Where the money is

I’m sure you’ll adjust fine to the 1950s. There are other people who wouldn’t. Not only that, the benefits of the 1950s are a result of massive inequality in world economic positions. You can’t actually political regenerate these policies without locking non-whites out, without huge investment sinks overseas, etc, etc…

The 1950s are the 1950s. Now is now, and we have different potential stakeholders, man…

That’s right. A return to 90% tax rates would immediately recreate segregation at lunch counters.

/me rolls eyes…

I understand that there are lame leftists that are indoctrinated to ignore how racial politics works or feel vulnerable, but…

If you’ve ever paid attention to grassroots opposition to the ACA debate, *the* primary driver is anti-egalitarianism, with a focus on getting better services than people you see as beneath you–visibly, the minorities with not peachy-skin. They would otherwise heartily support health care reform if people they don’t like can’t have it.

There are a ton of these little issues, ranging from meat consumption to waste disposals that are fundamentally driven by race and related issues, which were a matter of low-level, informed *preference* by some empowered group of people. You will have to navigate them, somehow, if you expect to be able to institute lefty reforms, which is the raison d’étre of race rhetoric in the first place.

“What the US needs at this point is someone willing to advocate a return to the economic institutions that made America great – 90 per cent top marginal tax rates, strong trade unions, weak banks and imprisonment for malefactors of great wealth.”

I was with you until this. These might be great policies on their own merits, but they are at best tangentially related to the broadly shared prosperity of the 50’s. The great majority of that story has to be about pent-up demand and accumulated innovation.

Shah8, that point in your second comment is basically obvious to everyone in the US, and I’m guessing that it’s almost as obvious in Australia. But what’s the point in your first comment? Lefty reform is impossible until we embrace racism? Now that we’ve ended Jim Crow, we can never have high marginal tax rates on the rich again?

Ted Kennedy was a credible alternative to Jimmy Carter in the way that, well, no one is to Obama. And the Kennedy challenge hurt Carter badly in the general election (thus poor tactics) and helped to usher in a long term shift to the right (thus poor strategy.)

“As to Bernie Sanders, aside from the blow-hard factor and the small state factor (mine), he’s 69.”

and the since he is not actually a member of the Democratic party he can’t be a primary challenger factor is rather important

@12:

Right. No Joe-mentum for him.

someone willing to advocate a return to the economic institutions that made America great – 90 per cent top marginal tax rates, strong trade unions, weak banks and imprisonment for malefactors of great wealth.

Prof. Quiggin, perhaps you already know this, but the 90% marginal rate was designed with massive loopholes built-in. That’s why it was 90% in the first place. There were enough loopholes in the 1950’s tax structure to drive a truck through, and the kind of high-income professionals that one thinks were liable for that kind of marginal taxation almost overwhelming did not ever pay any significant amounts of their tax at that rate.

Now is a good time to explode this myth, that America was in any substantial way ever a 90%-marginal-tax country, once and for ever. The 90% marginal tax did not make the U.S. great, because it was never really meant to apply in any substantial way.

er,

Well, I never meant to exclude the forced savings in the first place, and second, if you think that import/export was *anything* like the whole of the story…

http://en.wikipedia.org/wiki/Post–World_War_II_economic_expansion

I don’t think that Jim Crow comment helps your argument, indeed I’m not even sure how it is relevant…

Regrettably, it is far easier to manipulate the dark side of American political character in a zero-sum economic situation than it is to appeal to the better angels. That is why an American Weimar scenario is far more likely than the rekindling of enlightenment and a Rawlsian happy ending.

We will see race, ideology, and Xenophobia cards played by the top 1% to keep their share of the static (and soon to be shrinking pie). It has worked for them consistently for decades, and their propaganda technicians are only too happy to generate more targeted hatred, the emotional drug of choice for an ignorant and brutish electorate.

Prof. Quiggin, perhaps you already know this, but the 90% marginal rate was designed with massive loopholes built-in. That’s why it was 90% in the first place. There were enough loopholes in the 1950’s tax structure to drive a truck through, and the kind of high-income professionals that one thinks were liable for that kind of marginal taxation almost overwhelming did not ever pay any significant amounts of their tax at that rate.

It’s not just loopholes (although they mattered). The cutoff for the 91% bracket in 1955 was $400,000. Using the BLS inflation calculator to adjust to present dollars, that was $3.4 million dollars. Now, I don’t have data on what percentile that represented, but it certainly wasn’t the 99th percentile. It’s not even the 99.9th percentile today, according to Piketty and Saez data. We’re talking about a tiny fraction of the top 1% here.

Now, there may be some case based on notions of fairness that these tax rates for the very wealthy were desirable. But it’s pure flimflam to suggest that they impacted anything approaching the number of people that would be impacted by a change in rates for the “top 1 percent” today. We’re not solving the deficit by taxing the top 1/100th of a percent of the people more.

Ah. I see that StevenAttewell had already said what I meant, and said it better.

@StevenAttewell

the richer you are, the less you spend and the more you invest – maldistribution of income leads to credit-fueled demand and an excess of speculative investment.

Intuitively this is appealing, but a quick look at the data shows pretty much no change in investment as a % of GDP in the last 30 years, with large changes in inequality. The EU also has higher investment as % of GDP than the U.S., with lower inequality and no serious speculative investment problems.

Politically, large concentrations of wealth corrupt republican governance.

Sure, but so do special interest groups that you are all for. And after all it’s a democracy: people have to option to vote for candidates unswayed by those large concentrations of wealth.

My preference is for what the Revolutionary Generation called a “rough equality of means” – not absolute equality, but enough that the low-to-middle classes are economically secure, and that the disparity between workers and employers is not so great that the former are deprived of economic independence.

That’s sort of obvious, but it does not explain why. Utilitarian, egalitarian, etc.? Which one is it? Indeed you’re currently arguing for redistribution TO some of the richest people on the planet. Where does this nationalism come in to your “rough equality of means”, and how do you reconcile it with whatever underlying philosophy you picked above?

But if we’re looking for a starting place, I’d say that the division of wealth that Americans either assume or prefer when asked would an improvement on the status quo (see link).

Just because they assume or prefer it does not make it right or just. (If you were planning on answering that with “democracy”, let me preemptively retort with “constitutional democracy”, and “ad populum”.)

Never mind, the cutoff is in the data I linked to–under $400,000 to reach the 1955 99.9th percentile. So less than a tenth of the population in the “top 1 percent,” even before we start talking about loopholes and exemptions, in this 91% bracket.

Just because they assume or prefer it does not make it right or just.

The top .1% have not the least interest in justice. They are simply maximizing their wealth using every available means. Of course, this does not play well in public forums, so they have their mouthpieces make philosophical arguments. There would be no shortage of eloquent defenders of the rich if American society regressed to the Middle Ages. There will always be eager and well-paid defenders of the strong against the weak.

The insights of Rawls are very useful on a pragmatic basis. Social justice favors a healthy and dynamic society. Left to their own devices, the beneficiaries of concentrated wealth embrace dynastic succession, a singularly bad scheme of social organization. Governments that enforce equality of opportunity and meritocratic principles are opposed to the aristocratic concentration of wealth. Portraying the continuing concentration of wealth in America since Reagan as some kind of natural or inevitable process is disingenuous. It has been the consequence of the deliberate and systematic undermining of Rawlsian principles by interested parties. FDR called them “Malefactors of great wealth.”

So because the last big social contract accommodated itself to the racial realities of the time, it’s impossible to have a new one that won’t be racist? I’ve read and reread shah8’s comments, and I can’t extract any other meaning from them. Yes, the New Deal worked the way it did in part because of Jim Crow. But, if we start from the premise that America is a less virulently racist society than it was then, perhaps we can imagine social democratic programs that are less compromised by racism?

As for the 90% tax bracket, I have no idea why he’s so invested in exposing it as a myth; it’s an apt proxy for a world in which a much smaller percentage of both pre- and post-tax earnings stayed with the wealthiest, and in which a good chunk of government was funded by the same. Given that the modern debate is between taxing extreme wealth at 35% or 15%, I don’t think it much matters whether the 90% bracket was “really” a 75% or even a 50% bracket, do you?

I’d love to see a coherent argument from first principles that would give explicit and exact quantitative answers to how much each percentile should be allowed to have…

Ooh, we’re working from first principles now, are we? So I assume that Anonymoose is in favor of 100% estate tax (no exemption), the elimination of private schooling, and full federal funding of all public schools? Oh, he’s not? And he’d like to maintain his white male* privilege as well? Well knock me over with a feather. I thought we were headed to a utopia of equity, when it turns out we’ve just got ourselves another internet libertarian.

* just a hunch

Sha8 – import/export is the most important measure of how dependent the U.S economy was on world trade. U.S investment overseas post WWII was driven by political motives much more than economic motives.

And it’s beyond obvious that what people like Quiggan and I are calling for is a high-wage, high consumption economy with a more even distribution of wealth, not some reversion to the past.

Anonymoose –
A quick look at the data shows an enormous shift of money into the financial sector, which is exactly what you’d see if speculative investment was on the rise a la Minksy.

We differ whether they are “special interest groups.”

Why is fairly obvious – a combination of pragmatic and republican grounds. The nationalism flows from basic republicanism – the sovereign people are the nation, whether the international economy was balanced or unequal to begin with. However, I must say that “redistribution TO some of the richest people on the planet” is a massive canard. The top 1% are not redistributing their wealth to the Global South en masse.

“Just because they assume or prefer it does not make it right or just.” As long as it’s within constitutional bounds, it accords with principles of justice. Property rights have always been bounded by society – let me retroactively respond with salus populi suprema lex esto and sic utero tuo.

Why stop at 90%, or even 100%. Make it 200%. That should put a stop to people’s willful ignorance of what ‘marginal’ means.

One thing the Tea Party has shown is that, in the current dire state of the US, there are few penalties for abandoning moderation.

No, the Tea Party shows that in mid-term elections (when the moderate voter is most likely to stay home) and in particular districts, the far right can do well.

On a national stage, to abandon moderation means that you appear unreasonable. The American public actually cannot stand that. The Republicans in Congress, for example, are scoring impressively low with the public for their intransigence in the debt-ceiling debate.

Now, on your point about taxing the wealthy, I agree.

But listen. There is where Republicans have a talent for stopping conversations at this point, so that the issue shifts entirely to taxes. For us though, the conversation may absolutely not stop here. Those revenues must immediately be linked to specific and popular programs that have concrete impacts on lives.

To be honest, taxing the top might be a good but slow start to some kind of progress towards economic equality, but a big fire and scattering their ashes would be quicker.

John Quiggin: “One thing the Tea Party has shown is that, in the current dire state of the US, there are few penalties for abandoning moderation.”

I am not convinced of this yet.

“I’m more liberal than you are…”

Ah, the “more liberal than thou” card! That wins every game!

The 50’s WERE more egalitarian. The 50’s DID have higher union participation and higher marginal tax rates. There isn’t a perfect correlation between the two, but it’s certainly a better answer than racism, which America had for 150 years without anything like the 50’s. Is Shah8 arguing that some unique racism in the 50’s led to egalitarism? Seems unlikely. Is it impossible to unionize without 50’s-style racism (whatever that is)? Seems doubtful.

Except for the banal point that some votes for progressive policies could be bought with racist polices (and probably were, although I’ve seen little evidence of it), this is just coalition building. This would be the point – finding a way to make a progressive coalition. Progressive votes can be bought with lots of different sorts of horsetrades.

*sigh*

Maybe I should say this again.

The 50’s were mostly a good time for white males. Anyone else who benefited, did so incidentally as part of the boom. We can’t actually have the 50’s back because there were lots and lots of political bargains tied around allying against the state’s enemies, foreign and domestic. Many of those bargains, like the fact that businesses offered health care benefits instead of the state, lasts perniciously to the present day.

As for 90% tax rates…again, few people ever paid those rates. If you look to the modern day, you see Japan, with executives that have some much smaller multiple of the lowest employee salary. This practice existed for the same reason, to promote solidarity and psychological investment into businesses and keiretsu, so forth and so on. However, those japanese executives don’t exactly live like humble servants of the company. They get other compensations, under the table, just like winners of the 1950s US economy.

