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The Rich Already Pay Their Fair Share of Taxes

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Uh oh! How did this one slip out? On July 10, The Congressional Budget Office (CBO), reported that 3/10 of one percent of income taxes (0.3 percent) were paid by the bottom 20 percent of wage earners, while the top 20 percent of wage earners paid 67.9 percent of income taxes. The CBO report is based on 2007 through 2009 tax returns.

Will someone explain how that is “fair?” Did the top 20 percent of wage earners receive more protection from the military than the bottom 20 percent? Did the top 20 percent receive proportionately more services from the government than the bottom 20 percent? I would argue that the bottom 20 percent received more services than the top 20 percent. But I can’t prove that, so it will have to be an expression of my opinion. And y’all know what my opinion is worth: the same as y’all’s.

The CBO also observed that the wealthiest Americans paid almost 70 percent of taxes, but earned 50 percent of all income. And according to the CBO, which examined 2009 tax records, the top one percent of wage earners, whom fearless leader President Barack Hussein “kill list” Obama has targeted, paid 22.3 percent of taxes. That’s down 4.4 percent from 2007. Is three years a trend?

The CBO reported that between 2007 and 2009, for the bottom three quintiles (for you progressives/liberals, a quintile is 1/5th or 20 percent of a distribution), the share of taxes paid fell. For the fourth quintile (next to the top), taxes paid were substantially unchanged. For the top quintile, taxes paid rose. Big losers, according to the CBO, were those in the top quintile who saw their taxes increase.

Obama is calling for the wealthy to pay more money in order to lower the deficit. But the primary cause of deficits is federal spending. George W. Bush inherited a $3.4 trillion deficit in 2000. He doubled that amount to $6.8 trillion during his two terms, an increase of $3.4 trillion. Obama, in less than four years, has increased the debt to almost $16 trillion.

And this is the same Obama who extended the so-called Bush tax cuts at the same time that he says that tax cuts are causing the majority of economic troubles. Obama said, “So the money we’re spending on these tax cuts for the wealthy is a major driver of our deficit, a major contributor to our deficit, costing us a trillion dollars over the next decade.”  A day after extending middle class tax cuts while raising taxes on the wealthy, Obama argued that the rich should pay higher taxes in order to fund his spending priorities and to cut the deficit.

Tax cuts also have not always been a contributor to deficits. A comprehensive tax reform was passed under Ronald Reagan in 1986. Revenues increased by $128 billion. Reagan’s tax structure had two percentages: 15 percent and 28 percent. Obama wants to raise those rates to 36 percent and almost 40 percent. Federal tax rates in 2008 and 2009 were 18 percent and 17.4 percent, the lowest in the last three decades. Lower tax rates suggest that lower tax rates yield deficits. But correlation doesn’t necessarily mean causation. And history has shown that lower tax rates do not necessarily cause deficits.

Obama was just too busy to go to the NAACP convention in Houston, TX, but he found time to go to George Clooney’s house, and he also found time to have dinner at Sarah Jessica Parker’s house. I guess he was just too busy to read the CBO report. Or what probably happened is that Obama’s speechwriter did not have time to transcribe the CBO report so Obama could read it on his Teleprompter. See, once everything is known, the answer is quite obvious.

But that’s just my opinion.

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  • Alexander J Smith III

    Interesting, even though I think mathematically it follows that the wealthiest 1 or 2 percent of Americans would account for the majority of taxable incomes. The CBO data only demonstrates that they pay a larger share in relation to the overall amount of tax collected, but again that makes sense considering they earn more money. In general, income tax rates are the lowest they’ve been in nearly thirty years and the governments liabilities on its balance sheet continue to increase because the Federal Reserve keeps raising inflation because of the governments inability to raise taxes to supplement significant decreases in income. But I agree that the tax code is a real problem, and needs greater simplification so we can more efficiently collect it.

  • Igor

    Warren misrepresents the CBO report that he cites. Here is the first paragraph from the report he cites:

    Wealthy Americans earn about 50 percent of all income but pay nearly 70 percent of the federal tax burden, according to the latest analysis Tuesday by the Congressional Budget Office — though the agency said the very richest have seen their share of taxes fall the last few years.

