Corporatism is running wild on the east coast
Started a new job in CRE and commercial banking a while ago where 75% of my clients are in the top 1% of wage earners and/or wealth holders and almost all of the rest are in the top 10%. I’m a very pro-free market conservative, always an opponent of corporatism/crony capitalism, and a skeptic of both the right’s claims that the rich pay a bunch of taxes and the left’s claims that the rich don’t pay any taxes. The truth, of course, is somewhere in the middle.
Bearing in mind that 99% of my clients are in the Mid-Atlantic and Northeast (with geographic access to the D.C. and Wall Street power centers), what I’ve found incredibly disconcerting and somewhat disillusioning is how many of the super high earners (not the people earning, say, $250,000 per year, but the people earning at least 7 figures) are making their money. Corporatism. Crony capitalism. Whatever name you want to give it, man after man is making huge money through connections with state, municipal or federal government. I’ve seen government contractors—that is, people who are paid indirectly by federal tax payers—report individual adjusted gross earnings of more than $18 million and report to us that their 2014 is looking good because they are “favored” to win a no-bid or minimal bid contract. I’ve seen real estate developers who send thousands of dollars to local politicians’ campaigns and then these developers, miraculously, win tax credits, zoning disputes, etc.
What’s more is that many hardly pay any taxes as they have sheltered their income through creative accounting, real estate, and S corps and other partnerships--creative rules that they and their predecessors have lobbied for for 100 years. Washington and NYC have basically created mechanisms for wealthy and/or connected people to use force of law, the bureaucracy, lobbying, and rule making to earn outrageous sums of money and then to pay very little tax on those earnings. The idea of raising tax rates to cure this ill is somewhat laughable when these people are making, say, $7 million and paying taxes on $300k. You could tax these people 100% of their taxable earnings and they would pay a 4% real rate.
The point is, the problem to me is clear—big government. The bigger our government has become the more the well connected in these power centers are able to shave money off the top through lobbying, manipulation of the law making process, or through simple contacts. If I want to ensure that my children end up as part of America’s ruling class I need to pay to send them to private high schools, then to elite private universities, and then have them spend a few years working on Wall Street or in the federal government while giving plenty of money to the Republican and Democratic politicians. I really don't think this is what our founding fathers envisioned for our country.
This is shocking to you? This is why I donate to political campaigns.
It's not "shocking" to me--I just didn't think it was as rampant as I've witnessed. I don't think I've seen an "honest" 7 figure earner yet.
//www.youtube.com/embed/_T7T-0iR2Sw
A lot of the money our government spends is on defense.
If we want a smaller government, we need to start cutting the military.
In any case, this problem was much worse 120 years ago. The US got through it. And in all likelihood, your kids and mine will be replaced by machines.
I seriously doubt there was more crony capitalism 120 years ago prior to the advent of the federal income tax that exploded the size of the federal budget. Federal spending was 3% of the GDP in 1900. That sort of limits one's ability to influence government for profit.
I think that in 20 years, technology will allow us to move to a system allowing more direct democracy, with voters eventually setting objective functions for state and federal governments. This is something that was impossible 250 years ago. This will allow the government to be much more efficient. Perhaps more interestingly, one day it may be more efficient for a large, centralized computer to manage the economy than the free market.
The problem is, you have an entire class where government is their "kingmaker" at the expense of the masses. You have tens of thousands of people who are legitimately getting rich off of lobbying, connections, rule making, political donations. And these people are concentrated in America's 2 most important cities--NYC and D.C., the finance capital and political capital of the country. They set policies that benefit themselves at the expense of everyone else. I don't want to make this political since it's both sides, but as an example, take Obamacare--the insurance companies supported the ACA because they stood to make billions, and now they are being bailed out--the federal government is going to pick up the tab for medical claims over $45,000. A well connected Canadian IT firm won a 9 figure, no-bid contract for healthcare.gov and completely screwed the site up. The Ivy League graduate owners of the contracting firm (well connected through alumni) made millions personally at the expense of literally everyone else.
It's frightening the level of legalized corruption that takes place.
And the IT firm in question has been thoroughly embarassed.
The reason direct democracy has failed historically is that it doesn't have a fast enough election cycle. If a petition and vote can be conducted in a one week period at minimal expense, California can undo bad referendums faster and more efficiently.
But the beauty of computerized decision-making is it allows us to have a bigger government without all of the problems. As computers replace human beings, most of the remaining economy becomes economic rent. Theoretically, we could tax this rent at high rates and redistribute the money without the same adverse effects that socialism had in the 1900s. (I'm not necessarily advocating this- just observing that technology and the replacement of labor favors socialism. And if everyone gets the same benefits from the government and does the same work- nothing- nobody can cry unfair as you allege the current system is.)
Also, if you work at a commercial bank, your kids probably won't be able to get into a top school. Admissions there has also become increasingly political, too. So you're kinda locked out of the system there too. Funny how in socialist countries admission to the top schools is driven largely by a standardized test.
DC, honestly it sounds like more socialism would solve most of the problems you allege are wrong with society. I'm not sure why you're a fan of capitalism when you allege it's just crony capitalism.