In any event, imagining that you can actually change the effective tax rates of the rich in the US of Citizens, United requires something fairly innovative. So innovative, you can’t get it. It would be nice if it could be done, but it’s just not that important. Everything flows from finding ways to empower the masses, which requires its own ingenuity, since modern day Jay Goulds are, for all intents and purposes, considering Brevik, literally hiring one faction of the working class to kill the other. However, success would mean that people could have choices that encompass other choices–one could act politically to raise taxes on rich, or one could do some other priority. Power matters. Real power…matters. If you can’t actually figure out pyrite from gold, just how much of a liberal are you?

This all feels very academic (and almost pointless) to me. We are about to be fleeced by the mother of all shock-doctrine schemes. It seems to me the only hope is to move the frame to that, rather than simplistic notions like (paying your way, debt is borrowing from the future, etc. etc. that the right has successfully injected into the conversation). Until the people see this first and foremost as a scheme to separate them from there hard earned wealth, and their kids from their opportunities, I don’t think we have a snowballs chance in h#@ of steming the erosion.

John,

President Obama may be playing this just right in terms of politics. He tells the American people low interest rates do more to stimulate the economy than anything the government can directly do. The US government cannot lose its Triple A rating, for that is what keeps confidence high in the US and interest rates low.

But to continue to enjoy that confidence and low rates the government has to carry out fiscal reform. Yet it would not be fair or possible to achieve that by making the middle class suffer alone; the very well off have to make some sacrifices too.

Boehner and the Republicans are totally deluded that they have a mandate from the American people to reject any deal that raises taxes in any way. They are misreading the midterm elections. The poll data show that Obama’s plan appears quite reasonable to a big majority of Americans.

But the Republicans won’t deal, and they are wrong that the resulting anger, anxiety and confusion that will result from the default will be easily channeled into energy for a public lynching of tax-and-spend liberal Obama.

The anger may well turn against the Republicans. The space for left politics will probably open up quite a bit.

Obama should just do an LBJ. He won’t, of course, but that’s because he’s not as honorable as LBJ.

@John Quiggin

“My point is not that this is a justified response, but that it is the one we are seeing, in a situation where 99 per cent of the population is trying to share out 75 per cent of the income, a share that is declining steadily”

I did not think that you were justifying the response, but I do not see that you have explained it, either.

I think talking about high income taxes on the top 1% is meaningless now, because they already have so much wealth. It’s too late; it’s already past the critical mass. IMHO, you need to come up with something much more radical than 90% income tax.

Just on the 91% marginal tax rates: all through this period capital gains taxes were 25%.

Given how much of that top 1% of income is through share options and the like, not hugely different from the rates today. 90% income taxes might not have all that much effect given the opportunities for washing income into capital gains.

@31

The insights of Rawls are very useful on a pragmatic basis.

The insights of Rawls in this case tell you to either support minarchism or free market anarchism, and open the borders. Hell, if you want to stick to some weird nationalistic ideal, the insights of Rawls are still completely and utterly against unions, as they give power to employed people which is then used against unemployed people, who are in fact worse off and as such according to Rawls should be the target of welfare increases.

bq. It seems to me that a good place to start would be a primary challenge

“We need a futile gesture at this stage. It will raise the whole tone of the war. Get up in a crate, Perkins.”
“Sah!”
“Pop over to Bremen.”
“Yessir!”
“Take a shufti.”
“Right sir!”
“Don’t come back.”

Walt at 68

It’s not that the white working class is intrinsically racist; there is simply historical inertia its being so as well as nativist as expressed in the virulent scapegoating of illegal immigrants. There wouldn’t be so much pressure on Obama to cut government spending if white workers–influenced by the Tea Party, Limbaugh, Beck, Hannity and Fox News–weren’t reasoning that they stand to gain more in tax relief from those cuts than they would gain from programs being fully funded.

That is, government is understood as a handout or reparations mechanism for blacks. It’s not the New Deal that many white workers want to reverse; it is rather its universalization to include allegedly free-loading colored citizens as a result of the Great Society programs.

Moreover, the putative refusal of the government to enforce the borders is understood as the result of the capture of the state by cosmopolitan capitalists hungry for cheap laborers who steal jobs and social services to which they are not entitled and for which they have not paid. This is nativist component of white nationalism.

White nationalism is a real force in America; it is driven not only by racism but also by nativism as well as a chemical mixture of the two.

It took extraordinary circumstances for Obama to be elected, and in spite of the financial crisis and the delusional qualities of the McCain/Palin ticket, a clear majority of white men voted for the Republicans. Obama won on the basis of high black turnout and a shift in the Latino vote made possible by very ugly anti-immigrant sentiment in the Republican base (see analysis of the poll data by Steven Ansolobhere at Harvard). The country still suffers deep racial divides. It should not take massacres to make us attend to such issues.

Yglesias posts a finding of great significance: ‘CBPP ANALYSIS OF JOHN BOEHNER’S PLAN | The Center on Budget and Policy Priorities concludes that if enacted, John Boehner’s debt ceiling plan “could well produce the greatest increase in poverty and hardship produced by any law in modern U.S. history.”
That sounds to me like something that would create strong incentives to not be poor and, indeed, to fully incentive richness. Consequently, we’ll have massive economic growth. Right?’

When Boehner ways he won’t give Obama “a blank check” he means that he won’t give blacks a check. That is what he means; that is what his constituency hears. They could care less if blacks are incentivized to work; they just don’t want to be taxed for those people. This is white identity, tough guy politics (I see that Gary Younge has a new book on identity politics which is something that George Akerlof is working on from an economics perspective). At any rate, this is a politics of social Darwinism; it is not a politics meant to secure any social objective, such as economic growth.

this is a politics of social Darwinism

Even worse, it is a politics of zero sum. The plutocrats know that growth is tapering off. For them to increase their wealth, entitlements must be cut. Both political parties have been tasked with this mission. They differ only in the rate at which it will be accomplished.

“Do you really fucking think working/union class support for Reagan was not related to Great Society?” This is erasing a far more complicated history – white ethnic middle/working class voters who either didn’t vote or voted for Nixon/Wallace in ’68 went back to voting Democratic in 1970 and 1974. The white working class voted against Carter in 1980 because he failed to pass anything that might alleviate their economic plight – tax reform, health care, inflation controls, labor law reform, and a real full employment bill. They certainly didn’t vote FOR Reagan’s economic policies as became incredibly clear in 1982.

Henri – I don’t think income taxes are no longer effective; the new wealth is based both on capital and high-end salaries. What you’d need is to pair income tax increases with capital gains and business tax increases to get at the self-incorporated types.

Matt Yglesias has posted a response to this here post. I think it misses most of the point.

He concludes with:

To me, it’s an indication that we need to spend a fair amount of time thinking about the scarcity as such and ameliorating it. … This scarcity is a problem — or perhaps an interlocking set of problems — that, like the inefficiency of the health care system and the brutal inefficacy of the crime control system needs to be tackled on its own terms.

This looks like standard-issue pie-embiggenment talk to me, which is futile as long as you ignore distribution. To solve these issues, you’d need to alter the distribution of 1) income, 2) wealth, and 3) political power (these factors are inseparable).

Additionally, the inefficiencies he mentions in crime-control and health care are not accidental and they are not considered defects. These inefficiencies create 1) profits and 2) societal pressures that are advantageous to powerful players.

PS, there is a dated but still pertinent discussion of the sources of wealth here, by Edward Wolff of NYU: http://multinationalmonitor.org/mm2003/03may/may03interviewswolff.html

12.5 trillion times .24 gives me 3 trillion. At 30% including imputed taxes I get 900 billion in taxes collected. At 45% I get 1.35. I think 45% is a pretty high effective tax rate. Probably higher than the top rate politically possible. That is a difference of 450 billion. At full employment that would probbaly just about cover the defict. At 55%, 750 billion, which would definitely cover the deficit.

That leaves unfunded public sector obligations. The SS deficit. [You need to cover the lost surplus plus the outlay gap.] Ok let’s say we could cover this with reduced military spending.

Let’s also assume a miracle in the way we provision public health care so that doesn’t bankrupt us.

That leaves no money for any fantastic new programs.

IMO. Also, if you charge 1 million dollars for a cup of lemonade, you don’t improve the final price, because I just say that is BS and walk away angry. 90% doesn’t move the overton window it just ostracizes you. IMO that is a shame.

#4 Anonymoose wrote,

Why focus on the top 1% and not the 1.1% or 0.9%? What makes you think that they have too much? Perhaps they had too little before and they have just enough now. Perhaps not.

Since the bulk of income collected by the truly rich is simply economic rent, they clearly have too much, since rent is stolen, not earned.

Watson Ladd wrote,

It’s not something where there are that many easy answers.

Actually, there are easy answers, at least economically if not politically: tax economic rents first and foremost. No deadweight loss; and equitable since rents are not earned anyway. And these days there’s a lot of rent out there.

Sorry, that was suppose to be an arched-eyebrows ironic question:

The problem in the US is not the super-rich it is scarcity in land …?

As much as “we” would like to tax the super rich, it’s important to remember that their incomes derive from the exploitation of workers abroad (clearly profits from foreign operations are more robust than domestic operations) and the management of surplus value held by a global capitalist class. That fantastic wealth is not based just on the exploitation of the American workforce; in fact one reason why CEO pay, coupled with stock options, skyrocketed was to incentivize top management to close shop in the US to take advantage of more exploitable labor and laxer environmental conditions abroad. Top management may not have destroyed as many lives for a paltry 20-1 pay ratio vis–a-vis an ordinary line worker, but all kinds of things become conceivable when you can make 350x more than an ordinary American worker.
So there are questions in regards to international justice of national economic populism.

LGM had a post a short while ago, which really shocked me.
http://www.lawyersgunsmoneyblog.com/2011/07/law-and-law-school-economics

Here’s the money shot, so to speak:

Thirty years ago, annual in-state tuition+fees at UM Law was $5,367, and out of state tuition was $11,514. This fall, the respective figures will be about $47,000 and $49,500. In other words, in-state tuition has increased by a factor of nine in real inflation adjusted terms. Part of this is no doubt a function of the gradual withdrawal of tax subsidies for in-state tuition. But note that out of state tuition, which was never tax-subsidized, has increased by four and a half times in real terms. One result of these trends is that the 84% of 2010 UM Law grads who borrowed money during law school graduated with an average debt of $112,133. (That class matriculated when tuition was nearly $10,000 per year lower, so the entering class of 2011 is likely to average close to $150,000 in law school debt when it graduates three years from now).

That dynamic, with its implications for reduced investment in education, for social stratification, and for debt peonage, it seems to me, is more than a pothole, on the highway of public disinvestment. And, it implies, to my imagination, the possibility that there’s a powerful, accelerating dynamic at work, just below the pond scum on the calm surface of the stagnant pool filling our Lesser Depression.

liberal, he ignores a huge amount of race and class dynamics in his discussion of the scarcity of housing with “good public schools”. For many white upper-middle-class people, “good” schools are defined as schools without many poor or dark-skinned students.

The problems with making those “good” schools available to poorer people should be self-evident.

Similarly, the benefits of reducing the income gap should be evident as well.

He’s written at least one other tone-deaf post about gentrification recently, so this isn’t very surprising. I think that the class, race, distribution, and power politics of it is just invisible to him — if only the pie was higher, then everything would be great.

But if we compress the income distribution be taxing the rich, and if there are a range of such goods G1…Gn, then the capacity of the rich to outbid across the range is going to get exhausted, thus giving middle and working class families currently excluded from access to those goods access to them. No?

The people buying up all the swish new $8-million penthouses and so on in New York and London aren’t, in many cases, even American or British. Compressing the incomes of American citizens is not going to change the buying power of foreign millionaires.
I think we are very fortunate to live in a much more multilateral, open, free and pluralistic world than had existed in the 1950’s, but that also means (and this is perhaps a good thing) that the individual State can’t unilaterally impose (what some people and perhaps the world at large could reasonably construe as) unreasonable economic policies, just through legislative action, without pushback. Specific economic policies posit specific incentive structures, and the State should not be surprised if the result implicitly encouraged but eh given incentive structures is actually realized.

Watson Ladd 07.26.11 at 3:50 pm

“Furthermore, higher capital gains taxes will discourage investment. ”

Is there any evidence of that – for the US economy, at any realistically attainable rate?