    Getting 50% of the income and paying 70% of taxes doesn’t represent abuse of the rich.

  • Glenn Contrarian

    Here goes Warren again with a long list of Obama’s-destroying-America “facts”…and as usual, his “facts” are built on half-truths and insinuations. Fortunately, right now I have the time to go through his points one-by-one.

    Uh oh! How did this one slip out? On July 10, The Congressional Budget Office (CBO), reported that 3/10 of one percent of income taxes (0.3 percent) were paid by the bottom 20 percent of wage earners, while the top 20 percent of wage earners paid 67.9 percent of income taxes. The CBO report is based on 2007 through 2009 tax returns. Will someone explain how that is “fair?”

    Paul Krugman – a man the Right loves to hate – answers Warren’s question quite handily: “On one side, we have the claim that the rising share of taxes paid by the rich shows that their burden is rising, not falling. To point out the obvious, the rich are paying more taxes because they’re much richer than they used to be. When middle-class incomes barely grow while the incomes of the wealthiest rise by a factor of six, how could the tax share of the rich not go up, even if their tax rate is falling?

    Did the top 20 percent of wage earners receive more protection from the military than the bottom 20 percent? Did the top 20 percent receive proportionately more services from the government than the bottom 20 percent? I would argue that the bottom 20 percent received more services than the top 20 percent. But I can’t prove that, so it will have to be an expression of my opinion. And y’all know what my opinion is worth: the same as y’all’s.

    Warren, y’all – and I’ve got every bit as much right to use that word as you do – really would benefit if you thought a bit more deeply. Why? Because in every one of the questions you asked above, yes, it can be argued that the rich benefit a great deal more from military protection and social services, et al. For instance, ask yourself how Big Oil would be faring if the Navy wasn’t spending billions of our tax dollars protecting their tankers, particularly as they pass down the east coast of Africa. Better yet, edjimicate yourself on corporate welfare:

    According to the Cato Institute, the U.S. federal government spent $92 billion on corporate welfare during fiscal year 2006. Recipients included Boeing, Xerox, IBM, Motorola, Dow Chemical, and General Electric. Alan Peters and Peter Fisher have estimated that state and local governments provide $40–50 billion annually in economic development incentives, which many critics characterize as corporate welfare. Some economists consider the recent bank bailouts in the United States to be corporate welfare. U.S. politicians have also contended that zero-interest loans from the Federal Reserve System to financial institutions during the global financial crisis were a hidden, backdoor form of corporate welfare.

    Now let’s get back to your article:

    The CBO also observed that the wealthiest Americans paid almost 70 percent of taxes, but earned 50 percent of all income. And according to the CBO, which examined 2009 tax records, the top one percent of wage earners, whom fearless leader President Barack Hussein “kill list” Obama has targeted, paid 22.3 percent of taxes. That’s down 4.4 percent from 2007. Is three years a trend? The CBO reported that between 2007 and 2009, for the bottom three quintiles (for you progressives/liberals, a quintile is 1/5th or 20 percent of a distribution), the share of taxes paid fell. For the fourth quintile (next to the top), taxes paid were substantially unchanged. For the top quintile, taxes paid rose. Big losers, according to the CBO, were those in the top quintile who saw their taxes increase. (boldface mine)

    In Warren World, the top quintile are the BIG LOSERS! So let’s see just how much the BIG losers have lost:

    Economist Emmanuel Saez: In 2010 The “Top 1% Incomes Grew By 11.6 Percent While Bottom 99% Incomes Grew Only By 0.2%.” In a paper released in March, University of California, Berkeley Economist Emmaunel Saez found that in 2010, the income of the top earners grew much more than the income of the rest of Americans. He also found that since 1993, top earners’ income grew 58 percent while the earnings for the rest of Americans only grew 6.4 percent.

    Read that again, people: In 2010 The “Top 1% Incomes Grew By 11.6 Percent While Bottom 99% Incomes Grew Only By 0.2%.” The top 1%’s income grew FIFTY-EIGHT TIMES as much as that of the bottom 99%. Yeah, they’re big losers, all right.

