Posts Tagged ‘small business owners’

What Mitt Romney Said Last Night About Tax Cuts And The Deficit Was Absolutely Right. And What Obama Said Was Absolutely Wrong.

October 4, 2012

Mitt Romney repeatedly said last night that he would not allow tax cuts to add to the deficit.  He repeatedly said it because over and over again Obama blathered the liberal talking point that cutting taxes necessarily increased deficits.

Romney’s exact words: “I want to underline that — no tax cut that adds to the deficit.”

Meanwhile, Obama has promised to cut the deficit in half during his first four years – but instead gave America the highest deficits in the history of the entire human race.

I’ve written about this before.  Let’s replay what has happened every single time we’ve ever cut the income tax rate.

The fact of the matter is that we can go back to Calvin Coolidge who said very nearly THE EXACT SAME THING to his treasury secretary: he too would not allow any tax cuts that added to the debt.  Andrew Mellon – quite possibly the most brilliant economic mind of his day – did a great deal of research and determined what he believed was the best tax rate.  And the Coolidge administration DID cut income taxes and MASSIVELY increased revenues.  Coolidge and Mellon cut the income tax rate 67.12 percent (from 73 to 24 percent); and revenues not only did not go down, but they went UP by at least 42.86 percent (from $700 billion to over $1 billion).

That’s something called a documented fact.  But that wasn’t all that happened: another incredible thing was that the taxes and percentage of taxes paid actually went UP for the rich.  Because as they were allowed to keep more of the profits that they earned by investing in successful business, they significantly increased their investments and therefore paid more in taxes than they otherwise would have had they continued sheltering their money to protect themselves from the higher tax rates.  Liberals ignore reality, but it is simply true.  It is a fact.  It happened.

Then FDR came along and raised the tax rates again and the opposite happened: we collected less and less revenue while the burden of taxation fell increasingly on the poor and middle class again.  Which is exactly what Obama wants to do.

People don’t realize that John F. Kennedy, one of the greatest Democrat presidents, was a TAX CUTTER who believed the conservative economic philosophy that cutting tax rates would in fact increase tax revenues.  He too cut taxes, and he too increased tax revenues.

So we get to Ronald Reagan, who famously cut taxes.  And again, we find that Reagan cut that godawful liberal tax rate during an incredibly godawful liberal-caused economic recession, and he increased tax revenue by 20.71 percent (with revenues increasing from $956 billion to $1.154 trillion).  And again, the taxes were paid primarily by the rich:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So we get to George Bush and the Bush tax cuts that liberals and in particular Obama have just demonized up one side and demagogued down the other.  And I can simply quote the New York Times AT the time:

Sharp Rise in Tax Revenue to Pare U.S. Deficit By EDMUND L. ANDREWS Published: July 13, 2005

WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.

A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.

Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.

Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.

The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.”

The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well
.

And of course the New York Times, as reliable liberals, use the adjective whenever something good happens under conservative policies and whenever something bad happens under liberal policies: “unexpected.”   But it WASN’T “unexpected.”  It was EXACTLY what Republicans had said would happen and in fact it was exactly what HAD IN FACT HAPPENED every single time we’ve EVER cut income tax rates.

The truth is that conservative tax policy has a perfect track record: every single time it has ever been tried, we have INCREASED tax revenues while not only exploding economic activity and creating more jobs, but encouraging the wealthy to pay more in taxes as well.  And liberals simply dishonestly refuse to acknowledge documented history.

Meanwhile, liberals also have a perfect record … of FAILUREThey keep raising taxes and keep not understanding why they don’t get the revenues they predicted.

The following is a section from my article, “Tax Cuts INCREASE Revenues; They Have ALWAYS Increased Revenues“, where I document every single thing I said above:

The Falsehood That Tax Cuts Increase The Deficit

Now let’s take a look at the utterly fallacious view that tax cuts in general create higher deficits.

