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Go Home Dangerous Game

POLITICS JANUARY 28, 2011

Dangerous Game

BY WILLIAM GALSTON

I’ve just spent a snowed-in day plowing through the Congressional Budget Office’s latest ten-year budget and economic outlook. The short-term outlook is grim enough, with an estimated deficit of $1.5 trillion—a new record, and the third consecutive 13-figure result. As for the long-term outlook, it’s not as bad as you’ve read; it’s worse.

Here’s why the headlines understate the gravity of our situation. CBO is required to use current law as the basis for its estimates—to assume, for example, that all the Bush tax cuts will expire at the end of 2012, that Medicare payments to physicians will be cut sharply, and that the alternative minimum tax will be allowed to affect millions more Americans. Using these assumptions, taxes as a share of GDP would by allowed to increase by five percentage points by 2014 and would keep on rising thereafter, we’d have a cumulative deficit of about $7 trillion dollars over the next decade, and debt held by the public would increase from 62 percent to 77 percent of GDP. Using more politically realistic assumptions, the cumulative deficit would be about $12 trillion, and debt held by the public would reach 97 percent of GDP, the highest level since 1946 (when it was headed down, not up).

I don’t know many economists, liberal or conservative, who view this prospect with equanimity. The CBO certainly doesn’t; its report states that “Although deficits during or shortly after a recession generally hasten economic recovery, persistent deficits and continually mounting debt would have ... negative economic consequences for the United States”—among them, reduced investment, output, and incomes; less room for maneuver when the next economic crisis erupts; and worst of all higher probability that investors would eventually lose confidence in our country’s creditworthiness and demand much higher interest rates. While no one can predict when that “tipping point” might occur, the report notes that as the global economic recovery gathers strength, investors will be less inclined to purchase U.S. government debt as a safe haven and will focus instead on its rising risks.

What should we do? Answer: Use the tax compromise struck during the lame-duck session of the 111th Congress as a two-year window to get our house in order. By the time that legislation expires, we should agree on a long-term plan that halts and then reverses our downward fiscal plunge. How should we do it? A number of high-level commissions have come to roughly the same conclusion: We need a grand bargain that deals structurally with both spending and our outdated tax code. Can we do it? Yes, because we’ve done it before—in the 1990s, to be precise, starting with the bipartisan budget deal that may have cost George H. W. Bush a second presidential term, continuing with Bill Clinton’s brave 1993 austerity budget, and concluding with an agreement between the Clinton administration and the Gingrich-led House Republicans.

Let’s look at a snapshot of the eight Clinton years (all numbers expressed as a percentage of GDP).

                                                  1993                            2000 

Total spending                          21.4                             18.2

Domestic discretionary              3.4                              3.0

Deficit                                         3.9                              -2.4 (surplus)

Debt held by the public           49.3                             34.7

During the Clinton years, spending of all kinds declined as a share of GDP, deficits turned into surpluses, and debt held by the public barely budged: $3.2 trillion at the beginning, $3.4 at the end. During the Bush years, by contrast, every form of spending increased substantially, surpluses turned into deficits, and debt held by the public almost doubled, from $3.3 to $5.8 trillion.

The experience of the Clinton years contradicts a standard Republican talking point: increased revenues aren’t always spent. The Clinton administration used the proceeds from a higher top marginal tax rate to reduce the deficit. And those rates didn’t exactly suppress economic growth or job generation either.

I wish I could say that today’s elected officials are as serious about our fiscal future as Clinton was. Republicans are proposing damaging cuts in domestic discretionary spending (a small part of the total budget) while ducking far more important drivers of the long-term deficit problem—such as entitlements. Democrats seem to be hoping that they can score tactical political points by hanging back and forcing the Republicans to put specifics on the table. And although the State of the Union address left the door open to a serious discussion, not even the president’s supporters are claiming that it etched a profile in fiscal courage. (As intended, his investment message had far more resonance.) Senator Kent Conrad, the Democratic chair of the Senate Budget Committee, is publicly lamenting the president’s unwillingness to join in a budget summit with the bipartisan congressional leadership.

Memo to Republicans: You’re rightly critical of George W. Bush’s fiscal performance. But there is no evidence—none—that you can get the deficit and debt under control with your preferred combination of spending cuts and tax cuts. Have you noticed that Paul Ryan’s famous Roadmap allows the national debt to reach 100 percent of GDP? Do you care about facts?

Memo to Democrats: Denouncing the proposal offered by the president’s commission as a “cat food” budget for the elderly is a political talking-point, not a serious argument. Is Dick Durbin no longer liberal enough for you? Have you forgotten that fiscal restraint and full employment were partners, not adversaries, little more than a decade ago?

Memo to Obama: During your 2008 campaign, you said that the president has to be able to walk and chew gum at the same time. You were absolutely right. You can talk, as you should, about vital public investments and take the lead, as you must, to head off a fiscal train wreck.

During the next two years, we have to do what Clinton did, and more. We have to restrain discretionary spending (defense as well as domestic) and boost revenues. And because what was only a cloud on the horizon in the 1990s—the retirement of the baby boom generation—is now a swelling reality, we have to do what Clinton didn’t: Namely, find a way to reduce the anticipated increases in entitlement spending without imposing hardship on the lower-income elderly who depend on these programs for a decent and dignified old age.

William Galston is a contributing editor at The New Republic and a current senior fellow at the Brookings Institution.

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62 comments

Clinton raised effective tax rates about 1.5% on wealthy earners, but he also slashed cap gains by 30% (28% down to 20%). So, if you were an affluent guy in your late 50's, with $2M of your retirement sitting in the market, and earning $400K/year as a partner in a law firm, you would have seen your income tax go up by $6000, but your stocks would have produced a staggering $200K per year in investment income, and your taxes on that investment income would have dropped from $56K to $40. Yes, that's an extra $10K (16K savings on investment income minus 6K extra on income tax) you did NOT pay to the government under Clinton's tax policies. So, many with lots in the market made out like bandits under Clinton. And it showed: the top 10% saw their gains outpace the middle class unlike any other time in history. Maybe you should re-title the article: "Letting rich people keep more of their money is a sure-fire way to ignite the economy". Of course, Obama knows this. That's why he kept Bush tax cuts for the wealthy. Hehehe....The wealthy paid more under Clinton. Good grief. That is rich.