    But wait, you say, Warren’s talking about the top quintile! Okay, we can do that. From the same reference:

    If income were equally divided across households, each quintile (fifth) would account for 20% of total income. The Congressional Budget Office and others have documented that the bottom fifth has long accounted for much less than 20% of total income. The bottom quintile’s share of income has remained little changed for the past few decades at less than 4%, according to Census Bureau data. In contrast, the income shares of the top fifth and the top 5% of households appear to have trended upward. The top fifth’s share of total household income rose from 42.6% in 1968 to 50.2% in 2010; the top 5%’s share, from 16.3% to 21.3%. (Estimates derived from federal income tax data suggest that those at the very top of the income distribution have experienced greater gains.) The middle class, defined as the middle 60%, received a disproportionately smaller share of the total economic pie in 2010 (46.5%) than in 1968 (53.2%). [Congressional Research Service,

    Yeah, those in the top quintile are SUCH losers, huh? But back to Warren’s article:

    Obama is calling for the wealthy to pay more money in order to lower the deficit. But the primary cause of deficits is federal spending. George W. Bush inherited a $3.4 trillion deficit in 2000. He doubled that amount to $6.8 trillion during his two terms, an increase of $3.4 trillion. Obama, in less than four years, has increased the debt to almost $16 trillion.

    Gee, Warren – how exactly is it that Obama got from $6.8T to $16T in less than four years, especially since the total in deficits from 2010-2012 (2009 was Bush’s budget, remember) totaled $3.92T? Better yet, where did you get that Bush left office with a $6.8T federal debt? I’m just wondering, because the federal deficit was $10.626 trillion on President Bush’s last day in office, which coincided with President Obama’s first day.

    In other words, Warren, that $6.8T was how much Bush ADDED to the federal debt, never mind that he inherited a BUDGET SURPLUS that was projected to pay off our ENTIRE federal debt by 2012. But don’t let actual facts like mathematics and history get in the way of what you think you know.

    This is already a pretty long comment, so I’ll split it into two comments.

  • Glenn Contrarian

    Now let’s get back to taking Warren’s article apart, paragraph-by-Fox-infected-paragraph:

    And this is the same Obama who extended the so-called Bush tax cuts at the same time that he says that tax cuts are causing the majority of economic troubles. Obama said, “So the money we’re spending on these tax cuts for the wealthy is a major driver of our deficit, a major contributor to our deficit, costing us a trillion dollars over the next decade.” A day after extending middle class tax cuts while raising taxes on the wealthy, Obama argued that the rich should pay higher taxes in order to fund his spending priorities and to cut the deficit.

    Um, Warren, according to data from the Congressional Budget Office, the Bush tax cuts are indeed the single biggest factor in our deficit today. The second biggest factor is the economic downturn from the Great Recession, and the third biggest factor were the wars in Iraq and Afghanistan. But since the CBO’s saying something you don’t like, of course you’ll immediately discount anything they say.

    You went on to say:

    Tax cuts also have not always been a contributor to deficits. A comprehensive tax reform was passed under Ronald Reagan in 1986. Revenues increased by $128 billion. Reagan’s tax structure had two percentages: 15 percent and 28 percent. Obama wants to raise those rates to 36 percent and almost 40 percent. Federal tax rates in 2008 and 2009 were 18 percent and 17.4 percent, the lowest in the last three decades. Lower tax rates suggest that lower tax rates yield deficits. But correlation doesn’t necessarily mean causation. And history has shown that lower tax rates do not necessarily cause deficits.

    I’d really like to see where you got your figures, Warren – but you didn’t give a link showing where you got them. Be that as it may, I think this chart might be educational, since it shows the income, corporate, and capital gains tax rates from 1916 to 2011, all in one easy-to-read picture for the numerically-challenged. Looking at the points where the tax rates were highest, one just has to ask that if high taxes are SO bad, why weren’t we in another Great Depression then?

    But you won’t answer that question, will you, Warren?

    And for the last part of your article:

    Obama was just too busy to go to the NAACP convention in Houston, TX, but he found time to go to George Clooney’s house, and he also found time to have dinner at Sarah Jessica Parker’s house. I guess he was just too busy to read the CBO report. Or what probably happened is that Obama’s speechwriter did not have time to transcribe the CBO report so Obama could read it on his Teleprompter. See, once everything is known, the answer is quite obvious.

