Who Actually Earns $400,000 Per Year?

by Emily Guy Birken · 4,600 comments

Surgeons

After the unending media coverage of the fiscal cliff throughout December 2012, it was a relief to everyone when a last-minute compromise was reached. In particular, the most reported-on compromise had to do with the extension of the Bush-era tax cuts. Those cuts will remain in place permanently for any individual making less than $400,000 per year, and for couples earning less than $450,000. Those fortunate few who make more than that amount will see their rates rise from 35% to 39.6%.

The news about this particular tax rate increase got me wondering: what professions can expect to earn that kind of money? Since I don’t personally know anyone bringing home $400,000 per year, I decided to find out what kind of jobs command such high salaries:

1. The President

Perhaps the most famous $400,000 per year job is the leader of the free world. The office of president not only pays a $400,000 annual salary, but also provides the president with a $50,000 annual expense account, a $100,000 nontaxable travel account, and a $19,000 entertainment account.

There are some obvious downsides to this particular career, however. Besides being very difficult to get, the job is highly stressful, and advancement post-office can be considered somewhat iffy. And, of course, you can’t expect regular raises: the last salary increase for the commander-in-chief (from $200,000 to the current rate) was in 2001. Prior to that, the previous raise (from $100,000) occurred in 1969.

2. Surgeons and specialists

Even a local general practitioner can expect to pull in over $100,000 per year, but the real money in medicine is reserved for those who specialize. Anesthesiologists, heart surgeons, and brain surgeons can all expect to make up to $400,000 per year at the height of their career. Plastic surgeons can make up to twice that amount.

3. CEOs

The median salary of a Chief Executive Officer is over $700,000. These directors are in charge of both short- and long-term profitability for their companies. CEOs generally have to know the industry backwards and forwards (although there are certainly plenty of counter-examples), and need to have worked their way up over many years.

4. Wall Street Bankers and Lawyers

If you work in either finance or finance law, the place to go for fat paychecks is Wall Street. According to an October 2012 report, “the average salary of financial industry employees in New York City rose to $362,950 in 2011.” While that still falls short of the mark required for the higher tax bracket, it’s important to remember that this figure represents the average (meaning some people are making more) and that there have almost certainly been raises in the past year and a half.

The Top Percent of the Top Percent

These high-income earners are really rare. Consider the fact that most articles listing the highest paying jobs in America don’t even include any professions with median salaries of $400,000. Those individuals making $400,000 per year are in the top one percent of the top one percent — and often, they’re also public figures.

Thankfully, even though individuals in this bracket are few and far between, the government estimates that raising the tax rate on this small group will raise about $600 billion in new revenues over the next decade.

Not bad for a group that small.

What other professions that earn annual incomes of $400,000? 

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current Verizon FiOS promotion codes and promos to see if you can save more money every month from now on.

Looking to save on your mortgage? Here are some good rates...

Related Posts

{ 4600 comments… read them below or add one }

Stevendad March 19, 2015 at 6:39 am

Peter from 20 years ago sounds like Stevendad from 30 years ago. 100+hour work weeks and lotsa home cooking. Now being punished by high (but not high enough for some) taxes.
I ran into this article: http://twitter.com/washingtonpost/status/578372084952354816/photo/1
and would love some comments. The overlay correlation of the income disparity map is extraordinarily close to that of the counties that voted for Obama map. Do liberals talk so much about inequality because of guilt? Or do their local liberal policies cause inequality? Other explanations? Steven H, Peter and JTM have any ideas?

Reply

Steven H March 24, 2015 at 6:31 pm

Inequality is caused by political and monetary control of those who have money over those who don’t. It is caused by the natural tendency of wealth to trickle up, not down, unless government actively counteracts that trend. It is caused by growth of capital tending to exceed growth of salaries. You may recall a bestselling economics book of groundbreaking research made that point recently.

Reply

Peter N March 24, 2015 at 9:15 pm

“Inequality is caused by political and monetary control of those who have money over those who don’t.”
Libtard non-sense.

” It is caused by the natural tendency of wealth to trickle up, ”
Well yes. There are those that know how to generate wealth and those that just consume it.

“It is caused by growth of capital tending to exceed growth of salaries. ”
Not quite. It is cause by the increasing percentage of wealth being generated by capital.
Basically, machines are replacing people in low skilled jobs or one can buy low skill over seas skills cheaper.

