Obama, Wealth, Work, and Poverty

We should want a tax code that rewards wealth to create work. Not a tax code that rewards work, instead of wealth. The latter would “succeed” only if the government was the primary source of job creation. That describes societies with command economies, such as what we saw in Eastern Europe and the former Soviet Union before the fall of Communism and in struggling developing countries today that have yet to figure out why their economies haven’t worked. Such hostile views towards wealth creation should not be found in free market economies, such as the United States, but it is exactly what we saw and heard during the Democratic National Convention (DNC).

Its funny, in my circle of friends, decrying the engines that create wealth is the equivalent of economic blasphemy. At the DNC, it was a virtue. The message of “we need a tax policy that rewards work, not wealth” wasn’t merely seen on the signs of delegates or alternates. It wasn’t the occasional mentioning of one of the many speakers that passed in front of the microphone. It came from the keynote address of the Party’s nominee for President. Barack Obama.

This sentiment of wanting to bite the hand that feeds the economy (wealth created by corporations and small businesses, not revenue confiscated by taxpayers) stood in contrast to the message heard by the candidate that I hoped would get the Republican nomination and who spoke at the his party’s Convention on behalf of Sen. John McCain, former Sen. Fred Thompson of Tennessee.

Thompson uses a Southern charm and has a disarming approach to speaking that made the logic of what he said perfectly clear, regardless of party affiliation or philosophy. Paraphrasing the Senator, Thompson pointed out that the Democrats only want to increase the taxes on a small group of people – the top 5 percent. This, we are told, has no effect on the common person. Unless you buy milk, bread, or any other consumer product at the store. Or if you have a job that is dependent on someone (or company) subject to that top five percent. The Democrats like to bemoan “trickle down economics” (where the government ostensibly benefits the wealthy, which in turn creates opportunities for others). But the trickle can be seen in more than one way. The trickle can be policies that hurt the rich and, out of simple self interest, they share the misery with everyone else. Thompson did an excellent job of warning us of that possibility.

According to economist Stephen Moore of the Wall Street Journal, the US already has the second highest corporate tax rates of any developed country in the world after Japan. That, more than cheap wages, has led to the flight of jobs and manufacturing to other countries. Barack Obama promises to push us further in that direction through tax increases.

Ronald Reagan use to say that “you can’t help America’s poor by making America poor.” Obama disagrees. He intends to help America’s poor by making more people poor, so they will have more company. An Obama administration will be very interesting indeed. I doubt, however, we can afford it.

Kevin Price's articles are found daily in national publications such as USA Today, Chicago Sun Times, and Reuters. Subscribe to his newsletter here.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review.

On the Show: Charles Payne Tackles Poverty

Charles Payne of Wall Street Strategies (and of Fox News and Fox Business) was recently on the Houston Business Show discussing the problem of poverty facing many minorities today. Charles brings a unique perspective on the subject since he has faced both poverty as a young boy raised by a single parent and wealth because of his entrepreneurial success as an adult. As a result of his up bringing, Charles takes a some what contrarian view of poverty.

Conventional wisdom is that poor people should be given hand outs and that the poor should be treated as victims rather than as people merely seeking opportunity. Conventional wisdom fails to understand that the more you subsidize something, the more you get of it. Subsidizing poverty generates more of it.

Payne says that a big part of the poverty problem as that the focus is on the wrong thing. We don't need a "Poverty Czar" as advocated by many liberal leaders, but a "Wealth Czar" who points people away from poverty. We need to tackle the real causes of poverty in this country -- excessive taxation on wealth creation that prevents many businesses and opportunities to be created, excessive regulation that deters business growth, and licensure laws that inhibit people from entering the market place.

I love Charles' insights and he is one of my favorite contributors to the Houston Business Show. Listen to this informative two part interview here and here to understand America's poverty problems from someone who has experienced them.

For a copy of the free report, "Why Your Marketing Isn't Working," email Info@HoustonBusinessShow.com and put "marketing" in the subject line.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

The Wealth Gap

One of my sons sent me an interesting article from MSN about the wealth gap in the world. The article title cannot help but grab your attention: "Got $2,200? You're Rich on a Global Scale."

The artcle points out that the world's three richest people are worth more than the 48 poorest countries combined. That is a very serious gap, we are informed. Further, the article points out that the top 2% of the population makes more than half of the world's household wealth.

I believe that these articles are truthful in content, but often have an agenda beyond being informative. Often we come to moral conclusions about right and wrong when it comes to information such as this, without understanding the larger economic issues.

The question articles like this might want to address is, why are some countries wealthy and others are not?

Why is the United States the richest country in the world?

Why is Japan among the world's most affluent, yet it has virtually no natural resources of its own ("natural resources" is one of the excuses used by some to describe why some countries are affluent and others are not)

Why is Singapore, which is one of the most densely populated countries in the world, prosperous when Somalia (which has a density that is similar to the US) is one of the poorest countries in the world? We have been told that people cause poverty, but it isn't working in this and many other scenarios.

The answers to these questions are far more useful than the issuess offered in the article and the answers point to the power of free enterprise. The countries that are affluent and enjoy far more wealth, also have stronger committments to private property, lower government cost for doing business (fewer regulations, licensing laws, or taxes), and generally smaller (or at least more efficient) governments. Conversations on how the world's poorest countries could pursue such an agenda of their own, would make those countries far richer and would make for more interesting content.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Move Over Bill Gates

I read in the Wall Street Journal this week that:

Bill Gates has always said that he hates bearing the title of “world’s richest man” — and the accompanying burden. Now, he may finally get some relief.

According to this article by Geri Smith in Business Week and this AP story by Lisa Adams, the world’s richest man may now be Carlos Slim Helu (picture), the Mexican telecom tycoon. (Both articles build on the work of financial journalist Eduardo Garcia, founder and director of Sentido Comun, a Mexico-based financial-news Web site.)

Granted, determining people’s net worths is always just educated guesswork, so I wouldn’t say the finding is definitive. Yet the articles say that Slim, as he’s known, was worth $67.8 billion, or nearly 8% of Mexico’s entire GDP. In its latest global billionaires list, Forbes listed Bill Gates’s wealth at $56 billion.

It is at times such as this that I begin to feel very ethnocentric. Imagine, someone other than an US citizen, being the richest person in the world. It isn't the first time, but it strikes me as odd. To add further irony, Mr. Slim is Mexican. In a time when everyone seems to be leaving his country in order to find opportunity in the US, he has capitalized on opportunities that has made him the world's richest person.

Well, Gates can give a sigh of relief. The burden of being at the pinnacle of wealth has been transferred to another person. Being rich can be so challenging. My heart bleeds for both of them.