    Now what that has to do with the rest of your article, I’m not quite sure. But I will tell you that Romney’s appearance at the NAACP convention was the best (and most cost-effective) thing for the Obama campaign.

    But let’s get back to the thrust of your article, that Richie Rich, the poor little rich boy, has been the Big Loser since Obama came to town, because the rich are paying such a disproportionate share of taxes. I think The Atlantic said it best in this article:

    In 1979 the top quintile contributed 56% of all federal taxes. In 2006 they contributed nearly 70%. The share of federal taxes paid by the top 1% nearly doubled in that time from 15% to 29%. Tax shares declined for every group except the top 20 percent, as the tax burden shifted from the bottom 80% to the top 20%. But again, this was not the result of rising tax rates. It was the result of rising household income at the top. (boldface mine)

    Remember, in 2010 the income for the top 1% increased FIFTY-EIGHT TIMES MORE than the income for the bottom 99%. It’s called “Income Inequality”, Warren, and the greater the share of the money controlled by the wealthy, the greater the share of the tax burden they WILL carry…and when they have 100% of the wealth, they’ll pay 100% of the taxes. Of course you’ll think that’s just socialism run wild….

  • http://www.lunch.com/JSMaresca-Reviews-1-1.html Dr. Joseph S. Maresca

    We need an excess consumption tax on junk food. That would bring in additional revenues and reduce the great demand for disease management systems and treatments. We have got to get back to diet and exercise as the main preventive strategies for major diseases. Then, every health care system would cost less because the demand for treatment would be lower due to better health outcomes. I’ve known people to live into their eighties and beyond with virtually no hospitalization until the very end- some died at home.

    We need more of the Paleolithic and Mediterranean Diets which produce less need for disease management.

    Lastly, we need to stay out of costly foreign entanglements.

  • Glenn Contrarian

    Dr. Maresca –

    For once, I agree with you! We should include junk food – including all fast food (except for certain healthy offerings) – in with what we once called “sin taxes”. Along with alcohol and gas which are already taxed, we should legalize marijuana and tax the heck out of it. And we should tax guns (and especially bullets) to the point where the revenue from gun taxes would pay for all the results of gun violence in America.

  • Glenn Contrarian

    Warren?

    Oh, Warren?

    I see you’ve time to write more articles, but none at all to address the problems pointed out with this article. Why is that?

  • http://rwno.limewebs.com Not the liberal actor

    Re: comment # 7, Glenn, in case you didn’t notice, the article was about tax rates, or percentages paid, rather than about absolute income, something on which you wish to focus. So there is no way for me to respond to your rant, er, discussion.

    Allow me to be specific:

    You quote Paul Krugman. His entire argument is based on income. He even makes the same point I’m trying to make.

    You say, “According to the Cato Institute, the U.S. federal government spent $92 billion on corporate welfare during fiscal year 2006.” I agree with you on that point, but what does that have to do with tax rates? You offer the figure $92 billion, but again, I must ask “What does that figure have to do with tax rates?” And I assume that you somehow missed this link.

    You quote Economist Emmanuel Saez: “In 2010 The “Top 1% Incomes Grew By 11.6 Percent While Bottom 99% Incomes Grew Only By 0.2%.” Again, he is discussing incomes, not rates.

    You say, ” …according to data from the Congressional Budget Office, the Bush tax cuts are indeed the single biggest factor in our deficit today.” If that’s true, then WHY did Obama extend them? I guess those “Wascally Wepublicans” got to him.

    As for my closing, I find it amazing that Obama can always find time to fund raise, but cannot find time to attend a convention or read a report that directly contradicts him.

  • Glenn Contrarian

    Warren, you’re reaching really, really deep to dig yourself out of this one.

    Tell me, Warren – exactly how is it that the top 1% are part of what you termed “big losers” when it came to the taxation rate, yet their income increased at FIFTY-EIGHT TIMES the rate of increase of income of the other ninety-nine percent? Exactly HOW is that unfair to the rich? Exactly HOW does that make them “big losers”?

