Where the money is

by John Quiggin on July 25, 2011

I’ve been largely on the sidelines of the debate about neoliberalism and political theory. That’s mainly because, observing the US political and economic situation, I have a very clear view on what policies could, in principle, sustain a progressive political movement, but (given my distance from the scene and the absence of anything substantial enough to force its attention on the mass media) no real idea about how such a movement might develop.

My analysis is quite simple and follows the apocryphal statement attributed to Willie Sutton. The wealth that has accrued to those in the top 1 per cent of the US income distribution is so massive that any serious policy program must begin by clawing it back.[1]

If their 25 per cent, or the great bulk of it, is off-limits, then it’s impossible to see any good resolution of the current US crisis. It’s unsurprising that lots of voters are unwilling to pay higher taxes, even to prevent the complete collapse of public sector services. Median household income has been static or declining for the past decade, 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) and the easy credit that made the whole process tolerable for decades has disappeared. In these circumstances, welshing on obligations to retired teachers, police officers and firefighters looks only fair.

In both policy and political terms, nothing can be achieved under these circumstances, except at the expense of the top 1 per cent. This is a contingent, but inescapable fact about massively unequal, and economically stagnant, societies like the US in 2010. By contrast, in a society like that of the 1950s and 1960s, where most people could plausibly regard themselves as middle class and where middle class incomes were steadily rising, the big questions could be put in terms of the mix of public goods and private income that was best for the representative middle class citizen. The question of how much (more) to tax the very rich was secondary – their share of national income was already at an all time low.

The problem is that most policy analysts and commentators grew up in the world of the 1950s and 1960s, or at least in the mental world created by that era. So, we are busy fighting about tax expenditures, barber licensing and teachers unions, and the implications of these things for a hypothetical working class mobilisation. Meanwhile, most of the anger created by the collapse of middle class America is being directed not at the rich but at those who don’t look, sound or pray like Americans of the vanished golden age.

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

It seems to me that a good place to start would be a primary challenge to Obama (Bernie Sanders suggested this, and he’d be a good candidate I think). It would be impossible for the media to ignore completely, and might get enough votes to shift the Overton window. Whether such a challenge could form the basis of a mass movement, I don’t really know, but it seems to be worth a try.

fn1. When I was at the American Economic Association meetings in January I went to a session where a group of Very Serious Economists (Holtz-Eakin, Elmendorf and others) discussed the US budget problem, which comes down to the fact that on a structural basis US public expenditure exceeds revenue by something like 7 per cent of national income. I made the comment that this gap was almost exactly equal to the increase in the share of income going to the top 1 per cent of households over the last decade or so. The Very Serious Guys declined to respond, and waited for a serious question. I wasn’t surprised, but I wasn’t impressed either.

{ 326 comments }

1

shah8 07.25.11 at 11:21 pm

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…

2

eponymous_coward 07.25.11 at 11:23 pm

It seems to me that a good place to start would be a primary challenge to Obama (Bernie Sanders suggested this, and he’d be a good candidate I think). It would be impossible for the media to ignore completely, and might get enough votes to shift the Overton window. Whether such a challenge could form the basis of a mass movement, I don’t really know, but it seems to be worth a try.

I tend to think the best answer is going to have to come internally, through the ranks. Barack Obama isn’t that guy, clearly, but he never was if you listened to what was being said instead of getting all hopey/changey. 50, 60 years ago, Obama would have been this guy: a moderate/liberal Republican.

http://en.wikipedia.org/wiki/Edward_Brooke

Thing is, Bernie Sanders is a Socialist, not a Democrat, so he’d be joining a party he’s kept himself deliberately distinct from just to screw with the existing incumbent. This sort of self-aggrandizement/Napoleon on a horse doesn’t usually work out well (see: Nader, Ralph, and the shrinking margins the Greens have gotten every year he’s run).

Also, there is some recent history of leftist candidates in the Democratic Party: Dennis Kucinich ran in the 2008 primaries. I think he managed to get a grand total of one delegate to the Democratic National Convention- himself. It’s not just a matter of policy, it’s having some charisma as well. I don’t know if anyone is out there advocating for this sort of politics now… on the other hand, FDR turned into a bit of a surprise, I think.

3

Walt 07.25.11 at 11:30 pm

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

4

Anonymoose 07.25.11 at 11:31 pm

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. I don’t know, but you seem to…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…

And the idea that 90% top marginal tax rates and strong unions “made America great” is at least naive. Surely there were other factors? Cowen’s low-hanging fruit immediately comes to mind…In fact America was pretty great before income taxes were even introduced at all, no?

5

shah8 07.25.11 at 11:51 pm

/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.

6

Marc 07.25.11 at 11:53 pm

The USA was incredibly unequal before the Depression. What made the postwar era different was that it became much less so – that is, the median household had a tremendous improvement in both absolute terms and those relative to the very wealthy. Our one recent experiment with increased progressive taxation (Clinton in 1993) is pretty convincing to me about the positive effects of progressive taxation. It’s certainly hard to come up with evidence of harm from it (or evidence of benefit from the opposite experiment, namely the Bush tax cuts.)

Before the primary challenge idea, however, a quick question: is there any evidence in the record of having such a challenge do anything but backfire? In other words, where did a challenge to an incumbent do anything but end up assisting the opposition in a win? I can’t think of a single example, but would be glad to hear of one.

The top 1% is a shorthand, but you can approximate it by drawing a line in the distribution where, say, the average (not median) gain in real income over the past 30 years has been located. I suspect around 1%, but would be glad to be wrong.

7

salacious 07.25.11 at 11:56 pm

“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.

8

shah8 07.25.11 at 11:57 pm

And much of the fundamental progressive works that were extant in the 1950s came about with explicit compromises that excluded women and minorities from enjoying those “good times”. The Civil Rights Movements, in one aspect, became virulent because poor whites became *much* better off and drove an inflation process that really concentrated the minds of black leaders (and undermined the crabs-in-a-barrel conservatives).

The wealth and education of *my* family comes from the very late 60s and early 70s, as IBM back then didn’t give a fuck about anything but raw IQ for the construction of this digital age. The increasing economic rights of women and minorities in the 70s made that quite a better time than the effin’ 50s.

9

Walt 07.26.11 at 12:02 am

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?

10

john c. halasz 07.26.11 at 12:04 am

“In these circumstances, welshing on obligations to retired teachers, police officers and firefighters looks only fair.”

Umm… Is “welshing” here exactly PC? (I say this as half a hereditary Dutchman.)

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

11

Marc 07.26.11 at 12:14 am

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.)

12

shah8 07.26.11 at 12:15 am

First, few people ever paid out taxes that high, for various reasons. Second, it’s a legacy of WWII that got adopted into post-war tax ethos for various reaons, like encouraging people to invest in businesses. That was easy to do when there were sooooooo many business ventures just waiting to ooze money.

I feel like a broken record, but you actually need a *WAAAAAAAARRRRRR* to have some of these things we’re talking about. Which I’m not interested in having.

13

BillCinSD 07.26.11 at 12:15 am

“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

14

shah8 07.26.11 at 12:18 am

And Walt, you might say that the point is obvious to everyone, but what *I* don’t see is the obvious point being taken into account when talking about changing people’s political actions at the grassroots level.

15

john c. halasz 07.26.11 at 12:27 am

@12:

Right. No Joe-mentum for him.

16

StevenAttewell 07.26.11 at 12:31 am

Agree with the argument about redistribution, but Quiggin is absolutely wrong on the solution: “It seems to me that a good place to start would be a primary challenge to Obama (Bernie Sanders suggested this, and he’d be a good candidate I think).”

Primary challenges to sitting presidents never work. It didn’t work for the Democrats in ’68, it didn’t work for the Republicans in ’76, or the Democrats in ’80.

Moreover, it’s a perfect example of the strategic blindness of the left vis-a-vis the right. The Tea Party did not start by trying to run a presidential candidate – they started by taking over local/county/state parties, which gave them influence in the nominating process, then injecting their favored candidates into legislative races, etc.

That’s what we should be doing – building structural power within the party. Challenging Obama doesn’t change the number of Blue Dogs in Congress, or the influence that financial lobbyists have within the broader party, or anything else.

shah8 – rubbish. Imports and exports together made up less than 10% of GDP in 1950; U.S prosperity was overwhelmingly domestic in origins, based on two factors: one, the nexus of high wages/consumption that stemmed from large unions, low unemployment, and the release of wartime savings, and two, increasing productivity largely derived from government investment in infrastructure and plant modernization during and after the war. As people noted at the time, Jim Crow dragged down American economic growth and development.

17

Myles 07.26.11 at 12:34 am

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.

18

StevenAttewell 07.26.11 at 12:44 am

Anonymoose -we focus on the top 1% (and the top 5% and 10%) because they’ve got all the wealth. They have more of it than they’ve ever had before.

Why is this much too much? Economically, it creates long-term weaknesses, because 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. Politically, large concentrations of wealth corrupt republican governance.

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.

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).

What makes you think that they have too much? Perhaps they had too little before and they have just enough now. Perhaps not. I don’t know, but you seem to…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…

19

shah8 07.26.11 at 12:50 am

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…

20

shah8 07.26.11 at 12:57 am

Thinking about it…

No, I did not make the argument that Jim Crow (as the distinct set of policies by southern states as opposed to the national ramifications of SS) was economically necessary for prosperity. I made the argument that specific exclusion of minorities from welfare programs and from any sort of political participation was necessary for getting economically beneficial liberal policies enacted. Minorities who did not live in the South did benefit from the elite consensus on low unemployment, though.

21

Straightwood 07.26.11 at 12:59 am

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.

22

StevenAttewell 07.26.11 at 1:14 am

Sha8 – your statement “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…” suggests otherwise.

If the U.S economy was primarily domestic, then you don’t need “massive inequality in world economic positions” to gain the benefits from a strong economy.

Likewise, your statement seems to be suggesting that 1950s economy requires 1950s politics. That doesn’t really make sense. If you’re not suggesting that, then it’s an irrelevance. Yes, the compromise was forced on the country at the time, although it was rapidly eroding, but it wouldn’t be necessary now.

23

Steven 07.26.11 at 1:22 am

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.

24

joel hanes 07.26.11 at 1:22 am

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

Because starting at the top worked so well for John Anderson and for Eugene McCarthy and Ralph Nader and Dennis Kucinich.

The radical right has spent 30 years on bottom-up organizing, starting with local offices like schoolboards, and working up through city and county government to state legislatures. For some reason liberalism doesn’t seem to produce brigades of similar foot-soldiers.

25

joel hanes 07.26.11 at 1:24 am

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

26

shah8 07.26.11 at 1:25 am

1) The US was not isolated from the rest of the world, and import/export percentage is not some accurate record of just how autarkic the national economy was.

2) Yes, I am precisely arguing that the 1950s economy required 1950s politics, and I think it’s very hard not to see either as being at all separable from the other, for very obvious, practically definitional reasons. I’d rather build the best version of ’10s and ’20s economy inside it’s own context, built out of the political voices of *everyone* in it instead of pretending that the ’50s were some kind of golden age.

27

Anonymoose 07.26.11 at 1:29 am

@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”.)

28

Watson Ladd 07.26.11 at 1:35 am

The economic policies of the 1950′s and 1960′s were not todays policies but with higher tax rates. Intercity trucking was prohibited, airlines were heavily regulated, etc. Capital also was assisted by restrictions on union participation in politics. Women also didn’t work. A doubling of the labor supply was guaranteed to push down wages, which is one of the reasons why the ERA was unpopular with labor. Furthermore, the structure of the welfare state was not one of popular empowerment, but rather of elite policymaking. Walter Lippmann’s theory of the elite as well as the dominance of the elite in the history of the 1960′s are indicative of this, but I don’t really have more to go on then that. The more egalitarian income distribution of the 1960′s was part of an entire matrix of policies, and I’m not sure we can simply revive any one of them. This isn’t to say increasing taxes is bad, but one can’t argue that because taxes were higher in the 1960′s they were responsible for broader prosperity absent a mechanism.

29

Steven 07.26.11 at 1:37 am

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.

30

hartal 07.26.11 at 1:38 am

“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.”

We are supposed believe that because something like this was once in place the chances of it making its way through an essentially anti-democratic political system and the courts are reasonable today.

As Robert Brenner would point out, concentrated firms today haven’t had immunity from global competition for a long time to pay for a program like that; fratricidal global competition itself followed on the ending of the temporary post-War boom caused, as noted above, by the special factors of pent-up demand, suppressed innovations, and reconstruction.

Only parts of Europe seem to be holding onto social democracy and shah8 is probably correct that that’s possible only because, unlike in the US, the ex-colonials are not citizens to the same degree. Social programs don’t cover them.

Most US colonization (agro-mineral production by formally unfree labor–see Evelyn Nakano Glenn) happened within the territorial boundaries of the US, which led to an incomplete struggle for full citizenship. And it certainly put limits on what TH Marshall would call social citizenship (I hear Margaret Sommers is the one to read on this), with the more privileged (usually white, usually male) workers relying on private employers for benefits (read an article by Sanford Jacoby on this).

31

Straightwood 07.26.11 at 1:44 am

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.”

32

hartal 07.26.11 at 1:55 am

The remarkable CT member Scott McLemee linked at his bookforum cite to James Cypher’s running of the numbers
http://www.dollarsandsense.org/archives/2011/0711cypher.html
It contradicts what I say above by making serious reforms appear to be quite affordable through progressive taxation.

33

JRoth 07.26.11 at 2:15 am

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?

34

Substance McGravitas 07.26.11 at 2:18 am

Politically, large concentrations of wealth corrupt republican governance.

Sure, but so do special interest groups that you are all for.

So you don’t see any difference between one guy having clout and 50000 people having clout?

35

JRoth 07.26.11 at 2:19 am

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

36

Glen Tomkins 07.26.11 at 2:43 am

‘M’awm Back!