Let’s take a trip back in time, starting with the 1920s.  From Burton Folsom’s book, New Deal or Raw Deal?:

In 1921, President Harding asked the sixty-five-year-old [Andrew] Mellon to be secretary of the treasury; the national debt [resulting from WWI] had surpassed $20 billion and unemployment had reached 11.7 percent, one of the highest rates in U.S. history.  Harding invited Mellon to tinker with tax rates to encourage investment without incurring more debt. Mellon studied the problem carefully; his solution was what is today called “supply side economics,” the idea of cutting taxes to stimulate investment.  High income tax rates, Mellon argued, “inevitably put pressure upon the taxpayer to withdraw this capital from productive business and invest it in tax-exempt securities. . . . The result is that the sources of taxation are drying up, wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people” (page 128).

Mellon wrote, “It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower taxes.”  And he compared the government setting tax rates on incomes to a businessman setting prices on products: “If a price is fixed too high, sales drop off and with them profits.”

And what happened?

“As secretary of the treasury, Mellon promoted, and Harding and Coolidge backed, a plan that eventually cut taxes on large incomes from 73 to 24 percent and on smaller incomes from 4 to 1/2 of 1 percent.  These tax cuts helped produce an outpouring of economic development – from air conditioning to refrigerators to zippers, Scotch tape to radios and talking movies.  Investors took more risks when they were allowed to keep more of their gains.  President Coolidge, during his six years in office, averaged only 3.3 percent unemployment and 1 percent inflation – the lowest misery index of any president in the twentieth century.

Furthermore, Mellon was also vindicated in his astonishing predictions that cutting taxes across the board would generate more revenue.  In the early 1920s, when the highest tax rate was 73 percent, the total income tax revenue to the U.S. government was a little over $700 million.  In 1928 and 1929, when the top tax rate was slashed to 25 and 24 percent, the total revenue topped the $1 billion mark.  Also remarkable, as Table 3 indicates, is that the burden of paying these taxes fell increasingly upon the wealthy” (page 129-130).

Now, that is incredible upon its face, but it becomes even more incredible when contrasted with FDR’s antibusiness and confiscatory tax policies, which both dramatically shrunk in terms of actual income tax revenues (from $1.096 billion in 1929 to $527 million in 1935), and dramatically shifted the tax burden to the backs of the poor by imposing huge new excise taxes (from $540 million in 1929 to $1.364 billion in 1935).  See Table 1 on page 125 of New Deal or Raw Deal for that information.

FDR both collected far less taxes from the rich, while imposing a far more onerous tax burden upon the poor.

It is simply a matter of empirical fact that tax cuts create increased revenue, and that those [Democrats] who have refused to pay attention to that fact have ended up reducing government revenues even as they increased the burdens on the poorest whom they falsely claim to help.

Let’s move on to John F. Kennedy, one of the most popular Democrat presidents ever.  Few realize that he was also a supply-side tax cutter.

Kennedy said:

“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”

– John F. Kennedy, Nov. 20, 1962, president’s news conference


“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”

– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964

“In today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”


“It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”


“Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate.”

– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.


“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

Which is to say that modern Democrats are essentially calling one of their greatest presidents a liar when they demonize tax cuts as a means of increasing government revenues.

So let’s move on to Ronald Reagan.  Reagan had two major tax cutting policies implemented: the Economic Recovery Tax Act (ERTA) of 1981, which was retroactive to 1981, and the Tax Reform Act of 1986.

Did Reagan’s tax cuts decrease federal revenues?  Hardly:

We find that 8 of the following 10 years there was a surplus of revenue from 1980, prior to the Reagan tax cuts.  And, following the Tax Reform Act of 1986, there was a MASSIVE INCREASE of revenue.

So Reagan’s tax cuts increased revenue.  But who paid the increased tax revenue?  The poor?  Opponents of the Reagan tax cuts argued that his policy was a giveaway to the rich (ever heard that one before?) because their tax payments would fall.  But that was exactly wrong.  In reality:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So Ronald Reagan a) collected more total revenue, b) collected more revenue from the rich, while c) reducing revenue collected by the bottom half of taxpayers, and d) generated an economic powerhouse that lasted – with only minor hiccups – for nearly three decades.  Pretty good achievement considering that his predecessor was forced to describe his own economy as a “malaise,” suffering due to a “crisis of confidence.” Pretty good considering that President Jimmy Carter responded to a reporter’s question as to what he would do about the problem of inflation by answering, “It would be misleading for me to tell any of you that there is a solution to it.”

