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Go Home Trouble Ahead

JOHN JUDIS APRIL 22, 2011

Trouble Ahead

BY JOHN B. JUDIS

I must have seen ten articles in the last week explaining why President Obama will lose the November 2012 election; or at the least, how he could lose. Most have been by conservative pundits, but a few have also been by Democrats. I certainly agree that he could lose, but it’s a question of how. I want to consider one of these articles—by Salon’s news editor Steve Kornacki. Not because I disagree with the conclusions, or most of the argument, but because it makes the wrong use of what could be an instructive analogy to the 1992 election.

To deflate the expectation that Obama is sure to be re-elected, Kornacki points to the 1992 election. Eighteen months prior to that election, it looked like George H.W. Bush was a shoo-in, but in November 1992, he won less than 40 percent of the electorate against Bill Clinton. “It was the economy that sunk the president,” Kornacki writes. If the U.S. economy “remains lousy” next year, and if the Republicans don’t nominate someone “outside the mainstream,” then Obama, Kornacki reasons, could suffer a similar fate. I agree with the final sentiment, but not with the logic leading up to it.

If you look back at the U.S. economy in 1991 and 1992, you find something very curious. The recession took place during 1991—growth was negative that year—but in 1992, the economy grew 3.4 percent, and the unemployment rate began falling from a peak of 7.8 percent in June to 7.3 percent in October. The economy was not “good,” and there is always a lag in the public’s perception of an economic recovery; but there is still a gap between fact and perception that politicians try to fill with their version of the facts. That’s the role of politics and political campaigns.

George H.W. Bush lost in 1992 because he failed to fill that gap with his perception of the economy. He failed to convey to voters that he knew or cared about the lack of jobs. They saw him as more interested in foreign wars than in domestic distress—a point that Clinton made, but that was also hammered home by primary opponent Pat Buchanan and by independent candidate and erstwhile Republican Ross Perot. It was, above all, a political failure on Bush’s part to convince voters that he was doing something about the economy, and that what he had already done was responsible for the drop in unemployment and increase in growth.

Fast forward to Obama and the 2012 election: If the unemployment rate were to plummet—say, to 7 percent by June of next year—then assuming even a mediocre campaign effort, Obama would probably be re-elected regardless of his opponent. Conversely, if the United States plunges back into a recession because of the Republican budget cuts that Obama has agreed to, then even a semi-mainstream candidate like former Arkansas Governor Mike Huckabee could defeat Obama. But what is most likely is a situation similar to that faced by George H.W. Bush in 1992: a sluggish economy that is improving, but at a sufficiently slow rate to leave a gap between fact and perception that rival politicians will attempt to fill.

So far, Obama has not done very well in filling that gap. He has allowed Republicans to make a case that things are getting worse, and he has cooperated with them in taking measures that will actually make things worse. He has allowed Republicans to set the terms of the debate. It has been about the perils of deficits and debt. That is not just bad economics; it also leads Democrats into a political cul-de-sac.

You’d think Republicans ran on debts and deficit during the 2010 election. Some did, but most of them focused on attacking the administration for failing to create jobs and for passing a health care bill that would cut Medicare. And polls taken immediately after the election showed that the electorate was not concerned with deficits, but with jobs and economic growth. If voters were concerned with deficits, it was as a way of expressing their concern that the government was wasting their tax dollars on unnecessary programs. Here is a November 11, 2010, CBS poll taken immediately after the election:

What Should New Congress Concentrate on in January?

Economy/Jobs
56 percent

Health Care
14 percent

Budget Deficit
4 percent

War
2 percent

Immigration
2 percent

Taxes
2 percent

Education
2 percent

But for the last five months, Republicans have been harping on deficits as the cause of the economic downturn and continuing unemployment. The economy and jobs are still voters’ top concern, but in the latest Gallup poll, deficits and spending come in second. That’s not because the Congressional Budget Office suddenly found a river of red ink, or because interest rates shot up, or because the unemployment rate has gone up. It’s because Republicans have advanced the deficit as the reason for the problems in economy and jobs. They filled in the gap between fact and perception with the idea that things are getting worse and that the reason they are getting worse is because of the deficits.

I am not sure exactly why Republicans have focused on deficits. I suspect it is a combination of reasons. Some of them don’t understand modern economics; many of them want to use the peril of the deficit to justify cuts in government spending on social programs; and some of them, perhaps, want to arrest the recovery to improve their election chances in 2012. But the effect is to nullify Democrats’ ability to offer popular programs that will fuel growth, save jobs, and reduce people’s insecurity.

Obama has, sadly, bought the Republican argument for why the economy is in trouble. This week, he went to a community college in Northern Virginia to rally students there to the cause of the deficit. Here’s my expurgated version:

For a long time, Washington acted like deficits didn't matter. … And as the saying goes, there is no such thing as a free lunch. … Now, if we don't close this deficit, now that the economy has begun to grow again, if we keep on spending more than we take in, it's going to cause serious damage to our economy.

Obama has tried to carve a liberal niche within this retrograde political framework by charging that the Republican plan to cut the deficit would get rid of Medicare and would keep the Bush-era tax cuts for the wealthy. That’s all well and good, but Obama is still playing on Republican turf. And it might not work. The last Democratic presidential candidate who based his campaign on deficits was Walter Mondale in 1984. Mondale probably would have lost to Ronald Reagan in any case, but he would have won more than Minnesota and the District of Columbia. The other Democratic candidate who tried to make deficits an issue was Al Gore in 2000, and he lost to a candidate he should have defeated easily. And you can be sure that Bill Clinton in 1992 didn’t focus on deficits in running against George H.W. Bush.

I know Obama and his political advisers think that by emphasizing deficits they are going to win over independent voters. But as I have argued earlier, Obama is pursuing a political fiction. The independents he needs to attract are primarily white working-class voters in places like Ohio, Pennsylvania, and Wisconsin. They may care about deficits as a stand-in for what they see as wasteful spending on undeserving groups. But their primary concern, as they demonstrated in 2008, is jobs and the economy.

Of course, you could still argue that deficits really do matter and that even if Obama is acting in a way that is politically stupid, he is doing the right thing. Unfortunately, that is not the case either. We need a long-term plan for curbing deficits as a percentage of GDP, but what we need to do now is ensure that a full recovery takes place. That requires just the opposite of what Obama has agreed to do. If you think budget cuts will revive the economy, look at what is happening in Tory England as a result of Prime Minister David Cameron’s budget cutting. Britain, which had been recovering from its recession, is now projected to have grown .3 percent over the last six months.

What should Obama have done and be doing? He should focus relentlessly on creating jobs and speeding economic growth. He should have presented programs to do so, and if the Republicans blocked them, then they would have to take the blame if the economy stalls or actually turns down again. And above all, the president should not acquiesce in, and even praise, measures that will harm the economy and his own re-election chances.

Of course, Obama can still win, even while talking about deficits, if the Republicans nominate what Peggy Noonan has felicitously called one of their “antic” candidates. Or he can win if the Republicans don’t quickly discard the Paul Ryan playbook and return to what got them good results in 2010—attacking Obama for not creating jobs. But my guess is that the Republican nominee will dissociate him or herself from Ryan’s Medicare agenda. If a credible GOP nominee emerges and adopts that stance, and Obama continues to talk deficits to twentysomethings at community colleges, his re-election is far from assured.

John B. Judis is a senior editor at The New Republic and a visiting scholar at the Carnegie Endowment for International Peace.

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126 comments

I think this is a good point. Certainly I don't know anybody who is worried long term about anything but the economy, and people are dismayed by what they're seeing as a sideshow (The Deficit) - which in fact would be greatly impacted, for the better, if people had more and better jobs - this would automatically increase revenues. Plus, the Republicans have scared people. Many of us feel threatened, we feel there's no future, the US is on the brink, if you aren't rich you're doomed, etc - this is obviously hurting the economy too, by itself. I spoke to a woman after class tonight. She said she'd voted for Obama but now worried that he will not be re-elected and the reason is twofold: a) the economy b) he is too interested in "bipartisanship" and not interested enough in defending the people (especially Democrats.) She said she regretted having preferred Obama over Hillary but now regrets that because she perceives him as "too soft," when the times call for determination and toughness. Regardless, I think the fix was in. I don't think the Democratic elites were listening to the people then either. President Obama is an awesome person but he'd only been a US Senator for less than 2 years, and obviously the GOP is hell bent on taking the legs out from under the US as we know it. So regardless, maybe the Limousine Liberals should have tried to support the tougher, more experienced person, and focused on trying to get Obama elected after a few more years of national political experience. The sheer nastiness of today's political climate must have surprised him - he hasn't reacted well at all imo - lately he's shown some fire but it's already too late, probably. There's an article in HuffPo about the job situation and it's really shocking - people who do get jobs are often taking huge pay cuts - security and lifestyle have been completely lost along with homes, cars, careers and even hope. This is probably closer to a depression than a recession. I agree with the author of this piece that the Republican spending cuts will hurt the weak recovery, not help it; Krugman repeatedly makes the same point. But the Republican House members have hijacked the debate and rammed their unpopular ideas down our throats and we appear to be defenseless. I think, President Obama should start talking about the economy, jobs, the fact that deficits grow when revenues fall; and start challenging these Republicans, who after all are supposed to be business people, "'producers" as opposed to all us "parasites," to start creating some jobs instead of trying to figure out how to break down unions, take away affordable birth control pills and destroy the AHCA along with Medicare, Medicaid and Social Security - safety nets that also represent a contract we, the people, have made with each other - that no American shall be abandoned, that we the people won't leave each other behind.

- Sophia

April 22, 2011 at 12:59am

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It's an old story that the way to deal with a big monster is to sacrifice someone, even if everyone in the audience thinks the sacrifice is cruel and unnecessary and hopes that a hero will rescue the virgin. I'm hoping the voting electorate says, "Now that we know you fear the deficit, you don't have to sacrifice your priorities; sacrifice a ram instead."

- Nusholtz

April 22, 2011 at 9:08am

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While I don't share sophia's regrets regarding Hillary, I largely agree. Obama has not understood that his primary task is politics, not policy, and has abandoned the field to the Republicans. As their framing of the issues is largely uncontested, they are succeeding, even in selling absurd lies. If he cares about the future, Obama has to steel himself and shoulder his burden -- and it is an enormous burden in the best of times -- of devoting himself to the public dialog, to setting forth his goals, his hopes for the American people, how we can get there together, and drilling it ceaselessly. He has to seize the narrative. A start would be educating the public, not with one speech but with 50, about how "supply-side" economics, a new idea with Reagan, has been tried now for most of the last 30 years and proven to be a complete failure, resulting in shocking and still growing income disparity, anemic growth, huge trade deficits and foreign debts (turning us from a creditor to a debtor), epic budget deficits, instability, and insecurity -- a stream of disasters for the nation. The answer is not to do more of the same, but to chart a new course away from this trail of woes, a course that will restore to all of us the promise of opportunity and a brighter, not bleaker, future for our children. People are hungry to hear this, but the Democrats are not speaking to them. As ever (since 1972), Democrats are mired in policy-wonkishness, unable to ply the trade of politics.

- roidubouloi

April 22, 2011 at 10:10am

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Good analysis. It's STILL the Economy that will determine the election. Oh, and Bush-I lost his re-election because Ross Perot sucked away enough of the Republican votes, that Clinton could win with a minority of the votes. That, and "Read My Lips, No New Taxes", and the Savings and Loan debacle.

- AllanL5

April 22, 2011 at 10:14am

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It's not just the President. It's the entire leadership of the party. Everyone needs to be out there with a coordinated message addressing reality that people are living; lost jobs, lost homes, lost benefits, lost retirement savings, lower wages, along with higher energy and transportation costs, higher health care costs, higher education costs. The middle class is caught in a vise and the poor are trapped in a nightmare. Bush 1 was too blinded by class to understand that the recession was only "over" for his class -- the investor class. For many Southern politicians the kind of inequality and lack of opportunity that is now spreading across the country is just America as they've always known it. For many rural respresentatives, the problems don't seem new or if they are new they aren't close to home. But what is the cause of Obama's callousness? I love my country. But I am unbelievably ashamed of where it is heading. For years I believed deeply in, when all was said and done, American pragmatism and our ultimate sense of fair play -- I thought those were the bedrock of American character that would, eventually, over time, emerge the victor from any fight, no matter how difficult. Now I'm not so sure.

- esmense

April 22, 2011 at 10:43am

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Allan: 1) the economy will determine results only partly. That's why communication matters, and is Judis's point: the economy WAS already improving in the third quarter of 92. But Bush lost anyway. 2) Most analyses of the 92 Presiduntial election come to the conclusion that Perot drew equally from Democratic and Republican voters.

- Curran1

April 22, 2011 at 10:47am

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I generally agree with the political analysis, but I had to laugh at this "I am not sure exactly why Republicans have focused on deficits. I suspect it is a combination of reasons. Some of them don’t understand modern economics..." Evidently Judis himself is so cocooned he does not understand that there are modern economists who believe that too much government spending hurts the economy.

- DWAnderson

April 22, 2011 at 10:50am

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Perfect, esmense and curran. DWA, I don't know how such people can be called economists. Can people who believe the earth is flat or carried through the heavens on the back of a giant turtle be considered astrophysicists?

- roidubouloi

April 22, 2011 at 11:08am

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Judis points out today that Barack Obama could lose the 2012 election, if the economy goes into a double dip or only improves in a way that by-passes “independent” – actually skeptical, disappointed, disaffected, and betrayed Democratic – voters. Those are my constituents. I am a retail politician. The majority-minority Senate District I now represent will return a Democratic majority in 2012 with, maybe, a margin the size of Delaware. Like the whole state and country, it could do much better. But, our margin may not contribute enough to countywide or statewide races or anything to an electoral College margin, if our party morale remains low and GOP vote suppression continues unabated by the pretty much worthless Department of Justice and reactionary DNC. No, if there is not a coherent message of political equality and popular economic transformation from Democrats at all echelons of politics and government, Democrats could get wiped out in Texas and Harris County again, actually, starting this year in the City of Houston. We have latent and actual Democratic majorities in Harris County and Houston, respectively. But, we have no party capital or infrastructure. The national breeze is a local storm when the media blows through town. We have an awards banquet and an ATM machine for the DCCC that nets zero at the grass roots. We do not have a real party. We cannot figure out why an American President would protect a British oil concession in Libya or the Gulf of Mexico rather than our environment or livelihoods. George H. W. Bush got an honorary knighthood. Is that Barack Obama's ambition? We thought he admired Lincoln. So, the most immediate national analogy for today's looming political failure is George H. W. Bush (and the moderately liberal but utterly elitist GOP in Texas) back in 1992. That would be today's cringing liberal Democratic Party today. The economy was improving but public perception lagged. President Bush seemed oblivious to the electorate’s situation and perception. So, why would Obama seem to be walking in the footsteps of George H. W. Bush? I think he is mostly blinkered by his training, experience, and comfort level with lawyers. Collusive bargaining is what they do. And, the most professionally accomplished, or just well-paid, lawyers today are transaction lawyers. They bargain collusively to advance deals which benefit themselves and a variety of other self-serving intermediaries and brokers. They do not really represent wealthy, middle-class, or lower-class principals – just “clients”. And, these are not clients represented before the bar in courts of law but clients patronized or "advocated for" in "courts" of influence such as posh restaurants. These clients are exploited by flimsy, semi-secret deals, consisting mostly of public credit applied to private gain. The only reliable benefits of such Enron-grade crony capitalism and pseudo-public policy -- socialism for the rich and capitalism for the poor -- are “attorneys’ fees and expenses”. Behind the lobbying (energy wedges), wonkery (digital hoo-hah), and Federal Reserve Popery (humbug) are no principles or even principals. All I see are echoes of Law & Economics theories of hypothetical market adjustments, marginalia, and utopian optimalia – a great, new prep-school Latin word I just made up. My constituents do not articulate matters this way. But, they are, nonetheless, eloquent. And, they make judgements like petty jurors about who they can trust to tell the truth and to exact justice. They make conclusions about what is good for them based on what is palpably bad for them but rewarding for the criminal or, much more lucratively, politically-connected and predatory interests besetting them. This is not Marxist class-consciousness. No, it is a hunger for patriotic solidarity that could unite the Democratic Party but not with British Whigs and Tories. It is a patriotic solidarity that could be expressed as realistic foreign policy and practical economics. Those would unite Democrats against the extreme and increasingly wierd coaltion of "Darbyites, Trotskyites, and Thatcherites" on the right. Why does this President strive to achive some sort of consensus with at the expense of unifying his own party. He is not editor of the Harvard Law Review. In any case, jurors are out of the room when deals are made by their clerical interlocutors. And, they are often bewildered and demoralized when the details of a deal trickle-down or blow-out. Such is pretty much my constituents' state of mind today. They are not sympathetic to the defendent -- the GOP -- but they are wondering what the prosecutor is up to in chambers. ::JRBehrman

- JRBehrman

April 22, 2011 at 12:15pm

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"Why does this President strive to achive some sort of consensus with at the expense of unifying his own party? He is not editor of the Harvard Law Review." Indeed. Has the man no inner FDR at all?

- roidubouloi

April 22, 2011 at 12:28pm

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Judis is right on. BTW the DLC may be gone, but it lives on via Obama. I vote for Democrats. But we must face up the lie that it still represents the Party of the People. http://www.newdeal20.org/2011/04/14/speech-recap-values-maybe-vision-no-41806/

- hkaye

April 22, 2011 at 12:37pm

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There's some truth here, but Judis is making this much more black-and-white than it truly needs to be. Here are some salient thoughts on his good advice for Obama: 1. Most voters don't really understand what a "budget deficit" means in the national context and how it affects them. There is a vague notion among voters old enough to have been gainfully employed in the 1980's and early 1990's about how deficits lead to higher interest rates and thus affect their pocketbooks and ability to finance homes, cars and household items, but beyond that there is a general ignorance of the matter. Thus, for most voters "deficits" is a proxy for the overall economy and voters express concern about "deficits" when the overall economy is not doing well. While Judis is correct to point out that "deficits" is not a particularly salient issue when pollsters ask voters about "deficits" together with "jobs" or "the economy" among their list of concerns, "deficits" often becomes a proxy for general economy-related concern when it is not paired with questions about "the economy" or "jobs". 2. Given the above caveat, politicians can do well by bringing up the issue of deficits in economically turbulent times to beat up on the incumbent party. This didn't work for Mondale because the economy was booming in 1984 despite the fact that the government was running unprecedented peacetime deficits. But raising concern about the deficit helped defeat Bush in 1992 when it was raised not just by Perot but also by Clinton. Deficit talk then helped Republicans regain the House in 1994, when the economy was still slowly recovering from the 1990-91 recession. And the deficit talk helped Republicans in 2008 because it was used interchangeably with other economic issues, such as the lack of jobs. Look back at successful Republican campaign ads from 2008 -- they don't avoid mentioning deficits but present them as part of a general attack on economic malaise and the Democrats' supposed responsibility for such malaise. 3. Judis is right that the key to independent working-class voters in the Midwest and Mid-Atlantic is to address their concerns about a lack of jobs. He is also right to note that those same voters, and many others like them elsewhere (especially elderly voters), are now pretty much convinced that increased government spending is really intended to waste their tax dollars on undeserving groups or politically favored causes. There was a window to convince these voters early in Obama's term that increased, Keynesian-style stimulus would work to their benefit, but the depth of the recession and the mistakes by Obama's team in pursuing the Stimulus Bill wasted much of that opportunity. That said, it's not like Obama has backed off the jobs and stimulus talk -- he has just recast it rather astutely into the "winning the future" argument, which dwells on economic investment for long-term gain and developing a vibrant economy and plays down the idea of mass public works projects or cash grants to give services to poor, black or brown people. And Judis is just plain wrong in his argument that the Federal spending cuts that have been agreed upon to date are going to be a serious drag on the economy -- most them will take very little money out of the economy over the next 2-4 years, as they are simply reductions in projected future spending years out. This is why conservatives realized that they were snookered in the 2011 budget deal after initially celebrating it, and why John Boehner had to drag Douglas Holtz-Eakin to explain things to the House Republicans to save the budget compromise. I agree that the economy needs more active stimulus spending now (especially stimulus aid to states to keep them from laying off workers), but the lack of such additional money from Washington is not the difference between recession and slow growth and would probably not be the difference between slow growth and rapid growth -- it's more like the difference between slow growth and slightly faster growth. I'm not sure how that sort of a difference would really convince most average voters to change their economic and political perceptions of the moment. 4. Last but not least, Obama doesn't need working-class independents in the Rust Belt to win re-election -- he can do just fine if he holds white-collar independents in what I would call the Progressive South (VA, NC and FL) and in the Mountain West (CO, NM, NV). Those sorts of people respond favorably to deficit talk when it is coupled with a strategy of jobs for the future, but don't really care much about plans for public works projects and cash grants to states. I also think that Obama's team realizes that the GOP's hard anti-labor slant is going to bring out blue-collar Democrats and independents in the Rust Belt in 2012 regardless of how much Obama talks or doesn't talk about deficits and jobs, so long as Obama points up that he will protect whatever is left of organized labor from Republican depredations.

