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Eliminating dividend taxes the solution?(81 posts)

Eliminating dividend taxes the solution?ColnagoFE
Jan 6, 2003 7:09 AM
I guess this is Gearge W's latest foray into fixing the crap economy. Yet another tax break for the rich it seems. How many middle and lower class folk really worry about dividend taxes anyway?
It's an issue of equality...TJeanloz
Jan 6, 2003 7:33 AM
The call to eliminate the tax on dividends preceeds G.W.B. by many years, and makes a lot of sense for a lot of people. The trouble with this is the definition of who is "rich" and who is "middle and lower" class. More than half of American households own equity stocks and will benefit from an elimination of the dividend tax. Consider also that stocks that pay large dividends are disporportionatly owned by the elderly (because they are considered "income", rather than "growth" stocks), and a large chunk of the cut is going to the aging population.

Any income tax cut is going to have a greater impact on the rich. They have more income: 1% of 1,000,000 is much more than 1% of 25,000. They also already pay much more in taxes. When talking about tax cuts, people opposed always make one glaring omission. They point out that cutting the tax rates, across the board, by 1% saves the person with a $1million salary $10,000, while saving the person with a $25k salary only $250- the tax cut is all for the rich, they say. But they neglect to point out that the millionaire is still paying $380,000 in taxes, while the person on the $25k salary is paying just $3,500. And they get the same services from the government, right?

And lastly, on why the dividend tax doesn't make sense in the first place, is that taxes have already been paid on that money. The corporate tax was paid on the profits, by the corporation, and then the shareholder has to pay the dividend tax on the profits that are given to them. You're taxing the same income twice, which, from a theoretical standpoint, doesn't make any sense, and costs the government more money to process the taxes.
As for the double taxation issue: enlighten me, serioulsy128
Jan 6, 2003 9:36 AM
I understand it on a theoretical level: the same dollar taxed twice. But practically, as I clearly recall my tax professor saying "if it makes you richer, it's income." I never heard that once a dollar is taxed, that's it, it's now forever a Teaparty Dollar. There must be tons of ways in which dollars are twice, three times taxed: each time it makes a different party richer. No? As for goods, my car is taxed every year. ( I really can't get my mind around excise taxes....That has got to be a scam!) I've already paid taxes on it? I am no richer this year b/c of the car. In fact it has depreciated. Maybe I'm nixing comquates and star fruit, I don't knbow. As for the dividend: Are there not two parties made richer by the increase in value and therefore each party should pay the resultant tax?? (assuming one believe it should be taxed at all in the first place)
No, there is only one party,TJeanloz
Jan 6, 2003 9:48 AM
The profits of a corporation are entirely owned by the shareholders - it made them richer when the corporation made the money. The corporation is, after all, just a group of shareholders. These profits are owned by the shareholders whether or not they are distributed as dividends. When the shareholder receives his dividend, he is no richer than he was before- he already owned that money. He is the only party made richer.
But, if the corp. is "an individual" for certain legal fictions128
Jan 6, 2003 10:00 AM
which benefit corp. then why not for parallel concerns that may be a burden on the corp? Therefore it is theoritcally consistent to tax it twice. (anyway, I get your point and appreciate the explanation. It makes sense as far as it goes)

The stock market is too theoretical and 'unreal' for my tastes anyway, seems like a starched Vegas to me, hell when those dudes first gathered near the wall on what is now called wall street, it was soooo peripheral to our economy and was largely villified as immoral gambling by the Victorian culture. Has the stock market and fictional gains of it have gone too far, become too central to the economy?. Shouldn't the economy grow not on speculative profits but on jobs and dollars paid the worker (including wealthy workers.) Rhetorically speaking....
My biggest pet peeve,TJeanloz
Jan 6, 2003 10:10 AM
One of the major problems with feelings towards the American economy is that the American public seems to think that the stock market and the economy are the same thing. They are not the same thing. If they were, half of the country would be out of work, and we'd be in the worst economy in the country's history, considering that that's the shape of the stock market. The stock market is largely a casino game whose odds are somewhat determined by economic factors. The procedures at a Vegas sportsbook aren't all that different from those at Wall Street analyst's desks.
That's true for short termmoneyman
Jan 6, 2003 12:59 PM
But for long term, the numbers are very consistent and dependable. Any given year in the market is a crapshoot, but over 25 year periods, it is pretty consistent. Modern portfolio therory is built on that premise, and the largest pension funds in the US manage their portfolios based on that. They can do that because their liabilities extend beyond 100 years, thus allowing the magic of time to right the wrongs of the short term.

All returns revert to the mean, anyway. As a very bright man from a very large money management firm put it: Bad things get better, good things get worse.

A random walkTJeanloz
Jan 6, 2003 1:21 PM
Yes, of course the stock market is correlated to the economy in the big picture. Unfortunately, people hear a news report about how the DJIA lost 100 points, and they think that this means the economy is worse today than it was yesterday. The day-to-day random walk bears little reflection on the economy, but people remain unable to seperate the economy from the market.
To support TJ's statementMcAndrus
Jan 7, 2003 6:45 AM
The easiest example to make regarding TJ's statement "the stock market is not the economy" is to look at the last year's performance. The economy (GDP) grew at something like 2% in 2002 and the stock market declined.

As my investments professor said, the stock market is the value placed on the sum of the expected free cash flows of all the corporations on the exchange, into infinity. As these expected free cash flows change day-to-day with market news, the stock prices vary and the stock indexes vary.

It's also correct to say that long term these day-to-day changes wash out. One of my favorite b-school exercises was when we did a present-value analysis of all forms of investments. We discovered that the only form of investment that outperformed the market as a whole was small company stocks (today that means something like $300 million a year or less in income). And this comparison was done from data from 1930 to 1990.

All other forms of investment performed at or below the market as a whole.

So, is the market volatile? Yes. Is the market stable and predictable? Yes. Well, which is it? The answer is, it depends on the time frame.

In general a removal of a dividend tax is a good thing for both economic and moral reasons. All taxes are a form of theft provable by one simple proposition. If you do not pay your taxes, what happens to you? You forfeit some property, pay fines, or go to prison. That's a punishment very similar to that given by my local loan shark if I miss a payment.

The question that should be asked by a lot of people and is seldom asked is which taxes produce more tax revenue and which taxes produce less tax revenue?

Dividend taxes produce less tax revenue because they reduce the money available for investment in productive assets: machines, factories, etc.