Reagan whipped inflation.  Just as he whipped that malaise and that crisis of confidence.

This might explain why a Gallup poll showed that Ronald Reagan is regarded as our greatest president, while fellow tax-cutting great John F. Kennedy is tied for second with Abraham Lincoln.  Because, in proving Democrat policies are completely wrongheaded, he helped people.  Including poorer people who benefited from the strong economy he built with his tax policies.

Let’s move on to George Bush and the infamous (to Democrats) Bush tax cuts.  And let me quote none other than the New York Times:

Sharp Rise in Tax Revenue to Pare U.S. Deficit By EDMUND L. ANDREWS Published: July 13, 2005

WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.

A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.

Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.

Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.

The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.” The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.

[Update, September 20: The above NY Times link was scrubbed; the same article, edited differently, appears here.]

Note the newspaper’s use of liberals favorite adjective: “unexpected.” They never expect Republican and conservative polices to work, but they always do if they’re given the chance.  They never expect Democrat and liberal policies to fail, but they always seem to fail every single time they’re tried.

For the record, President George Bush’s 2003 tax cuts:

raised federal tax receipts by $785 billion, the largest four-year revenue increase in U.S. history. In fiscal 2007, which ended last month, the government took in 6.7% more tax revenues than in 2006.

These increases in tax revenue have substantially reduced the federal budget deficits. In 2004 the deficit was $413 billion, or 3.5% of gross domestic product. It narrowed to $318 billion in 2005, $248 billion in 2006 and $163 billion in 2007. That last figure is just 1.2% of GDP, which is half of the average of the past 50 years.

Lower tax rates have be so successful in spurring growth that the percentage of federal income taxes paid by the very wealthy has increased. According to the Treasury Department, the top 1% of income tax filers paid just 19% of income taxes in 1980 (when the top tax rate was 70%), and 36% in 2003, the year the Bush tax cuts took effect (when the top rate became 35%). The top 5% of income taxpayers went from 37% of taxes paid to 56%, and the top 10% from 49% to 68% of taxes paid. And the amount of taxes paid by those earning more than $1 million a year rose to $236 billion in 2005 from $132 billion in 2003, a 78% increase.

Budget deficits are not merely a matter of tax policy; it is a matter of tax policy AND spending policy.  Imagine you have a minimum wage job, but live within your means.  Then you get a job that pays a million dollars a year.  And you go a little nuts, buy a mansion, a yacht, a fancy car, and other assorted big ticket items such that you go into debt.  Are you really so asinine as to argue that you made more money when you earned minimum wage?  But that’s literally the Democrats’ argument when they criticize Reagan (who defeated the Soviet Union and won the Cold War in the aftermath of a recession he inherited from President Carter) and George Bush (who won the Iraq War after suffering the greatest attack on US soil in the midst of a recession he inherited from President Clinton).

[To read that article in its entirety, click here].

When Romney said that the small businesses that create jobs was going to be hurt by Obama’s taxes, he was RIGHT.  In a different article available here, I document the facts from official sources and then say:

Out of 27,281,452 total firms, 21,351,320 are listed as “nonemployer firms.”  Which means that 78.23 percent of all small businesses hire ZERO employees.   So when Obama says that 97% of small businesses won’t be affected by his tax hike, please understand that the whopping majority of those businesses that won’t be affected aren’t hiring anybody.  Another 3,617,764 small businesses have no more than four employees.  Those small businesses that hire zero workers plus those small businesses that hire no more than four workers constitute 91.5% of ALL small businesses.

Here’s a more relevant way to look at it.  When you consider the businesses that employ more than four people, you are looking at businesses that hire 94.97 percent of ALL the workers who work for small businesses.  And while not all of the small businesses that hire between 5-9 employees are going to be paying higher taxes as a result of Obama’s class warfare on small businesses, most of them do.  And virtually none of the businesses that hire more than ten employees are going to earn less than $250,000 a year.

Romney pointed out in the debate that half of all jobs created by small business and a quarter of ALL THE JOBS CREATED IN AMERICA would have their income taxes skyrocket under Barack Obama.