- seattleeng

January 28, 2011 at 2:45am

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Not to belittle Galston's larger point, to get the US fiscal house in order, but using statistics to demonstrate the calamity that is sure to befall us won't do it, for actual events are likely to make a lie of those statistics. Take defense spending. Will the US continue to spend $200 billion per year on the two wars it is waging in the mideast (the official estimate, about $40 billion per year, is laughable and everybody knows it)? Or are the events of the past few weeks in the Arab world only the beginning of regional chaos that will require the US to spend even more lavishly in the region? Will the baby boomers quickly exhaust the social security trust fund and require either a large tax increase or a large cut in benefits? Or will the baby boomers find themselves unable to retire because their employers have long since dropped their defined benefit pension plans, their 401(k)s have either been decimated or grossly underfunded, and they continue to dig themselves out of the debt incurred during the most recent bubble, forcing the boomers to stay in the work force and not receive full social security benefits? Will the US reject Obama's call for greater investment in the future, in education and infrastructure, making permanent the current drag on US employment and income and expanding the deficit as the result of lower tax receipts and higher support payments to the unemployed? Or will the US accept Obama's call, make the investment in the future, and trigger the longest period of economic growth in history, augmented by an economic boom in China and elsewhere, thereby growing our way out of the deficits and allowing a paydown of previously incurred public debt? Will the baby boomers be like the greatest generation retirees and continue the trend of increasing per capita health care expenses, thereby requiring large tax increases to continue funding Medicare and creating an even greater drag on economic growth? Or will the baby boomers, unlike the earlier retirees, require far less in per capita health care expenses as the result of a healthier lifestyle that they continue into retirement, avoiding entirely the predicted health care funding crisis of many prognosticators? I spend much of my time advising small (health care) businesses, which have suffered during this long recession (surprised?). The owners' first response is always to look for ways to cut expenses. Fine, but to be an effective advisor, my job is to get them focused on the revenue side of the ledger, actions they and their staffs can take to increase revenues, because to focus only on the spending side is both shortsighted and likely to accelerate a downward spiral. The same is true at the macro level. Unless our focus is shifted to the future as Obama would have it, a downward spiral it will be.

- rayward

January 28, 2011 at 8:12am

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We CAN afford the social programs, IF we raise taxes into the 25 to 30% range. What you're seeing is the effect of under-taxing and over-spending on the military. Can you say "Guns and Butter"? It didn't work under Johnson, but at least he TRIED to justify it. Under Bush it just got approved by the Rubber-Stamp Congress of the time. At LEAST you mention "raising revenues", which is anathema to the Republican mind-set, good for you. Your article is actually quite realistic and practical, but your Chicken-little "fiscal disaster!" verbiage plays into the Republican's hands.

- AllanL5

January 28, 2011 at 9:20am

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AllanL5: "We CAN afford the social programs, IF we raise taxes into the 25 to 30% range." No, we can not. We pull in, what, $1.8T in personal income taxes each year. We have a $1.5T shortfall. We need to pull in 2X more taxes. As a first order estimate, everyone needs to pay 2X what they pay today. That means a $300K earner, who is currently paying about $85K in taxes, will need to pay $170K in taxes. An extra $85K in taxes. Won't work. The money isn't there. Don't make such ridiculous statements without at least entering a few numbers into a calculator.

- seattleeng

January 28, 2011 at 9:56am

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Oh yes we can. There is plenty of GDP in our economy to support the government. We are undertaxed because income has shifted hugely to the top 1%, 5%, 10% and 20% of earners. Thus, the middle class is missing a huge chunk of what used to be discretionary income and the top earners, who now have enormous discretionary income, are vastly under-taxed. Of course the money is there. We have an economy that is approaching $15 trillion in GDP. And what seattleeng simply cannot understand no matter how many times it is explained to him is that we are already spending the money, although debt financed rather than tax financed. This means that the economy is already producing this output (with a still relatively minor addition of net imports). It is ridiculous to say "the money isn't there" when we are in fact producing virtually all of what we are consuming. And if we stopped running a trade deficit, we would produce that too and have a lot more jobs to show for it. Seattle, you wouldn't know what to do with a calculator if it fell out of your ass which is where you appear to keep yours.

- roidubouloi

January 28, 2011 at 10:05am

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Here's the problem: fiscal restraint and full employment CAN'T be partners when you're in a liquidity trap. Borrowing is cheap right now, precisely because we are in a liquidity trap. And spending the money we can borrow cheaply to prime the pump in a serious way is our first-best policy option.

- bmoodie

January 28, 2011 at 10:19am

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Thank you roi for [trying to] educat[e]ing seattle. It's a thankless, and maybe hopeless task. I do think though, that seattle represents a segment of the educated(?) population living in an alternate reality that allows him/her to maintain the fantasy. Ray, thanks for mentioning the large amount of military spending that Galston conveniently left out of his post. There's no excuse for not mentioning it anymore.

- jet

January 28, 2011 at 11:00am

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Roid, we are financing 40% of our spending each year. The money isn't there. If what you are saying is true, then why didn't Obama put this plan into motion when congress was all his? Obama/Reid/Pelosi apparently doesn't believe you either. So, outside of some whackjob and Mother Jones, who believes you? Not the repubs. Not the dems. Who? If there was a shred of truth to what you are saying, wouldn't Obama et al have be thrilled to put that plan into play? Of course. But they didn't. Because it won't work. It's fantasy math.

- seattleeng

January 28, 2011 at 11:45am

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You can argue whether the conservative gop and tea party initiatives to substantially trim spending via cuts in social programs are laudable or contemptible, but the elephant in the room is this: Anyone who talks about reducing government spending without drastically cutting defense simply cannot and should not be taken seriously. The amount we spend on national defense is an absurdidy of epic proportions.

- Tristan

January 28, 2011 at 11:50am

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Seattle, the politics of why we cannot raise taxes has to do with people like you who believe nonsense about the economy. That is a separate matter from the economy itself. What you believe about the US economy is not the economy. Your core confusion is two-fold: You don't understand the difference between money and real output and you don't understand why the US economy is not just a big household. The amount that we borrow externally is the equivalent of household net borrowing. It represents the amount that we consume in excess of what we produce. Currently it is approximately 2.75% of GDP. Now, even as to that, it is not the case that we cannot produced enough to cover that additional consumption. We have nearly 10% unemployment. Conservatively, the employment of that idle resource would generate at least a 5% increase in output, more than enough to cover our net imports and then some. Why don't we do that? Because we have free-market nuts, libertarian nuts, paleo-conservative nuts, and liberal nuts who delude themselves on the subject of free trade. Even if free trade would work in a world where everyone practiced it, almost no one does other than the US. With everyone else engaging in managed trade, being a pure free-trader does not work, particularly when for political reasons you represent the safest place to store wealth so that the rest of the world will keep financing your consumption. For purposes of present discussion, we can ignore the trade deficit. It is the product of stupid trade policies. It is not the result of our inability to produce what we consume/invest. We have enough capacity to do that and more. Okay then, if the US economy as a whole produces (or could with sane trade policies) as much as it consumes/invests, including what is consumed by government in the provision of services of various kinds, in what sense could one possibly say that "we" cannot afford what we are currently spending? Self-evidently we can because we are producing everything, including all of our government services, that we are consuming/investing. We do not consume money. Money need not be here, there, or anywhere, except insofar as it is needed to allow market exchange. If we do not have enough money for our current rate of market transactions, which would produce deflationary/contractionary pressures, then there is a simple solution: the government prints more money, the deflationary pressure goes away. Since we produce everything we consume (to within 2.75%), it cannot possible be the case that we cannot afford what we consume. Since every single dollar of output is earned by somebody, there has to be sufficient national income to tax to pay for what the government spends. We are already spending it, we are just not collecting it. Instead, we give the people who fork over the money pieces of paper. When presented with this necessary truth, an accounting identity, libertarians such as yourself will invariably fall back on the position that, if we had high enough nominal tax rates to pay for government, there would be enormous disincentives to output. This is also a fiction for which there is no evidence at all. It is a recycling of the laughable Laffer curve, moronic. When we had 90% marginal rates, we had adequate output to meet our needs, and nothing like 90% marginal rates are required to balance the budget. The truth of the matter is that libertarians such as yourself believe that taxation is immoral. You do your best to dress up your philosophical claim as one of necessity. That is an intellectual fraud. We have the money because we are already spending the money. We just decline for political reasons to collect it as taxes.

