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What Future is Best for the Rich?

David Callahan

Let's say you're a member of the upper class. You work as an investor or a banker or an entrepreneur or a highly paid professional (like a doctor, lawyer, or accountant) or a business owner in some industry like retail or transportation. Or maybe you don't work at all, but live off your stocks and bonds. Which economic scenario looks more attractive to you, strictly in terms of how it will affect your bottom line:

Option A. The federal government raises your taxes back to where they were in the early 1990s, so you pay higher rates both on income and capital gains. At the same time, the government engages in another big round of stimulus to help get the economy going again. It also steps up public investment in infrastructure, education, and scientific research. As well, Washington enacts a carbon tax to fight climate change and incentivize the adoption of clean energy technology, a move that raises your energy costs. And there's more: the new Consumer Financial Protection Bureau is allowed to do its job and the rest of Dodd-Frank is fully enacted. Healthcare reform is also fully implemented. And Congress passes the Employee Free Choice Act, making it easier for workers to form unions, and raises the minimum wage to boot. Finally, Washington finally gets serious about helping families by enacting paid family leave and bigger subsidies for early childhood education.


Option B. Your taxes don't rise and the federal government engages in years of austerity. Public investment in infrastructure, education, and scientific investment is cut, along with a range of other spending. Tuition goes up at public universities. Subsidies for clean energy are eliminated and no steps are taken to raise the price of carbon, or your energy costs. The new CFPB is neutered, along with Dodd-Frank overall. Healthcare reform is watered down or reversed entirely. Labor regulations remain weak and unions keep getting weaker. The minimum wage continues to be worth less than it was back in the 1960s. No new protections are created for working families.

Okay, rich person, which scenario looks more attractive to you economically?

Your answer will probably depend on a few factors. If your business depends upon a large number of low-skilled wage workers, Option B may look more appealing because you'll have lower labor and energy costs, fewer regulations, and -- of course -- lower taxes. On the other hand, Option B will also mean slower growth overall and less business as a result, so that's not good. As well, a regime of low wages means that your consumers won't have much money to spend and that's a problem now that they can't tap their home equity any longer. Still, you might judge that you'll still come out ahead under Option B, especially if you believe that small government is the ticket to a stronger economy.

Your answer may be quite different if you work in the "knowledge economy." If you run a technology company, say, you'll be heavily reliant on skilled workers, and reduced investment in education will mean that it's harder to find such workers. Also, fewer public dollars spent on scientific research will mean that your sector creates fewer breakthroughs that spin-off new opportunities for you. And, to the degree that new infrastructure investments -- for instance, into high-speed rail or better air traffic systems -- mean that people can travel more easily to exchange ideas and do business, you won't be happy about cutbacks here. As for labor costs and regulation, chances are that you already pay your workers well and provide them with healthcare and some paid family leave, so none of this is going to make much of difference to your bottom line. Meanwhile, higher energy costs probably don't much matter to you, either, but you may see benefits from a boom in the clean energy tech sector.

Overall, Option A looks pretty good if you're in the knowledge economy. Sure, you'll be paying higher taxes, but you'll come out ahead amid greater overall growth and innovation, and be largely unscathed by the regulatory stuff. Even if you work in finance, Option A may hold appeal, because you'll be doing more deals or getting higher returns amid stronger overall growth. And new regulations will mean less chance of another financial collapse where you could lose your shirt. 

The point of this exercise is simply to say that the wealthy have different interests and are not monolithic. Some benefit more from small government laissez-faire policies and others more from progressive policies.

Still, many on the left assume that the rich only back Democrats who are willing to sell their out progressive principles. That's wrong and anyone who believes that progressive policies are indeed the ticket to higher growth, more innovation, and a richer America that can compete better globally, needs to think in a more supple way about class and politics.