The (marxist) social engineering goals of the inheritance tax

A response to this column by Sebastian Malleby.

The federal government faces a future of expanding deficits. Thanks to the baby bust and medical inflation, spending is projected to rise by nearly 3 percent of gross domestic product by 2030, a growth equivalent to the doubling of today's Medicare program. What is the dumbest possible response to this? Take a source of revenue and abolish it outright.

Yes, this is the dumbest response. But only if, as a solution to expanding deficits, one looks only at the revenue side of the equation. Here Malleby commits a logical fallacy: false dilemma. There are two sides of the equation: the revenue side and the expenditure side. Malleby focuses only on revenue. We could also improve our deficit problem by focusing on expenditures. The unquestioned assumption here is all of the expenditures are justified. Are they? In fact, they are not? Most of what the federal government does when it comes to spending is unconstitutional. Of course, very few people actually believe that, mostly because they are net beneficiaries of federal government largesse. Then, there is the issue of the ethics of talking something from someone only because he has more of it to take than most everyone else does. Talk about a tyranny of the majority! And look at that last sentence. The wealthy, unlike the rest of us, are not human beings with a right to private property which, like the rest of us, they can bequeath to their descendants as they please. (I can, after all, because I don’t fall into the same tax bracket as "the wealthy." Lucky me!) No, the wealthy—merely by virtue of being wealthy—are merely a source of revenue, hosts, as it were, for a myriad of parasites. The wealthy exist—thanks be to whatever God you may believe in. And they exist for the benefit of the non-wealthy. Malleby seems to think that we have a right to some portion of the heritable property of the wealthy. By logical extension, this means that we have a right that wealthy people exist. Wealthy people have a duty to exist—so that we can take their wealth from them. And let’s be clear: we can take all of their wealth from them; and anything that we decide not to take from them is a gift to them for which they ought to be grateful.

The nation faces rising inequality. Since 1980 the gap between the earnings of the top fifth and the bottom fifth has jumped by almost 50 percent. The United States is by some measures the most unequal society in the rich world and the most unequal that it's been since the 1920s. What is the dumbest possible response to this? Identify the most progressive federal tax and repeal it.

A question: When the United States were less unequal was there even an inheritance tax? Did we, as a society, enter "the rich world" by transferring wealth?

The nation faces the prospect that inequality will damage meritocracy. When the distance between top and bottom widens, it becomes harder to traverse the gap; people of low birth are stuck at the bottom, and human talent is wasted. What is the dumbest possible response to this? Take the tax that limits what the super-rich pass on to their children and get rid of it. Send a message to hereditary elites: Go ahead, entrench yourselves!

Malleby wants to talk about meritocracy? Did his parents never, ever give him anything that was theirs? If so, they how did he merit it? Was he never given any Christmas (or Chanukah) gifts, or any birthday gifts? If they were gifts, then he didn’t merit them. Think about this. The wealthy—most of whom actually worked for a living, by the way—were taxed on the money they earned. That very same money is then taxed again when they leave it to their heirs. And why? Because Malleby and the rest of his marxist economics-of-envy loving ilk, think that the super-rich ought to be limited in what they pass on to their children, the "hereditary elites." On his view, no one who doesn’t "merit" shouldn’t receive. Well, they shouldn’t receive too much anyway. And Malleby and his ilk—benevolent thieves that they are—will decide how much is too much. (And you’ll be thankful that they let you keep anything, by God!) He’s talking about merit? He wants to take money from the heirs of "the wealthy" (because they don’t "merit" that wealth: they did nothing to earn it after all. And he wants to give that money to—get this—others who also didn’t earn it! It’s okay if he and his fellow travelers take from one group of "unmeritorious" and give to another group of "unmeritorious." You see it, don’t you? Malleby doesn’t have a problem with damage to meritocracy. The people to whom he wishes to distribute all that unmerited wealth are no more deserving of that wealth than the people from whom he wishes to take all that unmerited wealth.