When Romney said that Obama’s taxation was going to destroy 700,000 small business jobs, he was RIGHT.

Which is why 85% of small businesses agree with Romney and disagree with Obama that Obama’s policies have led America down the wrong track.

Which is why 64% of small businesses are saying they plan to simply wait Obama out rather than create jobs while he’s trying to ruin them.

Obama deceitfully talks about giving tax cuts to small businesses when in fact he is actually massively taxing them.

Obama IS helping small businesses … into BANKRUPTCY.  And Obama says the recession is behind us while small businesses are going belly up in droves.

Romney absolutely crushed Obama in the debate last night.  Nobody had EVER won a debate by the margin that Romney won by in the history of CNN.  If you have any decency and care about people who need a job and love this country at all, please cast your vote for Mitt Romney.

Small Business Owner Jack Gilchrist Responds To Obama’s Idiotic ‘If You’ve Got A Business, You Didn’t Build That’ Rhetoric

July 20, 2012

It finally occurred to Homer Simpson:

How about you?

ObamaCare Is Killing Private Practice Physicians

January 8, 2011

First ObamaCare had death panels.  Then massive public outrage forced Democrats to abandon the death panels.  Then Obama brought back his death panels by sneaking them in via backdoor regulation in secrecy.  Then the public exploded in anger again.  And now the death panels are gone again.  At least until the next time these dishonest rodents go behind our backs to impose vile policies the people have already loudly rejected.

Then there’s the case of all the waivers.  As of now, 222 businesses have been given waivers from ObamaCare provisions because otherwise they would have to dump their employee health coverage altogether.  Including quite a few unions that pushed for ObamaCare, by the way.

Doctors are still getting shoved into nasty little death panels, however.  Because ObamaCare is murdering them:

12.21.10 | Sandy C. Pipes | MedCitizen
Private practice doctors: Another Obamacare casualty?

While making the case for his health reform package, President Obama argued that his proposal would make life easier for small-business owners.

Unfortunately, Obamacare threatens to undermine a group of small-business owners that is perhaps more important than any other to his reform effort — doctors in private practice.

The number of privately owned medical practices has declined sharply in the past five years. In 2005, at least two-thirds of practices were in private hands. That figure has dropped to less than half today — and is expected to sink below 40 percent by next year.

Many doctors, specifically those who have just completed a resident specialty, are now choosing not to enter private practice in the first place. Instead, they’re heading to salaried positions at large hospitals. Last year, 49 percent of first-year specialists chose hospital employment.

Obamacare will only exacerbate these trends. Some of the law’s dictates will make it more expensive to operate small practices — even though the rules are supposed to reduce medical costs.

Take the new law’s health IT initiative, which pushes doctors to set up extensive electronic health records in hopes of better coordinating care among providers. More information, the law’s boosters argue, means less waste and lower costs.

But many private practices can’t afford to drop five or six figures on expensive health IT systems that may not even save them money.

Boosters of health IT acknowledge that large organizations are more likely to enjoy its benefits. But shoving patients into ever-larger medical groups may not actually bring down costs.

The reason, as representatives of the American Medical Association recently warned, is that big hospital networks have greater market power. They can use that power to keep prices high, and there’s little that insurers — and even less that consumers — can do about it.

Paying more for treatment doesn’t necessarily guarantee better access or quality. Without an ownership stake in their practices, salaried doctors have an incentive to work the hours for which they’re paid — and no more. Fewer hours for doctors means fewer appointments for patients.

History demonstrates that these incentives matter. In the 1990s, several large hospitals bought up practices and put doctors on flat salaries. As Dr. Bill Jessee, CEO of the Medical Group Management Association, observed, doctors suddenly “weren’t working as hard as they were before their practice was acquired.”

Proponents of Obamacare have conveniently ignored these lessons. President Obama’s top health care aide Nancy-Ann DeParle, for instance, wrote in the August issue of the Journal of Internal Medicine that the new law is “likely to lead to the vertical organization of providers and accelerate physician employment by hospitals.” These organizations are called Accountable Care Organizations, or ACOs.

