

  12. Hal_10000 Avatar
    Hal_10000

    Returning to the subject at hand … Kudlow’s comment is mind-bogglingly stupid, an early front-runner for dumbest comment of the year. I was just reading an article in the NYT about how a sleazy businessman tried to make $400 million disappear through a byzantine labyrinth of shell companies and offshore banks. His businesses would make million of dollars but only declare a few thousand in the US by shuffling the money to other countries. And this part of a massive elaborate system to allow the very rich to avoid taxes (or lawsuits).

    What has made this possible is not that taxes are “too low” contra above. What’s made it possible is the maddening labyrinth of tax laws, financial transaction laws and banking laws that make tracking down rich people’s money almost impossible. And the attempts to “reform” the system — Sarbanes-Oxley or Dodd-Frank — have only made things worse, bringing down the hammer on small businesses while allowing the megarich to continue to milk the system.

    This is one of the reason I’m open to eliminating the corporate tax system (with revenue made up by taxing dividends/capital gains as ordinary income). The money from the corporate tax system ain’t worth the corruption.

  13. Ben Wolf Avatar
    Ben Wolf

    @Hal_10000:

    That’s the personal income tax rate.

    1) Correct. I was in too much of a hurry.

    2) First plot shows flatly that fixed investment after 1983 never again reached 4.5%.

    3) And please stop being an ass.

  14. Ben Wolf Avatar
    Ben Wolf

    Furthermore, revenues failing to peak at 100% is not the original argument behind the Laffer Curve (as we can see above arguments in its favor have repeatedly shifted as empirical evidence has shot each down in turn.) The original argument was high tax rates on the wealthy discourage their productive investment. This lack of investment thus means lower revenues.

    The argument Hal is making could just as easily be explained by tax avoidance, which is most certainly not a factor in the supply-side case made forty years ago. Also, it is a matter of sleight-of-hand to argue that supply-side measures must have been offset by something else which just happened to occur at exactly the same time.

  15. michael reynolds Avatar
    michael reynolds

    @Hal_10000:

    Well, as an owner of a profitable though small corporation (consisting of my wife and me), and as a guy who will also stand to benefit greatly from the proposed cut in income taxes, I welcome the notion that the 1% should get still richer on the backs of the idiot coal miners who put their faith in Trump.

    More for me! Yay!

    What’s that Trump voter? You lost your health insurance? And you’re still unemployed? And you think giving me more money will somehow help you? Ah hah hah hah!

    Ahem. Sorry. What I mean is yes, yes my friend, making me richer will totally help you. You just wait right there in Shitheel, Kentucky, and I’ll be along shortly with your high-paying job. I just first have to maybe buy a new Mercedes and perhaps a house in the south of France. But then, I’m totally going to invest in a dead town in the rust belt.

  16. gVOR08 Avatar
    gVOR08

    @Mr. Prosser: Actually, the Laffer curve is real, and economists have known it for many decades. Well, maybe not the whole curve as sketched by Laffer, but the idea that there is a tax rate above which revenue goes down. Econ types have known roughly since rocks that if your goal is to maximize revenue, the marginal income tax rate should be around 70-75%. This is why Kennedy lowered it to that rate, a genuine supply side tax cut that worked. As with many things, Dems know how (or more to the point, when) and Rs don’t. I do, however, love the unspoken assumption by Laffer that the goal of any tax should be to maximize the take.

    Unfortunately, Kennedy’s cut seems to have put rates on a slippery slope. Any claim that cutting the marginal income tax rate to 30% or 50 or whatever is a supply side cut is a lie. Also, you may remember that we recently suffered a financial crash and recession caused by what was called the savings glut. Despite the wipeout of capital in the crash, the glut still exists. We have more money than we have productive projects. That’s why the Fed can barely give away money at zero real rates. In our current situation, any talk of tax cuts to promote savings and investment is complete nonsense.

  17. Ratufa Avatar
    Ratufa

    Kudlow is also the guy who, in late 2007 said:

    The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come.

    http://www.nationalreview.com/kudlows-money-politics/2452/recession-debate-over-larry-kudlow

    It’s rumored that Trump is considering him to be the chairman of the President’s Council of Economic Advisers. What could go wrong?

  18. al-Alameda Avatar
    al-Alameda

    @Ratufa:

    Kudlow is also the guy who, in late 2007 said:
    The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come.

    Yes, and by late 2007, there were some bank economists who were becoming very worried about the trillions of dollars in defective mortgage backed securities that were on balance sheets of major financial institutions, and which ultimately crashed the economy in 2008 and into 2009.

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