THE PERMANENT CAMPAIGN DECEMBER 22, 2010
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The last few months of 2010 have been illuminating when it comes to the priorities of the Republican Party. By jumping at the Obama-McConnell tax deal, Republicans underscored the fact that protecting the marginal tax rates of high earners—not reducing the federal deficit, and not even denying Obama legislative success—is their party’s primary focus at the federal level. It says something that most conservatives who opposed the tax deal did so on the grounds that it was not permanent, or that it did not completely eliminate the estate tax. As ever, to paraphrase Dick Cheney, Republicans seem to think deficits don’t matter.
Yet that’s not the half of it. For a true litmus test of the lengths Republicans will and will not go to in order defend the incomes of the very rich, you have to look to the states, where budget deficits are generally not allowed. There, a new crop of Republican governors and lawmakers—huge numbers of which rode to power on the Tea Party wave—are focused not just on preserving upper-income tax cuts, but actually cutting taxes for the rich while slashing services and raising taxes on the poor and middle class. All this is happening at a crucial time, since the most dire fiscal conditions in decades are about get vastly worse, as federal stimulus dollars run out.
One of the GOP’s biggest 2010 rock stars, Governor-elect Nikki Haley of South Carolina, is an especially instructive example: During the campaign, Haley came out for abolition of the state corporate-income tax. Facing an enormous and chronic state budget shortfall, she breezily suggested that her tax cut might be paid for by eliminating a recently enacted state sales-tax exemption for food purchases, because the exemption “didn’t create one job.” This statement, which seems to imply that eating is an economically useless activity, takes conservative disdain for consumption as a growth generator to new heights. Instead of trying to keep food on South Carolinians’ tables and consumer demand high, Haley is betting on a tax code tilted to “producers” and “job creators.” As Haley spokesman Rob Godfrey recently explained:
We are a right-to-work state. We keep the unions out. And if we become a no-corporate-income-tax state as well, we will become a magnet for businesses to come to South Carolina. And that means more jobs for our citizens, more contracts for our small businesses, and more growth for our economy.
It’s hard to imagine a more enthusiastic endorsement of the old moonlight-and-magnolias approach of making lower business costs—including taxes, wages, and all those inconvenient regulations aimed at protecting the workforce or the environment—the sole strategy for economic development, at the expense of other public and private goods.
A similar thing is happening next door in Georgia, where outgoing Republican Governor Sonny Perdue created a heavily loaded fiscal commission tasked with addressing the state’s massive budget gap. (Incoming Republican Governor Nathan Deal is expected to embrace the report.) It suggests “redirecting the state’s taxing emphasis to what people buy and the services they use rather than the income they earn,” meaning adoption of a higher sales tax, paired with corporate and upper-income tax cuts and cuts in government services, and speaks somewhat dismissively of “advocates for the poor and elderly [who] stress that those groups spend a higher percentage of their income on goods and services that would be taxed under the Republicans’ scenario.” And Florida’s state budget situation may be even worse than South Carolina’s and Georgia’s—education costs for Haitian refugees are a major new problem—but Governor-elect Rick Scott is committed to both the elimination of corporate taxes and major reductions in property taxes that support local schools.
This trend is by no means confined to the South. Newly elected Michigan Governor Rick Snyder is insistently pushing for reductions in business taxes, which would double the state’s current $1.5 billion budget shortfall. In Pennsylvania, Governor-elect Tom Corbett is determined to cut corporate taxes by nearly one-third while increasing business deductions. Wisconsin Governor-elect Scott Walker, who made headlines by turning down $810 million in federal money for a high-speed rail connection between Milwaukee and Madison, has pledged to cut corporate taxes for smaller employers, and also wants to give a state tax break that will encourage people to snap up those hardy conservative pet rocks, health savings accounts. Walker is facing a two-year, $3 billion budget shortfall. Ohio Governor-elect John Kasich, who, like Walker, turned down federal high-speed rail money, is pushing to restore a previously delayed state income-tax cut, even though his two-year budget shortfall is about $8 billion.
This is what Americans got when they voted for the Tea Party. When the last comparable wave of state-level Republicans took office, in 1994, it happened to coincide with the beginning of the long boom of the ‘90s, which allowed GOP officeholders to make popular tax cuts without reducing popular spending. Not this time: Across the country, Republicans are assuring that budget adjustments will be real and painful for everybody but the rich.
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47 comments
They are making no secret of being on the side of the big bosses. Nikki Haley's nominee for the Director of Labor, Licensing and Regulation is a union busting attorney who is determined to keep unions out of the Boeing plant outside of Charleston. http://seattletimes.nwsource.com/html/businesstechnology/2013625654_apscscgovernor.html
- tsquared
December 22, 2010 at 1:35am
I could remind that Governor-elect Scott lead the giant hospital corporation Columbia as it stole hundreds of millions of dollars in a Medicare/Medicaid fraud scheme. But everybody already knows that. While the St. Petersburg Times designates Scott's opponent, Alex Sink, as having run the worst campaign in 2010 because she was defeated by a known thief, I suggest that Scott prevailed because of this history not in spite of it. After all, if he can steal from the federal government with impunity, what devious and highly profitable schemes can he direct on behalf of Florida as its Governor.