- wildboy

April 22, 2011 at 12:46pm

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DWA -- The deficit is the symptom of the problem, not the problem The problem is this; the American economy is not producing many jobs and the jobs it produces in largest number are service jobs that do not pay enough to cover basic living costs or offer security. That is actually a decade long problem (but 30 years in the making) -- those conditions persisted throughout the Bush administration but were masked, during that decade and in the decades in which the problem was developing, by massive consumer debt. The difference between now and then is the collapse of the consumer debt economy and the collapse of debt-fueled asset value. It's unlikely that model (low pay, low, employment, high consumer debt) can be successfully revived. Now we're just stuck with the realities of low pay and low employment and no credit cash machine to pay for it. Too few Americans have jobs (among young workers the unemployment rate is 20%, among some demographics of young Americans it is as high as 40%. With no relief in sight.) and too few American jobs pay enough to provide the basics of decent life, to allow family formation, to allow the asset accumulation that contributes to economic mobility. That all means less government revenues. Combine that basic reality with massive tax cuts to the narrow demographic of Americans who are making sufficient earnings, who have accumulated considerable assets and who enjoy huge levels of disposable income, and you make a bad situation worse. Add on top of that massive bail outs and giveaways to financial institutions and corporate interests, the financing of three wars and the maintenance of the world's largest (by far) military, and decades of overspending payroll tax contributions as part of the general fund instead of using those funds to prepare for the needs of an aging population (over the last several decades payroll taxes have dramatically increased as a source of revenue for government, while corporate taxes have dramatically declined and income taxes have, with some fluctuation, remained relatively stable.) Focusing on deficits instead of our underlying economic problems is like making the possibility of hairloss the most important factor in whether to undergo chemo. If you fully address the cancer, you'l get to live and eventually get your hair back. If you worry more about keeping your hair, you won't just lose your hair, you'll lose your life. It's time for someone, anyone, on either side of the aisle to address those problems.

- esmense

April 22, 2011 at 12:48pm

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Roid and Sophia for Prez and VP. I'll let the two of you decide who takes first billing!

- desertdog

April 22, 2011 at 1:56pm

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LOL - what do you say Roid? We will be co-presidents, none of this pecking-order thing. Solidarity!

- Sophia

April 22, 2011 at 2:02pm

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Is it just me, or does the common wisdom about Obama's decisions change from news cycle to news cycle? About a week ago, we applauded his defense of the safety net in opposition to Paul Ryan's plan. Now we criticize the salability of his campaign message? Lest we forget, the GOP spent months attacking health care and claiming that Democrats had no ideas for job creation. Where are the Republican job bills? Fiscal austerity--not job growth--has become this season's barometer for true leadership. Obama offered centrist proposals for cutting the deficit that even Paul Krugman found palatable. Furthermore, Obama has repeatedly pushed his "Win the Future" message for months. You can call it a Reaganesque and even a weak campaign slogan, but it emphasizes government investment in education and the jobs of the future (energy, infrastructure, etc). The GOP abandoned most job-growth talk after the midterms. Obama has, at the very least, continued to offer tangible solutions. Did we hear Boehner share plans on how to remain competitive and relevant in the global economy? No. The GOP killed high-speed rail investments and no one blinked an eye. Why? Because the conversation is about deficits now. And due to our collective ADD as armchair politicos, that conversation will yet shift again in the ensuing months. Meanwhile, the general voting public, who lack the fervor of posters here, will probably ignore the election until next year.

- maxhencke

April 22, 2011 at 3:28pm

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"What should Obama have done and be doing? He should focus relentlessly on creating jobs and speeding economic growth. He should have presented programs to do so" And just how can he do this? What specific policies will create these jobs? More deficit spending? With a Republican Congress that is impossible. So Judis's solution is to just talk about creating jobs as though that will make people feel better. I have no idea how to create millions of jobs out of thin air. That is mostly up to the private sector. This entire freaking article was a complete waste of time since it did not lay out in detail exactly how those jobs would be created and how well those jobs will pay. Otherwise Judis, don't fucking patronize me about how you feel my pain. Your empathy won't put any food on the table and I don't want your f-ing charity.

- blackton

April 22, 2011 at 3:43pm

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I say we alternate by month, sophia, like Roman consuls. I so have an idea how to create millions of jobs out of thin air. Demand. The same way jobs are always created, in response to demand. Investment is nice, education is nice, high-speed rail is nice, but, those too, are really quite secondary. None of it magically produces growth. The driver of a modern economy is effective demand. For that reason, the single biggest economic problem that we have in our country is the terribly skewed income distribution, the legacy of Reaganomics. The maldistribution saps demand and makes everything seem unaffordable because too much of the country is strained for income. It generates mountains of consumer debt, as the system struggles to maintain demand in the face of the maldistribution. This is ultimately unstable as the debt cannot pile up fast enough to sustain demand. It produces asset bubbles because the investor class has too much money. This too is unstable as the bubbles burst. The second biggest problem we have, although an order of magnitude smaller, is the trade deficit which also saps demand and exports jobs. There are many reasons why income is piling up at the high end of the spectrum, some a result of policy, some of technology, some of globalization. However, it really doesn't matter that much why it is happening. What matters is that the tax structure needs to mitigate the effect, certainly not exacerbate it. Right now, under the Reagan-Bush revolution, we have been flattening rates just as income is becoming more and more skewed. Contra the right wing-nut economic claims, the most important single thing we could do is make our tax system much more progressive so that we get back to a net income distribution more like what it was before Reagan. The wealthy invest their surplus. Most everyone else has none and spends their income. (Yes, according to the life-cycle theory people save and invest when young and disinvest when retired, but this is just swapping current consumption between generations. It is not a big net source of investment. Overall, wage earners have had to take on debt to maintain spending, debt that I am pretty sure is in excess of the aggregate investment by this class.) If we put more income in the hands of the middle and working class and adopt trade policies that do not permit consist deficits, we can return to prosperity. It really is that simple. Of course, the Republicans, slaves to the plutocratic class, are trying their best to row us backwards. This is the crisis of our era of which the crash, the recession, the deficit, are all but symptoms. Can that directly be turned into a political platform? Yes and no. If you try to sell it as policy, no. Then it is just another topic for a dissertation. But the right rhetoric, the rhetoric of an FDR that addresses itself to people as they are, as they understand the world, can be used to build the political strength to make the right policy possible. Without that political strength, nothing much will be accomplished to solve our problems, it is all just finger in the dike against the Republican tsunami of greed, corruption, fear, hate, racism, homophobia, nativism, jingoism, and militarism. If the Democrats, and Obama in particular, cannot summon themselves to the political task, then the Republicans will succeed, as they have for the past 30 years, in making things worse, a lot worse, before there is a crisis of such magnitude that they are cast out as the were for 50 years.

- roidubouloi

April 22, 2011 at 4:27pm

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Blackton, how is Judis patronizing you? In any event, the way to add well paying jobs is twofold: expand high value areas of the economy and have a workforce ready and willing to participate. To some extent, we have been growing high value areas -- Silicon Valley type enterprises. And guess what -- there is a shortage of qualified US engineers, to the point that SV companies are bringing them in from overseas. Google is paying $250,000 for programmers with 4/5 years experience, and having trouble finding enough of them who are well qualified. OK, not everyone is cut out to be an engineer, but as the economy grows so will jobs throughout. At the lower end, it is critical to put an end to illegal immigration of unskilled and low skilled workers. They are taking the $10 -$20 an hour jobs that used to give a lot of Americans a modest but reasonably comfortable living if they were willing to work enough hours. I think we should take steps to encourage the rebirth of domestic manufacturing. If tariffs or similar are necessary to promote "infant industries", so be it. And millions of jobs can be created by vast public and private works, like high speed rail, school construction, etc. That's a start.

- PeteBeck

April 22, 2011 at 4:32pm

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I neglected to add that, although it is primarily the wealthy who invest, they do not invest in real assets as an abstraction. Firms add capacity in response to consumer demand. When the demand isn't there, then even low interest rates will not stimulate investment, the so-called liquidity trap. Ultimately, both immediate consumption spending and investment are in response to consumer demand. This is why the income maldistribution is crushing us. We have a long-term crisis of lack of demand exacerbated by trade deficits that further reduce labor demand below even the anemic level of consumer demand. Equally important, the lack of labor demand reduces wage pressure. That in turn reduces the rate of growth of labor productivity and hence the rate of growth. It really isn't rocket science. But we are stuck with a bunch of clowns who, either out of stupidity or thrall to the immediate interests of the wealthy, believe in a pseudo-economics called "supply side," that more and more money in the hands of the wealthy will produce investment even though there is no one to buy the output because everyone else is short of income. This is nonsense, fully the equivalent of creationism and climate change denial. It should surprise no one that the three are often found together.

- roidubouloi

April 22, 2011 at 4:35pm

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The shortage of domestic engineers is real but the cause and effect that PeteBeck describes are reversed. There needs to be a sufficient income premium for higher levels of engineering skill to justify the education and training required. Right now, the premium is too low. But the reason it is too low is that we are importing engineers for whom US salaries are just dandy in comparison to what they can earn at home. The principle is not really different at the high end than the low end as far as the impact of imported labor on the labor market. If we stopped importing engineers, then the shortage would raise the premium to the point where it made sense for our own nationals to invest in the education, providing many good jobs for Americans.

- roidubouloi

April 22, 2011 at 4:39pm

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Pete is correct that a sufficiently aggressive program of public investment can make a difference by pumping up demand, but not in isolation. This was tried for years in Japan (in response to US haranguing) without success. We need to ensure that the middle and working class have a sufficient share of net income.

- roidubouloi

April 22, 2011 at 4:42pm

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" If a credible GOP nominee emerges and adopts that [Ryan's Medicare agenda, pro-job rhetoric} stance, and Obama continues to talk deficits to twentysomethings at community colleges, his re-election is far from assured." Nor should BHO's election be assured. He has been a political twit and a Progressive disaster in that he has empowered the Repub agenda. He looks good in comparision to idiot-extreme opposition. Neville still looks better than Adolf or Benito. But that's hardly a roaring endorsement of Neville nas a model for future politicians. Or, if you dislike 20th century history, substitue Buchanan for Neville and Jeff (Davis) for Adolf or Benito. Those that are (or appear to be) spineless in the face of intractable opposition typically get their clock cleaned. And the voting public (especially independents) sense that. Joe-low-info sixpack will typically chose strong and wrong over inept and right.

- drofnats1

April 22, 2011 at 4:57pm

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yeah drofnats, Dems should nominate Ralph Nader instead, right? yeesh. PeteBeck, Judis is patronizing Democrats with bullshit that talking about jobs is somehow going to be magical, nor does he show how Obama can pass job packages through a Republican house. Hence we gotta work with what we have. And tariffs are bullshit. I would simply import goods from China to Mexico, slap a Hecho en Mexico label on them and clean the hell up. Or will you repeal NAFTA as well. roid, many US businesses in China are doing very well making a lot of profits, it is getting to the point that US businesses need American consumers less and less thanks to Global markets and the cache of American brands (yes, they do have one) so Republicans really don't give a rats ass about Americans except their own class and thanks to willing idiotic peons in the south get away with it.

- blackton

April 22, 2011 at 9:22pm

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Blackton, I don't need to be persuaded that Republicans don't give a shit about this country, only about their own narrow class interests. The American market remains very attractive, particularly to China. Opinion matters not here; the fact is that we are still running trade deficits in the hundreds of billions and getting rid of them would be the equivalent of a lot of fiscal stimulus. The reason we run these deficits is so that capital can keep pressure on labor and suppress domestic wage pressures. This is of course but a piece of a larger process that includes monetary policy, fiscal policy, labor policy, and immigration policy all with the purpose and effect of suppressing domestic labor demand and hence hold down growth in real wages for the sake of profits.

- roidubouloi

April 22, 2011 at 10:58pm

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Ditto blackton. The idea that the president, any president, can just go into the Oval Office and flip the Jobs Switch is risible nonsense. Better income distribution, better infrastructure, better utilization of talent, etc. all work, but surely not in time for the next election. Judis simply misses the mark here on so many points. The deficit was 90% of the reason Perot got in the race in 1992, and that's what cost Bush 41 a second term. Dealing effectively with the deficit was a major factor in perking up the economy and giving Clinton a second term. The deficit may not be polling as the top concern, but it's been in the top two or three consistently, and it's one thing a president can actually be seen to be effecting. Taking steps that can reasonably be projected as addressing the debt crisis will help. Combining that with intelligent tax and entitlements reform would be a trifecta virtually guaranteeing O's re-election even if the Repubs don't nominate on of their "caper" candidates.

- Robert Powell

April 23, 2011 at 4:15am

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Blackton wrote: "And tariffs are bullshit. I would simply import goods from China to Mexico, slap a Hecho en Mexico label on them and clean the hell up. Or will you repeal NAFTA as well." Blackton, you don't know what you are talking about. Maybe a small timer could, as you say, "clean the hell up" until caught and maybe even be put in jail for criminal fraud (evading tariffs by false labels is the equivalent of tax fraud). But no significant importer, such as WalMart, Apple, Sears, Macys, RCA, IBM, Amazon, etc., would risk being involved

- PeteBeck

April 23, 2011 at 10:03am

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Judis: "The economy and jobs are still voters’ top concern, but in the latest Gallup poll, deficits and spending come in second....It’s because Republicans have advanced the deficit as the reason for the problems in economy and jobs. They filled in the gap between fact and perception with the idea that things are getting worse and that the reason they are getting worse is because of the deficits." I think Judis draws an unwarranted inference here. Just because people are now concerned about the deficit does not mean that Republicans have succeeded in convincing people that it's the cause of a slow economy. It's entirely possible, and I think probable, that some people are worried about an unsustainable deficit problem regardless of whether it's costing jobs or not. One would need more specific polling to see. Also, the deficit mantra plays into Republican anti-"big government" rhetoric. Obama should be pushing back against this meme too (people don't like "big government" in general, but they have a hard time finding major programs to cut when it comes to specifics), but that aspect also has little to do with jobs or the economy. "he can win if the Republicans don’t quickly discard the Paul Ryan playbook and return to what got them good results in 2010—attacking Obama for not creating jobs." What got Republicans good results in 2010 was not attacking Obama for not creating jobs; it was the fact of a lack of jobs. No attacking was required. When people think things are bad, many of them will vote for something else regardless of what that something else is. But now Republicans have to bear some responsibility for the economy. And according to the poll results that appeared in yesterday's NY Times, though a majority (59%) disapproves of Obama's handling of the deficit, an even larger majority (63%) disapproves of how congressional Republicans are handling the deficit. Make of that what you will. Also, that same poll says just as many people think that reducing the deficit will cost jobs as create jobs (both at 29%), which may also undermine Judis's assumption that people in general have linked the deficit to the economy in some substantial way. Perhaps some swing voters have, but again one would need more informative polling to find out.

- dsimon

April 23, 2011 at 10:11am

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Roid writes: "Roid writes: "There needs to be a sufficient income premium for higher levels of engineering skill to justify the education and training required. Right now, the premium is too low" The premiums are there, no question. Good CS/EE on the west coast that can manage a small team can make $400-$500K per year after bonus + stocks The problem is that there aren't enough good engineers coming out of US schools.

- seattleeng

April 23, 2011 at 11:32am

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With all due respect seattle, there are sufficient good engineers coming out of US schools. The problem is that we kick a significant number of them out of the country when they graduate. If every degree came with a green card, we'd have no problem.

- Robert Powell

April 23, 2011 at 1:27pm

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With all due respect to both seattle and robert powell, you really cannot just make up economic facts to please. I attended I talk a year ago by a UC economist who has spent several years studying engineering and the demand for H1B visas. Her conclusion is that the premium being paid to mid-rank engineers over junior engineers in the fields with claimed shortages is not high enough to justify the additional expense and opportunity cost of the education required. This in turn can create a shortage further up the job ladder. What is remarkable (actually not given the ideology) is that it is the supposed free-market purists who do not believe in the free market as soon as labor stands to benefit. Supply and demand. Heard of it? If we have a shortage of domestic something or other, then the price will rise until the shortage is eliminated. Meaning, in the case of engineers, that if we don't have enough the price has to go up to induce greater supply. This is market orthodoxy. However, if instead we import the supply to fill the demand, the price need not rise and there are fewer jobs for Americans. What business means when it says there is a shortage of labor of some sort or other is that it cannot find the labor it wants at the price it would like to pay. Invariably, the response is then that we should import labor from elsewhere at the price business would like to pay, undercutting demand for domestic labor and putting downward pressure on wages and salaries. This is why I say repeatedly that suppression of labor income is deliberate American policy in every area, fiscal, monetary, trade, tax, immigration.

- roidubouloi

April 23, 2011 at 2:20pm

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I fully agree with what I believe Judis is in effect saying: 1) That on a policy level, Obama should be pushing for more stimulative, job-creating initiatives, even as the short-term cost of even greater deficits. 2) On a political level, he should be using his bully pulpit to pound home a counter-narrative to the GOP's, emphasizing that a stimulus is good in terms of both economic growth and equity, and pointing out repeatedly that the Republicans' policies got us into this mess. (Without delving into the details of a history lesson, that counter-narrative could run back to the Great Depression in terms of Hoover the cause and Roosevelt the cure, and point out that the economy was healthy and the budget balanced under Clinton and that both deteriorated under Bush.) All that being said, there is a potentially effective method to Obama's "madness," though many of us disagree with it. Many voters will decide in 2012 not on issues (even those as broad as deficits or jobs), but on the images the candidates convey. With that in mind, Obama keeps tacking toward the center to portray himself as a steady hand versus a risky, right-wing alternative; as someone sincere as opposed to phony (as in his potentially strongest opponent, Romney); and as someone prepared to compromise (as much as many of us dislike those compromises) as opposed to an opponent who won't budge. This is not to say that I agree with this approach. As a matter of both policy and politics, I very much wish he'd been more aggressive re Wall Street and the economy (especially re his choice of top economic advisers) from the start. I think he could have made that work, even given the substantial constraints imposed by his own party, our Senate's ridiculous cloture rule and the Republican takeover of the House last year. And perhaps Obama's own learning curve is such that if he could do it all over again he might have done things differently. But whether a product of his bipartisan temperament, his political calculation or the possibility that a black president/politician must come off as more moderate than a white one could to remain viable--or all of the above--he's chosen his political course and is sticking to it. And given that Republicans will need to tack right to win the nomination, including threatening Medicare and alienating conservative union members, Obama stands a good chance of making that political strategy work.

