Or to put it simply, do we or don't we want to soak the rich.

... or another way -do we want those who can afford to pay taxes pay them so we can protect ourselves and prevent a repeat of the Katrina disaster and have health care for all, etc.

"What I have in mind is the extent to which the salad days of liberalism, roughly the middle of the twentieth century, were fueled by a policy dynamic that, like the Bush tax cuts, was pretty highly non-transparent -- so-called "bracket creep."

From 1951 to 1996, total federal receipts varied in a very narrow band from 16% to 19% of GDP.

And there was no consistent upward pattern in the 1951 to 1981 era, which would be necessary for an even a minimal version of Matt's bracket creep theory to be true.

(Tangentially, it's interesting that we've broken out of that band both to the upside and downside since 1996.  Perhaps that is an illustration of the increasing political polarization in Washington.)

Or do we forge new rules and new technologies in service of some improvement over the old ways? 

It seems pretty clear to me that we are going to have to find a way to reverse the trend toward greater income inequality if we are to have a functioning economy (and democracy).  I would not like to see the Dems adopt the R's strategies (since most are dishonest at the core), but rather come up with some better ideas.  But I don't see why we can't shore up Social Security (it's not that bad) and have some real healthcare reform.  Having everyone be at the mercy of the market in these areas is grossly unfair to people who didn't grow up privileged.

I know what Matt was addressing...I just wasn't going to let the "soak the rich" comment slide.

If we don't play by the new rules we are fools and will be perpetual losers at the polls.  I have long been an advocate of "when in Rome do as the Romans do".  When (or maybe if) we ever regain the power we should use it to our advantage instead of changing it back to the old way...

I have a problem with the "do we want to soak the rich?" comment even though it rings true in my gut. The question we should ask is do we want the rich to pay for the services the federal government provides them. A good example is the WalMart family and Clinton opening up China. How much is it worth to them on a personal wealth level to have access to the Chinese labor for their suppliers? How much is it worth to them to be able to ship all there products safely back to the US and distribute them on publicly funded highways? How much is it worth to them to have a safe and democratic political system in the counties to which they hope to expand? The federal government is an integral part of forming capital for these people which is not a bad thing, but they shouldn't expect their workers to fund the infrastructure. Fairness dictates that they should pay high federal taxes as they're the ones who benefit from the large majority of federal programs. The debate is much different on the state level and could be argued in favor of a broader tax base being more equitable as more of the benefits should go to all citizens. The reason the system doesn't work as well as it should is the historical problem of having a federal system with very flawed state actions (segregation, slavery etc.) that need to be corrected by the feds. I think its pretty safe to say that those days are in the past. Now that some states like Illinois are beginning to provide things like universal healthcare maybe we will begin to see some impetus for change. The federal system is pretty broken so maybe it's time for progressive states to step up and not rely as much on the feds. There was a post the other day about how 70% of the senate represents something like 20% of the population (I can't remember the exact figures) many of whom are conservative republicans. (I think this was a definite strategy on the right's part to use the senate to control congressional spending on social programs.) Well if that's what they want then I think California should set the standard and start providing retirement benefits to all its citizens, universal healthcare, and continue with the clean air standards. As this starts to take hold I think the right and the feds will come crawling back with compromises.

And there was no consistent upward pattern in the 1951 to 1981 era, which would be necessary for an even a minimal version of Matt's bracket creep theory to be true.




Yes it's nice to have some actual data before you go around spinning half-baked theories. Congrats for skewering what seemed to me to be complete nonsense.




Precisely what Matt means by liberals thinking that the US has an "underdeveloped public sector" is unclear, but whatever it is, it is probably pretty far from the American mainstream. With the possible exception of healthcare (admittedly a pretty big exception) I don't see a lot of clamoring for an expanded welfare state. And even with healthcare, I think the sort of nationalized health care that most liberals would want is simply not in the cards. Despite Republican blather about it being a "government takeover of healthcare", even the Clinton healthcare plan was pretty much based on private sector actors engaging in good old-fashioned competition.




Liberals tend to think that the Republican resistance to an expanded welfare state is some sort of kooky eccentricity that is not really what Americans want, if they only had the choice. This betrays a fundamental misunderstanding of the American people. Republicans in the last few years are coming to grips with the limits of a welfare state rollback, but that doesn't mean that people want a lot of new programs.




So I think it makes sense to change the terms of the debate to begin discussing more radical change in areas, like healthcare, where there is a clear consensus that both politics and policy dictate a change. But turning that into a generalized call for more social spending would spell political disaster, especially if you go around talking about an "underdeveloped public sector".

Liberals didn't consider the pre-Bush, or pre-Clinton, or-Reagan status quo to be satisfactory. We (metaphorically speaking, I was more interested in He-Man at the time) thought of ourselves as living with a horribly under-developed public sector. I fear that the early 21st century is saddling liberals with an undue nostalgia for late 20th century politics. It would be perverse to celebrate the ways in which the current GOP is changing the rules of the game, but I don't think it makes sense to think of ourselves as defenders of the old order, either.

Very provocative post.  I'd be interested in Matt un-packing more of the policies that liberals were dissatisfied with and which rules we should be taking advantage of.  Until we actually win back some seats in Congress and at the state level, I think we can't really know.

We do need to seize on the fact that moderates, liberals, and radicals find so much problematic with the status quo, if only because Bush is the President now.  Real reform in economic and social policy needs to take place to save some of the old order if not for its own sake. 

