The Big Confusion
My apologies for the late entry. I needed to finish The Big Con before piping up. Now that I've polished off Chait's quite readable book, and organized some of my thoughts, I'll start, like Ross, by emphasizing the positive.
For those already inclined to think the worst of Republicans, The Big Con is an effective piece of partisan political propaganda. It successfully left me loathing the Bush administration and the recently departed Republican congressional majorities even more than I already had. (FYI, I am an anti-war, extremely socially liberal libertarian who finds the current GOP's fixation on war, imperial executive power, walling up the southern border, denying civil rights to gays, etc. completely odious. I can't imagine the miracle that would keep me from preferring a Democrat in the next presidential election.) Moreover, like both Ross and Megan, I agree entirely with one of Chait's subsidiary theses: the vulgarization of supply-side thinking, particularly the idea that tax cuts are always, or almost always, a free lunch, has created a nonchalance about spending that is poisonous to fiscal responsibility.
So much for the positive. Mostly, I found the The Big Con to be a thicket of confusion.
First, I was confused by the progression and upshot of Chait's historical narrative. By the time I got a good way in, I could see that the argument was supposed to about how George W. Bush and the Republican congress came to be so terrible. And, as I said, I do think vulgar supply-side thinking has played a truly regrettable role eroding important norms of budgetary responsibility. But, along the way, Chait seems to have wanted to frame previous Republican tax cuts as disreputable and ill-motivated, though they took place well before the transformation of the Bush II-era Republicans into odious plutocratic thugs.
So, in the first chapter, Chait makes it sound like "deranged" "crackpots" hijacked Reagan's fiscal policy. The zany Jude Wanniski gains Jack Kemp's ear. Jack Kemp then "almost single-handedly converted Ronald Reagan," who goes on to sign the Kemp-Roth tax cut, which brings down the top marginal rate from 70 to 50 percent. The loons are running the loony bin!
As a brief aside, it's worth mentioning that Chait portrays this as the first supply-side tax cut, though supply-siders themselves tend to point to the 1978 Steiger Amendment, which slashed rates on capital gains. According to Bruce Bartlett writing in 1987 [pdf], Clark Medal winner Martin Feldstein (not to mention Wanniski and Gilder) had argued in '78 for the cut on supply-side grounds, and it was passed by a Democratic congress and signed by a very grudging Jimmy Carter. I guess this would complicate Chait's narrative. As would pointing out that the Kemp-Roth cuts were proportional down the income scale, which Chait almost completely obscures by characterizing them as cuts that "unapologetically targeted the highest income levels." Also, wasn't Michael Dukakis's running mate and Bill Clinton's Treasury Secretary, Lloyd Bentsen, known as something of a democratic supply-sider?
Anyway, we have to wait until chapter three to discover that Kemp had not really converted Reagan to Jude Wanniski-ism, and that the Gipper promptly signed large tax increases in 1982 and 1983. I did not see Chait mention that Reagan also raised taxes in 1984, 1985, and 1987. Were the crackpots decisive to the historic tax transformation of 1980s or not?
The 1986 Tax Reform Act, a major rehaul of the tax structure that dropped the top marginal income tax rate to 28 percent! -- not quite a halving of the rate top rate set in place by the deep cut allegedly inspired by the "nutty" Wanniski. Remember, the top marginal rate in 1980 was 70 percent. (Here is a convenient table of the top rates over the years.) But Chait does not note the dramatic extent of the cut. He does say: "While it did lower the top tax rate, in every other respect, the Tax Reform Act that Reagan signed in 1986 was a liberal triumph," since it made the overall tax structure more progressive.
Well alright. I'd think it would also be considered a conservative triumph for dramatically lowering the average American's tax burden. But let's just agree it's a liberal triumph. So then what are we to make of Chait's mockingly derisive response back in chapter one to the conservative argument that the Clinton expansion was in part a consequence of Reagan's economic policy?
In one sense it's impossible to completely disprove this sort of reasoning. You can't prove in a scientific sense that Reagan's policies weren't responsible for the 1990s boom. For that matter, you can't prove that Calvin Coolidge's policies, or control of the magnesium supply weren't responsible either.
Color me confused. Why would Chait want to disprove the thesis that a major restructuring of the tax system, the "liberal triumph" of 1986, would have a salutary effect on the economy in following years?