- Thunderroad

April 23, 2011 at 2:29pm

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"Combining that with intelligent tax and entitlements reform would be a trifecta virtually guaranteeing O's re-election even if the Repubs don't nominate on of their "caper" candidates." Except that intelligent tax and entitlement reform is impossible with the Republicans. They would rather sink the ship than reform it because they think that is their path to power so that they can resume looting the government and the country. Intelligent tax reform means taxes go up as the deficit in the operating budget alone, without regard to entitlements, is $1.25 trillion. But the Republican idea of reform is that taxes should go down more. That is not intelligent; it is batshit insane. Intelligent reform of social security would be means-testing the benefits and raising or eliminating the cap on the tax base. The Republican proposal, raising the retirement age when we already have chronic unemployment and underemployment and young people who cannot get a foothold on the bottom of the job ladder. Intelligent reform of Medicare would be funding it with progressive income taxes rather than payroll taxes and regulating price and consumption of medical care directly through some form of single-payer, as in pretty much every other industrialized country. Do I hear Republican applause? The Republican proposal is gradually to eliminate the insurance coverage by underfunding so that over time only those with the means can afford healthcare. Okay, given that intelligent reform is impossible, any suggestion for stupid reform that do not, one way or another, involve taking money from the pockets of the middle and working class and depositing it in the pockets of our already obscenely rich wealthiest? Come on Powell, come on seattle. Let's hear something other than claims, already proven to be profoundly wrong, that increasing the income share of the wealthy will promote growth that will lift all boats. That supply side crock of stinking bullshit has now failed miserably for 30 years, but it is, pretty much, all that the right-wing nuts have to offer to justify their idiotic ideas of reform. Can you do better? It is a pretty low standard after all.

- roidubouloi

April 23, 2011 at 2:31pm

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Of course we can do better. For starters, let's give up on the "impossible to deal with Republicans" excuse. If Reagan could deal with Tip O'Neil, Obama can surely deal with the current Repub leadership. Tax receipts can go up with a simplification of the code--eliminate most deductions, virtually all of which benefit the top brackets. Means testing and raising the cap on social security is a middle-class tax increase Repubs may buy as well, and no harm is done by raising the retirement age in the out years, while the bond markets would love it. Substantial savings are available in Medicare/Medicaid by eliminating (or, realistically, reducing) fraud, and by following Obama's plan for best practice boards. Defense cuts are on the table, etc-- workable deals can be done. Let's not make perfect enemy of the good. The next election will be all about trajectory. If it looks like O's heard the people about the growth of government, and the economy is on a steady upward path, he wins. If he gets distracted by opposition antics or tries to sell leftist cant over pragmatism, maybe not.

- Robert Powell

April 23, 2011 at 4:24pm

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I don't think Democrats or anybody else can deal with the current Republican leadership. Good heavens. They are pushing birtherism and practically demanding an end to Medicare, launching assaults on women's rights and unions and have voted against the idea that women should get equal pay for equal work. By the same token, they refuse to see that the deficit has two aspects: spending and revenue. Their mantra is cut taxes, especially on the rich, and cut spending, especially on the poor. What's to deal with here? Oh ps - raising the retirement age - right. Nobody will hire older workers anyway. And kids are having trouble getting jobs that pay more than minimum wage. Do you guys live in on another planet or what? Do you have the vaguest clue what's going on out here? Soup is getting expensive. The RE market is still terribly depressed. Oil is up so high American Airlines just took a gigantic hit. Soybean futures are up because of a lousy, too wet spring in the Midwest and Texas is on fire. Meanwhile, the Republicans supposedly create jobs. Riiiggghhhttttt......... Personally, I like this video, of Paul Ryan being booed by his constituents: http://www.huffingtonpost.com/dave-johnson/republicans-hearing-citiz_b_852689.html Listen. They voted for him and THEY can't deal with him. So, what should we do exactly? Robert Powell accuses Obama of "leftist cant" but much of the Republican platform, if not all of it, is ideologically driven - it sure as heck isn't rational or constructive and it is NOT designed to help form a consensus nor is it doing thing one to improve our situation, period.

- Sophia

April 23, 2011 at 5:00pm

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You think Tip O'Neill can be compared to the Tea party Republicans? Not enough, Me. Powell. Means testing could bet us close to balance in social security. The figure for "waste" in Medicare is in the neighborhood of only $50 billion. And that leaves the $1.05 trillion deficit in the operating budget, out of a gross of $2.25. Let us imagine a 10% across the board cut in Federal operations, including defense. We still have an $800 billion deficit to close in exactly one one -- tax increases -- because our tax rates are absurdly low. Eliminating deductions is a good idea, but hits the middle class too. The only way to get this done is the Willy Sutton method -- raise substantially the tax on the wealthiest earners because they have all the money, 46% of national income for the top 10% according to one of the blogs here in the last couple of days. Ergo, until tax increases are on the table, there is really nothing to discuss with the Tea party nuts.

- roidubouloi

April 23, 2011 at 6:32pm

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Robert Powell: "For starters, let's give up on the 'impossible to deal with Republicans' excuse....Tax receipts can go up with a simplification of the code--eliminate most deductions, virtually all of which benefit the top brackets. Means testing and raising the cap on social security is a middle-class tax increase Repubs may buy as well..." I don't think a majority of current Republicans will go for these suggestions, so Boehner won't put them on the table. The Republican mantra these days isn't whether government works or not, but that it's "too big." They see any increase in revenues, and hence expenditures, as making it even bigger. And that includes closing loopholes and ending or reducing deductions, since they make someone's taxes go up regardless of the absence of any justification for not eliminating the loophole or deduction. Look at Grover Norquist, who insists that any revenue increase generated by closing a loophole be offset by lowering taxes elsewhere. I'd like to think that his is not the majority Republican position, but I fear that it is. I'd be glad to be proved wrong. I believe many of your suggestions are reasonable, and at least should be discussed. But ideology seems to overwhelm practicality for most Republicans serving in Congress. They voted unanimously for Ryan's budget, which does nothing to control overall health care costs (it reduces the cost to government but shifts all the risk of cost increases to participants). I can't see them endorsing best practices boards, since they're another intrusion of "government" in our lives and we need less government, not more (even though the market has shown itself unable to restrain the growth in medical costs). While a few individuals, such as Senator Corker, might countenance tax reform which both simplifies the system and increases revenues, I don't think very many of his Republican colleagues would go along. Boehner could conceivably get reasonable deal done with a lot of Democratic votes and some Republicans who are still willing to operate in the real world. But I don't think he has enough Republican support to make such a deal while retaining his role as Speaker, and then we'd have a different leader who won't make such a deal. As Roid wrote, net tax increases have to be on the table for any reasonable resolution of these matters. Unless Boehner is willing to buck his caucus on this, then I don't think it's possible to deal with current Republican leadership. (The same probably goes in the Senate, but it's not as apparent since Democrats still hold the majority.)

- dsimon

April 23, 2011 at 8:04pm

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Let's stipulate that there are two items under discussion here: economics, and politics. In terms of the latter, it's not necessary to come up with a budget plan that solves all of our problems in one go. A good-faith downpayment in the form of the sort of tax and entitlements reforms currently proposed by various players would relieve the bond markets and put us on a positive trajectory. There's no way that wouldn't be good politics, and Republicans know it. There is no way we can solve our economic problems by just "taxing the rich". There's not enough of them to do the job, and the kind of tax increases that would even come close would be dangerous to the economy assuming that they could get the necessary votes, which is totally unrealistic--most Democrats wouldn't even vote for it. Besides, fairness dictates that shared sacrifice includes folks like me. I'm far from wealthy, but I don't think the approximately $145,000 I've paid into the system over my career can be cashed out to the tune of $450,000 in benefits, both of which are average figures for someone of 65 today, with any claim of fairness. Means test EVERYTHING. Raise the caps. Eliminate virtually all subsidies. Cut Defense. And don't sneer at the savings available from attacking fraud and abuse. Christina Romer estimated at least $60 billion per year is lost in Medicare alone, and Medicaid is probably worse. This is real money even in Washington.

- Robert Powell

April 24, 2011 at 4:17am

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There can be no downpayment on the deficit as long as the Republican idea of compromise is benefit cuts in exchange for even more tax CUTS rather than benefit cuts in exchange for tax increases. The argument should be about how much, but it is rendered impossible even to have an argument because the Republican position is flat-out nuts. There is no danger to the economy in substantially greater taxes on the wealthiest. Who do you think is buying Treasury debt today because they have nothing to buy with their excess income? We can afford what we spend because the economy is in fact producing it. Our output is sufficient, but the income distribution is hugely skewed and exacerbated, rather than mitigated, by the current tax structure. Hence, the middle class goes into debt, both privately and publicly, to the wealthy who own the consumer debt and treasury debt. Completely unnecessary. If we took away a big slug of that upper-end income, there would be no need for the debt, private or public.

- roidubouloi

April 24, 2011 at 8:28am

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Roid writes: "What is remarkable (actually not given the ideology) is that it is the supposed free-market purists who do not believe in the free market as soon as labor stands to benefit. " I think the issue is that companies need bodies NOW to do the engineering work, and they do not have the time to wait for the educational system to correct itself. And, frankly, if solid engineering graduate is starting at over $100K right out of school, then you can't really make a case that labor isn't benefiting. And if a engineer with 8 years experience managing a team of 10 is seeing a total package of around $400K, you can't really make a case that labor isn't benefiting. There are a few options for a company like Google here 1) Hire only US graduates, even though they might not meet the hiring bar. 2) Hire from a broader world wide pool via H1B and employ them in the US 3) Don't hire US workers, and set up remote campuses (outside of US) and hire those folks instead. I think Google is doing all of these. And obviously #2 is better than #3 Robert Powell writes: "With all due respect seattle, there are sufficient good engineers coming out of US schools. The problem is that we kick a significant number of them out of the country when they graduate. If every degree came with a green card, we'd have no problem." Yes, agree. To me, those with desirable skills should be first in line for citizenship if they want it.

- seattleeng

April 24, 2011 at 12:00pm

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Roid writes: " Completely unnecessary. If we took away a big slug of that upper-end income, there would be no need for the debt, private or public." Hah. How much do you think the top 10% would need to give away to the other 90% to "equalize" the income? Round numbers are find.

- seattleeng

April 24, 2011 at 12:02pm

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It is not the education system that needs to correct itself to make paying for additional graduate school a good investment, it is the pay structure. If the pool of H1B visas were set on a path to contract, then US firms would have to pay enough to justify attending school or, even better, offer the training/education themselves. But, of course, they would rather just import labor and hire cheaper. What capital always wants and what the so-called free-market believers insist that government make available to them: cheap labor, or at least cheaper labor. Tell me again how American labor benefits from imported competition? The same way American capital benefits from imported competition? As for debt and taxes, you misunderstand. It is not necessary to equalize income. The amount that the middle class has to borrow from the rich is the effect of the current maldistribution of income. We could tax that away from the rich and their consumption and real investment would be unchanged. But they would no longer be lending their excess income as they wouldn't have any. The middle class would not have to borrow their shortfall (whether as private debt of public debt) because there wouldn't be a shortfall. As I have said repeatedly, we can make the whole thing work smoothly with three tax rates, 10% across the board (for entitlements), 40%, and 60% as progressive income taxes. Take all income and tax at 10%. Subtract that from spending and you have the progressive tax revenue target. Take all income over $1 million (or $2 million if it makes you feel better), tax it at 60% (a combined 70%). Then start taxing at 40% below the cutoff (a combined 50%). When the budget is balanced, declare a zero tax bracket for the rest of the way down. Thus, income is taxed at 10%, 50%, or 70%. Of course, some people would have to get by on only $500,000 or so of net income. Someone making $10 million would only have a bit more than $3 million to spend.

- roidubouloi

April 24, 2011 at 1:03pm

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Still waiting for you to confess error on your false claims about the increases in Medicare spending versus private insurance. Over 40 years, private insurance increased by a factor of 48x, Medicare by 31x. The only notable exception to the excess secular growth rate of private over public was the addition of the Part D drug benefit in 2006, which was not a lack of public cost control but the politically determined addition of a whole new benefit. Despite the numbers, you someone manage to claim that public costs have risen faster? Are you innumerate? Don't worry. I'm not holding my breath.

- roidubouloi

April 24, 2011 at 1:07pm

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Guess you're not talkin' to me, but sure, private insurance is more expensive. I've seen overhead figures in the double digits compared to single digits for administrative overhead on the Federal programs. Of course, viewed more broadly, healthcare costs are rising fundamentally because the Iron Triangle of Big Pharma/Med, Big Insurance, and Federal government have been passing the buck in a circular fashion for decades. The whole scheme is built on the idea that there are no limits to what docs, hospitals, and pharmacorps can charge because it's all paid for with Other People's Money. On the other matters, I don't see anything wrong with taking advantage of the opportunity to host the world's best and brightest. Looks like a win/win from here. If we are educating these folks, as we are, and they want to work, contribute, and help create jobs here, blocking them from doing so because a theoretical American may get theoretically higher pay for doing the job seems like knee-jerk closed shop unionism to me. We're not talking about sweat shops and stoop labor here. And please send me an e-mail the minute you think passing a 70% tax on top of all the other taxes upper middleclass earners pay is in the universe of the possible.

- Robert Powell

April 24, 2011 at 3:54pm

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I understand. For capital, anything other than the free ability to import as much labor as it wants and reduce wages to something like subsistence is a "closed shop." This, indeed, is the major purpose of globalization and US trade deficits in particular, a labor free-for-all that depresses US wages. That's sort of what happens when you increase the supply of something without increasing demand. It is so charming that otherwise devoted free-marketers are unable to observe this principle in action when it is applied to labor and have all sorts of colorful names for the desire to preserve American job opportunities for Americans so that Americans are employed and their wages are the best deal they can get. Exactly like I said, it is deliberate American policy, fiscal, tax, budget, monetary, trade, immigration, to maintain unemployment and suppress wage growth and pressure. We have the results to show for it in the increasingly skewed distribution of wealth, and then even the idea that we should use the tax system to mitigate the enormous disparities our policies create is "socialism" or god knows what else. We have a hideous class war being waged by the rich against everyone else. A big part of the war is propaganda the purpose of which is to obscure what is going on, and it is pretty successful. But it won't be forever. I am amazed that the propaganda extends to considering a tax rate of 70% on income in excess of $2 million a middle-class tax. Normally, we get the reverse, the insistence that, given the utter moral impossibility of high taxes on extremely high incomes, we have no choice but to impose heavy taxes on the middle class. That is, to be polite, a falsehood. We have plenty of wealth we could tax at the upper end to balance the budget, still leaving them with larger net income shares than they had 30 years ago, but we are supposed to consider this impossible and accept that we must balance the budget on the backs of the middle class and the poor. Feed the beast! Spend the Treasury dry. Bust it. But hold the line in refusing to consider any meaningful deficit reduction until large upper end tax increases are on the table as the first item. And don't stint in accusing the Republicans of committing any and every foul crime in the pursuit of class warfare. In case you haven't seen the chart, taxpayers at the high end pay barely more than their income share in taxes. Taxes in the US are essentially flat. But the wealthy want more from the bottom so that they can be even more scandalously wealthy at the expense of the rest of the society. Their greed knows no limits, none. Re the Medicare argument, you come in at the end. It may be obvious to you that private costs have been rising faster than public, but seattle actually claimed just the opposite to be the case in furtherance of the standard libertarian garbage argument that the private sector will do a better job. Libertarian arguments only work when the factual premises are invented, and invent them they do. This is but one in a long line of examples. It is tedious beyond belief constantly to have to point out that such claims as "We cannot balance the budget by taxing the rich," or "Government financed healthcare is much more inefficient than private," are ideologically motivated fairy tales. But they are. There is no argument advanced by the right that is not premised on falsehoods.

- roidubouloi

April 24, 2011 at 4:22pm

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Nice rhetoric. In the real world, Obama has himself described our current policy of training engineers then kicking them out of the country so that they can work for our competitors at substantially reduced rates as "insane". I agree. When we have a surplus of qualified engineering talent maybe things would look different, but this is far from the case. Pretending that these folks are going to get anything other than comfortable middleclass salaries is just propagandistic smoke and mirrors. Similarly, "soak the rich" may be emotionally satisfying, but it's dubious economics and absolutely hallucinatory politics. Ain't gonna happen, so what's the next idea? http://www.theatlantic.com/business/archive/2011/04/large-tax-increases-are-not-a-semantic-question/237699/

- Robert Powell

April 25, 2011 at 3:48am

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Actually, here on the planet earth, in the actual universe, it is the soak everyone else further to enrich the rich that is the dubious economics. Reaganomics. We have multiple disastrous results to show for it. And yet, the acolytes keep claiming that what we need is to do even more of the same. All evidence of our own economic history is to the contrary, but, no matter. You all will keep proclaiming the True Faith regardless. As for hallucinatory politics, that is a fine thing to talk about while the Republican party is completely in the grip of the Tea party, not merely hallucinatory, but insane. One has to start talking in order for something to be accepted, and I choose to start talking here, pointing out that the claim that there is not enough income at the high end to balance the budget is an ideologically driven lie. "Soaking the rich" is simply propaganda. Pointing out the reality of the distribution of income in this country is not. As for "next idea," I propose stalemate. There is not a reason in the world why the Democrats ought to be more concerned than the Republicans about deficits. Obama's rhetoric on this was great, pushes back on them by rejecting and excoriating their solution of soaking the poor and the middle class in order to make the rich richer. We need more of it, lots more, with the purpose of fighting the Republicans to a draw where they can accomplish nothing about deficits without agreeing to large tax increases for the wealthy. Bush's tax cuts got us into this mess, turning surpluses into deficits. The solution is to reverse them, and then some. Until then, Feed the Beast!

- roidubouloi

April 25, 2011 at 8:36am

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Here. Krugman explains it for you rather nicely. http://www.nytimes.com/2011/04/25/opinion/25krugman.html?hp Or you can keep reading garbage from Cato. Time to start calling the lies of the Cato Institute, the Republicans, the Tea party, Ryan and David Brooks just what they are: lies, propaganda. They should not be accorded a place at the table of rational discussion. They should be ridiculed relentlessly.

