I’ve been told repeatedly by the media that raising taxes by 3.9% on 2% of the population would destroy this country’s recovery.   Now, I know for a fact that this extra 3.9% given to the top 2% didn’t do a whole lot to stimulate job growth when it was given.  I actually know where a lot of that money went.  Here’s a story on the aftermath…

Dec. 8 (Bloomberg) — One of Bernard Madoff’s first clients, along with 19 family members, settled potential lawsuits by agreeing to forfeit $625 million in profits from the con man’s investment fraud.

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The Shapiro funds, held in accounts at JPMorgan Chase Bank NA, are traceable to money invested by victims of Madoff’s Ponzi scheme, the largest in U.S. history, according to prosecutors.

Madoff, 72, pleaded guilty in March 2009 and is serving a 150-year sentence at a federal prison in North Carolina. At the time of Madoff’s arrest, his firm’s account statements reflected 4,900 accounts with $65 billion in nonexistent investments. Investors lost about $20 billion in principal.

[full story]

So why am I bringing up Madoff and Obama’s extension of the tax cuts for the wealthy?   We already know that tax cuts for the richest are a poor economic stimulator…

CBO studied various options that could offer some economic pop over the next two years. Extending the Bush tax cuts ranked last. Topping the list were increased aid to the unemployed, reduced employers’ and workers’ payroll taxes and the full or partial expensing of investment costs.

…but the real question, for me at least, was why.  See, it’s one thing to simply accept a political axiom, it’s quite another to look at recent example of a similar situation, their results and then apply that to the same situation.  In 2001 and 2003 Bush made huge tax cuts for the wealthy.  At the time, most investment vehicles were largely full.  With the situation where there is a lot of idle money, and normal investment vehicles are full (i.e. at a point where adding money only lowers returns), the investment class gets more creative, or dishonest.

The creative aspect we saw in the “sub-prime” market, where the creativity ultimately collapsed taking a whole lot more with it.  The dishonest side was largely encapsulated by Bernie Madoff.   It is exactly that kind of scenario (windfall coming to someone to doesn’t need it) that leads to hucksters gaining ground.  There was a large pool of un-used money around, a no-questions asked kind of way to make it grow, and there ya go, recipe for a disaster.

So that’s why giving more money to people who have plenty doesn’t work to help stimulate an economy.  Any investment, at this point, is going to be shady or international.   The only group that is going to, for sure, invest the money in the American economy is the government.   Individuals will find a better rate of return in shady deals or international investment.

Which brings us back to the title.  Rush Limbaugh makes about $37,500,000 a year.  This 3.9% tax break increases his take-home income by about $1,462,500/yr.

What I’m curious to find out, and will take a nice look back on later, is how many American jobs this specific tax cut will create.    Or how many people Rush has announced on air he is planning to hire with this money.

 I know Rush spends a lot of his fun money down south where sex laws are more lax and the papparazzi less common, and I’m sure a lot of this money will find its way South as well, but surely *some* of it will go to help the economic recovery here, right?  Surely a few grand will go to employ someone hoping to fight their way into the middle class.

Perhaps a bit will, how do you say, trickle down.   Perhaps someone who serves his food will note a bigger tip.   Perhaps.  We’ll see.