For most of the past century, the case for the estate tax was regarded as self-evident. People understood that government has to be paid for, and that it makes sense to raise part of the money from a tax on "fortunes swollen beyond all healthy limits," as Theodore Roosevelt put it. The United States is supposed to be a country that values individuals for their inherent worth, not for their inherited worth. The estate tax, like a cigarette tax or a carbon tax, is a tool for reducing a socially damaging phenomenon -- the emergence of a hereditary upper class -- as well as a way of raising money.

Well, some people regard the existence of God as self-evident. So what? Government has to be paid for, yes. But when you read Malleby closely, he isn’t talking about paying for government. He is talking about transferring wealth and social engineering. Not only that, but if, as Molly Ivins claims, this tax affects only 1 percent of Americans, how significant a hit can revenues possibly take if they are denied that paltry 1 percent? To me, this brings into question the left’s oft-repeated assertion that the wealthy aren’t paying their fair share. I mean that tiny fraction of Americans must be financing one huge portion of last year’s $2.119 trillion revenues, if we are going to suffer all the societal ills which Malleby forecasts. As Molly Ivins would say: "Sheesh!"

But now the House has voted to repeal the estate tax, and the Senate may do the same this week. Republicans are picking up support from renegade Democrats, such as Blanche Lincoln of Arkansas, Bill Nelson of Florida, Ben Nelson of Nebraska and Max Baucus of Montana. Several more may go over to the dark side if a "compromise" bill, which would achieve nearly everything that abolitionists dream of, is introduced in the Senate. President Bush, who has already muscled a temporary repeal of the estate tax into law, would be delighted to sign a bill making abolition permanent.

If the abolitionists succeed, some other tax will eventually be raised to make up for the lost revenue. So which tax does Congress favor? The income tax, which discourages work? A consumption tax, which hits the poor hardest? The payroll tax, which is both anti-work and anti-poor? Really, which other tax out there is better?

Why make up for the lost revenue? Another false dilemma. Why not let government tighten its belt like everyone else has to do? Malleby’s gross assumption is that everything that the federal government presently does it is doing legitimately. If you deny that, as I do, then government should stop doing those things that it does not legitimately do. And when it does so, it will need much less in revenue. Of course, one of the things that government does most is transfer wealth. Obviously it must replace those revenues, since those revenues are presently being transferred from the net producers to the net receivers of those revenues. Malleby also claims that the income tax discourages work? Now that’s an interesting assertion is it not? The inheritance tax is a tax on income. Oh, I know it’s not a tax on the heirs’ income. But it is a tax on the testators’ income. Remember, that income was taxed when it was earned; now it is being taxed again. If you knew you were going to work all your life, only to have what you saved taxed again, why work? How is it, Malleby, that an income tax discourages work, but not an inheritance tax? Is it because we all take pleasure in knowing that our heirs are going to be taxed both on their merited income and on their "unmerited" income when we die? Finally, whether or not a consumption tax hits the poor hardest will depend upon that tax rate, which will further depend upon what government is doing with those revenues. Obviously, if government stays in the wealth-transference business those revenues will have to be pretty high; and so will that consumption tax rate. Tell you what let's do. Let's just take all of it. Since the heirs of the rich don't merit any of that property whatsoever, let's just have a 100 percent inheritance tax. You can save and buy as much as you want, but when you die, game over; it all belongs to the government.

The abolitionists don't respond to this question because there is no convincing answer. Paul Volcker, the former Federal Reserve chairman, has written that "we would be hard-pressed to find evidence that, compared with the alternatives, a reasonable estate tax significantly discourages work or innovation or savings." In other words, killing the estate tax and raising some other tax instead would damage the economy. And that's before you take into account the positive distortions introduced by the estate tax, such as more social mobility and higher charitable giving. Charitable bequests will fall by at least a fifth if the estate tax is repealed permanently.