- roidubouloi

January 28, 2011 at 1:12pm

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Tristan: amen. But remember a huge chunk of our military spending goes to employ roughly 3 million men and women, and probably another 10 or 20 thousand R&D engineers and support staff at companies like Boeing. So, cutting military in half will put around 1.5M people on the streets. It needs to be done carefully. But it needs to be done. Still, even cutting the miltary in half would net $300B, and we're $1.4T short. So, what else???

- seattleeng

January 28, 2011 at 3:13pm

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Roid, you don't have to convince me. It's Obama/Pelosi/Reid you needed to convince. They seem to reject your notion.

- seattleeng

January 28, 2011 at 3:16pm

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And I don't think taxation is immoral. I am all for everyone sharing the burden of building things for the common good. What I am against is someone just deciding that they will take money from someone that earned it so that a person that has made a lot of bad life decisions can have an easier go at things. Not one person on the TNR boards thought it would be good to heavily tax our middle class so that poor people around the world could have clean water. So, let's drop the notion of helping everyone and call it what it is: Envy.

- seattleeng

January 28, 2011 at 3:19pm

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You characterize government spending has relieving people of their own failings, bad decisions, etc. That is must your characterization in order to justify your aversion to taxes. Has nothing to do with the reality of people's circumstances except at the extremes. The numbers that fit your characterization are completely trivial. In dollar terms, less than Halliburton steals from the taxpayers on a good day (for Halliburton). As for who needs convincing, read up. You are the one who insists that we cannot balance the budget with taxes. But the fact that we are producing our consumption already proves that we can. As I said, the reasons why the politicians cannot and will not do what is necessary are, to no surprise, political. They haven't accepted your notions either. Is that sufficient to prove you are wrong? Proof by politician? I don't think so.

- roidubouloi

January 28, 2011 at 5:09pm

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No, it would be a STUPID idea to tax our middle class to pay for everyone in the world to have clean water. Taxing the RICH and WEALTHY classes to pay for everyone in the world to have clean water sounds like a great idea to most of us.

What I am against is morons like you thinking virtue is a cause of wealth. Especially considering people like Madoff whose family will probably never want for an extravagance, and yet whose actions cannot be accurately described as anything other than LYING and STEALING. The best that could possibly be said about your point of view is that you are stuck in the 1980's, still railing against welfare queens; but I have seen nothing to convince me your intentions are so pure.

So let's drop the notion of fair and balanced and call it what it is: greed.

- GSpinks

January 28, 2011 at 5:18pm

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Gspinks for President:) + thanks Roid. Also, malahat's point about "adult conversation" is certainly a starting point. What do we get? Right about the SOTU, attacks on Obama from not one but two right wingers - with no corresponding voice from the Left - and as soon as Obama mentions "green energy" and reducing some subsidies to the oil industry guess what's on TV: ads for the oil industry. How on earth are we going to overcome this inertia?

- Sophia

January 28, 2011 at 8:48pm

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I meant "right after." It was tough to watch the immediate attacks on the Obama Administration from Bachmann - as though the policies of the previous 8 years had had NOTHING to do with our current woes - but yet her outfit wants to cut funding for disabled vets now - unbelievable.

- Sophia

January 28, 2011 at 8:50pm

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gpsinks: "Taxing the RICH and WEALTHY classes to pay for everyone in the world to have clean water sounds like a great idea to most of us." Well then it won't get done. With the top 10% earning some 25% of the money, there isn't enough to to do all this goodness that people want. Clean water alone is $80B. If you take everything the wealthy make and leave them $0, it runs out pretty quick. that is what is strangely delicious about all this. What you want cannot happen. It's only a question of how long will it be until you figure this out. gspinks: "What I am against is morons like you thinking virtue is a cause of wealth" Virtue isn't a cause of wealth. But rather than look at what might be the cause of wealth, instead ask what is the cause of poverty. A series of intentional bad decision, repeated over and over. Take a guy making $400K a year today, and send him back to ninth grade. He'd still end up earning a lot of money each year. He'd do this by doing well in school, staying out of trouble, not getting anyone pregnant, finding his way into college, paying for it with a crap job. The formula is so simple. But I know, you feel better if you call it "luck"

- seattleeng

January 29, 2011 at 10:16am

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Roid: "As for who needs convincing, read up. You are the one who insists that we cannot balance the budget with taxes. " Find me an OECD country that has balanced lavish benefits on the back on their wealthy. You cannot. They have done it on backs of ALL their citizens. The UK and Germany tax the living crap out of their working poor. The closest anyone has come is Canada. They have 2X higher taxes on their middle class (compared to the US) and have made health care work. So, where is your proof point, Roid?

- seattleeng

January 29, 2011 at 10:19am

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Seattleeng I would like to know if you think we will be able to compete globally without government intervention (e.g. education, subsidies, regulation & etc) or if capitalism, left to its own, will meet our needs (like it worked in the recent subprime mortgage crisis, for example). And if government is a necessary element of capitalism, how do you propose to finance the cost of economic stability if it is not drawn from the individuals who benefit the most from a stable economy?