Or to ask the question another way, what do investors people do with their money? Do they put it under a mattress or bury it in a can in the backyard? No. They invest it or spend it. If they invest it they create capital (more money) that creates more assets that create more wealth. If they spend it they create more demand for goods and services.

To assume that lower taxes produce less tax revenue assumes what's called a "static growth" perspective. If I pay less in taxes then I take the money and put it under the mattress. But I don't do that: I save it, invest it, or spend it. This is a "dynamic growth" perspective that says consumer and investor activity changes (is influenced) by tax policies.

Lower dividend taxes mean greater economic growth and very soon greater tax revenues. Seems like a win-win situation to me.
such a tired, old argumentDougSloan
Jan 6, 2003 7:51 AM
I agree with Ted. I get so tired of hearing how tax cuts benefit "the rich," seeingly totally ignoring the reality of "the rich" paying far more in the first place. Maybe you'd prefer we just go communist and confiscate everything and redistribute it to the poor and be done with it.

Some people just don't get it. Where, exactly, do jobs come from? Not a whole lot of hiring going on by those entrepreneurs grossing $20,000 a year. Sure, go ahead. Tax the crap out of those who create jobs, but first ask yourself, "would I rather have a tax cut or a job cut?"

such a tired, old non sequitur...cory
Jan 6, 2003 9:05 AM
There's the heart of the conservative argument on taxes right there: If we don't believe what you believe, we're communists. If we think a nation that can provide every accused criminal with an attorney should be able to provide every sick person with a physician, we're socialists. If we think the environment is worth protecting for its own sake, not just because it makes money, we're anti-free enterprise. Jesus, do those people THINK before they spout that stuff?
as long as you're making gross generalizations...gregario
Jan 6, 2003 9:13 AM
Why is it that the most liberal folks here at work are also the laziest SOB's I've ever seen?
such a tired, old non sequitur...BikeViking
Jan 6, 2003 1:09 PM
WHen a person is charged with a crime, it is only fair that the person be properly represented and the government is looking to take the freedom of the accused if he/she committed the crime. But using that logic, does the government need to provide people with "proper" housing? Shouldn't the government help feed the starving? I guess we should all send our money to the "great Daddy" and let them decide what is best for us...not!

My point is...where would this government gravy train end? At the corner of Marx and Lenin street? There is such a lack of personal responsibility in our country!! I am responsible for taking care of my family and I should not be looking for governmental help.

Hand-ups are the way to go , not handouts.
Marx Ave. and Enron Blvd128
Jan 7, 2003 7:17 AM
It is clear you have never read Marx, or if you have you missed the boat. To correlate Marx's political economy ecxlusively to Communist(read fascist) Sov. Un. or to some anemic argument regading hands and gravy trains whatever, is like correlating Enron (Crooked E Corp. -yeah, I actually thought network tv made a good one there- read the worst of the capitalist model)exclusively with market capitalism: you can't. And when you do it's counterproductive and frankly ignorant. Marx was one of capitalisms greatest proponents; why? Do your own homework. Marx is regarded by "liberal" and "conservatives" alike as among the most potent known, economic minds. And largely irrelevant today. To ignore his work or ascribe it's substance to anything under the oppressive pre-rvolution Soviet fist is foolish. It is just like grouping another great scholar, Adam Smith, under the corrupt and worst examples of capitalism which we can all list ad infinitum, and thereby discredit all of his work and capitalism. But that is not market capitalism, it's just a bunch of crooks operating under the guise of capitalism. Your arguments sounds so 60's....

Now go read Capital (or whatever it's called) and see which 10% of it is still relevant at all, before you rather meaninglessly invoke your taboo.

There is a place for regulation and distribution of assets and power even in a market driven economy. Just as government needs to be limited, so do the occasional sinister forces of bussinessmen and women. All in good measure though.
Marx Ave. and Enron BlvdBikeViking
Jan 7, 2003 1:48 PM
Point well taken...I'll rephrase the point I was trying to make.

There is an undefined societal line between what a person should provide for themselves and what the government should provide for them. I believe the able-bodied individual should be providing for him/herself the basics of life (food/shelter/clothing/medical care). WHen people get into REAL difficulty, the government should be there for them in a LIMITED period to help them get back on their feet. Most people who have pride in themselves will not allow themselves to be on the dole for long. I know it's anecdotal, but I remember reading a study that extended unemployment benefits only result in people being on the dole longer because once the benefits run out (short or long term), most people get jobs. Should this be a proven stat, unemployment needs to be for a reasonable, yet limited time period.

Rich or poor, earned money belongs to the person who earned it, not the government.
Jan 6, 2003 9:25 AM
I get so sick and tired of you right wing ideologues devolving every argument to some tired boilerplate "commie threat redistribution paranoia" That's reductionist bs. These issues are far more rich and interesting than that.
It makes your argument sound as old as the arguments you claim to abhor.

I fully support just about any tax cut that doen't cut into basic services. And I agree that most miss the point of the larger, proportional, issues about taxes and "the rich" definitionally. But Taxes are simply a necessary evil. Just like the occasional deficit. Deal with it. How many jobs will a dividend tax cut create? Are you dilluding yourself? Or will there just be a few more investors taking vacation this year with the big bonanza?? (a good thing btw)

Where do jobs come from?? The beter question is where did the jobs go? Or: how about a raise or a bonus this year, Scrooge?? I suppose the American worker is too demanding on those tight ass corporate purse strings? Can't afford 6 bucks an hour so lets move to Indochina and pay those poor saps a decent wage and raise their boats. Nice. That's civic duty and job creation for ya. But they'll all come rushing home after the tax is cut on dividends. Yuh.

As soon as you knee jerk right wingers (and liberals) start addressing the exporting of OUR jobs and the deceit of offshore tax havens of OUR aggregate wealth and the b/s manipulation of unbridled capitalists your arguments cannot be taken meritoriously. They are myopic.

I know you like to bait your arguments and engage largely in hyperboly (sp) to make the case and start the arguments,s o I'll continue to view them somewhat as grains of salt.

But really, Limbaugh is not good for your soul man, and there never was a Communist threat and the poor are not going to invade you. Relax....

btw, great ride report and sweet photos...
how would you know what Rush says?DougSloan
Jan 6, 2003 2:14 PM
Do YOU listen to Rush? Or, are you speculating what he says.