- rayward
December 22, 2010 at 6:48am
I read Ann Rand as a fourteen year old. It's hard to believe that their bare adults who find her novels to be inspiring road maps to a prosperous future. With growing inequalities they are playing with dynamite.
- paskunac
December 22, 2010 at 8:09am
I say good to all of this, let them destroy the poor and middle class, it will destroy these nutjobs for a long time. Without a well educated and competent worker class why would any business go to these places, if they want people who have a better educated work force who will work for peanuts they will go to China.
- blackton
December 22, 2010 at 9:02am
Michigan's new governor is an interesting case: his tax cut proposal arises far more from his corporate life as one-time CEO of Gateway than from any allegiance to the Tea Party. If anything, he was widely derided by the true believers of the TP set. Moreover, recent appointments suggest that Michigan's policies may be more rational than campaign rhetoric would suggest. But then again, we are speaking of Republicans in the Legislature, and there -- well, whackiness reigns.
- riley
December 22, 2010 at 10:08am
Well, I don't know what happens if the middle class is so diminished and crushed that they lose hope. Will they rise up and do something, or become so alienated they either don't vote or watch Fox News and vote against their interests? Does anyone happen to know?
- Walpole
December 22, 2010 at 10:26am
Re MI, business people (men) conflate what they regard as a personally annoying set of requirements that make their jobs more challenging with business necessity, good economic regulation, and so forth. In truth, jobs all have unpleasant features to be addressed and handled. But businessmen think their personal convenience is holy grail.
- Walpole
December 22, 2010 at 10:28am
"There, a new crop of Republican governors and lawmakers—huge numbers of which rode to power on the Tea Party wave—are focused not just on preserving upper-income tax cuts, but actually cutting taxes for the rich while slashing services and raising taxes on the poor and middle class." If only it were true. Ayn Rand would have called the Republicans, "socialists" (and I agree). We have a long, LONG, way to go before we even approach a libertarian (or objectivist) society. In other words, these new Republican governors are finally focused on stealing (even if it is "legal" it is still "theft") less money from the productive class to subsidize the parasitic class (including welfare recipients and almost all government workers). Never a fan of either major party, I applaud them for finally waking up. However, despite the whining of the democratic socialists (i.e., liberals and progressives), I still do not trust the Republicans; they have campaigned like Libertarians and governed like Democrats for too long. It will take many years, if ever, before this libertarian trusts them. "Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes..." — Alan Greenspan
- dalefogden
December 22, 2010 at 11:09am
Ah yes...we are now seeing the actual activation of Randinomics. That new breed of fiscal narcissism that pretends not one iota that Randinomic policies benefit only one type of constituent. The self-professed and self-made (cough, inherited wealth, cough) John Galts of America. The Randinomic tax policy slants towards the top income "earners" and "job creators" because those lowly, working wage earner middle class and working poor Americans haven't done enough boot-strap lifting of themselves to warrant a generous government handout in the name of self-determination. The era of Randinomics is here. Where even trickle down economics is still too much of a welfare give away to the undeserving, wage leeches we call the middle class and working poor.
- singlspeed
December 22, 2010 at 11:22am
Coming from Singapore I am genuinely puzzled by the general disdain for a consumption tax system amongst American progressives. Please hear me out. I agree that the extension of Bush tax cuts for the wealthy and estate tax reductions are egregious and purely indulgent since they do little if any in the way of job creation. But most of what Ed Kilgore cites are business tax reductions--from my experience, they work. Tremendously. Here in Singapore the first legislative measure that was rolled out to tackle the recession in '09 was what we called a jobs credit scheme--the govt paid money to employers (employers) if they maintained payroll, as evidenced by payroll tax contributions. We managed to suppress the unemployment rate and came roaring back with est. 13% GDP growth this year. Our corporate income tax rates at 17% are the second lowest after Hong Kong. We implement a 7% goods and services tax on all consumption. It is only by adopting a consumption-based tax system have we been able to keep income taxes low for most Singaporeans--we pay 0% on the first 20k of income and thereafter its 3.5% for the lowest bracket (20-30k) and 20% at the highest (320k). Isn't that desirable from a progressive standpoint? I'm with you guys on most issues (including healthcare) but on this one, I'm stumped.
- belegoster
December 22, 2010 at 12:00pm
belegoster. Good points. Lets occupy Singapore next week. They haven't the army or military expenditures to resist. About time we got some real return out of our large military budget. Occupying much of the Arabian peninsula should come next. Agreed?
- drofnats1
December 22, 2010 at 12:44pm
Thanks dalefogden I haven't heard anything that hilarious in awhile, you must be a riot at the student council meetings.
- Pnaut
December 22, 2010 at 12:57pm
Well, the people of these states voted for Supply-Side Economics and States-Rights and lower taxes (even though they've already GOT historically low taxation). It only seems fair that they'll now have to live with the implementation of those philosophies, then have to live with the results of those implementations. If that means that the divide between the rich and poor becomes even larger, that schools and libraries are cut or closed, well at least they don't have the Federal Government dictating policy. You can't trust the Federal Government you know. The resulting back-lash could be very educational.
- AllanL5
December 22, 2010 at 1:01pm
@drofnats Thanks for the reply, but I will patiently wait for someone who will genuinely help me out on my confusion.