I remember when the right said that the Clinton tax increase would kill the economy;
and when they all retconned things a few years later.

I want to see proof.

@Myles 96

So, basically, you’re saying that because Russia, with its robber-baron economy, has more billionaires than the U.S., the U.S. has to embrace a neo-feudalism of economic pillage, to keep up?

Or, what?

Bruce Wilder @100 hit the nail squarely on the head, as usual. The shocking, and vastly under-reported, fact is that most of the gains of recent decades accruing to those at super-high income levels have been going, not to investment income as has been the case in past eras, but to compensation paid to the predatory CEO class. Once this has been understood it is easy to see the truth of Wilder’s analysis. And to understand why the one issue the right (which is controlled by the parasite class) truly cares about is minimizing taxation of the rich.

Chris Bertram,

We are talking about the top 1%. I don’t think reducing their income is going to result increased access to allegedly scarce goods like a good neighborhood. Right? They will have plenty left over to outbid everyone for such important goods.

‘In America today, a house in a safe neighborhood with good public schools featuring a convenient commute to the central business district of an economically vibrant city is a scarce commodity. This scarcity is a problem — or perhaps an interlocking set of problems — that, like the inefficiency of the health care system and the brutal inefficacy of the crime control system needs to be tackled on its own terms. ‘

Convient commute = much more mass transit and congestion pricing.

Good public schools = more money invested in education + experimenting with reforms.

A house in a safe neighborhood = allowing denser housing so that lower income earners can move into safer neighborhoods.

Taxing the rich and the above approach are not mutaully exclusive. Matt’s approach might require taxing the rich.

But absent the other which is more likely to achieve the goal of

”In America today, a house in a safe neighborhood with good public schools featuring a convenient commute to the central business district of an economically vibrant city is a scarce commodity.’?

You really think taxing the rich is the better answer?

Steve Sailer could have written

‘’In America today, a house in a safe neighborhood with good public schools featuring a convenient commute to the central business district of an economically vibrant city is a scarce commodity”

Yglesias does seem to repurposing Sailer’s arguments, without attribution, as Sailer has claimed.

Realistically, a primary challenge to Obama seems more likely to result in his defeat in the general election than to actually nominate an alternative. But on some days I have begun to think about voting for the Republican anyway. I suspect that (1) both Obama and the Republicans will destroy the economy so the Republicans might as well get blamed, and (2) Obama’s reelection would convince both him and all future serious Democratic politicians that the way to become President is to edge up as close as possible to the Republicans’ positions without going beyond them. I hope I come to my senses before doing anything rash (or better yet that he does).

_You really think taxing the rich is the better answer?_

I’m struggling to see the scarcity of good neighbourhoods as something other than and independent of a totally screwed income distribution. It obviously isn’t down to a shortage of physical space.

Actually, we do miss part of the answer by concentrating solely on taxing the rich; we should also be concerned with cutting taxes for the vast majority. You want a sweetener to go with your politics. Unfortunately, the liberals tend to want to raise taxes for everybody, thus creating the fusion between the rich and the rest. But there is no reason for that fusion. On every level, the majority should: a, pay less in taxes; and b., receive more in benefits.
b., as of now, is all about benefitting the wealthy, by giving them + trillion dollar loans at 0.01 percent interest. In other words, as things stand right now, the government is the biggest worldhistorical backstop for the pilferers since the days of Nero. The amount the Fed “loaned” the wealthy over the past three years could easily have been loaned to the non-wealthy, and the bottom 80 percent would have been absolutely delivered from debt peonage, own their homes with 0.01 percent mortgages, etc. 9 trillion does go a long way, after all.
Shifting ten percent of the wealth of the upper 20 percent to the bottom 80 percent is doable only if the bottom 80 percent really do feel the benefits. And one of the ways they would is by lowering their taxes dramatically. Call it ‘fair sacrifice” – it is fair to sacrifice the wealth of the plutocrats; it is even fun.

Let’s make liberalism fun again!

Bruce Wilder @93 and @109

The enormous increase in law school/med school tuition over the past thirty years is entirely akin to the comparable increase in tuition at Ivy League and elite liberal arts undergraduate institutions. Your conclusions seem entirely on point, but I don’t understand why you found the data on UM shocking – other “elite” consumer products (e.g. housing in a “good neighborhood”, access to high-quality preventive and interventionist health care) have also been priced out of reach of the formerly middle class; it seems to me inevitable that the educational institutions which serve as gate-keepers to the top 5% or 1% should also have become prohibitively expensive.

As for the substantial increases in law school faculty and administrators’ salaries, I suspect the reasoning is that salaries have to compete (somewhat) with those offered by private firms. Since the starting salary for a new associate in a Top 25 NYC law firm is around $120-160,000 currently, the salaries cited remain at the low end for practitioners in top firms, and are certainly nothing like those received by senior associates or full partners.

Having read the lawyersgunsandmoney post, there is an interesting point raised about the consequences of debt peonage for young lawyers, namely that graduates carrying debt loads of $150,000 (from law school alone) cannot realistically undertake careers in public service (as ADAs, public defenders, govt lawyers). Currently this is being addressed through supply and demand, i.e. the top 100 law firms aren’t hiring as many graduates as in pre-2008 years, so even debt-ridden new graduates will apply for public service legal posts. But once this asymmetry is addressed, one can only wonder who could possibly afford to work for $65000 a year as an ADA in Manhattan if they’re looking at $150,000 law school debt (+ undergrad debt, which averages around $25,000 but can be much higher). While I tend to believe this is an unintended consequence of debt peonage, it does not bode well for the U.S. judicial system, and will further reinforce the elite in a variety of ways.

Chris Bertram,

I don’t see a large scale issue of good neighborhood scarcity at all. I don’t think good neighborhoods depend all that greatly on income in a country as rich as the US.

I don’t see the top 1% out bidding everyone for allegedly scarce resource of good neighborhoods in any way shape or form.

Even if I don’t agree, I think Matt is more right. .

In NJ middle class communities use tax payer money to buy farms and prevent further development in middle class neighborhoods. Local zoning laws prohibit the sub divisions of lots. I mean imagine if some industrious Mexicans split a 1/2 acre or shudder a 1/4 acre lot and built two houses on it? The horror! Congested highways like 287 dramtically increase commute times. Limited and deficient mass transit causes further problems. At 50 or so miles south of NY City and North of Philadelphia the default option should be a city commute and with decent mass transit it might be. But the pokey trains probably travel slower than my car up the Turnpike. Imagine if they allowed real urban development around transit hubs? But existing property owners won’t allow that. Imagine more mass transit hubs and all.

The issue is artificial scarcity created by middle class property owners and under provisioning of public goods like quality education and mass transit.

Get that stuff right and you create better neighborhoods even with an income pattern skewed towards the top 1%. Though obviously there is nothing wrong with taxing the top 1% to fund such improvements.

Rob in CT:

While I think that would be just, and I think it would have some positive impact on our society, I don’t know that it would do all that much for economic growth. Is it going to make people in other countries import more stuff we make? Is it going to create decent American jobs? I don’t really see how. Other policies (or economic changes independent of government policy) would seem to be required for that, and I’m at a loss.

Economic growth (per-capita real gdp) has grown at a not-terrible rate (though slower from 1980 to today than in the prior period). The problem is that all of that growth has been taken by the top quintile and none has reached the median household.

People talk about growth — making the pie higher — when they want to change the subject away from distribution.

I don’t see a large scale issue of good neighborhood scarcity at all. I don’t think good neighborhoods depend all that greatly on income in a country as rich as the US.

Perhaps the problem is one of definitions. A “good” neighborhood is one without poor people in it. “Good” public schools are defined similarly.

The issue is artificial scarcity created by middle class property owners and under provisioning of public goods like quality education and mass transit.

The purpose of this artificial scarcity and under provisioning is to keep those neighborhoods “good”.

Those zoning rules didn’t happen by accident and mass transit isn’t underfunded by accident. I would like those things to change, but the underlying attitudes won’t change so long as distribution of wealth stays lopsided.

As long as the top couple of percent own practically all the wealth and all gains in income, then those of us lower on the scale will be left to fight for scraps. It serves the plutocrats to keep the so-called “middle-class” in terror of the lower class.

@Barry: Suppose I have $100 to invest or consume. My investment will need to return enough to justify the delay of my consumption. But a higher income tax means it will need to return more to make it worthwhile. How much more? Depends on the rate. How much lower will this make growth? Its hard to say: not that much, but Fair says paying down the debt will cost us 1.38% of GDP. Some people brought up the 1950’s taxes vs. gdp. I think that higher top marginal rates caused people to get payed in fringe benefits and, by increasing the cost of high cost labor caused companies to spend more on acquiring lower cost labor to substitute. Taxing rents is a good idea, but eliminating rents would work much better since it removes deadweight loss. I’m not saying we shouldn’t raise taxes, just that we should pay attention to all the consequences of doing so.

As for the whole debate over land shortage, no good neighborhood is going to exist away from employers, and employers require employees. There is a limited amount of land for that, and zoning laws just reduce it further. In Hyde Park (Chicago) we don’t have that many high rise apartment buildings because of zoning restrictions, and that lowers the supply of homes, raising the rent. That was a deliberate move as part of urban renewal efforts to try and drive out an underclass seen as criminal. However, we also have lots of empty lots and borded up homes on the South Side. Actually nabbing muggers and killers would do a good deal more to increase the supply of livable real estate 20 minutes from the Loop (most of the jobs) then changes in income distribution. So would extending the public transit network further.

@121

Scraps? Scraps is what people in famine conditions in Somalia fight for. Scraps is perhaps what heavily abused workers during the industrial revolution fought for.

You wrote that whiny post on an incredible machine that can perform millions of calculations every second. What you are fighting for is a more equitable distribution of conspicuous consumption for ridiculously rich people. Perhaps a noble goal, but let’s keep things in perspective, yes?

_In NJ middle class communities use tax payer money to buy farms and prevent further development in middle class neighborhoods. Local zoning laws prohibit the sub divisions of lots._

Obviously, since I don’t live there, I’m arguing from a position of ignorance here. But you do seem to be ignoring what makes the middle class neighbourhoods middle class neighbourhoods, and what makes the poorer neighbourhoods poorer neighbourhoods. Something to do with the incomes of the people who live there? Maybe? And if, for neighbourhood X you changed the laws such that the class composition of the neighbourhood also changed over time, and poorer people moved in, do you think the richer people would stay? All of which changes might be for the better of course, but they aren’t going to increase the supply of “middle class neighbourhoods” – in fact maybe the opposite. So I think (from my position of British ignorance of course) that Matt is probably barking up the wrong tree.

_But if neighborhoods are purely positional goods you cannot change the supply of middle class neighborhoods. Pretty much by definition? Right?_

No, that’s not right. It is true that if you have some people that are richer than others, then those wealthier people will outbid those poorer than they are for homes in desirable areas. But with a flatter income distribution there will be less of that and with more middle class people you get the gentrification of formerly poor neighbourhoods. So the supply of middle class areas isn’t fixed at all, but is dependent on the supply of middle class people. That’s what Yglesias is getting wrong afaics. If you don’t have enough people with enough income, then you won’t have enough nice areas; if you do, then those who are still well off but are outbid will change the areas in which they end up.

” . . . household wealth has fallen by something like 50 per cent (at least for ordinary households whose wealth, if they have any, is dominated by home equity).”

Huh? The latest figures I’ve seen for the impact of the Great Recession on net worth [March of this year] places the median decline at 18 percent.

132: L Arnold is right. Quiggin wants to know how it’s done? It’s done ugly, painful, and dangerous. Should have been done Jan 2009.

Heighten the contradictions. Bring on default.

Watson @ 123: you’re giving the same old same old that the neolibs and right has given for decades. We’ve played their game, and in fact it simply does not work that way.

Great theory, but it has little to do with reality.

John Quiggen’s post:

One thing the Tea Party has shown is that, in the current dire state of the US, there are few penalties for abandoning moderation.

That’s not how I’d interpret it. What the Tea Party shows is that there’s no penalty for far right-wing politics.

The media is responsible for some of this, but U.S. party politics are also to blame.

The media covers a political story by getting a few quotes each from a Republican and a Democrat.