    And when it comes to taxation rates, oh great and powerful Warren, I’m not sure if you’re aware of this, but a certain guy named Mitt Romney paid a WHOPPING THIRTEEN-POINT-NINE PERCENT tax rate. You see, he – like most of the rest of the top quintile – can afford to use accountants who find them every loophole there is, every overseas tax haven there is.

    But I forget – they’re all Big Losers in Warren World! Just like the 7000 millionaires who paid ZERO TAXES in 2011. Yeah, they’re all Big Losers, right? That’s why they need Warren Beatty (NTLA) to stick up for them!

    And FYI, Warren, when it came to the Bush tax cuts, if you’ll remember, the Republicans were holding the extension of unemployment benefits hostage until Obama extended the cuts. But don’t let reality blind you to your fantasies, now. Here was the deal:

    In December 2010, Mr. Obama reached a deal with Republicans that extended the tax cuts at all income levels through the end of 2012 (they expire Jan. 1, 2013) as part of a package that would also keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy. It also continued tax breaks on dividends and capital gains, and lowered the estate tax.

    But I guess in Warren World, just because Obama compromised with the Republicans on something, that means that the CBO must have been lying all along about the impact of the Bush tax cuts, huh? You know, the CBO that only tells the truth when they say something that Warren likes to hear?

    Oh, and did you want to fix your addition problem about the federal debt under Bush yet?

  • http://rwno.limewebs.com Not the liberal actor

    Re: comment # 9, Glenn, using your “yet their income increased at FIFTY-EIGHT TIMES the rate of increase of income of the other ninety-nine percent?” logic, let’s examine the tax rate inconsistency. Did you know that the “rich” pay 226.33 times the rate of the of the 99%. Please explain how that is fair.

  • Glenn Contrarian

    Warren –

    How could the rich pay 226.33 times the rate of the 99%, when the 99% don’t all pay the same rate?

    Hm?

    Like I told you, when the rich have ALL the money, they’ll pay ALL the taxes…and you’ll probably still think we’re demanding too much of those poor, poor rich people that you call “big losers”.

  • http://rwno.limewebs.com Not the liberal actor

    Re:comment # 11, Glenn, Again, to use your argument, how can you say that the “rich” made 58 times the income of the 99% if they don’t all have the same income? Hm?

    Cuts both ways.

  • Tiffany

    The rich pay MORE than their share!! They’re the ones that EARN their money after busting their behinds in school. Let the burger flippers and cashiers pay more taxes because most of them sleep in their parent’s basements anyway, and don’t have a house or car to worry about. Leave the more intelligent people that did something with their lives alone!!

  • http://cinemasentries.com/ El Bicho

    I am dying to know what Tiffany has done with her life

  • http://rwno.limewebs.com Not the liberal actor

    Re: comment #13, Tiffany, well said! Thank you.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Hussein “Filthy Communist Propaganda” Dreadful

    Warren, did you actually think about Tiffany’s comment before you posted your standard cheerleading response?

    I mean, really? It’s only the rich who truly earn their money? You honestly believe the highway construction worker who puts in hours of overtime in rain, wind or burning sun doesn’t work as hard as the CEO who basically just talks all day?

    The highway worker is never going to get rich doing what he does, even though he pulls more than his weight. Why is that?

  • http://rwno.limewebs.com Not the liberal actor

    Re: comment #26, Doc, you say, “… CEO who basically just talks all day?” Never been a CEO have you? Or ever heard of risk? Plus, who do you think made it possible for the highway worker to have a job?

  • Igor

    What made it possible for the highway worker to have a job was a General Obligation bond floated by the state or federal government. The construction company was just an intermediary hired by the government agency to do some work building/repairing the road. Those bonds are binding on all the citizens of the state or nation. Construction company executives may get rich on those contracts, but without initiative and funding from the state or nation the projects would never even get started.

  • http://rwno.limewebs.com Not the liberal actor

    Re: comment # 18, Come on, Igor, I KNOW you can do better than that.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Hussein “Guillotine ‘em. Guillotine ‘em all” Dreadful

    Warren, I was talking about value of work and effort, not dismissing our hypothetical CEO as lazy.