- belegoster
December 22, 2010 at 1:08pm
belegoster - What drofnats is saying is that a consumption tax won't capture sufficient revenue for the US's needs. There are a number of factors here including the US's considerably higher military spending (which yes, could go down for the same net effect) and the concentration of wealth in the US. If a consumption tax would capture high-level expenditure at the level needed, then that spending should also have stimulated the economy in a way which that we did not observe in the last decade. My understanding of Australia's conversion to a GST about a decade ago is that it really didn't change the revenue picture (or even recapture much of the black economy) and is obviously regressive. Places like Singapore (while marvelously successful through clever policy, don't get me wrong) basically do not pay for any of the external costs of their success through trade, security or the stability in the price of or access to oil. Instead, this is almost exclusively paid for by the US through the US Navy and its other military arms. If you scoff at this, have a look at what happens where the US either isn't interested or isn't willing to intercede militarily (e.g. the Balkans pre-intervention or Georgia). The stability we have enjoyed for so long that we think of it as normal is most definitely not from a historical perspective.
- Nari224
December 22, 2010 at 1:37pm
Ah, yes. Objectivism: or, Stalinism of the Right. (That's the short version of my critique.) "Christian Objectivism:" obscenity masquerading as oxymoron. (The short critique, much aggravated.) I admit it, I cannot be objective concerning Objectivism. It could top my top ten don't get me started list. Depends on my mood.
- Tgossard
December 22, 2010 at 1:50pm
The article writes: "For a true litmus test of the lengths Republicans will and will not go to in order defend the incomes of the very rich..." As long as you guys think republican positions are for the wealthy, you will continue to fail to grasp all this. In fact, republicans believe their positions are pro-business, which in turn results in a better economy for everyone. I know it's more fun to claim republicans are for the rich, but they really aren't. The data just doesn't support that. You all are aware that the wealthy and ultra-wealthy voted for Obama over McCain this last election, right? And you are all aware that wall street bonuses have been higher under Obama than Bush, right? And you are aware that the gap between wealthy and middle class grew faster under Clinton than Bush, right? Seriously, if the republicans were for the wealthy, wouldn't you expect for the wealthy to overwhelmingly vote for McCain, and woudln't you expect wealthy income under Bush would have skyrocketed at the expense of the middle class? But neither happened.
- seattleeng
December 22, 2010 at 2:02pm
No, the Republicans are for big business. As a result, they want low-taxes, low regulation, no labor laws, no social safety net (makes labor uppity and expensive, bad for business. Besides, Social Darwinism says if you're rich, you're smart. Why would you need a safety-net?). And since they percieve that it's the wealthy that create businesses, they'll favor taxes that favor the wealthy to help them do big business. The fact that most of this has proven to create draconian 50 year business cycles, in which lots of people starve, escapes them. The fact that the New Deal programs have served to prevent draconian business cycles, also escapes them. They're like manic-depressives, who want to really enjoy the manic phase, while denying the depressive phase "is really that bad". Well, in the Tea-Party states, they're about to find out how bad it can get.
- AllanL5
December 22, 2010 at 3:28pm
Seattleeng - Cite some sources, for crissake! - sounds like blather, but try to back it up with facts. Re: Clinton - strip the party labels and look at the policies, and he was mainstream repukelican, before they went even further into the deep end of republiscumism.
- bonsaibush
December 22, 2010 at 3:37pm
@Nari Thank you for the clear response. If I get you correctly, what you're saying is that the US is in fact subsidizing the low tax rates of countries like Singapore through her insurance of global security. I'm sympathetic to that, as a matter of fact our leaders place the highest value on ensuring a central American presence in the region (much to the consternation of our neighbours). But if the problem is one of ensuring adequate revenue I think you're prematurely writing off the capacity of a broader tax base to meet such needs. The Rivlin-Domenici and fiscal commission deficit plans both give a nod to such a concept-- by raising various excise taxes on consumption while simultaneously lowering income tax rates across the board. Im trying very hard not to sound like I'm hurling pejoratives but what I'm seeing is that American progressives tend to view revenue demands in isolation. It obscures the problem of its sustainability-- the gargantuan deficits of Obama's first half term for which he gets mercilessly blamed for are really simply a collapse of tax revenues (not increased spending), while the fastest way to close the deficit is to grow the economy--which restores such revenues. Furthermore, when there is instinctive opposition to revisions of marginal rates then special interests attack it by the backdoor through the kinds of crazy tax expenditures which I think are what's really ludicrous. Why not consider an economy-first approach to thinking about revenue--it is possible to have a pro-economy tax code which is not egregiously and specifically favouring the rich. Low across the board rates, progressive, consumption tax to make up shortfall, low burden on business. No loopholes.
- belegoster
December 22, 2010 at 4:54pm
Clinton was the most successful president the Democrats produced from FDR to present. A little deference is in order bonsai. Both Republicans and Democrats are for Rich People, Big Business, and expanding government. There's some regular bickering about how best to secure these interests, but for the most part we've had a single-party Republicrat state since WWII that has agreed on the fundamentals. It's in the interest of the parties, their main constituent blocs, and above all the media, to make this look like a never-ending duel between the White Hats and the Black Hats, but the evidence is plain. There have been no significant US policies foreign or domestic that were pursued without bi-partisan support since the New Deal, and maybe since the Civil War.