Such vertical integration may prove costly. Already, hospitals lose money on a substantial chunk of the people they see. In New York, for example, hospitals take a loss on more than 70 percent of patients.

That’s mostly because of the stingy reimbursement rates paid by government health programs like Medicare and Medicaid. In 2008, the average Medicare reimbursement in New York represented a 4.7 percent underpayment. Medicaid’s reimbursements were even worse — as little as 64 percent of a hospital’s actual treatment cost. Those with private insurance are forced to pay more for care to make up the difference.

Hospitals’ Medicaid losses are compounded by the fact that the program’s beneficiaries use far more medical services than other patients. On average, the privately insured visit the doctor three and a half times a year. Medicaid patients make an average of seven visits.

Yet Obamacare will add 18 million new individuals to the program’s rolls by the end of the decade — and thus stretch our healthcare infrastructure even thinner.

Primary care physicians are already in short supply. The Center for Workforce Studies predicts that by 2020 there will be a shortage of 45,000 family doctors and 46,000 surgeons. Unfortunately, Obamacare provides no funding to significantly increase their numbers.

Emergency rooms will have to pick up the slack. The new law could result in as many as 41 million additional trips to the emergency room each year.

The health reform law was sold as a way to fill in the cracks in America’s fractured healthcare system. Instead, it has only made them wider.

This is just another example of how Marxist Democrats imposed their utter contempt for the free market system.  Doctors who don’t have their own practices have far less incentive to work hard when they receive the same salary whether they work hard or not.  And at the same time, the Medicaid patients go to the hospital twice as often as people who have insurance because it doesn’t COST them anything to do so.  Contempt like that is only possible for freeloaders who don’t have a stake in anything and don’t have to worry about their premiums going up like the people who pay into the system to keep the whole thing running.

This is why I keep saying that Democrats are either genuinely evil or totally stupid.  And either way they are moral idiots.

This is hardly the only article, and hardly the only issues that explain why ObamaCare is so vile.  I’ve got plenty of articles which detail plenty of reasons why ObamaCare is murder for the doctors whom our entire medical system depends upon:

Medical Pros Needed To Staff ObamaCare Getting Canned Because Of ObamaCare

Medical Doctor Points Out That Doctors Will Be Fined Or Jailed If They Put Patients First Under ObamaCare

ObamaCare Driving Essential Primary Care Physicans Out Of Medicine

Doctor Cassell: ‘If You Voted For Obama, Seek Urologic Care Elsewhere’

ObamaCare Factoid: Access To Health Care Doesn’t Mean Squat When Hospitals, Doctors And Pharmacists Bail

38 States Now Working To Preempt ObamaCare Disaster

Mayo Clinic Realizes ObamaCare A Total Disaster, Stops Accepting Medicare

Harvard Medical School Dean Flunks Democrat Health Bill

Why Won’t Obama Invite The Doctors Who Will Resign If His Health Agenda Passes?

Wall St. Journal Bursts The Obama Bubble: ObamaCare Is All About Rationing

And yes, that IS just for starters.

ObamaCare pledges to push something like 30 million more people into the health care system even as it forces the doctors who ARE the health care system to leave medicine.

How does that NOT sound like a total disaster in the making?

Punishing The Rich Punishes The Poor By Punishing Economic Growth

July 15, 2009

I don’t know about you, but I have never gotten a single job – or even a single job offer – from a poor person.  And even when I’ve applied for a job at a company, there was always a rich person or persons up the food chain who had made that job possible.  We “ordinary people” don’t stop and think about how much we have actually depended upon the rich.  But as our economy tanks, maybe it’s time we did.

How the Mighty Have Fallen

The rich really aren’t like you and me–: They’re historically recession-proof. But this time they’ve been hit hard—and we may all be the poorer for it.

By Robert J. Samuelson | NEWSWEEK
Published Jul 11, 2009
From the magazine issue dated Jul 20, 2009

Just who is “rich” in America is a matter of considerable disagreement. No one disputes that Bill Gates (No. 1 on last year’s Forbes400 list with a net worth of $57 billion) and Warren Buffett (No. 2 at $50 billion) are wealthy or, indeed, that everyone on the Forbes list qualifies (the poorest had a net worth of $1.3 billion). But as you move from billions in net worth to the mere hundreds or many tens of millions, and then to annual incomes of the mere hundreds of thousands, the arguing begins.

