The Invisible Hand
I make no claims about being an economically knowledgeable. And I’m not going to speak about broader economic trends and policies (though of course I have a number of opinions). There is one issue that’s come up recently that seems to make no sense to me. If someone of the like 3 people that reads this can help me out, please let me know in the comments.
So O’Reilly (and other conservatives, he’s not alone) have been using the idea that raising the marginal tax rate on high earners will lead to them deciding not to work anymore, leading to laying off all of their staff. This seems like a laughably incorrect interpretation of the Laffer curve (apologies if misspelled). Of course, if taxes are 100%, then people wouldn’t work (if you can’t harvest the results of your labor, then why bother?). However, that’s nowhere near where we are talking about. Raising the rate from say 30 to 40% still allows you to benefit from the work you do, so we’re not talking about that far end.
So the narrative goes like this: raise the taxes and these high income earners will stop working. If these people stop working, then their workers will lose their jobs. However, this seems to neglect that the roles that these individuals fill are not irreplaceable. Say that that extra 10% taxes were enough to make O’Reilly quit. In such a case, it’s not like that market niche goes away. Just because he doesn’t believe it’s sufficiently profitable does not mean that it’s not profitable. And if there is profit to be made, someone will do it. That role will be filled by someone else who will in turn restafff and continue. And if individuals were to replace O’Reilly’s media empire in a piecemeal fashion, they might even increase employment as they lack the returns to scale that a larger, consolidated operation can bring.
If the government were making it so that it were not profitable for the top earners to continue as they are, then I would agree totally with that point. But what he and others are arguing is that the proposed changes make it not profitable enough from their perspective to continue. That’s a personal choice, but it’s not like the government is making an industry impossible to run. Those roles will continue to be filled (there’s obviously a market and with unemployment over 9%, there’s obviously supply) and if it’s profitable, someone will take on his place. We’re not in a supply constrained space with regards to the supply people that can produce political bullshit, so demand rules the day.
Just a rough thought.