- Robert Powell
December 22, 2010 at 4:57pm
Actually, Robert, one could argue that Lyndon Johnson was more successful than Clinton, at least with regard to domestic programs - the Civil Rights Act and the passage of Medicare. That said, i don't want to appear to impugn Clinton, so consider this my deferential act of contrition.
- bonsaibush
December 22, 2010 at 5:18pm
Remember the bridge to the 21st century? This is the beginning of the tunnel to the 19th (a tunnel that Chris Christie will likely support).
- bdballard
December 22, 2010 at 6:12pm
These states might to read what's happening in Tunisia. Could be a wake up call although I doubt it. Somehow the ability to empathize doesn't strike one as a strong point of the Tea Party Ayn Rand Republicans. Alas.
- Sophia
December 22, 2010 at 8:36pm
Bonsaid brush says "Seattleeng - Cite some sources, for crissake! " Obama won 52% of voters making more than $200K in the WSJ link below. Lots more inside that link. Summary: Obama dominated among poor and wealthy voters. The middle class split. We've debated the gains made by the wealthy under Clinton and Bush at length in link 2, and how the middle class had more money under Bush... 1) http://blogs.wsj.com/wealth/2008/11/05/why-the-wealthy-voted-for-obama/ 2) http://www.tnr.com/blog/jonathan-chait/77774/how-tax-cuts-dupe-conservatives-case-study dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.dont eat the link.
- seattleeng
December 22, 2010 at 8:53pm
Concentration of wealth is a legitimate concern as far as it goes--Kevin Phillips wrote a whole book denouncing his party's actions that have exacerbated the problem. But as problems go it's nowhere near our biggest. In the first place, we live in the richest society ever. People classified as "poor" in the US would be middle class in most other places, with cable tv, air-conditioning, cars, and most importantly real opportunities to get educated and move up. Not as good as it should be, but still a far cry from most other places. I live in a country now that has less than half the average income of the US, grossly overloaded public services, collapsing infrastructure, an awful housing shortage, gas is about $6 a gallon--and most folks feel they've never had it so good having suffered through nearly a half-century under a regime that worked diligently to distribute the wealth. In the second place, our current situation isn't particular new. In 2001 the "top 1%" accounted for 33.4% of the income; in 1998 it was 38.1%; in 1969 31.1%; in 1939 36.4%; and in 1922 the figure was 36.7%. This is not a crisis. Thanks to bonsaibush for consideration. LBJ was a legislative genius, and he deserves great credit for the civil rights victories. But this was a train that had been running for some time and was inevitably going to reach the station because that was the overwhelming will of the US public. Truman had already integrated the Armed Forces; Eisenhower sent troops to Little Rock to enforce Brown vs Bd of Ed; and LBJ's legislation depended critically on Republicans to pass. On the other hand, his escalation in Vietnam killed about four million people (including nearly 60,000 Americans), and destroyed both our economy and our standing in the world for a decade. On balance there's no way he could be described as a successful president. My definition for that is two consecutive terms that leave the country better off than he found it. Clinton qualifies; LBJ doesn't.
- Robert Powell
December 23, 2010 at 4:07am
seattleeng; viewed the link. Of course since the basis for that claim is no longer linked in the aricle (if it ever was) this is just more WSJ editorilizing. BUT, hypothetically, if the information they are providing is in fact reflective of reality, you are still off-base. You state " if the republicans were for the wealthy, wouldn't you expect for the wealthy to overwhelmingly vote for McCain, and wouldn't you expect wealthy income under Bush would have skyrocketed at the expense of the middle class? But neither happened." To your first point just because the the wealthy voted for Obama does not mean the republicans are NOT for the wealthy, only that the wealthy perceive Obama as providing sufficient benefit for them to not vote for McCain and then vote for Obama. To your second point, I would disagree. I am certain that both the income AND the wealth of the wealthy under Bush did increase RELATIVE to the middle class. At a minimum this claim is simply lacking any support. In addition, you ignore the matter of a lag between policy implementation and results. I am not trying to describe the facts (who knows what they are, certainly not me) only your failure to address it.
- e065702
December 23, 2010 at 8:21am
Fair enough -- both parties want business in America to succeed. FDR said his regulations and reforms were to SAVE the free market, not destroy it. The big difference is Democrats want business to succeed on a level playing field, through ethical decision making, in a way which doesn't damage the people or the environment. The Republicans just want the stock market to go up and the wealthy to keep their gains. Changing the rules to reduce regulation, lower the price of labor, and even favor lobbyists is the easiest way to get there. After all, except for the Great Depression and the CDO crisis, what could go wrong?
- AllanL5
December 23, 2010 at 9:58am
e065702 writes: "To your first point just because the the wealthy voted for Obama does not mean the republicans are NOT for the wealthy, only that the wealthy perceive Obama as providing sufficient benefit for them to not vote for McCain and then vote for Obama." Alas, can we just agree that the wealthy voted for Obama over McCain and leave it at that? That alone kind of nullifies one of the articles key assertions. And then writes: "At a minimum this claim is simply lacking any support. In addition, you ignore the matter of a lag between policy implementation and results" Both Bush and Clinton made their major economic policy changes early in their presidency. Both served 8 years. That gives around 6 years of baking time. If you want to argue their policy adjustments needed a longer baking time than 6 years, then I guess debating ANY presidential policy adjustment would be impossible.