    And your question works both ways. Who do you think made it possible for the CEO of the highway construction company to have a company to run in the first place?

    But anyway, you’re not answering my question: why does a CEO make more than a construction worker even though they both work just as hard?

  • Zingzing

    I can see a CEO making more than a construction worker. They are the head of a company and their words spell boom or bust for their company and maybe industry. I just can’t see that their work is worth 200+ times what that construction worker’s work is worth. And I can’t see how a CEO’s severance package (because they were fired for substandard work) is worth more than everything said construction worker will make in their life.

    There’s something wrong about things when those who aren’t CEOs will accept this. I guess it would be worth looking at countries where CEOs aren’t paid such gross salaries as compared to their workers and seeing how those economies are doing… Yahoo recently paid 70 mil to their 7th CEO in how many years? How does this company throw that much money around? Desperation?

  • Zingzing

    Re: comment 19, come on Warren, I know you can do better than that.

  • Igor

    Yeah, Warren. How about offering up some real rebuttal, some real facts, some real analysis, instead of just snark?

    You look like an intellectual weakling, Warren.

  • Glenn Contrarian

    Igor –

    Note the glaring lack of any response by Warren to my last comment. What he’s doing is starting from the point of “Right-wing talking points must be right”, therefore anything he (or his surrogates) comes up with – no matter how flimsy or illogical – makes perfect sense to him.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Hussein “If You’re Not a CEO You’re a Socialist” Dreadful

    Re: comment 22:

    No, zing, I don’t think he can.

  • troll

    I am struck by how Zingzing and Warren use such similar moral calculations – the ceo’s relationship with risk – to justify an earnings differential

    American conservatives and liberals really are cut from the same cloth I guess

  • http://www.RoseDigitalMarketing.com Christopher Rose

    I am struck by how bold it is to make comparisons based on two data points…

  • troll

    hey – I’m perfectly happy to limit my comparison to these two ‘data points’ pending the results of a cleverly constructed national survey

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Hussein “Vive La Révolution” Dreadful

    troll gets what I’m getting at, even if no-one else does.

    Why is the risk management-based labour of a CEO valued more than the physical labour of a construction worker or a fast food cook?

    There’s no empirical moral justification for the disparity, when you really think about it. It’s just the way capitalist economies are set up.

    And whether you’re comfortable living under the current economic system or not, it really shouldn’t do anything other than piss you off when smug right-wingers start disparaging someone’s labour solely because of the type of work they do and what they get paid for it.

  • roger nowosielski

    I guess troll was right when he said that winning over Dreadful is a worthwhile and commendable task.

    (A side comment)

  • Igor

    @24-Glenn: I noticed that Warren ran away.

    I’ve noticed a form of rationalisation from Warren and some of his cohorts (Dan?): they just KNOW their beliefs are right, so they reason backwards to invent facts that create those beliefs, then they claim the invented facts as truths. But they’re wrong: that’s not what the basic facts are.

  • Igor

    @29-Dr D.: Indeed, the risks undertaken by the public when they advance the money (thru General Obligation bonds) to finance ALL the infrastructure projects across America cannot be denigrated. The American public undertakes greater risks in public projects than the CEOs ever do.

  • Zingzing

    Troll: “I am struck by how Zingzing and Warren use such similar moral calculations – the ceo’s relationship with risk – to justify an earnings differential”

    I’m not using it to justify anything. But that’s how a company justifies it. Why else would they pay the guy such a disgusting figure? How could they even begin to justify it to the shareholders?

    But whatever, troll… You read what you want to, just like the right wingers on the second amendment. Amazing how similar you two are. Right? Gosh, I’ve made a valid point.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Hussein “Line ‘em Up Against the Wall” Dreadful

    @ #30: Where did he say that, Rog?

  • roger nowosielski

    It was part of personal conversation we had in Albuquerque.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Hussein “We’ll Keep the Red Flag Flying” Dreadful

    Ah, I see.

    The very location at which Bugs Bunny always suspected he should have taken a left toin.