I listen to Rush about 1 hour a month, if I happen to be driving somewhere in the morning.

Nonetheless, believe me, I don't need Rush or anyone else to tell me how to think. I suppose there's a good sized segment of the Left who believe that Rush has brainwashed a generation or two, when the reality is that there were, in fact, a few conservative ideas floating around prior to 1990 (remember Reagan, e.g.?). All he does is re-articulate them fairly well.

Besides, Rush and I were raised in the same town, a small conservative German town on the Mississippi River in southeast Missouri. It might be no surpise that we would have some similar values (hate his views on tobacco, though).

Jan 6, 2003 2:17 PM
Thanks. No matter the differences in politics and such, we all share the common bond of cycling. Heck, I might even go along on a ride with Cory, if he'd let me.

I don't think this is gonna prevent job cutsColnagoFE
Jan 6, 2003 9:30 AM
Let's get real. The only people who are going to benefit greatly from this are rich individuals with large portfolios. Grandma living off her pension fund isnt even going to notice. Trickle down economics didn't work for Reagan and I'm predicting won't work for Bush either. My opinion of course. Let's see what happens in 5 years.
How this is going to prevent job cuts,TJeanloz
Jan 6, 2003 9:44 AM
This is a great issue of cutting a tax that most people don't understand the ramifications of, and are ill prepared to say anything about. So, from a finance perspective, how is this going to prevent job cuts?

When companies need money there are two basic things they can do: issue bonds (take on debt), or issue equity (sell % ownership). Cutting the dividend tax will make every stock that pays a dividend more valuable (because it will create a higher annual cashflow on the stock). This, in turn, will make issuing new equity less costly (the Company would have to give up a smaller % ownership to receive the same $ benefit). This is good for two reasons, (1) it lowers the costs of taking on new projects for the company, and more projects mean more jobs; (2) it encourages equity financing. The more reliant a company is on equity financing, the less likely a bankruptcy is (bankruptcy occurs when debts exceed assets, so reducing corporate debt levels will help prevent bankruptcy). Bankruptcy has been a pretty serious source of job loss over the last year. And this is why the elimination of the dividend tax is being proposed as a short-term economic stimulous- not because it will give some old lady another $0.05 a share.
or create jobsmohair_chair
Jan 6, 2003 9:45 AM
I've never, ever bought the trickle down theory myself, because it is the most extreme wishful thinking to be nice, and frankly, it's absurd. Give someone money in the current economy and they'll either use it to pay off debt or save it. Neither one of those things will create jobs. Maybe there will be an upswing in hiring of servants.

This seems like a fake resume-filling tax cut to me, like most of the supposed tax cuts over the years. I can't imagine that there are too many people making all that much from dividends anyway. Like you said, it would take an awfully large portfolio in dividend-producing stocks, and that's old school investing.
Giving money to people who don't need to spend it. . .czardonic
Jan 6, 2003 5:36 PM
. . .stimulates nothing. Period. Give money to people who want, and more importantly need, to spend it.

This won't stop corporations from cutting jobs or moving them overseas either. Corporations will simply bank the extra money in addition to snatching the food out of the mouths of common American folks. From an strictly economic standpoint, why shouldn't they?

Economic theory simply can not be relied upon to foster a healthy society. There are too many deprivations that can exist alongside a "healthy" economy. Why can't it be acknowledged that things like the minimization of costs or the maximization of profits are not absolute in their virtue? Remind me again why maximization of things like employment, home ownership etc. will send us to hell in a hand-basket (faster than capitalism, that is).
For once I agree with you, mostly.sn69
Jan 6, 2003 6:31 PM
I think you and I have had fairly objective discussions in the past, relatively free from the blinding passion that fuels subjectivity in politics. I've enjoyed our discussions.

Still, it might surprise you to hear/read that I largely agree with what you've said. Greed has its place providing it's held in check by professional ethics and, whenever/wherever applicable legislation is required. Tragically and unfortunately, greed alone defines much of what takes place within the corporate world, both here and abroad. I've always sardonically (pun intended) joked that I should have majored in CEO in college so I too could rape a company for all of its tangible assets, ruin it outright and then move on to the next, larger company safe within the cushion provided by my grossly overstated severance package.

Frankly, it disgusts me. I'm a middle income American. I work hard, as does my wife. We obey the rules of society and even give back in several different ways, from our professions to charity. Still, the rich continue to gain ground while the middle class slowly looses ground to the lower class who, in turn, have little to turn to for relief.

It's very frustrating. Here's where I disagree, however. I don't think that capitalism in and of itself is to blame. The bottom line (in my worthless opinion) is that capitalism has been one critical facet in the American Experiment that has helped us gain so much in such little time (along with so many other aspects included, but not limited to, cultural diversity, vast natural resources and an unspoken, generalized desire to do right as a people, although not as a business entity...).

I live in the poorest of America's large cities, and the squalor is deplorable. My two years in New Orleans have been a real eye-opener. Likewise, I have a long-standing childhood friend whose brother is deeply involved in the Enron scandall at the highest levels. It's been hard to talk to him; his pain is visceral. Still, what his flesh and blood did was/is wrong. Wrong is wrong is wrong. Argh....

Anyhow, here's an off-topic segue that is still oddly related. I'm thinking about doing my part to stimulate the economy by buying one of those Tange Prestige steel frames at Chuck's Bikes and building it up as a total frankenbike for commuting in San Diego once I return in June. Of course, with my luck, once I finish the beast I'll get deployed for the war.

Life/fate/god/kharma/random happenstance has a wicked cool sense of humor at times, I think.
You are just so wrong on so many assumptionsmoneyman
Jan 7, 2003 7:28 AM
No one is giving money away - the government is just taking less of it. What you adhere to, that I have accused you of in the past and accuse you of today, is socialism. You would take money from those who create wealth and redistribute it to those who "need" it.

From each according to his ability, to each according to his need.

How does your sense of economic justice differ from the author of that statement?

"Economic theory simply can not be relied upon to foster a healthy society." Is that not what you are espousing? Yet you insist in dragging out the perceived benefits of an economic theory that has been proven, by time and practice, to be not only unworkable and utopian, but a dismal failure.

"(M)aximization of things like employment, home ownership etc." won't send us to "hell in a hand-basket", but rather capitalism provides each of us the opportunity to have those things. How many home owners were there in the USSR?