Republicans stick to the party line. Republican proposals (no matter how far-right) are good, Democratic proposals are IslamoCommunist treason.

Democrats will sometimes criticize a Republican position, though rarely very strongly. It’s also easy to find a Democrat to criticize another Democrat as insufficiently-right-wing — try Blanche Lincoln, Harold Ford, Joe Lieberman, or Evan Bayh.

The net result is that Republican positions look “moderate” (one commentor for, one opposed) while Democratic positions look radical (even other Democrats agree that it’s anti-rich class warfare/communism/a government takeover).

It seems bizarre to me that Americans (on the right but also, as this thread shows, for many on the left) can watch their living standards being sucked away by the ultra-rich…

I think the problem is that most Americans don’t really see their living standards as being ‘sucked away’. This sort of thing may be why:

http://cafehayek.com/2011/07/stagnating-middle-class.html

Also iPads.

On top of that, it appears to me that tea party types have actually been a whole lot more successful at the whole class warfare thing than progressives — beating them at their own game. There is a little overlap in the sets of villains (both progressives and the tea partiers hate the Wall Street bailouts), but the TP includes the auto bailouts in the same category and seem to have been pretty effective in generating class-based anger about public-employee unions and their early retirements and generous (grossly underfunded) pension plans. The tea party has been so successful in this that they’ve even got some blue-state Democratic governors on board.

Outside of Wall Street, progressives haven’t had much luck generating outrage about billionaires generally — probably because the best known billionaires are geeky, wholesome, jeans and t-shirt wearing tech entrepreneurs like Larry Page, Mark Zuckerberg, and Steve Jobs whose companies provide all the cool goodies including those bewitching iPads (Apple — America’s leading producer of false consciousness!) that distract Americans from realizing how much their lives truly suck.

@Barry:
What, your saying that I can borrow $100 from you now and pay you back in a month regardless of the amount I pay in interest? That doesn’t sound right. I’m not opposed to getting a flatter income distribution through taxation: I just think capital has a lot more problems then that, and in particular taxes have costs beyond revenue.

Simple example: suppose I want to buy a bus ticket. I will pay up to $11, and the ticket costs $10. If there is a 20% tax on bus tickets, then I don’t buy the ticket, making me $1 poorer then I would be compared to buying the ticket (I didn’t realize a $1 gain) and the government doesn’t get that money. Keynes, Marx, von Hayek, would all agree on that point. (As would those who work at my alma mater)

This doesn’t say we shouldn’t have that tax. In particular trying to minimize deadweight losses puts the burden heavily on poor people. It just says that taxing will extract some moo (the deadweight loss) along with the milk (the revenue). We want to minimize the moo while maximizing the milk (but not all moo is created equal). That’s not something that ideological answers will suggest: at some point reality must intervene and teach us how to milk.

As for the firebrand who wants to heighten the contradictions, this is a 1914 moment. Was the SDP right to let WWI happen in order to survive it and come up afterwards? Worse is better lets the party and its history off the hook, and in particular removes the working class of agency.

Simple example: suppose I want to buy a bus ticket. I will pay up to $11, and the ticket costs $10. If there is a 20% tax on bus tickets, then I don’t buy the ticket, making me $1 poorer then I would be compared to buying the ticket (I didn’t realize a $1 gain)

I am just not understanding the drift of this argument. How could not buying the bus ticket make me poorer?? If I walk instead I’ve saved $10.

And doesn’t the tax on the bus ticket help pay for the streets without which the bus wouldn’t run at all?

#144: Come off it. Really, these tired libertarian arguments will convince absolutely no one. We’re looking at a society with a stagnant median income; one where the top end has stretched out and the majority have seen no change in real income. I think a lot of people would like to have pensions, job security, or the ability to support a family on one income. A lot of people would like to be able to graduate college without ruinous debt. I could go on, but why bother? The glib libertarian argument cashes in all of the technological advances as somehow *requiring* the stacking of all of the cash at the top of the income distribution. It’s just as easy to postulate a fantasy world where we have even more nifty gadgets and a less grotesque society. The rest of the planet provides some useful examples.

There is a lot of missing the point here. The setup in the 50s through the 70s was that there was no particular point to dumping a lot of cash on the CEO because they couldn’t keep much of it. As a result, the workers got more money and the companies invested for the longer term. That is the point of progressive taxation – to give strong incentives to spread the rewards of productivity among the people who earned it.

We’ve now switched to a system where nothing restrains executives from giving themselves as much as possible, and one where only the short term counts.

Barry @ 142

I’m pointing out that under the circumstances in question, it doesn’t seem to matter.

Are you referring to the fact that the wealthiest don’t have any choice but to reinvest most of their income (capital gains)?

For example, Warren Buffet’s net worth increased by approximately $3 billion in 2010; there’s no possible way for him to consume all of that, so he’s going to reinvest the majority of it regardless of the tax rate he’ll ultimately pay when he realizes the gain.

Obviously at some high tax rate, his behavior would change, but he reports his current effective tax rate is 19%. He’d surely still reinvest most of it even if that rate was 50% and the rate at which his behavior changes significantly is probably higher than that.

I seem to recall that someone wrote a book recently on the failures of supply-side theory, I think the author’s name was John Quiggin, and the book was Zombie Economics.

Even the notion that the top 1% now have vastly more wealth and economic power than they once did is fallacious. In 1965 — by anyone’s measure, I think, the height of the golden age from a liberal perspective — the top 1% of American wealthholders had 34.4% of all wealth. In 2007, the top 1% had 34.6% of all wealth. Not exactly a monumental shift in distribution. Actually, no shift at all.

I have no idea what’s libertarian about my argument—I’m just saying there is no evidence that the living standards of middle-class Americans have declined since the mythic golden age. John wonders why Americans are tolerating the “fact” that their living standards are being sucked away by the ultra-rich. An important part of the answer is that their living standards aren’t being sucked away at all.

Do you have any evidence that Americans have had their standard of living increased due to their much greater productivity vis a vis 1970? I’m guessing you don’t.

Which sort of invalidates anything else you might have to say. Until you produce that evidence, that is ;-)

“Do you have any evidence that Americans have had their standard of living increased due to their much greater productivity vis a vis 1970? I’m guessing you don’t.”

Actually, I offered the evidence above: the average American today is better-educated, lives longer, has better health care, is healthier, has more wealth, lives in a much bigger house, has easy access to vastly better food, and enjoys much cleaner air and water. What do you think is paying for all these improvements if not rising productivity?

Iow, you don’t have any evidence to offer . . . and more to the point, you are offering up the same old same old libertarian arguments.

Gotcha. Are you always this easy to outmaneuver[1] as well as being a stone liar?

Libertarians. They just can’t help themselves; they have to follow the script.

[1]And of course, in keeping with libertarian innumeracy, his cited figures don’t show what he thinks they do – which he’d know if he hadn’t been so lazy as to not compound out those annualized figures over the decades he claims they cover.

For those not interested in K. Williams’s hand-picked data, the table is on p 118.

For the mid-80s to mid-90s time period, the U.S. is ranked 11 out of 22 and for the later period it’s 21 out of 25.

To put it differently, you don’t aspire to the middle class because it’s desired by others, but because it’s a better life, for everyone, that having to look for food in a dumpster or having to worry about buying bread at the end of the month.

Earnings “somehow” being shifted, Andrew? Every time you pay one of the corporate rents (ridiculous bank fees, outrageous cell phone contracts being two examples) that (due to regulatory capture) are far more burdensome in the US than in other developed countries, you’re witnessing some of that shifting in action. Another major piece of it is hidden in the huge semi-submerged network of tax giveaways to corporations, which has helped to impoverish our public life and infrastructure. A third, recently prominent, is making whole the perpetrators of financial fraud from public monies while letting the victims twist in the wind. And the success of these and other mechanisms of upward wealth shift (crony-directed privatization of public services is yet another significant one)- which exist largely because of the stranglehold of the beneficiaries over our political system- is visible right now in front of your eyes, as corporate profits have recovered handsomely from recession leves while employment and wages stagnate.

Really, stop shilling for the top 1% and pay some attention to the reality around you instead of repeatedly making an ass of yourself.

If you’re talking about inequality you really don’t get to register medical advances as an entry in your favor. There are plenty of countries with both more equality and better health systems than the US. There are plenty of places where you can graduate from college without enormous debts, and so on. It’s as if they believe that the world outside the United States doesn’t exist, or that you can’t have computers unless you give all of the money to billionaires.

“even so I don’t see our problems as deriving from too much influence by the super-rich.”

There is ample study and research on this. It’s as established as can be.

“(3) could be true, but what are the numbers? What does a top 90% bracket get us?”

Let’s put it in place and find out. it’s definitely better than now.

VasVas,

‘It’s not a “positional good”, it’s akin to food: Clean streets, parks, etc. ‘

Ok. Sure. So it doesn’t have to be related to income distribution? The important thing is not the income level in the neighborhood but that the schools are good, the streets are clean, publics spaces are attractive and useful, the commute is decent, etc.

““even so I don’t see our problems as deriving from too much influence by the super-rich.”

There is ample study and research on this. It’s as established as can be.

Really? Offer up some citations please, that demonstrate that the US’ economic problems are the result of “too much influence by the super-rich,” as opposed to simply being correlated with it. There’s a huge difference between showing that as median income growth slowed and labor union influence shrank, and more income went to the top of the income distribution, the rich became more influential, and showing that it was the influence of the super-rich that’s responsible for the US’ problems. The former is certainly true — the latter there’s almost no good evidence for at all.

That’s the whole point of the comparison to Germany, France, Japan, et.al. Even in countries where the rich control a much smaller percentage of national income, and presumably have less political influence, you’ve seen a significant and material slowing of the growth of incomes for most workers over the past 25 years. (Pace ScentofViolets’ mysterious whining, German workers obviously haven’t seen their incomes rise in line with productivity gains, either.) This is not what you’d expect to see if the “class struggle” explanation for America’s problems was correct. Instead, it’s what you’d expect to see if what we’re witnessing is the result of more global labor competition, declining productivity rates, and increased reliance on technology rather than labor.

Apparently people are having trouble with consumer surplus. Need I point out that no one wants money for its own sake, but only for various goods? I can think of nothing more inherently useless then green paper. Only by trading that green paper for other things do I realize possibilities for consumption of goods I cannot create. Secondly, most investment is not Warren Buffet. Most investment (by individuals) is by people saving for retirement. 300 million people saving $1,000 per annum comes out to $300 billion in investment. Yes, divide that number by 2 or 3 for the non workers, add a bit for those who save more, but that’s a lot of money any way we put it. Warren Buffet owns a lot, but not $300 billion. These are people for whom tax rates will matter. When congress decides to tax 401(k) contributions, fewer people will save for retirement.

Anyone arguing micro doesn’t matter is wrong. This isn’t supply side: supply side argued that lower tax rates would increase revenues (wrong) as well as increase growth (far to simplistic, contradicted by evidence from Europe). Europe doesn’t use high tax brackets, but rather has the lines for brackets quite low and rates of around 65% top (Germany) as well as taxes on investments and net wealth. (Netherlands). And there is VAT, a truly nasty tax for the poor and one that is hidden from most people. Are their effects on savings? Yes. Are they offset by the increased revenue? Depends on what the situation is and what you think the right balance between milk and moo should be. At some point hard numbers need to come into play. I said a high rate would increase the wages of other workers under certain situations, which I think is a good argument in its favor.

Finally there is the question of the retreat from the welfare state. Looking at data from Department of Numbers here I am not seeing a decrease in government spending as a percentage of GDP, but a sharp rise quite recently. Clearly we don’t need to spend more to have the welfare state back, but rather cut military spending and actually invest social security in something other then treasuries and raise revenues to reasonable levels. Of course, the increasing percentage of children below the poverty line is partially responsible for this increase.

And lastly I am not an economics student! I am a maths student, but thinking hard about economics. It remains one of two necessary components for thinking about the modern world, along with sociology as Marx so ably pointed out.

K. Williams, no I don’t think it’s absurd to argue that someone who ‘earns’ a million dollars is a sociopath for wanting to ‘earn’ $2 million.

It’s that there’s something deeply offensive about forcing people, on pain of prison, to spend 90% of their marginal working hours working, in effect, for everybody else.