- roidubouloi

April 25, 2011 at 8:49am

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http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States Several economists have demonstrated that income inequality has grown more rapidly under Republican administrations than under Democratic administrations. Income-tax policy has been cited as one of several factors that contributed to inequality. Republican President Ronald Reagan reduced the top marginal tax rate from over 70 to 28 percent during his tenure in office, which greatly contrasted with the very high top marginal tax rates in place during the period of great income equality, the “Great Compression”.[56] Larry Bartels, a Princeton political scientist, looked at average annual pre-tax income growth from 1948 to 2005, which encompassed most of the egalitarian Great Compression and the entire inegalitarian Great Divergence (up until the time he did his research) and published his findings in the book Unequal Democracy: The Political Economy of the New Gilded Age (Princeton University Press: 2008). His calculations showed that pre-tax income increased overall about 1.42 percent for people in the lowest quintile of the population and 2 percent for those in the top 5%. His research did suggest that income inequality increased under Republican administration and not under Democratic administration. Timothy Noah in the series “The United States of Inequality” summarized Bartels's findings below: “In Democrat-world, pre-tax income increased 2.64 percent annually for the poor and lower-middle-class and 2.12 percent annually for the upper-middle-class and rich. There was no Great Divergence. Instead, the Great Compression—the egalitarian income trend that prevailed through the 1940s, 1950s, and 1960s—continued to the present, albeit with incomes converging less rapidly than before. In Republican-world, meanwhile, pre-tax income increased 0.43 percent annually for the poor and lower-middle-class and 1.90 percent for the upper-middle-class and rich. Not only did the Great Divergence occur; it was more greatly divergent. Also of note: In Democrat-world pre-tax income increased faster than in the real world not just for the 20th percentile but also for the 40th, 60th, and 80th. We were all richer and more equal! But in Republican-world, pre-tax income increased slower than in the real world not just for the 20th percentile but also for the 40th, 60th, and 80th. We were all poorer and less equal! Democrats also produced marginally faster income growth than Republicans at the 95th percentile, but the difference wasn't statistically significant.”

- roidubouloi

April 25, 2011 at 9:34am

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Robert Powell: "Let's stipulate that there are two items under discussion here: economics, and politics." I'll agree to that. The problem is that I don't see Republican leadership seriously dealing with the economics because their caucus, particularly in the House, seems to refuse to consider any proposal that increases revenue even when coupled with spending cuts. So I still question whether Democrats can deal with current Republicans. "In terms of the latter, it's not necessary to come up with a budget plan that solves all of our problems in one go." I agree with that too. But the problem is that that's not what I hear coming out of some conservatives in DC. Instead I hear people like Bachmann saying we shouldn't raise taxes on the wealthy because it wouldn't solve the problem on its own. By that reasoning, I shouldn't pay taxes because my contributions won't fund anything on their own. Whether she represents a majority Republican position, I can't say. "A good-faith downpayment in the form of the sort of tax and entitlements reforms currently proposed by various players would relieve the bond markets and put us on a positive trajectory. There's no way that wouldn't be good politics, and Republicans know it." I have seen no sign that House Republicans are willing to consider any tax reform that results in increased revenues. It's all about "shrinking government." Ryan's plan claims to be, at most, revenue-neutral, and only 4 Republicans voted no. Again, it's hard to tell what is a strongly held ideological stance and what is political positioning, but I haven't heard one of them say "I'd favor increased revenues if...." "There is no way we can solve our economic problems by just 'taxing the rich'." But which House Republicans have come out in support of even that? And how many more than just a potential handful of Republican Senators? "Raise the caps." That's a tax increase. "Eliminate virtually all subsidies." That's another tax increase. Will Boehner's caucus allow him to consider these possibilities? I think there are reasonable Republicans out there. I just think there aren't very many of them on Capitol Hill at the moment.

- dsimon

April 25, 2011 at 9:54am

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Roid writes: "Over 40 years, private insurance increased by a factor of 48x, Medicare by 31x. The only notable exception to the excess secular growth rate of private over public was the addition of the Part D drug benefit in 2006, which was not a lack of public cost control but the politically determined addition of a whole new benefit." There's no error to confess. If you want me to admit that since the beginning of time public has risen faster than private, no problem. It does. But now, how about you admit than since 1990 medicare costs have grown faster than private costs? Don't worry, I won't hold my breath.

- seattleeng

April 25, 2011 at 11:00am

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Dsimon writes: "But which House Republicans have come out in support of even that? And how many more than just a potential handful of Republican Senators?" Side note...Recall the discussion in whcih you noted an article in which if we let cuts expire on the rich we'd be most of the way there towards addressing the deficit. Some more details on that in a good article in Slate (search on "the do-nothing plan"). They explain the various mechanisms that kick in: 1) Top rates rise to 39.6 2) AMT would kick in on 20M more families 3) Obama's health care plan would kick in a push costs down 4) Medicare payment rates to doctors drops to really low rates (no more doc fix) Presumably, this collection of things is what the NYT was referencing their CBO reference. But I think that saying letting bush tax cuts expire by themselves fixes this isn't quite right. That is $300B per year, and the deficit is much larger than that. But with these other things happening, I could see how the $1.6T gap is closed.

- seattleeng

April 25, 2011 at 11:36am

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You are out of your fucking mind seattle. Even if you INCLUDE the addition of the Part D benefit, the cost of Medicare over the 40 year span in the data you cited increases less than the increase in the cost of private insurance. That is, don't make any adjustment for the addition of a whole new benefit. Private costs STILL ROSE SIGNIFICANTLY FASTER THAN PUBLIC. 48x versus 31x. Do you understand that 48 is a larger number than 31? Or are you really one of these types who will utter any lie that you think is convenient to your ideology? As for your claim that public costs have risen faster since 1990, the answer is no again. Definitively, unambiguously, no. From 1990 (your somewhat arbitrary starting point, but it doesn't matter) through 2005, public costs rose 2.48x and private costs rose 2.72x. 2.72 is a bigger number than 2.48. So, private costs rose more. Accordingly, there is no basis for saying that "since 1990 medicare costs have grown faster than private costs." You might as well pick a date prior to the creation of medicare costs and say that medicare costs have grown faster since that date. It would at least be correct, although misleading, to say that medicare costs have grown faster than private costs since 2005. 36% versus 19%. However, as you now already know, this is attributable to the addition of a new benefit, the Part D drug benefit, in 2006. Not only is this an entirely new benefit, but, by law as required by George W. Bush, Medicare is prohibited from negotiating rates with pharmaceutical companies. Also, as I have noted, in 2003, Medicare added Medicate Aadvantage which allows enrollees to choose a private insurance option subsidized by Medicare, subsidies that are now known to be unnecessary and will be eliminated by the ACA, which will see Medicare costs dropping relative to private costs. The so-called free-market maniacs who love nothing more than to put their hands in the Federal till do damage; the Democrats eventually undo it. So, while one could literally state that Medicare costs have risen more, not since 1990 but since 2005, one cannot properly claim that public costs have risen more than private over even that period if you are talking about the costs of the same things. And the more serious point is that what has been responsible for the faster increases in Medicare costs in recent years has been the inclusion within Medicare of private sector costs with the deliberate, legislated absence of public sector controls. One thing we can be sure of, if the Republicans are allowed to do healthcare their way, we will all be bankrupt. All they and you really want to do is plunder the public treasury, and you are perfectly willing, as they are, to tell absurd lies in the service of that cause. You are way over the line here, deep into the territory of deliberate attempts at deception.

- roidubouloi

April 25, 2011 at 3:31pm

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roi - where are you sourcing the increases in "private" cost increases since 2005? When I looked into Seattle's claim from a few threads ago, it looked like the only way that Medicare costs increase more than for Private Health Insurance is to count PHI as "not medicare/medicaid". Which of course includes both BOTH actual PHI and out-of-pocket payments in the "not" category. And out-of-pocket payments (not surprisingly) are not increasing at anywhere the rate of PHI or Medicare. Taking PHI *alone*, it was still outstripping Medicare, even with Part-D from what I could see.

- Nari224

April 25, 2011 at 3:52pm

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This blob seems to be missing something--I guess that is because it is based on a very firm but totally unsupported (at least in this piece) assumption that during a recession, or whatever we're in, the government should spend money like a drunken sailor and not even talk about paying back the accumulating debt. I am all for priming the pump and all that, and I support a lot of things we're spending money on, but don't you think at some point people have to start planning, at least, for how we're going to reduce the annual deficit and the national debt, and perhaps even take a few quasi-symbolic steps in that direction? Especially in the political environment the president must operate in, where the Repubs and the Tea Partiers oppose any and all expenditures and constantly threaten to blow up the government if some deficit/debt reductions are not instituted? Obama actually did a pretty good job of settling with the forces of (false) economy in the last deadline episode, holding them to a relatively modest amount of cuts, most of which do not even kick in this fiscal year. He also seems to be working, however clumsily, toward some relatively sensible cuts in entitlements, defense, etc., many or most of which also will not take effect, at least not fully, for years to come. His approach, while bumbling, makes a lot more sense than the half-understood, all-or-nothing hissyfit offered by our armchair philosopher.

- mlottman

April 25, 2011 at 4:01pm

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With all due respect gentlemen, if we share as I believe we do the intention to support the re-election of the President, it is incumbent upon us to spend less time preaching to the choir about the crimes of the hated Republicans, and more time trying to understand and communicate with the voters we are going to need in 2012. I'm talking about mostly working class white people, many of them Independents and some of them Democrats who have been voting Republican from time to time. Their votes elected Obama, and will do so again if they are not further alienated by condescension and left-wing cant. Years worth of studies by economists about perceptions of economic fairness demonstrate that big majorities of Americans think fairness is important, and that we live in a society that should, and does, reward merit. The see the USA as an opportunity society. A small minority, I believe well-represented by roi, believe more or less that opportunity in America is a sham--the system is rigged and people only get the breaks for reasons of luck, birth, or discrimination. A good argument can be made that reality is somewhere in between merit and luck, perhaps more skewed towards luck than merit recently, but maybe not. But that's intellectual speculation, not politics. National Democratic strategy that attempts to demonize "the rich", who most Americans admire and hope some day to join, has reliably failed for decades. The party that makes the necessary compromises on cuts and taxes while respecting the values of the voters will win. There are deals to be done here, to the common benefit. They won't be made by folks who don't understand their interlocutors or those voters they speak for. ps-dsimon, just because you are unaware of the statements and positions of quite conservative Republicans in favor of revenue enhancements (Tom Coburn is a good example) doesn't mean they don't exist. If you think the Ryan Plan is the Repubs final offer any more than Obama's is the Democrats....well, let's just say they're not.

- Robert Powell

April 25, 2011 at 4:44pm

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Nari, I am using seattle's own source, tables from the Bureau of Economic Analysis here: http://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf The relevant table is Table 13. You have all the data you need there to compute point-to-point growth. If you look at the two right hand columns, that compare costs for comparable benefits (so called "common benefits"), public and private, rather than the left, a comparison of total costs, the comparison is even more favorable. Seattle makes claims about these numbers that are flatly contradicted by the numbers. That is the tactic on the right, simply to make claims that are untrue and keep repeating them as if the evidence to the contrary does not exist or, worse, claiming the evidence to show the diametric opposite of what it clearly shows. This is a vaguely policy discussion so it doesn't matter. But in the political world, it is the reason why the moment you accept the opposition's frame, you are already dead. You have to impose your own frame. Obama did that well in his recent speech, but nothing relevant to actual deficit reduction will emerge from that other than the expiration of the Bush tax cuts as next scheduled. There is no serious problem attributable to entitlements in the near term. They account for only 20% of the deficit. It is a problem to be sure, but the obfuscators of the right are doing a bait and switch, trying to impose draconian cuts in entitlements because of a deficit that is not due to entitlements but to the lack of tax revenues. We have a $2.225 trillion federal operating budget (exclusive of Medicare and Social security and payroll taxes) and a $1.05 trillion deficit in that budget. We have a $244 billion deficit on the entitlement side, pretty much all in Medicare. Even eliminating Medicare entirely would not eliminate the bulk of the deficit. The idea that we are going to see a 47% cut in Federal operating expense is beyond absurd as that would require cuts on the order of magnitude of 80% in the entire budget other than defense and interest -- everything from courts, to prisons, to air traffic control, plus all of Medicaid. The whole deficit discussion is unreal because it is the Republican frame, which is why Judis is basically right. The Democrats need to talk about the fact that income has become grossly maldistributed due to Reaganomics and its agenda of unsupportable tax cuts for those who earn the most. This is the reason why the middle class and working class are struggling, some desperately, even though our per capita income is the highest the world has ever seen. Fighting about deficits in this climate is a rearguard action at best.

- roidubouloi

April 25, 2011 at 5:03pm

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There are no deals to be made because there are no rational deals to be made with the Republicans. If one is going to separate policy and politics, as one should, and as I constantly urge that Democrats must do, then fighting within the Republican frame -- about deficits which are their issue -- is a drop-dead loser. There are no deals to be made and nothing to be gained by fighting on their turf. Merit, luck, etc. are almost beside the point, although these are factors that affect who gets what reward within a given social stratum. The larger and much more important point is that we have policies at the macro level that assure an increasingly skewed net income distribution. An individual may jump between levels through some combination of luck, merit, or prayer, but the overall distribution is the result of policy, not individual effort. Those policies are killing us because they consign larger and larger numbers of Americans to the economic margins, increasingly destroy social mobility (we used to be the best at this, no longer), and slow growth by sapping the economy of the demand that is the ONLY basis for growth in a modern, monetized economy. Supply-side economics is bunk, hokum, snake-oil. It is a pure fantasy invented for ideological reasons, the pathological hatred of the right for the New Deal. At some point, the budget deficits created by the supply-side madness are also going to wreck our credit. That is not today's problem. Today's problem is unemployment, under-employment, and the inability of an ever larger percentage of the population to afford a decent share of our collective output because it is all accumulating at the top. There are plenty of ways to describe the disastrous effects of supply-side economics -- an experiment that has been tried now for 30 years and has failed decisively in every possible way -- that do not require "demonizing the rich" in the manner that Powell describes. See, e.g., FDR. As for Powell's claim that elections cannot be won this way, see the 50 year period from 1930 to 1980. I suppose I have to raise a flag whenever I am discussing the range of available (sane) policy options, when I am debunking false claims about policy and reality made by the right, and another flag when I am proposing political rhetoric. I do not think that one can win elections by reading aloud from my posts on TNR.

- roidubouloi

April 25, 2011 at 5:18pm

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Roi: Thanks, looks like the data I was looking at before was either wrong or included a much longer time span. And the intended-to-bust-Medicare Part-D aside, I can't think of any other reason that Medicare costs may have been outpacing PHI in recent years. Unless of course there's something in that whole massive economic downturn removing older workers from the PHI risk pool and adding them to Medicare. Or the aging of the population doing the same. However, since the "beginning of time" (assuming that starts in 1969 for some reason, guess he's a young earther as well) Medicare appears to win hands down.

- Nari224

April 25, 2011 at 5:37pm

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RP: I'm with you to a certain point, but I'm struggling with the argument in its entirety. The party that does the first part of "The party that makes the necessary compromises on cuts and taxes while respecting the values of the voters will win." is the Democrats. The latter is the Republicans, or at least they are presumably "respecting the values of the voters" if your prescription is what is required, as the GOP clearly isn't the slightest bit serious about cuts and taxes. I must ask what your proposal for the Democrats is? You talk about how people believe that the US is a meritocracy, yet that is clearly NOT what the GOP believes, or cares to preserve. Do you not get tired of Lucy whipping the football from you? Did the experience with Wyden Bennet not leave any impression? As for Republicans in favour of revenue enhancements - you like to dismiss plenty of other's arguments (such as Roi's 70% top bracket) as being politically unrealistic. How is this any different? If the GOP is remotely serious about tax increases, why is Ryan's plan getting so much more attention than Coburns?

- Nari224

April 25, 2011 at 5:43pm

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Yes, Medicare does win hands down. Medicare growth in costs (the rate of growth), first started to outstrip private insurance in 2003. That was the year that Medicare Advantage came in, a private insurance program funded, and subsidized, by the public. Then you have Part D in 2006. Not only a one-time kick in costs, but, due to the law that prohibits Medicare from negotiating rates with pharma, a continuing source of costs increases. The moral: the more you dump private sector practices into the public sector the worse things get. The private sector is worse by comparison and, therefore, when the Republicans force the public sector to pay private sector costs -- because of their myth that the private sector is cheaper and more efficient -- you get deterioration in the public sector. Also, the population served by Medicare is aging, as it has since the inception. Given that the Medicare population becomes more demanding of care due to age and the privately insured population does not age (because the aging is all in the Medicare population), the success of Medicare is all the more remarkable. If anything, this is a decent natural experiment to prove that government control of medical costs and utilization is our only hope for preventing private sector health care from eating us alive. Let me make that clear: All the evidence that exists repudiates the libertarian-free-market thesis about how to ensure affordable healthcare for all Americans. The evidence is that we need considerably more government intervention and supervision, not less. ACA is a step in the right direction, but only a step.

- roidubouloi

April 25, 2011 at 5:46pm

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Roid writes: "You are out of your fucking mind seattle." Sorry, I didn't mean to make blow a gasket. I made a typo: I originally wrote: "If you want me to admit that since the beginning of time public has risen faster than private, no problem. It does. But now, how about you admit than since 1990 medicare costs have grown faster than private costs?" I should have written (change in caps) "If you want me to admit that since the beginning of time PRIVATE has risen faster than PUBLIC, no problem. It does. But now, how about you admit than since 1990 medicare costs have grown faster than private costs?" Now, you can blame all this on Bush if you wish. But the fact is that all along the way we'll always have politicians doling out the love through higher benefits. Asking to exempt a decision along the way is foolish. The numbers are what they are. In '74 medicare had a 21% jump. In '75 18%. In '76 17%. In '78 13.4. In '79 13 In '80 18%. In '82 14.8%. In '83 11.8%. In '89 11.5. In '92 10.5. Should we throw all these out too? Those jumps were almost or bigger as the 2006 jump under Bush (16.3%) you keep going on about. In fact, the 2006 jump is not at all unprecedented (especially considering the year after it was a comparatively low 5.4%). There's no reason to remove it from the list unless your goal is to simply cook the numbers. In fact, from 2000 to 2008 Medicare grew at an average of 7.4%. If you wish, we could count from 2001 to 2009 where it grew at an annual average of 8.2%. Over it's entire lifetime, it's averaged 9.2% annual growth. Tell me again, why are you wanting to throw out Bush's reign when it was lower than the lifetime average growth???? Now, with that said, since 1990 (or 2000, your choice), which has grown faster? Medicare or private? Medicare. Sorry. Buddy. Your ideological bent prevents you from rationally looking at numbers. But I try.

- seattleeng

April 25, 2011 at 11:12pm

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Roid writes: "he larger and much more important point is that we have policies at the macro level that assure an increasingly skewed net income distribution." Roid, this is where you go off the rails. If you pay someone more that works harder than someone that doesn't (which most believe is fair), then you will have an eternally diverging income distribution. Period. Assume Person A does the minimum work to get by, and Person B does everything they can to get ahead. They both are waiters. Of course, at the end of a year, you expect person B to have earned more than A, right? He worked harder, he should earn more. But then, you find that waiter B expects more from his kids, and has enough to send them to a community college. And after college, they don't become a waiter. They become a foreman or a manager or learn a trade. And they expect great things from their kids. And save enough for university, vacations to other parts of the world to see and grow, you know, the entire package. Lather rinse repeat a few more generations. Meanwhile, Person A is a great grandparent, and their great grandkids are working as a checker at Safeway. And the daughter is pregnant and had to quit school at the age of 15. A contrived example, for sure. But it happens day in and day out. But if you believe in meritocracy, incomes between the do-somethings and do-nothings will ALWAYS diverge. There is no way around it. The only way to have a meritocracy WITHOUT diverging incomes is to ensure children are not rewarded or penalized for parent's decisions and teachings. You will always have parents that care more, and will expect more from their kids. That is the greatest advantage you can give a child. Far greater than money. Conversely, you will always have parents that could not possibly care less. Bad choices surely account for a huge portion of our poverty. Sad but true.