  • Igor

    Actually, CEOs ‘risk’ very little. The money they play with is the shareholders money. You could say that their compensation package is at risk, but the generous terms of Golden Parachutes and Golden Handcuffs eliminates most of that. At least the CEO has striven mightily to achieve independence from risk.

    Even the upside gain is not much at risk since the CEO has contributed to his own Performance Plan and continuously lobbies with the Board to update it.

    You may wonder how CEOs in the news continue to get raises and bonuses despite their companies failings. That’s because they have fine-tuned the Performance Plan so that they always win, and so that downside losses are never as big as upside gains. They’re able to do that because in the heady days of CEO/Corp marriage, everyone is optimistic and bets on the upside. So every Plan has a revenue bonus and a profit bonus and a cost-cutting bonus. Sometimes the CEO makes a play that increases revenues but not profits, and he gets a big revenue bonus. Sometimes revenue falls, but by radical cost-cutting he improves profits and picks up that bonus. One of the best desperation plays is to have a big layoff, in which case you pick up two bonuses and it’s painless (to the CEO, anyway). And even if the company fails the CEO can probably get an even bigger job next time because he’s run a big outfit, and increased his experience by going thru a failure.

    Even in a startup, where the CEO might be a founder and investor, he has usually insured his risks with his working agreement with the Board. Usually by making his employment through his own personal consulting corporation, which guarantees his income and insulates him from the fortunes of the company he is running. Thus, he starts drawing good wages immediately, while other founders will wait.

  • http://rwno.limewebs.com Not the liberal actor

    Re: comment # 31, No, Igor, I did not run away. My arthritis has been acting up, so my production is down.

    Re: comment # 29, Doc, you say, “Why is the risk management-based labour of a CEO valued more than the physical labour of a construction worker or a fast food cook? There’s no empirical moral justification for the disparity, when you really think about it. It’s just the way capitalist economies are set up.” What does “moral justification for the disparity” have to do with anything? If you want to tip a fast food cook (or a construction worker), that’s fine. I certainly won’t stop you. The problem arises when you use MY money to convey the tip.

    Two questions:

    (1) While the CEO and the construction worker or cook may not have the same knowledge base, which knowledge base have the stock holders identified as having the potential to maximize their return on money they have placed at risk? That perception is the basis upon which the CEO is paid more money. And that perception is not 100% correct, but it is certainly high enough for investors to keep trying: hence the stock market level.

    (2) Have any of y’all considered the (re)training necessary if the CEO was to switch jobs with the construction worker or fast food cook? I’m not talking brute strength here, I’m talking knowledge. Could the construction worker or fast food cook achieve the CEO’s knowledge? Could we investors wait that long? If knowledge is the basis for pay, then I contend that the CEO is underpaid, or the construction worker or fast food cook is overpaid.

    Remember, the CEO’s first responsibility is to the stock holders, not to society or to provide jobs.

  • Zingzing

    Warren, could the restaurant’s owner wait while the CEO is trained to cook the way a fast order cook cooks? And is the CEO really worth thousands per hour? Of course not. It’s just the unfortunate way corporate culture has grown that makes it hard to attract good CEO material for less than that.

    The idea that CEOs are underpaid… What planet do you come from?

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Hussein “Goose Steps and Bread Lines” Dreadful

    If you want to tip a fast food cook (or a construction worker), that’s fine. I certainly won’t stop you. The problem arises when you use MY money to convey the tip.

    You’re goalpost-shifting, Warren. I jumped into this conversation in response to your witless ra-ra-ra-you-go-girl response to Tiffany, whose comment, let us remind ourselves, was this:

    “The rich pay MORE than their share!! They’re the ones that EARN their money after busting their behinds in school. Let the burger flippers and cashiers pay more taxes because most of them sleep in their parent’s basements anyway, and don’t have a house or car to worry about. Leave the more intelligent people that did something with their lives alone!!”

    Not a word about welfare or wealth redistribution. The only information conveyed by the above comment is that, in Tiffany’s world, the rich are all national treasures while fast food workers and cashiers are all lazy spongers.