Reply

Normal Joe March 26, 2015 at 9:00 pm

@Peter N Please desist with the ad hominem attacks. It accomplishes nothing other than poisoning the well. It is my earnest hope that if you are either unwilling or unable to assimilate reason over ideology, then at least there are others that find the exercise enlightening and therefore useful. There are just as important things in life, and business, as wealth accumulation. Many people more clever than I have recognized and accept that as an oligarchy public policy is shaped by and for those with the money for lobbying and supporting political campaigns. Both political parties have succumbed to the pressure turning our legislative process into a tool of those who finance it. Your opinion is unsupportable without your circular reasoning.

Let’s separate wealth from income. Wealth, as I define it, is the accumulation of assets, be they cash, investments, and property. Income, is simply cash flow. It is this cash flow that has been seriously hijacked by fewer and fewer people since the ill advised implementation of Reagan’s voodoo economics we now call “trickle down.”

What those who share some of your points of view need to understand is that these voodoo economics is an ideology without empirical evidence that it functions as it is purported to. And this almost dogma like commitment is preventing you from accumulating more wealth because of the negative impact on the engine of the economy, consumer demand.

In a previous post I used the term “trickle up” as a metaphor for the way cash flow enables wealth accumulation. The current state of our economy illustrated by the severity of the recessions, the longer it takes to emerge from recessions, and the slum lord way we are forsaking our infrastructure are all related to this severely constrained cash flow. What we see instead are corporations buying back issued stock to reduce the number of shares in circulation resulting in paper profits and the illusion of wealth. There is no incentive to invest in the means of production.

It seems that every Republican President this century who left a trashed economy upon leaving office, starting with Herbert Hoover, believed in “trickle down” economics. Will Rogers explains why, despite its devastating effects on the poor, the GOP may forever be enamored of the concept.

“The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.”

The minimum wage went up in 13 states — Arizona, Connecticut, Colorado, Florida, Missouri, Montana, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont, and Washington — either thanks to automatic increases in line with inflation or new legislation, as Ben Wolcott reports in his analysis at the Center for Economic and Policy Research. The average change in employment for those states over the first five months of the year as compared with the last five of 2013 is .99 percent, while the average for all remaining states is .68 percent.

Digging deeper, all but one of those states are experiencing increases in employment, and nine of them have seen growth above the median rate.

Wolcott’s analysis builds on a previous one from Goldman Sachs, which did the same evaluation for just January and compares it to December of last year. It found that the states that had minimum wage increases experienced faster job growth than those without a raise.

This doesn’t mean that increasing the minimum wage necessarily creates more jobs. “While this kind of simple exercise can’t establish causality, it does provide evidence against theoretical negative employment effects of minimum-wage increases,” Wolcott writes. Indeed, it adds to the evidence that higher minimum wages may not hurt job growth as much as some have warned. Washington has the highest minimum wage and saw the biggest increase in small business jobs last year. Its job growth has also remained steady and above average in the 15 years since it raised its wage. When economists studied state-level minimum wage increases over two decades they didn’t find any conclusive evidence that the raises impacted job creation.

These very same states are showing economic growth higher than those who have not raised their minimum wage rate. How is Minnesota’s economy doing compared to Wisconsin’s which is in the process of doubling down on tax breaks for the wealthy and refusing to bow to the pressures for raising the minimum wage?

http://www.minnpost.com/macro-micro-minnesota/2013/02/walker-vs-dayton-smackdown-which-governor-has-better-economy

http://www.huffingtonpost.com/walker-bragman/minimum-wage-a-simple-fact-check_b_3114239.html

http://davidjamesbrunner.org/en/the-case-for-restricting-stock-buybacks/

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/09/25/the-case-for-raising-taxes-on-capital-gains/

Reply

Peter March 25, 2015 at 7:31 am

I need to read over this at home. Unfortunately my firm blocks twitter so I can’t look at it at work….been meaning to read and comment though.

Reply

Steven H March 26, 2015 at 9:29 pm

The states that vote for GOP also correlate to greatest dependency on government. This doesn’t necessarily mean anything, as this article fairly discusses,
http://www.cheatsheet.com/business/10-states-most-dependent-on-the-federal-government.html/?a=viewall
with multiple detailed reasons for the top 10 government-dependent states, 8 of which happen to be red. Finding simplistic correlation of one set of data to another often means very little and speculation just invites a false sense of proof to a predisposed bias, as exhibited in your post.