- seattleeng
December 23, 2010 at 12:36pm
AllanL5 writes: "The big difference is Democrats want business to succeed on a level playing field, through ethical decision making, in a way which doesn't damage the people or the environment." But this is just your wishful thinking, right? For every example of this happening due to republican policy you can cite, I can find a counter example of it happening due to dem policy. Ergo, your assertion means nothing.
- seattleeng
December 23, 2010 at 1:39pm
Don't know where Robert Powell gets his numbers, but they are wrong. 1980, the top 1% had 8.5% of AGI and the top 5% had 21%. And adjusted gross income is something less than a comprehensive measure of economic income at the top end. There are no forms of tax shelter for wage-earners. 2008, the top 1% had 20% of AGI (down from 23% on 2007 due to recession impact on gains) and the top 5% had 35%. This IS a crisis by any rational standard. Meanwhile, the average tax rate of the top 1% declined from 34.5% in 1980 to 23.3% in 2008. For the top 5%, the average tax rate declined from 26.9% to 20.7% in the same period. http://www.taxfoundation.org/news/show/250.html The shift in income, which is disastrous enough for collective well-being and for the demand that fuels the economy, has been exacerbated by the increasing regressivity of incomes taxes. This is why we have a fiscal problem. This is why we have an unemployment problem. And STILL the nutjobs keep insisting that what we need is more of the disastrous, flat-earth fiscal, tax, and trade policies that got us here. __________________ Anyone who insists that virtually the sole policy agenda of the Republican party is anything other than more money for the wealthiest is simply spouting right-wing propaganda. seattle is just blustering, as usual. He can never back up his claims with relevant facts and this is no exception. The issue is not who votes for whom, but what the policies of the two parties are. On this, the matter is perfectly clear. If seattle wants to believe the fairy tale that the make the rich richer agenda is somehow meant for the greater good, that is his prerogative. The numbers tell a very different story of what Randian Reaganomics has done to our country. I have no idea why Powell keeps insisting that Clinton was a huge legislative and policy success. He raised taxes which, to no surprise of anyone who can add and subtract, generated virtually the first post-war budget surpluses and somehow is twisted here to argue against Clinton-era tax rates. He achieved free-trade gains that have cost American workers mightily because they never considered seriously the distributive aspects of competing with Chinese workers who make a fraction of the wage. He bears a great deal of the responsibility for cutting the regulation of financial institutions that contributed as much as anything to the epic bust of 2008. He put curbs on welfare. The rest of his legislative success is so forgettable that I have forgotten it. With the exception of reversing the worst of the Reagan-Bush tax cuts, he seems to have followed a largely Republican agenda, followed by a a radical Republican agenda under Bush II. His leftwing policy push for health care reform was a bust and cost the Democrats the Congress the last time. And look what we have to show for it.
- roidubouloi
December 24, 2010 at 12:04am
Don't know where Robert Powell gets his numbers, but they are wrong. 1980, the top 1% had 8.5% of AGI and the top 5% had 21%. And adjusted gross income is something less than a comprehensive measure of economic income at the top end. There are no forms of tax shelter for wage-earners. 2008, the top 1% had 20% of AGI (down from 23% on 2007 due to recession impact on gains) and the top 5% had 35%. This IS a crisis by any rational standard. The argument that the American middle class and even the poor are still better off than Zimbabwe should not move any American to other than disgust. This same argument was made in defense of apartheid too -- that black South Africans were still the best off on the continent. So what? Meanwhile, the average tax rate of the top 1% declined from 34.5% in 1980 to 23.3% in 2008. For the top 5%, the average tax rate declined from 26.9% to 20.7% in the same period. This has further exacerbated the income shift that results in larger measure from our trade, labor, monetary, and fiscal policies. [I hate when it eats the post. I hate when it eats the post. I hate when it eats the post. I hate when it eats the post. I hate when it eats the post. I hate when it eats the post. I hate when it eats the post. I hate when it eats the post. I hate when it eats the post. I hate when it eats the post. I hate when it eats the post. I hate when it eats the post.] http://www.taxfoundation.org/news/show/250.html The shift in income, which is disastrous enough for collective well-being and for the demand that fuels the economy, has been exacerbated by the increasing regressivity of incomes taxes. This is why we have a fiscal problem. This is why we have an unemployment problem. And STILL the nutjobs keep insisting that what we need is more of the disastrous, flat-earth fiscal, tax, and trade policies that got us here. __________________ Anyone who insists that virtually the sole policy agenda of the Republican party is anything other than more money for the wealthiest is simply spouting right-wing propaganda. seattle is just blustering, as usual. He can never back up his claims with relevant facts and this is no exception. The issue is not who votes for whom, but what the policies of the two parties are. On this, the matter is perfectly clear. If seattle wants to believe the fairy tale that the make the rich richer agenda is somehow meant for the greater good, that is his prerogative. The numbers tell a very different story of what Randian Reaganomics has done to our country. I have no idea why Powell keeps insisting that Clinton was a huge legislative and policy success. He raised taxes which, to no surprise of anyone who can add and subtract, generated virtually the first post-war budget surpluses and somehow is twisted here to argue against Clinton-era tax rates. He achieved free-trade gains that have cost American workers mightily because they never considered seriously the distributive aspects of competing with Chinese workers who make a fraction of the wage. He bears a great deal of the responsibility for cutting the regulation of financial institutions that contributed as much as anything to the epic bust of 2008. He put curbs on welfare. The rest of his legislative success is so forgettable that I have forgotten it. With the exception of reversing the worst of the Reagan-Bush tax cuts, he seems to have followed a largely Republican agenda, followed by a a radical Republican agenda under Bush II. His leftwing policy push for health care reform was a bust and cost the Democrats the Congress the last time. And look what we have to show for it.