Chait repeatedly bashes the idea that reductions in marginal tax rates have a positive revenue effect through increased output right away. But, sort of to his credit, he remains pretty quiet about the thesis that tax cuts have significant long-run growth effects. So was Reagan's tax policy crackpot or a triumph? Both?
The very fact that there was a big Clinton boom (as well as a big Reagan boom) after such huge reductions in the average tax burden at the very least demonstrates decisively that a policy of much, much lower marginal tax rates doesn't hurt economic performance. Right?
This points us toward Chait's almost completely unconvincing attempt to explain why the entire political spectrum has moved "right" on economic policy--specifically on tax policy.
Suppose the American public were to discover that it is possible to keep a much larger share of their wages than they had in the 1970s -- to have 70 or 60 cents of each hard-earned dollar to spend or save, instead of just three thin dimes -- while also enjoying long stretches of phenomenal economic growth? You'd think the demonstration effect would make low tax rates pretty popular, wouldn't you?
When Bill Clinton -- Blair to Reagan's Thatcher -- argued for his increase of the top rate to 39.5 percent (up from George H.W. Bush's increase to 31 percent) by asking "the economic elite ... to pay their fair share," he seems to me to imply that much higher rates -- such as the 50 percent top rate left after the crazy-person-inspired Kemp-Roth cut, not to mention the Carter rates -- are unfairly punitive. If the crackpots delivered this radical revision in Americans' idea of a "fair share," should we thank them?
I don't think I caught Chait complaining that the Clinton rate was too low. So is this "class war" hypothesis really based on the difference between a 35 percent and 39.5 percent top marginal rate -- a difference Chait thinks barely matters at all? This also confuses me.
I know: part of the complaint is over the progressivity in the distributive structure of the Bush cuts (or lack thereof). But Chait strikes me as proceeding pretty shadily when he notes that the 12.4 percent payroll tax is regressive, and that Bush "has not touched it at all" as part of his attempt to argue that "Bush's opposition to any given tax is exactly proportional to the degree that it affects the rich." Bush's proposal to transition to a system of Social Security personal accounts through a payroll tax "carve out" would have been a large progressive tax cut. At the time, Chait argued quite vehemently for blocking this reform.
I think it's worth noting that liberals howled when Bush endorsed Robert Pozen's proposal to make the social security system both more progressive and sustainable by reducing social security benefits levels for those who need help the least. Why? In a Slate piece, Brad Delong repeated Social Security founding father Wilbur Cohen's bafflingly implausible claim that "a program that deals only with the poor will end up being a poor program." That is, unless Warren Buffet gets his social security check, the AARP won't lift a finger to make sure poor old people don't eat cat food. Chait knows full well that Democrats are the ones who continue staunchly to defend the regressivity of the social security system on principle. So why lay this at Bush's feet?
What is Chait's evidence that Republicans are plutocratic class warriors--that the GOP is "a party whose central aim is the upward redistribution of wealth"? In The Big Con I found mostly quotations that establish nothing but a problem with Chait's capacity for non-tendentious interpretation. To use an example from his last post, Chait seems to think that when Tony Snow says, "Upper classes have always pulled societies forward economically -- and their conspicuous prosperity has always aroused the jealousies of the lower classes,” he means... what? That we'll all be better off if we take money from poor people and give it to the rich?
Snow's "class" language is unfortunate, as it does conjure an image of Old World aristocratic stratification, wherein the upper classes seldom pull anything but money from their vassals' purses. However, to anyone who has spent time around the economic "right," Snow is evidently making the polar opposite of a class-war point. He is making a point about the mutuality of interests in a market economy.
Here's my gloss: the wealthy are generally those who create the most wealth, and their wealth-creating activities tend to benefit all. However, this benefit is by no means transparent, and the gap in wealth can fuel envy. The next step in this very typical piece of classically liberal reasoning is that envy-based redistributive policies--policies based on the idea that there is some kind of zero-sum class war--are likely to have perverse or counterproductive consequences. Perhaps Chait believes, against the evidence, that the supply of labor, skill, effort, ingenuity, and entrepreneurial attention is simply unaffected by economic incentives. But to believe, like Snow, or me, or just about every living economist, that these social goods are affected by economic incentives is hardly an endorsement of class antagonism. Was John Rawls a right-wing class warrior?
