Why rich people are good for the economy... even filthy rich people

One thing that annoys me about the current tax debate is, of course, people like Joe Biden who shout admonishments like "It's time to be patriotic."  I think most people can see past the us vs. them bullshit on that one, at least eventually.  I mean, it just has too much of a Nazi ring to it I hope.  You might not think it's fair that people are paid a lot more than others; but throwing around words like "patriotic" just seems so... Dick Cheney.

That is not what annoys me most though.  It's the complete unwillingness or inability of most commentators, and the rich themselves, to stand up for themselves.  The replies are always on the defensive... like the current Economist debate about highly "progressive" tax rates.  The argument is mainly founded on assumptions about effects of high taxes on productivity, but the antagonist, Cato's Chris Edwards finally flesh-wounds a point almost by accident:

It still makes no sense to impose high taxes on them because those entrepreneurs are more likely to use the cash productively than the government. Indeed, from the beginning of Silicon Valley, wave after wave of millionaires have funded the next wave of business successes through angel financing and venture capital. Obviously, that would not have been possible under Piketty's 80% tax rate.

It's an expanding pie, which Edwards says repeatedly.  But who expands the pie?  Many people would like to think government does, and there is some evidence that infrastructure is a net good.  But looking at the proportion of medical advances and high-tech companies that come out of countries with relatively stable and liberal (that's classically liberal, sorry) governments one has to ask: who expands the pie rapidly and efficiently?  A comment on the sidebar:

Picketty [the tax proponent] tends to ignore the hardly theoretical expanding pie, like the expanding universe, which is accomplished only by these driven, high-earning individuals who, through no altruistic intent, do not get enough credit for their socio-economic contributions. 

It's people with lots of extra cash, and I would argue quite vehemently that, since these people are also the greatest charity-givers and philantropists, it is not all with lack of altruism.  A friend of mine who should know better dropped some comment about how the rich hoard all the money, like a) it's some fixed-size thing and b) they're stuffing it in a mattress.  Rich money goes into stocks and other investments, which directly leads to employment.  Hence the high unemployment in places like New Deal America, where the rich were taxed at extremely high rates near 80%; and modern-day Europe, with similar levies.  As a "poor" employee of a start up that is financed by millionaires, I see this every payday.  Rich buy things, things that the middle class makes.  Ask any small businessman, and he will tell you he aims to get rich clients.  Rich clients are early adopters and luxury buyers, so they fund the development of mass-market goods.  

People balk at all this money going through the rich man's hands, but not at many times that amount going through a politician's hands.  The argument is also made by a lot of pro-government people that it should be channeled for the good of society.  But nobody really knows what that is, and I trust a million investors and philantropists to address problems efficiently much more than I trust bureaucrats and politicians... if only because the investors and philantropists are spending their own money.  The rich are not black holes where wealth goes to die; indeed quite the opposite.  They are by and large where wealth goes to make babies.     

The rich need to re-cast themselves as great redistributors of wealth.  Get the focus off how they deserve their money or how they earned their money - even a stout libertarian like myself knows that much of it is a product of luck.  Get the focus on the people that money flows to - the charities, the churches, the small businessmen, the zero-interest tuition loan, the blue-collar job saved by the investor with the wherewithal to buy low in a recession.  Above a certain point, it stops being personal wealth and becomes something much bigger and more inclusive... after all,  most rich people are well aware they can't take it with them.  That point is made by a commenter whose conclusion I disagree with:

Dear Sir, If you were to decide for ANY system, rich ,poor tax, social giving, war machine, what each of us have to ask, if I put X dollars into it, what will be the end product. If the STATS ,shows that one group gain with no limits, then it is wrong. if however, it balance itself i.e for example if the poor have enough to eat, send their kid to a good school, be able to see a doctor when they are sick,without losing the roof over their headhave a roof over their heads, the rich can have ALL THE GOLD ThEY WANT ,they can eat it, sleep in it and die in it, however since this not the case, we need to tax the rich.

There is certainly a level beyond which a "poor" person has no right to complain.  This commenter, like most of what I call the 80/20ers, employs a moving scale for which nothing will ever be good enough as a floor.  For instance, show a poor Briton to a middle-class Angolan and I guarantee who will switch places with whom (a great thing about immigrants... again, another post).  And I can understand that, as a society gets richer, it is moral to move the floor up as well... just because American bums live like Haitian kings, doesn't mean it's a good life.  But the poster makes the usual 80/20 failure of imagination by implying that it is the government that must do this.

In fact, government is quite bad at getting people out of poverty; especially when compared with accountable charities and, um, corporations that offer jobs for unskilled labor.  That's a topic for another post.  It is the rich who fund charities at by far the highest rates, except when you tax them for doing so.  It should be no surprise that they are not all or even mostly evil people.