“The wealth that has accrued to those in the top 1 per cent of the US income distribution is so massive that any serious policy program must begin by clawing it back.”

You and Huey Long, as in this video clip:
http://www.youtube.com/watch?v=hphgHi6FD8k&feature=related

Reviewing this classic in the present context, I’m struck that he clearly had read his Keynes on consumption as the basis of economic activity. He loved to play hick, but was probably more widely and deeply read than FDR.

Oh, the “‘M’awm back!” is how I remember what he renders in more standard English in this clip as “Come on back (to the table)!”. Long would vary his dialect quite a bit depending on the audience, and back in Louisiana he would go way local on that phrase. I remember a version of this speech in which the “‘M’awm back!” is repeated over and over again as sort of refrain, as he catalogues what the money that comes back is going to be used for.

That, of course, was a different era. We don’t have Ds anymore who are for clawing back, or welcoming their hatred, or generally being actual Ds.

37

StevenAttewell 07.26.11 at 2:47 am

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.

38

John Quiggin 07.26.11 at 2:47 am

shah8, I have no idea how old you are, but I am certainly old enough to be aware of both Jim Crow and the fact of widespread tax evasion. I think others have responded adequately to your Jim Crow point, and the other implicit defences of post-70s free market liberalism you have offered.

Adding to this, as regards evasion of the 90 per cent marginal tax rate, I note your implicit claim that the existing, barely progressive tax system is *not* widely avoided and evaded by those in the top 1 per cent. Obviously this is untrue and your defence of the top 1 per cent fails on this score also.

(I’m assuming that your intent here is to defend the top 1 per cent. If you are just engaging in ultraleft defeatism don’t expect an apology from me – I’d rather deal with honest enemies than with dupes).

39

John Quiggin 07.26.11 at 2:48 am

To various other commenters, as I said in the post, I don’t have a political strategy, which is why I’m pushing desperate options like a primary challenge. Feel free to make better suggestions.

40

Marc 07.26.11 at 3:00 am

John: Start with the places where you can already make a difference. There are plenty of places where liberals are a majority or can form a majority coalition (e.g. at the city level.) Build up a good farm team of mayors, state legislators, city council members, and so on. Start picking off carefully targeted incumbents – ones where a liberal can win a primary and the following general election. Be smart about coalition politics. Be disciplined about applying pressure (e.g. always attack your enemies first.) Don’t make empty threats. Even political minorities can do well under these circumstances.

41

eddie 07.26.11 at 3:05 am

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

42

Andrew F. 07.26.11 at 3:12 am

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.

43

Andrew F. 07.26.11 at 3:12 am

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.

44

shah8 07.26.11 at 3:13 am

/me blinks

honest enemies and dupes, eh?

Alrighty then, but you do realize the purity trolling is toxic to nerve cells, hmmm? Do it too much and you’ll be in the corner, flipping your lips with the thumb.

I’ll posit this though. I’m more liberal than you are, but then…hey, I care about actually making things better and focusing energies towards realistic path to egalitarian outcomes. Grandiose personalities that’s about being ineffectual bombast in favor of policies that can’t happen without a sprinkle of unobtanium? I despise. Not least because such people sellout, or demand credit for the hard work of others…

45

eddie 07.26.11 at 3:15 am

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.

46

John Quiggin 07.26.11 at 3:19 am

If you care about making things better, Shah8, maybe you could have started your contributions to this thread with some suggestions along those lines – for that matter, you could have done so at any point in the discussion. There’s still time if you want to start.

47

Lee A. Arnold 07.26.11 at 3:26 am

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.

48

shah8 07.26.11 at 3:31 am

I have in other threads.

I just think in this thread, my contribution is best serve by being critical. There wasn’t ever any Glory Age. Reminding people of that, can be important. Every age is about the influence of the previous one and the anticipation of the future age. We work with the tools that are in front of us, with the levers that are in our reach. We actually walk in other people’s shoes and process their tendency to be great and terrible, and we do the work of linking up mutual advantages. That this does not reach to the heights of senators and presidencies, well, perhaps we must be humble, too.

49

L2P 07.26.11 at 3:33 am

“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.

50

Jim Harrison 07.26.11 at 3:53 am

Everybody assumes that racial politics is automatically a win for the right. One of these days the emerging immigrant/hispanic/black majority is going to reach for power, and there is no guarantee that it will do so by legal or electoral means in the teeth of the force and fraud of the threatened herrenvolk. That’s hardly a utopian solution, but it’s more likely than the Arctic-Ocean-will-become-orangeade-once-we-finally-arrive-at-a-suitable-theoretical-understanding academic politics featured in these parts.

51

shah8 07.26.11 at 4:08 am

*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?

52

Billikin 07.26.11 at 4:28 am

“Median household income has been static or declining for the past decade, 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) and the easy credit that made the whole process tolerable for decades has disappeared. In these circumstances, welshing on obligations to retired teachers, police officers and firefighters looks only fair.”

No comprende, sennor. Things are bad, so it is only fair to make things worse?

53

Omega Centauri 07.26.11 at 4:37 am

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.

54

shah8 07.26.11 at 5:10 am

My unobtanium has always been about finding ways for people to talk to one another without corporate intermediaries. Without that, can’t cut through the noise, ’cause rich people will always own the presses and broadcast station. Decentralized and encrypted coms for the masses is one thing liberal geeks have been working on for awhile. Worthwhile project that needs organizers to market them once they ever get beyond creaky alphas like FreeNet or PGP email. I also think people have a hard time realizing just how fundamental a revolution Napster was. Bigger change than people think, in terms of the choices and *leverage* consumers actually had. More of that sort of thing, on the digital front, can only help. Man, it’s been a looooooooong time for me…

55

John Quiggin 07.26.11 at 6:02 am

Shah 8, this is not the discussion I’d planned to have but since you insist, I’ll point out some exceptions to your claim
* Desegregation of US armed forces 1948-54
* Brown vs Board of Education 1954
* Voting Rights Act 1965
* Civil Rights Act 1968
Contrary to your claim, the 1950s and 1960s saw the end of Jim Crow, not to mention substantial advances towards equality for women. As I said, I regret the thread derailment and will try to get back on topic from now on

56

John Quiggin 07.26.11 at 6:03 am

@Billikin 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

57

hartal 07.26.11 at 6:29 am

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.

58

shah8 07.26.11 at 6:33 am

First of all, Kennedy in 1962 presumably is the end of your glory period as it refers to high tax rates.

Second, nothing ever actually happens in a pure fashion. No great slide into evil, or great ascent into goodliness. Right now, minorities have lots of nominal civil rights, many of which are used, but minorities are also predated by structural drug war elements. There are overall great peaks in de jure/de facto rights in the populace and valleys as well.

Thirdly, much of the progress you cite fundamentally unwound many of the previous bargains that were made, and your utter refusal to comprehend race and racial rhetoric as dynamic and contingent is perplexing. Do you really fucking think working/union class support for Reagan was not related to Great Society? Or that Lyndon Johnson didn’t know what would actually happen? Please, just please, don’t be this obnoxious. It’s the fundamental basis by which reactionary elements control society. When women got more rights, labor lost bargaining power, when minorities got more rights, some other aspect of ruler/ruled dynamic changes.

There is no utility in this sort of discussion, without understanding bargaining position. Who bargains? For what? Insisting that the past was some sort of picture clips is just mostly letting your social programming show, man. I’m not on board with your general post because there’s a presumption that one can refuse to bargain or denies the necessity of negotiating. Probably not least because you’re tired of the President doing so. Obama does so because he, like you, is not in a position to dictate terms. He just understand that far better than you do. Silly ideas like a primary from the left by a 69 years old, blustery fake will not get you what you want, except being indebted to the blustery old fake!

There just isn’t a quick, fast, and easy way to fix things, not even fast enough to prevent revolution, perhaps. Moreover, one of the great challenges is to build negotiating power, and doing that more or less means attacking ideological constructs that holds political milieus together, like white supremacy, without the internal police catching on to what you’re doing or being able to stop the phenomenon you start, quietly.

59

john c. halasz 07.26.11 at 6:46 am

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

60

L2P 07.26.11 at 7:05 am

“When women got more rights, labor lost bargaining power…”

That’s not the way history writes it, but the history books have been wrong before. Chronologically, as women were getting the right to own property, divorce, and vote, unions were for the first time organizing. Unions made dramatic gains only AFTER women obtained the power to vote. I’m sure something happened, but I can’t think of a single important labor victory until AFTER the civil rights amendments. So, generally, civil rights gains => more union power. If you look only at a specific decade or two, you might get a few different answers, but, well, I’m sure you’re not going to be convinced either way.

I think this idea of American history as beginning and ending with the 50′s and 60′s makes your idea of politics less than compelling. It confuses the results of a short period of time for tradeoffs that have to be made for all eternity. Politics is the art of the possible, not the repetition of past patterns; otherwise, we’d see big business allied as much with progressive causes as not, like we did before the Civil War (pro tip – not so much anymore!)

61

Billikin 07.26.11 at 7:11 am

@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.

62

Jason McCullough 07.26.11 at 7:17 am

“When women got more rights, labor lost bargaining power, when minorities got more rights, some other aspect of ruler/ruled dynamic changes.”

The “lump of working-class political power” fallacy?

63

Henri Vieuxtemps 07.26.11 at 9:48 am

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.

64

Thomas Jørgensen 07.26.11 at 9:51 am

Political strategies ? Okay, here is one. Start a new party. Call it the workers and employment party. Suggested banner issues: WPA 2.0, Medicare for all, Adressing enviormental problems via heroic civil engineering projects. Dams, Granite Pistons Electricity storage (google it!), Advanced Nukes, HVDC lines ect.

Organize the unemployed to canvas and register for you. Do not spend a dime on media advertisment – you need to win this via social networking, and not just the online kind, the old fashioned one as well. Typical participation in US elections is 35% or below. Current unemployment is 9-10 %. If you get them and their spouses to vote for you you win the election. Screw trying to move the Repuglicrat behemot, just marginalize it entirely instead.

65

Tim Worstall 07.26.11 at 9:52 am

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.

66

Marc 07.26.11 at 11:33 am

shah: you are willfully blind on the past. The world is a complex place, and your entire contribution rests on the following: the world in the past was racist, thus there was nothing else of any value.

That’s an arrogant and blinkered view. You can understand that racism was crippling and still be able to see things of value. A thousand years from now there is a long list of things that people could use to tag our entire society as evil too. (Climate change is an obvious candidate). The point that you can’t see, because your ideology blinds you, is that things were *better* for the broad middle class, *and for minorities* after the Depression than before it. And that difference is largely the result of economic changes that tilted the playing field away from the very rich.

The process of broadening civil rights has been a long one, moving from slavery to sufferage to the modern civil rights movement to gay rights. It’s one area where the modern world is unconditionally better than the world used to be.

That doesn’t make every choice that we have today automatically better than anything in the past.

67

Anonymoose 07.26.11 at 12:00 pm

@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.

68

Walt 07.26.11 at 12:30 pm

shah8, do you think that the white working class is intrinsically racist, so that politics is a zero sum game where policy can only either a) help the white working class, or b) help black people?

69

bert 07.26.11 at 1:00 pm

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.”

70

Henri Vieuxtemps 07.26.11 at 1:07 pm

Huh, I see I’m not the only one here annoyed at “…because the whites are racists” theory of everything in the universe.

71

hartal 07.26.11 at 1:43 pm

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.

72

bjk 07.26.11 at 2:08 pm

Let’s assume we changed the name on the stock certificates of the Walton family from “Walton” to “US Govt.” Everything else stays the same. What changes? Nothing changes. Walton consumption does not go up or down. The Walmart workers aren’t wealthier, the society isn’t wealthier. Nothing changes but the name on the piece of paper and the fraction of wealth controlled by top 1%. And guess what? Who or what controls the wealth doesn’t matter, what matters is how it’s allocated. Whether it’s allocated in productive investments or in wasteful consumption. But the Waltons don’t consume, nearly all of their wealth is in shares of stock they don’t sell. Taxing the Waltons more, either the wealth or income, would simply lead to more consumption and less investment. Is America better off by investing Walmart profits in new distribution centers, new stores and better IT systems? Of course. As the socialists like to say, wealth is always social.

73

hartal 07.26.11 at 2:32 pm

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.

74

Oliver 07.26.11 at 2:36 pm

The “lump of working-class political power” fallacy?

Why political power? A higher labor participation rate may simply mean less union power by ordinary supply and demand of labor.

75

Straightwood 07.26.11 at 2:50 pm

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.

76

Lee A. Arnold 07.26.11 at 2:53 pm

Hartal #57: “The space for left politics will probably open up quite a bit.”

Exactly so. However, the left is not ready. There has to be a fuller understanding of economics to oppose to Hayek-Friedman-Reaganomics. It will be something like a defense of institutions.

Also, do NOT expect Obama to rush into left politics. He wants it, he will allow it, he will incorporate it — but he will NOT be leading it.

Obama is going to look like a centrist until the end of his days, for one very good reason. And he is absolutely correct to do it in no other way.

77

StevenAttewell 07.26.11 at 3:14 pm

“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.

78

purple 07.26.11 at 3:20 pm

If you couldn’t elect a progressive Dem in 2008, then you will never be able to do it, defining never as the foreseeable future. It’s over.

Don’t people realize they have these same conversations every four years ? Bradley/Nader/Dean/ and Obama was supposed to be that man.

Don’t waste your time, the country is irretrievably broken.

79

elm 07.26.11 at 3:43 pm

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.

80

roger 07.26.11 at 3:45 pm

Actually, the rates of the 50s would work much better at capturing the wealth of the wealthiest today, as income wealth constitutes a much greater component in the portfolios of the wealthy now than it did in the 1950s – back then, there simply were no CEOs making 300 times the median employees salary.

This is a very important point. It would be relatively easy to design corporate tax policies that would heavily fine any company that makes over an x amount and pays its top management in stock and compensation more than, say, 10 times the median employee – the standard in the 50s.