- roidubouloi
December 24, 2010 at 12:08am
I love dalefoggedin's quote from Greenspan, the very Randian nutjob who, more than any other single individual who fathered the economic disaster of 2008, encourging and indeed enabling the parasitic financial class to prey upon working people, stealing there nominal income and dewtroying their wealth and purchasing power. Naturally, foggedin approves. Wealth, including capital, is ultimately the product of labor, foggedin. You adore the plutocratic class while you despise working people in the name of a truly assinine theory of economics that brings nothing but disaster in its train. All libertarians should be moved to Wyoming and a 60 foot wall constructed to keep them in there. Once gathered together, they should be left alone to be productive, generating vast wealth through objectivism without lifting a finger. My prediction is it would take them less than a decade, if they survived at all, to reproduce a slave society characterized by extreme savagery. They would claim that the productive are merely keeping the parasites in line.
- roidubouloi
December 24, 2010 at 2:11pm
seattleeng: "Alas, can we just agree that the wealthy voted for Obama over McCain and leave it at that?" No, we can't, because you don't define "wealthy" and "voted for." If we look at those making above $100,000, which is twice the median household income, then McCain actually held a one point advantage. http://pewresearch.org/pubs/1023/exit-poll-analysis-2008. Your link says that those making above $200,000 broke for Obama 52-46, but that's just in line with the total national numbers. Is getting a bare majority of a group grounds for making definitive statements about the political proclivities of members of that group? "In fact, republicans believe their positions are pro-business, which in turn results in a better economy for everyone." I believe they believe it, but I don't think the data supports them. Just compare the 1990s (very good growth, even excluding the tech bubble) to the 2000s (sluggish growth, even excluding the fiscal collapse). But they continue to believe it despite all the evidence to the contrary. Businesses said give us low taxes, easy credit, and less regulation, and watch the economy boom. Well, they got that under W, and we had anemic growth with whatever gains there were going mostly to the wealthy, and then the economy did indeed go boom. But hey, let's not let the facts get in the way of a good theory.
- dsimon
December 24, 2010 at 2:28pm
We could use Obama's definition of wealthy, which is $250K, and given your data point that shows >$100K went for McCain, and my linked data point that shows >$200K went for Obama, we know that >$250K went even more solidly for Obama. There were more regulations under Bush than Clinton. I don't think you can make the case of decreased regulation under Bush. Sarbox alone was a think chunk of regulation. Recall that was to prevent another Enron and Global Crossing (and countless others), which happened on Clinton's watch. And if low taxes were the cause of the economy going 'boom', then Obama just signed up for the most foolish thing he could think of. The fact is, Obama (and Clinton) both know that low taxes will rev the economy, and both know the economy must be humming for Obama to get re-elected. We also know that Obama has passed nothing of substance to repair the structural issues since the meltdown, so easy credit is still out there for just about anyone to grab. So, if low taxes + easy credit will kill the economy, then Obama just voted to kill it. Right?
- seattleeng
December 26, 2010 at 2:35am
No one, and certainly not Obama, is going to kill this economy. It's fundamentally strong and likely to get stronger over the next few quarters. My numbers on wealth (which is different from adjusted gross income) are good, and easily verifiable. Be my guest, it's not rocket science. Demand is not going to be a line item of the federal budget, and will come back a bit slowly this time but steadily and just in time for 2012. Dems should be optimistic and opportunistic rather than confrontational and wonkish.
- Robert Powell
December 26, 2010 at 4:52pm
"And if low taxes were the cause of the economy going 'boom', then Obama just signed up for the most foolish thing he could think of." You see, seattle, you just don't understand the difference between deficits in a full-employment economy, as under Bush, which cause the economy to go bust, and deficits in a still slack-employment economy, that help to stimulate demand when demand is insufficient for full employment. That's right, Obama has done nothing to repair the structural deficits created by Bush (well, not nothing, he has slowed the growth in a variety of ways). He could have made a start, but the Republicans wouldn't allow that. And, yes, if the economy bounces back and he does not raise taxes to pay the cost of government, probably impossible with Republicans in control of the House and still blockading the Senate, the economy will again go bust. You know nothing, you learn nothing. You just repeat your libertarian dogma endlessly. __________________ Powell, I have already cited a reliable source to show that your numbers are trash. You offer nothing to back them up. If its not rocket science, show us you can support your claims. Otherwise, a sense of honesty should oblige you to desist from making them even if you cannot bring yourself to admit error.
- roidubouloi
December 27, 2010 at 1:49am
Okay roi, here's the link: http://sociology.ucsc.edu/whorulesamerica/power/wealth.html Scroll down about halfway through the article for the chart that shows stats since 1922. You'll see that the numbers I quoted are precisely accurate. Perhaps the source of your confusion is the difference between income and wealth?