- Nusholtz

January 29, 2011 at 3:57pm

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Malahat, sure, take a look at the link below. The source of the data in the article is OECD. Median earners (with kids) have the following effective tax rates: USA:11.9% Canada: 21.5% UK: 27.1% Germany:35.7% France:41.7% As you probably know, "effective" means what you pay out, versus what you take in. So, in the UK, for example, someone earning $50K is paying 0.271*50 = $13500 in taxes, while in the US someone earning $50K is paying $5950 in taxes. Quite a difference, eh? See where all those social programs come from? A middle class earner in the US gets to keep roughly $15K more of his money than a middle class earner in France. http://web.archive.org/web/20060415173013/http://moneycentral.msn.com/content/Taxes/P148855.asp Don't eat the link. 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 linkDon't eat the linkDon't eat the link

- seattleeng

January 29, 2011 at 5:11pm

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Nusholz, yes, we can compete globally with countries that are exhibiting similar levels of subsidization to the US. The mortgage meltdown is an example of free markets run amok? You mean people lending money that wasn't their own to those that were known not to pay it back? If ever there was an example of good government intentions driving a car off the cliff, the meltdown was one. Hint: If they had to use their OWN money, nobody would loan to anyone with a FICO score under 630, or even 700. It just wouldn't happen. Ever. Full stop. The only reason someone is given a loan when they have a crappy FICO score is becuase the government promises to cover them if they default. That is the GOVERNMENT at work, not free markets. That is the government wanting to get as many into houses as they can. Historically, a 630 FICO score has a 30% chance of defaulting in a normal market. In a tightening market, their default rate will be 2X that. Would you loan money to someone that had a 50% chance of not paying it back? Especially if they had no job documentation? And a long history of late payments on credit cards. I wouldn't. Big banks wouldn't. Nobody would EXCEPT....Fannie and Freddie. Free markets would NEVER loan to such risky borrowers. Ever. Ever. Ever. Or if they did, it would be at interest rates that were 2X or 3X what credit worthy borrowers were getting.

- seattleeng

January 29, 2011 at 5:31pm

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Seattleeng First, I think you overlook the role that government plays in science and the role that science plays in the economy. Second, at the root of the subprime crisis was the rating agencies and the inability to accurately evaluate the various CDO's and CDS's and other investment vehicles of pooled mortgages that were bought, sold and insured as triple A rated investments. Had their true nature been known, the crisis would not have occurred. Like the former oil in Texas and the former lumber in Michigan, capitalism often moves rapidly toward a dead end and needs government for stability. That cost should be borne by those who benefit.

- Nusholtz

January 29, 2011 at 6:11pm

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Oy. The nonsense never ceases. Seattle, the biggest reason that middle class taxes have to be higher in Europe is that they have a much more level distribution of income. The US is an outlier amongst industrial nations in having an extremely skewed distribution toward the top. You have to tax where the income is, not where it is not. The last time I pointed this out to you, you cited a study that, you said, contradicted my claim. So, I read it, and the study said exactly what I had claimed and the direct opposite of what you had claimed -- the US is an outlier in income distribution. I don't make this stuff up, seattle. I spend my days working on a PhD in economics and certain facts, including the skewness of US income distribution, come up over and over and over again. Unless every professor in every course is high on the job, I have some reason to believe the things I claim before I make the claim. You also fail to account for what social programs in Europe pay for. In France, where you say that they pay a lot more in taxes, the also have universal, virtually free medical care. Once you adjust for the cost of medical care that US families have to pay privately, the difference almost vanishes. Then, their kids, if they perform in school, can attend university at what is, by our standards, a very low cost. They have a higher labor productivity than we do, in output per hour, and work shorter hours with a lot more vacation. The only reason the right-wing here dumps on Europe is that they have no idea how well, how much better in the case of the vast majority, they live there than we do here. It costs me more than double in New York to maintain a standard of living similar to the one I enjoyed in Paris for three years, and the truth is that the life there, even adjusting for the cost, was a hell of a lot better. As fro the nonsense about mortgages, you appear to want to abolish the business of banking altogether as a solution to the lack of appropriate bank regulation. We would not be able to maintain an industrial society without banking. Demand would collapse. And that means, by definition, institutions lending other people's money. That's a big part of why those institutions need to be tightly regulated. As for your claim that no one would make sub-prime mortgages but for a government guarantee, you are quite simply very confused. The very definition of a sub-prime mortgage is one that does not qualify for government agency financing. Don't you know that? And trillions were lent. Unregulated financial institutions will always take excessive risks. They always have, and they always will. Your claim that, but for government guarantees, the wouldn't is belied by every financial crisis of the last 600 years. Doesn't it bother you continually to make these false claims in the service of an ideology that is a proven failure, absolute, total, abject failure? All libertarians belong in Somalia where they need not be bothered by government.

- roidubouloi

January 30, 2011 at 12:08am

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Nutz, Fannie and Freddie represented their investments as "backed by the full credit and faith of the US government." There was a total reality distortion field in place. Yes, the credit agencies suck at their job. But make no mistake that Fan/Fred were WAAAY overstating the soundness of their offerings. Again, interference from the government causes everyone to feel far more comfortable that they should. If there were no Fan/Fred in all this, nobody would have made the loans. "That cost should be borne by those who benefit." Everyone benefits from capitalism. The middle class in the US has seen their wealth grow (in constant dollars) from 51,000 to 59,000 (pretax) and 41,500 to 50,200 (after tax) since 1979 according to CBO numbers. That's 21% more the middle class has today than 30 years ago. No other OECD economy in the world is posting those types of gains for their middle class. If you wanted to argue for even moderately socialistic economies like Sweden and France, then you should be able to show their middle class purchasing power has outpaced ours. They have not. Now, do the wealthy benefit more? Of course. They always will. In every system. They generally create the wealth by starting new companies. They will reap most of the benefits. But that's life.

- seattleeng

January 30, 2011 at 2:34am

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Roid, from the study I cited, on page 110 (table 4.5) The top 10% get what % of the income: US 33.5% UK 32.3 Canada 29.3 German 29.2 Finland 26.9 Sweden 26.5 France 25.5 the US is within 4% of Canada and Germany. If there are $10T of income in play, and the US wealthy get 33.5% of that (3.3T), let's assume we just tax 4% of that away, so $400B, and give that to the other 90M families. That's $4400 per family which puts our top 10% grabbing same share as Canada and Germany. And then we tax the middle class at Canada's tax rate (2X the US). The middle class still lose. Big time. How about this. We take the difference between US and Finland (33.5-26.9=6.6%) and give all that money (6.6% * 10T) = 660B to the other 90M families. That'd be an extra $7300 per family. And then we tax the middle class at Finland's rate of 42%, and watch the $5500 the middle class tax payer pays today jump up to $22000, minus the rebate of $7300. That would put our top 10% earning the SAME share as Finlands top 10%, and with Finland's taxes we'd see our middle class having to cough up an extra $15,000. On a family earning $50,000. You are wrong, Roid. The higher taxes on our wealthy is not becuase they earn that much more. You could take all that away, and the stick in EU taxes and it'd cost our middle class a fortune. The EU social programs cost a fortune. That's why they are taxed so heavily. The difference is not explained by what our top 10% earn.

- seattleeng

January 30, 2011 at 2:51am

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Seattle You have to go back 31 years ago to claim an increase in middle class incomes? Instead try China and Germany that have 45% top rates and Canada for comparison. The bulk of the subprime mortgages were not conforming mortgages and if what you thought was correct, that the mortgages were backed by the U.S., then how is that the investments failed at all? It is generally accepted that failed regulation and deregulation caused the subprime problem which further supports my point that the government plays a role in the stability of capitalism and that the cost of that stability should be borne by those who benefit and according to their benefit.