But as importantly as the mechanisms that could be put in place to embody Quiggin’s insight – the policy mechanisms that MY has complained are lacking in this discussion – just as important is the principle that the insight is built upon. That is the principle that enormous inequality has enormous consequences. Those consequences might not show up in a given year, but they do show up over time. In other words, neo-liberalism has taken the Micky Kauss route of giving up the talk about equality, and thus recasts the tax issue, for instance, in terms of revenue for the government and deficits and stuff – instead of viewing it in the broad perspective of challenging outsized private power. There is no outsized private power for the neo-libs, except in terms of some very weak picture of competition that breaks up monopolies – which often ends up in encouraging de-regulation of airlines, power, etc., all of which feeds into new monopolies and avoids entirely the question of how public utilities should be governed.

The disagreement, then, falls entirely on the dynamic axis of the consequences of economic disparity. It does not fall on the synchronic axis of finding ‘solutions” to policy ‘problems’, one by one. It is that techno problem solving approach, with its blindness to historic trajectories and contexts, that is the real problem.

81

roger 07.26.11 at 3:50 pm

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

82

Watson Ladd 07.26.11 at 3:50 pm

I think a bunch of people are bringing up working class power as union rent seeking, policies that benefit the employed and hurt the unemployed. There’s also a model of working class power which creates a society where everyone gets to work, but that means changing capitalist social relations substantially. Furthermore, higher capital gains taxes will discourage investment. Deadweight losses are real, as is the need for more taxation. It’s not something where there are that many easy answers.

83

someguy 07.26.11 at 4:09 pm

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.

84

Chris Bertram 07.26.11 at 4:17 pm

I just saw the Yglesias response, which strikes me as really quite weak. His objection is that even the heavily taxed rich will be able to outbid the poor for a range of intrinsically scarce goods. Well if there’s just one such good (a house in a nice are) and everyone really wants that, his claim is true. 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?

85

liberal 07.26.11 at 4:19 pm

#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.

86

liberal 07.26.11 at 4:23 pm

Chris Bertram wrote,

Well if there’s just one such good (a house in a nice are) and everyone really wants that, his claim is true. 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?

I took Yglesias as meaning that we could, e.g., reduce scarcity in housing. Here the key is land, not housing itself, and land-use policies that lead to unnecessary scarcity. (IMHO that’s a fact at least in the US, and from reading Yglesias’ blog that’s what I take him as meaning.)

Around here (Wash DC metro area) it’s quite obvious that density is kept artificially low. You can even stay comfortably within the neoclassical paradigm and still realize what the net effect of that’s going to be.

87

liberal 07.26.11 at 4:27 pm

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.

88

Chris Bertram 07.26.11 at 4:32 pm

From here in the UK that just seems plain weird (god knows how it seems to a Dutch person!). The problem in the *US* is not the super-rich it is scarcity in land …. Just compare Connecticut (4th US state by population density) to the Netherlands.

89

Chris Bertram 07.26.11 at 4:33 pm

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 …?

90

haninoz 07.26.11 at 4:34 pm

Bring back the Draft…

In the 50s there was a greater notion of shared sacrifice–’we’re all in this together’ etc. People had lived through WWI, the great depression, and WWII. Everybody had suffered to some extent. The rich had fought alongside the poor. There was compulsory service (and yes, some got favoured treatment, absolutely–but they were scorned for it.) It would have seemed selfish beyond comprehension, and almost inconceivably medieval, for a manager to be making 1000 times the rank and file worker. A janitor was allowed to make enough money to own his own home and put his kids through school because unions were accepted, yes, but also because of a respect for the working class–they had won the war. The idea that one person could be worth more than 1,000,000 other people was absurd. A 90% tax on the rich was possible because the rest of society had carried the burden, and now carried the scars, of depression and war. There was a social contract that had to be repaid, and enough of the rich accepted it. (…And the fact that the poor had been armed and trained was probably a whispered reminder on more than a few occasions.)

The end of conscription has played a factor in the rent of the social fabric. Like it or not, organization and functional hierarchy was taught on an existential level–and those lessons carried over into life. It isn’t just the left that hasn’t learned the lessons of national service–it is the right. They have lost the sense of responsibility that comes with great wealth and power. Or rather, they have never learned it. Neither the left, nor the right, have learned how to govern–how could they? There is no meaningful lab where they can go and figure it out. Like it or not, a fully represented standing Army provides that lab. All they have now-a-days are dysfunctional theories, self interest, and Ivy League entitlement. Until Rush, Beck, et al, actually strap it on, and the sons of the rich serve with the sons of the poor, the prevailing meme is not going to change.

Is the US the only western country without a Labor party? Herein lays the problem. Until there is another ground situation that demands a level of sacrifice on the scale of the great depression and WWII, there will be no change in the political landscape. Richard Nixon would be completely unelectable right now–he would be way, way too far left. Wacko left: An environmentalist who instituted wage and price controls, expanded welfare and social programs, and engaged in detente with an enemy…The only thing he had going that would carry him today was abject moral depravity–that still plays.

Change we can believe in might only come through default, and a crash that brings down the top….which would make a resurrection of national service necessary on a few different levels.

91

hartal 07.26.11 at 4:36 pm

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.

92

elm 07.26.11 at 4:39 pm

Chris Bertram, I think Yglesias’s analysis fails even worse than that on economic grounds. In economic terms, scarcity is just a fact of life and many important problems, questions, and models are about allocation/distribution.

Perhaps he thinks he’s proposing something new when he observes that “scarcity would remain” (this is assumed in market economics and true regardless of circumstances) and “we need to spend a fair amount of time thinking about the scarcity as such and ameliorating it”, but I’ve heard it before, it’s just supply-side economics and making the pie higher. He’s already carefully avoided discussing the problems of the income gap.

93

Bruce Wilder 07.26.11 at 4:43 pm

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.

94

Harold 07.26.11 at 4:44 pm

The problem is that uncontrolled, unregulated speculation cannot be relied on as a source of affordable housing, just as it cannot be relied on to provide decent banking and investment services.

95

elm 07.26.11 at 4:47 pm

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.

96

Bruce Wilder 07.26.11 at 4:54 pm

@87 “tax economic rents”

Yes.

Also, since economic rents in the 21st century U.S. economy are largely ‘paper’ rents associated with pointless financial activity and fiat arrangements (intellectual property law), some carefully placed policy “nudges” have the potential to cause price collapses that eliminate a lot of rent, and free resources for productive activity.

97

Myles 07.26.11 at 4:55 pm

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.

98

K. Williams 07.26.11 at 5:02 pm

“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.”

This is exactly right. The concept of the Overton Window has become an easy way for people to rationalize their more extreme positions, but it’s poorly thought through. The existence of the hard left in the 1960s did not push American politics to the left. On the contrary, because voters associated the Democratic Party with the more extreme positions voiced by SDS, the black-power movement, and the Yippies, it pushed American politics to the right — Richard Nixon and George Wallace together got 57% of the vote in 1968, while McGovern was absolutely crushed in 1972, despite (or rather because of) campaigning on a platform that was as far to the left as any major-party candidate in American history. Go back and read the Democratic Party’s 1972 platform — it would make any leftie blogger today gleefully happy. Advocating positions that most American voters find offensive is not a way of building support for more moderate versions of those positions — it’s a way of alienating voters and making them turn to your opponents.

The fact that JQ, et.al., can’t see this is, I think, symptomatic of one of Crooked Timber’s biggest problems, especially of late, which is that it involves people who aren’t American pontificating on what American voters are like. Frankly, there’s no evidence that JQ or Chris Bertram or even Henry Farrell have any real sense of what matters to Americans — particularly the middle-class suburban Americans who are the voting bloc that really matters these days. So it’s no surprise that they’re offering up political advice that, not to put too fine a point on it, suicidal for Democrats to follow.

99

Barry 07.26.11 at 5:03 pm

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.

100

Bruce Wilder 07.26.11 at 5:05 pm

I think Quiggin is right to focus on “where the money is”. In particular, I think a high marginal income tax rate may be the sine qua non, here. Whether it is politically feasible, absent a war, I don’t know. (Though, if we cannot have a war, would financial and economic collapse do, in a pinch? ’cause I don’t think that would be hard to manage, in our circumstances.)

It seems to me that a high marginal income tax rate, (and a high corporate income tax rate if properly structured), is, as liberal prescribes, largely a tax on economic rents. I would draw attention, though, to the effects on behavior. It seems to me that low marginal rates on top (labor) incomes create incentives for sociopaths to take over the corporate executive suite, and to run corporations in pernicious ways to generate those incomes. And, then, the corporate executive class — a class of sociopaths — like a parasite taking over a hapless host, takes over politics and the state, for the same purpose.

Take away the cheese, to take away the rats. Much smaller cheese, and maybe we get only mice.

101

Bruce Wilder 07.26.11 at 5:09 pm

@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?

102

Mary Coulthard 07.26.11 at 5:14 pm

`My analysis is quite simple and follows the apocryphal statement attributed to Willie Sutton. The wealth that has accrued to those in the top 1 per cent of the US income distribution is so massive that any serious policy program must begin by clawing it back.’

Amen to that. You’d have to seize their assets though as most of the tax dollars collected go straight back to them via their ever maturing share ownership of the national debt not to mention the bailed out bank bonds they own and which are now state guaranteed ($34 Trillion’s worth I think).

103

Steve LaBonne 07.26.11 at 5:36 pm

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.

104

matth 07.26.11 at 5:50 pm

I’ve never seen a convincing quantification of the extent to which taxable income was under-reported back when marginal rates were above 50%. The tax code back then truly was rife with loopholes, but it’s difficult to track non-taxable income.

The most reliable measure of effective tax rates may be the percentage of GDP collected in taxes. By that measure, the 1950s did not have higher taxes than the rest of the post-war era (excluding the 2000s). However, that metric doesn’t tell us whether the wealthy were avoiding taxes by ensuring they took compensation in tax-advantaged forms, or whether they were avoiding taxes by just taking less compensation.

(I got my numbers from here, but would welcome a correction if someone has better data:
http://www.heritage.org/budgetchartbook/current-tax-receipts)

105

someguy 07.26.11 at 6:07 pm

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?

106

Morgan Warstler 07.26.11 at 6:18 pm

Ok John Quiggin, I’m going to make a radical suggestion to you for progressive strategy to go after the 1%, if you are up to it, I’ll come back and really make my case with you.

Please give it some real serious thought.

Here it is: ADMIT YOUR TEAM IS JUST THE “C” POWER.

If you are familiar with bipolar theory of during the Cold War, great. If not here it goes:

The A power was the US.
The B power was the USSR.
The C power was China.

Basically as in a two party Democracy, the sides all split up into two teams, and the third power the C power, they go their own way – and the best strategy is to PLAY BOTH SIDES against each other.
——-

Ok, now for the radical part. Forget Republican / Democrat. Instead, there are three self interested parties in America:

1. The” A” power are all us citizens who during part of their earning life are part of the top 90-99%. This is a GIANT group of citizens. They look like the Tea Party. Lots of SMB owners. Lots of big fish in small ponds. They are all “likely voters.” There are tens of millions of these pretty comfortable people.

2. The “B” power are the top 1%.

3. The “C” power are the folks who never spend anytime in the top 90%. In fact, there are some who get up into just the 80%+ who also identify as A, a smaller amount of 70%+, etc. So it isn’t exact, but the demos hold very well.

This is why we have so many elites in the 1% who skew liberal. Some are born with it. Some are in industries that skew that way (lawyers). And some are Fortune 100 management types who like lawyers get part of their income from the government.
——

OK, here’s my point: Your side has no $, and without $, your numbers aren’t great enough to be A or B.

The mistake you’ve been making , and the cause of this economic crisis, AND THE GIANT DISPARITY we now have is that for FAR TOO LONG you have been partnering with a B power the top 1% to get political donations.

To serve your “Big DC” urges the technocracy has partnered with the corporatists, to try and topple those 30-40MILLION republicans who NEVER make it to the top 1%.

And Tea Party, the natural A power, they like the asshole of the body are in shutdown mode.
——-

There is a real strategy here. As the C power, what you want to do is CRAFT POLICY that takes directly from the B power (the top 1%) and gives it ALL to the A power.

Keep nothing for yourself.

Think of this as a series of broad tax changes that make SMB owners far richer and more nimble and make investors and Fortune 1000 far less comfortable.

Imagine the kind of tax policy where the best and brightest ALL WANT TO START THEIR OWN BUSINESS. Nobody goes to Wall Street, because investor / bankers pay real taxes, and SMB owners have it easy.

Like a flat tax of 25% on corporations AFTER say $10M in profits with NO EXEMPTIONS.

And it is easily attainable, and you could pull it off immediately. The A power has $ and votes, you have votes – all it takes is you ACTUALLY JUST FUCKING THE TOP 1%.

The problem is you don’t REALLY want to get the 1% if the money doesn’t go directly to you. That’s bad strategy.

This is called distributism.

http://en.wikipedia.org/wiki/Distributism

——-

The truth is, during the past 30 years, the B power (top 1%) have made huge gains.

But the 90-99% haven’t lost a dime. They are powerful because they are far more than than just 9% – they have MORE $ then the B power, and they have 35M+ more votes than the A power.

Meanwhile the C power – they have lost it all to the B power.

Anyway, you asked for a way out. And I’m sure at first blush, this won’t convince you. but rather than write me off, please ask questions – see if I can answer them.

Yes, this will entail a different approach to regulation, but it isn’t nearly what you think it is.

And yes, there are some negatives that comes from a broader swath of well monied SMB owners who are suddenly less afraid of government.

But I do think I can convince you that this strategy WILL net out the C power MORE real gains, not everything you are after, but more than you got now.

107

bjk 07.26.11 at 6:52 pm

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.