Well of course there’s no convincing answer. Once you’ve formulated as a fundamental premise that wealth must be transferred from one group (the undeserving "elites") to another group (the "deserving" poor), there could not possibly be a convincing answer to the question. The main problem you are working on has, by your own admission, little to do with funding government (except as an agent of wealth transference). The main problem you are working on, as you have just admitted, is social engineering. It doesn’t matter what sort of answer you receive: the heirs are just not entitled to that money because of your social engineering goals. Once you’ve determined that, there’s no need to worry about how to replace the revenue because you will still want to limit what the super-rich can leave to their "elite" children—even if those revenues could be conveniently replaced.

People often remark on the perversity of popular support for estate-tax repeal. A majority wants to abolish the tax, even though only the richest 2 percent of households have ever had to pay it. Yet this shoot-your-own-foot weirdness is easily explained: Most people just don't know that, under the law's current provisions, a couple can bequeath $4 million without paying a penny to the government.

Okay, so Ivins was wrong: it’s not 1 percent; it’s 2 percent. But the question I raised above is still valid, I think. If the loss of what this 2 percent contributes to federal revenue is that great, then aren’t the rich already paying more than their fair share--or at least their fair share? And if this amount isn't really all that much then the issue isn't revenue; it's social engineering. But then, we've always known that, haven't we?

But I'm fascinated by the spectacle of elite support for this policy. How can the president and the abolitionists in Congress, who understand the tax and its details, possibly want to kill it? They all say they accept the principle that the tax system should be fair -- Bush officials are constantly claiming that their tax cuts are progressive. They all accept the principle that free trade and competition get the best out of American firms, so what about subjecting rich heirs to competition from ordinary Americans?

Well, I am hardly an elite; and I support this policy because I believe that the rich should have the same rights that I have. Because I am not rich, my heirs won’t be "penalized" the way Malleby thinks that the heirs of the rich should be. Note that he talks about merit. Merit can be applied to many things. An employee who gives an honest period of work merits his wages. A murderer merits the death penalty, or at least life in prison. Malleby believes that the heirs of the rich don’t merit their parent’s estates. But note that he apparently believes that mine merit their inheritance. He believes that what "elites" merit is a fine, a fine for being the heirs of wealthy parents. And someone else, who doesn’t merit that money either, is going to get it nonetheless. And this, because Malleby has marxist social engineering goals. And damn your property rights, Mister. (Remember: marxists think that all profit is exploitation. And what is an inheritance but a form of profit?)

Repealing the estate tax is like erecting protectionist barriers around the hereditary elite. It is anti-meritocratic and unfair -- and antithetical to this nation's best traditions.

Well, Malleby, rights aren’t merited. The earner has the unmerited right to dispose of his property as he deems appropriate. Besides, there is only a hereditary elite if one’s heirs don’t squander the inheritance. If they don’t then, in the long run, they earn it. And also, Malleby throughout writes as if we have a static society: once rich always rich. When the fact is that we have a dynamic society: there are rich people now who were not rich when they started out in life; and they got their riches the non-Kennedy/Rockefeller way—they earned it. If Malleby really wanted to decrease the gap between what constitutes rich and poor he should seek to expand the liberties of people to create wealth for themselves, rather than engage in economics-of-envy, government run wealth transfers from one group of unmerited to another group of unmerited.

Malleby believes that property rights should be subject to some (reasonable?) limitations. I’ll just bet he doesn’t feel the same way about his freedom of the press.

More fodder from Molly Ivins

Commentary on certain parts of this column by Molly Ivins. (I’m picking on her lately for two reasons. First, she demonstrates vividly one of my favorite theses about liberals: they don’t think, they emote; they don’t analyze an opponent’s position, they caricature it; they don’t argue, they insult. Second, she lives in my home state, the Great State of Texas.)

AUSTIN, Texas -- Thank goodness the Republicans are around to tell me what to worry about.... [O]f great concern to Republicans is God Almighty, who...has been elected chairman of the Texas Republican Party. That's what they announced at the biannual convention in Fort Worth this week: "He is the chairman of the Party." Sheesh, the Democrats couldn't even get Superman.