The USSR was neither socialist nor communist. MikhailOldEdScott
Jan 7, 2003 12:00 PM
Gorbachov himself said so recently. It was a totalitarian state, and its economic system was state capitalism. You keep trotting out the USSR as the poster child for socialism's failure, which is naught but setting up a straw man.

Worldwide, socialism has had successes and failures. Socialism has worked remarkably well in Western Europe. Capitalism too has had its successes and failures. Any system is only as good as the people implementing it.
Jan 7, 2003 12:05 PM
What was it about the Soviet Union that was not communist? Is "state capitalism" merely a euphemism for communism so that they can claim communism did not fail?

I do agree with your last sentence. Nonetheless, that does not mean that some systems are not better than others.

State capitalismOldEdScott
Jan 7, 2003 12:37 PM
The state owned the means of production, and managed it largely for its own economic benefit. The state controlled capital. There was no discernable difference between state bosses in the USSR and corporate bosses in America. Workers' ownership of the means of production, which is absolutely necessary for communism to exist, was a myth in the Soviet Union.

Communism did not fail in the USSR because it never existed in the USSR.

We can argue the merits or demerits of communism if you like, but you can no more use the USSR as an example of communism's failure than you can say Mussolini proved capitalism doesn't work. In both cases, you're dealing with bizarre mutations wholly unfaithful to the original.
I guess it never existed, thenDougSloan
Jan 7, 2003 12:54 PM
I guess I was wrong. Communism has never really existed; sure, we had states telling everyone they were communist, but I guess they were lying.

I guess it is fair to say that the USSR is an example of the failure of a state purporting to be communist.

Very fair to say that.OldEdScott
Jan 8, 2003 5:52 AM
It's interesting to note that there are still communists around, and almost none of them have anything good to say about the states that purported to be communist.

It's also interesting to note that, from the beginning, it has been true that there were communists who weren't Stalinists, and who in fact deplored Stalinism.

Communism is an economic theory that, clearly, has a political dimension. But communism, the theory, has never said: "There will be censorship, Gulags boiling with political prisoners, repression, jack-booted police kicking down your door ..."

Some bad actors hijacked the Russian Revolution early on, and the same has been true elsewhere. They called themselves communists, but that was just for convenience and to give themselves legitimacy. They were, mostly, totalitarian thugs.

Communism as a theory is sweetness, light, love, peace and abundance. Pure idealism. I'm doubtful it would ever work. But it's certainly not evil. It is probably the most high-minded expression of the Good in people that we've ever seen in political/economic theory.
For that matter, true capitalism hasn't existed either.czardonic
Jan 8, 2003 4:44 PM
It is useless to divine the virtues of free market capitalism or the failings of communism based on the experience of the United States and the USSR.

Democracy beats totalitarianism. End of comparison.
Babies and Bathwater,TJeanloz
Jan 7, 2003 8:08 AM
Economic theory isn't a silver bullet that can explain all issues and solve all problems. Actually, what most people don't realize is that it encompasses everything. Economics is the science of studying what makes a society healthy, but too often people just think of it as dollars and sense. Minimization of costs and maximization of profits is one little segment- economics also trys to minimize social costs and maximize happiness ("Utility" in economics jargon). Throwing out economic theory because it doesn't always explain everything perfectly would be throwing out the baby with the bathwater, and blindly going through life trying to solve problems, but never knowing if you've made anything better or worse.

Maximization of employment will send us to hell in a handbasket because not everybody wants to work. The point of maximimum employment is enslavement. That doesn't seem like something you'd be in support of- but it would really get the economy humming...
The USSR had full employmentmoneyman
Jan 7, 2003 8:35 AM
To carry your analogy another step.

That's an asinine correlary,TJeanloz
Jan 7, 2003 10:00 AM
It is really starting to grate on me that anytime there is a situation that is not 100% free market, it gets compared to the USSR, and people advocating it are derisively called communists. The failure of the Soviet experiment is not an indictment of everything the Soviets ever did.

The disconnect is that people use rhetoric to set themselves apart, and really the goals of free market advocates and socialists should be the same. We're all (or should all) be trying to make everybody better off. And free marketeers tend to follow the rising-tide-lifts-all-boats reasoning, while those on the left believe that they can even the tide out to prevent anybody from being particularly wealthy, while preventing anybody from being very poor. The net goal is the same, how we get there is the difference.
No it is notmoneyman
Jan 7, 2003 10:27 AM
"The point of maximimum employment is enslavement."

Tell me that the people of the Soviet Union were not enslaved. Tell me they had freedom to move about the country and the world. Tell me they could choose where they lived and went to school. Tell me that they were able to choose their line of work. Tell me that they had opportunities for ownership of private property. Tell me that they were not subjected to severe punishment for failing to adhere to Government policies. If you can tell me those things are fabrications, I will then grant to you that the citizens of the USSR were not enslaved.

The USSR bragged about full employment for its citizens. But when your citizenry is made up of slaves, full employment is, exactly as you say, "enslavement."

But is it fair to equate Communism with Totalitarianism?czardonic
Jan 7, 2003 11:27 AM
Or for that matter, Capitalism with Democracy? If not, were the people of the USSR enslaved because their system was Communist or because their system was Totalitarian?

I ask because it seems like there are a few democratic states in Western Europe that manage to incorporate Socialist principles.
any communist democracy?DougSloan
Jan 7, 2003 11:59 AM
Have there ever been any communist countries that had any form of government even close to democracy or democratic republic?

Totalitarianism is inherent in communism. Control by the state is the essence of it.

Democratic states "incorporating socialist principles" is not the same as communism.

No, but on the other hand,czardonic
Jan 7, 2003 12:07 PM
it's not as though the USSR had a history of democracy. Absent of the rise of communism, is it reasonable to assume that the USSR would have become another USA? For that matter, absent of the USA who's to say that the USSR would have become what it did? This is yet another issue that can not be analyzed in a vaccum.

Democratic states "incorporating socialist principles" is not the same as communism.

I couldn't agree more. Tell that to the chicken little red-baiters the next time univeral health care is discussed.
"GIVE" people money?DougSloan
Jan 7, 2003 8:57 AM
So, all money belongs to the government, and its gives it to people as it deems fit? Hmm. Didn't think that's the way it is supposed to work here in the old USA. I sort of had the impression that it's my money, and I allow the government to keep some. Geez, where did we go wrong?

Sure it's your money.OldEdScott
Jan 7, 2003 11:52 AM
And taxes are the price you pay to have America.