Oh well, back to my rusty Honda and moderate Illinois Republicans who don't need to shut down the government and don't think the federal reserve is privately owned or that social security is a ponzi scheme.
Thoroughly embarrassed? Your joking right. I used to think you were smart and rational. CGI Federal has had negative performance ratings on over 80% on the around 100 technology projects they have done for the US government. It doesn't mean anything if the completely fuck it up. They will just get the next project that comes down the line. Sure people might talk about the company for a couple of weeks until the next FBI planned terrorist entrapment activity happens. If you really look into it. Around 95% of federal projects that have budgets over 10 million dollars fail to achieve most of their stated goals at the projected budget. The entire system is a huge cesspool of corruption and connections. Take a look at the NSA Prism program leak. That is going to turn into a huge bonanza of federal contracts for the storage of the information because they will keep collecting it, only now it will have to be stored by a private company. The leaking of the program was more than likely done to provide a kick back to one of the data storage companies that the CIA has provided funding for. If you didn't know the CIA has what is essentially a venture capital arm to fund the advancement of companies that will allow the CIA to at any point in time tap into any conversation being held anywhere. In the next 20 years everything that plugs into an outlet will be in some way connected to the internet and will have the ability to record and transmit data.
What's CRE? perhaps smaller government will shrink the problem. however, more broadly, this is what has gone on forever, and elite few rig the system in their favor. where has this Not happened? Furthermore, it seems to be less appalling in countries with larger government relative to GDP.
Direct democracy is a proven failure. California suffers from a complete inability to govern because of its inefficient direct democracy system. I definitely don't see direct democracy as a method of improving government efficiency.
And to think that people thought I was crazy when I said there is more corruption here in the USA than there is in Africa.
I want to know who told you, you were crazy. They are just extremely ignorant.
It was in one of the threads about investing in Africa.
Sure, and then we can have a computerized government that knows where the wealth is and redistributes it fairly.
Technology and Socialism will be able to solve all of the things the far-right thinks is wrong with the country. All of the crony capitalism will die and be replaced with a benign computerized authoritarian socialist state.
In the meantime, I'm going to grab a bucket of popcorn and watch the political clown show that the tea party has become scream about non-existent socialism and cronyism in a government that dramatically underspends.
I'm not sure if this is serious or tongue-in-cheek. Cronyism is non-existent, the US federal government drastically underspends, and all will be fixed when an authoritarian artificial intelligence dictatorship benevolently manages society? Umm, ok?
In this area the US is still light years ahead of other countries especially in the third world. I was at one of these countries recently and you can get pretty much whatever you want if you pay up...I was literally really close to just handing the airport people some cash so I could cut in line.
Also it goes without saying that if you want to make the US government smaller the #1 place to start would be the military.
Paying off the airport people to be able to smuggle some for of whatever out of the country isn't real corruption in the form of how I view corruption. That's just people who are morally corrupted on an individual level. What is real corruption is using a "donation" to influence X and then expecting X in return. Sure they are both "corruption" the difference in the former is contract between two parties, the latter is a contract with two parties that has positive impacts and negative impacts on parties that are unrelated to the transaction itself.
That's basically the two-party US political system in a nutshell...both sides preying off different special interest participants in an effort to seize power and control. Total joke, that's why I don't vote.
Of course the U.S. isn't a third world country--we don't have rampant illegal corruption with corruption laws that go unenforced by government. The U.S. has rampant LEGAL corruption where players impact public policy for the masses so that they can enrich themselves.
The best way to reduce legal corruption is to have Congressional term limits and for there to be a proactive, independent, non-partisan media that publicly shames public officials for their quid pro quo behavior.
Direct Democracy? I shudder. And why do we worry about fairly redistributing money? We spend so much time babying the people who contribute the least to society.
Because maybe those minimum wage guys making your burger do contribute to society; a la making your food?
Also, the fact that you seem to imply we shouldn't worry about "fairly" redistributing wealth is a little disturbing. So we should unfairly redistribute it? (Just giving you a hard time about your verbiage)
By contibute I mean make the world a better place. How about subsidizing people who want to study medicine or biology. People who are teachers even. That is what I mean. Yeah, burgers are nice, no doubt, but I am taking about higher order good.
Yes, should have clarified better. What I mean is I think the government should focus less on redistribution. IMO, it is arbitrary and not "true" redistribution. Let the markets sort it out more than the government meddling with things.
I have a friend who's a realtor. Over the summer we went out on his boat and drove around the Long Island Sound. He showed me all the waterfront mansions in the area for sale. One of them was a $13 million dollar house owned by a guy who builds highways. I can certainly see where you are coming from.
Yeah, I mean, I don't begrudge people their success, but one of my clients owns a government contractor that does $200 million in annual revenue. The owner pockets $18.5 million each year, which is fine except that it's tax payer money. After paying 100% of his/her expenses--overhead, salaries, direct costs--this person pockets $18.5 million of public money from no-bid federal contracts, and to me that's the key--the contracts are no- or nominally-bid contracts with an enormous profit margin. Obviously the persons authorizing these contracts aren't doing their homework or, more likely, they've been told by powerful politicians who they are supposed to hire.
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