108

Jona 07.26.11 at 7:00 pm

Anonymoose #4: “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. I don’t know, but you seem to…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…”

I’ll turn to Cohen to start off the reply: “what I find arresting is the remarkably contrasting reaction that we manifest to vagueness (and so on) when our interests are and aren’t at stake. When facing our legitimately self-interested choices, we feel no need for a theory that will make everything determinate. Do we demand such a theory in the moral realim in order to avoid, or reduce, our moral commitment? Recall Thomas Hobbes’s remark that the “doctrine . . . That the three Angels of a Triangle should be equal to two Angles of a Square” might well have been “disputed,” had a belief in its falsehood served somebody’s interest.” Cohen, Rescuing… p6

Second, the fact that 1% of the population are filthy rich in the midst of poverty and people with much less resources and less opportunities is intuitively strongly unjust. There is empirical evidence that suggest that very many people share that intuition. In the face of that evidence I but the onus of justification on you to provide some argument (from exact first principles, given that you yourself embrace that standard of evidence) against massive redistribution. Let’s hear it!

Third, extreme poverty elsewhere in the world provide very strong reasons for assistance from richer nations. But note that redistributions within the US in no way blocks also redistributing internationally. You falsely paint the picture of having to redistribute from the 1% to the rest of the US population OR take distribute concerns seriously internationally. That is simply false.

109

John B 07.26.11 at 7:02 pm

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).

110

Bruce Wilder 07.26.11 at 7:07 pm

“You really think taxing the rich is the better answer?”

I think it is a necessary part of the answer.

There’s a dynamic at work, when income inequality is increasing, and top incomes — the incomes for the executive elite, who run everything — pull away, telescoping all kinds of institutions into a shape, which further reinforces inequality.

The economy becomes a plutonomy, and it affects everything. The mass production / mass consumer economy of the 1960s tended to reinforce equality. A mass-production / mass-consumer economy was oriented toward producing good stuff cheap. Even if your household income was modest, you had many options — many of them the by-product of the kind of price discrimination a neo-liberal would mindlessly scorn, like coupon-clipping or buying an airline ticket weeks in advance — to even the score, so to speak. We’re moving toward an economy, in which a $3.00 fast-food burger is poison, but Kobe beef burgers are commonplace, if you belong to the upper 20% (soon to be 10%).

Go back to my comment @93, about the U-M Law Schoolm and click thru to the article. The dynamic, to me, is fascinating: the compensation of law professors has risen along with the tuition, and the salary of the dean! The number of administrators multiplies. And, the Law School embarks on a $100 million, gold-plated building program. (What they’re proudest of, is replacing an eyesore addition for administrative offices, which the more “restricted” budgets of the 1950s (when state money was plentiful) forced them into, back in the day, when the children of autoworkers went to that law school, and graduated without debt.)

Inequality built Versailles, and left France, the richest country in the world in the 17th century, economically prostrate in the 18th. And, the Revolution eventually came.

111

Chris Bertram 07.26.11 at 7:09 pm

_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.

112

ChasW 07.26.11 at 7:48 pm

The point is, inequality is the cause of our problems, not an effect. Continuing down this road is not an option. So those who claim the ‘the left’ have no answers need to find some on the right – to save ‘capitalism’ (or, more correctly, ‘financialisation’) from itself.

And it’s not a new phenomenon:
“An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” –Plutarch (c. 46 – 120 CE)

113

roger 07.26.11 at 7:54 pm

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!

114

Bruce Wilder 07.26.11 at 7:57 pm

David Atkins, new to Hullabaloo, tells another story of life in the plutonomy, this time about visiting an emergency room in the middle of the night, for a painful, but not life-threatening condition:

I knew it would take some time to be seen; after all, my case was probably the least critical they had. So I brought a book and settled in for the long haul. After 3 hours waiting on the floor of the emergency room without even a chair to sit in, I was finally admitted. A harried doctor examined me for approximately 30-90 seconds with a regular scope, said he couldn’t see anything but that there might still be blockage that he was unequipped to detect, said there was nothing else he could do, and sent me on my way. The actual visit took less than two minutes.

Today I got my bill. The total? $371. $371 for a three-hour wait, followed by a two-minute visit, with no procedures of any kind performed. And that’s with pretty decent insurance.

I especially love the kicker, in that last sentence: “with pretty decent insurance”
http://digbysblog.blogspot.com/2011/07/proud-to-be-american-where-at-least-i.html

Again, this is how the economy must be shaped and structured, to pay the elite their fantastic rates of “compensation”. And, of course, if you are a policy wonk, with the kind of neo-liberal orientation, which addresses “inequality” only as an abstraction, you have plenty of make-work ahead of us, coming up “solutions” to the “problems” of, say, health care. Ditto for the problems of decent schools and neighborhoods, and opportunities for higher education.

115

dbk 07.26.11 at 7:59 pm

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.

116

Rob in CT 07.26.11 at 8:08 pm

A primary challenge strikes me as a poor idea. It will fail, but will harm Obama and help elect Mitt Romney (or some other Republican), whose policies will be the same or worse. I think those who have posted about concentrating on local & state politics have the best general idea. Easier said than done, of course. That’s a long, hard slog.

I also think that, while it can be overdone, pointing out that we’re not going to get the conditions we had in 1950s (with half the world blown to hell) back is important. Our country needs to figure out how to succeed in the world as it is today.

I have a strong sense of what I would do vis-a-vis US tax policy and I suspect most here would like it (I’d junk the code and re-write it as a strongly progressive structure that treated all forms of income the same, had a large standard deduction but no other deductions, credits or loopholes). 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.

117

someguy 07.26.11 at 8:19 pm

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.

118

Ben Alpers 07.26.11 at 8:19 pm

The problem with a primary challenge to Obama is not that it would likely hurt him, but that, given the incredible shallowness of the progressive Democratic bench, that it would likely have no effect at all, thus making progressives look even weaker than we are. Stop thinking Kennedy in ’80 or Buchanan in ’92. There are no Kennedys or Buchanans on the Democratic left in 2011. Think Ashbrook in ’72. That’s why it would be an enormous waste of time and energy.

(FWIW, I think the Reagan primary challenge in ’76 is an example of how, in the medium run, an unsuccessful primary challenge to a sitting present can reap enormous rewards for an ideological movement within a party. Without ’76, ’80 might have looked very different for Ronald Reagan.)

119

elm 07.26.11 at 8:24 pm

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.

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John Quiggin 07.26.11 at 8:37 pm

The primary challenge idea wasn’t presented because I’m convinced it’s a good one, just that I couldn’t think of anything better. And, sad to say, the comments thread doesn’t suggest that I missed anything obvious.

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 and continue to focus on the same old culture wars. But experience shows that what seems bizarrely American today is all too likely to be the norm in Australia and elsewhere in 10 or 20 years time.

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elm 07.26.11 at 8:38 pm

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.

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Morgan Warstler 07.26.11 at 8:54 pm

“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 and continue to focus on the same old culture wars. “

Ok then, never mind.

Those in the 90-99% haven’t LOST anything. Nothing has been sucked away.

But your mistake is thinking that they are only 9%. The A power is much much larger. Lots of folks spend years in the top 80%, 90%, even 99%. They all have an allegience to their “comfy club.”

What you are after are the top .1% the folks who never leave the gilded space. And it’s the bottom 6 deciles or so that have given it all up to the top 1%.

You need to be far more inventive.

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Watson Ladd 07.26.11 at 8:56 pm

@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.

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Andrew F. 07.26.11 at 9:03 pm

1. How much of an increase to federal revenue would a 90% marginal rate on income over 357,000 provide?

2. I’d also think that, at 90%, you’d be substantially reducing an individual’s incentive to work to earn above that 357,000 mark. How would that reduced incentive manifest itself?

3. 90% seems rather arbitrary. Why are we taking 90 cents of every dollar earned above 357k? What’s the justification for this number, either from a fairness perspective or a utilitarian perspective?

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Anonymoose 07.26.11 at 9:09 pm

@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?

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Henri Vieuxtemps 07.26.11 at 9:16 pm

How would that reduced incentive manifest itself?

The hope is that it’ll manifest itself by letting at least some non-sociopaths to move up the ladder.

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Chris Bertram 07.26.11 at 9:23 pm

_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.

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someguy 07.26.11 at 9:51 pm

Chris Bertram,

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

Take down the barriers and you will end up with more mixed neighborhoods. At the margin a number of ambitious people will take advantage of the freedom and find it easier to improve their lives. In the long run it might not last but the long run is a long time, in the meantime people’s lives would be better, and if we define neighborhoods as purely positional, there is ultimately nothing we can do to change the composition.

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Chris Bertram 07.26.11 at 10:20 pm

_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.

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chrismealy 07.26.11 at 10:24 pm

The point of high taxes isn’t to raise revenue. It’s to take power away from plutocrats. Our elite’s been doing a terrible job of running things lately anyway. Let’s see how elite they are without their money.

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David Carlton 07.26.11 at 10:46 pm

” . . . 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

Lee A. Arnold 07.26.11 at 11:02 pm

President Obama must stand firm on more revenues. It goes beyond the usually-stated issues. It will start to reverse the conversation.

The President ought to veto any bill whether from House or Senate that does not raise revenues on the richest. Then invoke the 14th amendment to raise the debt ceiling anyway. Make them hopping mad, let them try to impeach, and run with it into the next election. Who cares. This is fun. Hold the line. They are nuts.

Perhaps it really ought to be pushed into the next election, so that the whole country can vote on it. A national decision: Should we raise taxes, a little, on the rich? What are the poll numbers on that? 70% yes?

Why does this work? Because Obama is right about this, on the substance. Long-term, revenues must be raised. We are not going to throw more Grannies onto the streets.

After the debt ceiling is lifted, let’s also downgrade Standard and Poor. Previously they have been imbeciles. Let the stupid capitalists try to find a better bargain without them, those clods!

If the President holds firm, the election will turf-out some Republicans. It’s the only way out, now. You are handed a big stick, start beating them at the polls.

POn the other hand if the President caves, he is finished. Then no one will ever believe another word he says, and he certainly will not win re-election.

However a wrench in the works is that the Dem primaries may move nuttily left. This could make the independents scared that martini socialists are overrunning the place. Look at the Dem’s discontent with Obama! Throughout the internets commentarium, many Democrats misinterpret Obama’s intentions and ignore his constraints, while wanting to see the rise of some progressive billboard campaign that could never win an election. It is as if the parting on the Right is to be accompanied by a parting on the Left. And the beards have all grown longer overnight

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bob mcmanus 07.26.11 at 11:46 pm

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.

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bob mcmanus 07.26.11 at 11:50 pm

132: Oh

After the debt ceiling is lifted

After August 2, Obama/Geithner goes 14th or coin seignerage or starving granny the debt ceiling may not get lifted until January 2013. What, the frothing at the mouth crazies are going to impeach Obama while simultaneously passing a bill he likes? Maybe not.

Canned fruit and water.

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Barry 07.27.11 at 12:23 am

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.

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John Quiggin 07.27.11 at 1:08 am

@David Carlton: I can’t now find the numbers I recalled when I posted the comment. This source gives a 28 per cent decline in median net worth from 2005 to 2009, and I think the peak would have been in 2007

http://pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-highs-between-whites-blacks-hispanics/3/

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elm 07.27.11 at 1:14 am

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).

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Andrew F. 07.27.11 at 1:36 am

Henri @125: The hope is that it’ll manifest itself by letting at least some non-sociopaths to move up the ladder.

Because people who are motivated by money – and are less motivated by 90% less money – are sociopaths? Come on.

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mw 07.27.11 at 1:39 am

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.

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someguy 07.27.11 at 1:43 am

Chris Bertram,

I was thinking of middle class as in income quintile.

But if I think of it as within 25% more less than median income we could certainly have a bigger middle class.

But what if a good part of what makes a middle class neighborhood desirable is a decent commute, good schools, a low level of crime, attractive and usable public spaces etc. Not just the extra material goods afforded by middle class.

And if it is the extra goods how middle class is the American poor vs say the median Italian or Spainard which are relatively very well off vs the rest of the world.

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Watson Ladd 07.27.11 at 1:44 am

@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.

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Barry 07.27.11 at 2:09 am

You keep using theories and hypothetical examples; I’m pointing out that under the circumstances in question, it doesn’t seem to matter.

Are you an econ student?

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garymar 07.27.11 at 2:15 am

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?

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K. Williams 07.27.11 at 2:53 am

“can watch their living standards being sucked away by the ultra-rich”

But the problem is that most Americans’ living standards aren’t “being sucked away by the ultra-rich.” Americans today are, as a group, healthier, better-educated, have better health care, live longer, and live in bigger houses than they were/did in the 1970s. The air is much cleaner, as is our water (thanks to the Clean Air and Clean Water Acts, and the end of acid rain.) The quality of food easily available to middle-class households is enormously better than it was in the seventies, as for that matter is the quality of the consumer products people buy. The percentage of households earning less than $30,000 (inflation-adjusted) has not risen substantially since the late 1970s, while the percentage of households earning more than $100K has roughly doubled. There are a host of issues that make middle-class life in America worse than it should be — a number of which Matt alluded to in his post — but anyone campaigning on the idea that life for most Americans is worse than it was during the heyday of American unionism is fighting a losing battle (and this isn’t even to mention the myriad non-economic ways, pace shah8, in which life has improved).

The other truth that isn’t being mentioned here is that most of the gains of the top 1% have come at the expense of people in the top 10%. That’s where the big shift in income has occurred. There has not been a huge shift from the middle class to the top 1%.

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Marc 07.27.11 at 3:08 am

#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.

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Lee A. Arnold 07.27.11 at 3:12 am

K. Williams #144: “There has not been a huge shift from the middle class to the top 1%.”

It has not been insignificant. There is some transfer of income upward with paying-off the national debt to the bondholders.

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elm 07.27.11 at 3:38 am

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.

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K. Williams 07.27.11 at 3:38 am

“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 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.