In April, The Wall Street Journal ran an article sympathetically portraying families with incomes around $250,000, the level that President Obama has targeted for tax increases. By most measures, these families rank in the top 2 percent to 4 percent of the income spectrum. But many—possibly most—see themselves as “upper middle class” and not “rich,” the paper reported.

“I’m not after sympathy,” said the wife of a surgeon who makes about $260,000. “What I want is a reality check on what rich means. I can pay my mortgage and can buy some clothes. I’m not going without, but I’m not living a life of luxury.” The mayor of San Jose scoffed at $250,000. That’s what a two-engineer couple might make, he said. It put them in “the upper working class” and wasn’t enough to “buy a home in Silicon Valley.”

The article triggered an outpouring of e-mails—many applauding that someone had finally described their harried plight; others sarcastically wondering what planet the whiners lived on. But so much angst among the affluent—however defined—attests to something else: the present recession, unlike any other since World War II, has deeply shaken the nation’s economic elite.

With secure jobs and ample incomes, the rich and the near rich are supposed to be insulated from economic slumps. Well, not this time. Many feel fearful, threatened, and impoverished. In a recent Unity Marketing survey of consumers with incomes exceeding $250,000, 60 percent said their financial situation had deteriorated; 39 percent said bonuses or commissions had been cut; 29 percent said their regular income had been reduced; 8 percent said they’d lost their jobs; and 4 percent said their hours had been reduced. Even with a partial stock-market rebound, many of America’s most affluent feel vulnerable to layoffs and lost income, just like other Americans. “This has been an equal-opportunity recession,” argues Pam Danziger of Unity Marketing.

Collateral damage is widespread. Sales at luxury chains have fallen sharply; same-store revenues for Saks Fifth Avenue and Neiman Marcus dropped about 25 percent in recent quarters. Many country clubs are struggling to hold members. In New York’s Hamptons, unsold homes reached a 34-month supply early this year at the prevailing sales pace; buyers had hibernated. Economist Susan Sterne, a specialist in consumer spending, calls it “the demise of luxury… the people who buy $3,000 Gucci handbags. You see it in the luxury-car market and housing.”

Some causes are obvious. With the recession’s epicenter on Wall Street, layoffs and bonus reductions among highly paid investment bankers, traders, and money managers have thinned the ranks of the rich. The plunge in share prices has especially hurt the wealthy, because they disproportionately own stocks.

But something bigger may also be happening. In a new study, economists Jonathan Parker and Annette Vissing–Jorgensen of Northwestern University find that—contrary to conventional wisdom—income losses in recessions are proportionately greater for the well-to-do than for middle-income households. By their estimates, the relative income loss for the top 10 percent of the population is 26 percent larger than for the average household. For the top 1 percent, the contrast is even starker. Their proportionate loss is more than double—that is, if the average household had an income loss of 10 percent, the top 1 percent would lose more than 20 percent.

That doesn’t mean they suffer more hardship. It’s almost certainly tougher for a family with an income of $50,000 to adjust to a $5,000 loss (10 percent) than it is for a family with $1 million to compensate for a $200,000 drop (20 percent). And the poor experience the highest joblessness. Still, the increased economic vulnerability of the upper classes is a change from the past. Before the 1980s, the conventional wisdom was true, Parker and Vissing–Jorgensen say. Higher income conferred more stability.

It’s not entirely clear what changed. Parker thinks that “one cause is the dramatic increase in pay for performance.” In the past quarter century, salaries for top executives and managers have increasingly consisted of stock options, year-end bonuses, and sales incentives, he says. When the economy thrives, pay rises; when it sours, pay falls. Parker also cites the growth of professionals (lawyers, doctors, accountants, consultants) among the economic elite. “When the demand for elective surgery or legal services or consulting services goes down, so do their incomes,” he says. Even among the top one tenth of 1 percent, wages represent half their income, and “proprietors’ income” (essentially profits from a business or partnership) accounts for another quarter. The stereo-type of the rich living mainly off dividends and interest income is increasingly outdated. Many of the wealthy are owners of small businesses whose well- being is—to some extent—hostage to the business cycle.