- seattleeng

April 25, 2011 at 11:34pm

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Well, seattle, acknowledging that you wrote it backwards unintentionally at least puts you back in the realm of the rational, but your claim that Medicare has risen faster since 1990 would get you a prison term under the securities laws if you put that in a prospectus. It is an intentionally misleading claim because Medicare did NOT rise faster between 1990 and 2005. Nor did it rise faster over the span of 2000 to 2008. It rose faster from 2006 through 2009, having risen at a distinctly lower rate than private care from 1970 to 2005. Why one would conclude on that basis that there is a problem with Medicare rather than a problem with private costs is beyond me. But the main point is that you make a false statement when you say Medicare has risen faster "since 1990." If it were a horse race, anyone would understand that statement to mean that Medicare, if not growing faster at every moment since the date you pick, has been ahead since that date. But that is emphatically not the case. It was behind for the first 15 years of the period you cite and then had a spurt. So, no, if one is not innumerate, you cannot fairly say that Medicare has grown faster since either 1990 or 2000. You can say that it began to grow faster in 2006. Regarding 2006, there is a particular reason to regard that change differently having nothing to do with George Bush's identity. It has to do with the fact that we KNOW that a large additional benefit was added in that year such that the public growth rate was 16.4% and the private 5%. We also know that, if you look at the common benefits in that same year, public grew at 3.2% and private at 6.5%. Thus, my estimate that 10% of the growth in public costs in that single year was due to Part D is almost certainly too low. Now, it may well be that some of the large increase in the early years of Medicare were due to benefit changes, or possibly enrollment changes. Maybe someone knows the answer, but we don't. So, I am graciously willing to assume that these are "growth" in costs. Your point fails even so. What is unique about Part D is not only that it was a large new benefit, but that the particular president, Bush, insisted that the law actually prohibit Medicare from exercising control over those costs. This is a massive give-away to pharma. But, for our purposes, what it means that, due to Bush, a large piece of medicare is now regulated by the private market instead of by the Medicare system. And what do we see? That the rate of growth of Medicare accelerates providing additional evidence that you are flat-out wrong. When the private market is allowed to override government controls, things get worse, not better. Since the point you are attempting to make is not one about the aesthetics of numbers, but about the relative success in controlling costs, the proper comparison is actually the "common benefits." If you look at common benefits, where the costs are being compared for the same benefits, then in every period cited above, 1990 to 2009, 2000 to 2009, 2005 to 2009, the rate of growth of private costs is higher. 2.93x v 2.58x, 1.88x v 1.57x, 1.25x v 1.16x. However, your point is so far to the wrong, that one can even show you to be wrong if the comparison is not between common benefits but total benefits. If you want to make the argument that Medicare is more costly or inefficient because, despite its slower rate of growth over its 40 years existence as well as over almost any sub-period you pick to look at, in 2006 George Bush added a large public benefit, Part D, for which he specifically prevented the government from controlling costs, go right ahead. That is self-refuting and would not be taken seriously by anyone. But don't try to dress it up with phony claims about costs since 1990 or 2000 so as to make it appear that it is anything other than Part D that is the cause of even the shortest period of higher growth of Medicare.

- roidubouloi

April 25, 2011 at 11:49pm

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Actually, seattle, bad choices account for very little of our poverty. Lack of well-paying jobs is the cause of poverty as is perfectly clear from the business cycle. When we have a boom, poverty goes down. Do you think it is because people suddenly stop getting pregnant or whatever your favorite example is of a "bad choice?" Or is it because the labor market got tighter, wages were higher, and there was less unemployment and under-employment? When a town is impoverished and a large employer moves to the region, poverty goes down. Did those people suddenly stop making bad choices? The answer is perfectly clear, clear enough for a child. You just want to ignore it because you love your little myth about personal effort and just outcomes. Where you and the Cato-tonic crowd go completely off the rails is the fantasy that labor income is the result of individual output or merit. It is not. Labor income is mostly a function of the job itself and not of who holds it. Now, I will grant you that competition and merit have more to do with who gets particular jobs, but the relative income of different jobs is not a function of the productivity of who is doing it. A Harvard lawyer sweeping floors is not going to be worth $250,000 doing it. The distribution of income amongst jobs, and the number of jobs available, has almost nothing whatsoever to do with individual merit or effort. It has to do with the structure of the economy and is heavily influenced by government policies, particularly government policies that affirmatively suppress the value of labor and generate unemployment. There are reasons to do this, although in many cases it should not be necessary. But let us grant that creating and maintaining this tournament system in which people compete to occupy particular slots, is good for total growth and productivity. Fine, but that does not in any way compel the conclusion that the outcome is just or that, having created this system and having sustained it with a wide variety of policy choices because it is efficient, we just meekly accept the market outcome as is. Why should that be? Why is it that we can, for the greater good, adopt a variety of policies that make unemployment and under-employment a certainty, that consign someone, if not some particular one, to a low-wage, crummy job, but we are not allowed to alter the market outcome after the fact, particularly if we are able to do so without sacrificing the efficiency benefits of the market system? Then we have the best of both worlds, the efficiency of the market and the equity of central planning. Indeed, the willingness to maintain some equity amongst different jobs is the only thing that makes it morally acceptable for us to maintain such a system. It is the social quid pro quo for a system of labor competition that creates great disparity that we then mitigate the outcome, not person by person, but income class by income class, through progressive taxation that puts the largest part of the burden of maintaining the system that makes it all possible on those who benefit the most. If it could be demonstrated, as libertarians and Cato-tonics relentlessly claim, that progressive taxation reduces productivity, then at least you would have some point, if not a compelling one. But the fact is that there is zero evidence for that thesis. None at all. You all just keep claiming it, on the basis of nothing at all, because it supports your ideological desire for unfettered market outcomes. There is no empirical evidence to support it.

- roidubouloi

April 26, 2011 at 12:06am

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Robert Powell: "National Democratic strategy that attempts to demonize 'the rich', who most Americans admire and hope some day to join, has reliably failed for decades." The proposal on the table is not about demonizing "the rich." It's about applying the notion of "shared sacrifice" that some Republicans have claimed is necessary to solve this supposedly dire, nation-endangering budget crisis. Ryan's plan asks nothing of the wealthy because it relies just about entirely (if not completely entirely) on spending cuts. But cutting programs by and large do not affect the wealthy, who do not depend on them. The only way that those of means can contribute to solving our budget problem is to pay a little more. Having all of us pay the rates we had under Clinton should not be even remotely controversial. Asking the wealthy to pay those rates should be even less so. Yet Republicans are unwilling to do even that (see the extension of the Bush tax cuts during the lame duck session). So their supposed requirement of shared sacrifice crumbles when it comes to asking anything of those who have the most. To the extent that there is class warfare going on, it seems to me to be on the part of Republicans who ask nothing of the wealthy. If there is one thing Republicans are asking of the wealthy, I'd like to hear it. So it's not about demonization; it's about fairness. "dsimon, just because you are unaware of the statements and positions of quite conservative Republicans in favor of revenue enhancements (Tom Coburn is a good example) doesn't mean they don't exist." I like to base my views on evidence. Coburn makes one. Maybe a Maine Senator or two could go along. But I wrote I didn't see more than a handful in the Senate doing so. And Democrats are in the majority in the Senate anyway (for now), where they could pass budget legislation with 50 votes under reconciliation. The bigger problem is in the House where Republican cooperation is needed. And I see no evidence that Boehner would make a deal that increases revenue given the current makeup of his caucus. (Grover Norquist was on MSNBC yesterday claiming that about 240 House members had taken the pledge not to raise taxes, which he has said means not closing any loopholes or eliminating deductions without a corresponding tax cut elsewhere--no net increase in revenues.) I'd like nothing more than to be proved wrong, but I see little reason to expect a surprise at the moment. Yes, the "do nothing" plan would go a long way towards resolving the deficit problem. But it's not a deal; it's the result of a failure to make a deal. It's also not a very good deal: allowing the AMT to hit more households would be politically unpopular, and ending the "doc fix" would be draconian and likely result in far fewer doctors taking Medicare patients and leaving many elderly without care. So I think Congress would make a deal on these issues--but these are deals which would increase the deficit, not help to solve the problem.

- dsimon

April 26, 2011 at 12:53am

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seattleeng: "Bad choices surely account for a huge portion of our poverty. Sad but true." Surely? Why are you sure? Where are the data? To contrast your self-admittedly "contrived" example, allow me to provide a real one. I was at the Lower East Side Tenement Museum a few weeks ago. Our tour told us the stories of two families who lived in the building. One made it out to the Promised Land (Brooklyn) with a ton of hard work. The other family didn't make it out because the father came down with tuberculosis and died, and the rest of the family had to scramble just to make ends meet. Why shouldn't this true story carry more weight than your hypothetical? I just saw the play "Good People" last weekend which contrasts one person who made it out of Boston's "Southie" with one that did not. The former accuses the latter of having made bad choices; the latter makes a powerful argument that one's choices can be severely limited by circumstance and happenstance. Roid makes many of the points I would otherwise have made regarding the structure of the job market (we seem to have a lot of recent college graduates in jobs that usually would not require a college degree these days). Given these many other factors, I think it unwise to assume that one factor is primarily responsible for success in the absence of any data whatsoever. Otherwise, it's too easy to fall into the trap of assuming the predominance of the factors that comport with one's ideology when that may not be the case at all.

- dsimon

April 26, 2011 at 1:13am

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One of my earlier political memories comes from the McGovern campaign of 1972 in which I worked as a volunteer. McGovern made a speech to workers at a rubber factory near Akron, Ohio. He announced his plan to raise estate taxes dramatically and redistribute the money to folks like those assembled, feeling sure this message would resonate with a working class audience. He was booed off the stage, and went on to lose in a landslide. If success is due to luck and merit fictitous, then redistribution brings greater fairness. But if America really is still an opportunity society, rewarding merit is more fair. Consistently over decades, about 7 in 10 Americans believe the latter to be the case, and I suspect the percentage is even higher among likely voters. And even if only a portion of the outcomes in life are due to merit, we should still gear our system to the part that is under our control. Otherwise we have no incentive to be industrious, honest, innovative, and optimistic--and there's no reason to teach these values to our kids either. I know the numbers on wealth/income distribution. But I also know that a lot of Republican support comes from people who are not fronting for The Monopoly Guy, but instead honestly believe in protecting the incentives that keep us an opportunity society. We need at least some of these people's votes to win, and can get them with a little empathetic understanding of their core values. Unsurprisingly, the Republican budget concentrates on cuts rather than tax increases--that's what they have Democrats for. Likewise, there is little evidence that Dems are serious about the kinds of cuts and entitlements reforms necessary to put us on a sustainable path. At the end of the day, all the grownups on both sides recognize that we need both cuts and revenue enhancements. I'm not particularly concerned with how much media attention Paul Ryan is getting over people like Coburn or Simpson, but even Boehner is on record as acknowleging this fact. I think a deal can and will be done, but it won't be done by people who ascribe the worst possible motives to those with whom they disagree.

- Robert Powell

April 26, 2011 at 2:57am

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http://www.washingtonpost.com/opinions/the-democrats-working-class-problem/2011/04/19/AFBKSnQE_story.html?wpisrc=emailtoafriend

- Robert Powell

April 26, 2011 at 4:37am

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Leaving entirely aside the questions whether the pattern of income distribution has anything at all with who fills which job, whether we need these enormous disparities to motivate people, whether we need these enormous disparities for prosperity, or whether they are the result of policy or individual behavior: 1. We have no serious entitlements problem in the near term. Its deficit is currently $250 billion. 2. We have a $1.05 trillion deficit in the operating budget of $2.25 trillion that cannot possibly be closed even primarily with cuts. Let's suppose all the crocodile tears deficit hawks cut the $100 billion in cuts they want, all from the social safety net and regulatory enforcement as is their preference. What do they propose to do about the other $900 billion? Nothing of course. The entire budget deficit discussion is a sham, even in these pages. Most people, even here at TNR, wrongly believe that entitlements are the problem. Hence, the faux deficit cutters are using the occasion of the operating deficits to attack entitlements, the rest of the social safety net, and regulatory enforcement (even of tax collections). The deficit is a manufactured crisis being used to justify the destruction of everything conservatives hate about government: social safety net and regulation. Withal, do they propose anything actually to close a material part of the deficit that they are crying, crying, crying about? Of course they don't. They don't actually give a shit about the deficit which is why they adopted policies guaranteed to create a huge one in the first place. Closing the deficit would require big revenue increases, and nothing but, and that they will not permit. Oh my, they say. That would mean the end of incentives to work. Never mind that we have been prosperous and saw higher growth in per capita income when we had much higher tax rates. Don't let any facts hit you on the ass as you walk out the door of the real world. The entire deficit discussion, including this one, is a farce, a sham. Those who cry big, fat, hot tears for the deficit refuse to acknowledge any single relevant fact about its sources or what it would require to close it. It is a drama staged for one reason, the destruction of Federal regulation and the New Deal.

- roidubouloi

April 26, 2011 at 7:25am

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Robert Powell: "Unsurprisingly, the Republican budget concentrates on cuts rather than tax increases--that's what they have Democrats for. Likewise, there is little evidence that Dems are serious about the kinds of cuts and entitlements reforms necessary to put us on a sustainable path." I think this is a false equivalence. Mainstream Democrats have looked at entitlement reform. Heck, Republicans pilloried them on Medicare cuts in the last election. The ACA does not go as far as I would like, but at least it's a start. When Democrats try to give a payment advisory board real power, Republicans cry "rationing!" But Republicans have offered nothing I can point to that would hold down health care costs; instead, they just shift increasing costs to individuals. It's not reforming the system; it's abandoning it. Democratic proposals have included both revenue increases and spending cuts. By contrast, Republican proposals don't just "concentrate" on cuts; they consist solely of cuts. I have not seen a single Republican budget proposal that considers an overall increase in revenues. I have not heard more than a handful of Republicans in Congress say they're willing to contemplate such a thing, and those mostly have been in the Senate. Again, I ask: would Boehner's caucus really let him cut a deal that includes raising revenues? When just about all of his caucus has already taken a pledge that they would not? How many would really defect? I'm not ascribing bad motives. I just think that most of the current crop of House Republicans value ideology over practicality, and I don't see them willing to make a deal. I think too many of them hold onto their ideology even when the facts should require them to moderate their views. (Norquist said that taking taxes off the table forces government to reduce spending--completely ignoring what happened during W's administration.) Again, look at the fight that was put up during the lame duck session about having the wealthy pay the tax rates they had under Clinton. I don't see why that is remotely controversial. It even has majority support among self-identified Republicans. And yet it couldn't get more than a few Republican votes (if any) in Congress. That doesn't make me optimistic that the question is one of balance than of overcoming much more difficult ideologically-based opposition. Again, though, I'd be glad to be proved wrong. I just think the evidence at the moment is sparse at best.

- dsimon

April 26, 2011 at 10:52am

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Robert Powell: "And even if only a portion of the outcomes in life are due to merit, we should still gear our system to the part that is under our control. Otherwise we have no incentive to be industrious, honest, innovative, and optimistic--and there's no reason to teach these values to our kids either." I hate to do this, but if you're going to quote Arthur Brooks, you should put it in quotes and provide a cite. (Chait uses the same excerpt today at http://www.tnr.com/blog/jonathan-chait/87380/arthur-brooks-goes-another-round-the-straw-man.)

- dsimon

April 26, 2011 at 11:06am

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dsimon writes: "Surely? Why are you sure? Where are the data?" The best comment on this I've read is from the "working seminar on family and american welfare policy", where they write: "the probabilities of remaining involuntarily in poverty are remarkably low for those who completely high school; once an adult, get married and stay married (even if not on the first try); stay employed, even at a wage and under conditions below their ultimate aims. Those who do these three traditional things may experience periods in poverty, but are quite unlikely to stay involuntarily poor...the poverty rate for those households where the primary wage earner finished high school, was married, had no more than two children, and worked full time...was trivially small--1 %" So, yes, these 3 basic choices are choices one can make quite readily. Staying in school, get and stay married with just 1 or 2 kids, and stay employed, even if you hate the job and if the wage sucks. Do those things, and your chances of poverty are very small. Roid writes: "Actually, seattle, bad choices account for very little of our poverty. Lack of well-paying jobs is the cause of poverty as is perfectly clear from the business cycle" Nope. In 2005, the census reported among non-working poor adults that only 6.2% gave the answer "could not find work" as a reason for not working. It is not a lack of jobs. 33% said they were ill or disabled, 10% said they were "retired" (although they were under 65), 31% said "home or family", and 21% said "school and other"

- seattleeng

April 26, 2011 at 11:35am

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RP: That's actually quite a good narrative, and I can't disagree with it in the abstract, but you've not answered any of the specific questions I've posited. The Democrats actually ARE doing everything you're suggesting as far as I can see (address medical costs through the PPACA, and address the deficit by raising taxes and constraining spending) and are getting pilloried by the GOP for it. And perhaps not co-incidentally, got hammered in the last election. You've not actually provided any specific's of "leftist cant" and keep talking about "soaking the rich" when tax rates today are at historic lows, and we're talking about very modest increases. If any increases are "soaking the rich" and we can't do it because it offends voters "values" then we are well and truly screwed. There just aren't the savings there until you start dismantling the military or dramatically dismantling the safety net. And no-one is proposing to raise taxes to increase redistribution. Could the Dems do more? Sure, but why should they stick their necks out for the GOP guillotine? Not like they didn't get a lesson in that recently. You keep calling for adults on both sides, but the behaviour of the GOP in both recent years (and arguably since the 80s) makes that an exercise in moral equivalence.

- Nari224

April 26, 2011 at 11:42am

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Roid writes: "or did it rise faster over the span of 2000 to 2008. It rose faster from 2006 through 2009, having risen at a distinctly lower rate than private care from 1970 to 2005" Roid, you look silly when you try to ignore periods of benefit expansions. Benefit expansions are a fact of all government programs. The Bush expansions are not unprecedented. Medicare showed similar (and even bigger) jumps in the 90's, 80's and 70's. Do you wish to ignore those too? Can you just admit that medicare costs from 1990 til today outpaced private costs from 1990 til today? Or that medicare costs from 2000 til today outpaced private costs from 2000 til today? The math is quite simple. PS. Medicare growth under Bush averaged 8.2% growth (2001-2009). That is below it's lifetime growth average of 9.2%. Be fair.

- seattleeng

April 26, 2011 at 11:47am

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DSimon writes: "The other family didn't make it out because the father came down with tuberculosis and died, and the rest of the family had to scramble just to make ends meet. Why shouldn't this true story carry more weight than your hypothetical" That is why we look at the numbers. I bring up the example of waiter A and waiter B because I want to calibrate an understanding. Some I talk to, honestly, believe both waiters should be paid the same even if one slacks. They are socialists (not a slur). If they believe that then there's a different path of discussion to take with them. But if someone does believe that hard work should give better rewards, then I think ultimately it's very easy to understand that the wages between the hardworking families and, uh, not hardworking families will drift apart over time. The hardworking families will get rich, and continue to accumulate: They will get richer. The poor won't get poorer, but they won't gain. Ultimately, we end up with the rich growing their income at a bit more than 2% per year, and the poor growing their income at a bit less than 1% per year. Run that over a few decades and the differences are huge. The only way to NOT have an increasing gap is to grow poor at rich at, say 1.25% per year. But then you can't pay a hard worker more than a slacker. And I think we all agree that is a problem. Now, back to your person with TB example. Sometimes families are dealt blows that can set back their wealth accumulation by a generation. In other words, we'd not expect a family to have rare and heartbreaking illnesses generation after generation. Statistically that is very, very rare. In general immigrants to the US move from poverty to the top 20% in 1-2 generations. If someone gets a horrid illness at some point, then it might take 2-3 generations. But it's not game over. Bad luck, yes, but not game over.