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K. Williams 07.27.11 at 3:42 am

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.

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elm 07.27.11 at 3:44 am

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.

Median income has stagnated in the U.S.; that hasn’t happened in the rest of the developed world. Yglesias points out that U.S. median income is still comparatively high, but it isn’t growing. If it stagnates for another decade, that comparison isn’t going to look so good anymore.

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John Quiggin 07.27.11 at 3:48 am

@KW That’s not what the WSJ thinks, but I guess they are out-of-touch lefties

http://online.wsj.com/article/SB10001424052748703440604575495670714069694.html

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Satan Mayo 07.27.11 at 4:11 am

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.

Could any such evidence possibly exist? Also, what does “living standards” mean? Does it include job security? Probably not.

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ScentOfViolets 07.27.11 at 4:17 am

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 ;-)

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K. Williams 07.27.11 at 4:22 am

“Median income has stagnated in the U.S.; that hasn’t happened in the rest of the developed world.”

Really? Here are the annualized rates of growth in median income for a number of developed countries over the last twenty years or so, according to the Stiglitz/Sen commission: http://www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf. First number is growth rate between mid-1980s and mid-1990s, second growth rate between mid-1990s and mid-2000s.

Germany: 1.2 0.6
US: 1.0 0.4
France: 0.5 0.8
Japan: 1.8 -1.0
UK: 1.9 2.1
Canada: -0.2 1.1
Denmark 0.9 0.9
Sweden 0.9 2.2

Do you really see any evidence in those numbers of some meaningful difference between the performance of the US economy and that of other developed countries in terms of median income? Clearly not.

155

K. Williams 07.27.11 at 4:29 am

“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?

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Tony Lynch 07.27.11 at 4:33 am

How mightr we start to constrain, then roll back, the power of the super-rich? We need politicians willing and able to do this, and we need them to be available to us to be elected.

One preliminary idea: ensure that there is a direct connection between the material rewards available to politicians because of their power, and the levels of such rewards as they are generally available across the community.

In fact, why not aim at Modal Justice?

The idea is that politicians’ level of remuneration be indexed to the modal income of the community. Index to the mode, not the median or mean, because in right skewed income curves that will be the lower amount (and in our societies will generally approximate the minimum wage); and because it means any increase in politicians returns depends on their ensuring the modal income rises.

A full account—rather than an example meant simply to stimulate thought—would, of course, have to look at inequality more generally. But one might hope that politicians remunerated as I have suggested, might be motivated to do something about that issue.

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ScentOfViolets 07.27.11 at 4:38 am

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.

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andthenyoufall 07.27.11 at 4:46 am

Great job cherry-picking the data. It is very clearly stated right there in the line below “United States” that the average for the OECD was 1.5 in the first period, and 2.0 in the second period, so the US is below after in both periods, and markedly below average in the second period.

Put differently; in the OECD as a whole median incomes increased 41% from 1985 to 2005, while in the US median incomes increased 16%.

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elm 07.27.11 at 5:22 am

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.

160

VasVas 07.27.11 at 10:06 am

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

Wrong. Germany, Denmark, Sweden, have many many more middle class neighborhoods. It’s not a “positional good”, it’s akin to food: Clean streets, parks, etc. It has become a positional good in the US because of the existence of so many f*ed up neighborhoods, which is an effect of the underfunding of public goods and the VAST income gap.

Amazing how people rationalize the f*ed up characteristics of US society.

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VasVas 07.27.11 at 10:08 am

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.

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Andrew F. 07.27.11 at 10:58 am

I’m seeing three arguments for a 90% marginal rate in here:

(1) The earnings from those in lower brackets are (somehow) being shifted to those in higher brackets; a 90% rate would (somehow) encourage those earnings to be shifted back to those in lower brackets;

(2) A 90% bracket would reduce the power of the super-rich;

(3) A 90% bracket would pay for things like higher education and other services;

No one has yet managed to answer the three questions in 124.

(1) is probably false. I don’t see how a high marginal rate would affect the price of labor for occupations that fall below that bracket. In fact, I could see a perverse effect wherein more money is spent on the 90% bracket, as the value of current compensation in that bracket would be immediately discounted.

(2) is true to a limited extent, and even so I don’t see our problems as deriving from too much influence by the super-rich.

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

163

John Quiggin 07.27.11 at 10:58 am

K Williams, you seem very keen on ignoring the recent data, which is quite unequivocal – median household income in the US has declined over the last decade.

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Walt 07.27.11 at 11:21 am

You’re #1 seems pretty obviously true, and coincided with the empirical evidence, Andrew F.

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Steve LaBonne 07.27.11 at 11:29 am

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.

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Marc 07.27.11 at 11:29 am

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

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Marc 07.27.11 at 11:37 am

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.

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Henri Vieuxtemps 07.27.11 at 11:54 am

Because people who are motivated by money – and are less motivated by 90% less money – are sociopaths?

90% is a marginal rate. 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? Do you really want a person like that to make important business and financial decisions that may affect thousands or even millions of people?

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VasVas 07.27.11 at 12:29 pm

“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.

170

K. Williams 07.27.11 at 1:46 pm

“Great job cherry-picking the data. It is very clearly stated right there in the line below “United States” that the average for the OECD was 1.5 in the first period, and 2.0 in the second period, “

It’s not cherrypicking the data — it’s making sure we’re comparing countries with reasonably similar GDPs and of reasonably similar sizes. The OECD includes Ireland, Greece, Spain, Portugal, etc. — do you really think their growth rates in median income over this period tell us something interesting about how the US was doing relative to its competitors?

171

someguy 07.27.11 at 1:55 pm

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.

172

Chris Bertram 07.27.11 at 1:56 pm

I’ve not got time to go and look up the data on this, but it strikes me that the use of median income for cross-country comparison is _potentially_ seriously flawed. The reason for picking the median as a meaningful measure in the context of the US is that the mean is so seriously distorted by the share of income going to the super-rich. But a country where the benefits from growth flowed disproportionately to the least advantaged might also show little or no growth in median income. Putting that country next to the US and saying that they performed similarly would be grossly misleading.

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K. Williams 07.27.11 at 1:58 pm

““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.

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K. Williams 07.27.11 at 2:05 pm

“90% is a marginal rate. 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”

Henri, you’re completely missing the point. The problem with the 90% rate isn’t so much that it prevents people who are already super-rich from becoming richer (although 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. It’s not a question of money, it’s a question of control — people want to be rewarded for their labor, and they want to have some measure of control over what happens to those rewards (in other words, they want to decide whether they go to charity, or to a new house, instead of having the state decide). At 50%, or whatever, you still have that control. At 90%, you’re essentially a servant of the state — 54 minutes of every hour is being taken from you. It’s not sociopathic to be offended by this — on the contrary, I think it’d be deeply weird not to find this viscerally offensive.

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Watson Ladd 07.27.11 at 2:14 pm

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.

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Lee A. Arnold 07.27.11 at 2:27 pm

You should separate standard of living and quality of life indicators, which are getting mixed-up here. There is no agreed-upon distinction, but they are usually considered differently. “Standard of living” is usually spoken of partly as the available basket of consumer goods, and there have been recent moves to include quality improvements within the idea; for example computers are at the same price point as before but so much more powerful, etc. “Quality of life” is a much broader range with more subjective data, and may include environmental amenities, time spent in automobile traffic, and all sorts of things. Stiglitz and Sen have a nice list, and Hazel Henderson was the leader and has been working on it for decades. Most people you talk to now in the U.S. would say that quality of life is falling, due to crowding, households are now double-earners and are working more hours to keep up with the same objectives as before, such as having a new car, etc. Sometimes income growth stands as a surrogate for these complaints.

If income in one sector (e.g. finance) grows without growth in, say, median income, then to justify it economically you would have to point to ways in which the development of financial products has improved labor productivity (without the requisite growth in wages) or has improved the quality of consumer goods. As far as I know, every economist who has looked at this to-date says that it is false to claim that REAL investment leading to improvements in goods and services has been INCREASED by the recent financial innovation. After the recent debacle, you could argue the opposite.

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Henri Vieuxtemps 07.27.11 at 2:33 pm

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?

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SamChevre 07.27.11 at 2:37 pm

I think a lot of people would like to have … the ability to support a family on one income.

You can have an male-female egalitarian society, or you can have the ability to support an average household on one income. You can’t have both.

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Marc 07.27.11 at 3:02 pm

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.

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Marc 07.27.11 at 3:09 pm

@174: A progressive tax code can act as an incentive for a variety of things. A corporation has a choice: they can give their profits in salary to the CEO or they can pay their median employee more money. The entire point of a steep progressive tax code is *not* to collect all of that tax. It is to ensure that the corporation chooses to distribute their profits broadly because a society structured in that way is a healthier one than one where the bulk of the money goes to a few.

When the money flows to a few they don’t spend it; instead they chase high yields, leading to speculation and bubbles. It isn’t a coincidence that high inequality has been attached historically to high volatility and speculative bubbles. This isn’t new; try reading Theory of the Leisure Class.

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K. Williams 07.27.11 at 3:15 pm

“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.

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Thomas Jørgensen 07.27.11 at 3:30 pm

Marc: the societies with high birth rates and gender equality did not get there by making one income families workable. They got there by making being a working mother workable. This support takes various forms, making quality childcare available and affordable, keeping the working week short enough that children still see their parents even if they are working, paternity and maternaty leave for parents with infants, and so on. (I particularily like the norwegian policy on this. Paternity and maternaty leave are equal in length and non-transferable. This counters employee discrimination against women because workers of either gender end up taking childcare leave, so you cannot avoid having your workers do this by avoiding femal workers) .
The places where the ideal is the one-stay-at-home parent and one working one are exactly the places where fertility crashes the hardest.

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ScentOfViolets 07.27.11 at 3:31 pm

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.

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ajay 07.27.11 at 3:34 pm

You can have an male-female egalitarian society, or you can have the ability to support an average household on one income. You can’t have both.

Why not? Just because one country has had the one, lost it, and is now heading towards the other?

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Sebastian H 07.27.11 at 3:40 pm

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

186

Walt 07.27.11 at 3:46 pm

It’s K. Williams, back to tell us that the achievements of the middle class were really done by the rich! Thank god we have the rich. The middle class has just been sitting on its ass designing airplanes and writing software and inventing the next generation of medicines. If it wasn’t for the rich coming around and taking their disproportionate cut, why we’d be loving in savagery! Thank you rich!

187

SamChevre 07.27.11 at 3:48 pm

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.

188

roger 07.27.11 at 3:53 pm

K. Williams is right about one thing. Of course we are richer! And the rich are even richer. To slap them with a marginal rate of 90 percent will interfere with not a meal nor a yacht – except on the margins – but it will make us all much richer, in terms of affordable health care, education, and the civil power we can exercise in a democracy. The argument that the middle class is doing fine is, actually, the neo-lib argument, which is why neo-libs ignore the dynamic structure of the economy and of politics and like to shift the focus to atomistic policy problems and solutions, often having to do with deregulating barbers ( a la MY).

The argument should be made positive and Edgeworthian: there is no reason that the qol of the bottom 80 percent should stagnate, or become a ‘little’ better, when it can become a lot better simply by seizing part of the wealth of the upper class (mostly administrators and rentseekers) and distributing it down. There are multipliers to putting in strong disincentives to plutocratic wealth accumulation in capitalism – for instance, private enterprises would correct the absurd income skew that now dogs them, and has made even manufacturers like GE nurture financial/speculative units to make real money. Real money should come from real R and D addressing real problems – for instance, the problems coming up in a world in which the traditional primary products that underlie industry become scarcer and more expensive, and their collective negative externality, ie climate change, becomes an overriding challenge to the Holocene.

There is no reason not to do this. There is nothing positive that a man who is making 100 million a year will not do when he is making 10 million per year, save the kind of profitmaking ventures that have no social utility. There’s no principle involved, either, of course – it is absurd to lament that our 10 million dollar man is, as Grover Norquist once put it, the equivalent of a Dachau prisoner because he only makes 10 million, due to the mean gov.

As soon as K. Williams comes up with a chart showing that millionaires of the 50s and 60s suffered from a host of quality of life issues (they could barely afford dentistry! or multiple marriages!) that were fortunately cured by the new Gilded Age, maybe we can talk of harm. Otherwise, there is no harm. Better lifestyles for all would result, and this is a good thing.

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K. Williams 07.27.11 at 4:09 pm

“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.

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K. Williams 07.27.11 at 4:14 pm

“It’s K. Williams, back to tell us that the achievements of the middle class were really done by the rich! Thank god we have the rich”

No, I’m not saying this at all. I’m happy to stipulate that chance, and social circumstance, has played a huge role in getting today’s rich where they are, and that there are plenty of rich people who create no value at all or indeed subtract value. CEOs are, as a class, highly overpaid, as are Wall Street money managers. That still doesn’t mean that having the state forcibly take 90% of the marginal rewards of someone’s labor is not offensive.

191

LFC 07.27.11 at 4:19 pm

jch @59 – Obama/LBJ

My response.

192

LFC 07.27.11 at 4:21 pm

K Williams @189
You have to look at the percentage of income, not just the percentage of wealth. (The two, of course, being different.)

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ScentOfViolets 07.27.11 at 4:22 pm

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.

194

shah8 07.27.11 at 4:24 pm

You know guys, instead of some unlikely political path (likely to be absolutely repugnant, too) towards a 90% tax rate…how ’bout some inflation? If the problem is that some people have cornered the market on cash and cash influence, why not just make more cash? If we ain’t on the gold standard, or some other stupid standard of physical production, but we’re relying on a barbaric ideology to replicate the gold standard, well, there are substantially unilateral paths towards credit creation. We just have to figure out how to shuffle off what are cultural chains.

195

Lee A. Arnold 07.27.11 at 4:25 pm

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.

196

elm 07.27.11 at 4:30 pm

Here’s the apparent source the statistics K. Williams mentions @ 149 and 189. See Table 3: Share of wealth held by the Bottom 99% and Top 1% in the United States, 1922-2007.

