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Short Term Vs Long Term Self Interest

At the depths of the Great Depression, John Maynard Keynes had the insight that society can go badly wrong when people’s short-term interests lead them to oppose their long-term interests. He was referring to the tendency of businesses to cut workers and investments when their sales go down. Of course it makes perfect sense to do this, but if everyone does it at once you launch a spiral of unemployment that has no end. Lost jobs cause further declines in sales, causes further┬álost jobs, etc.

I would suggest the same dynamic applies to billionaires and taxes. Of course no one wants to pay more than they have to. And 39% of one billion dollars is one hell of a tax bill. So the ultra rich will use every legal means to reduce their taxes, including not just using all the available loopholes, but spending on lobbying to create new loopholes and to slash their own tax rates. That is individual short-term self interest. But what happens when all the ultra-rich avoid paying any taxes, especially at a time when the top 1% own 38% of the wealth and 23% of the income? The quality of society as a whole suffers. And it is a downward spiral. Eventually society is not able to generate as much overall wealth, due to things like chronically under-funded education, unnecessary spending on police and prisons, and the like.

There are many more ways in which a weakened US is bad for the long-term self-interest of the ultra-wealthy. For example, less funding for science means fewer cures for things like cancer decades later. Science funding is cut when budgets are tight, so the ultra-wealthy, who can buy anything that exists, are more likely to die of an illness that might have had a cure, since they can’t buy something that doesn’t exist if it was never invented. And no, the free market is not going fund caner research the way the government can; corporate R&D has been slashed to a tiny fraction of what it was in the 1960s because it is a drag on share price increases, and CEO pay is tied to this weeks share price, not profitability decades hence.

So what we have playing out right now is a classic case of short-term self-interest undermining long-term self-interest.

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