Quite right, the Democrats can only manage Supermouth. (Sorry. Couldn’t resist.) Besides, what exactly is so bad about God being the chairman of the party? It’s an overstatement, of course. I wouldn’t have made such a statement. Assuming that there is a "God Almighty" having "great concern" for him seems pretty rational (rational, I mean, if one grants the assumption, which I explicitly do). Indeed, one could say that God Almighty is, as theologian Paul Tillich would put it, of ultimate concern. Of course, to say that God Almighty is of ultimate concern is one thing; to say that He is the chairman of a political party is a bit over the top. I’ll grant Ivins that much.

Also weighing down the nation with a heavy burden is the estate tax, which the Senate will try to repeal this week. The estate tax applies to around 1 percent of Americans, and I have yet to find any record of it costing anyone a family farm or business. It affects only very, very, very rich people, of whom you are probably not one. And they don't, actually, need another tax break.

A theme which runs throughout her column is that Congress need only work in areas in which there is some sort of crisis. If only they would. (But then there would be the obligatory debate over what constitutes a crisis. But I digress.) Look at the logic of her argument. If something applies to, and hence only affects, 1 percent of Americans then no one need bother about it. Would she like to have the same logic applied to something like rape, if only 1 percent of American women were raped? (Note to liberals: If you think I just compared getting taxed to getting raped, then you missed the point of comparison.) Could she live with Congress (or the Texas state legislature) taking no action on the matter and justifying their inaction on the basis that only 1 percent of the population is, or would be, affected by the action? I doubt it. My objection to the estate tax—and I am by no means wealthy (ask The Oracle)—is that I believe it is ethically wrong. That’s right: it’s wrong. I believe it is stealing. It is taking from someone for no other reason than that he has it to take from in the first place. And you’re right, Molly, the rich do not need another tax break. They deserve another tax break. They deserve a break from any and all taxes that are justified on the sole basis of their being rich. Stealing is wrong, even when the victim can "afford" to be stolen from. I see no reason why the wealthy should be subjected to a tax that, by your own admission, no one else is subjected to, or affected by.

These are the things we are supposed to be worrying about, and you notice that it frees us of quite a few troubles we might otherwise fret about. The war in Iraq? No sweat.

She’s lying. She has to know very well, that the war is probably the single greatest reason for the President’s low popularity rating. No sweat? The media call him on the war every opportunity they are given—or can take. As Ivins herself has most recently done.

Impending war with Iran? We're carefree.

The recent move of the administration (which has really irritated The Dragon Master Gunner) to negotiate with Iran on the issue of nukes constitutes being "carefree"? "Carefree" must not mean what I think it means. Really, this sort of move strikes me as an honest, if misguided, attempt to seek to avoid unnecessary conflict. It strikes me as being equivalent to telling Iran that they have until the count of three and then counting off, One, one-and-a-quarter, one-and-a-half, one and three-quarters, one and seven-eighths...." Carefree? Please.

The economy? Hey, did you see that employment report? Well, ignore it.

Well, despite it’s having become standard practice to do so, I don’t hold the federal government constitutionally responsible for anyone’s employment status. I don’t find either the power or the authority on this matter to have been granted by the Constitution to the federal government. And as we all know, liberals are all about following the Constitution. (We’ll see Ivins express concern for the Constitution below.) However, I will grant that other, legitimate actions of the fed. Can affect things like employment—things like the minimum wage, for example. Interestingly, given their concern for employment, despite reams of evidence and numbers-crunching (some of which I’ve done myself) which demonstrate that minimum wage actually puts people out of work we still have this harmful law. Democrats still insist on there being a federally mandated minimum wage. It staggers the imagination. And only someone who hasn’t tried to manage a business could continue thinking that declaring a minimum wage—without a universal price-freeze (i.e., a freeze on the prices of all goods and service in the nation)—will actually solve anything. (Incidentally that price freeze wouldn’t work either, unless Congress could find a way to institute a worldwide price freeze. I don’t need to explain why, do I?)

Budget out of control, shipwreck ahead? Never mind -- Bush doesn't. Worst class divisions since the Gilded Age, rich so much more enormously richer than everybody else, country starting to get creepy? Don't worry, be happy. Torture, massacre, extraordinary rendition, hidden gulag of prisons in foreign countries, Guantanamo, and massive violations of international law, American law and the Constitution? Well, you can see why gay marriage is a far greater menace.