Reply

Stevendad March 19, 2015 at 8:08 am

Just had a chance toread through some of the posts while I was out.

Steven H, here is why you said we left ( to paraphrase) “they left because they could not support their weak positions”

I left because you were being arrogant, abrasive, closedminded and dogmatic.

Just to be clear.

It’s fascinating to see you have changed your position ZERO since your first post. And yet you constantly say how fair minded and open you are.

Not to dredge up the past, but I had to defend myself from your falsehood.

Reply

Steven H March 24, 2015 at 6:22 pm

Stevendad,
“I left because you were being arrogant, abrasive, closedminded and dogmatic.”
As were you, if you recall correctly. You apologized at the time but seem to have forgotten that part. Why try to stir it up again?

“It’s fascinating to see you have changed your position ZERO since your first post.”

Not true. Just another potshot from the peanut gallery. I will listen to any facts you choose to provide but I will not be lured into another p*ssing match.

Reply

Steven H March 24, 2015 at 6:46 pm

Steven dad comments in quotes:
“Something ignored here is that capital can and will flee and the very hard working will quit working.”
Agreed, except the very hard-working are mostly the middle class, not the very wealthy, and the fleeing capital is their labor and ingenuity which is underused.

“Again, SS and MC are NOT taxes as much as enforced saving for old age.”
Agreed.

“Also, it is assumed that there is NO immorality in taking something from those who work very hard and smart and giving to those who don’t.”
Exactly. We need to stop doing that. Which is why wealth and income needs to be moved back to the hard-working middle class. Our gross overpayment of investment class is indeed immoral.

“Again 100% taxation of the 1% doesn’t solve our deficit.”
No, but quarter to half of the deficit could come from the upper 0.5% or so and it would bring us a whole lot closer.

“We must and will go lower and lower OR seriously curtail payouts. Only other option locking up a lot of long term debt and printing money to inflate our way out of it.”

Deficits are less than 3% GDP. Growth is over 2% GDP. When Deficit = Growth as % GDP, that IS a balanced budget in national economic terms. Anything beyond that and we are paying down Debt/GDP over time.

We need to stop talking like we need we have to reach $0 deficit to balance the budget, or that we EVER need to drop total debt below $17T. We dropped Debt/GDP from 100% plus in WW2 to 32% in 1980 without lowering the total debt even a dollar or maintaining a negative deficit. Deficits were generally 1 to 2% of GDP and total debt multiplied.

We need to understand the math and aim for realistic goals or we will never succeed. $0 deficits and lowering total dollar debt are not practical or useful goals. Cutting investment in education and slashing safety nets is neither necessary, nor productive.

Reply

Peter March 25, 2015 at 7:33 am

“the very hard-working are mostly the middle class, not the very wealthy”

This is the error in your perspective in a nutshell.

Reply

Peter March 25, 2015 at 7:34 am

And nobody is going to care about debt as a percentage of GDP when the bills come due….. all that matters is the actual number and whether we can afford to pay it.

Reply

Steven H March 25, 2015 at 8:45 pm

If we can drop the deficit/GDP ratio below GDP growth rate (and we are very close), we ARE paying the bills and Debt/GDP ratio falls. It really does not matter if the raw dollar amount falls any time soon, as long as the economy can grow and population can grow. There is an eventual limit to both, but probably not even in our grandchildren’s lifetimes.

We do not need to drop the deficit to $0 in 10 years or in 50 years, or maybe ever. Realistic goals are to get deficit/GDP down to 1.5 or 2% and concentrate on getting growth higher than that. If we can get Debt/GDP down close to 30%, as it was in 1980, we can maybe manage to pay the rest off quicker. It might take us 30 or 50 years to get that far, and maybe raw dollar debt will be $25 or $30 trillion after inflation and economic growth. It won’t matter.

The point is that we must not strangle the economy and suffocate the middle and working class with needless austerity to meet economic goals that make no sense.

Reply

Steven H March 25, 2015 at 8:35 pm

No, not an error, but it is the heart of our disagreement. You have convinced me you are a hard-working entrepreneur. But I am not convinced that very many of the $5 million plus earners work any harder or smarter than an average construction worker.

Reply

Peter March 26, 2015 at 10:03 pm

That’s a shame. What an odd perspective. Seems like everyone who wanted to could just make $5 million then if it is no harder than construction work. Come on…..