    And to answer your questions:

    (1) This is precisely my point. The CEO is paid more because in a capitalist economy, success, or “doing something with your life”, is measured not by skill but by profit. I quite understand, though, if the alternative way of looking at economic value that I propose isn’t something you’re able to get your head around. Most people can only think of things in terms of the way they are, not other potential ways they could be.

    (2) Again, it is because we have a profit-based economy that the CEO’s knowledge of how to maximize profits is valued more than the construction worker’s knowledge of how to build a good road. There is, as I said, no empirical reason why it should be that way.

  • troll

    Zingzing – if my use of ‘justify’ offends you feel free to replace it with ‘explain’ which works about as well for my purpose

    where are the marxists who should remind us that the real job of ceos and their overcompensated ilk is as society’s ccos – chief consuming officers – and drivers of our innovative high-end economy

  • http://rwno.limewebs.com Not the liberal actor

    All, I want to thank y’all for me finally seeing that your world view and mine are quite different, and never the twain shall meet. I just hope that I have some money left when y’all finish your wealth redistribution schemes. Lady Thatcher was correct.

  • Zingzing

    Well, troll, if you think Warren and I were saying the same thing, you forgot to read most of what was written… You just stopped once you thought you had enough to make a point. That offends me.

  • Zingzing

    Warren, the day when you value the road under your knees half as much as you value sucking the dicks of CEOs will be a sweet day for us all. I have no idea why you have such a hard on for them, but they won’t be bending down to give you a reach around. Still, they might think about thanking you if they even realize you exist.

  • Igor

    @42: all the “wealth redistribution” schemes redistribute money from low to high, from poor to rich, from worker to owner. It’s evident from the statistics on wealth ratios, and even in daily life as the rich get richer and the poor get poorer.

    And the overall effect of those “wealth redistribution” schemes is that the whole of society gets poorer and poorer. Maldistributions in wealth make us all poorer.

    That’s why we have so many economic problems now.

  • http://www.RoseDigitalMarketing.com Christopher Rose

    Thatcher and her evil twin Reagan are responsible for many of the economic problems we face today, to say nothing of the burden of excessive state paranoia and the terrible polarization of political debate we all face today.

    The last 30 years of politics in the West have been a disaster directly inspired by these two clowns.

  • troll

    Zingzing – did I say that you and Warren were “saying the same thing”?

    – I compared how you linked risk and compensation (as in I can see a CEO making more than a construction worker. They are the head of a company and their words spell boom or bust for their company and maybe industry) and found what looks to me like a strong similarity

    seems to me that you were supporting the principle but objecting to the ‘overreach’ in the rest of your comment

    sorry if that offends you

  • Igor

    Being CEO is not a skills-job, it is a people-job. Most CEOs are quite dumb about their products and even cash flows within and in and out of the company. What they ARE good at is influencing people through threats, promises, rewards and love. Especially love. Usually, when you first meet a CEO he tries to woo and seduce you, and usually he’s successful. Really. (That’s one reason they have so many sexual affairs: it’s just practice to them). Even the stoutest cynic can be measured and seduced. It’s hard to reject his entreaties and promises: you don’t want to cast a pall on the operation do you?

    The good CEO, once in office, is good at organizing people into little armies that usually are part of his private informal management plan, but not necessarily in the formal org chart.

    One reason a particular guy is hired as CEO is that the Executive Search Committee of the Board is saying to itself “how good a BS artist is this guy? Can he back his claims with followup arguments and entreaties?” Part of it is “if he can con me does that mean he can con customers, employees, shareholders and suppliers?” It’s kind of a variation of the “bigger fool” theory in stock market operations.

    It’s a myth that CEOs and Boards are trying to maximize profits to shareholders (i.e., through corp profits expressed as dividends). Most companies are operated to increase revenue and growth because the biggest personal profits come from increased stock values. As one CEO said “the trick is to break even at ever higher levels”.

    Operating for profit is usually reserved for sunset companies that seem to have limited growth potential. Or companies that are going broke, which is when you call in a ‘liquidator’ such as Bain Capital to break it apart, rescue the ready assets, dump deadend losers, etc. Even though the commission costs are high, i.e., usually 2% of any new capital and 20% of any eventual one-time profits from asset sales.