But they can tax and borrow which is the same thing. They sure as hell can shake things up a bit by being creative. Of course they'll need progressive, responsible and dynamic leaders which may be an even bigger "if".

Just a "gutless wonder" doing some wondering ... what's wrong with raising the amount of income one pays Social Security taxes on or is that "soaking the rich". The good old GOP has been helping their big donors" screw the non-rich" during the last almost five years now.

.  .  . what's wrong with raising the amount of income one pays Social Security taxes on .  .  .  ?  tlees2

Nothing whatever, and since $140 - $150,000 would probably be the upper limit, it most definitely would not be soaking "the rich"*.

* Average income of top 10% was $302,700 in 2001. And if past trends stay the same (2004 SCF isn't out yet) 2004 average income of top 10% was $383,380.

You'd have all sorts of creative, in-kind compensation packages; business owners would funnel everything through their companies to avoid income -- it would become a nightmare circle of evasion and enforcement.

That's an understatement.

You'd have no rich people left in this country and not because they were paying those taxes.

Why not just ask some of those aging 60's rock stars why they left England back in it's good old socialist daze.

That's because I believe the top marginal bracket got into the 90%'s. We don't have to be that extreme to remedy the damage the GOP has done to our system of progressive taxation.

"Soaking the rich" is more appealing on populist grounds than on economic ones, particularly now that almost all barriers to moving funds out the country are gone.  Not only that, but it's pretty hard to sell soaking the rich in the old US of A.  Unfortunately a large proportion of our middle classes tend to read actions against the rich as actions against middle class aspirations of being rich, not to mention that it offends the propertarian sensibilities of a wide swath of folks (propertarian is what the Republicans mean when they say libertarian).

As for your contention that the majority of Democrats are at the income scale where they pay more in FICA than income taxes, I'd like to see data to back thatup, because I don't believe it.

I think Matt's question is an attempt to broach the subject of whether we liberals think the welfare state should be reformed or not.  To me that's a no-brainer - we have been through an economic revolution in the past 25 years, and people's expectations of how services should work are vastly different than they were in the 1950's and 60's.  Should the government should help people pay for education and healthcare?  Absolutely? Do we need to raise taxes to do so?  Almost certainly. Should it run these services?  I'd say probably not, but it should keep a very watchful eye on them if it doesn't.  Should it hand services out to anyone that asks?  Not sure, but there are some serious downsides.

It's increasingly seems to me that liberals are making a mistake hitching themselves to an LBJ-style War on Poverty welfare state.  Not that LBJ shouldn't have built what he did, but making a welfare system that discourages working because working almost always means moving down before you move up doesn't really help people move out poverty, much less play well with the middle class.  We can be the party of broad opportunity with being the party of entitlement.

Just the thoughts of one more gutless wonder.

Oh, I entirely agree with Matthew that we've got an "underdeveloped public sector".  18% of GDP is peanuts compared to other wealthy countries.  You mention health care, but that could soak up another 5% to 10% by itself.  Add in expanded federal education funding, and you're at 30% of GDP with government services the American electorate would eagerly support with majorities.


Until they figured out how much their taxes would have to go up to pay for it.  

Re; "71% of households pay more in payroll taxes than income taxes."

That can't be right. I'm a little over median income, but my federal income taxes dwarf my FICA taxes by close to a ratio of 2 to 1.

Do we or don't we want to be able to help the people who truly need help?

The answer to that is "yes" we do, but we want to decide individually how much help we want to provide. And, for most people, that is far less than they pay in taxes.

That is the major flaw in capitalism. People, by nature, it seems, are selfish and acquisitive. Without some severe regulations capitalist countries must always become nations with a few very rich and a lot of very poor people. I doubt that in today's world we can ever again increase income taxes enough to counter that trend. So many people became obscenely rich through good luck in internet stocks and businesses, as well as good luck in other enterprises, that now most moderate income people are just sure that their turn to grab the brass ring is just about here. They sure don't want to have to give any of that to the government, so they oppose taxing the wealthy with progressive tax rates. I see this as a problem that has to be solved, and solved within very few years.

Current F.I.C.A. is 15.3% on 92.35% of earned income from $400 to $90,000. (Under $400, no tax.)

If you're over $90,000, they tell you to add 2.9% of your total income to $11,160.

that's from the IRS 2005 Form 1040 Schedule SE for self-employed to pay Social Security. Most get a small credit on this on another line but it doesn't help much.

If you're not self-employed, your employer is paying half of this; only half is deducted from your check.

I gotta say, and I know I'm at odds with history here... I don't consider Social Security to be a pillar of the welfare state or even part of the welfare state.  Everybody pays taxes into it, despite the caps on what's taxable for this purpose, and everybody, no matter how rich they are, gets a check.  It's not welfare, at least not these days, it's a national retirement plan that has all US workers pooling assets and then drawing benefits.  I'm not trying to nitpick here, I think the universality and the sense (and we can dehbate whether or not this is right or wrong) that everybody pays and everybody is entitled to be paid later, is what makes Social Security so popular and insulated from attack.

Re: Your employer pays 1/2 your F.I.C.A. and you don't see that on your stub. Just double it.

OK, there's an argument out there in favor of counting the employer's contribution as a tax on the emplopyee instead, but if you do that then you also have to adjust the employee's pre-tax income upward to include that employer-paid amount.
And if someone at median income is still paying somewhat morer to the IRS than to FICA then that 71% is still way ouit of line.