Well, if the President doesn’t "mind," it may be that he just knows more about finance than a journalist does. (Unless being a liberal with a journalism degree makes one more of an expert in these matters then being near-conservative with an MBA.) I don’t know. The budget is out of control? I’m not sure how we define "out of control" here. Last year (the last year for which I have figures at my fingertips) revenues were $2.119 trillion and expenditures were $2.466. Clearly, expenditures exceeded revenues, but only by 16 percent. Granted, expenditures should not exceed revenues; but I just cannot agree to a characterization of our budget problem as "out of control" when the variance is 16 percent. Given that fact, I don’t think it’s exactly a shipwreck, either. And as for those pesky class divisions and the gap between the rich and the poor, although I do think it’s a problem, I also don’t see a responsibility or an authority in the Constitution given to Congress to fix those problems. Besides the rolls of the rich and the poor are not fixed. Some who are poor become rich, and vice-versa. Regardless, of all that, however, nothing about the attempt at a federal marriage amendment makes gay marriage a "greater concern." It may be a lesser concern, but that doesn’t preclude its being dealt with concurrently with other matters. After all, I doubt very much that Molly Ivins would be less critical of the federal marriage amendment if the budget problem were fixed the gap between rich and poor closer, there were no torture, massacres, gulags, or violations of international and domestic law. Assuming those conditions, would she then say, "Okay, now you can try to pass your amendment"? Sure she would. And I’m really a higher being in the TTLB Ecosystem, not an insignificant microbe. Really.

By the way, I thought the Constitution was a living, breathing document. That’s what originalists are told when we insist on a close reading of the Constitution. Now, suddenly, the living, breathing document is so fixed as to have inflexible provisions violations of which a President can be held responsible for. And certainly, if our Constitution is a living, breathing document, certainly the body of existing international law is, as well. Or, again, do these things have a fixed meaning only when a conservative is being judged against it?

Wipe out for the environment; hundreds of regulations and laws changed to favor those who exploit and damage natural resources; all so common, no one is keeping track of them all? Let her rip.

Rather than get into whether the environment is being harmed, I just want to focus in on her use of the word, exploit. In my post on oil profits, I explained how, on a marxist view, profit is evidence of exploitation. (And I have no doubt that Ivins is in the heart of her bottom a marxist.) The one thing I gather when left-liberals talk of someone’s "exploiting" and "damaging" natural resources, is that what they most object to is someone’s making a profit from natural resources. Marxists (I speak as a former marxist, recall) view natural resources as belonging to the world. Any single entity who makes a profit off of those natural resources is, therefore, a thief.

Global warming? In the first place, it's Al Gore's issue. In the second place, it's a downer. In the third place, who cares if it's too late in a few years?

Actually, that isn’t the argument. The argument, even if false, is that there is no global warming in any significant sense of the term. There isn’t global warming just because a few scientists say there is any more than there isn’t global warming just because a few scientists say there isn’t. The issue is still highly and hotly contested and Republicans choose not to pretend that the "jury" isn’t still out on the question. Liberals think that once they have decided where they stand on an issue, the discussion is closed.Oil crisis? Ha! What oil crisis? You want a $100 rebate you can then give the oil companies? Hey, we're going to drill in the Arctic National Wildlife Refuge, and that should see us through ... oh, about nine months. Windfall profits? You think the oil companies are ripping us off for windfall profits? Who? ExxonMobil? Why, they would never!
Ripping us off? To make a mere 9.7 percent profit? (Bear in mind, again, that any profit, on a marxist view, is evidence of exploitation. Any profit is then a rip-off.)

I believe what we have here is a difference over moral values.

Finally, something we can agree upon!

The Republicans are worried about the flag, gay marriage and the terrible burden of the estate tax on the rich. The rest of us are obviously unnecessarily worried about war, peace, the economy, the environment and civilization. Another reason to vote Republican -- they have a shorter list.