Reply

Peter N March 24, 2015 at 9:29 pm

““Again, SS and MC are NOT taxes as much as enforced saving for old age.”
Agreed.”
you are both wrong. SS and MC are a wealth transfer program. If it was enforced savings I would get back what I put in.

““Also, it is assumed that there is NO immorality in taking something from those who work very hard and smart and giving to those who don’t.”
Exactly. We need to stop doing that. Which is why wealth and income needs to be moved back to the hard-working middle class. Our gross overpayment of investment class is indeed immoral.”
You are confusing working hard with working smart and the true value of what is being done.

““Again 100% taxation of the 1% doesn’t solve our deficit.”
No, but quarter to half of the deficit could come from the upper 0.5% or so and it would bring us a whole lot closer.”
This is dangerous talk. You all might as well be communist.

“Deficits are less than 3% GDP. Growth is over 2% GDP. When Deficit = Growth as % GDP, that IS a balanced budget in national economic terms. Anything beyond that and we are paying down Debt/GDP over time.”
What non-sense.
GDP is not a measure of the increase in wealth.

It is clear the libtards are clueless.
I have zero faith in our economic system now. I am looking at buying real assets like property, gold, weapons and food.

If you believe the government you are a fool.
Those that can create wealth will survive the coming chaos but it won’t be easy.

Reply

Peter March 25, 2015 at 7:38 am

““Again, SS and MC are NOT taxes as much as enforced saving for old age.”
Agreed.”
you are both wrong. SS and MC are a wealth transfer program. If it was enforced savings I would get back what I put in.

—- I won’t get anything close to what I put in and many will get more than they put in. Some won’t get anything at all (if they die before 62).

Bottom line is – and we aren’t changing Steven H’s point of view of this – is that he thinks the middle class works very, very hard for inferior wages while the super rich ‘do nothing’ or very little and just accumulate more wealth. This shows his ignorance and in spite of example after example, anecdotal stories and other evidence – he will not change his point of view. Honestly, if I felt the way he did I would likely share his worldview. I TOTALLY see his point of view. I just think it is narrow-minded and categorically wrong.

Reply

JTM March 25, 2015 at 3:59 pm

Peter – A few simple calculations would show that you will most likely get back at least as much as you paid in to SS as long as you retire at the normal time and live at least 11 years beyond. I don’t know your age, but know you are a bit older than me. I used birth of 1960 and an SS calculator with max earnings for each year. The maximum SS tax payment (employee + employer) this year is $14,694 time 35 years is $514,290, this would be the absolute maximum in today’s dollars you could have paid in, the actual total is way lower. The monthly SS payment then is $3,861, leaving 133 months needed to recoup all inflation adjusted payments. this disregards the facts that monthly payments will go up with COLA and that the earliest years max payments were only $2200. Yes, you may receive less, but that would also mean to paid in less some years. Like many other insurance programs, losses by some (early death) make up for others coming out ahead (living longer). It’s a bit of a stretch to call it wealth transfer though.

Reply

Peter March 25, 2015 at 4:42 pm

That’s fair enough….

Reply

Steven H March 25, 2015 at 8:20 pm

“Bottom line is – and we aren’t changing Steven H’s point of view of this – is that he thinks the middle class works very, very hard for inferior wages while the super rich ‘do nothing’ or very little and just accumulate more wealth.”

Overstating my position does not prove my actual position wrong.

Bottom line is that there is a very simple test to determine whether wealthiest people are earning more money per effort than the past. You just have to look at whether wealth and income of the richest people grow at a faster percentage than the rest of the population, and …. yep, that is what is happening.

It’s not that I think rich people do nothing or very little. That is a complete and utter exaggeration of my position. They are just overpaid by a certain amount, as per relative to both historical norms and proven optimum income distributions. Why do you always take my positions, exaggerate them into absurdity, and then ridicule my arguments based on things i never said?

Reply

James March 26, 2015 at 9:16 am

your position is absurd enough without exaggeration

Reply

Steven H March 26, 2015 at 9:32 pm

And your actual point, if you have one, is …? Or are you just trolling?

James March 27, 2015 at 7:09 am

Quotes from this page alone……

Steven H – “the very hard-working are mostly the middle class, not the very wealthy, and the fleeing capital is their labor and ingenuity which is underused”

Steven H- “I am not convinced that very many of the $5 million plus earners work any harder or smarter than an average construction worker”

Steven H – “Businessmen alone do not create wealth … unless and until they collaborate with the middle class to do so. If you think the middle class needs you more than you need them, you are a fool.”