You may be surprised to learn that the conclusions don’t follow the data.

The years 1965 and 2007 were hand-selected with the care I’ve come to expect whenever K. Williams claims anything. The top 1%’s share in 1965 was higher than in 1945, ’49, ’53, ’62, ’69, ’72, etc… I assume that’s why K. Williams chose to misrepresent that year as if it was a baseline.

197

roger 07.27.11 at 4:34 pm

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.

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ajay 07.27.11 at 4:35 pm

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.

No, I don’t think that follows. You could have half of all (hetero) households consisting of a wage-earning man and a stay-at-home wife, and the other half consisting of a wage-earning woman and a stay-at-home husband.

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ajay 07.27.11 at 4:37 pm

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?

200

Marc 07.27.11 at 4:40 pm

@196: wow, that’s pretty amazing. Williams could have quoted a valley (1976 at 19.9%) vs. recent history; instead he took a spike in a volatile number (34.4% in 1965) and treated it as a mean. That’s an….enlightening….debate technique.

201

roger 07.27.11 at 4:40 pm

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.

202

Henri Vieuxtemps 07.27.11 at 4:42 pm

Why is this relevant? I’m not forcing anyone to pay me the money—they’re choosing to

Please, K. Of course you’re forcing them to pay. If not for the police, the army and the navy, it would take exactly 30 minutes for them to show up at your door, kick your ass and take all your stuff. It’s all about who control the police: the guy who ‘earns’ a million, or the average guy on the street.

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.

Nah, I don’t think so. I don’t believe pop-culture celebrities (and that includes Steve Jobs, glamorized electronics salesman) produce any values whatsoever. That’s a different phenomenon altogether. I, for one, would be happy if they spent time doing something useful for a change. I’m sure we can all survive without iPhone 6 and Jurassic Park 5.

203

K. Williams 07.27.11 at 4:47 pm

“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?

204

Bruce Wilder 07.27.11 at 4:49 pm

I love my iPhone. Improved gadgetry is about the only brightspot in this darkening world.

205

Steve LaBonne 07.27.11 at 4:51 pm

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

Fixed that for you, Marc.

206

K. Williams 07.27.11 at 4:51 pm

“I don’t believe pop-culture celebrities (and that includes Steve Jobs, glamorized electronics salesman) produce any values whatsoever. That’s a different phenomenon altogether. I, for one, would be happy if they spent time doing something useful for a change. I’m sure we can all survive without iPhone 6 and Jurassic Park 5.”

Dude, it’s not about survival — it’s about pleasure. People derive enormous pleasure from watching the world’s best athletes perform at their best. That’s an enormous amount of value that’s being created. Millions of kids have derived enormous amounts of enjoyment from reading “Harry Potter.” That’s an enormous amount of social value that J.K. Rowling created. 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.

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elm 07.27.11 at 4:52 pm

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

208

K. Williams 07.27.11 at 4:57 pm

“Williams could have quoted a valley (1976 at 19.9%) vs. recent history; instead he took a spike in a volatile number (34.4% in 1965) and treated it as a mean. That’s an….enlightening….debate technique.”

Yeah, I could have, but it wouldn’t be a very useful comparison, since 1976 (or 1982, for that matter) was at a stock-market trough, while 2007 was a stock-market high, and trough-to-peak comparisons don’t really tell us much that’s interesting. On the other hand, if you want to say that most fluctuations in the concentration of wealth are the result of changes in stock prices — and not of some dramatic shift in power toward the top 1% — I’m happy to agree with you. I don’t think it really supports your “class struggle by the rich” view of the American economy, though.

209

Watson Ladd 07.27.11 at 5:02 pm

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.

210

Lee A. Arnold 07.27.11 at 5:03 pm

Roger #197: “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.”

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, which is exactly why it is opposed by the right. This whole idea that you need to always get what you want not only invalidates a major Rolling Stones song, but is short-sighted and deadly to the New Deal, given the current reign of Reaganomics as the only articulated economic theory.

211

Lee A. Arnold 07.27.11 at 5:09 pm

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.

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someguy 07.27.11 at 5:11 pm

elm and Marc,

LOL.

The pre 200o average for wealth share based on table 3 is 32.3%. The average for 2000s is 34.1. Yet somehow K Williams is the one being dishonest. LMAO.

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Henri Vieuxtemps 07.27.11 at 5:17 pm

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.

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elm 07.27.11 at 5:18 pm

someguy @ 211

Here’s K. Williams original statement (emphasis mine):

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.

Here’s the actual data (in section Table 3: Share of wealth held by the Bottom 99% and Top 1% in the United States, 1922-2007.

Also from that link: “as of April 2010, it looks like the wealth distribution is even more unequal than it was in 2007″.

I’ll also point out that your “pre-2000 average” includes the high-inequality 1920s, 1930s, and 1990s. It appears that you’re comparably honest.

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K. Williams 07.27.11 at 5:22 pm

“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.

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Marc 07.27.11 at 5:29 pm

@211: there is a lot of noise in that statistic, so either the thing being measured is too variable to be useful or the instrument is flawed.

In other words, I wouldn’t use that data to claim much of anything. I hope you wouldn’t either. There are other statistical tools which are less sensitive to market gyrations.

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roger 07.27.11 at 5:29 pm

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.

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Lee A. Arnold 07.27.11 at 5:34 pm

K. Williams: “Nor are the super-rich the reason why median income growth in the US has slowed so much.”

You would attribute it to (1) globalization causing displacement of workers without a compensatory framework, and (2) technological innovation accelerating beyond the educational processes of most people? For 40 years or so? Or has there also been a change in government policy toward labor gains, in favor of another class?

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Bruce Wilder 07.27.11 at 5:37 pm

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.

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Watson Ladd 07.27.11 at 5:38 pm

Henri,

So J.K. Rowling made millions how? The problem isn’t the 90% tax bracket as slavery: it isn’t, and I agree that it isn’t. The problem is with the idea that social relations under capital are coercive as opposed to unfree, or the idea of right. You seem to think that all fortunes are ill-gotten gains, which just doesn’t seem right. The state in the US maintains a monopoly on force rather effectively, so it would seem that only the state can steal and if we abolished the state we would have free capitalist relations which would result in equality. Maybe I’m reading too much into your argument, but I’ld like to see a broader discussion of capitalist society to back it up anyway.

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Henri Vieuxtemps 07.27.11 at 5:49 pm

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

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Steve LaBonne 07.27.11 at 5:55 pm

It’s particularly funny when propertarians try to make “arguments” based on the most obviously artificial, state-constructed and enforced forms of “property” like copyright. The gang that couldn’t argue straight.

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ScentOfViolets 07.27.11 at 5:55 pm

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 ;-)

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Henri Vieuxtemps 07.27.11 at 5:56 pm

No, I’m not saying that if we abolished the state we would have free capitalist relations which would result in equality. I’m simply saying that the idea that someone – naturally somehow, without any coercion – can earn millions, is ludicrous. They use force to take millions, and so it would be only natural to use force to get at least some it back.

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Bruce Wilder 07.27.11 at 5:58 pm

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?

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Lee A. Arnold 07.27.11 at 6:00 pm

Roger #215 — It is all an empirical and political question. “Medicare went the other way?” When? The politics of Medicare at this moment is that it has 70% or more in support, and it is untouchable in any practical sense. Obama is offering the Repubs a deal because it shuts them up about deficit politics for 3 to 5 years, but everyone knows that Medicare will be instantly increased again in the future, in the moment that Grandma can’t afford her meds again. (The Republicans, you will remember, were responsible for Medicare Part D.) What are they gonna do: stop going to Grandma’s house for Thanksgiving? An empirical question, you say? Exactly. Medicare isn’t disappearing now, or ever. Or at least until the point where medicine develops into being as cheap as chewing gum.

This whole “Obama is destroying Medicare!” stuff is why the Left is going to self-immolate.

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. The non-profit will be obviously the better deal for most buyers. After that, the biggest non-profit will have the largest risk-pool and therefore the cheapest policy plan, and it is going to become effectively a national single-payer. Whether it is gov’t or NGO or quango is immaterial. Consumer logic will win the day in any case. You end up with a healthcare system like every other intelligent country. The best shot at universal healthcare is to fight for the implementation of ACA.

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Steve LaBonne 07.27.11 at 6:06 pm

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!

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Lee A. Arnold 07.27.11 at 6:06 pm

Bruce #225 — And as you may know, old buddy, J.K. Rowling appears to share your opinion.

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K. Williams 07.27.11 at 6:13 pm

“‘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.

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Lee A. Arnold 07.27.11 at 6:15 pm

Steve La Bonne #227: If you think the profit plans don’t see the writing on the wall, then you aren’t thinking like a capitalist! Capitalists shun genuine market competition, if they can. The basic message of ACA is to go look for economic rents in another line of work.

One thing we might want to watch is the input of private players at the state levels, since the state and local gov’ts are far more corrupt than the U.S. federal gov’t, the state legislatures are more corrupt and bought-off, and since ACA lets the state insurance commissioners structure the state exchanges, within the broader federal guidelines.

And of course, some states are refusing to implement ACA and set-up the exchanges — which may allow the Feds to intervene, I am not clear on that point.

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Steve LaBonne 07.27.11 at 6:18 pm

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.

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Steve LaBonne 07.27.11 at 6:24 pm

I point out to Lee as well that Massachusetts is not an encouraging sign for the impending doom of the profit makers. He needs to explain why not. And her also needs to take note of the fact that Romneycare has done nothing, or less than nothing, to put the brakes on rampant cost inflation- something that MUST happen, in the not very distant future, at the national level.

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K. Williams 07.27.11 at 6:33 pm

“(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!

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Lee A. Arnold 07.27.11 at 7:01 pm

Steve LaBonne #232: “Romneycare has done nothing, or less than nothing, to put the brakes on rampant cost inflation”

No, I haven’t followed Masscare, but I remember that an NBER study last year showed that Masscare reduced the length of stays in hospital, reduced the amount of hospital treatments for preventable complaints, and reduced the number of in-patient admissions from emergency rooms. I don’t have the link in front of me but it was carried by DeLong. Another more recent study from about 2 months ago showed the same sort of thing: after an increase in initial doctor appointments, a reduction in spending on avoidable problems.

I don’t think the cost of healthcare is going to drop absolutely, but given the fact that Masscare doesn’t have anything in the way of cost controls to begin with, not even ACA’s weakened provisions — e.g., Massachusetts made no limits on administrative overhead, etc. — in the most expensive health insurance market in the country, these are good signs that the cost-curve can be bent downward anyway, for many reasons, some of them quite obvious reasons: e.g. preventative or early diagnosis and treatment, etc.

I also don’t understand why Masscare’s experience is a guide to the national possibilities, when the emergence of a nation-wide risk pool is exactly what is necessary to get demand-side costs down far as possible.

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Steve LaBonne 07.27.11 at 7:11 pm

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.

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Steve LaBonne 07.27.11 at 7:17 pm

Lee, the way to get a nationwide risk pool that will indeed control costs is simple and obvious- Medicare for all. The most cost-efficient systems in the world are those with direct government provision of services like the UK. The next most efficient are government single-payer systems (Medicare is by far the most efficient health insurer in the US). The least efficient are those with a large private component. The latter (eg. Switzerland and Germany) show no tendency at all to evolve toward more efficient single-payer systems; quite the contrary, the latter are under constant assault from the international plutocratic / neoliberal elite. ACA is a diversion from the path we need to follow, not a step along it.

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Lee A. Arnold 07.27.11 at 7:55 pm

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?

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Steve LaBonne 07.27.11 at 8:06 pm

Medicare for all wasn’t politically possible, so it is hard to see how ACA can be a diversion from an impossibility.

It’s even harder to see how going off in the wrong direction gets you closer to your goal.

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. Instead we now have Village idiots talking about RAISING the Medicare eligibility age, which wouldn’t even save the government money. (Obama likes the idea of getting 66 and 67 years olds into his exchanges.) This illustrates how ACA is a step, not even sideways, but backwards, one that set back the cause of serious health care reform for yet another generation.

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ScentOfViolets 07.27.11 at 8:33 pm

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?

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roger 07.27.11 at 10:09 pm

Obviously, the politically possible is a matter of politics. For instance, in 2001, I would have predicted that it was politically impossible for a black man with a Kenyan name that sounds much like Osama to become president. And in fact I can’t imagine a pundit who would have said that was possible in 2004, when Bush became the beneficiary of all that political ‘capital”.

What happens, sometimes, is that you design your defeats. Civil Rights legislation was impossible in the late fifties in the Senate, but every time a new civil rights bill emerged, it was defeated by a lesser margin. If Obama’s party had gone into the 2010 election as the party that proposed extending Medicare and was defeated, I don’t think – and my opinion on the politically possible is as good as yours – that they would have suffered the biggest setback in the House that the Dems have experienced in a century. Instead, they designed a victory that is leading, via Obama’s ‘negotiations’, to less health care support for Americans from the government rather than more.
ACA was a technocrat’s dream, and a political disaster, that we are supposed to believe shows the genius of Obama and his liberal side. This is silly. It is not a good program, it will not lead to any single payer program, its aftereffects have the noxious effect of putting Medicare at risk. It is a case study in bad politics and bad policy. I don’t think we should take advise from those who led the Dems into the disaster of 2010. Obama may be re-elected, but he has jettisoned what the Democrats were still barely for. And he has done so because he is part of the same continuum that produces what is “politically possible”.

What we need is what is politically impossible, meaning what we can create outside of the toxic DC atmosphere. I imagine if Obama loses – and certainly he will not have the work and enthusiasm of tens of thousands of people who worked for him last time – that too, in the name of the politically possible, will be blamed on them. Which is just funny. Discourage your base, then blame them for being discouraged. It is the politics of morons, or third way Dems.

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K. Williams 07.27.11 at 10:36 pm

“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.