- Robert Powell
December 27, 2010 at 4:16am
With the quibbling over numbers hopefully behind us, perhaps I should re-state my basic argument: recent trends in wealth concentration are a problem as noted by basically everyone, including prominent Republicans. But a "crisis" about to destroy the economy? Hardly. As illustrated in the Domhoff article "numerous studies show that wealth... has been extremely concentrated throughout US history". His table 3 shows the relevant numbers going back to 1922, but he notes studies showing this to be the case much earlier too. I don't say this is ideal, but it hasn't prevented us from developing an economy that is a wonder and the envy of most of the world, with more wealth distributed further down the class scale than just about anywhere, any time. Obviously I'm not comparing our society with that of Zimbabwe. This is the sort of hysterical rhetoric that also suggests plutocrats are currently taking the food out of the mouths of babes and throwing old people into the street. It may be popular in undergraduate dorm room debates, but is really out of place in an adult discussion of economic policy options.
- Robert Powell
December 27, 2010 at 4:57am
I understand the difference between wealth and income, but you don't understand the article you cite to and you misquoted its numbers to boot. You said: "In the second place, our current situation isn't particular new. In 2001 the "top 1%" accounted for 33.4% of the income; in 1998 it was 38.1%; in 1969 31.1%; in 1939 36.4%; and in 1922 the figure was 36.7%. This is not a crisis." These figures, assuming them to be correct, are identified by the article as the percentage of "wealth." You incorrectly identified them as the percentage of income, that is income share. Capital receives about 40% of the US income share. Thus, its distribution is far from the only factor affecting income distribution, and as we do not live in feudal England, income share and security are far more important to well-being than wealth. Here's what the article you link had to say about income distribution: "The rising concentration of income can be seen in a special New York Times analysis by David Cay Johnston of an Internal Revenue Service report on income in 2004. Although overall income had grown by 27% since 1979, 33% of the gains went to the top 1%. Meanwhile, the bottom 60% were making less: about 95 cents for each dollar they made in 1979. The next 20% - those between the 60th and 80th rungs of the income ladder -- made $1.02 for each dollar they earned in 1979. Furthermore, Johnston concludes that only the top 5% made significant gains ($1.53 for each 1979 dollar). Most amazing of all, the top 0.1% -- that's one-tenth of one percent -- had more combined pre-tax income than the poorest 120 million people (Johnston, 2006)." This is a crisis. You think it is only a crisis if it tanks the economy, which it has the potential to do at any time as it renders demand increasingly fragile leading to unsustainable levels of household debt that do in fact result in recession. But even if GDP were unaffected, it is a social crisis if you believe, as most Americans do, that this is to be a place of opportunity, social mobility, and relative equality. As for Zimbabwe, you are the one who insists that Americans should not be dissatisfied with this state of affairs because our poor are richer than many in the world. That is a discreditable, almost hysterical, argument of just the sort previously used to justify apartheid. It is, in a word, absurd. Here's what your article went on to say: "But the increase in what is going to the few at the top did not level off, even with all that. As of 2007, income inequality in the United States was at an all-time high for the past 95 years, with the top 0.01% -- that's one-hundredth of one percent -- receiving 6% of all U.S. wages, which is double what it was for that tiny slice in 2000; the top 10% received 49.7%, the highest since 1917 (Saez, 2009). However, in an analysis of 2008 tax returns for the top 0.2% -- that is, those whose income tax returns reported $1,000,000 or more in income (mostly from individuals, but nearly a third from couples) -- it was found that they received 13% of all income, down slightly from 16.1% in 2007 due to the decline in payoffs from financial assets (Norris, 2010). And the rate of increase is even higher for the very richest of the rich: the top 400 income earners in the United States. According to another analysis by Johnston (2010a), the average income of the top 400 tripled during the Clinton Administration and doubled during the first seven years of the Bush Administration. So by 2007, the top 400 averaged $344.8 million per person, up 31% from an average of $263.3 million just one year earlier. (For another recent revealing study by Johnston, read "Is Our Tax System Helping Us Create Wealth?"). How are these huge gains possible for the top 400? It's due to cuts in the tax rates on capital gains and dividends, which were down to a mere 15% in 2007 thanks to the tax cuts proposed by the Bush Administration and passed by Congress in 2003. Since almost 75% of the income for the top 400 comes from capital gains and dividends, it's not hard to see why tax cuts on income sources available to only a tiny percent of Americans mattered greatly for the high-earning few. Overall, the effective tax rate on high incomes fell by 7% during the Clinton presidency and 6% in the Bush era, so the top 400 had a tax rate of 20% or less in 2007, far lower than the marginal tax rate of 35% that the highest income earners (over $372,650) supposedly pay. It's also worth noting that only the first $106,800 of a person's income is taxed for Social Security purposes (as of 2010), so it would clearly be a boon to the Social Security Fund if everyone -- not just those making less than $106,800 -- paid the Social Security tax on their full incomes."
- roidubouloi
December 27, 2010 at 11:52am
This is how regressive our tax system has become in the face of rising inequality in pre-tax income, but for the libertarian/conservatives, even this is not enough. The income distribution figures (rather than wealth distribution) in the article you cite, are less comprehensive than what I linked, not splitting out the top 5% for example, and only span 1982 to 2006, but they are more or less in agreement with what I quoted above, 12.8% in 1982 and 21.3% in 2006 for the top 1%. I cannot imagine how you could dismiss this as a mere "quibble," but then libertarians think that the distribution achieved by the market comes from the Randian god and so it cannot be too unequal by their standards. It is what god intended. _____________ Bottom line, the article you link does not support your claims or arguments, but it supports mine rather nicely. Facts are facts.