- Nusholtz

January 30, 2011 at 9:44am

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You really have to read and understand the whole thing, seattle. One statistic won't do. For example, page 25, GINI coefficients (most common measure of income inequality), the US has the most uneven income distribution amongst the thirty nations, the worst save Portugal, Mexico and Turkey, just the sort of company I guess you would like us to be keeping. Or take another measure, table 9.4 on page 242, ratio of income of top quintile share to bottom quintile share. US, at 6.9, is the worst save Mexico and Turkey again. When all income transfers and social benefits are taken into account, we improve a bit on this measure. We edge up slightly past Greece and Poland. So, we are right up there with Mexico, Turkey, Greece and Poland. Page 32, share of richest 1%, the US tops the chart at more than 15%. With most clustered around 10%, the extra 5% for the richest in the US represents $700 billion of income. Page 30, ratio of median to mean household income, we are at the bottom again, with only Great Britain to keep us company, and they are improving while we show a straight decline. Poverty gap? The difference between the poverty level and the mean income of the poor? Check out table 5.2. By this measure we are worse than Turkey and behind only Mexico, by a tad. Finally, read the conclusions on page 38, "the distribution of household income differs significantly across countries." "Lastly, there are large differences in terms of how people at similar points of the income distribution in different countries compare -- differences that are "hidden" when countries are compared in terms fo their mean income. "percentage differences in income levels across countries are larger at the bottom of the distribution than at the middle, while the top of the distribution features differences in living standards across countries that are wide in absolute terms, but smaller in percentage terms." Fact is that amongst the wealthy nations, which would not include Turkey, Greece, Poland and Portugal, we are the outlier, just as I said.

- roidubouloi

January 30, 2011 at 10:39am

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You also seem to think, seattle, that any money collected by the government just vanishes, goes up in smoke, with nothing to show for it. This is part of the libertarian fantasy. But the French, for their taxes, get terrific medical care at almost no out-of-pocket expense. We have to pay for our medical care one way or the other. I am not worse off because I pay the tax to the government instead of to some thieving private insurer that is constantly trying to avoid paying the benefits it is obliged to pay. And if the national tab is only 11% of GDP, as it is in France, rather than 17% and climbing as it is in the US (with millions uncovered here until recently), they are much better off paying those taxes than we are paying insurance premiums. The other major "social program" is education, which has enormous externalities both positive and negative, the gains to society of educating those with ability, and the loss to society of having an uneducated workforce. "Welfare," the eternal right-wing and libertarian bugaboo, is a tiny part of our government expenditures. As for pensions, they are still modest, and the elderly can be expected to continue to eat and have a roof over their heads whether the pensions are public or private. So, one way or the other, they are going to consume a share of national income, with less for everyone else, regardless of how their pensions are financed -- unless, that is, we are going to simply allow a large portion of them to live in dire poverty as you would like. That is not the society we live in, based on our democratically arrived at choices. I am sure that Somalia would welcome someone with your abilities and then you can be free of the terrible burdens imposed on you here in the United States.

- roidubouloi

January 30, 2011 at 11:26am

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You also seem to think, seattle, that any money collected by the government just vanishes, goes up in smoke, with nothing to show for it. This is part of the libertarian fantasy. But the French, for their taxes, get terrific medical care at almost no out-of-pocket expense. We have to pay for our medical care one way or the other. I am not worse off because I pay the tax to the government instead of to some thieving private insurer that is constantly trying to avoid paying the benefits it is obliged to pay. And if the national tab is only 11% of GDP, as it is in France, rather than 17% and climbing as it is in the US (with millions uncovered here until recently), they are much better off paying those taxes than we are paying insurance premiums. The other major "social program" is education, which has enormous externalities both positive and negative, the gains to society of educating those with ability, and the loss to society of having an uneducated workforce. "Welfare," the eternal right-wing and libertarian bugaboo, is a tiny part of our government expenditures. As for pensions, they are still modest, and the elderly can be expected to continue to eat and have a roof over their heads whether the pensions are public or private. So, one way or the other, they are going to consume a share of national income, with less for everyone else, regardless of how their pensions are financed -- unless, that is, we are going to simply allow a large portion of them to live in dire poverty as you would like. That is not the society we live in, based on our democratically arrived at choices. I am sure that Somalia would welcome someone with your abilities and then you can be free of the terrible burdens imposed on you here in the United States.

- roidubouloi

January 30, 2011 at 11:26am

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Sigh. Don't know why that double posted.

- roidubouloi

January 30, 2011 at 11:27am

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Nutz writes: "You have to go back 31 years ago to claim an increase in middle class incomes?" No, I'm saying that if you look at ALL the CBO data since 1979 it shows this. The CBO data is the most complete and readily available data we have, and it only goes back to 1979. Roid, I'm not denying there is a tilt in our distribution. But as long as our poor have more disposable income than the poor person in the EU, why do you care if our rich have more?

- seattleeng

January 30, 2011 at 1:24pm

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Roid writes: " I am not worse off because I pay the tax to the government instead of to some thieving private insurer that is constantly trying to avoid paying the benefits it is obliged to pay." If the government is giving a ROI for the money, then yes, it can be well spent. But even the government learned long ago that they can build more roads IF they have private contractors build the roads cheaply, and the government just tells them where to build the roads. From the previously referenced table, France taxes their middle class at an effective tax rate of 42%. That is 4X higher than the US. Do you think the guy in France would generally like to have that money to spend as he wishes? Maybe he wants a boat instead of health care? Should that not be his decision? Re welfare. We spend almost $1T a year on welfare. It is not a tiny part of our expenditure.

- seattleeng

January 30, 2011 at 1:32pm

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Here's my thesis: 1) Our poor in the US have the same as poor elsewhere 2) The poor in the US have quite a bit more (constant dollars) than the poor of 50 years ago 2) Our wealthy in the US have a bit more more than the wealthy elsewhere So what? Our wealthy generally create more than the wealthy other places. Facebook created $50B in value from nothing. And that is repeated over and over again throughout the US. Not on the same scale. But it's common. So, when someone creates a Facebook, who should get the wealth? The creators of Facebook, or should it be diluted among the masses via punitive taxation?

