Eat The Rich

In one of those incidents on which the conservative takes write themselves, a member of the NY Times editorial board participating in Brian Williams show on MSNBC this last week quoted approvingly a tweet claiming that with the $500 million which he had spent trying to capture the Democratic presidential nomination, billionaire Mike Bloomberg could have given every American one million dollars. Brian Williams and his production crew apparently also didn't realize the basic math error, and the discussion went forward as if this was somehow true. Via Buzzfeed (which I found doing the one minute of googling that apparently the show producers didn't do on the subject at hand):

On MSNBC's 11th Hour with Brian Williams on Thursday night, guest Mara Gay, a member of the New York Times editorial board, brought up a tweet with a glaring mathematical miscalculation while discussing former New York mayor Mike Bloomberg's decision to drop out of the Democratic primary.

"Bloomberg spent $500 million on ads. The US population is 327 million. He could have given each American $1 million and still have money left over. I feel like a $1 million check would be life-changing for most people. Yet he wasted it all on ads and STILL LOST," writer Mekita Rivas tweeted on Super Tuesday. (Rivas has since made her Twitter account private.)

Bloomberg had bet on big Super Tuesday returns, spending half a billion dollars to flood the airwaves in states that voted on March 3. He ended up winning in only one place: the US territory of American Samoa. He dropped out the next day.

"When I read it tonight on social media, it kind of all became clear," host Williams said, reading the tweet on the air as a graphic of it floated onto the screen. "Don't tell us if you're ahead of us on the math...It's an incredible way of putting it."

Gay agreed, then made a point about the outsized influence of money in politics.

"It does suggest what we're talking about here. There is too much money in politics," she said. "What we want in politics — the point is to have competition."

Obviously, the numbers here don't come close to adding up. There are roughly 330 million Americans, so 500 million divided by 330 million is about a buck fifty. Did the average American get a dollar and fifty cents in value out of Mike Bloomberg's political campaign? Who's to say. Personally, I consumed more than that value in beer during the one half of one democratic debate that I watched featuring Mike Bloomberg.

As Charles Cooke pointed out over at National Review, the idea that a billionaire could flush on a vanity project an amount of money capable of changing the lives of every American fits very well with a current assumption in the progressive world that we could easily remake America if we could only have the courage to take some of the ill gotten spare change away from the country's billionaires.

So I got to thinking, it would perhaps be interesting to see how much of a difference liquidating the wealth of all the billionaires would make. "Eat The Rich!" has become a half serious slogan of the progressive left, and candidates such as Elizabeth Warren and Bernie Sanders have attempted to make the case that that we could pay for massive new social programs simply by instituting a basic wealth tax.

According to the Wealth-X Billionaire 2019 Census (which I found via a Guardian article from a year ago which linked to a previous edition) there are 705 billionaires in the US with a total wealth of $3.0 trillion dollars. That's an average of $4.3 billion per billionaire, though obviously even within billionaires there's considerable inequality. Mike Bloomberg himself is worth about $56 billion this year, which means some "poor" billionaires must be just barely making the cut. The Billionaire Census provides a nice little graphic of the pyramid of billionaire wealth tiers worldwide.

So imagine that we were going to create massive change in the US by confiscating the entire wealth of the all the US billionaires. There are a few things we should briefly think about in relation to doing such a thing. Our modern wealthy don't tend to hold onto huge piles of non-circulating gold coin, like good old fashioned Smaug, who had accumulated the wealth of his neighbors and then was literally sitting on it.

If we wanted to confiscate the wealth of Jeff Bezos, we'd need to make him sell the roughly 11% stake that he still owns in Amazon (plus whatever other investments he has) and give us that money as liquid currency that we could then use to pay for your medical bills or school teachers' salaries or some other similar good cause. Of course, we if were doing this to all billionaires at once, there would be the difficulty that they'd all be trying to sell their investments and they'd need to sell them to people who were not billionaires, since all the other billionaires would also be in the process of selling all their assets in order to give the money to the government. We know pretty well what happens when a lot of people are trying to sell a stock and not many people are buying: the price drops until the people who are buying are able to buy up the available supply. So while Bezos currently owns Amazon stock worth about $100 billion, he probably would not get $100 billion in cash by selling it. He might get a lot less. Amazon shares which currently sell for ~$1,900 each would drop in value as the market was flooded by Bezos, his ex-wife, and other billionaires who hold the stock selling their assets. Among the collateral damage of such selling would be pretty much any person or institution with money invested in mutual funds. So the billionaires would be seeing their wealth evaporate even as they sold it in order to have it confiscated, and all the rest of us would see the value of our retirement accounts and other investment accounts drop too.

Perhaps, some might say, Bezos could simply transfer his Amazon shares to the government instead of selling them. Well, that's fine, but if the government then wants to spend the money on paying school teachers or paying health care expenses, the government would need to sell the shares. So the problem would remain.

But let's wave a wand and say that somehow that's all solved. We have the $3 trillion in billionaire wealth. What does that do for us?

Well, it could pay for about one year of Medicare For All (which was estimated to cost something on the order of $30 trillion over ten years.

We could pay for operating the federal government at current scale for about nine and a half months (the total federal budget is $3.8 trillion.)

Given the MSNBC discussion about giving every American one million dollars instead of Bloomberg's political campaign, maybe the best way to visualize it is: We could give every man, woman, and child in the US about $9,000 in cash.

That's a lot of money for most people. For a family of five that made $45k a year, that would mean that they'd get an extra year's income. It could pay off debt, make a down payment on a house, help pay for college. All sorts of things would be possible. But we would have eaten our entire population of billionaires and there would be no more to get.

Here's another comparison which is worth keeping in mind, however. While the total value of all US billionaire wealth (and remember, wealth means the total value of all their assets, which for the rich is much more than the value of their yearly income) is about $3.0 trillion, the total federal revenue every year is greater than that. For 2018 the IRS shows that total tax receipts were about $3.5 trillion. And while confiscating all billionaire wealth would be a one time move, the federal government successfully collects taxes (primarily income, payroll, and corporate taxes in that order) every year.

To hear people talk, you'd think that the wealth of billionaires was a vast untapped amount far greater than the our current sources of government revenue. However, total US personal income in 2018 was $17.5 trillion, 5.8 times the total wealth of all US billionaires combined. The average federal tax burden applied to personal income in the US is 21%. That's how the US population as a whole is already able to supply in taxes every single year more than the one time value of totally liquidating all billionaires. We don't have nearly the wealth that they do. But the amount of money that passes through our hands each year is much greater than the total value of all billionaire wealth.

And that, in turn, is why we should be skeptical of the idea that we can do things as a country by "eating the rich" that we can't afford to do with ordinary income taxes. There is simply much more money and much more sustainable money to be found in taxing income than there is in liquidating the wealthy. We would raise more money over ten years by increasing the federal income tax effective rate by 2% than we would by confiscating all the wealth of all the billionaires in the country.

In the end, people trying to pay for expansive government programs (like bank robbers) will go where the money is. That money is to be found in taxing the broad American income earning population. So in the end, if we put in place big new expensive programs, expect that they will be paid for out of taxes on income. It's where the money is. If a politician wants to be honest in proposing a big new program, that is the basis on which the politician should propose to pay for it.