The endless fight

Once every four years, people around the globe save their time and keep their eyes on an event whose consequences may shape the way the world function. I am not talking about the World Cup or Europe Football Cup. I am talking about the US presidential election. America is doubtlessly the dominant force in the modern world and its leader, the US president, is one of the most powerful men on Earth. Therefore, it is worth paying attention to see who will lead the world in the next 4 years. Though there are many parties in America, the presidential election is said to be the battle between the two mains parties: GOP and Democracy party.

There is a very common belief that the Republicans support the rich while the Democrats stand for the rest, the middle income. We usually hear of the GOD’s cutting-tax-for-the-rich policy, and also listen to the Democrat’s argument against it. Bear in mind that in any particular society, the rich only accounts for a very small part in the population (Recently, they are called the “1 percent”, while the rest is regarded as, of course, the “99 percent”). It makes us wonder why in such a democracy world like American, where every vote counts the same no matter where it comes from, the Republicans try to pursue a tax policy that goes against the majority of the society. Unless they are not so insane, there must be some reasons for that.

First, though the rich only make up for only 1% in the society’s population, they hold more than 80% of the total assets. It is needless to say that they are wealthy and powerful. They are the employer, the CEO, the celebrities, the one who has great influence on others. When a movie star states that he will vote for the Republican candidate, most of his fans will follow that action. When a company has its environment influenced by the boss who is a faithful Republican, the employees may change their political perspective. Besides, it is worth noticing that the poor do not vote as much as the rich do. When you have little to lose, you do not care about who will lead you. You do not have much faith in the system. In contrast, the rich consider voting right one of their basic human right, and they want to vote because the consequence may have an impact on their wealth. That helps explain why averagely the gap between the amounts of votes for both sides are not so much wide.

Second, Republicans pursue such policy because unlike their counterparts, they are conservative, which means they believe in the market mechanism. Their moto is “Capitalism makes everyone unequally rich. Socialism makes everyone equally poor.” One of the basic rules in economics is that we have to choose between efficiency and fairness. Put it simple, if you raise tax to make the world more equal and fairer, you will, as a consequence, demotivate people to work hard because a considerable amount of their income is now taken away. The whole society suffers from years of slow growth. Vice versa, cutting tax for the rich may drain the budget for social service which can help the whole society. Though we never know which option is more preferable, we are sure that the extreme extent of both ideas only leads to disaster. Hitler, Soviet in the late 1970s and 1980s are evidence against extreme equal society while the recent economic crises are the proof for the other side. Such different perspectives and beliefs have led to different targets between Republicans and Democrats for years.

Last but not least, the difference between Republicans and Democrats may be just an imagination. There are rich men who vote for Democratic Party as well as poor men who support Republicans. No candidates and no politicians will ever say that he will raise tax from the middle class and cut tax for the rich, or at least, not that obvious. However, if we look at their plans more carefully, we may find out what is truly behind those beautiful lines. For example, Mitt Romney this year has announced his tax plan is to reduce tax rate together with deduction. He also states that under no circumstances does he reduce the tax for the rich. But when analyze his tax rate reducing, we figure out that among many tax rates which are cut there is tax rate for capital gain. Normally, when we have our money in a bank, we are taxed from the capital gained from that. The same thing applies to bond, stocks and other investments. However, now when the tax rate for capital gained is cut down, you can earn more money from that source. Well, after all, the whole society benefits from that policy. The question is who has the most of the cake. In this situation, the rich win more than the poor. Most of the income of the middle class is spent on basic needs such as food, clothes, energy, house, but on investment on capital. Vice versa, the rich invest much money on stock, bank deposit and earns a lot. Therefore, such tax policy will have the whole society get richer but at difference paces.

Today is the election day in US. No matter who wins this time, he is going to enjoy a successful term. Not because he is good (maybe he is, hopefully), but because now it's time for a recovery. 

Vote wisely.

kz