- seattleeng

April 26, 2011 at 12:00pm

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Now you are back out of your fucking mind, seattle, lying shamelessly. I should have known it was too good to be true. I won't even bother any more with your fantasy version of economic life in America. You invent it out of whole cloth, or read it on one of those rightwingnut blogs or something. Go look at real statistics on, for example, the earnings of male high school graduates. They are sinking in real terms. They earn less than their fathers did. As for you really scummy abuse of numbers about Medicare, no, Medicare costs DID NOT INCREASE FASTER THAN PRIVATE CARE FROM 1990 to 2009, no matter whether you include benefit changes or not. THIS IS A LIE! You are no longer entitled to the benefit of the doubt as making honest, if asinine, mistakes. From 1990 to 2005, Medicare costs per enrollee, with whatever benefit changes occurred, rose 2.48 times, private costs rose 2.72 times. From 2005 to 2009, Medicare rose 1.36 times while private costs rose 1.19 times. We all know by not that the difference from 2005 forward is due to the addition of Part D. But, even ignoring completely the causes, no one, if they have any self-respect, would describe that state of affairs as "Medicare costs have grown more since 1990." Like I said, if you wrote something like that in a prospectus and sold securities based on it, you would go to jail for fraud. Even in the period 2000 to 2005, Medicare costs rose 41% while private costs rose 53%. It is fair to say that Medicare rose faster from 2005 to 2009 without regard to reasons. Your other claims are just lies. Plain and simple. Do they make you look foolish? No. They make clear that you are dishonest.

- roidubouloi

April 26, 2011 at 1:36pm

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seattle says, "That is why we look at the numbers." No, in your case, pal, that is why you falsify numbers, as everything else. You waste everyone's time littering these blogs with your phony crap, seattle. From now on, I shall just call attention to the fact that you are a serial liar and leave it at that.

- roidubouloi

April 26, 2011 at 1:38pm

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From 1969, the start of the table, through 2000, 31 years, Medicare grew at an average compound rate of 9.4%. Over the same 31-year span, private costs grew at an average compound rate of 11.1%. During the Bush administration, Medicare costs grew at an average compound rate of 7.7% while private costs grew at 7.2%, thereby reversing the trend of the preceding 31 years in which public costs grew more slowly than private. The only fair conclusion is that Bush's privatization of parts of Medicare had the effect of causing a spurt in public costs and reversing the historical relationships.

- roidubouloi

April 26, 2011 at 1:52pm

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http://live.psu.edu/story/12714Number of working poor families growing in America Wednesday, July 13, 2005 University Park, Pa. -- Although the war on poverty was declared in the 1960s, a poor family today in 2005 is much worse off than the average poor family in the 1960s, because official poverty measures have failed to keep up with changing basic needs, according to a new report. "An Atlas of Poverty in America: One Nation Pulling Apart, 1960-2003" has just been published by a team of Penn State researchers. The project was funded by the Ford Foundation. An expanded version of the atlas, with updated and new sections, will be published by Routledge this fall. * * * Over the last 30 years, the number of jobs that do not pay a living wage has increased dramatically. In the U.S., as many as 25 percent of all jobs pay less than a poverty-level income, the report says. In some states, as many as 30 percent do not pay a living wage.

- roidubouloi

April 26, 2011 at 1:59pm

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Economic News Release http://www.bls.gov/cps/cpswp2000.htm Labor Force Statistics from the Current Population Survey A Profile of the Working Poor, 2000 U.S. Department of Labor Bureau of Labor Statistics March 2002 Report 957 In 2000, 31 million people, or 11.3 percent of the population lived at or below the official poverty level—1.1 million fewer than in 1999. While the bulk of these individuals were children and adults who did not participate in the labor force, about 6.4 million were classified as the “working poor.” This was 445,000 fewer than in 1999, continuing a 7-year downtrend. As defined for this report, the working poor are individuals who spent at least 27 weeks in the labor force (working or looking for work), but whose incomes fell below the official poverty level. Of all persons in the labor force for at least 27 weeks, 4.7 percent were classified as working poor in 2000, down 0.4 percentage point from the previous year. Working full time substantially lowers a person’s probability of being poor. Among persons in the labor force for 27 weeks or more, the poverty rate for those usually employed full time was 3.5 percent, compared with 10.2 percent for part-time workers. The majority of the working poor—three-fifths— were, nevertheless, full-time workers. Only a small proportion of the working poor (4.1 percent) actively sought a job for more than 6 months in 2000 without finding any work, up from 3.5 percent in 1999. (See tables A and 1.)

- roidubouloi

April 26, 2011 at 2:05pm

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http://www.msnbc.msn.com/id/27181041/ns/business-us_business/ NEW YORK — The number of U.S. jobs paying a poverty-level wage increased by 4.7 million between 2002 and 2006, according to a new analysis of census data released Tuesday. A report by The Working Poor Families Project, based on an analysis of U.S. Census Bureau data, found conditions worsened for the working poor in the four years ending in 2006, as the number of low-income working families increased by 350,000. The project is funded by the Annie E. Casey, Ford, Joyce and C.S. Mott Foundations. The report defines a low-income working family as those earning less than twice the Census definition of poverty. In 2006, the most recent year for available data, a family of four earning $41,228 or less qualified as a low-income family. The number of jobs with pay below the poverty threshold increased to 29.4 million, or 22 percent of all jobs, in 2006 from 24.7 million, or 19 percent of all jobs, in 2002. "The real surprising news, the alarming news, is that both the number and percentage of low-income families increased during this period," said Brandon Roberts, co-author of the report. "This was a time when we had solid and robust economic growth." An increase in poverty "is not just a new phenomena over the last six months," he said. Poverty-wage jobs increased in part because 2.5 million new jobs paid poverty wages; additionally 2.2 million jobs that paid greater than poverty wages in 2002 became poverty-wage jobs by 2006, as pay failed to keep up with the cost of living, Roberts said. In two states, Mississippi and New Mexico, 40 percent of working families were low income in 2006, according to the report. In 11 other states, at least 33 percent of working families were low income: Alabama, Arizona, Arkansas, Idaho, Louisiana, Montana, Oklahoma, South Carolina, Tennessee, Texas and West Virginia. The number of low-income families rose to nearly 9.6 million, or 28 percent of the total population, in 2006 from 9.2 million, or roughly 27 percent, in 2002, according to the report. The number of children in low-income families rose by roughly 800,000 during the same period, climbing to 21 million from 20.2 million.

- roidubouloi

April 26, 2011 at 2:06pm

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seattleeng: "the probabilities of remaining involuntarily in poverty are remarkably low..." Seattle, that's yet another number that may not mean what it appears to mean. Getting above the federal poverty threshold does not mean "doing well." It does not mean attaining a middle-class lifestyle. It may not mean not still qualifying for some forms of federal or state aid. (And yet again, you don't provide a cite for your assertions.) From what I've read, our social mobility is less than in many of our peer nations such as Denmark and Australia. http://economix.blogs.nytimes.com/2010/02/10/are-you-better-off-than-your-parents-were/ "But if someone does believe that hard work should give better rewards..." Seattle, that's what even most liberals believe. If you're generalizing from a few people you know who believe the opposite, then you're drawing false inferences based on personal anecdotes instead of looking at the data. You should ask us what we believe instead of assuming it.

- dsimon

April 26, 2011 at 2:12pm

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dsimon - not to mention that the federal poverty threshold needs to be adjusted geographically to derive that sort of conclusion from it. Somewhat meaningless to compare someone in a large city with a more rural area based on a single threshold. Also, the claim that less than 10% of people living in poverty actually want a job doesn't seem to make much sense. We control inflation on the backs of the most vulnerable in society by increasing interest rates, which decreases demand by *decreasing employment*. Now perhaps people are falling into lower paying jobs rather than rank unemployment and poverty, or perhaps they are getting the pleasure of burning their savings for a long time before falling into actual poverty, but that response rate is interesting to me. And that's ignoring that it relies on self identification on a subjective measure, which isn't particularly reliable. I mean, who says that they are retired under 65 when living in actual poverty? But I think the killer is comparisons with other countries, including those with similarly heterogeneous compositions, like Australia (because clearly the lower poverty levels in European and Asian countries are due to racial purity!). Poverty has been a feature of the US for some time, whereas most other countries have greatly reduced the incidence of it since WWII. Admittedly comparisons are complex and difficult, but I've not seen the US fair too when you adjust for relative wealth of the countries (as opposed to a direct "things" comparison). Then there's the embarrassing findings of low mobility in the US compared to other countries that you mentioned...

- Nari224

April 26, 2011 at 5:55pm

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The study by the Working Poor Families Project adjusts for regional differences in deriving its figures on poverty and the working poor. We no longer fare well on measures of social mobility, we are an outlier on maldistribution of income. Among industrial countries, only Turkey and Portugal are worse. And this despite the highest per capital income in the industrialized world. Apparently these problems are the result of teen pregnancy, if the Cato-tonics are to be believed.

- roidubouloi

April 26, 2011 at 6:57pm

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It is, by the way, a standard trope of right-wing economics that there is no involuntary unemployment, even when there are six job seekers for each job opening. Their theories tell them that there should not be involuntary unemployment. Hence, there is none and reality be damned.

- roidubouloi

April 26, 2011 at 6:59pm

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Roid writes: "No. They make clear that you are dishonest." You are the one carving out exceptions and cherry picking dates, not me.

- seattleeng

April 27, 2011 at 1:23am

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Roid writes: "The only fair conclusion is that Bush's privatization of parts of Medicare had the effect of causing a spurt in public costs and reversing the historical relationships." Medicare growth under Bush, from 2001 to 2009, averaged 8.2% per year. Historically, since 1969, Medicare has averaged 9.2% per year. Bush's "spurt" was well below the historical average.

- seattleeng

April 27, 2011 at 1:27am

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Roid writes: "University Park, Pa. -- Although the war on poverty was declared in the 1960s, a poor family today in 2005 is much worse off than the average poor family in the 1960s, because official poverty measures have failed to keep up with changing basic needs, according to a new report." Consider measurements of poverty DO NOT generally include transfers in. In other words, food stamps, housing subsidies and medicaid are NOT counted as income. More than 4/5th of governments transfers to the poor are not counted. Of course, in 1960, those programs didn't exists, or if they did they were a fraction of the scope (welfare was 1% of GDP under LBJ, today it is 5%) Ask yourself this: Can a report that fails to note the gains had by food stamps, housing subsidies and medicaid really be interested in the truth about poverty? In other words, by current measures, we could give the poor triple food stamps and housing subsidy (worth $60,000) and a gold plated health insurance program worth $20K a year. That would be $80K in government aid. And they'd still be listed by the government as poor. Odd, isn't it? If you want to know the truth about poverty, you should look at what the poor had in 1960 and what they have today. The poor today live better than the middle class did in 1960. Bigger homes (which they own) more cars, more living space, more air conditioning, etc. Lack of "stuff" is a not a problem with the poor today. In 1960, hunger was still a problem. Today, the poor have more meat than higher income kids, get more than 100% ABOVE recommended protein levels. And yes, they weigh too much. And how about smoking? The Center for Tobacco Research and Intervention notes 42% of poor adults smoke in their study. Most of these they studied had incomes below $15K/year, while enjoying $9/pack cigarettes. Being poor today is nothing like being poor in 1960

- seattleeng

April 27, 2011 at 1:44am

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dsimon writes: "Seattle, that's yet another number that may not mean what it appears to mean. Getting above the federal poverty threshold does not mean "doing well." It does not mean attaining a middle-class lifestyle. It may not mean not still qualifying for some forms of federal or state aid. (And yet again, you don't provide a cite for your assertions.) From what I've read, our social mobility is less than in many of our peer nations such as Denmark and Australia." My point was to show that those living at or below poverty were largely there due to bad decisions, often compounded. As the cited study noted, if you merely graduated high school, had 1-2 kids within a marriage, and went to work each day, even at a crappy job, you could avoid poverty. Being just above the poverty line in NYC is a big problem. But being just above the poverty line in rural Iowa might not be. The cite where I noted the Census reported that among nonworking poor adults, only 6.2% said "could not find work" was the reason for not working. The more detailed data is linked below. See http://pubdb3.census.gov/macro/032006/pov/new24_100_01.htm BTW, your link ate the rest of your post. Don't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the linkDon't eat the link

- seattleeng

April 27, 2011 at 2:08am

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Nari--I'm okay with the Clinton tax rates or something like them, and suspect we'll end up there at the end of the day. I'd prefer tax reform that raises more revenue with the same rates by cutting loopholes and broadening the base. When talking about "soaking the rich" I was referring primarily to roi's suggestion that if we would tax the top earners at 70% (presumably on top of the local, state, property and other taxes they already pay), everyone would live happily ever after. I think that proposal can fairly be characterized as "soaking the rich"; and to the Democrats' insistence that taxing the rich more will solve our problems, and that although middle-class earners soak up by far the most benefits from entitlements they be exempted from any shared sacrifice, or even pragmatic adjustments to benefits. I think this is bad politics. The Ryan Plan served exactly the purpose I think Obama intended, by putting Republicans' heads under the guillotine. If O comes out looking like the moderate, pragmatic compromiser who gets results generally seen as fair, he wins. All those who are certain that Republicans are dead set on scuttling the economy and won't make any deals, please note that most of the official commissions that have been proposing "everything on the table" deals are bi-partisan by design. Ryan himself didn't vote for the final Simpson/Bowles report because it didn't tackle Medicare. Dems won't support Ryan because it doesn't add revenue. End of the day, the deal will require both sides to give something, and I can't for the life of me see what's wrong with making existing entitlements more efficient, doing away with distorting subsidies, and closing tax loopholes. I predict we'll get a deal, and sincerely hope this is not a case of "wish is father to the thought". I suppose we'll see....

- Robert Powell

April 27, 2011 at 3:22am

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I predict we won't get a deal, maybe a tiny figleaf of a deal, because the current crop of Republicans will NEVER agree to anything that could come close to solving the problem. As I said above, the whole thing is a deliberate farce. The immediate problem is the trillion dollar deficit in the operating budget. Yet, all the drama is about solving the problem of entitlements that currently account for a deficit only 20% of that or less. One of these days soon I will sit down and do the work to show that, even at a 70% marginal rate for individual income above $1 million, the net income share of the top earners would still be higher than it was 30 between the end of WWII and 30 years ago when Reagan arrived with his ouiji board. A deal would mean that the Democrats give cover to the Republicans on cutting entitlement benefits in one form or another to solve the entitlement problem and Republicans give cover to Democrats on income tax rate increases significantly weighted toward the top to solve the operating deficit problem with a modicum of spending cuts NOT directed at the Republicans' ideological targets. Nothing like that is in prospect. ________________________ "You are the one carving out exceptions and cherry picking dates, not me." This is but another lie, seattle. A rather desperate one at that. I didn't pick any dates, you did. I merely described accurately what occurred over the periods for which you make false claims. If something were falling for 15 years and then rising for five, no honest person would describe that as "rising for 20 years," even if, at the end, it ended up at a higher place than it started. This is an abuse of the language and of the facts. Now, as for your inane point about the rate of increases in Medicare costs during the Bush years, one should first note that Medicare and Medicaid are still well under half the healthcare market, in the range of 30%. Thus, the baseline for healthcare costs is the private market. Unless you are claiming that Bush was somehow controlling costs in the private market, the relevant comparison is between public and private over any common period, not between rates of growth in one time period versus another time period. As well, if one wants to make comparisons across time periods, it is necessary to adjust for inflation. Otherwise, the comparison is quite meaningless. I just happen to have a schedule of GNP price deflators from 1948 to 2009. (No, 2009 is not a happy coincidence. At present, a lot of the BEA economic data you can look at ends with 2009. I was studying real wages using BEA data and thus had to end the series with 2009, the same end date as the BEA Medicare table.) If one adjusts for the price level, the real average compound annual rate of growth for Medicare (including all benefit changes) from 1969 to 2000, 31 years, was 4.5% per year. The real growth rate for private insurance over the same period was 6.4%. Considering that Medicare serves an aging population and private insurance does not, that is some indication of how totally out of control healthcare costs are in this country, a problem that will not be solved even by eliminating Medicare and Medicaid. During the Bush administration, the real growth rate for Medicare rose to 5.0% per year. Got that, seattle? The real rate of growth in public expenditure rose under Bush; it did not fall. And what about the private market? During the Bush administration, the real rate of growth for private insurance fell to 4.5%. The reversal was from a positive 1.7% for public to private to negative 0.5%, a total adverse change in the real growth rate of 2.3%, roughly a 50% adverse change, enormous. That is how much damage Bush did to Medicare in his eight years. As Bush might describe it, he made things "even worser" than what one would see before adjusting for inflation. Considering the damage he did to everything else he touched, we should not be surprised. In conclusion, seattle, your point is nonsense, contradicted by reality, rationally understood.

- roidubouloi

April 27, 2011 at 9:14am

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In case it wasn't quite clear to you, seattle, the real rate of growth in Medicare rose under Bush above its long-term average while, at the same time, private care fell from its long-term average, with the result that the rate of Medicare cost increases, for the first time, outstripped private cost increases.

- roidubouloi

April 27, 2011 at 9:18am

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seattleeng: "My point was to show that those living at or below poverty were largely there due to bad decisions" But my point was that your numbers don't show what you say they show. The official "poverty" level is a very low threshold. Getting above it doesn't mean you're not still poor, or that you no longer qualify for benefits, or that you've made it to a middle-class lifestyle. You don't seem to contest that. It's far too easy to throw up a few numbers and say "point proved" when just a little reflection shows that the numbers show no such thing. And as I pointed out (and at least the link works), our social mobility these days is apparently no better, and in many cases lower, than peer nations with far larger social safety nets, so one should at least question whether one's choices are so completely determinative of outcomes. "The cite where I noted the Census reported that among nonworking poor adults, only 6.2% said 'could not find work' was the reason for not working. The more detailed data is linked below." First, roid did not say there were not jobs; roid said there were not enough well-paying jobs. It's perfectly possible that people can technically "find work" but not a job that makes ends meet. So your data do not refute roid's point. And the more detailed data are very important. Substantial numbers of single parents with at least one kid say they are not working because of family reasons. You have no idea why they are single parents. Perhaps some of them were irresponsible, but perhaps the parents split up for understandable reasons. You have no data as to how many of them made reasonable decisions, and neither do I. But to say they have the same choice to work or not is not based in reality where child care may not be available, transportation may be sparse or unavailable, and so on. Again, it seems to me that you're taking numbers that you assume prove your point when just a little reflection would show they do not. "Some I talk to, honestly, believe both waiters should be paid the same even if one slacks. They are socialists (not a slur)....But if someone does believe that hard work should give better rewards..." Seattle, even most liberals believe that more or harder work should produce higher compensation. If you're basing your views on a few people that you know (or post), then you're making unwarranted assumptions instead of relying on data. "Ultimately, we end up with the rich growing their income at a bit more than 2% per year, and the poor growing their income at a bit less than 1% per year." We've discussed this before. You have provided no inherent reason why income growth at the top of the scale should be more (much less twice, as provided in your assertion) than growth at the bottom in percentage terms. Indeed, I have previously provided historical examples where this has not been the case. And the multiple of the highest wage earners to the average earner is far higher here than it is in most of our peer nations, without any good explanation. Can it be that our successful people here make such better choices than the successful people in other advanced nations?