Talk about completely missing the point. Who is forcing you to do anything? Don’t you think that, in fact, by ‘earning’ that million, you’re forcing everybody else to work for you? Or you really do believe that you are producing, for the benefit of everybody else, 30 times more than the average person? What are you, the superman?

I’m not sure that I buy that Sam; it’s a societal choice too. France has been an interesting example; they have systematically ratcheted up incentives for having children until the birthrate has come into approximate demographic balance. Countries like Italy or Japan, on the other hand, have seen plunging birthrates – related directly to a combination of traditional gender roles and the pressure to have two working members of the household. In other words, we have dramatic differences in fertility rates directly linked to social policies around child care. It’s not impossible to envision a structure where we decide that raising kids is important enough that it’s worth encouraging parents to do so.

“Who is forcing you to do anything? Don’t you think that, in fact, by ‘earning’ that million, you’re forcing everybody else to work for you? Or you really do believe that you are producing, for the benefit of everybody else, 30 times more than the average person?”

The state is forcing me. To be more accurate, it’s forcing me to choose between not working or working 54 minutes out of every hour for everybody else. That’s a Hobson’s choice, and it’s not one the state should force people to make.

“Or you really do believe that you are producing, for the benefit of everybody else, 30 times more than the average person?”

Why is this relevant? I’m not forcing anyone to pay me the money — they’re choosing to. Am I supposed to say no because it doesn’t comport with your idea of a just society? (And, by the way, it’s certainly true that some people — like, most obviously, professional athletes, but also including people like Steve Jobs — are producing much, much more than 30 times the social value produced by the average person.) In any case, I’m not making any argument that people’s salaries reflect their merit, or just deserts. I’m saying that no normal person would be happy to have control over 90% of the product of the marginal labor be taken away from them on pain of prison. But that’s what you’re advocating, and that bizarrely suggesting that only a sociopath would be troubled by it.

The state is forcing me. To be more accurate, it’s forcing me to choose between not working or working 54 minutes out of every hour for everybody else. That’s a Hobson’s choice, and it’s not one the state should force people to make.

Has this poster been banned before? The trollerly sounds familiar.

And while you’re still here, “K. Williams”, stop trying to force conclusions in such a clumsy way. No, I’m not going to assume that someone who receives $10 K for an hour’s worth of work has actually done $10 K’s worth of work. That’s up to you to prove.

Is ScentOfViolets complaining about trollerly immediately before he invokes his “use in every thread” burden of proof argument? Hmmm.

ajay–in my statement, it’s definitional that you can’t have both.

If men and women are equally likely to be in the labor force, and earn equal amounts while at work, then families with two incomes will be average.

“There are multipliers to putting in strong disincentives to plutocratic wealth accumulation in capitalism”

The point is that there has been no plutocratic wealth accumulation by the top 1% in recent years. As I posted upthread, the percentage of wealth held by the top 1% in 2007 was almost exactly the same as the percentage of wealth held by the top 1% in 1965. Why was it that the plutonomy in 1965. Indeed, except for those periods when the stock market plummeted sharply (the 1930s and the 1970s), the percentage of wealth held by the top 1% in the US has not varied much throughout this century. I’ll just say it again — attributing the problems in the US economy to the existence of the super-rich does not fit with either the cross-national or cross-historical data, and the notion that a 90% marginal tax will solve our problems — or even be able to garner public support — is just wrong.

jch @59 – Obama/LBJ

My response.

And you presuming to tell us that these people are actually creating that much value without any proof whatsoever (indeed, with quite a lot of proof to the contrary) is highly offensive indeed.

As Bruce Wilder said so well above, extracting 90% plus of a rentier’s income can’t do anything but free up resources for productivity.

It is also likely that the argument that the wealthiest people will work less, if they are taxed more, is false. At 90% of course, they may move to another country. But for smaller hikes, it is not much of an issue. It is a current complaint because everyone is thinking about it and taking political positions. But the historical evidence is that with higher tax rates, economies do just fine. The reasons why should be obvious. The debate is changed now, because the class war has changed the expectation about possible taxes, not because of any new economic law about efficiency or productivity. I am trying to find a Fed study that purportedly showed that the very wealthiest never stop working a whit, largely because many of them are motivated by status and baubles anyway, having met their basic needs long ago. I think that Adair Turner also adverted to some other, similar studies in his most recent address to the INET. (They don’t transcribe the speeches, and I am not going back through the whole video.) The argument that greater tax rates reduce work applies better at the bottom of the scale, where poor people can get caught in brackets that reduce their transfers if they have more income, and so they would be objectively worse off meeting basic needs.

K.Williams – I’ll say it again – while one had to struggle against the plutocracy in 1965 and at all times – struggle is the natural condition of democracy – you are wrong about the share of income that goes to the top 1 percent. This is what distinguishes the plutocrats of 1965 from those of 2011. Emmanuel Saez, in Income and Wealth Concentration in a Historical and International Perspective, summarizes the evidence over the twentieth century and over a number of OECD countries. As he puts it, since 1980, “top wage earners have replaced top capital income earners at the top of the income distribution in English speaking countries.” Why, you might ask, did millionaires not rally against the income tax in the 50s and 60s? Because the income tax did not hit their major source of wealth. The shift to remarkable upper management gains, in tandem with the compensation of capital shifters – investment bankers, hedgefund managers, etc. – explains the shift in the arguments about taxes.

We can battle both fronts, of course, of plutocratic power. But the perversity of the wage income disparity is that it directly effects re-distribution done in the private sphere, by private enterprises, who are squeezed by the enormous compensation packages of upper administration – who, moreover, take control of the corporation’s larger policies from boards composed essentially of scroungers – and this has the effect of stressing out all who are not part of the upper tier. Thus, a good strategy would be to make this disparity unprofitable to the company. It would be easy to achieve. For instance, corporate taxes could be tied to disparities between the income of the upper management and those of the workers, with larger disparities being socked hard. Easy as pie.

The whole point of New Deal Liberalism is that there is no point of rest, no point at which the plutocracy can be uncontested, because they will not rest. The forgetting of this New Deal wisdom leads to the disaster of milktoast center right policies, like the ACA, promoted as all we can get. We can get a lot more. But only if we know that it is always going to be a struggle, and that consensus and compromise are only momentary tactics in that struggle.

That still doesn’t mean that having the state forcibly take 90% of the marginal rewards of someone’s labor is not offensive.

There is a bit of a distinction between “marginal” and “overall” though. No one has the state take more than 50% of their overall income. If I pay, say, 35% tax, does that mean that from 3 pm onwards every working day the state is taking everything I earn? Should I be offended?

Lee, I don’t think moving to other countries is a very big threat. After all, if America gets clear of millionaires, then I guess we can vote out those pesky IP rights upon which much of their wealth depends, and cease loaning them 6-9 trillion when they feel woozy, as in 2007-2010. I notice that no other country in the world decided to tack pity on poor Mr. Moneybags and make sure that he has the odd 30 billion loan at 0.01 percent to rely on when times are tough.
Without the U.S., there is no system that millionaires could rely on, period. Hence, their inclination to stay and fight instead of Galt off. The U.S. government is an enormous source of revenue for the world’s wealthy – it is their ace, their trump card. Without it, bye bye mr. moneybags.

“I assume that’s why K. Williams chose to misrepresent that year as if it was a baseline.”

No, I chose 1965 because I think pretty much everyone would agree that it was the pinnacle of postwar economic liberalism and shared prosperity — you had the creation of Medicare and the expansion of AFDC. Wage growth was strong. Much of the economy was more tightly regulated. And yet at the same time you had the top 1% of wealthholders controlling the same percentage of wealth as they did in 2007. If the super-rich’s domination of the political realm explains our current economic problems — and the migration of the US economy away from a more regulated, quasi-social-democratic model — then why were the super-rich of 1965, who controlled just as much of the nation’s wealth as the super-rich of 2007 did, willing to expand the welfare state and allow workers’ wages to grow at a fast pace?

That’s an….enlightening libertarian….debate technique.

Fixed that for you, Marc.

Marc @200 that’s precisely the honesty and quality of debate I’ve come to expect from K. Williams.

Henri, their being forced to pay because they wanted to pay at one point to receive something in return. Capitalism is not slavery, hence John Brown being viewed heroically by Marx for expanding capital. As for the police, every time they beat a mugger or capture a rapist, the victims of such criminals are helped. The average burglary victim is poor and loses many weeks of labor. The rich man can hire a guard if need be, ala the middle ages. I’m wondering if you think of getting mugged as simply giving to a member of the poor their due, rather then an imposition upon ones rights.

K. Williams: “It’s absurd to dismiss these things as trivial when they take up a massive amount of psychic and emotional space in people’s lives.”

But the question is in regard to the various sorts of monetization of same. Athletes and J.K. Rowling are easy cases. Take the case of the psychic and emotional ease afforded by U.S. Social Security and Medicare. It is monetized through taxation to provide the transfers. Take the case that medical costs are on an upward trajectory so that Medicare is predicted to grow as a percentage of GDP. Who is going to pay for this? Speak to the central problem adumbrated in Quiggin’s top post.

Capitalism is not slavery, but neither is 90% marginal tax bracket.

Henri, their being forced to pay because they wanted to pay at one point to receive something in return.

Not sure what you mean. You work, you produce cheese, you exchange some of it for some wine, produced by someone else. You go see a jester or athlete, drop a coin into the hat. How does ‘earning’ millions fit in here? It just can’t happen without force.

“It is monetized through taxation to provide the transfers. Take the case that medical costs are on an upward trajectory so that Medicare is predicted to grow as a percentage of GDP. Who is going to pay for this? Speak to the central problem adumbrated in Quiggin’s top post.”

I’m happy to say that high-income earners should be taxed more heavily than they are today — I think Clinton-era rates for the top 2% make sense, and I think we should add additional rates for those at the very top: it makes no sense to have someone making $300K and someone making $10 million to pay the same marginal rate. So if we’re trying to figure out how to pay for Social Security and Medicare, I’d start there — but any real solution obviously requires us to get control of health-care costs. In terms of the broader picture, though, 90% marginal rates are bad ideas both on the merits and politically, and they are not — contra JQ — part of what made America’s economy great. Nor are the super-rich the reason why median income growth in the US has slowed so much. If you want to solve the central problem in JQ’s post, advocating 90% marginal rates or having Bernie Sanders mount a primary campaign isn’t going to move the Overton Window or make the problem any better — it’s far more likely to make things worse.

Lee, I disagree with this: “It is important to understand that ACA sets up the framework for a public preference for universal coverage under a single-payer, and this final outcome is virtually irrevocable…”

I totally disagree with the virtually irrevocable, which is an empirical and political question. One notices that the politics of Great Society middle class entitlement programs like Medicare went the other way than ACA, one empirical point against your point. But I would argue against the rest of the sentence too. I’d like to see how you put that argument. To my mind, inefficient government-private enterprises tend the other way – to future privitization. This is a massively inefficient private enterprise with a mandate requirement that alienates the constituency needed to actually push across the single payer, and it has had the malign affect of identifying single payer plans – say, with Krugman, simply extending Medicare – with an extremely unpopular program. Its effects have been to make Medicare more vulnerable, as Obama has included Medicare within the set of trillion dollar cuts. At one time I was hoping that this was the strategy behind ACA. Now I think, no. The strategy was to use it as a way of pulling the rug out from under Medicare. Obama basically agrees with his Bowles-Simpson commision.

The economics pits the classical analysis of (economic) rent against the neoclassical marginal revolution. It’s a 19th century grudge match of ideas!

The moral analysis of economics is very, very persuasive to lots of people. I see people arguing against “economic rent” as a moral article, an evil which right-minded people are against. “Rent-seeking” is a simple pejorative, and a smaller, weaker government is thought to disable it. The power of marginal incentives is endorsed strongly by conservative economists, from Mankiw to Laffer. The market economy is “natural” and, more than that, naturally ideal: tending, in the absence of government interventions, which can only muck things up, to some perfect optimum.

I don’t doubt Steve Jobs’ talents. If there were ever evidence for the potential of a CEO to generate an enormous marginal product, it is there, in Jobs’ career. And, I wouldn’t deprecate that talent as mere salesmanship. Jobs, to my mind, does what a CEO in a large organization should do: he exercises a kind of moral leadership and — for lack of a better term — good taste.

