Class Warfare : Take From Productive - Give to Unproductive

This is a little long but very profound. Alex Green explains how class warfare works and is working in our politics. It has always been there in one form or another, but it's during this election cycle that it has become destructive to our way of life.

Is This 'Untruth' Keeping You From Getting Rich?
By Alex Green, Chief Investment Strategist, Investment U

I know it's a political year, but I don't generally like to talk politics. When I'm not making readers money, I'd like to at least make them happy. And when you talk politics, you often make half your audience – and sometimes more – unhappy.

Still, I'm shocked and surprised by an ominous development in this year's presidential election. No, not the personal attacks, negative ads, or over-the-top promises. Those have been staples in national elections for more than 200 years. What's new – and troubling, in my view – is that some see political gain in demonizing economic success.

I don't get it. As a kid growing up in a solidly middle-class family, I admired the businessmen, entrepreneurs, and professionals in my community who earned large financial rewards. I remember feeling that these folks must have studied hard, put in long hours, or taken big risks. I didn't envy them. I wanted to be like them.

Yet there was former President Bill Clinton at the Democratic Convention stoking the flames of resentment with his remark that some "want a you're-on-your-own, winner-take-all society."

I find this disheartening, in part because Bill Clinton is not a left-wing ideologue. Yes, he's a card-carrying liberal but in his two terms, he promoted free trade, slashed capital gains taxes, and reformed the welfare system.

I thought the class-warfare remarks were beneath him. For starters, capitalism is about voluntary exchange for mutual benefit. Businesses don't "take" money. Only government (which has a monopoly on the legal use of force) and criminals do that. Businesses merely collect the money that consumers and other businesses voluntarily trade for products and services.

Perhaps Clinton meant the rich "take" in that they don't pay their fair share in taxes. This is certainly a debate worth having – and opinions are bound to vary. But we should begin with the facts. According to the Internal Revenue Service, the top 10% of Americans pays almost 70% of all personal income taxes. The bottom 50% pays essentially nothing. What would George Orwell say about calling the 10% of Americans who pay 70% of the taxes "takers" … and stoking a sense of grievance among the half that pays nothing?

I'm also confused about the "you're-on-your-own" bit. No one objects to a social safety net for the truly needy. But when I reached the age of majority – after receiving a free public-school education and a library card – I expected to take care of myself.

If I couldn't take care of myself in a pinch, I knew I might have to lean on family or friends temporarily. If I couldn't find help there, I might have to count on churches or local charities for a while. And if that still weren't enough, maybe I would have to turn to the state government as a last resort.

I never imagined that some bureaucrat in far-off Washington cared about me… or even wanted to meet me. Some folks seem to mistake government for community.

My point is that class warriors aren't just attacking Mitt Romney and Paul Ryan (two men with whom I have my own differences). They aren't just vilifying the Republican party (a party fully deserving of some vilification). They are attacking the very notion of individual initiative and personal responsibility. Now that's new.

You might reasonably ask what this has to do with investing. My answer is everything. Investment begins with savings. Savings comes from earned income. An income high enough to permit saving comes from education and hard work. And the desire to get educated and work hard comes from a belief that the system is fair and these qualities will be rewarded.

To me, it seems particularly corrosive to tell people – for political advantage – that they don't have a fair shot… that the system is rigged… that Wall Street is corrupt… that the rich don't pay their fair share… and that, somehow, you have less because "millionaires and billionaires" have more.

This strategy may win votes in some quarters… But that doesn't mean we shouldn't call it what it is: a profound untruth.

Good investing,
Alex Green