Notice what she does with an assertion that is actually true. She says, "The Republicans are worried about the flag, gay marriage and the terrible burden of the estate tax on the rich." And it’s true, Republicans are concerned about those things. But Ivins actually writes so as to communicate the idea that "The Republicans are worried only about the flag, gay marriage and the terrible burden of the estate tax on the rich." See the difference? Ivins tacitly asserts that Republicans are not concerned about war, peace, the economy, the environment and civilization. And why? It can be only because Republicans disagree with Democrats about the solutions to these problems. Typically liberal approach: If you disagree with us about what the solutions are, it can only be because you disagree with us about what the problems are.

The only apparent reason to vote Democrat: Democrats are right (so to speak), and Republicans are wrong—because Democrats say so.

Thanks for clearing that up for me, Molly.

I just have to comment some more

I had wanted to provide in-text commentary on the aforementioned column by Molly Ivins

Last week, Bush visited Yuma, Ariz., to tour a portion of the U.S.-Mexico Border by Border Patrol buggy. Maybe Jorge was doing a little measuring for the $3.2-million-a-mile fence the Senate recently approved, which I guarantee will be really helpful. Are they insane? As Arizona Gov. Janet Napolitano observes, "Show me a 50-foot wall, and I'll show you a 51-foot ladder."
Attention burglars!!! Easy mark here: Molly Ivins doesn’t lock her door when she’s away! After all, if she shows you a door lock door, you’ll show her a picked lock.

Meanwhile, Republicans in the Senate have constructively declared English the national language. That'll fix everything. Every foreigner at our borders will stop and say: "Gosh, ma foi! English is the national language here. Good thing to know. I'll begin speaking it immediately."

Now, see, this is another example of the mischaracterization of Republican postitions in which liberals must engage in order to have any argument against Republicans. This is called a strawman argument: arguing against a position which your opponent does not hold. The motive for the English-as-national-language legislation was never stated as a solution to the immigration problem. The legislation was supposed to be pursuant to the goal of assimilation of immigrants. And certainly, ever we stupid Republicans know that no one starts speaking a language foreign to them just because that language happens to be the official language for conducting state business.

Naturally, in Texas, National Laboratory for Bad Government, we do it all first and worst. We started with this dandy plan to outsource applications and enrollment for social service programs such as food stamps and Medicaid. In theory, we were to save millions -- though I never could understand it myself. You see, Texas has one of the cheapest state governments on the continent, but when we hire outside contractors, they expect to make a profit. Add profit, add cost. Oh well. So the state hired this firm based in Bermuda on an $899 million five-year contract. So far, the health and human services commissioner has been forced to ask 1,000 state employees who were scheduled to be laid off by the end of the year not to leave after all -- and to offer each of them a $1,800 bonus to stay. Oops. Among other errors, the private consortium mistakenly dropped 6,000 children from the children's health insurance program. The state comptroller (who is running for governor against the incumbent, Goodhair Perry) says the program is "a perfect storm of wasted dollars, reduced access to services and profiteering at the expense of Texas taxpayers."

Wow. She has a real point here. After all, we know that government-run operations are smoother than a baby’s freshly powdered behind. (And when they aren’t, we also know that the problem is not the system; it’s the people running the system, specifically Republicans. A typical, leftist rejoinder.)

With a record like that, of course, Republicans want more outsourcing. Ted Koppel suggests in The New York Times that we outsource war: "Blackwater and other leading security companies are seriously proposing to officials at very high levels of the government that their private forces could relieve a number of the burdens now being shouldered (or not) by American troops. ... The Pentagon ... is nonetheless struggling to come to terms with what it now calls 'the long war.' There is every expectation that the fight against global terrorism and the most extreme forms of Islamic fundamentalism will last for many years. This is a war that will not necessarily require aircraft carriers, strategic bombers, fighter jets or heavily armored tanks. It will certainly not enable the United States to exploit its advantages in nuclear weapons. It is a war, indeed, that favors the highly mobile and adaptive fighting skills of the former Special Forces soldiers and other ex-commandos ..."