What I do doubt is that the full marginal product has to be delivered to him, to get him to do his thing. Or, that there’s any moral imperative to deliver him, his full marginal product.

Philosopher Nozick argues that Wilt Chamberlain is morally entitled to the marginal product of his extraordinary talent, with little practical acknowledgement that that marginal product runs into many millions of dollars, not because of Wilt’s physical prowess or dedication, but because of the technology and organization behind television and professional basketball as an exhibition sport, played in huge arenas and before television cameras able to reach audiences of tens of millions, which advertisers are willing to pay for.

Although I think the moral has an important place in the functioning of the political economy — Steve Jobs’ “good taste” is a important, apparently scarce, driver of achievement — the moral analysis of the natural economy, just seems to me to be so much nonsense, something akin to astrology. Only, where astrology projects moral and spiritual meanings onto an indifferent natural universe, in order to help people organize their personal experience, the moral theory of economics denies the entirely artifactual nature of the actual economy, in order to pretend that the economy is a “natural” phenomenon speaking spiritual truth: a natural world, like that of the Greeks, where the constellations in the sky memorialized mythic heroes, or that of the medieval Christians, for whom an earth-centered universe, symbolically reflected man’s moral place in a divinely ordered hierarchy. For the libertarian-conservative devotees, “markets” speak like the Delphic oracle, and the billions accumulated by our Galtian overlords are a proof of saving grace, more certain than any offered for the Calvinist elect.

Those of us disenchanted with our 21st century economy have to speak for disenchantment.

J.K. Rowling made millions using copyright laws. Enforced by people with guns.

What I do doubt is that the full marginal product has to be delivered to him, to get him to do his thing. Or, that there’s any moral imperative to deliver him, his full marginal product.

There’s nothing new under the Sun. And a lot of times that’s true for what by any other measure would be called recent history. Once upon a time in a faraway place called Usenet, there used to an argument made that unequal societies were to be preferred if the havenots were, in the end, better off than their counterparts in Socialist Hell.

To no one’s great surprise (though there are a few who profess it – and who apparently think if they stick their head behind the couch the rest of their body must be safely hidden), it turns out that no, highly unequal societies just don’t have the growth that would justify that sunny premise. In fact (imho) the evidence seems to indicate that more equal societies have higher rates of growth in the end, even if the rich aren’t so very rich compared to their fellow citizens.

That last is particularly amusing – it seems we’ve come full circle over the last twenty-odd years and a lot of those libertarian ‘droids now seem to want to argue that highly unequal societies are better because there are more rich people! Probably the same people who once argued against global warming, but in a sop to reality now announce that while it may be real, there’s no reason to believe that it’s caused by human activity. Or if it is, that it’s not necessarily a bad thing, or if it is a bad thing, the Socialist alternatives of dealing with it are worse ;-)

Economics is supply AND demand. JK Rowling’s Harry Potter may have creating many millions of dollars worth of market value, mirroring the satisfaction of her readers, but it did not require millions of dollars to get her to write it. Most of what she “earned” is an economic rent. And, that her efforts were so highly valued has more to do with the technology and organization of printing, movies, advertising, etc., than with the actual writing. In the larger scheme of things, it is nearly as accidental as winning the lottery.

Lots of worthwhile things don’t pay as well — or pay at all — in large part, because we haven’t managed to organize the social cooperation to make them pay.

The economy is something we do, an entirely artifactual and incomplete scheme of social cooperation, exploiting deep specialization of labor and capital investment (thru time) embodying technology. There will be some big winners: factors of production, which draw large, perhaps unexpected, incomes. And, some big losers: investments, which don’t pay off (some of which are actually worthwhile, even after the fact — they just don’t pay off)

Using the winnings to pay off the losses — what’s so hard to understand about that? Using the winnings from the things our imperfect attempts to organize have made very profitable, to pay for the worthwhile things we haven’t found ways to organize as profitable — again, what’s so hard to understand?

If you offer tens of millions to people, who can assume the most powerful positions in the economy, how can there not be an extreme risk of perverse strategic response? Of attracting sociopaths? Of short-term risk-taking by people, who only need a couple of paydays to become independently wealthy? (assuming, of course, that they don’t destroy the universe while their sojurn as Master of same) Where millions and billions ride on the score of a game, why don’t you expect someone to try to rig the score-keeping?

Obamacare: If ACA sets-up the state exchanges so that consumers can price-shop easily for medical plans, with non-profits listed alongside profit-makers on the same webpage, then the game will be shortly over for the profit-makers.

And a pony!

“‘Obamacare: If ACA sets-up the state exchanges so that consumers can price-shop easily for medical plans, with non-profits listed alongside profit-makers on the same webpage, then the game will be shortly over for the profit-makers.’
And a pony!”

These threads are a remarkable case study in the self-defeating nihilism of today’s left. Look at this: Steve Labonne thinks that something as simple as setting up the state exchanges to make price comparisons easy is so far outside the realm of possibility that it has to be compared to wanting a pony. Yet the Massachusetts system works precisely this way, and there’s no reason to think that other states will set up the exchanges any differently — certainly the mandate from the administration will be designed to facilitate comparison-shopping. Yet even this — a simple but useful improvement — is deemed either unrealistic or, alternatively, irrelevant. Ridiculous.

Look at this: Steve Labonne thinks that something as simple as setting up the state exchanges to make price comparisons easy is so far outside the realm of possibility that it has to be compared to wanting a pony

Look at this: K. Williams doesn’t know how to read. No, that’s not even close to the whole of the outcome that Lee was predicting and which prediction I was mocking. (Is the “game over for the profit-makers” in Massachusetts? Not hardly.) This is typical of your style of “argumentation”, though. Take your dishonest horse manure to some place like Redstate that’s more on your intellectual level.

“(Is the “game over for the profit-makers” in Massachusetts? Not hardly.)”

Really, Steve? Which big for-profit health insurance companies are doing business on the Massachusetts exchange? The answer is there are none — the health-insurance market in Massachusetts is completely dominated by nonprofits.

And a pony!

Which big for-profit health insurance companies are doing business on the Massachusetts exchange?

CeltiCare for one. (The “nonprofit” status of entities like Blue Cross / Blue Shield is essentially fictitious and the fiction has been given up entirely in many parts of the country.) And for-profits continue to flourish in the employer-provided sector of the Massachusetts market outside the exchange. (Also don’t forget that profit-makers continue to function in care provision as well as insurance.) And costs continue to be the highest in the country (they know this and are flailing to try to find effective cost-control measures- good luck with that). This is not a sustainable model nor is it evolving toward one. And why YOU would want to defend it is beyond me. If you were right about the virtues of the market in health care (you aren’t), this plan would prevent them from operating, and you ought to regard it as the worst of both worlds.

Medicare for all wasn’t politically possible, so it is hard to see how ACA can be a diversion from an impossibility. Even when the Dems held a Senate supermajority, they had Blue Dogs who wouldn’t vote even for lowering the Medicare age to 55. Ben Nelson, etc. That pretty much ends it. Those knuckleheads think that Medicare is out of control.

So what is your strategy? Don’t do ACA, wait until the medical system gets bad enough so people cry “uncle!” and go for universal Medicare?

Medicare for all wasn’t politically possible, so it is hard to see how ACA can be a diversion from an impossibility. Even when the Dems held a Senate supermajority, they had Blue Dogs who wouldn’t vote even for lowering the Medicare age to 55. Ben Nelson, etc. That pretty much ends it.

Do you think repeating this for the 1,001 first time is going to not only magically make it so, but make us all forget the first 1,000 times this sort of “analysis” was offered up in lieu of evidence?

Why don’t you just stick with the truth instead? Why don’t you simply note that Obama didn’t twist any arms on ACA (and in fact, actively lied during that whole sorry affair), so we’ll never know whether or not certain provisions would have passed?

“and my opinion on the politically possible is as good as yours”

Why would you think this? Your politics are far, far to the left of those American voters, and American politicians, who matter most in terms of passing legislation — the Olympia Snowes and Bill Nelsons of the world, and their voter equivalents. Why would you, or those of us reading you, think you have any sense at all of what it would take to get Olympia Snowe or Joe Lieberman or Bill Nelson, or American independent voters, to go along with a single-payer system? Nothing you’ve written before, or in this thread, suggests to me that you really understand what makes American middle-class voters tick. Your judgment about what works and what doesn’t in American politics is not as good as Lee Arnold’s. It’s much, much worse.

K. Williams

Steve LaBonne @165: Every time you pay one of the corporate rents (ridiculous bank fees, outrageous cell phone contracts being two examples)[…]you’re witnessing some of that shifting in action.

You’re arguing here that an increase in the price of goods and services has shifted income and wealth from the middle class to higher earners, and that this increase accounts for increasing income and wealth disparity. But this seems very likely to be false. It’s certainly not a fact made obvious by annoyance at bank fees.

Another major piece of it is hidden in the huge semi-submerged network of tax giveaways to corporations, which has helped to impoverish our public life and infrastructure.

How does this explain income/wealth disparity?

A third, recently prominent, is making whole the perpetrators of financial fraud from public monies while letting the victims twist in the wind.

I don’t buy the premise, but even if I did, that’s WAY too recent to account for the phenomenon in question.

… is visible right now in front of your eyes, as corporate profits have recovered handsomely from recession leves while employment and wages stagnate.

Yes, driven by profits made overseas. See e.g. Wall St. Journal

Marc @166: Andrew: what about the historical record of what actually happened with high marginal tax rates?

The decline in marginal tax rates coincided with a lot of things though, no? The expansion of global trade, declining transport costs, and the digital revolution all come to mind.
Because people who are motivated by money – and are less motivated by 90% less money – are sociopaths?

Henri @168: We all are motivated by money, to an extent, but someone who already has a lot and still wants more and more, most likely is a sociopath; is there other explanation?

Yes, it’s called hedonic adaptation. It could also be personal ambition, anxiety, habit, and a variety of other reasons. It’s any one of the reasons why someone who makes 60k/year rather than 30k still wants to make 200k/year, or better still 200m/year.

It has absolutely nothing to do with being a sociopath.

Do you really want a person like that to make important business and financial decisions that may affect thousands or even millions of people?

It’s also okay with me if that person would prefer his personal computer to be twice as fast as his current one, or his view to be twice as nice, or his life twice as long, or his children twice as secure, or his seats to the game twice as comfortable, and so on.

In other words, I’m okay with human beings making these decisions.

Steve LaBonne #238: “Here’s an incremental step in the right direction that WOULD have been politically possible- allow buyin to Medicare from age 55 or even 50.”

No, Blue Dog Democrats explicitly rejected that idea, too. Without 60 votes, you are going nowhere.

ScentOfViolets: “Why don’t you just stick with the truth instead? Why don’t you simply note that Obama didn’t twist any arms on ACA”

This is why the left is doomed. Name any situation where any President has successfully twisted any Senate arms, particularly at the start of an Administration.

Chuckle. Yet another demonstration of why you’re so disreputable: what makes you think I’m a “leftist”? Particularly when wanting a public option wasn’t a “leftist” desire but rather a moderate, mainstream one. Name calling is no substitute for a rational argument for your case, son. Grow up.

The other bit of left-is-rightism is you promoting a dead-end theory, yet you want others to prove you wrong, rather than you actually, you know, making some sort of effort to do some work defending your thesis. Did you think I wouldn’t notice this? Are you really trying to be that insulting? You’re contemptible.

It’s obvious why you’re doing this of course; people who play the make-me-say-I’m-wrong-or-I-win are very aware that all they’re pushing is hot air. Moreover, they have absolutely zero scruples; just so long as they can tote up a win for their side. Admitting they were wrong, or that they have no evidence for their silly beliefs that they want others to live by?

That’s strictly for losers :-(

Oh I missed this part. It is you in lieu of evidence. Both Nelson and Lieberman made public statements that the public option was dead.

Chuckle. Look at the boy carry on. Once his talking points are, well, pointed out, all he can do is repeat them. Not somebody who’s very fast on his feet.

