Other people's money

I hate to spoil a good punch line by tacking on a commentary, but there was something I wanted say in the discussion of Rick Santorum (the magic link is back up to number 2!) and his views on the special needs of risk takers that the punch line didn't quite convey.

It's that Santorum wasn't just misspeaking in an amusing way, [jump]
or making a "gaffe": he was saying what he probably more or less sincerely believes, as do they all, that being a financial risk taker makes you a special person, so special that society needs to heap money on you in addition to whatever you get if your bet pays off--you're the wand through which the market works its wizardry.

The taxation of capital gains discourages innovation, risk-taking, and capital investment, thus diminishing entrepreneurial activity in the economy,

said Representative Jim Saxton's Joint Economic Committee in June 1997; the 2010 Tax Extenders' bill

sends the wrong message to our nation's innovators. Instead of rewarding their risk-taking and hard work, we are telling them that their work is worth less than that of others,

wrote Glenn Hubbard of Columbia Business School in protest. Dr. Newt Gingrich writes,

We must eliminate the capital gains tax to encourage investing. Federal Reserve Chairman Alan Greenspan testified that the most economical rate for taxing capital gains is zero because tax-free capital gains will encourage much greater risk-taking and lead to more entrepreneurial behavior. This leads to more prosperity, a bigger economy, and better jobs.

These guys are seriously arguing that if your investment person has to pay 25 or 30% tax on his (or presumably her) winnings in the Grand Game, they will just go off and get a civil service job, because the taxation would make them feel so devalued  and disrespected. Because they take risks!

And then you know what?

Who do they think are bearing the risks? Their blather about free enterprise risk-taking has it upside down. The higher you go in the economy, the easier it is to make money without taking any personal financial risk at all. The lower you go, the bigger the risks.

Wall Street has become the center of riskless free enterprise. Bankers risk other peoples’ money. If deals turn bad, they collect their fees in any event. The entire hedge-fund industry is designed to hedge bets so big investors can make money whether the price of assets they bet on rises or falls. And if the worst happens, the biggest bankers and investors now know they’ll be bailed out by taxpayers because they’re too big to fail.

But the worst examples of riskless free enteprise are the CEOs who rake in millions after they screw up royally.

(from the sublime Robert Reich)

That's right, it's a total fraud anyhow.

Now this is what I call risk taking. Of course it always pans out for him....

By the way, I have a way for Santorum to fix his Google problem: he should change his name. To Rick "Sanctus" Sanctorum. Not only holier than thou, holier than everybody!