Steven H – “Companies and their high paid management teams are getting rich off of conditions that simultaneously enable them to lord their power and control over the rest of the country.”

Peter – “Steven H thinks the middle class works very, very hard for inferior wages while the super rich ‘do nothing’ or very little and just accumulate more wealth”

How is this an exaggerated restatement? At least own what you believe. You almost never mention the middle class without the adjective “hard working” before them – even calling them “ingenious”. And you have spoken repeatedly about the rich as using their wealth and power to accumulate more wealth, earning more than they deserve, and not creating jobs or anything of value. Own it at least…..

Peter March 27, 2015 at 9:09 am

We could add this quote from Steven H: “You confuse accumulation of wealth with creation of wealth. Some businessmen create wealth with their efforts. Others accumulate it. Many create some but accumulate more than they create”

Steven – at least own the fact that you think that the large majority of the super-wealthy are not job creators or helpful to the economy – they are simply using their existing power and wealth to accumulate more wealth – far more than they deserve, far more than in history, and far more than is good for society at large. Meanwhile, the middle (and lower) classes are full of hard-working people who are largely the ones responsible for the success of our economy – but they aren’t getting their fair share – due to policies that favor the rich and undermine their negotiating power.

You don’t believe that the rich are there because they took risks, have special talents or skills, or simply worked harder and/or smarter than others. You also don’t believe that the middle class’ perceived struggle is due to automation, a changing economy, their own lack of skills or work ethic.

Own your opinions. I think it is very telling that you react the way you do to your words being restated. I really don’t think you even hear yourself…. (this is the dogmatic, closed-minded trait that Stevendad was referencing)

Ken really hit the nail on the head with your lack of acceptance of “ownership” as one of the key factors in income disparity. I think that is the biggest missing link in your arguments. You dismiss this far too readily and continue to insult and blaspheme the successful. Say what you want about my point of view, but I don’t do the same thing for the lower wage earners. Why would I? I used to be one myself. (See the Peter from 20 years ago post that you didn’t reply to)

Steven H March 25, 2015 at 8:30 pm

Peter N,

You confuse accumulation of wealth with creation of wealth. Some businessmen create wealth with their efforts. Others accumulate it. Many create some but accumulate more than they create.

GDP is directly proportional to sum of earned income of the population, which absolutely means increased GDP measures increased wealth of the nation. Debt/GDP stays constant (balanced budget) when % GDP growth = Deficit/GDP. That’s not nonsense. That is math.

Businessmen alone do not create wealth … unless and until they collaborate with the middle class to do so. If you think the middle class needs you more than you need them, you are a fool. Those that create wealth (middle class and true entrepreneurs) will survive the coming chaos. Those that merely accumulate wealth will not.

Reply

Peter N March 27, 2015 at 9:00 am

GDP is not a measure of increasing wealth. Got that!!!? GDP is simply a measure of economic activity. Rebuilding New Orleans increased the GDP but rebuilding what as lost isn’t a gain.

“Businessmen alone do not create wealth”
30 years ago my company had 3 owners only. Somehow we created enough wealth and opportunity without others to start hiring and expanding. If what you said were true then we would be stuck back with the 3 owners only.

Reply

Peter March 27, 2015 at 9:12 am

I have certainly created a great deal of wealth for many. My employees, my clients, and all of the personal contractors I have employed over the years at my house. When I was making $20k/year I was creating wealth for nobody, including myself. Now that I make more money, I create wealth for dozens of people – not JUST myself.

Reply

Steven H March 25, 2015 at 9:04 pm

I’m restating this because it is the obvious and seemingly irrefutable heart of my argument:

“Bottom line is that there is a very simple test to determine whether wealthiest people are earning more money per effort than the past. You just have to look at whether wealth and income of the richest people grow at a faster percentage than the rest of the population, and …. yep, that is what is happening.”

The other point that this brings up is that I have been told here that high income disparity is largely due to automation and availability of cheaper labor overseas. This increases incomes to companies in this country. OK. But then the argument goes that average US citizens and workers do not deserve any of that increased profit because they did not work harder to earn it. But business owners and investors seemingly DO deserve that increased profit … even though they also have not worked any harder to earn it.

Why do the richest people “deserve” more of our national profits, but average citizens do not, if the money is basically a windfall that is unearned by both groups?