The anti-tax crowd always astonishes me. Talk about wanting something for nothing!
just less something for less moneyDougSloan
Jan 7, 2003 12:03 PM
No one (well, there might be a few anarchists out there) wants something for nothing. That's silly. I want less something for less money.

Regardless of how much it is or what we get, my main complaint is with the attitude that the government cutting taxes is "giving" you money.

I'll be clear. I gladly pay taxes. I want taxes. I enjoy the fact that I can pay taxes. Is it too much to ask that I demand value for my money?

I think America's a tremendous value, probably along theOldEdScott
Jan 7, 2003 12:38 PM
lines of Veloce or 105 in terms of bang for your buck. But on that I suppose we disagree.
maybe; I'd prefer fixed gear. nmDougSloan
Jan 7, 2003 12:45 PM
Modernize, man! At least go single speed!OldEdScott
Jan 7, 2003 12:52 PM
sn69, moneyman, TJeanloz & DougSloan. . .czardonic
Jan 7, 2003 11:19 AM
. . .I'll respond to your comments here rather than argue this on 4 fronts.

Your points are well taken, sn69. Generally speaking, I agree that capitalism is the superior of all systems devised by mankind. It has fostered great abundance, and will continue to do so. However, I don't think anyone can argue that it is perfect. As with any human creation, the weak link of human nature prevents it from reaching its full potential. It is all too easily perverted by the kind of greed and corruption that leaves hard working people who play by the rules penniless in the wake of Enron-like outrages.

TJeanloz, you are right. Not everyone wants to work. That is an unfortunate fact of the human condition to which there are no easy solutions. But they will persist, whether in public housing, on the streets, or in prison. Those are the options. Which poses less of a burden on those of us who inevitably foot the bill? These people are going to live off of everyone elses dime. I've paid that dime in taxes and I have had it taken directly from me at gun-point, and I prefer the former.

Doug and moneyman, is it not true that the government retains the right to tax? While it may offend you libertarian or conservative sensibilities, this is a fact of life. So yes, insofar as the government is not required to release money to anyone, when it does it is "giving" it away.

Doug, you make a good point about your money, but you talk as though it weren't also your government (and mine, and many other's). In America, government is an organ of the People. If it taxes the rich and gives to the poor it is because the People wish it to be that way. Your gripe is not with some coercive third party, it is with people like me and likely with some of your friends and neighbors who believe that more can be done by pooling resources, and that the community is better served when even the seemingly undeserving receive a certain modicum of support.

I was an impressionable grade schooler in the 80's, and my liberal Bay Area teachers filled my head with the potential horrors of nuclear war. I can fully understand people's fanatical adherence to capitalist priniciple when its battle with socialism was one of pure survival. But that war has been won, and I think it is time to stand down and take an honest look at our system. The mere fact that the Soviets may have approached a problem in a certain way does not mean that it is evil, inevitably disasterous, or the thin end of the totalitarian wedge. The fact is, certain segments of our economy have always strayed from free-market principle, and often to their benefit. When I say "maximization of employment", I am not talking about forcing anyone to work. (That is a conservative schtick). I am talking about making sure that everyone who wants a job can get one, even if it doing so prevents absolute maximization of profit. If the job of economic theory is to maximize profits and "happiness", what happens when the two are mutually exclusive? It seems like we have the discretion to choose that which we value more.
very reasonableDougSloan
Jan 7, 2003 12:17 PM
A very reasonable post.

First, my reference to communism early on was pure hyperbole. I thought that would be obvious. I guess sarcasm and such does not communicate well here.

The philosophy of libertarianism or fiscal conservativism is not limited to the anti-communism survival days. It is based upon a fundamental first principle, essentially that the system should encourage maximizing personal initiative and opportunity. It's the "teach me to fish" versus the "give me a fish" mentality. We believe that over all, society and most individuals in it will have more incentive to work hard and succeed if they think they must; in other words, you "eat what you kill." The safety nets are only there for the most needy. Further, we believe that government exists primarily for peacekeeping and the most essential public services and infrastructure. The goal is to make everything possible privatized, and then regulated as little as possible.

Of course, we do realize that this is a continuum, and we can't have a totally regulation free, skeleton crew of a government. Frequently, regulation can promote competition (another good thing); even then, regulation is like the referee, not the coach. It keep the game clean, but doesn't call the plays.

Lots of us here tend to talk in extremes to make a point, when all of us are likely simply on various points on the continuum of whatever issue we're discussing. I guess we are no different that the public at large or our leaders.

Apology acceptedmoneyman
Jan 7, 2003 12:27 PM

Governments have the right to tax. I have never said otherwise. The debate comes in the attitude with which the money is taken, i.e., "insofar as the government is not required to release money to anyone, when it does it is 'giving' it away." That statement says it all. It is through the benevolence of government that I get to have my money "released" to me. That is backwards.

Profits and happiness are not mutually exclusive. In fact, when I generate profits for my business (which I own, which is why I can waste my time here)I am happy, my wife and family are happy, my clients are happy, my banker is happy, and so on and so forth.

What happens when you "generate" profits. . .czardonic
Jan 7, 2003 12:42 PM
. . .by slashing the workforce and giving those who remain the choice of losing their jobs or taking up the slack left by their former collegues? And what happens when they become so disgusted with a system that rewards their hard work with these false choices that they resort to defrauding your worker's comp insurance, burglarizing your family home and bouncing checks from your banker's bank. Who's happy then?
Oh let's cut to the chase here and just talk frankly aboutOldEdScott
Jan 7, 2003 12:51 PM
what 'profits' are. That ought to be a rip-snorter of a debate.
you guys are funnyDougSloan
Jan 7, 2003 12:57 PM
Profits? It's what investors want after they give a company money as capital. No profits = no investors = no capital = no company... = no jobs = no taxes = nothing for liberals to do. :-)

what I wonderColnagoFE
Jan 7, 2003 1:13 PM
Is when the word "liberal" became an insult? I'm no bleeding heart liberal--more in the middle, but I don't understand why conservatives always throw the "L" word around like it was poison.
no insultDougSloan
Jan 7, 2003 1:15 PM
I meant it, that time, neutrally, or at least factually. Defensive?