- roidubouloi
December 27, 2010 at 12:00pm
I know the article provides support for your argument, which I disagree with only in degree. And I also acknowledge mixing "income" and "wealth" in my original comment. My bad. I think wealth is more relevant because it reflects power more accurately--income comes and goes, but wealth tends to persist. But the numbers are exactly as I reported. My point stands--exaggerated concentration of wealth is a Bad Thing and should be addressed within the limits of common sense and political reality. But the NYU study clearly shows that the current numbers don't represent a "crisis" so much as a more-or-less normal condition for better or worse. Addressing this problem requires recognition of both it's complexity and the political realities. You aren't going to get anywhere with American voters demanding that Washington be authorized to decide how to distribute our income by means of extorting taxes from the wealthy and dumping them into a black hole of the General Fund. This looks like waste and macroeconomic folly even to those in the bottom bracket. Because it is.
- Robert Powell
December 27, 2010 at 6:29pm
That is evasive, Robert. When we have a wealth tax, you can opine on the distribution of wealth. We tax income in a variety of ways. Hence what is relevant is the distribution of income. The current numbers do not in the slightest show our current condition to be "normal" as they show a huge increase in the income share going to the wealthiest. That is what people live on, their income. The notion that taxing income in a manner that mitigates this disparity is "extorting taxes from the wealthy and dumping them into the black hole of the General Fund" is pure propagandistic cant, without any factual or other basis. It bears no relationship whatsoever to any economic theory, of waste, of folly, or of anything else. It is just empty rhetoric. Propaganda without any effort to relate to the facts of the economy or society. You tried to make your point with numbers. You cannot because the numbers do not support you. You don't redeem it by waving your hands and trotting out the little set of libertarian hot button words.
- roidubouloi
December 28, 2010 at 1:56am
Okay roi. Let's forget about wealth and just concentrate on income. Since boosting the rate on income above $100,000 to 50% (which if I'm not mistaken is your current hobbyhorse on this subject) has about a zero-percent chance of being enacted by this or any likely future Congress, what is your alternative suggestion? This a sincere question, not a rhetorical one. In my view it is entirely possible, and given recent events bordering on likely, that Congress and the Administration will be able to agree on a combination of tax and entitlements reforms that will represent a major step forward in addressing our fiscal crisis. Cuts to programs and deductions that mostly benefit the top income brackets have the same effect as tax increases on them, but are much more politically viable. At the end of the day you have to accept that our system is based on compromise, and the practice of labeling your interlocutors as venal liars and their deeply-held beliefs propaganda is not an effective negotiating strategy. I believe the concentration of wealth is a more serious problem than current skews in the income numbers. The latter has an effect on the former, but as one of several factors and as recent events show, can be transitory. Long term I think addressing the growing obstacles to social mobility are more important than a few percentage points in the top rates one way or the other.
- Robert Powell
December 28, 2010 at 5:24am
My point about being able to raise all the revenue we need with a 50% tax for income above $100,000 is not that I think it likely -- although I do think it would be a huge boon to the country -- but to illustrate just how grossly skewed income is. Even the changes proposed to social security have only a minimal impact on the current deficit. Long-term solvency for social security, not a big problem, could be achieved by means-testing benefits and by subjecting the first $106,000 of investment income to the same taxes as earned income. Both would render the system noticeably less regressive. Tweaking health care is not going to make much of a difference. The problems are not with the government programs but with the structure of health care finance generally. As I have said, in the absence of cost controls, there is no possibility of getting the costs of health care down to an acceptable level and keeping them there. Any such system has been rejected by the Republicans and is off the table for the foreseeable future. But I would look to energy taxes to fund the health care system so that we can solve a couple of problems at once. That leaves the operating budget and the income tax. You can cut whatever the hell you want, I really don't care, as it is not material to the problem. Let them negotiate whatever cuts can be agreed upon so long as there is also agreement that, when they get up from the table having made the cuts, income tax rates will be high enough for a balance budget in a full-employment economy, not ten years from now, but now, as these agreements to grow our way out of the deficit are nonsense. They only perpetuate it. As to the rates, I would be satisfied to see us do away with all deductions and exceptions other than state income taxes and then set the rates so that the after-tax distribution of income is no more skewed than it was in 1980, before the huge rise in the income share of the wealthiest. This would barely affect the poor but would mean that the middle class would get a big boost relative to the top 5% who are garnering ever more of the income. That is a politically doable plan, but it requires some nerve. We are not going to solve the problem of social mobility without serious changes in our trade policy, so that we no longer run deficits, and in the way in which we finance education.
- roidubouloi
December 28, 2010 at 2:50pm
Not a bad take on what current income inequality is all about: http://www.the-american-interest.com/article-bd.cfm?piece=907 Makes a good analysis of how it got this way, and especially on why the politics are as they are when one tries to mobilize voters against it.
- Robert Powell
December 29, 2010 at 3:03pm
Really? Seldom have a read so much tendentious nonsense in one place.
- roidubouloi
December 30, 2010 at 8:42am