Better arguments, please. Something that doesn’t devolve yet again (in Lee’s case) to “Prove that what I said was wrong . . . to my satisfaction”. Yeah, like I’m really going to bother with someone who claims that arm-twisting a Senator is impossible, but it’s perfectly plausible for the lowly House of Representatives. And if I cite any of a number of articles that use just that phrase, how likely am I to get “that’s not really arm-twisting; you’ll have to come up with something else to prove it to me.”

Like I said, contemptible.

Andrew F @245: “. . . an increase in the price of goods and services has shifted income and wealth from the middle class to higher earners, and that this increase accounts for increasing income and wealth disparity. But this seems very likely to be false. . . .”

Do you think increasing income and wealth disparity is something, which is not going to show up in and/or be traceable back to changes in relative prices?

That seems an odd thesis, for a market economy.

ScentOfViolets #251: ” Yeah, like I’m really going to bother with someone who claims that arm-twisting a Senator is impossible,”

Well then logically, you shouldn’t have written even that much. You may as well state your clever plan for dealing with Ben Nelson.

Well then logically, you shouldn’t have written even that much. You may as well state your clever plan for dealing with Ben Nelson.

Sigh. The point, Lee, since it went clean over your head is that you’re the one making this claim, so it’s up to you to provide evidence for it. Not on me to “prove you wrong.”

Do you really not get it, or is this some of that oh-so-convenient thickheadedness that’s supposed to shield you from the folly of your words?

So, ante up: where’s your proof?

“Go peddle your rotting tripe elsewhere, troll. A majority of Americans favored the public option. Multiple polls confirm this, as googling “majority favors the public option” confirms.”

You’re equating the public option with turning the American health-care system into Medicare for all? They’re completely different things, which have radically different consequences for the economy, for people’s ability to hold onto their current health insurance, etc. Extrapolating from one to the other is absurd.

More important, the fact that a majority of Americans supported the public option (or Medicare buy-in, which I assume a majority of people supported as well) tells us nothing about what Olympia Snowe or Bill Nelson would have supported, and without the support of at least one of them (or of Lieberman), there was no chance of making health-care reform of any sort law. I assume you realize this, but the hurdle you have to get over to make a bill law these days is not the hurdle of majority support — you have to get 60 votes in the Senate, which means you have to win the support of the least left-wing Democrats (or the most left-wing Republicans, such as they are) in order to pass legislation. And I will say it again, neither roger nor you has any clue what those people think, or how to appeal to them. Indeed, your entire approach seems designed to wholly and utterly alienate them, which effectively means it’s designed to ensure that liberals end up unable to do anything at all.

What counts as data in politics for you, ScentofViolets? Votes? Opinion polls?

Dec. 2009 — 64% of Nebraskans opposed healthcare reform, including 53% strongly opposed. They didn’t even like his deal to get a Medicaid expansion in return. This was well-known at the time:
http://www.cbsnews.com/8301-503544_162-12006-503544.html

And now? Even after rejecting the public option, Nelson is probably finished in 2012:
http://publicpolicypolling.blogspot.com/2011/02/nelson-trails-bruning-stenberg.html

No one has the state take more than 50% of their overall income.

I’m guessing you don’t live in the State of New York. NY residents regularly get less than 50% of their income on their actual paycheque.

What I do doubt is that the full marginal product has to be delivered to him, to get him to do his thing. Or, that there’s any moral imperative to deliver him, his full marginal product.

This is so bizarre and illogical I don’t even know whatever. If you want the most allocatively efficient outcome, marginal adjustments have to be free to be made in full. Otherwise you don’t actually have allocative efficiency.

Either you get the kind of allocative results you want that you get from marginalism, or you don’t use marginalism and you don’t get those results. But you can’t possibly get the kind of economics results you want under marginalist conditions if you don’t actually allow marginal adjustments to operate. That’s impossible by definition. You know, marginalist economics produces marginalist results (and these results, i.e. really cool iPhones and other Apple products, seem to be what you want), and non-marginalist frameworks will produce non-marginalist results. Pick one and stick with it. Even Sweden, the non plus ultra of social democratic states, allows the founder of IKEA to get his full marginal product.

>> What I do doubt is that the full marginal product has to
>> be delivered to him, to get him to do his thing. Or, that
>> there’s any moral imperative to deliver him, his full
>>marginal product.

> This is so bizarre and illogical I don’t even know whatever.
> If you want the most allocatively efficient outcome, marginal
> adjustments have to be free to be made in full. Otherwise you
> don’t actually have allocative efficiency.

I worked for a number of years for an industrial firm that has been in business for 120 years. For 105 of those years the President was generally paid around $600,000 [all numbers in today’s dollars], the average engineer around $60,000, and a union guy could make anywhere from $40-$80,000 depending on his job skills and how much overtime he worked.

For the last 15 years the “CEO” of that company (where I no longer work) is being paid $22 million plus “bonus”, and the BoD “honorarium” has risen from $10,000/meeting to $100,000/meeting plus additional bennies. The company is doing more or less as well/poorly as it had been for the 105 years before that and has made no significant advance or retreat in its market. And that I think is pretty typical of the results across the US economy wherever the Gordon Gekko Plan has been implemented betting on the come: there is absolutely no evidence that these massive salaries/rake-offs for those at the very top provide any significant incentive whatsoever.

Cranky

Andrew F, marginal productivity is a reasonably insightful idea, and it can explain the return on a college education, for example. But it can’t explain why the pay to the top 0.1% has grown so quickly, unless you are prepared to attribute superpowers to CEOs and hedge fund managers. If we were talking about Magneto, who worked all day bending bridges into shape with the power of his mind, then marginal productivity could explain it, but invoking it for managers is a leap of faith. I’m sure if marginal productivity theory had been invented in 1788, we’d be hearing all about the extraordinary marginal productivity of the King of France.

This is why Bruce Wilder is scoffing at you, not because he’s perplexed at the idea that CPAs make more money than line workers at the plant.

Walt, I agree that copyright is state coercion. But its also an incentive to create by granting a temporary rent. But now you are suggesting rather then eliminate the rent and its deadweight losses we tax the rent for the state. Copyright is clearly an incentive to produce, even when its costs exceed its benefits. But with 1 year copyright Rowling would have still made a lot of money. Sure, marginal productivity is an occasionally useful idea. It doesn’t work in the CEO case because the board is spending other people’s money which is very easy to spend. What else spends other people’s money?

Steve LaBonne #252: “The political environment would have been very different if Obama had pushed such a plan from the start. And that’s all I’ll say on this now way-off-topic divagation.”

It is on topic. John Quiggin’s post asks if a primary challenge to Obama might start a mass movement to push better ideals, starting with taxing the rich more. That is worth thinking about. The immediate problem is you cannot sell it to the majority of Nebraskans, and Obama’s obvious political constraints in passing ACA are a case in point.

The basic problem is that lots of people (not merely the majority of Nebraskans) believe in Reaganomics. They religiously despise gov’t expansion. You see this in dozens of ways. This won’t change because a crusader takes a firebrand to Washington, against them. You may get the politician elected, but he still won’t be able to get the legislation passed in some fantasy of “arm-twisting”.

Indeed the other usual liberal Democratic response has been to “get rid of the Senate filibuster”. (We heard this during the ACA debate.) I wonder why the filibuster is an issue, when arm-twisting can be so effective anyway. But you are likely to be in the minority sometimes, and wish you had the filibuster.

What we really need is a massive rhetorical effort to change more minds. We need a new economics that supports higher taxes, proving things such as (1) government spending on non-market necessities cannot hurt the market economy and (2) tax cuts aren’t the only thing that causes economic growth.  Because as things stand now, you haven’t convinced the Nebraskans and many others who will stop your legislation.

I don’t see how getting rid of ACA in the context of creating the movement Quiggin wants so see is either wise or efficient. You need to get more of the population at large to understand the basic economics of social institutions. ACA can be a tool.

I don’t see how leaders are the real problem. Obama sees an political opportunity to take a good strong position in this debt ceiling debate, and so he does. The reaction from the right points again at the same problem. What I didn’t expect is the rather tepid response from some Democrats that somehow Obama isn’t their man anyhow. That is a revealing and disappointing misconstruction.

Get rid of the pernicious nonsense strewn throughout the pop writings of Hayek and Milton Friedman. That is what is ruining the country.

272: If I did, sorry. I thought you and Myles were making roughly the same argument.

“Sigh. The point, Lee, since it went clean over your head is that you’re the one making this claim, so it’s up to you to provide evidence for it. Not on me to “prove you wrong.”

No, Scent, you made the claim. You wrote “Why don’t you simply note that Obama didn’t twist any arms on ACA (and in fact, actively lied during that whole sorry affair), so we’ll never know whether or not certain provisions would have passed?”

That clearly implies that had Obama twisted arms on ACA, “certain provisions” would have passed.

Chuckle. No troll, it means that we don’t know if matters would have been different if Obama had twisted a few arms. What are you, a high school drop-out?

That’s the difference between people like you and Lee, and people like me: in the absence of any sort of verification of the theory, when it comes down to facts or theory, I prefer facts. I simply observe Obama’s behaviour and report it, namely he did nothing to advance the public option and in fact, he actively lied about his support after a deal had already been done. Them’s just the facts. Lee, otoh, has a theory about why this is; he claims it’s because arm-twisting would have done no good, and in fact the President is powerless – Powerless!, I tell you – to effect his will in the Senate. That’s what’s known as a theory, troll. And that’s something Lee has to prove.

Of course, the fact that he’s made no attempt to do so, in fact has expended a good deal of energy doing anything but proving this little theory of his, tells you just how much he really believes it himself. Once again, it’s down to “If you can’t make me say I’m wrong I win” with this child.

272: If I did, sorry. I thought you and Myles were making roughly the same argument.

Actually, he is. He’s also the guy who’s been making arguments from incredulity. I’ve got to say, the amount of sheer butt-headed dishonesty has gone way, way up over the last few days (though of course, it appears to be almost entirely confined to the usual suspects). This is, to say the least, exasperating in the extreme.

ScentofViolets: “Sigh. Son, what has that got to do with your claim that ‘arm twisting would have been useless’?”

Not useless, less than useless.

“btw, if I sound exasperated, it’s because I’ve finally (finally!) finished grading several stacks of exams. Exams in which it was made very clear to me that even after pounding on the basic ideas week after week for eight weeks, most of my students still don’t have the vaguest notion of what a valid proof is, let alone how to apply some very basic proof techniques. And yet, these are our supposedly best and brightest engineering and science types who in other circumstances wouldn’t hesitate to tell you they understand how to prove things just fine, thank you very much.”

I just wanted to add that it’s great to see that you’re just as arrogant, self-satisfied, and obnoxious in the classroom as you are online. What an absolutely wonderful teacher you must be. I can’t tell you how happy I am that my tax dollars are helping to pay the salary of someone like you.

@280—Let’s see. A new (1) President gets (2) Senators of his own party to destroy their re-election chances, near the beginning of a session in which many other pieces of legislation will be coming-up for consideration. Yes—I see it now! The White House and the Senate both have PLENTY of incentive to do that!

Can you be a bigger dunce?

What!?!?!? Still no evidence? And the kid still refuses to sit down and shut up?

Can I call em’ or can I call em :-(

I just wanted to add that it’s great to see that you’re just as arrogant, self-satisfied, and obnoxious in the classroom as you are online. What an absolutely wonderful teacher you must be. I can’t tell you how happy I am that my tax dollars are helping to pay the salary of someone like you.

“Prove either by contradiction or contraposition that if x^4-x^3+x^2-2x+7 is even, then x must be odd.” An extraordinarily easy problem, yet three students answered along the lines of “If I put 3 in for x, the answer is 64, which is even, so the statement must be true.” So. The statement was not proven, let alone by proving the contrapositive or by contradiction.

Yes, I’m aware that you think being exasperated with this answer after eight weeks of instruction is the mark of arrogance, troll. Now why don’t you keep your promise and jet on out of here?

“Further, John-Boy, the burden of proof falling more heavily on one party than another is commonplace, in fact, pretty much given most of the time.”