"Will"? Hell! Did and does. This is a war that is being fought with the wrong tools -- and, in Iraq, at the wrong time, in the wrong place and against the wrong enemy. It never did call for tanks, jets or carriers -- just a combination of good detectives and good intelligence. In other words, smart, clever people with language skills. All of which we have fully available to us because of ... immigration. Lebanese, Iraqis, Iranians, Syrians, Pakistanis and Indonesians have all become Americans, and in so many cases we got the bravest of the brave -- those who fought Saddam, the Ayatollah and Assad, Lebanese who saw their country torn apart by religious factions. These are Americans who know the culture and language of the Middle East and other Islamic countries, and who care deeply about how it all comes out.

Now General Ivins comes to tell us how the war should be fought. If only she had been at Waterloo that fateful day. Wellington would not have defeated Napoleon.

By all means, reform immigration with this deep obeisance to the Republican right-wing nut faction and their open contempt for "foreigners." But do not pretend for one minute that it is not a craven political bow to racism (yes, racism -- I am actually calling them racists, although they pretend it hurts their feelings. Try reading their websites and see for yourself), and to nativism, to xenophobia and to Know-Nothingism. Just don't forget what you are throwing away in the process.

Aside from the ad hominem here (more typically leftist response), I’ve noted previously how she demonstrates that she knows nothing about her opponents.

Obscene oil profits: a post script

There were two questions I raised in this post that I should have answered:

Who gets the profits?

When a corporation makes a profit, the people who receive the profit are the shareholders of the corporation. But this only happens if the corporation’s board of directors declares a dividend, otherwise the profits are retained by the corporation. Note that this means that, in general, those obscene profits made by ExxonMobile didn’t actually line anyone’s pockets. Employees received their wages, salaries and bonuses, but the profits, unless ExxonMobile declared a dividend, were retained by the corporation itself. (To avoid a lengthy discussion of what corporations may do with profits, let’s just say that corporations put their profits in the bank, and leave it at that.)

One thing I don’t recall Democrats and other complainers telling us was whether ExxonMobile’s board of directors declared a dividend. Because if they didn’t then no one made $36.130 billion, which is the manner in which people were speaking of the matter. On the other hand, if ExxonMobile’s board did declare a dividend, then here is a partial list of some of the largest shareholders: Barclay’s Global; State Street Global Advisors; Vanguard Group; Wellington Management Company; Merril Lynch; TIAA-CREF; Mellon Financial Corporation, among others. Now, many people—little people like myself, perhaps even yourself—have various retirement accounts and the like (e.g., mutual funds, pension funds) and so forth with one or more of those organizations.

Mrs. Philologous, for example, has a TIAA-CREF account. TIAA-CREF has a 0.9 percent share in ExxonMobile, giving it that percentage of the $36.130 billion in profit that ExxonMobile made last year. So if Exxon’s board of directors declared a dividend and decided to pay out 100 percent of the profit as a dividend, then TIAA-CREF would have received $324 million. Now, I have no idea how much of that, if any, would have inured to my wife’s benefit. But the point is this: it’s a retirement account; it inured to some future retiree’s benefit. (My portfolio also includes some oil stocks. I can’t remember if any of it is ExxonMobile, but you can bet that I certainly hope so!)

Speaking of retirement, much of the furor over ExxonMobile’s profits was generated by the fact that it’s outgoing, retiring CEO received a $400,000,000 severance package. That’s awful isn’t it? Please, it amounts to 1.1 percent of that $36.130 billion dollar profit we’ve been talking about. Gosh, not paying that bonus would really have kept those fuel prices down wouldn’t it?

Why did the price on the gas already the station go up?

"Well," you say, "that has little to do with the fact that it can’t all be explained by the increase in the price per barrel set by the world oil market. When I fueled up on Monday, the price at the pump was $1.97 per gallon. On Tuesday, it went to $2.79! The gas that was already in their tanks didn’t go up in price; they had already paid for it!"

