Monday, March 30, 2009

The “Fixed Economic Pie” Mythology STILL Holds Some Weight...




As if things haven’t been depressing enough lately, a recent Rasmussen Poll shows that a full "30% of Americans believe the government should make it illegal to pay movie stars and athletes more than $1 million per year."

There is a more support - but not much more - for capping the pay of corporate executives. Thirty-six percent (36%) say the federal government should make it illegal to pay any executive more than $1 million a year. The majority (54%), however, disagree.


Yes, a whopping 59% of Americans still oppose capping compensation for movie stars and sports figures, and 54% oppose capping CEO pay, but, the fact that younger Americans tend to favor government limits on celebrity salaries more than their elders and that, as expected, lower income Americans like them more than those whose annual salaries are higher, along with the fact that forty-two percent (42%) of women think a government limit on executive salaries is a good idea, compared to only 29% of men does not bode well at all.

Yes, indeed the vast majority of those young people will “grow up,” and out of those foolish, child-like ideas, but the numbers are still way too high!

The fact is there is hardly a myth more pernicious than the Malthusian one that goes, “There is only a certain amount of wealth available at any given time, so those who earn “too much” TAKE wealth away from those who wind up with too little.”

NOTHING could be further from the truth.

Wealth expands and contracts and the primary cause of wealth creation/expansion is investment and Capitalization.

Those who have Capital demand a good return, with a limited cut going to the government, for putting that Capital at risk...and rightly so.

So far as compensation goes, some skills are obviously more valuable than others.

Only a fool would argue that a surgeon isn’t some forty or fifty times more valuable than a math teacher, for instance.

Athletes and movie stars aren’t “salaried employees,” they’re independent contractors whose earnings are based on the returns (profits) their films, sports teams bring in.

Why shouldn’t someone who draws in millions of dollars in revenues get a percentage of the gate?!

Same with sales people, who largely work “on commission.” Why should they be limited in what they can earn, as that also, in turn, winds up limiting what they can/will sell?

After all, if a salesman is capped at $1 MILLION/year in compensation and has routinely brought in sales that have resulted in $5 MILLION/year in commissions/compensation, then why should he sell any more than his cap makes it worth his while to sell?

Such limits always come back to limit ALL of us!

So, yes, while it’s comforting that 60% of Americans recognize that we do not exist within a “fixed economic pie,” it’s sad that apparently 30% do!

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