I suppose if I were a Texan then "Sooner" would be an insult, right? :-)

Jan 8, 2003 5:56 AM
Profits = the labor workers aren't paid for! ;-)
Jan 8, 2003 7:23 AM
What you say is sort of a truism, but then workers are paid for whatever wages they bargain for; they have no claim to profits; if they want profits, let them buy stock (or the whole company), like everyone else.
No, no, that misses the point.OldEdScott
Jan 8, 2003 8:06 AM
We're not saying that workers want profits. This is a workers' paradise we're talking about here, remember? In a classless communist society there would be no profits.

The point is, the workers would work less hours. In an eight hour day, workers work six hours for themselves (the money they make from their labor) and two 'surplus' hours to make money that is not returned to them as wages, but is pocketed as profits by the boss.

In the bossless/profitless workers' paradise, we'd work six-hour days!

Uh oh, here's grist for the 'lazy liberal' stereotype.
ok, butDougSloan
Jan 8, 2003 10:05 AM
Hmm. Your example makes sense, but seems to ignore something. Those workers are working in a factory, working on metal or something purchased from a supplier, with tooling provided by someone. The workers did not buy those things (means of production, etc.). Someone had to come out of pocket, risk their money, and expect a return on their money better than they could get putting it in the bank. So, while we might debate the number of hours per day, part of the workers' day is spent repaying the people who risked their money so that the workers would have a job.

Sound fair?

Uh ...OldEdScott
Jan 8, 2003 11:12 AM
Fair, yes, if you mean 'is this a fair desciption of reality?' Fair, no (the Marxist would say)in a fairness sense. But the unfairness is a little further back: The fact (as you point out) that the workers don't own the means of production.

The very fact that some individual (or group) can 'own' something and make a living off it without doing the actual work means that there is a surplus somewhere. More money is being generated by the workers than the workers receive. The owner is siphoning off that surplus. This is known among communists (and other lefties) as 'exploitation,' especially when the surplus is so great that the owners are very wealthy and the workers are very poor.

If the workers owned the means of production, and reaped the rewards, the wealth generated would equal the wealth received.

Also, your use of the word 'repaying' is a bit misleading. The workers aren't repaying anything. They never borrowed any money from the investor. They are, however PAYING for the privilege of working and generating wealth for the owner, in the form of those surplus hours every day. Kind of like a tithe. (And kind of like the taxes that the owners hate).

The beauty of the dialectic is, it's ironclad. You may not believe in it, and you may say it won't work (and you'd probably be right). But Marxist analysis is elegant and relentless, and even a serious conservative, taking Marx as Marx without political prejudice, would have to concede he was a giant intellect.
not ironcladDougSloan
Jan 8, 2003 11:32 AM
It's only ironclad if it is considered in a vacuum and ignores reality.

If we are starting from scratch, who starts up the businesses where the people will work? Who risks their money or assets or time to do so? I think much of communist theory is based upon a seizure of existing means of production -- the factory is there, and they take it. That might work short term, but then who is going to risk what they have for the next one? The theory ignores reality (and psychology).

Sure, owners "siphon off surplus." But, if they did not foresee that opportunity, they likely would not have created the business in the first place.

Marx was an intellect, but sort of in the same way that any idealist might be. He constructed a perfect model of civilization, but like most constructs, it ignores human qualities and realities that makes a huge difference. It's like he did a paradigm of a pro forma for a business start up, but left out a huge factor that crashes the company (remember Rodney Dangerfield in "Back to School," when he suggested to the professor that he ignored Mafia payoffs and greasing the wheels of government in the business plan?).

Maybe it is fair that you look at it as if the workers are paying for the right to work. Why not? I certainly do.

Marx is certainlyOldEdScott
Jan 8, 2003 11:45 AM
an idealist, and the whole thing is not very practical, but it's kind of lovely nonetheless. And his inspiration to at least move in the direction of his ideal world has led to lots of good, practical stuff. I know that's heavily debatable, especially here. But I think labor unions, annoying as they can be, are more tolerable than 19th Century sweatshops.

To roughly paraphrase something you said about taxes the other day: Maybe it's OK for workers to pay a hidden tax to owners for the simple right to work & make a living, but lefties inspired by Marx would say: We(workers)would like to pay less and get more value.
When does it stop?czardonic
Jan 8, 2003 11:56 AM
Should "owners" be able to siphon off surplus indefinitely simply because without them the business would not exist in the first place? That sounds an awful like those indentured servitude scams that are rigged so that freedom can never be obtained.

You say Communism is based on the seizure of existing means of production. Couldn't one also say that Capitalism is based on the perpetuation of ownership beyond every reasonable compensation for risk? It seems to me that at some point it should be acknowledged that the "owners" have received their due, and that it is the workers who play the primary role in maintaining a business' value.
Actually, czarOldEdScott
Jan 8, 2003 12:03 PM
I was going to say the same thing, but you have to bring the reactionaries along a little at a time in these debates!
Remember: Be a vaguard Party!
so, private ownership is a problem?DougSloan
Jan 8, 2003 1:17 PM
So, at some point the owners forfeit their property? (Government can't do that, at least without paying just compensation -- little 5th or 14th amendment problem).

Keep in mind that incentive to risk is important, even vital. Potential investors know that some businesses never make it, and they lose their investment. Some do make it long term. To justify the risk, people need to be assured that if they do invest in a good business, their reward is enough to balance the risk of losing that business or others that offset that one.

Also, every employee bargains for what they get. They don't have to work there or anywhere else for that matter. There is nothing even approaching "involuntary or indentured servitude." They can leave in a heartbeat totally free from any obligation to their employer.

The key word is "enough".czardonic
Jan 8, 2003 2:04 PM
A difficult but far from impossible term to define.

I think you missed my point about indentured servitude. The point I was trying to make is that a company can continue to pay returns on the risk of its investors indefinitely. There is actually no relationship between the risk and the return. Thus a shareholder who has already recouped his investment, plus compensation his risk and for "losses" he incurred by not investing in some other more lucrative concern, still has a claim to a companies profits. At that point, he is more a parasite than a saviour.

By the way, aren't employees also investors (of time) who take on risk (of unemployment or missed opportunity) to provide a service that business can't exist without (labor)?

And if labor is easily replaceable, isn't capital as well?
one day maybe you'll understandDougSloan
Jan 8, 2003 2:14 PM
I challenge you to go out and start a business. Put all your money, credit worthiness, time, relationships, and health at risk, get all stressed out, and get something going. Employ a few people. Take years and years to pay off your initial debt, survive some industry 180's, government regulation, competition, lawsuits, and insurance premiums, and then at some point start to derive a profit. It might take years and years before your profits even begin to exceed what you might have made had you put your money in the bank and just gone to work for someone else. Be one of the few companies that does not go under, and actually is left standing in 10 years.