- dsimon

April 27, 2011 at 9:36am

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"First, roid did not say there were not jobs; roid said there were not enough well-paying jobs. It's perfectly possible that people can technically "find work" but not a job that makes ends meet. So your data do not refute roid's point." Apart from the fact that a poverty-level wage, plus an income tax credit, plus Medicaid hardly represents a good life, the implicit point I was making is that the market as a whole (including its many imperfections and the results of many policy decisions) determines income distribution. It is not a function of individual effort or genius. Just as the market at the bottom fails to afford a living wage to 30% of the employed, the rest of the market is just as skewed. There are many, many economic rents to be found in our economy and it would be impossible to regulate them out one by one. New ones would emerge as fast as old ones were killed. Rather than even attempt to regulate the entire market, which would be futile and have enormous efficiency costs (see, e.g., Soviet Union), a sensible and ethical solution is to allow markets to function with modest regulation, applied only to cases of serious externalities such as health and safety, pollution, and financial fraud, and adjust the aggregate results after-the-fact. That is, we accept the inequities of markets for what they give us in efficiency, but then we compensate for the inequities on global basis. The cleanest, simplest, most efficient and least dislocating way to do this is progressive income taxes (without all sorts of deductions that are really expenditures), particularly including progressive taxes with negative rates at the low-end. Markets are not god. They are a tool, a human invention to accomplish certain ends. Like any tool, they can be used well or poorly, reasonably or to excess. Because they are useful does not mean that we have to stop thinking about what they do not do well and how we can do it better.

- roidubouloi

April 27, 2011 at 9:53am

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dsimon writes: "But my point was that your numbers don't show what you say they show. The official "poverty" level is a very low threshold. Getting above it doesn't mean you're not still poor, or that you no longer qualify for benefits, or that you've made it to a middle-class lifestyle" For 2009, the poverty line is $22K for a family of four. Not great. But step one is getting folks out of poverty. And the 3 steps cited do that will remarkable efficacy. As I said, bad choices tend to stick you in poverty. Now, once we've eliminated poverty for 99% of those that make smart choices, next we can turn our attention to wage equality. There is an interesting study (Harvard's Verba & Orren in Equality in America) in which 2,762 leaders in America, including academic, business, labor, etc, were asked to specify what they thought would be a "fair" income for an engineer, and an elevator operator. Their average response was that an engineer should be paid 3.1X the income of the elevator operator. The actual ratio of that lifetime pay, they determined was 2.9X. In other words, the gap was less than specified by these leaders. Interesting, eh? And then, when looking at lifetime incomes, Fullteron and Rogers in Lifetime Tax Burden report the lifetime income of the top 2% was only 8X the lifetime income of the bottom 2%. In 2005 Census, median earnings based on education for a male worker aged 25 or over, who worked full time, year round: No High School: $27.1K High School: $36K Some College: $42 Bachelor's: $60 Masters: $75K PhD: $85K Where is the unfairness here? A guy that graduates high school will make a median salary of $36K, while a guy that gets his PhD will see $85K. Tell me, what should these numbers be instead? DSimon writes: "We've discussed this before. You have provided no inherent reason why income growth at the top of the scale should be more (much less twice, as provided in your assertion) than growth at the bottom in percentage terms" Let's say a company has a blow out year. And it comes time to reward the CEO, a mid level manager, and the janitor. Do you expect each to receive the same % of bonus or pay increase? Did they each contribute the same to the growth of the company? Probably not. Can you name a country that does not exhibit this divergence between top and bottom? No you can't. What happens here isn't at all uncommon. The same thing happens in all modern economies.

- seattleeng

April 27, 2011 at 11:38am

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Roid writes: "In case it wasn't quite clear to you, seattle, the real rate of growth in Medicare rose under Bush above its long-term average while, at the same time, private care fell from its long-term average, with the result that the rate of Medicare cost increases, for the first time, outstripped private cost increases." No, it didn't. From 1969 to 2009, medicare has averaged a yearly growth of 9.2%. From 2000 to 2008 it rose an average of 7.5% From 2001 to 2009 it averaged 8.2%. Either range could be attributed to Bush. But both are lower than the long-term yearly growth average of 9.2%.

- seattleeng

April 27, 2011 at 11:46am

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You're not listening, seattle. You can compare relative changes in a given period using non-inflation adjusted prices. You cannot meaningfully compare changes across time without adjusting for inflation. A dollar in 2009 is not the same measuring stick as a dollar in 1969. When you adjust for constant dollars, you have "real" price changes. I adjusted the prices in Table 13 to constant 2009 dollars using the GDP price deflaters provided by the BEA. This is standard practice. The result is that, in real terms, the rate of increase of Medicare costs under Bush rose above its long-term historical average while the rate of increase of private care fell during his administration. That was absolutely explicit in what I wrote above. Numbers do not lie. But once has to be numerate.

- roidubouloi

April 27, 2011 at 11:57am

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"The same thing happens in all modern economies." Another falsehood. No, it doesn't. The income shares in the United States are more skewed to the top than in any other industrialized country with the exception of Turkey and Portugal. Moreover, they have been becoming extremely skewed over the last 30 years while we have been in the grip of Reaganomics. In that same period, we have lost ground to other countries by many measures. Some of that is their gain. Some is our loss, such as social mobility. Is there no argument you can make seattle without relying on false claims? There is no better indication of how bankrupt your libertarianism is that you cannot support it without fictions.

- roidubouloi

April 27, 2011 at 12:01pm

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And what, for example, do the guy making $85K and the guy making $36K have to do with taxing incomes above $1 million at, say, 70% as I have suggested? Nothing. You are playing bait and switch. The issue is not the compressed income distribution below $100K but the huge disparities between those above and below that line.

- roidubouloi

April 27, 2011 at 12:03pm

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seattleeng, you still don't show that your data prove your claims. It's probably because the data is obviously insufficient to do so. Getting out of "poverty" doesn't mean you're not still poor, and your data doesn't tell us how many people who made "right" decisions aren't still poor. And you don't address the missing information as to how many people even have the option of making "right" decisions (a victim of domestic violence doesn't have a "choice" about being a single parent and the corresponding limitations on work options.) Sure, there are some people who are irresponsible. But there are many who are responsible and still poor. How many are there of each? I don't think you have any idea, and instead make unwarranted assumptions as if everyone had complete freedom of opportunity. "Do you expect each to receive the same % of bonus or pay increase? Did they each contribute the same to the growth of the company? Probably not." Why shouldn't they get the same % increase? In fact, why give a bonus on a percentage basis at all? Why not give the CEO $1000 and the janitor $500? Why isn't the reward for the CEO the fact that he's going to be CEO another year, the way it is for most employees? Moreover, how do we know the CEO was the reason for the "blowout" year? Perhaps every business in the same field also had a blowout year. Perhaps the business had an excellent year but still trailed its peers. There have been far too many examples of CEOs getting big bonuses for outright failure, much less for underperformance. Plus there is little justification for CEO pay as is; does anyone seriously think they would work less hard or make poorer decisions if they were all making half of what they're making today? There's little rhyme or reason here. And you fail to address the international comparisons I brought up, which you don't seem to contest. As for fairness, you might want to check out this recent study from the Harvard Business School, http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20press.pdf, showing that not only to most Americans dramatically underestimate the degree of income inequality in the US, but when shown the unlabeled distributions here and in Sweden, and asked which they would prefer to be placed in randomly, they prefer Sweden.

- dsimon

April 27, 2011 at 6:11pm

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Roid writes: "No, it doesn't. The income shares in the United States are more skewed to the top than in any other industrialized country with the exception of Turkey and Portugal. " That's not what I argued. I argued that the top in ALL SOCIETIES see their income grow at a faster rate than the others. It all depends on how you wish to slice it. For instance, Figure 2 from the link below shows that historically the top 10% (minus the top 1%) have seen their income grow at a similar rate between US and France. Ergo, our growth in the top 10% isn't at all unprecedented, even compared to France. Figure 3 Graph A shows our top 0.1%--the ultra wealthy--grabbing income at a rate that is similar in the UK and Canada. Ergo, our growth rate in the top 0.1% is on par with the UK and Canada. Think about that Roid: Our top 10% are grabbing income share at a rate similar to those in France. Does that make you mad??? http://elsa.berkeley.edu/~saez/berkeleysympo2.pdf

- seattleeng

April 28, 2011 at 12:29pm

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dsimon writes: "Getting out of "poverty" doesn't mean you're not still poor, and your data doesn't tell us how many people who made "right" decisions aren't still poor." The data I shared showed that if you made the "right" decison and graduated high school and had 1-2 kids in a married relationship, you'd avoid poverty 99% of the time. The other data I showed said that if you graduated high school, you'd see a median salary of $36K. So, someone that graduates high school should have a reasonable chance of seeing $36K/year. Not bad if you aren't living in a coastal city. "Why shouldn't they get the same % increase?" Fascinating. So, you are arguing that paying them the same % bonus is FAIR, but when it comes to taxes, the same % isn't fair, and the higher earner should pay a higher %? But no way should the higher earner collect a higher % of bonus.. What is fair to you? DSimon: "And you fail to address the international comparisons I brought up, which you don't seem to contest." I noted your post was eaten. Maybe that part was the part that was eaten? " showing that not only to most Americans dramatically underestimate the degree of income inequality in the US" The study you cite did not include transfers (benefits) to the lower earners, nor did it include taxes on the upper earners, nor did it account for an equal number of hours worked. If I work 10 hours per week, and another guy earns 50 hours a week, at a minimum you expect him to probably make 5X more than me, right? Everyone agrees that is fair. When you adjust for all that, what do you think the ratio between the top X% and bottom X% should be????

- seattleeng

April 28, 2011 at 12:46pm

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I see you have moved on, seattle, to abusing another paper that you either haven't read or don't understand. Once again, you manipulate growth rates and other numbers to reach a spurious conclusion or just invent claims that are completely contradicted by the study you cite. First of all, income distribution is not solely a function of the top 10%. Leaving that completely aside, however, look at Figure 2 in the report you cite. In 1978, the top 1% in the US had an 8% income share and the top 10-1% had a 24% income share, a total of 32% for the top 10%. The numbers in France were identical for the top 1% and only a fraction of a percent lower for the 10-1% class, a total of 32%. The same, a statistical dead-heat. In 2000, when the table ends, in France the top 1% still has 8% of income and the top 10-1% has 25%. The total for the top 10% increased from 32% to 33%. In the US, however, the share of the top 1% rose to an incredible 17% of the nation's income while the share for 10-1% grew to 27%, a total of 44%, and we know it is close to 50% today. So, what on earth are you talking about? How did France stay flat while the share of the top 10% in the US grew by a factor of 1.375 if the growth rates for this class were the same? Bear in mind, that if the income share of the top 10% grew from 32% to 44%, the share of the bottom 90% fell from 68% to 56%. Is it any wonder that the middle class in the US is pressed and that, by cutting tax rates on the rich just when their income share exploded, we cannot collect taxes to cover our expenses? The fraud of supply-side and libertarian economics. You really are either a boob or a liar seattle. Stop wasting everyone's time with phony statistics and false claims about real statistics.

- roidubouloi

April 28, 2011 at 4:52pm

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Roid, yes for the top 1%. A simple question: In the last 20 years, hHave the 90th to 99th percentile grown their share of wages in France at a rate similar to the US growth for the same percentile? See second panel in figure 2.

- seattleeng

April 28, 2011 at 8:51pm

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And a second question: What has happened to the share of income held by the bottom 90% in France in the last 20 years? Did it grow or shrink?

- seattleeng

April 28, 2011 at 8:52pm

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Seattle, If the top 1% has shown huge growth and the bottom has taken the loss, there is some point or range in between that will have been unchanged. There is even a mathematical theorem for this, generically know as a "fixed point theorem." If the 90-99% had remained the same, which in the US is not the case, its share grew, then the hit was taken by those below that level. To put it another way, if you hold your own while some other segment is growing its share, you are doing fairly well. In this case, the 90-99% grew by about 4% in income share since 1978 when the US and France were at parity on the graph. They did this while the top 1% grew at 8%, which would have inflicted a loss of about 2% on the 90-99% tier if the losses were evenly distributed. Instead, this tier grew its share 4% which meant the losses for the bottom 90% were greater. In France the shares at the top didn't budget over the same period. So, no, the rate of growth of income at the top tier in France has been about 0 while the rate of growth in the US has been very high for the already wealthiest. As a result, there is not a significant disparity at the top between the US and France. Look at the graph. You can see this at a glance.

- roidubouloi

April 28, 2011 at 11:40pm

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Let's go back to my argument: I argued that all modern economies are showing the top earners grabbing share from the bottom earners, and that it is inevitable in a meritocracy. The data here supports that and shows the income share grabbed by the top 10% in France grew over the last 25 years. Which means the bottom 90% shrunk. It's true for UK and Canada too. And if you look at the figure 7.1 in the link below, you'll see it's true for Sweden too. Since 1980, the top 10% in Sweden have seen their share of income grow from about 23% to over 30%. So that means in US, Canada, UK, France and Sweden (which represents a wide range of governments), in ALL CASES the rich have taken share from the bottom 90%. Proving my argument correct, no? And hey, what do you know, the top 10% in the US saw their share of income grow about the same as the Swedes. Go figure. http://www.hhs.se/SITE/Publications/Documents/TopIncSwe_OUP2010.pdf

- seattleeng

April 29, 2011 at 4:15am

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DSimon writes: ""Why shouldn't they get the same % increase?" Here's another way to look at this: Instead of considering a CEO and a janitor, consider two janitors, one that works hard and one that doesn't. Should they get the same raise each year? If you answer "yes" then you live in fantasy land. Soon all your good janitors will leave and the ones that are left won't do what needs to be done. If you answer "no", then you can see how the harder working janitor will eventually graduate from being a janitor to something better, earning more each step along the way. And again, we have a case where two folks started in teh same place, and one continued to earn more and more, while the other one didn't. Again, anytime you are willing to pay even a little bit better for a job well done, you have created a system in which there will be winners and losers, and the winners will slowly take all the money from the losers. And the more they win, the harder they will work, and the pace will accelerate. And they will teach their kids to be winners, and drive their kids hard, and those kids will be even bigger winners than their parents. It's a seemingly viscous cycle, but completely predictable and unavoidable.

- seattleeng

April 29, 2011 at 4:21am

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The simple fact is that in income disparity the US is an outlier amongst industrialized countries, worse than all except Turkey and Portugal. The disparity has been getting worse, significantly worse, since Reagan. All of the blather about this instantaneous growth rate or the income of the 84.5 to 87.3% tier in Kazakhstan does not alter the key facts at all. While income has become less equally distributed other countries, we are the worst amongst wealthy nations. The fraud of supply-side, libertarian economics.

- roidubouloi

April 29, 2011 at 9:12am

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seattle loves his little invented fairy tales about hypothetical janitors but cannot honestly address the facts of income distribution in the real world. The fraud of supply-side, libertarian economics.

- roidubouloi

April 29, 2011 at 9:13am

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Roid writes: "The simple fact is that in income disparity the US is an outlier amongst industrialized countries" Ah, Roid, it's at these times where you won't even answer a simple yes/no question that I know you've been check mated. I can imagine you looking at the data provided by the Swedish government and realizing that yes, indeed, their top 10% have "stolen" income from the bottom 90% at a rate on part with the US...it must be very frustrating. But alas, learning is all about have preconceived notions knocked down. As for income disparity...the in US our income disparity is really an "hours worked" disparity afforded by any wealthy country that can allow a huge % of its working-agepopulation to not work at all. Our top 20% gets nearly 12X more income share than our bottom 20%. Sounds bad at first. But consider our top 20% works almost 8X more hours than our bottom 20%. And then consider the bottom 20% are those retired (and homeowners) and living alone while the top 20% are mostly families with a single earner support 3 or more. And the consider the bottom 20% income data does NOT include the value of SS and Medicare and other government handouts. When those adjustments are considered, the top 20% earned just 3-4X more than the bottom 20%. Which is very much in line with the median salaries I noted earlier (high school grad median is $36K, bachelor's is $60K, PhD is $85K). Think about a utopian society, where you lived to be 100, and you only worked from the age of 20 to 25 years old, but were paid an enormous salary for those five years and it was heavily taxed. At the age of 25 you could retire with a generous government pension and health care. What would that income distribution look like? It would appear 5% earn 100% of the income. This is because income share doesn't consider tax transfers or social programs as income. And yet this would be nirvana for you, woudln't it? Isn't it odd that the social construct favored by most liberals would also have such a skewed income distribution? If you are really interested in getting to the truth, then you will look at numbers that at least consider hours worked and the impact of social programs and taxes. Otherwise, it's just envy masquerading as fairness.

- seattleeng

April 29, 2011 at 11:11am

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No, seattle, I am not "checkmated." Your initial point I ripped to shreds. But you can and will invent new falsehoods, and you can do so much faster than I can take the time to study the facts and explain how and why you are radically wrong yet again. The fact is that, every single time I have checked one of your claims, it has proven to be wrong, often to the point of absurdity. Several times, documents you have cited say the exact opposite of what you claimed for them. However, no one could hope to keep up with the rate at which you make preposterous claims and I don't intend to be run around trying. Suffice to say that your track record on those I have checked is zero. Stop wasting everyone's time with nonsense.

- roidubouloi

April 29, 2011 at 11:24am

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Checked my claims? You won't answer my claims. You invent reasons the question is invalid, or you won't answer the assertion with a yes or no answer. The questions are quite simple: In the last decade or two, have Medicare expenditures for all benefits risen faster than private according to table 13 in the paper we were discussing? According to table 13, did Medicare expenditures under Bush grow faster or slower than the historical Medicare average for all benefits? Over the last few decades, have the top 10% in Sweden seen their income share grow or contract? Type the answers Roid. You know them in your heart and a 6th grader could read them right off the graph. Don't be afraid. Don't let ideology override honesty...

- seattleeng

April 29, 2011 at 11:53am

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Good god, seattle, the answer is emphatically no. According to Table 13, Medicare expenditures for all benefits grew slower than private during the period 1990 to 2005. From 2006 to 2009, Medicare expenditures grew faster than private. That is the correct answer. Under no possible legitimate construction can it truthfully be said, as you claim, that Medicare grew faster "in the last decade or two." That claim by you falsifies the record. The question whether Medicare expenditures under Bush grew faster or slower than the historical Medicare average is a meaningless question when applied to Table 13 because it does not use constant dollars. You might as well ask whether, if the moon were made of cheese would it be blue cheese or yellow cheese? Your question as framed is both meaningless and stupid. Sort of along the lines of, "Were you thinking about money when you killed your wife? Answer yes or no," when the correct answer is, "I didn't kill my wife she died of cancer 30 years ago." If you want to compare costs in different time periods, you have to adjust the dollars used for inflation. There is no other way to do it. If you make that adjustment so that the you are using constant dollars, the correct answer is that Medicare costs under Bush grew faster than the historical Medicare average for all benefits as well as faster than the growth in private costs during his administration, reversing the historical pattern in which public costs grew at a slower rate. In Sweden, the income share of the top 10% declined steadily through most of the 20th century, from about 46% in 1993 to about 25% in 1990. Then it rose for a while to 31% in 1999 (excl of capital gains it fell to 22%) then declined again to about 27% in 2003. It is reported back to 31% in 2006. Income share of the top decile in Sweden has been lower than, and declining, relative to the US since 1945. When capital gains are excluded, it makes a modest difference in the US, and a big difference in Sweden. In Sweden, exclusive of capital gains, the top decile share is half that of the US. The pattern in France and NL is flat in the last couple of decades. And so?