It will strike many, no doubt, that the setbacks and anxieties for the country-club set are just deserts. Some will correctly note that well-paid CEOs and investment bankers helped bring about the economic crisis. They’re just getting their comeuppance—and it’s about time. Others will point out that countless studies have shown that, in recent decades, the gap between the rich and the rest has widened. From 1990 to 2006, for instance, the share of pretax income received by the top 1 percent grew from 12 percent to 19 percent, says the Congressional Budget Office. The present reverses are a healthy correction. So goes the argument.

All this is understandable, but incomplete. The criticism usually presumes that if the rich and near rich get less, someone else will get more. Redistribution achieves a better social balance. Sometimes that happens. But sometimes when the rich get less, no one else gets more. Regardless of how the rich earned their money—trading bonds, performing surgery, starting new companies, providing legal work—it’s no longer so lucrative. The rich get poorer, but no one else gets richer. Society is worse off.

“Trickle-down economics” is a despised phrase and concept to many, but it also embodies a harsh reality. The rich often play a pivotal role in U.S. economic growth, and if they are enfeebled, then the consequences are widespread. Consider:

Consumption spending, the economy’s main engine, is skewed toward the upper classes, because they have most of the income. In 2009, households with more than $200,000 in income account for 3.4 percent of the total but will generate almost 14 percent of consumer spending, estimates economist Sterne. Households with incomes between $100,000 and $200,000 represent about 14 percent of the population and 34 percent of spending. Together, these groups generate nearly half of U.S. consumption, although they’re only a sixth of the population.

Similarly, the rich pay most of the taxes. In 2006, the richest 1 percent paid 28 percent of all federal taxes, estimates the CBO. The richest 10 percent (including the top 1 percent) paid 55 percent. The system is progressive—that is, the richer people get, the more of their income they pay in taxes. In 2006, the effective rate for the top 1 percent was 31 percent, reflecting all federal taxes. By contrast, the poorest fifth paid an effective rate of 4 percent. (State and local taxes are less progressive, because they rely more heavily on regressive sales taxes.)

The wealthy dominate charitable giving. In 2004, families with a net worth exceeding $5 million made up about 1.5 percent of all U.S. families but accounted for 27 percent of contributions, according to the Center on Wealth and Philanthropy at Boston College. Those with a net worth between $1 million and $5 million, about 7 percent of all families, represented another 20 percent of contributions. So, a tenth of American families made nearly half of all gifts.

Wealthy individuals are an important source of money for venture capital—funds invested in startup companies. Individuals and families represent about 10 percent of VC money (most of the rest comes from pension funds, college endowments, and insurance companies).

When the affluent retrench, they drag a lot with them. For example, the financial crisis led to a 44 percent fall in year-end bonuses at Wall Street firms, to $18.4 billion in 2008 from $32.9 billion in 2007, according to the New York state comptroller. No doubt that struck many as overdue and insufficient. Bankers were overpaid, and huge year-end bonuses encouraged excessive risk-taking. The trouble is that the loss of taxes on the bonuses blew a $1 billion hole in the state’s budget and made it harder to pay for schools, health care, and prisons.

It’s the same story with consumption. In late 2008, spending declined at about a 4 percent annual rate, and, in the first quarter of this year, rose slightly. But Danziger’s surveys show steeper cutbacks at the top. From 2007 to 2008, consumers with incomes from $150,000 to $249,000 reduced spending by about 8 percent, while those above $250,000 cut almost 15 percent. Similarly, charitable giving decreased to $308 billion in 2008, a drop of 5.7 percent after adjustment for inflation, says the Giving USA Foundation, a nonprofit group. Donations may fall further this year. The stock market is a strong predictor of giving. A 100-point rise in the S&P 500 stock index increases charitable contributions by $1.7 billion, says the Center on Philanthropy at Indiana University.

Not all charities have suffered. “Our funding is up 42 percent over last year,” says Ross Fraser of Feeding America, an umbrella group that channels cash and groceries to 206 food banks around the country. “Charities such as ours do well when times are hard. If you have to choose between giving to the ballet and feeding a hungry child, who’s going to win?” But that compounds the pressure on other nonprofits: colleges, hospitals, and environmental groups.