Then, when you've made some return on your money, hand your company over to your employees.

No amount of idealistic sophistry is going to circumvent that reality. I think you and your kin have no idea of the difficulties in starting and keeping afloat a company, in raising capital and avoiding the millions of landmines on the way.

When an investor/business owner has survived long enough to make a profit, you can't take that business away. To do so would be not only unconstitutional, but would discourage further investment and ownership. Then, fewer people have jobs.

Your ivory tower concepts just don't fit reality.

I guess you think only owners take risk.czardonic
Jan 8, 2003 3:00 PM
As an employee, I do stake my livelihood and life savings etc. And yet, despite the tens of thousands of dollars worth of time that I risk every year on the success of my employer, I am entitled to no reward above that which I actually invest.

Why aren't investors imperiously asked where they would be without labor? Neither can any amount of idealisitic sophistry circumvent the reality that with out labor there is no business just as much as without capital there is no business.

I have no problem with the concept of rewarding employees for their hard work with a proportional share of ownership, and honestly apprasing what that proportion is. Shame on anyone who wouldn't.
I guess we are on different planetsDougSloan
Jan 8, 2003 3:19 PM
It appears our principles are so different we'll never agree; heck, we may never even communicate in the same language. One more shot...

As an employee, you bargain for something. You and the employer agree that if you do certain work, you will receive something in exchange, salary and benefits. That's it.

When an investor invests, there is a bargain, too. The investor gives the company money, and the company promises to pay a return, if it can. If it can't, the investor gets no dividend. If it goes under, the investor is the very last person in line, after employees, creditors, and I dare say lawyers, to get any money. They could very well lose their entire investment.

As you can see, the bargain for employees and investors is not the same. If an employee desires, the employee is free to bargain for ownership, too, and this is frequently done. ESOP's are a good example of a way of doing this. Or, they can take part of their wages and purchase stock, just like anyone else. What you propose, apparently, is that employees be granted something that they never bargained for, or even asked for. I'm completely at a loss as to how that can be justified.

Possibly, but. . .czardonic
Jan 8, 2003 4:36 PM
. . .I'm not sure you are really distinguishing what I am saying from boilerplate leftism. Then again, I doubt I am explaining it very well.

First, I already conceded that an owner should reasonably expect to recoup his investment, plus compensation for his risk. Let's have investors face cold hard facts for once: theoretically, as long as the rate of return on investment is infintesimally greater than the rate for keeping money with a bank, the incentive to invest is maintained. It simply wouldn't make sense for them to take their ball and go home just because there was a limit placed on returns. In short, investors are vastly over compensated with profits that could easily and justly be diverted back into the business.

Second, while it would be unfair to change the terms of employee or investor bargains already made, there's no reason why the bargains made from here on out can't be more fairly negotiatied. There is a bias in the current bargains against workers that is remnant of times when workers had no rights (in many cases, not even the right to simply quit). By comparison to generations passed, a worker has little to complain about today. So what? Why should they ever settle? Owners and their apologists have always protested with wringing hands and furrowed brows each incremental increase in employee compensation. Yet industry marches on at an ever increasing pace.

Third, it is silly to pretend that investor's interests are beneath worker interests in the current model. In most failing businesses, employees are eliminated long before investors are deprived of their rewards. I suppose that your logic goes that they are no longer employees once they are fired, and besides that the freedom to pursue the multitude of opportunities to be found in today's job market is reward enough.

As I see it, when the contribution that labor makes to an enterprise is honestly appraised and the risk that labor takes to make that contribution is recognized, it is only fair that they lay some claim to profits. I don't advocate that they receive it by goverment mandate, but by the weight of logic and justice. This will happen on its own, thanks to point two, a.k.a. the immutable progress of labor rights (not "rights" per se, but rewards for the burgeoning recognition of labors necessity to commerce). In short, those bargains will someday be re-written.

Is that so unreasonable?
Labor, it's a market,TJeanloz
Jan 9, 2003 5:35 AM
What you say isn't entirely unreasonable, in the theoretical. But if such a system were to overtake the United States, I'd take my toys to Mexico, and then who would be better off? And then when Mexico passes similar rules I go to Brazil, and then China (which, oddly enough, is a "communist", if only in name, country).

The problem is that people on the left are trying to save workers from themselves. Wages are generally at an equilibrium level - if one worker demands $10 for a job that somebody else will do for $8, guess who's getting hired? And why shouldn't they? If they can make a living on $8/hour, I don't see why I should stop them, just because somebody else with a similar skill set (or lack thereof) can't manage to compete. What you are insisting upon takes away the basic freedom for a worker to negotiate his own wage, which will not help employment at all. But have fun in your Marxist utopia - all those experiments have worked out pretty well so far...
Ah, the unencumbered market,TJeanloz
Jan 8, 2003 10:53 AM
What fascinates me most, is that your "workers paradise" is exactly the place that the free market should (in theory) take us. In a 'competitive market' there are no profits in the long run. This doesn't get returned to the worker in terms of fewer work hours, but in terms of lower prices for goods, which could translate into fewer work hours if the workers could stop the conspicuous consumption that defines the United States.
That's a very elegant andOldEdScott
Jan 8, 2003 11:21 AM
tricky analysis. It points out the reality that, in a consumption and growth-oriented society like this one, the surplus gets plowed back very rapidly into play, which creates an illusion that it's not as bad as it really is. Workers don't feel particularly ripped off in America. Which is why socialism has never taken hold here.

It ignores the fact that, sometimes, the surplus is taken away and held and eventually becomes more and concentrated, until the worker DOES notice, and feel deprived and ripped off. Then you have a pre-revolutionary situation -- something I never expect to see in the US.
At least they have a choicemoneyman
Jan 7, 2003 1:08 PM
Of staying or leaving. Or starting their own business and deciding for themselves how they want to do things.

If my employees were so inclined to lie, cheat, and steal, I believe they should be punished accordingly. And what is the difference, aside from total dollars involved, between these disgruntled employees seeking revenge and reward through illegal means and the executives at Enron? Neither group has any right, either ethically or legally, to cheat the people they work for, whether it is the owner of the small business or the shareholders of the publicly traded entity.