Reply

Peter March 26, 2015 at 1:54 pm

Not sure if you are asking me, but I have never said anything about people deserving or not deserving their income.

Reply

Steven H March 26, 2015 at 9:55 pm

Peter =====
The job market, suppressed wages, etc. comes back to my point all along with the lost manufacturing and unskilled labor jobs in our economy due to the information age. The unskilled shouldn’t be “compensated” for this.
=========
I understand what you are saying, but wages are going lower on both skilled and unskilled jobs. The availability of cheap labor overseas drives part of this, as does automation. But another large part of it is the OTHER disparity: negotiating power. Cost of flight training to be an airline pilot is $100K but entry salary is about $20K. Students are paying out the nose for college education, but unemployment of college grads is high, and there are more college grads than ever before to BE unemployed. Amazon forces even seasonal factory workers to sign non-compete agreements limiting there job hiring opportunities for 18 months after the seasonal work. Skilled people are suffering low wages along with unskilled, and companies invoke unreasonable burdens on workers, because the large airlines, banks, stores and other companies have negotiating power mostly unfettered by govt or union limitations.

Companies and their high paid management teams are getting rich off of conditions that simultaneously enable them to lord their power and control over the rest of the country.

Why should the richest and most powerful be compensated highly for the advantages that globalization and automation provide, but the rest of the country is not allowed to benefit from those same advancements, and indeed, is made to suffer because of them?

Reply

Ken March 26, 2015 at 6:00 pm

“….This increases incomes to companies in this country. OK. But then the argument goes that average US citizens and workers do not deserve any of that increased profit because they did not work harder to earn it. But business owners and investors seemingly DO deserve that increased profit … even though they also have not worked any harder to earn it….”

The reason that “average citizens” do not “deserve any increased profit” (two inflammatory ways of expressing this viewpoint, IMHO) is not because “they did nothing to deserve it”. The reasons they do not receive “excess” profit, whatever that is, are because 1) they signed employment contracts, which they signed, which had stated dollar figures indicating their complete, agreed-upon compensation; and 2) unlike investors or business owners, they did not have an ownership interest in the retained earnings (the “excess” profits).

Reply

Ken March 26, 2015 at 6:20 pm

Sheesh… said “signed” twice. Oh well… lol. Did I mention they signed those employment contracts?

Reply

Ken March 26, 2015 at 6:27 pm

And I guess a third, corollary, reason non-investors do not receive “excess” profits is because non-investors took no risk commanding (“deserving”) the excess profits as a reward. It’s basically a risk-reward thing. If you play it safe and don’t take the risk of losing your capital, you can’t complain that you don’t share in the rewards.

Reply

Peter March 26, 2015 at 9:53 pm

Obviously. And it doesn’t matter “how hard they work” either. Which is why I have always wanted my own business or to take a job like the one I have which has ZERO salary. I take the risk but I keep the rewards. My assistants get a paycheck.

Reply

Steven H March 26, 2015 at 9:57 pm

So those who get control and capital are allowed to use their wealth and power to accumulate more wealth and power until the rest of the country is essentially enslaved to them. And you see no problem with that?

Reply

Peter March 26, 2015 at 10:00 pm

Power is different than wealth. Yes, you should be allowed to accumulate more wealth. And no this should not result in more power. I have lots of wealth myself and almost no power. The two don’t have to be correlated. Unfortunately they are but the way to change this isn’t to keep people from accumulating wealth. It is to reform the corrupt campaign financing practices that allow corporations to buy politicians.

Peter N March 27, 2015 at 9:07 am

More non-sense. You are free to start your own company anytime. You always decline. In the United Welfare States of America you don’t even have to work at all, those that pay taxes are your slave.

Steven H March 26, 2015 at 10:10 pm

Ken, your argument assumes that the reward of capital is a fair return for the risk … or if you don’t like the word “fair” then substitute “sustainable”. I think you can agree that there CAN exist conditions where entrepreneurial risk exceeds the potential reward and thus business growth is slowed. This could happen from market conditions, but also from over-taxation or over-regulation. If you agree, then you must also agree that the converse condition CAN exist: where reward exceeds risk and businesses and business income grow quickly. You may see no downside to this latter condition, but it has a cost: it cannot be sustained indefinitely and the extra reward comes from someplace, and and that someplace is getting depleted.

So are we in a stable economy with balanced risk/reward of capital, or one where risk is under-rewarded, or over-rewarded? How do you think that can be determined?