It’s probably true that being rich is more a state of mind than an explicit level of income or wealth. It’s feeling of having enough money so that money is no longer a worry. For many, that sense of security is gone. Michael Silverstein of the Boston Consulting Group reckons there are about 100,000 households with a net worth—counting their homes, stocks, bonds, and businesses—of at least $20 million. Even at these rarefied levels, he thinks, many are rattled. “They’ve seen up to a 30 to 40 percent drop in their net worth from peak to trough.  Some have friends at blue-chip companies like General Electric, AIG, or Citigroup who have lost fortunes invested in company stock,” he says.

What’s unclear is whether the trauma will permanently change behavior. Silverstein is skeptical. “The nice thing about Americans is that they have short-term memories,” he says. “We’ll get out of this—and then the rich will realize they’re rich again and start to spend.” But Danziger, the marketing researcher, thinks the shopping culture has taken heavy hits. Americans have “been on an extended buying spree for the past 20 years. They’ve got stuff—and they don’t need a lot of it,” she says. There’s a growing realization “that material wealth doesn’t make people happy.” Striving to replenish their savings, Americans—even the rich—will skimp on spending.

Once way or another, it’s doubtful that trickle-down economics will soon regain the power of recent decades, when exploding stock and real-estate values and rising salaries were compounded by George W. Bush’s favorable tax changes. But cheering at its eclipse may be premature and misguided. The contradiction is that many of the large gains at the top that are routinely deplored also provide the economic fuel for desired spending at the bottom. If the rich—however defined—remain stuck in neutral, the overall economy may not do much better.

Think about some of the “filthy rich” such as doctors and small business owners.  Ask yourself this: if there wasn’t the promise of high pay at the end of the road, do you think we’d have as many doctors?  Would you spend tens of thousands of hours in study, and thousands of more hours in stressful and sleep-deprived residency, if you weren’t going to be well-paid in the end?  How about small businesspeople?  Would you risk all your savings and years of your time developing a business if you didn’t have the right to expect a real reward if you actually succeeded?

What’s wrong with us for hating such people for their hard work and their success?  Why on earth would we wish them anything but success when we benefit from their succeeding with better health, better jobs, and better lives than we could otherwise ever have apart from them?

There has long been a movement by the political left in America to be more like sophisticated Europe.  Liberals say, “What Europeans do with government is pretty good.  And what they do with civil rights is pretty good.  And what they do with health care is pretty good.”  And there’s this constant movement on the part of the left to be more like Europe.  In our Surpreme Court liberal justices have been quoting what Europeans do in their law.  The fact is, 200 years ago there was the same kind of intellectual elitest movement going on – “Let’s be like Europe.”  Thomas Jefferson made a statement that is applicable today:

“The comparisons of our government with those of Europe are like a comparison of heaven and hell.”

That’s the thing.  As Europe has dived into socialism, fascism, communism, and just about every other “-ism,” what should have been obvious is that Americans shouldn’t be more like Europeans; it should be the other way around.  And socialist redistribution of wealth is neither American nor successful.

There’s a joke that compares the attitudes of Americans with the attitudes of Europeans.  An American rides the bus, sees an expensive sports car, and says, “Some day I’m going to own a car like that.”  And there’s a European who rides the bus, sees an expensive sports car, and says, “Some day that son of a bitch will be riding the bus just like me.”  What makes that joke so sad is that we have too many American liberals who are thinking like the Europeans even as the Europeans are beginning to think more like Americans used to.

As we speak, Democrats are devising more and more ways to fund their massive and frankly European-style socialist spending programs by punishing the rich for their success.  They are going to lift the successful Bush tax cuts and raise taxes on “the rich.”  They are going to impose additional taxes in the form of “surcharges” on “the rich” to try to pay for their socialist-style health care agenda.  As a result the rich – who already pay a shockingly high share of the taxes – will begin to see more taxes than they have seen in decades.  And they will keep coming after “the rich” as long as Marxist-style class-warfare politics pitting the proletariat against the bourgeousie continue to work for them.