- seattleeng

January 30, 2011 at 2:24pm

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No, the guy in France does not want to have the money to spend as he wishes. France is a democracy. The French have freely elected their governments and their governments have decided that universal health care is more important than allowing each individual to have more disposable income. The fallacy of libertarianism is the belief, based on nothing, that all decisions made by individuals are superior, both in their outcome and in their moral value, to decisions made collectively by democratic means. They believe this in the face of all evidence to the contrary. They believe this in exactly the manner that any religious sect believes the tenets of its faith, the operative word being faith. Who cares who gets the wealth from Facebook? The price for living in a society where one can create a Facebook is democratic governance. If the society as a whole decides that wealth should be distributed this way instead of that way, and people in like circumstances are treated without invidious discrimination, what is wrong with that? There is no a priori just distribution, there is no a posteriori just distribution. Individual freedom is a social good. Medical care is a social good. The only legitimate means of deciding how to balance them for society is democratically. Radical libertarians who imagine that they somehow exist above and outside of society should avail themselves of the opportunity to go someplace without effective government in order to enjoy the benefits of their radical freedom. We have a large budget deficit. The answer is to collect enough taxes to close it. We can do that almost exclusively by taxing our wealthiest because they have an overwhelming share of our national disposable income. Those who don't like that social arrangement should have the opportunity to forego their US citizenship, pay over a final tax on their wealth, and take the balance wherever they want. In this manner, they can escape from punitive taxation and the terrible burdens of being a member of American society. As far as I can tell, the best answer to the total cost of means-tested entitlements in the US is less than half of what seattle claims, about 3% of GDP. What a tragic imposition on American wealth.

- roidubouloi

January 30, 2011 at 2:58pm

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Seattle I can't follow your argument. In response to my claiming that those who prosper from the stable economy fostered by the government should pay their share relative to that benefit, you compare current middle class incomes with those back to 1979! When I question the relevancy of that, you say that those figures should be use because they are CBO figures. But it doesn't matter whose figures they are, and it doesn't matter if middle class incomes have gone up since 1979, people who prosper from the efforts of government should pay their fair share.

- Nusholtz

January 30, 2011 at 7:50pm

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Seattle Where would Facebook be without the Internet and where would the Internet be without government funding by the military? Is Zuckerberg the only one who gets rewarded for being innovative? His success results from innovations stemming from government funding but you feel Zuckerberg should get a free ride and I don't see why that makes sense to you.

- Nusholtz

January 30, 2011 at 8:04pm

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Roid writes: " If the society as a whole decides that wealth should be distributed this way instead of that way, and people in like circumstances are treated without invidious discrimination, what is wrong with that?" Ah, Roid, the TNR dream of the 1930s: Just look how wonderful the soviets are doing building their collective society. Alas, TNR was wrong then, just as you are wrong now. These collective dreams are just that: Dreams. The wealth in the US is not unlike the wealth in the EU. There isn't enough for the wealthy to pay for social programs in the EU. And thus the middle class get the crap taxed out of them. Means testing entitlements AFTER the fact is nothign but a backward looking tax over a persons entire lifetime, penalizing them for planning. If you think that will just happen overnight, you are wrong. It will be phased in over decades. All of your dreams start with this premise: "If we coudl just take the money from the wealthiest, and take it RIGHT NOW, then all our problems would be solved..." Again, your ENVY is showing.

- seattleeng

January 31, 2011 at 12:49am

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Nutz: "Where would Facebook be without the Internet and where would the Internet be without government funding by the military?" Good god, Nutz. What a mindless argument. How about this: "Most innovation has come about in order to drive the military and permit more efficient killing. Airplanes, the internet, drugs, genetically altered foods and high yield crops...it's all been driven by the military. Therefore, what we need is even MORE investment in the military to spur even more innovation" Ridiculous, yes? Quit kidding yourself. The government is no more responsible for innovation than the military is. They might need something 10 years before everyone else, but that doesn't mean that without their prodding it would have never happened. The creators of facebook need one thing from the government: Roads, fair commerce and and a peacekeeping force to keep the order.

- seattleeng

January 31, 2011 at 12:55am

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Nutz writes: "I can't follow your argument. In response to my claiming that those who prosper from the stable economy fostered by the government should pay their share relative to that benefit, you compare current middle class incomes with those back to 1979! When I question the relevancy of that, you say that those figures should be use because they are CBO figures. But it doesn't matter whose figures they are, and it doesn't matter if middle class incomes have gone up since 1979, people who prosper from the efforts of government should pay their fair share." My point is that under capitalism, all prosper. And they prosper, regardless of class, much more than they could have under socialism or any other -ism. If you are unhappy that the middle class has grabbed a smaller part of their pie than you believe they should have, then you must accept that under any other -ism they would have grabbed even LESS. If you want to refute this, find a world economy that is about at the same life-stage as the US and show me that their middle class has seen their slice grow faster than the US middle class has seen their slice grow. Can you demonstrate that? I suspect you cannot. Ergo, capitalism as experienced in the US has been kinder to the middle class than any other system of the last 50 years. Can you prove otherwise?

- seattleeng

January 31, 2011 at 12:59am

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May I point out, seattle, that Canada, Japan, France, Australia, Germany, Israel, the UK and almost every other advanced nation you can think of, with the exception of China and Russia (if you want to consider them advanced in the normal sense of the term, that is, more than just technologically), are all "under capitalism."

- ironyroad

January 31, 2011 at 1:26am

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Naturally, seattle, you have set up a giant straw man that you now attempt to destroy. We are not talking about the alternatives of capitalism and socialism. I am not advocating socialist production, nor is anyone else here. Nor is anyone here alleging that market systems are not the best mechanism yet invented for accomplishing some things. But you are an absolutist. By your lights, if markets are good, more markets are better. If markets are better than central planning, then completely unregulated markets are ideal. That one extreme does not work in no sense proves that the other does. We can have market-based production and distribution and still enjoy the benefits of government through the miracle of taxation and democratic decision-making. We can have markets that don't periodically fail and wreak havoc if we regulate them properly. When you run out of room to maneuver on this simple point, you invariably switch gears, trying to claim, as all libertarians do, that but for an absolutist laissez-faire system and de mnimis taxation, we would not enjoy growth and innovation. However. the record of the last 60 years is that the period of low taxation on the wealthy ushered in with Reagan has shown lower, not higher, growth in total prouductivity. The break-point? 1981. When your straw-man argument fails, you switch to the empirical argument, when that fails to the moral. But if the US wealthy can be taxed to pay for all of our government operating budget and still have a higher share of after-tax earnings than they did before Reagan began to wreck the economy, what possible cause would there be for complaint (to use your own argument)? And why should Americans not distribute their wealth be distributing their tax burden as they see fit? How is it the slightest bit relevant what is done elsewhere in this regard? Do we look to Mongolia to tell us how to do things? Why should we determine what we regard as the just distribution of wealth based on how many poor people there are in Africa? That is, in a word, ridiculous.

- roidubouloi

January 31, 2011 at 7:29am

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Seattle I can't see how you are disputing my point. My point is that the deficit is huge and government's role in the economy justifies increased taxes on the wealthy who have benefited from that.