- roidubouloi

April 29, 2011 at 1:43pm

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seattleeng: "anytime you are willing to pay even a little bit better for a job well done, you have created a system in which there will be winners and losers, and the winners will slowly take all the money from the losers. And the more they win, the harder they will work, and the pace will accelerate." But there is no inherent reason why it should accelerate on a relative bases as opposed to an absolute one. Why shouldn't there be diminishing returns (on a percentage basis) instead of accelerating returns? There are only so many hours in a day. There are only so many decisions one can make. There is no reason why the marginal differences at the top of the scale should not become smaller rather than greater. And you provide none, simply asserting without justification that it is "unavoidable." Indeed, if this cycle is "unavoidable," then why wouldn't we wind up with a system where a handful of people control all of the wealth? Wouldn't that result be inevitable with the unrelenting accumulation due to compound growth? Is such a system even sustainable? And you still provide no data that prove your points. You do not dispute that getting out of the official definition of "poverty" does not mean that you're not still poor. And your education data conflates correlation with cause. I could provide data that says those who complete Algebra II have higher incomes, but that doesn't mean that if we force more people into Algebra II then we'll raise average incomes; it could be the case that those who are going to be more successful are the ones who take more math, not that more math causes success. So having more people "choose" to take that course may not have an effect. Nor do you produce data on how many people even have the opportunity to make the "right" decisions. A couple can think they're doing the right thing by getting married and having kids, and then devolves into an abusive relationship or one parent gets into criminal activity. The other spouse does not then have a "choice" in becoming a single parent. Are these situations rare or common among those who end up single parents? I don't know, and neither do you--or at least you provide no evidence on the matter. You just assume that everyone has the same access to the "choices" that correlate (but may not cause) success. "So, you are arguing that paying them the same % bonus is FAIR, but when it comes to taxes, the same % isn't fair, and the higher earner should pay a higher %?" seattle, we discussed this before. There are many ways of saying a taxation system is fair, but you didn't explain why one system should be prioritized over another. A head tax is "fair" in one sense (each person pays the same amount), a flat tax is "fair" in another (each earned dollar is treated the same), and a progressive tax is also "fair" (in terms of equalizing the unpleasantness of paying the tax). You never justified your definition of "fairness" despite my several request for you to do so. (Do you believe in an exemption for the first $X of income? If so, then you believe in a progressive income tax too, at least the way it looks to me.) "I noted your post was eaten. Maybe that part was the part that was eaten?" If you clicked on the "view fill comment" link, it took you to the source. At least it did for me. "The study you cite did not include transfers (benefits) to the lower earners, nor did it include taxes on the upper earners, nor did it account for an equal number of hours worked." Come on seattle. You're doing statistical dances to deny that income inequality is substantially greater here than it is in just about all of our peer nations. You may think it's a good thing, but it's hard to deny that it doesn't exist. Second, those transfers can be a considered a consequence of dramatic inequality and so properly not included in such calculations. Third, have you considered how much a minimum wage job pays even if one is working full-time? Have you compared it to how much CEOs make? Again, do you really think those CEOs who are making $10 million and $20 million or more a year would really do such a worse job if they all made half as much? (Indeed, many CEOs were paid extravagantly for outright failure.) If not, what can possibly justify that level of compensation? You harp on the top 20%. Why not look at the top 10%? Or top 1%? If the wealth and earnings are concentrated, you'd see numbers there that may be far more dramatic than taking the entire top quintile. But I'm becoming increasingly convinced that ideology will cause some people to draw whatever conclusions they want regardless of data to the contrary, which will either be dismissed as inconvenient or used to draw the predetermined inferences with flawed reasoning. At that point, it's not worth trying to have a discussion because no amount of evidence, or showing a lack of evidence, will penetrate the ideological fortress.

- dsimon

April 30, 2011 at 12:44am

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DSimon writes: "But there is no inherent reason why it should accelerate on a relative bases as opposed to an absolute one." Yes, there would be. If each year Person A gets a 5% raise, and Person B gets a 10% raise, then after 10 years Person B has 51% more money. After 30 years Person B has 6X more money. So, if you believe in paying a tiny bit more for good work, then you have created a system where the rich get richer. There is no avoiding it. It's just a matter of time until the gap grows unbearable. DSimon writes: "You never justified your definition of "fairness" despite my several request for you to do so." I think I did. We are about at fair today, IMO, from a revenue perspective. Where I'd make adjustments would be to have lower earners have a bit more skin in the game (a la Europe), eliminate deductions, and simplify simplify, simplify. After the simplification, each bucket should still be contributing about the same. I also like consumption taxes as it encourages saving. Where I am not happy is the size of government and the sheer number of worthless programs. Take unemployment insurance. That something that even a worker at Walmart could do himself in just two years of saving. In that two years, instead of contributing to unemployment, he could put that same money in savings and get the same benefit if he lost his job. But for some reason, he needs to pay that premium his entire life...I think our parents called this savings. DSimon writes: "Come on seattle. You're doing statistical dances to deny that income inequality is substantially greater here than it is in just about all of our peer nations" You really don't want to count transfers to the poor and taxes on the rich? That means if we taxed the rich at 99.9% and just gave it to the poor (making the poor wealthier than the rich) that the data would STILL SHOW the poor as being poor. Is that really a fair framework? It is not. Sure we are more stilted than other countries. But they are right behind us. Just like other countries lag us in obesity. They will catch up. Tax rates around the world have been falling. Wealth has been concentrating. But that incentive has lit up economies. And it's not a zero sum game. When the Facebook guys pocket $50B, it doesn't mean the bottom 99% lost $50B. DSimon writes: "You harp on the top 20%. Why not look at the top 10%? Or top 1%? If the wealth and earnings are concentrated, you'd see numbers there that may be far more dramatic than taking the entire top quintile." To someone in the bottom 80% (which is what you are concerned with, right?), why do they care if the money goes to the top 1% or top 0.1%? It doesn't matter a bit to the them. Outside of that, there's limited data sets available. You take what you can get. Economists compare the top 20% to bottom 20% world wide, so it's easy to find that data.

- seattleeng

April 30, 2011 at 3:03pm

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Roid, it always cracks me up that you will type so many words to avoid answering a simple question. :)

- seattleeng

April 30, 2011 at 3:06pm

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The question was well and accurately answered, seattle. You just don't understand the questions or the answers. Again we see your libertarian myths at work: 1. Even after taxes, including transfers, our income distribution is still skewed, indeed more skewed. Other countries are not "right behind us." We are an outlier amongst industrialized nations. The pattern of increasing skewness is not universal. See, e.g. France and the Netherlands. But you will just keep on repeating the same falsehoods, over, and over, and over again, because you expect reality to conform itself to your Randian fantasy economics. You don't really want economics to be a description of the world as it is. 2. "But that incentive has lit up economies." No, it hasn't, at least not in the US. Our growth has slowed since 1980 just when the process of increasing income inequality got strongly underway. And there are reasons. First, the more skewed the income distribution, the more starved the economy is for effective demand which is the driver of any modern, monetized economy. So-called "supply-side economics" is voodoo economics, fairy tales, Randian myths with no basis at all the function of an actual economy. Right on a par with throwing human sacrifices into a volcano to assure a good harvest. Second, a key driver of productivity growth is positive wage pressure. When the wage pressure is relieved, growth in labor productivity slows and growth in capital productivity increases (slightly). The latter further exacerbates the problem by putting even more of income in the hands of the wealthy. 3. "Take unemployment insurance. That something that even a worker at Walmart could do himself in just two years of saving." Oh please. What nonsense. Unemployment insurance premiums are a pittance because the are only in the range of 2-4% and the income to which they apply is capped at about $7,000. 4. "I also like consumption taxes as it encourages saving." Of course you like them, because they are typically regressive as the wealthier one is the lower the percentage of income consumed. How about a big, fat progressive consumption tax? Easy enough to do in the modern world: Income less net inflows to investments or plus net outflows from investments. Still like consumption taxes? I doubt it. Beyond that, discouraging consumption is a lousy idea, unless that is you are short of capital to invest. We are not. The whole problem of the last 30 years, the force behind the epic asset bust, is too much money chasing too few investment opportunities. If consumption is damped by maldistribution of income, then there aren't enough income generating investment opportunities. The excess funds in the hands of the investor class then serve only to drive up asset values with a bust inevitable. You believe every supply-side fairy tale you have ever heard, seattle. It is all nonsense. That isn't so bad. What is appalling is that you make factual claims that are directly contra to the actual facts. You do it constantly, you do it shamelessly, and you, like any good Republican, will continue to do it even after the "error" has been explained in detail. You just keep insisting that black is what, war is peace. Stop wasting our time here with your falsehoods.

- roidubouloi

April 30, 2011 at 3:31pm

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seattleeng: "If each year Person A gets a 5% raise, and Person B gets a 10% raise, then after 10 years Person B has 51% more money." Well, duh. But you provide no evidence why this should, or even could, continue in perpetuity. As I wrote before, which you did not address, isn't there necessarily some diminishing returns? Aren't there only so many hours in the day one can work, only so many decisions that can be made? Surely one maxes out one's ability to work at some point, making further raises pure windfalls not based on performance. And as the recent economic collapse has shown, some of the highest paid people got rewarded for reckless destruction. So there is no necessary "inevitable" increasing gap on a relative basis even if raises are based on actual value--which they often are not. "We are about at fair today, IMO, from a revenue perspective." Again, that's an assertion, not a justification. Why not a head tax? Why not a true flat tax? Why are these not equally "fair"? What is it that you're trying to equalize? But I won't bother asking the question again, since you seem unwilling to answer it. (I asked in prior threads too, and still got no response.) "After the simplification, each bucket should still be contributing about the same." The same what? It sounds like you do believe in a flat tax. Even though in a prior thread you said you didn't. I don't know what you believe, or why. "Tax rates around the world have been falling. Wealth has been concentrating. But that incentive has lit up economies. And it's not a zero sum game. When the Facebook guys pocket $50B, it doesn't mean the bottom 99% lost $50B." First, who asserted it was a zero sum game? Again, you are attributing beliefs that most of us do not have. Second, I have cited arguments before that dramatic inequality can lead to economic catastrophes. You can google them yourself if you like. Third, did you not pay attention during the W years? Businesses got what they wanted: lower taxes, less regulation, easy credit. And even excluding the financial collapse, growth was anemic. Even excluding the market collapse, the wealthy did great and median income barely budged. So the fact that the wealthy did well doesn't mean that everyone else did better too. There is no necessary correlation one way or the other. "You really don't want to count transfers to the poor and taxes on the rich?" As I wrote before, such transfers may be the result of dramatic inequality. But I'll count it here if it's counted in our peer countries as well. You're the one who continually assails the higher tax burdens in EU countries, and they have far less income inequality than we do. And you're the one who relied on a statistical measure of "progressivity" by looking at a ratio of who pays what, and that measure would hold that a system where the top 10% pay a $1 tax and the rest pay nothing is as progressive as it can get. I wrote about this before and didn't get a response, so here it is again: "seattleeng: 'Progressivity only looks at the ratio, ergo, if the rich pay a lot OR of the poor pay a little, then you will appear to be very progressive.' "So we agree on the math on that one. But then we should question whether that's a good definition of 'progressive.' (Perhaps you agree, as you wrote that the ratio can make a system "appear" progressive.) And the rich do not have to pay 'a lot' for the system to 'appear' progressive using a ratio; indeed, they can pay very little. As my hypothetical showed, one can have a system where the top 10% pays 100% of the taxes, and yet the amount actually paid is minuscule--as low as a penny a person if the rate is low enough. Yet the ratio would say that system is maximally "progressive." Another system where the top 10% pay 80% of taxes (or 50% or whatever), yet the amounts paid are substantial, could have a much lower ratio and so be deemed less 'progressive' even though those funds actually assist the lower income groups. I doubt many people would deem the first system more "progressive" than the second. The differences and actual values in tax rates along the income scale would seem to be an important factor, not just the ratio (if the ratio matters at all)." "So yes, I contest the claim that the US has one of the most 'progressive' systems in the world. Maybe it does, but the numbers provided don't show it because they don't capture the notion of progressivity that most of us use." Anyway, I think it's increasingly clear that no data and no argument will penetrate your world view, in which case it's useless to continue this discussion. I think roid's assessment above is correct, and when facts have no effect then real interaction is futile.

- dsimon

May 2, 2011 at 1:59am

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seattleeng: I'm posting one more time to point out that there has been no response to my points that you have no data on how many people have the opportunity to make "right" decisions (such as how many single parents have that status out of choice rather than due to a spouse who has become violent or gotten into legal trouble), nor have you addressed the issue of conflating correlation with cause (just because more successful people take advanced math doesn't mean that forcing more people into advanced math will produce more successful people). Such omissions (which I think have occurred repeatedly) make it seem like an unwillingness to question assumptions or admit the other side might have a point, which makes it difficult if not impossible to have any real discussion.

- dsimon

May 2, 2011 at 9:25am

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Roid writes: "Even after taxes, including transfers, our income distribution is still skewed, indeed more skewed. Other countries are not "right behind us." " Look again at top 10% income expansion in France. Yes, they are right behind us. As figure 2 shows, the top 1% posted amazing gains under Clinton. But the 10-1% is perhaps one decade behind the US. Combined with the top 1%, within 20 years France's top 10% will be where our top 10% is today. So yes, they are right behind us. And the UK, Canada, they are right there too. Canada is perhaps 4 years behind in our top 0.1% (figure 7). Of course, I could decide to reject all top 1% growth since it happened on Clinton's watch, just as you tried to reject all the medicare gains under Bush. But that would be dishonest.

- seattleeng

May 2, 2011 at 12:05pm

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DSimon writes: "I'm posting one more time to point out that there has been no response to my points that you have no data on how many people have the opportunity to make "right" decisions (such as how many single parents have that status out of choice rather than due to a spouse who has become violent or gotten into legal trouble), nor have you addressed the issue of conflating correlation with cause (just because more successful people take advanced math doesn't mean that forcing more people into advanced math will produce more successful people)." As I noted previously, there's not an infinite supply of data. Some things thus cannot be readily known if the data doesn't exist. If you have a source of data that says that poor women are left high and dry by jackass boyfriends that turn violent after a few years of being a nice guy, then please share it. I agree, if that is the case then it's a different problem than if 15 year olds are getting pregnant and then ending up on welfare. But absent that data, the data is pretty clear that women that have a child out of wedlock are financially screwed and doomed to a life of poverty.

- seattleeng

May 2, 2011 at 12:15pm

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DSimon writes: "Well, duh. But you provide no evidence why this should, or even could, continue in perpetuity. " Of course there is. Person A does just enough to get by. Person B does more than expected. You can see that Person B will earn more than Person A. That is a no brainer to you. What about their kids? Person B will likely have much higher expectations for his kids. And he'll also have a bit more money than Person A to help with better schools. Do you not see how Person B's kids will be MUCH better off than Person A's kids? And role that a few more generations and what do you get? DSimon writes: "As my hypothetical showed, one can have a system where the top 10% pays 100% of the taxes, and yet the amount actually paid is minuscule--as low as a penny a person if the rate is low enough. Yet the ratio would say that system is maximally "progressive."" I'm not really sure what you wanted to me to respond to here. I pointed it out, you agreed with it. And then you noted: DSimon writes: "First, who asserted it was a zero sum game?" If new wealth or income is created, and it doesn't remove wealth or income from the bottom 98% of society, why do you care if the top 2% get to keep it exclusively? Should the welder in Topeka get a small slice of the wealth facebook created? If you say "no", then we agree, but understand that means wealth accumulates in the top. If you say "yes", then why? DSimons writes: "You're the one who continually assails the higher tax burdens in EU countries, and they have far less income inequality than we do." Look harder. From the thread with Roid, the UK and Canada are right there with the US. Where we were in 2000, they will be in 2005. Even egalitarian France is just a decade behind us in terms of income concentration. For wealth concentration, Sweden has us beat by a mile. "Maybe it does, but the numbers provided don't show it because they don't capture the notion of progressivity that most of us use." And what is that notion? If you can't define progressivity, how can we measure it? You guys don't like gini. You don't like HiLo ratios. You don't like flat. You don't like consumption. It seems the only thing you guys do like is a nebulous concept called "soak the rich", but outside of that you cannot describe that that should be. Since we're bringing up unanswered questions....I don't think you've answered what would be fair salaries for the range of HS dropouts through PhDs (I showed current data), nor have you taken a swing at what you think a ratio of the top 20% to bottom 20% should be for people that work the same # of hours and including government transfers.

- seattleeng

May 2, 2011 at 12:30pm

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You are babbline, seattle. The top 10% in the US had a 44% income share in 2000. In France, the figure was 33%. From the end of WWII until about 1980, the French top 10% had a larger income share than the top 10% in the US. The US passed France in about 1980 (see, Ronald Reagan) and the difference has only widened since then. Moreover, the French top 10% is pretty near its lowest share in the last century. Accordingly, your notions that France is "right behind the US" or that our skewed income is predictive of where France will be in ten years, 20 years, or 100 years are ridiculous, completely contradicted by the facts. You just cannot stop making this stuff up, can you?

- roidubouloi

May 2, 2011 at 12:38pm

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seattleeng: "Some things thus cannot be readily known if the data doesn't exist. If you have a source of data that says that poor women are left high and dry by jackass boyfriends that turn violent after a few years of being a nice guy, then please share it." I believe you have the burden of proof, since you're the one who seemed to assert that all people have to do is make the "right" decisions and they won't be in poverty (which may not mean that they're not still poor). You're the one who is arguing from unproved assumptions, not me. And you still don't respond to the conflation of correlation and cause. And you still don't respond to the issue of diminishing returns. There are only so many hours in the day, so many decisions that can be made, and yet you still seem to assert that 10% increases in productivity can continue ad infinitum. And again, that's assuming that pay is actually based on productivity, about which the recent banking bonuses should at least raise serious doubts. "I pointed it out, you agreed with it." No, I believe I pointed it out. You were using the ratio to assert that the US tax system was one of the most progressive in the world. I showed that this statistic, like many others you have used, doesn't tell us much without more information. So do you admit that using just a ratio is flawed? "And what is that notion? If you can't define progressivity, how can we measure it?" I think it is a fuzzy notion. But I didn't claim to have a measure; you did, and I showed why it was inadequate. (And Gini to my understanding is not a measure of the progressivity of a tax system; it's a measure of income inequality. And I never said what I liked or didn't like.) "I don't think you've answered what would be fair salaries for the range of HS dropouts through PhDs (I showed current data), nor have you taken a swing at what you think a ratio of the top 20% to bottom 20% should be for people that work the same # of hours and including government transfers." I addressed your question in another thread, and explained why I thought it didn't have an answer or simply wasn't relevant. I believe I said something like I didn't think there "should" be a ratio, and that the purpose of progressive taxation was not to create a proper ratio of wealthy income to poor income but to fairly allocate the burden of running government. If 90% of income earners make very little, say below the exempted income tax amount, and the other 10% make a fair amount to a lot, then that top 10% will bear the entire tax. But that's because they're the only ones who can afford to pay, not because anyone wants to "soak" them. This concept seems to escape your understanding, even though it's been made repeatedly. By contrast, you still haven't justified your notion of "fair." Again, it seems to be an avoidance of questions that seem inconvenient. I'm done here.

- dsimon

May 3, 2011 at 11:36pm

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