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ScentOfViolets 07.27.11 at 10:48 pm

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. Same with raising taxes on people making over $250 K/year, getting out of stupid and money-wasting imbroglios like Afghanistan, etc.

In short, it is you and yours who are way out of the mainstream, not roger. But then, you already knew that, didn’t you troll? Now why don’t you just slink back where you came from until you’re willing to invest a little effort in your asshattery?

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Tom Bach 07.27.11 at 11:30 pm

K. Williams

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Tom Bach 07.27.11 at 11:32 pm

Here’s the rest:
I think your paintings prove that you are far far to the left of the average American voter; on the other hand, for what it is worth, I think roger is correct.

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Andrew F. 07.27.11 at 11:53 pm

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.

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Lee A. Arnold 07.28.11 at 12:22 am

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. You need a virtual war to make it happen, and then, you don’t have to twist arms. Otherwise the Senate is 100 stuffy, mini-potentates each of whom figures he can do a better job than you as President. If an asteroid hits Washington, one of them may survive to run the joint. They are just waiting for you to slide your ideas under the mat, so they can slow it down and deliberate. This whole idea that a new President can magically go against the norms of collegiality in Washington is pure ridiculous masturbatory fantasy. Of course, frequent masturbation probably keeps your prostate healthy, not that there’s anything wrong with that. The legislative history on ACA is crystal clear. The White House got the doctors and big pharma on board, and passed it off to Congress, who had been working on the ideas for decades. One of those ideas was indeed the public option, so reach into your grab bag of smart tricks, and name the world-shaking threats Obama could have made against 20 or so Democratic Senators who refused to sign on for it. What’s he gonna do, promise to campaign against them? Name the horrifying plagues he was to visit upon Ben Nelson and Joe Lieberman, the vocal and diehard holdouts. Because it wasn’t going to happen. What does what the majority wants, have to do with it? 70% of Americans currently want long-term budget plan that has revenue increases. Do you see it happening yet? Not only did a majority of Americans favor the public option, a majority still DO. That is why we are finally going to get it. If we can prevent clowns from screwing it up because they can’t negotiate anything outside their purist intellectual paradise and because they didn’t get all they wanted the first time. If you ask for a lollipop when you get your next injection, maybe it will feel better.

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Lee A. Arnold 07.28.11 at 12:35 am

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.

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Lee A. Arnold 07.28.11 at 12:50 am

ScentofViolets: “forget the first 1,000 times this sort of “analysis” was offered up in lieu of evidence?”

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.

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ScentOfViolets 07.28.11 at 12:50 am

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 :-(

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Daniel De Groot 07.28.11 at 1:05 am

Count me under those who sees the primary purpose of high marginal taxes are a form of power redistribution.

You simply cannot have anything like a just or fair society that uses capitalism as its economic system without a strong redistributive mechanism from winners to losers.

As long as money is exchangable for power, and power can be used to extract even more money, then those with money will, absent a countervailing force, use that money to extract even more money. Winning begets more winning. Let the accrued winnings pass generationally and you very quickly have a bona fide aristocracy on your hands.

Sayings like “you need money to make money” and millionaires remarking that “the first million was the toughest” emerge from this reality. There’s a reason that social mobility is declining and drastically lowered top tax rates (and reduced estate taxes) must be an important part of that story.

251

ScentOfViolets 07.28.11 at 1:07 am

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.

252

Steve LaBonne 07.28.11 at 1:09 am

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

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.

253

Bruce Wilder 07.28.11 at 1:21 am

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.

254

Watson Ladd 07.28.11 at 1:23 am

Henri,
Where was the force for Mrs. Rowling? And as for rents, they are only rents in retrospect. Before the discovery they are a good idea to incentivize its finding. Sure, she benefited from being able to be exclusive about the sale of something she created. What about Google, who don’t need copyright to protect their wares. What coercion lets them take in millions? You seem to be arguing that force was used because absent force people can’t earn this much, while I’m asking you to justify it by showing me the force in this situation.

255

Lee A. Arnold 07.28.11 at 1:27 am

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.

256

ScentOfViolets 07.28.11 at 1:29 am

The problem here, Steve, is that people like Lee want to come up with theories to explain away certain unpalatable facts.

Now, there’s nothing wrong with trying to assemble some sort of coherent theory that concisely and (hopefully) elegantly explains the facts; that’s supposed to be a part of my day job, after all.

What’s wrong – and where our educational system let’s people like Lee down – is when these people have no idea how to verify their theories, or indeed, any idea of how to go about testing them for validity in the first place. The very best they seem to be able to do, the absolute top of their game – is to challenge other people to prove them wrong. Frankly, I suspect that even if Lee was 100% correct and he had all the relevant facts at his disposal, he still wouldn’t be able to make a good pitch for what he’s selling. Sigh.

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.

257

ScentOfViolets 07.28.11 at 1:32 am

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?

258

Andrew F. 07.28.11 at 1:47 am

Bruce @253: Nope. Three things: (1) Production (and demand) from foreign countries – which is enabling some of the biggest corporations to make money at the moment; (2) Technological improvements in production; (3) A much larger labor force.

Part of the effect of (1) and (2) is a decline in “middle-skill” jobs, which bolstered the middle class, and growth in “low-skill” and “high-skill” jobs. And that contributes, of course, to inequality.

The strongest argument for the 90% idea is that either (1) it will redistribute wealth to lower earners via free higher education, health care, better unemployment insurance, etc. or (2) it will be put to ameliorating the conditions that led to this in the first place – enhancing class mobility, perhaps, or by some combination of (1) and (2).

The other arguments… eh, much less persuasive.

But there’s a LONG way to go to persuading me anyway – others may think fasters than I do – that 90% marginal rates would be helpful to either (1) or (2), while not carrying a price that outshines the purchase.

259

K. Williams 07.28.11 at 1:50 am

“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.

260

K. Williams 07.28.11 at 2:03 am

“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. Given that Lieberman and Nelson quite explicitly said that they would not support Medicare buy-in, and that the number of senators who supported the public option was well less than 60 (indeed, fewer than 50 were willing to support it via reconciliation), the burden is on you to demonstrate that arm-twisting would have had any effect at all. Given that the academic evidence suggests that presidential leverage over Congress in general, and over senators in particular, has radically diminished over the years, I’d be interested to see how you’d demonstrate this.

“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.”

Of course presidents have more leverage over members of the House of Representatives than they do over senators. Members of the House are more dependent on coattails. They have to run every two years, not every six years, so they require more help from the party and the president in order to win. They typically have less legislative experience, and do not conceive of themselves as independent bases of power, as senators do. All of this stuff is uncontroversial. Really, do you know anything about American politics?

261

Lee A. Arnold 07.28.11 at 2:48 am

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

262

Bruce Wilder 07.28.11 at 3:20 am

@258: “skills”

In other words, you’ve got nothing, but pure b.s. Good to know.

263

Myles 07.28.11 at 7:30 am

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.

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Andrew F. 07.28.11 at 12:19 pm

Bruce @262: You’re too funny dude. See this paper, and perhaps peruse this article. Or just continue to scoff at different viewpoints. Cognitive dissonance can be hard.

265

Cranky Observer 07.28.11 at 12:26 pm

>> 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

266

Walt 07.28.11 at 1:02 pm

Watson Ladd, try opening up your own printing company that prints copies of J. K. Rowlings books, and see how long it takes before you become acquainted with the coercive force of the state.

267

Walt 07.28.11 at 1:10 pm

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.

268

Steve LaBonne 07.28.11 at 1:12 pm

It’s also pretty hard to avoid belly laughs at the expense of people like Andrew if you know the first thing about how executive compensation actually gets determined in the US.

269

Watson Ladd 07.28.11 at 2:02 pm

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?

270

Steve LaBonne 07.28.11 at 2:33 pm

What else spends other people’s money?

You do, unless you have a printing press in your basement.

271

Lee A. Arnold 07.28.11 at 2:55 pm

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

Andrew F. 07.28.11 at 3:20 pm

Walt @267, I think you’re confusing me with Myles. Steve LaBonne had raised the idea that income is being shifted from the lower classes to the highest earners via increased prices for certain goods and services. I disagreed – Bruce then asked how a shift in income share could be explained without a rise in prices of those goods and services – and I replied. Nothing, at an explicit level anyway, to do with whether compensation for executives is appropriately determined.

And look, I don’t disagree with the general sentiment that income/wealth inequality is a bad thing. What I’m skeptical about is a 90% top marginal rate as a fix.

273

Walt 07.28.11 at 3:44 pm

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

274

ScentOfViolets 07.28.11 at 4:20 pm

“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.

Silly troll, I’m debunking your idiotic claim that roger’s beliefs are way out of the mainstream “lefty” beliefs, or that your bizarre little world is anything like mainstream belief rather than far right.

Which I have done, troll. Funny how you snipped that bit of your flailing about.

275

ScentOfViolets 07.28.11 at 4:31 pm

“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.

276

ScentOfViolets 07.28.11 at 4:36 pm

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

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

Would you at long last put up some goddamn stinking proof for this statement or failing that, just shut the hell up? Or is this where you stick your tongue out and say “Neener, neener, let’s see you make me?”

Of course, we already know what you’re going to do, and it’s neither right, nor honorable, nor even remotely dignified :-[

277

ScentOfViolets 07.28.11 at 4:39 pm

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.

278

K. Williams 07.28.11 at 4:46 pm

“Silly troll, I’m debunking your idiotic claim that roger’s beliefs are way out of the mainstream “lefty” beliefs, or that your bizarre little world is anything like mainstream belief rather than far right.”

No, see, let’s do a little chart:

My Beliefs:

ACA better than no ACA; better with public option than not, but even without still preferable to 40 million Americans going without health insurance
Clinton-era tax rates on 250K+, higher rates on millionaires

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%

The top beliefs are mainstream, mainstream Democrat and arguably mainstream American voter. The bottom beliefs are far to the left of the mainstream. The top ideas are also politically viable. The bottom ones are not. Anyway, I’m out of here. You can keep mindlessly calling people trolls and saying “where’s the evidence?” on the other thread.

279

Lee A. Arnold 07.28.11 at 4:49 pm

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

Not useless, less than useless.

280

ScentOfViolets 07.28.11 at 5:59 pm

What!?!?! No evidence from these wights?

I’m shocked, I tell you, shocked :-0

281

K. Williams 07.28.11 at 6:49 pm

“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.

282

Lee A. Arnold 07.28.11 at 6:51 pm

@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?

283

ScentOfViolets 07.28.11 at 7:12 pm

@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 :-(

284

John 07.28.11 at 7:20 pm

Oh look scentofviolets, your contribution on the Chris Bertram post was to link to a video of obnoxious pro life campaigners and muse on your racist family, this isnt a peer reviewed article your critiquing and your burden of proof seems to fall only one way. Having said that I havent been folowing this thread closely since the early 100s so perhaps Im missing something.

285

ScentOfViolets 07.28.11 at 7:22 pm

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?

286

ScentOfViolets 07.28.11 at 7:31 pm

Oh look scentofviolets, your contribution on the Chris Bertram post was to link to a video of obnoxious pro life campaigners and muse on your racist family, this isnt a peer reviewed article your critiquing and your burden of proof seems to fall only one way.

The fact that you think evidence, cites, statistics, a coherent and rational argument is something that should only be expected of a “peer-reviewed article” says a lot about you – and none of it good.

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. When I see crank arguing how Einstein Was Wrong with someone who knows what they’re talking about, I don’t demand a lot of evidence from the knowledgeable party either.

What it comes down to is, you want it to be the case that both sides always have some sort of worthwhile argument to make . . . even if it comes down to “opinions on the shape of the Earth differ.” What a putz.

287

K. Williams 07.28.11 at 7:41 pm

“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.”

288

John 07.28.11 at 7:41 pm

As i said I dont know the context so I apologize and agree fully, Einstein is a more reputable source than cranky observer. Im liking this John Nash meets Norman Podhoretz shtick you have going on btw

289

Lee A. Arnold 07.28.11 at 8:16 pm

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.

290

ScentOfViolets 07.28.11 at 8:35 pm

As i said I dont know the context so I apologize and agree fully, Einstein is a more reputable source than cranky observer. Im liking this John Nash meets Norman Podhoretz shtick you have going on btw

Actually, John, I fricken hate it, and I bitterly resent the butt-headedness of these individuals which forces me to play anything like that roll – which is more like John Stewart from the Daily show meets Norman Podhoretz. I’m not exactly beating Satan at his own game here, nor is it to my credit that I know these things, just as beating 100 people at chess in batches of 5 doesn’t make me a Kasparov if those wins are against eight-year-olds who are playing their third game.

I’ll tell you what it is – it’s pull-your-hair-out, beat-your-head-against-the-wall exasperating. The sort of thing that makes Al Gore sigh.

291

Cranky Observer 07.28.11 at 8:39 pm

> 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

292

shah8 07.28.11 at 8:53 pm

We could be talking about Einstein’s son, who was/is an engineer.

293

ScentOfViolets 07.28.11 at 8:57 pm

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 . . .

294

eddie 07.28.11 at 10:14 pm

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

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

SOV is being deliberately obtuse here. The link given provided perefectly plain evidence on how the senator from Nebraska would not have his arm twisted by Obama. It is SOV’s “What?! No evidence from these wights?” @280 that equals “neener neener, not listening”.

295

eddie 07.28.11 at 10:15 pm

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

296

ScentOfViolets 07.28.11 at 10:34 pm

Sigh. Eddie, before I even go on record with yet another person whose already (and dishonestly) determined that no matter what happens they’re not going to change their mind, let me ask you this:

Are you saying that Senators never vote against the wishes of the majority of their constituency? Because that’s the only way this citing this “evidence” (which, incidentally, doesn’t seem to mean quite what you think it means) makes sense.