- Nusholtz

January 31, 2011 at 8:56am

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Irony writes: "May I point out, seattle, that Canada, Japan, France, Australia, Germany, Israel, the UK and almost every other advanced nation you can think of, with the exception of China and Russia (if you want to consider them advanced in the normal sense of the term, that is, more than just technologically), are all "under capitalism." Yes, in varying degrees. My interest is finding a state with a massive government that has shown enormous growth alongside enormous redistribution. So, for example, if Sweden, with their government around 55% of GDP and a very redistributive framework, was showing enormous gains for the middle class in the last 50 years, then it would be interesting to consider. Roid could lean on that and say "Look, here is a place that has taxed the wealthy very, very hard, and has also taxed the middle class very, very hard. But the middle class has 30% more income (constant dollars) than 50 years ago" In that case, we could debate the US system of a much smaller government and a trickle down mentality did worse for our middle class. But absent that proof point, I think it's fair to say the trickle down has outperformed every other system in the world in the last 50 years, including creeping socialist countries like Sweden and France. And definitely full-blown socialist countries like the soviet union.

- seattleeng

January 31, 2011 at 11:55am

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Irony writes: "May I point out, seattle, that Canada, Japan, France, Australia, Germany, Israel, the UK and almost every other advanced nation you can think of, with the exception of China and Russia (if you want to consider them advanced in the normal sense of the term, that is, more than just technologically), are all "under capitalism." Yes, in varying degrees. My interest is finding a state with a massive government that has shown enormous growth alongside enormous redistribution. So, for example, if Sweden, with their government around 55% of GDP and a very redistributive framework, was showing enormous gains for the middle class in the last 50 years, then it would be interesting to consider. Roid could lean on that and say "Look, here is a place that has taxed the wealthy very, very hard, and has also taxed the middle class very, very hard. But the middle class has 30% more income (constant dollars) than 50 years ago" In that case, we could debate the US system of a much smaller government and a trickle down mentality did worse for our middle class. But absent that proof point, I think it's fair to say the trickle down has outperformed every other system in the world in the last 50 years, including creeping socialist countries like Sweden and France. And definitely full-blown socialist countries like the soviet union.

- seattleeng

January 31, 2011 at 11:56am

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Nutz: "I can't see how you are disputing my point. My point is that the deficit is huge and government's role in the economy justifies increased taxes on the wealthy who have benefited from that" And my point is that the goverment needs to be funded by everyone. The EU taxes their working and middle class heavily to pay for their government. We do not. We should. Our top 10% do not have that much more wealth than the top 10% in the EU. And our middle class has more disposable income that the middle class in the EU. Why not tax our middle class similarly to the EU to solve our budget woes?

- seattleeng

January 31, 2011 at 12:00pm

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Roid writes: " I am not advocating socialist production, nor is anyone else here." So tell me, Roid, what size shoudl our government be in terms of GDP? I would argue 100% **IS** socialism. And a country that is 80% is closer to socialism than a country that is 60%, and then 40%. And so the closer we get to 100%, the closer we are getting to socialism. I don't think that is a strawman at all. So, what is this magic number you seek?

- seattleeng

January 31, 2011 at 12:03pm

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Most measurements now calculate a better chance of upward social mobility for someone born in Sweden than someone born in the U.S., when education and health and other social goods are factored in. Two points 1. Growth can also be growth in general quality of life, not just GDP. 2. Slow and steady growth can be better than boom and bust.

- ironyroad

January 31, 2011 at 2:49pm

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It's a silly question framed that way, seattle. I think that society should afford everyone necessary medical care, education for their children through university, and a decent pension. Everyone not disabled can be expected to generate market income to pay for their food, clothing, shelter, transportation, and recreation. Then the government has certain necessary functions to perform for security, transportation, sanitation, communications, market regulation, etc. It is not essential that the government be the corporation that provides these things, including medical care and education. Some functions are better served that way, others not. Once we decide to do these things, there are sound ways to determine what the standard costs should be, and we should be prepared to fund them with taxation, not with borrowing. The taxes should be distributed so that those with the most disposable income pay a higher percentage. The numbers and the distribution of the tax burden should be decided democratically and technically. Whatever percentage of GDP that turns out to be, it will be. If we managed health care properly, the total of these socially borne expenses should end as a lower share of GDP than what it is costing us today. That has nothing much to do with socialist production. It is a form of market intervention where markets cannot properly achieve what we need. That leaves plenty of opportunity for markets to do their job of achieving efficiency of production and allocation.

- roidubouloi

January 31, 2011 at 3:23pm

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Roid writes: "Everyone not disabled can be expected to generate market income to pay for their food, clothing, shelter, transportation, and recreation" And what % of the population (not including elderly) do you think we might consider disabled? If someone is going to "work hard" to get ahead, how much income do you think they might be entitled to? If someone decides to get pregnant at 16, smoke a lot of weed, or get fired 5 times per year, what type of life are they entitled to?

- seattleeng

January 31, 2011 at 7:29pm

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Irony writes: "Most measurements now calculate a better chance of upward social mobility for someone born in Sweden than someone born in the U.S., when education and health and other social goods are factored in." Studies have show Swedes have MODESTLY better (few points) of social mobility. Yes, it is true. Not enough to make a world of difference, however. On the other hand, the discretionary cash left over for their working poor and middle class families is a small, small fraction of the discretionary cash in the US. And our GDP growth continues to absolutely HAMMER their productivity, which is what has been so instrumental in our middle class discretionary cash absolutely crushing theirs.

- seattleeng

January 31, 2011 at 7:35pm

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Ah yes, the eternal fear of the right-wing: 16-year old girls with babies smoking dope. The entire tax structure must be jiggered so that the wealthiest have unimaginable disposable income so that we will not incentivize teenage girls to get pregnant and smoke dope. Seattle, this is truly ridiculous. First, it does not characterize more than a tiny sliver of the population. Do you really think that if they have health care, education for their kids, and can be assured a decent pension after a life-time of work that people are going to forego that in order to be teenage moms? If you really believed any of your own economic rhetoric, which I highly doubt, the first thing you would recognize is that it matters not at all from the standpoint of motivating someone who may start a Facebook whether they stand to make $1 billion or $6 billion, or a measly $100 million. But it matters a great deal at the low-end whether someone has $2,000 more of disposable income. So, if you really gave a shit about employment, you would want to cut taxes on the working poor entirely, and give them health care, so that they have the maximum disposable income to spend on food, shelter, clothing, transportation, and recreation. Getting rid of their tax burden entirely really would make a big difference. Except that it won't end unemployment because that is not due to people who just want to sit on the porch. It is due to the fact that we have an affirmative policy in this country of maintaining unemployment in order to keep wages from rising too quickly. This is thought to be the way to fight inflation. "Incidentally," it happens to keep the profit rate up. Thus, a large portion of the population is victimized by the very policies designed to ensure the wealth of the wealthy. The least we could do would be to compensate them with a decent government employment opportunity. All part of the libertarian fantasy that the wealthy have "earned" their wealth rather than found a way to collect rents from the rest of society, rents that we have every justification for getting back through progressive taxation. I don't know about Sweden, but France has higher labor productivity than we do.

- roidubouloi

February 1, 2011 at 9:41am

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And as for GDP growth, given the starting point of WWII, when we emerged unscathed while Europe was devastated, the have shown more growth than we have. You should try living there. It is lovely, clean, the public transportation works, good food is everywhere, nice parks, not nearly the same hideous suburban sprawl.