Yes, this is right. And in this case, the burden of proof falls on you. Saying that we don’t know what would have happened if Obama had tried to arm-twist Bill Nelson is like saying we don’t what would have happened if Obama had tried to fly by leaping off the White House roof. It’s true, we don’t know that he would have splattered on the ground. But that’s certainly the most likely outcome, and so if you’re saying he should have tried to fly, the burden of proof is on you to demonstrate that something other than the most likely outcome would have occurred. Similarly, there is no historical, empirical, or theoretical evidence to suggest that a new president can successfully armtwist senators into doing things that an overwhelming majority of their constituents oppose. The evidence does not exist, so no reasonable person would believe that arm-twisting Bill Nelson would have been effective. If you want to argue otherwise, the burden is on you to demonstrate why there’s any reason to think that it would have worked. Otherwise, you’re essentially saying, “Obama didn’t try to fly by leaping off the White House roof, so we don’t know that it wouldn’t have worked.”

John #284: “I havent been following this thread closely since the early 100s”

You haven’t missed anything, and I suggest you save your sanity by ceasing forthwith. Someone is trying to dig themselves out of a sad and useless hole. ScentofViolets’ entire position so far is encapsulated in #239: “Why don’t you simply note that Obama didn’t twist any arms on ACA (and in fact, actively lied during that whole sorry affair), so we’ll never know whether or not certain provisions would have passed?”

If he were asked to provide “evidence, cites, statistics” for this gibberish, he would be compelled to cite changing statements by politicians in newspapers, plus 1,001 whingings on blogs. He is not in possession of any real evidence.

The facts are, (1) the “public option” did not have the supermajority, due to the obvious reason that the general opinion poll number on the “public option” does NOT translate to every state (evidence presented at #261)– a remarkably faulty logical inference; and indeed (2) ACA without the public option barely passed anyway. Another fact is that (3) ScentofViolets cannot even prove that arms weren’t twisted, if it happens that the effort failed. Because we wouldn’t necessarily see the evidence of that. His predisposition appears to be that Obama is a bad and faulted man, and everything follows from that.

> Einstein is a more reputable source than cranky observer.

As a general rule I agree with that statement. I don’t think, however, that Professor Einstein spent much time working in engineering or management at a variety of US manufacturing firms, nor did he expend much effort analyzing them. Then again Richard Feynman did, so perhaps I am wrong on that too!

Cranky

Cranky, have you noticed a certain – shall we say – diminution of competence in the new hires, grads fresh out of college? It seems to be that the quality of student I’ve been getting – even the engineers and scientists – has been slipping. Not too long ago, I had to explain to third semester (third semester!) calc students how get common denominators composed of polynomials so they could do the integration by partial decomposition of fractions trick. Basic trig and trig identities seem to have fallen by the wayside as well, so that sometimes I’ll have to waste half a class period re-deriving double-angle formulas.

Kids these days . . .

Ah. Nested blockquotes fail :-( Welll, you can all see who said what upthread.

Oh, and Eddie? Once again – and I hate to have to explain this yet again to people who have apparently never took any sort of science class – no I’m not making any claims, so I don’t have any burden of proof. I’m simply making an observation.

Andrew, do you have something to say to me? C’mon, you can do it :-)

I haven’t been following this thread, but with the Nebraska poll: sure, they didn’t like the final version of the bill, and didn’t want Nelson to vote for it (unless I’m missing something here). But that’s kinda the point, isn’t it? They did like expansion of Medicaid, so they would probably like the “public option” and/or Medicare buy-in too, just like the rest of the population. So, why, in your opinion, did Nelson reject those things?

I like this chart of my beliefs. It looks good!
Roger’s beliefs:

-single-payer or bust; better to fail with single-payer than pass ACA
– 90% tax rates on highest earners
-Fed should loan $9 trillion to homeowners at 0.01%

Now, context is necessary: a failure has to be designed so that it ultimately becomes a success, so we can’t just have single payer or bust – Obama, jettisoning his idiot bi-partisan blather, would actually be in campaign mode from the beginning, tying medical care to the enormous loss of assets suffered by the middle class. Polls, which can be quoted back and forth, are only diagnostic tools – as is evident from any look at polls on an issue, depending on who is pressing in the discourse, the poll goes one way or another. However, Obama did not want to do this because Obama had no intention of doing anything more than nudging the current system of healthcare via Romney. So I am hypothesizing a different Obama, a liberal O., here.
Similarly, 90 percent marginal rates would be excellent, but I’d settle for Robert Reich’s 70 percent. However, what is missing here is that I think there would be significant decreases in the rates for the bottom 80 percent incomes – so that by the time you get to the median family income bracket, the rate would be around 5 percent. One has to come with the other.
And finally, it is important to note that 9 trillion dollars was loaned out by the fed at 0.1 percent interest rates. So the question is: should the Fed have loaned it to hedgefunds, Goldman Sachs, and Citi, or should it have simply loaned that amount of money to middle class Americans. I think middle class Americans (not a group I am in love with, by any means), would have preferred that the money not be loaned out at all, but that if it were, that it be loaned out to them. I don’t know, something to do with self-interest.

Altogether, these three ‘beliefs’ – about what policies would be right- do help us chart the difference between a liberal and a neo-liberal position. Neo-liberals are actually rather proud of the fact that they ‘avoided disaster’ by letting 9 trillion be loaned out to the rich. They actually think this was great policy. Just as they actually think ACA is great policy. And they love the shared sacrifice motif of raising taxes on the middle class and paring their entitlements. Reminiscent of Bush’s followers insisting that we were winning in Iraq, they simply ignore the absolute disaster of 2010, when a country that voted left and got lukewarm right then voted right. Or didn’t vote – as Nate Silver noted, the dems and liberals didn’t show up at the polls. You get what you work for – O. worked to discourage liberals and he succeeded. And he looks like he might succeed again. Wow, there’s political strategy for ya!

The neoliberals I know (and that I count myself among) seem to make policy always with an eye as to what’s politically possible…

Indeed they do. The problem is that their conception of what’s politically possible, is a) too convenient (for them) by half, and b) mistakes the status quo for a Law of Nature. Despite what a lot of people now pretend to think, capitalism and the government of the United States are neither of them eternal archetypes, they’re just the latest in a series of creaky temporal contraptions intended to better the human condition. If they fail at that, they can be dismantled, root and branch, in very little more time than it takes to tell about it. That would be very inconvenient for a lot of us, no doubt, but it ought to be kept in mind by those who’d like to limit our notion of what’s possible to servicing the power relationships we’ve already become accustomed to.

Indeed they do. The problem is that their conception of what’s politically possible, is a) too convenient (for them) by half, and b) mistakes the status quo for a Law of Nature.

This is the crux of the matter. They want to be “pragmatic” and put their energies towards what’s “politically possible.” Fine. I agree with that. I even like and admire that sort of thinking. But here’s the deal with these tossers: they want to claim sole power to arbitrate was is politically possible and what is not. That’s some privilege they’re arrogating to themselves, in fact, nothing more than a weasel-worded attempt to seize power. Notice, btw, the arrogance inherent in the claim (and doubtless how they justify their power-grab to themselves) that they – and only they – know what is “politically possible”.

That would be very inconvenient for a lot of us, no doubt, but it ought to be kept in mind by those who’d like to limit our notion of what’s possible to servicing the power relationships we’ve already become accustomed to.

Well, that’s the tell, innit? Funny how what’s “politically possible” just happens to benefit them – and at the expense of everyone else at that.

The other tell are the weasel words about what’s “politically possible”. Again, ain’t it funny that in all this oh so serious and sober discussion, no names are named, no specific deeds or actions ever come up? It’s never Senators X, Y, and Z are blocking this specific legislation for that specific reason, and the President isn’t targeting them because they’re from a key swing state in an election year. Oh no, it’s always some sort of vague combination of buzzwords, words about “realities” or “facts on the ground” (never named) or “political calculus” that somehow never manages to indict anyone – hey, it’s the whole process that’s at fault, so whaddaya going to do?

Feh. That’s not “political reality”; that’s an inept bit of propaganda, a stinking satchel of crap with the moronic label “political reality” boldly and crudely afixed to the front for all to see. Just so that all of us rubes can tell that it really is “political reality”, you see :-( Yes. It really is just that much of a political cartoon. And really just that offensive.

@Lee, All you need is a better supermajority in the Senate, and to get rid of the idiots who currently dominate the House.

There is no “better supermajority”, and they are no idiots. They are human beings, they are politicians, they can be bought. It only takes few million dollars to buy almost anyone of them; chicken feed.

In February 2011, despite “repeatedly and categorically insisting that he would not work as a lobbyist,” Dodd was identified by The New York Times as the likely replacement for Dan Glickman as chairman and chief lobbyist for the Motion Picture Association of America (MPAA). The hiring was officially announced on March 1, 2011.

ScentofViolets #306: “Time’s up, Lee. From here on out, I’ll have no problems paraphrasing all the tapdancing dreck you have written as, “I’m promoting a theory that I don’t have any evidence for, and that in fact I know is wrong . . . simply because it suits me to do so”.

So you are reverting to the defense, “I know you are, but what am I”? This is an acute logical trap!

@312 — I promised to be gone? I don’t remember writing that. But this isn’t the only thing you appear to have gotten wrong.

You also inferred that I “want to claim sole power to arbitrate what is politically possible and what is not” (#307, yet another claim by someone who claims to make no claims). At least, I think this is directed at me; your blame-game is so diffuse and full of generalities, it is hard to tell. I’m not sure that your claim would hold against anybody, really. But we’ll never know, because it has been amply demonstrated that you are not going to give an argument in support of anything you write.

I do remember you claimed that I am “someone who claims that arm-twisting a Senator is impossible” (#251). But I never wrote that. That too is false. I wrote that if you believe it was possible in the case of ACA, then you would spend your time better by looking after the health of your prostate gland.

Myles @263: “If you want the most allocatively efficient outcome, marginal adjustments have to be free to be made in full. Otherwise you don’t actually have allocative efficiency.”

Well, no. That’s where the concept of “economic rent” comes in. There can be a difference between the price (or wage or rent) a factor earns, in its actual use — presumably its allocatively efficient best use — and the threshold price at which it would switch to its next best use. A piece of farmland might be perfect for growing potatoes, and, at the current price of potatoes, given crop-yields, management practice, etc, it is earning a $100/acre growing potatoes. The next best use is growing corn, but it’s not great land for corn, and at the current price of corn would earn only $80/acre. So the difference — $20/acre — is an “economic rent”. If the the price of potatoes changed by a small amount relative to the price of corn, the farmland could earn slightly more or slightly less, but remain “allocated” to potato production.

This is the canonical Pareto concept of economic rent.

I am thinking, though, that this is not necessarily what you think of when you hear the term, “economic rent”, bandied about. I’m guessing that you think an “economic rent” always involves an element of coercion, of market power associated with an act of government rule-making. And, that absent such coercive interventions, economic rents would be competed away. Is that a mis-impression on my part?

K. Williams, again, 90% is a marginal rate. Your banker gets his reward alright. He just gets 90% less incentive to play games with other people’s money, and then, when he wins enough for himself by ruining millions of others, relax. Which (giving him less incentive to do this), presumably, gives him more incentive to do actual productive work. Or, if he is a sociopath, it gives him an incentive to find a different, more appropriate line of work, like armed robbery or something. You see: in the end everybody wins.

Right now the top bracket (35% marginal rate) includes those earning 379,150 per year and up.

So changing the top rate to 90% will not simply impact a CEO taking home 22 million. It will impact surgeons, businesspersons earning an order of magnitude or two less than this CEO we’re talking about, lawyers, etc.

To the extent we ARE talking about CEOs making 22 million or more per year, we’re talking about a very small number of people, and we’re talking about complex compensation. I don’t know what the effects would be, and I have my doubts that the revenue gained would be game-changing.

Henri, K Williams’s argument integrates the concept that the 90% is a marginal rate. That fact is central to his point.

Let’s try that link again.

So you do believe that marginal productivity explains everything after all, Andrew F.

Henri, if you cannot think of worthwhile ways to spend one billion of your own money, stop thinking about worthwhile ways to spend other peoples money. All you are claiming is that human needs are limited to $10 million worth of money, that there are not millions of worthwhile things that can be done with a lot more money. A few billion could end malaria, feed a lot of people, etc. etc. all of which are reasonable reasons to make some more money. As for “actual productivity” such a term is hogwash. The worker who hammers out tediously parts does no more actual work then someone who sits down, makes a single mold, and puts it in a machine that makes millions of parts. Socially necessary labor time is set by the conditions of production and demand.