And their criminal behavior does not affect my happiness. I am not responsible for the decisions made by someone who did not consult me for advice.

Jan 7, 2003 1:18 PM
I guess the underlying attitude is "give me money (either public or private) or the blood I spill will be on your hands." Nice.

Not quite.czardonic
Jan 7, 2003 1:44 PM
I fully acknowledge that there is a coercive element to this. But, if people are desperate, they will resort to desperate measures. All moralizing aside, this is a simple fact of human nature which is occasionally not "nice". I know it is not "fair" to ask those who work hard to carry the weight of loafers and free-loaders -- but I the only one who learned early on that life was not fair? It is in our interest from a societal standpoint to make sure that even those who simply refuse to earn their keep have some other option than crime or starvation. These people are a burden on society one way or another. It's time to deal with this unfortunate fact in a way that minimizes its detriment to the rest of us.
I agreeDougSloan
Jan 7, 2003 1:53 PM
I agree that employment is a good deterrent to crime. That seems to have been borne out in the stats over the last 10 years or so.

I guess the dispute is how to achieve an acceptable level of employment. It seems you'd have companies keep people on even if they are losing money, even if it jeopardizes the solvency and existence of the company, or you'd put them on government payrolls. I think companies must be free to keep their heads above water and not drown the whole entity by controlling payroll as needed; ideally, the fired or layed off workers would then be freed to go work somewhere else; that's more efficient over all.

The best thing we can do is provide a system that maximizes the incentives and need for companies to hire. Lower taxes tend to do that.

Is it so black and white?czardonic
Jan 7, 2003 2:12 PM
I don't think that companies should jeopradize their solvency to keep employees on. Nor do I think that is the only option. I'm talking about looking at profits, and deciding that spending them on employees may serve a greater good than distributing 100% of them to investors, owners, etc.

There are ways to lower taxes that create and incentive to hire and retain employees. Lowering dividend taxes is about the farthest you can get from such an incentive. In fact, since such a cut creates an incentive to maximize profit (and thus dividends), it is actually an incentive to further reduce hiring and retention. Or do I have it all wrong?
maybe notDougSloan
Jan 7, 2003 2:22 PM
>since such a cut creates an incentive to maximize profit (and thus dividends), it is actually an incentive to further reduce hiring and retention

There is a little psychology involved, I guess. Suppose an investor presently gets 10 cents a share dividend, and expects that as a minimum, yet the investor only realizes 7 cents after tax. With the tax gone, the company could pay 9 cents, and the investor thinks it's fantastic, as the "profit" to the investor went up 2 cents. The 1 cent difference could be used to keep more employees on.

Sound reasonable?

It sounds perfectly reasonable to me. . .czardonic
Jan 7, 2003 2:32 PM
. . . but it also sounds like using profits to increase employment. From a "maximizing shareholder value" standpoint, this does not make sense. As such, it is hardly reasonable to hope that companies will spend that extra cent on employees.
Stuff happens.czardonic
Jan 7, 2003 2:05 PM
Do you really think that you are only subject to factors that you are "responsible" for?

I didn't say that any of the likely consequences of squeezing the working class were ethical or legal. But they are foreseeable, and largely preventable. Either there are historical examples of a desperate people deciding en masse to starve rather than take out their discontent on the wealthy by illegal and unethical means, or we ignore other peoples misfortune and deprivation at our own peril.

Not everyone wants to start their own business, let alone has the skill and resources to do so. Some people just want to be paid and honest wage for an honest day's work. How does the glib notion that employees who are unfairly treated should "just" start their own business account for those with more humble aspirations? Or are they not worthy of a decent life?
You're rightmoneyman
Jan 7, 2003 2:33 PM
They are NOT worthy of a decent life. Make them live in squalor and filth unitl they have come to their senses and embraced the (Republican) party line. Humility? Forget it. Its either rich or nothing.

I didn't say that I was "only subject to factors that you are "responsible" for" but that I am not responsible for their actions.

Glib notion? If an employee perceieves himself as being treated unfairly, assuming there was nothing to viloate labor laws invoved, he can, among other things: 1. Choose to ignore it and continue working and receiving wages, 2. Quit and find another job, 3. Quit and not work, or 4. Quit and start his own business. And the best part? No one tells him which direction to take. Its all open to him and all up to him. You don't need a degree to run a successful business. Plenty of people have. Even YOU could do it if you had a mind to.

And where are these desperate people in the US? I know there are some unsatisfied workers, but desperate? Desperation causes people to cross mine fields in the hopes they can scale a concrete wall topped with razor wire, while border guards train machine guns on them. Desperation is NOT having to sacrifice a latte for Folgers at home. We live in a great country, made that way through capitalist practices, entrepenuerism, and risk taking people who perceive rewards large enough to take the risk. Not everyone is equally well off, but I think the term "desperate" is over the top.

I hate to break it to you. . .czardonic
Jan 7, 2003 3:07 PM
. . . but "capitalist practices, entrepenuerism, and risk taking people who perceive rewards large enough to take the risk" has not eliminated hunger and poverty in this nation. Also, there were things along the way such as the New Deal that helped us through some of the pitfalls of the capitalist system.

This notion that poor people are poor because they insist on Starbucks lattes rather than drinking Folgers is ludicrous. Tell that to the retiree who had his nest egg wiped out after a life time of playing by the "rules" of your capitalism. I guess his problem is that he foolishly insists on subsisting on brand name pet food rather than buying a cheaper generic brand.
You need to expand your reading listmoneyman
Jan 7, 2003 3:20 PM
The Utne reader just isn't expanding your horizons enough.

I get tired of having to explain things to you twice. And right now, I have to take some risks and generate some profits.

Listen. Or read, I guess. People aren't poor because they insist on latte's vs. home brewed Folgers. That IS ludicrous. And its not what I said. Read my post again, and you'll see that mine was a comment on desperation, not the origins of poverty.

Done for the day.

Copping out, huh?czardonic
Jan 7, 2003 3:58 PM
I know what you were saying. You were trying to mitigate any feeling of compassion for the poor by insinuating that they are not really desperate. In other words, as far as you are concerned, no one in American has any reason to complain. Not the elderly who can't afford food or medicines. Not the children who subsist almost entirely on school lunches. Not the unemployed wage earner with a family to feed. They are all "free" to start their own businesses or starve, and you don't care which. That's tough, but that's life. Is that an unfair characterization?