Stan Geiger

Carl Icahn: Magic Man

One of the great promises of Reaganomics was "trickle down": the notion that rich people would take their tax savings and plow it back into the economy. Instead of giving money to the government, some argued, the wealthy would use that money to create good jobs and prosperity for all in the private sector. That hasn't happened.

Reaganomics has a fatal flaw. And that flaw is, rich people have all sorts of options relative to dispensing their riches that have nothing to do with building the American economy.

Rich people can, for example, invest money in an emerging Chinese company that sells lead-laden toys in America for considerable profit. If the exchange rates and interest rates are favorable, a rich person can, for example, convert his or her money into British pounds or German marks and deposit that money in a foreign bank.

A rich person can, for example, give money to the federal government anyway. Not in the form of taxes yielded but in the form of a loan. Rich people can buy up treasury debt.

And rich people can, for example, do what Carl Icahn does.

The news magazine show 60 Minutes recently did a feature on Icahn. This guy, like many others in the country today, owns what is known as a "private equity firm." Kirk Kerkorian and T. Boone Pickens are notable others. What do private equity firms do? Simply put, they go out and buy assets. That's about it.

Icahn is an icon, you might say. By virtue of that, when he takes up a stake in a corporation, Wall Street takes notice. The stock in any company in which Icahn takes up a position goes up. There is a name for it. It's called the "Icahn effect."

Icahn isn't taking his tax savings and creating anything. He simply buys a piece of an existing company and makes a ton of money. He, in essence, has the power to manufacture money out of thin air. It's magic.

The 60 Minutes story made note of a deal Icahn entered into a couple of years ago. He bought a chunk of Time Warner. That deal didn't work out as well as he wanted. Nonetheless, Icahn said he made $300 million.

I've got no problem with a guy making a buck in a capitalist system. But Reaganomics says Icahn's unearned income, magically created, shouldn't be taxed. The "fair taxers" say Icahn's unearned income, magically created, shouldn't be taxed. With that I have a problem.

Government is, without a doubt, a giant mess. More money is taxed and spent than is needed. But there are things that are government provided that have value. Without taxes, we have no Golden Gate Bridge or Hoover Dam; we have no interstate highway system; we have no Social Security or Medicare; we have no public schools. Taxes are, therefore, in part, a good thing. Given that, the question becomes one of to whom we should hand the biggest part of the tab.

Should we tax the average people that have enough trouble putting food on the table or should we tax people that already have enough money to live like kings for ten lifetimes?

I see no issue here.

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