Pet Rocks didn't exactly develop a cure for cancer either. No, in a capitalist system like ours people make money in all kinds of ways, not just by helping society, like doctors and social workers. Hey, we all have to eat.
An article in the Times today, "Hedge Fund Managers Don’t Always Beat the Market, but They Still Make Billions," talks about how "the top fund managers still haul in enormous paychecks," regardless of "good performance, mediocre results or even downright ugly returns."
According to Institutional Investor’s Alpha magazine, "the 25 best-paid hedge fund managers earned a collective $11 billion in 2016." And, believe it or not, I'm okay with that. (Although I can see why others wouldn't be.) To give you an idea of the numbers we're talking about here (my emphasis):
The top earner of 2016 was James Simons, the former code breaker for the National Security Agency and the founder of Renaissance Technologies, who made $1.6 billion. Ray Dalio, the founder of Bridgewater Associates who is best known for his philosophy of “radical transparency,” came in a close second with $1.4 billion.
And my attitude is, good for them. They're probably really smart, really hard-working guys. I don't care if their funds underperform the market because I'm not invested in them. (When people ask me for financial advice I always tell them to put all their money in index funds and just forget about them.)
But what this piece did make me think about was not the return these guys achieve for their clients but rather the amount of money they contribute to the operation of the federal government.
The top rate is currently 39.6 percent, right? But under Eisenhower it was as high as 91 percent. (I know, I know, the effective rate was much lower, but that's a conversation about deductions, not marginal rates.)
And I wonder, are the rich paying enough in taxes? (When I brought that up recently to my brother he implied I was envious. And I am -- I'm trying to get rich too. But that doesn't mean we can't talk about marginal tax rates.)
Now I know all the arguments in favor of lower taxes. (I used to be a libertarian, remember?) "The rich will leave the country!" is one you often hear. And I think of Ken Griffin (above, with Illinois Gov. Bruce Rauner) and Sam Zell, a couple of local billionaires. And I think, go ahead, leave Illinois: without those two Rauner would have never been elected and the state might actually have a budget by now.
According to that piece in the Times, Griffin only returned five percent for his investors in 2016. Caveat emptor, I say. But Griffin himself took home $600 million. Again, good for him! He's a businessman. But what did he "kick back" to keep this operation (the United States) running? At a top rate of 39.6 percent a heck of a lot less than 91 percent (even with all the loopholes) or even 50 percent, which would be considered confiscatory by today's standards.
And now these guys want even lower rates? Good God, their greed knows no bounds! I say we start looking at higher, not lower, marginal tax rates, and if these Masters of the Universe don't like it they can take their hedge funds elsewhere. (Try starting a business in Uganda.) As I said at the top of this post, it's not like they're contributing a whole lot to the betterment of society.