If you say that Senators will vote against the wishes of the majority of their constituency, why is this considered evidence? If you say no, they never do vote against the wishes of the majority, well I think I can dig up a few cites that say that, well, yes they do ;-)

So which is it?

297

ScentOfViolets 07.28.11 at 10:38 pm

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.

298

Andrew F. 07.28.11 at 11:27 pm

Scent @277: Actually, he is [making the same argument as Myles re marginal productivity].

I don’t think I am actually. Why do you think this?

He’s also the guy who’s been making arguments from incredulity.

Nope, you’re confusing an expression of skepticism, or lack of persuasion, with an argument. I’ve expressed skepticism, but I don’t view my skepticism as an argument.

Scent @297: 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.

You claim to have observed a lack of arm-twisting by Obama w/r/t a public option in the ACA. Now, either this is an interesting biographical fact about yourself, or you mean to make a claim about what Obama did NOT do on the ACA. If the latter, then you are in fact making a claim for which you should present evidence. In this case, the evidence you have offered is that you did not observe arm-twisting.

The question asked is: why should we consider your lack of observation of arm-twisting persuasive evidence of your claim?

You then go on to claim that because Obama did not twist any arms, we will never know what provisions would have passed. That’s a claim that goes well beyond observation, and contains a host of implications for which you have adduced no evidence. At bottom seems to be this more general claim: If we do not observe the President twisting arms to get a particular policy passed by Congress, then we cannot know whether Congress would have passed that policy. And that’s fairly obviously a false claim.

299

ScentOfViolets 07.28.11 at 11:29 pm

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

300

Lee A. Arnold 07.29.11 at 6:15 am

ScentofViolets #296 — “Are you saying that Senators never vote against the wishes of the majority of their constituency? Because that’s the only way this citing this “evidence” (which, incidentally, doesn’t seem to mean quite what you think it means) makes sense.”

Finally, another clue to the puzzle. Since Senators have voted against the wishes of their constituencies before, it could have happened in this case! Kids, it is a logical fun game. Rules: You get to circumscribe some of the factors, naming only what you like to name.

#297 — “no I’m not making any claims, so I don’t have any burden of proof. I’m simply making an observation.”

But it’s not only a silly logical game. Kids, you get to use misdirection too! Observe, the only thing that wasn’t supercilious logical grammar was, in fact, three “claims”:

#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?”

Not a chance. Why don’t you simply name a real threat that works to twist an arm in that particular situation, or else we’ll never know if you can operate in contingent reality?

Make it realistic, no threatening to remove an airforce base over a healthcare bill. Something that would actually work.

301

Henri Vieuxtemps 07.29.11 at 7:38 am

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?

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Lee A. Arnold 07.29.11 at 1:52 pm

62% of Nebraskans disapproved of the deal with Medicaid expansion (Dec. 2009). Nebraska disapproved of a public option, 47-39% (Aug 2009). http://www.dailykos.com/story/2009/08/26/772667/-Nebraska-is-tough-sell-for-public-option Beware of smaller polls promoted by Democratic groups at the time who saw it closer or with a slight edge, you saw a lot of these at Huffington Post for example before they started with Pollster.

Nelson’s problem? “the public plan would be too attractive and would hurt the private insurance plans. ‘At the end of the day, the public plan wins the game,’ Nelson said. Including a public option in a health plan, he said, was a ‘deal breaker.’”

I don’t think you can trust all public statements of our elected officials, particularly in the middle of negotiations, but Lieberman and others, moderate Repubs like Snowe etc., made the same noises if I remember correctly.

With his lack of popularity becoming evident, perhaps the insurance lobby figured he needed a contribution?

It was disappointing, but it isn’t hopeless. The public option will continue to poll even better, as time goes on. It is going to go right up against the hardcore 18% who are Tea Party. A public option can be added at any time in the future. All you need is a better supermajority in the Senate, and to get rid of the idiots who currently dominate the House. I do think the Dems should have made the public option more of a 2010 campaign issue (I wrote that here probably 10 times before the election) and they might have saved a few House seats, but that’s another complicated story.

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roger 07.29.11 at 2:19 pm

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!

304

K. Williams 07.29.11 at 2:57 pm

“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.”

While we are proud of having avoided disaster, I don’t know anyone who thinks that what was done during the crisis was “great policy.” It was just better policy than any of the other possible options (including nationalization, etc.). Similarly, I don’t know many people who believe that ACA was, in any sense, ideal. But in a world where the vast majority of Americans have health insurance and 75-80% of those who do have private insurance say they’re happy with their insurance, completely revolutionizing the system was never going to happen. And it was more important that tens of millions of people be able to get health insurance than to hold out in pursuit of a future that was never going to come.

This, to me, is what’s peculiar (going back to an earlier thread) about the notion that neoliberals don’t have a theory of politics, while lefties do. The neoliberals I know (and that I count myself among) seem to make policy always with an eye as to what’s politically possible, and are keenly aware of the limitations of the bully pulpit (or your “losing to win” strategy). The Scents of the world, by contrast, like to indulge in fantasies of the power of armtwisting or liberal rhetoric to sway people from their deeprooted preferences. I just don’t see it.

By the by, I accepted without note your $9 trillion number. But do you mind providing a citation for it? It seems vastly bigger than any other number I’ve seen. (I’m assuming you’re not simply adding up the amount in overnight loans that the Fed made in 2008 and 2009, since I don’t think you think the Fed should have lent out money to individual Americans and had them pay it back the next day, as happens at the discount window.)

305

William Timberman 07.29.11 at 3:16 pm

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.

306

ScentOfViolets 07.29.11 at 3:44 pm

ScentofViolets #296—“Are you saying that Senators never vote against the wishes of the majority of their constituency? Because that’s the only way this citing this “evidence” (which, incidentally, doesn’t seem to mean quite what you think it means) makes sense.”

Finally, another clue to the puzzle. Since Senators have voted against the wishes of their constituencies before, it could have happened in this case! Kids, it is a logical fun game. Rules: You get to circumscribe some of the factors, naming only what you like to name.

Sigh. And the boy “wonders” why I won’t reverse the usual evidentiary standards just for him.

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”.

End of discussion. PLONK!!!!

307

ScentOfViolets 07.29.11 at 4:09 pm

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.

308

William Timberman 07.29.11 at 4:31 pm

Yeah, SoV, the battleship admirals never tire of telling us not only that we don’t have any dive-bombers (true) but that dive-bombers can’t be built by anybody, anywhere, ever. I’ve resolved not to argue with them any more. Life (mine, anyway) is too short.

309

Henri Vieuxtemps 07.29.11 at 5:19 pm

@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.

310

K. Williams 07.29.11 at 5:33 pm

“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.”

Really? There are specific names and specific actions, and specific poll results, cited all through this thread. You’ve just studiously ignored them because they don’t fit with your imaginary, unsupported notion of what “arm-twisting” might have accomplished.

311

Lee A. Arnold 07.29.11 at 6:22 pm

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

ScentOfViolets 07.29.11 at 6:23 pm

Oh, look, the troll is back after breaking his promise to leave. Whadda surprise. But let me play his little game (and better than he ever could – why do these types think they’re the only ones who know how to play this way):

I saw a cartoon the other night of Foghorn Leghorn telling the Chickenhawk Chick that he wasn’t no Chickenhawk.

AHA! This proves beyond any reasonable shadow of a doubt that “K. Williams” was the gunman on the grassy knoll!

Now, Troll, begone! You know, like you’ve already promised.

313

Lee A. Arnold 07.29.11 at 6:48 pm

@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.

314

roger 07.29.11 at 7:09 pm

Mr. Williams, don’t be silly. An overnight loan of a billion to some x bank, repeated every day for a month, or two months, or a year, is not the same as a pawnbroker giving you a certain amount on a diamond ring – the “one day” is purely a shuffle. The 9 trillion in ‘overnight loans” combines with other emergency loans that, altogether, amounted to 16 trillion dollars. This is according to the GAO report. You can find the report on Bernie Sanders site, and you can find the precis on Rawstory: http://www.rawstory.com/rs/2011/07/21/audit-fed-gave-16-trillion-in-emergency-loans/.

Of the $16.1 trillion loaned out, $3.08 trillion went to financial institutions in the U.K., Germany, Switzerland, France and Belgium, the Government Accountability Office’s (GAO) analysis shows.

Additionally, asset swap arrangements were opened with banks in the U.K., Canada, Brazil, Japan, South Korea, Norway, Mexico, Singapore and Switzerland. Twelve of those arrangements are still ongoing, having been extended through August 2012.

Out of all borrowers, Citigroup received the most financial assistance from the Fed, at $2.5 trillion. Morgan Stanley came in second with $2.04 trillion, followed by Merill Lynch at $1.9 trillion and Bank of America at $1.3 trillion.

The audit also found that the Fed mostly outsourced its lending operations to the very financial institutions which sparked the crisis to begin with, and that they delegated contracts largely on a no-bid basis. The GAO report recommends new policies that would eliminate such conflicts of interest, and suggests that in the future the Fed should keep better records of their emergency decision-making process.

As for your other points, they are to say the least puzzling. People may well be happy with their insurance, fine with me. So offer them a better deal, not a worse one. I don’t understand the ‘why not the worst’ attitude. Nor the attitude that understands polls as set in stone attitudes, rather than markers in an endless power struggle. In truth, no player in the political establishment wants to move those attitudes very much. Certainly not obama and the obamacrats. They love this attitude, they love to quote polls as if opinion were some natural product of the body, like lymph, and they love to ignore the political results of their policies, which have shifted the country strongly to the right and discouraged political activity by liberals.

The right, God bless em, understand the value of losing a fight in the right way. The Ryan budget had no chance of passing. It is a disaster for the GOP. And – it isn’t. Because it has set in place a rightward tilt to the deficit talk, as well as making it a priority over talk about, say, unemployment. That is what is meant by losing to win. Now, granted, the GOP can’t accept winning, so they may have lost out on their best win in a decade, except President Spineless’ “big deal”. But the politics of the next year seem destined to be played on the right side of the field, about ‘deficits.” Excellent strategy by the right. What is politically possible is manufactured, not found out there in the field.

315

Bruce Wilder 07.29.11 at 9:32 pm

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?

316

K. Williams 07.30.11 at 2:35 am

“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. “

This isn’t, though, really relevant to the discussion of 90% marginal income tax rates, or your more general discussion of taking money from successes to compensate failure, is it? You’re not talking about changing relative prices (by, for instance, taxing bankers more than other businessmen). You’re talking about reducing the rewards to work tout court. The relevant threshold isn’t the threshold at which an i-banker will switch to doing something else. It’s the threshold at which people will stop working and relax instead. That threshold is way below the 90% rate, which means imposing that rate will undoubtedly reduce the allocative efficiency of the economy, since work that people want done won’t be done because of the confiscatory rate.

317

Henri Vieuxtemps 07.30.11 at 7:51 am

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.

318

Bruce Wilder 07.30.11 at 8:22 am

If, as you say, the threshold wage rate at which people will stop working altogether and relax instead, is way below the 90% bracket, then, the logical expectation would seem to be that a 90% top marginal tax rate should not much affect whether that person works. Allocative efficiency may not be much affected at all.

Modeling the decision space of someone making $20 million/year as an executive, as if she’s making the equivalent of $10/hr doing piece-work in a sweatshop does not make much sense. The sweatshop worker’s options may be working another hour, or trying to churn out slightly more pieces in an hour, by dint of sheer, muscular effort, and it is not implausible to imagine that financing the family budget is a felt constraint for the sweatshop worker in ways not felt by the executive.

It’s a complicated world. Effort by the $22 million/yr CEO, and efforts by people who want to become CEO, which increase with take-home pay, are very likely to be malignant or wasteful. Reducing those efforts at the margin may well enhance allocative (or technical!) efficiency.

319

Andrew F. 07.30.11 at 10:26 am

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.

320

Helen 08.01.11 at 5:11 am

321

Helen 08.01.11 at 5:13 am

Let’s try that link again.

322

Encouraged 08.01.11 at 7:03 am

Keep going, you’re on the right track, but the data I see show the top 1% have 35% of the wealth, not 25%, and this is from 2007, before the full impact of the residential real estate collapse so the real numbers are considerably worse! But its not “the only thing that matters” as Yglesias suggests you’re saying. It matters too how we got here. In addition to “clawing back” the money we also need to “claw back” the representation. Representative government is the only protection against “duperies of the people” and allowing the wealthy to pre-screen our “representatives” and influence our elections with $’s violates this principle. We must have campaign finance reform to assure that our “representative” are actually representing us instead of the people who paid to get and keep them there.

323

Walt 08.01.11 at 8:27 am

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

324

Barry 08.01.11 at 5:24 pm

K. Williams 07.30.11 at 2:35 am
” This isn’t, though, really relevant to the discussion of 90% marginal income tax rates, or your more general discussion of taking money from successes to compensate failure, is it? You’re not talking about changing relative prices (by, for instance, taxing bankers more than other businessmen). You’re talking about reducing the rewards to work tout court. The relevant threshold isn’t the threshold at which an i-banker will switch to doing something else. It’s the threshold at which people will stop working and relax instead. That threshold is way below the 90% rate, which means imposing that rate will undoubtedly reduce the allocative efficiency of the economy, since work that people want done won’t be done because of the confiscatory rate.”

90% would probably be a bad idea, but it’s clear now that we could impose big whopping tax increases on higher incomes, and at worst yield an improved economy (by reducing the g-d speculative bubbles and bailouts).

Let me make this clear to you – the standard Econ 101 view of the economy, *particularly* as it relates to incomes and taxation on the top few percent, is f*cking wrong. We get predictions of doom if their taxes are raised, which are invariably wrong, and predictions of paradise if their taxes are lowered are also invariably wrong.

325

Watson Ladd 08.01.11 at 7:40 pm

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.

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Henri Vieuxtemps 08.01.11 at 8:07 pm

Why, yes, I’m claiming that human needs are limited to much less that $10 million/year worth of 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.

Lol.

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