Sure. But look, the value of any commodity isn’t just a matter of how much it cost the seller. The seller may attach a value to a commodity which a buyer does not. For example, I received as a gift a 1970 Dodge Dart from my deceased Great-grandfather. At some point I considered selling that car. I had intended to "soup" it up, but I just couldn’t find the time. Now I can assure that I had no plans to sell that car for the price that I paid, which was $00.00, if you recall. Although that car cost my nothing, it was certainly worth—to me—far more than I paid. The question was: Would it be worth as much to a buyer, as it was to me?
When a fuel station owner buys petroleum products, the value he attaches to that product is much more than just what he paid for it. He may take into consideration a great many factors in determining for how much to sell the product. Two considerations are (1) total cost—to him—of the product; and (2) how much he can sell the product for and still stay in business.

A third consideration when it come to value is the future. The price our gas station owner charges is not just a cover of expenses; it is also a bet on the future. So when the price that he pays goes up, he may also raise the price of the product he already has on hand as a sort of bet on future supplies of the product. This is not gouging; it is done in many, if not all, businesses other than the oil business. And, what is more, anyone who doesn’t do this can expect not to remain in business for long. Sure, you can praise him as a civic minded hero, but you won’t do so for very long: he won’t be in business very long, with foolish practices like that.

Besides, like I said, this obscene profit amounts only to 9.7 percent.

9.7 percent.

Why Mexico has no thriving economy

Perhaps you read this story, or something similar to it, in your local paper.  Most interesting about it, for me, was this portion:

[M]any migrants are making fewer passages back and forth between the United States and Mexico. When they do undertake the…journey, some count on divine protection, stopping at churches, makeshift altars and the tombs of saints on the way. The Roman Catholic Church offers a half-dozen patron saints for travelers, but many Mexican migrants turn to someone not recognized by the church: "Juan Soldado," or Soldier John.
Soldado was a soldier who was falsely accused of the rape and murder of a girl and executed by a Mexican firing squad in February 1938. He is worshipped as a man wronged by those in power….

Superstition is one of the reasons that Mexico and similar countries do not have, and will not have, thriving  economies.  People who believe that some dead guy, “wronged by those in power,” somehow controls their destiny, or their prosperity and welfare, are not very well disposed towards doing those things which bring about economic prosperity.  Think of it:  When they succesfully thwart our efforts to stop them, they credit a saint like Soldado Juan; when we are succesful in thwarting their efforts to cross our borders, they credit us (i.e., “those in power”) with persecuting them.

Note the absence of any attribution to themselves of responsibility for their success or failure.  Such people will hardly undertake the risks involved in a successful capitalist economy.  Why should they?  Success in life is the result of other people either giving you something because you begged and pleaded for it (e.g., “saints” like Soldado Juan) or taking something from you despite the good intentions of your heart (e.g., the evil gringo, “those in power”).  Such people, rather than trying to find a way to create wealth where they are, will flee to where wealth, on their uneducated view of things, just “happens” to be.  Those who have do so because they have exploited someone; those who have not do so because they have been exploited by the haves.   They come to America because this is where the jobs simply and magically are and not because this is where jobs are actively created  by people who have the liberty of doing so and who believe that they live, by God’s grace, in a world in which many things really do depend upon their very real, significant choices and the exercise of their God-given abilities.

This has nothing to do with how hard-working the Mexican is.  Very few people deny that he is hard-working.  But consider two men, both of them hard-working.  Both of them have to roll a boulder up a hill.  The first man will roll the boulder up the hill because that is his lot in life.  He believes, however, that his success will be due to the gracious activity of some dead saint, and that his failure will be due to the work of some unidentified malefactor who just has it out for him.  The second man will roll the boulder up the hill believing all the while that his success or failure will be due to his God-given strength and ability.  If he succeeds, he will thank God for the strength and ability; and if he fails he will seek to increase his strength and sharpen his ability.  Then he will try it again.  He may even start his own boulder rolling business (if he is free to do) and try some boulder rolling innovations that no one else has.  Who knows?  But this much is clear: there is a world of difference between these two hard-working men; and much of the difference is in their worldview.

Mexico needs a worldview enema.