- roidubouloi

February 1, 2011 at 9:43am

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Before you ask the obvious question why I don't live there, I am back in the US for family reasons. As soon as circumstances permit, I am back to Paris to live and will be happy just to visit here once in a while.

- roidubouloi

February 1, 2011 at 9:43am

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Roid writes: "Getting rid of their tax burden entirely really would make a big difference." But it also decouples them from the government. There is a reason the EU taxes their poor citizens so heavily: So they have a vested interesting in making the country work, and don't just exist to vote for "more stuff" " when we emerged unscathed while Europe was devastated, the have shown more growth than we have. " That's why I said countries that were at about the same "life stage" of development. "You should try living there. It is lovely, clean, the public transportation works, good food is everywhere, nice parks, not nearly the same hideous suburban sprawl." Roid, I'm coming up on 2M miles flow in my lifetime. I've been to perhaps 40 countries. Trust me, I've seen enough to form a reasonable opinion. Seeing more will not change it. (BTW, the slums we passed through via train from CDG heading into Paris made quite an impression on me that wasn't quite offset by the nice parks). I'm not against strong social programs as long as they are paid for, and if that is what a country wants. But this fantasy where 80% taxes on the top 10% can pay for everything is ridiculous. If we want EU style social programs, let's take a vote. And let's call it what it is: Massive taxes on the working poor in return for health care. Sorry, but they probably aren't interested. And when the working poor find out what much of the EU also has private health care for the wealthy residents, aren't' they surprised that they are treated again as second class citizens.

- seattleeng

February 1, 2011 at 11:42am

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Well, seattle, when push comes to shove, you always return to the same untruth -- that we must have massive or even any taxes on the poor, and more than modest taxes on the middle class, to fund pensions, education, and health care in this country. We don't. That you don't want to is clear. That you think the 50% marginal rates that we would need on incomes above $100,000 would be "punitive" is clear. But you are mistaken, apparently willfully so, when you claim that that we cannot have these things without heavy taxes on working people. You think that making the poor pay taxes is a moral good. I don't. I would rather have them fully vested in working and let the wealthy support government, particularly since income inequality is not merely an accident but an affirmative economic policy of ours for the purpose of maintaining profits and curbing inflation. I don't think those who get the short end of that stick should have to pay taxes too; they should rather have certain minimums, health, education, retirement, provided at the expense of the rich who benefit the most from this corrupt, inequitable system. In any case, you should stop pretending that you are making any sort of economic argument about the levels of taxation we must have. You aren't, and it shows in the manner you switch the gears of your argument constantly.

- roidubouloi

February 1, 2011 at 3:09pm

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Yeah, but seattle, the one thing that we always did that made us different from the Old World was upward social mobility. You had a chance in America and you weren't held back by class/birth/background. If we don't do that anymore, what do we have? It's not a question of a few modest points of social mobility, to use your phrase. It's a matter of, the Swedes (or French) are now better at upward social mobility AND they have far better public education and general health care for their population. What's our selling point now? Higher disposable income is meaningless if there's a danger that that disposable income is going to vanish down the drain of a major illness for oneself or a family member, or that increasing amounts of that income are going to pay for private educational options, or that companies are scaling back those better salaries because they have to carry the health insurance costs themselves. And if they stop doing that, guess what's going to happen to the disposable income of the employee, especially if the ACA is nixed?

- ironyroad

February 1, 2011 at 9:00pm

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Seattle, While the RER from Paris to CDG passes through the banlieues to the north of Paris, there is nothing particularly "slummy" looking that can be seen from the train. The working class neighborhoods you pass through are in fact rather neat. Not all that charming, but certainly not in any state of visible decay -- at least not as can be seen from the vantage point of the train. There are a lot of office and industrial buildings, also rather neat, along that route. No slums.

- roidubouloi

February 1, 2011 at 10:56pm

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ironyroad writes: " If we don't do that anymore, what do we have?" Immigrants that come to America still do better than immigrants that go to any other country. Our social mobility figures are dramatically muted by a permanent group of folks in this country that have doomed themselves to perpetual poverty by having too many babies, too soon, without any fathers. That trend wasn't present 50 years ago. But out of wedlock teen births are the surest way to doom a child to a life of poverty and to ensure yet another person is stuck at the bottom. Teen birth rates in the US: 53 per thousand. And in Sweden, Denmark, Finland, France: 7 to 9. If our teen birth rates mirrored Swedish teen birth rates, you can bet our mobility figures would again greatly surpass Sweden.

- seattleeng

February 2, 2011 at 9:19am

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Roid writes: "I don't. I would rather have them fully vested in working and let the wealthy support government, particularly since income inequality is not merely an accident but an affirmative economic policy of ours for the purpose of maintaining profits and curbing inflation." It's a shame that today a minimum wage worker with kids has more discretionary cash than a $60K earner with kids. But in fact that do. That is a distortion aided by government good intentions gone bad. I've asked before, and I'll ask again: Find a country at a similar stage of development as the US that provides lavish benefits for its citizens without dramatically bigger taxes on the middle class and working middle class. Can you find this? If you can't, then your assertion is just words.

- seattleeng

February 2, 2011 at 9:23am

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Seattle, You seem to think that the problems of distribution in America are due to out-of-wedlock teens. What drugs are you on? This is a pathetic repeat of Reagan's welfare queen nonsense. It has only the slightest little bit to due with US income distribution. And, in passing, why do we have such relatively high teen birth rate other than the wacko anti sex-ed, anti-contraception, anti-abortions lunacy of the right wing of which you are a card-carrying member? Then you utter this inanity: "I've asked before, and I'll ask again: Find a country at a similar stage of development as the US that provides lavish benefits for its citizens without dramatically bigger taxes on the middle class and working middle class." I hate to break the news to you, seattle, but there is no such thing as another country at a similar stage of development as the US. This is by far the wealthiest nation in the history of the world. Thus, your constant effort to explain how we MUST (according to you) finance our government by reference to other countries is nonsense. Whatever taxes they must pay for balance proves absolutely nothing about what we must pay for balance because we have more national income. Period. The way you figure out what our tax burden must be is to look at our national income and how our national income, not their national income, is distributed. I have done this for you a couple of times, but you cannot get it through you head and insist on invoking European precedents as if they proved something relevant. They don't. Particularly as we are already producing what we are spending. Thus, we have only a financial mismatch between consumption and income, not a lack of national income. Come on, seattle. This is really pretty elementary.

- roidubouloi

February 2, 2011 at 1:03pm

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And how can you possibly imagine that a minimum-wage worker making on the order of $16,000 a year has more disposable income than someone earning $60,000 a year? Is there no limit to the nonsense you will make up (or read on some right-wing website and repeat here uncritically)?

- roidubouloi

February 2, 2011 at 1:05pm

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