Reply

Ken March 27, 2015 at 6:36 am

It’s not really an argument, Steven. I was just explaining the reason why owners and investors participate in profits, while rank and file employees don’t. I get it that you don’t like the system, but that’s the reason why profits are apportioned the way they are. It has everything to do with risk taking. Risking failure is what causes someone to participate in company profits, if and when profits occur.

At any rate…. With regard to your question about the economy overall, I would say the US economy is the most robust, diverse, vibrant economy in the world. It has the most opportunities for success, and the fewest barriers to entry of any country I can think of. It has produced more wealth for more people than any other economy in the history of civilization. I’d say that’s a pretty good track record.

As far as risks and rewards go, I think (mostly) efficient markets overall determine the risk-reward tradeoff. This scenario plays out every day in the financial sector. Where risk exceeds the potential reward, the price of the investment vehicle decreases accordingly until risks and rewards reach equilibrium (based on available information). The same is true in the reverse.

And the same is true on a broader scale with entrepreneurship. As long as the rewards are out there, a certain portion of talented, self-assured, risk-taking individuals will take on that risk, despite the fact that 80% of small businesses fail. Most people, however, will not take the risk. Most people will opt for the security of a known paycheck, predictable hours, and so on, and forego the risk of failure.

So, after all of that, I would pose an alternate series of questions to you: Is having the most vibrant economy in the world, with the most opportunity and fewest barriers to entry a good thing, or a bad thing? When people are willing to take the risk of an 80% failure rate and achieve profitability anyway, is it fair that the government then takes 75% of their money (as is the case in France)? Where do you think the taxation line is where people will stop taking risks because the government will just seize the profits anyway, and thus the rewards are not commensurate with the risk? 50%? 60%? 80%?

Reply

Ken March 27, 2015 at 7:00 am

I guess my series of three questions in the last paragraph really boils down to the last one… the first two being more rhetorical in nature……Where do you think the taxation line is where entrepreneurs will cease taking risks because too much of the potential rewards are taxed away?

Stevendad March 26, 2015 at 1:58 pm

Steven H Only reason I brought up past is you said I left because I couldn’t support my positions. Wrong. And no, you really haven’t changed.
$18T with Normal rates around 4% doubles or debt payments. That will rob all the social programs more than anything. Assuming we eventually balance the budget. BLOAT is the problem. MORE BLOAT is not the answer.
SS and MC are intended to be an insurance/ savings for old age. Thus they should not be a wealth transfer vehicle. They have already been a generational wealth transfer vehicle. I will pay in about $500k and get back 240 x $3200=$760k, assuming colas eliminate inflation and I live to about 87, which is about expected at present age. Of course, would be millions in stock / bond mix mutual fund…
Any comments on the overlay of Obama voters and income disparity maps?

Reply

JTM March 26, 2015 at 2:29 pm

I do somewhat question your total paid in amount, but I’ll let that go, and I agree that it has been a huge generational wealth transfer. One thing you are overlooking is the actual insurance factor, these programs also have provided insurance coverage for reasons other than retirement – survivor and disability for ourselves and to support our families. Yes, it’s forced insurance and by it’s nature insurance provides more compared to the input to some than others. There are “winners” and “losers”. There are those like Paul Ryan who are huge “winners” and receive thousands without ever working because their parents died while they were young. My brother was a “loser”, he died single at age 31 after years of paying in, my sister is a “winner”, she has been on SS disability for decades due to a bad car accident after only a few year of full time work, my father is a “loser” as he maintained good health, began receiving SS at 62, but died at 65, my grandfather (and many more from his generation) has been a huge winner by living into his 90’s. So, yes, you may have been able to do better in the markets yourself (though not guaranteed), but you cannot forget about the other benefits you didn’t use, but which could have made a huge difference for you and your family.

Reply

Peter March 26, 2015 at 9:57 pm

Stevendad – I do think it is interesting that DC shows up as one of the most unequal cities in light of our discussion of the area a few weeks ago (and one or two pages back). The Federal government has been responsible for the growth in the DC area with its never-stop-spending mentality and it has truly helped the whole area. We have very little poverty in our area yet it rates “unequal”. This is likely because the top is so much higher here – the median income is over $100k at last check – not that poor people are being left behind. I don’t care what the top guy makes as long as there is a middle class and little poverty.

Reply

Leave a Comment