The charitable interpretation would be that Snow is attempting to preempt antagonistic class-based thinking simply by explaining why that would be a big mistake -- because we're in it together! -- not, as Chait has it, stating the rationale for undermining democracy in order to protect the rich from the hoi polloi.
Also, what does not harming the productivity of wealth-creators through high tax rates have to do with upward redistribution? I hope Chait is not in the grip of the view that individuals have no moral right to their market earnings because the state or "the people" really owns everything.
According this view, a tax cut is not restoring to someone what is presumptively theirs -- is not allowing them to keep more of what they have earned. Instead, it is nothing less than the state choosing to give them a bigger share of the collective income than they were given before. In the annual income allocation sweepstakes, more for one implies less for another. So a "tax cut" for the wealthy is just giving them what could have been given to the poor instead. Why give "our" money to the rich? They're already rich!
It is notable that "property rights" is not in Chait's index, nor does the idea play a notable role in his explanation for why many Republicans have seen lower tax rates as a matter of justice. So I'd like to ask Chait this question: Decreasing the tax burden for the rich "redistributes" whose wealth?
Chait offers Milton Friedman's thought that "Freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself," as evidence of "conservative" dogmatism, which he contrasts unfavorably with liberal pragmatism. I am truly curious what part of Friedman's statement of economic liberalism Chait rejects. That "economic arrangements are a part of freedom broadly understood"? That freedom is an end in itself? In what sense are you really a liberal if you reject either?
While conservatives (and apparently libertarians like Friedman and me) are table-pounders about the inherent value of human freedom, Chait wants to think that "Liberal support for bigger government, on the other hand, is entirely rooted in what liberals believe to be its practical effects." Evidently, Chait does not believe that effects on economic liberty are "practical" ones. But he both begins and ends his book lamenting America's relatively high level on income inequality. Yet if the rather large, evidently "practical" difference to citizens between a government that takes one-third of their income instead of two-thirds does not count as a "practical effect," then why exactly does the mathematical ratio between the average income in the top and bottom income brackets count?
In his concluding section, "Plutocracy in America," Chait suggests that the quickly dwindling era of GOP dominance was the result of wealthy elites undercutting the mechanisms of democratic rule in order to secure their hoards against socially and politically destabilizing economic inequality. Now, if Chait is aware of any empirical evidence that rising income inequality has increased the risk of some kind of destabilizing lower- or middle-class uprising in the United States, or that a single Republican economic policy was motivated specifically by the felt need to set illiberal limits on democracy in order to insulate the rich against the breakdown of the social order, then I am sure he will share it with us. (I didn't see it in his book, and I am skeptical. Here is Richard Posner's 1997 paper finding that the level of income, but not of inequality predicts political instability.)
So, another question for Chait: What is your evidence for the "practical effects" of income inequality?
I ask because I'm interested to see Chait demonstrate the pragmatic empiricism he preaches. "If Liberals were to be convinced [their] programs failed to achieve their intended goals, they would withdraw support for them." But it can be hard to convince some people, can't it? Chait seems to disdain those who are true to their non-instrumental values, and are thus indifferent to certain data about consequences. He seems to think, rather strangely to me, that liberalism is a creed without values other than... what? Economic performance? Happiness? A high score on the UN's Human Development Index? It's not clear. Anyway, based on his performance in The Big Con, I think we might reasonably suspect that the value of economic equality (or the value of democracy) is not really instrumental in Chait's worldview.
Liberals and conservatives may, as Chait claims, have "different epistemologies." I'm actually quite open to the idea that liberals have better ones. But if Chait is really what he claims liberals are -- a hard-headed empirical consequentialist (a lovely thing to be, in my book) -- then the relevant difference in epistemology isn't between liberals and conservatives, but, sadly enough, between Jonathan Chait and, to a first approximation, the human race. It's true: most social scientists are Democrats. However, the AFL-CIO is not an organization of social scientists.
I suppose I will follow precedent and mention something both good and bad about your review of Chait's book.
It probably could have been even more condescending.
September 12, 2007 5:36 PM | Reply | Permalink
I'm sorry, I didn't read this all the way through. I think you started to lose me when you announced you were a libertarian, which as far as I'm concerned is like announcing yourself as a child molester. After that it was all downhill, a dreary litany of increasingly incoherent name dropping, random snark, unexamined premises, three dollar words and pretentious self satisfaction.
I hope that someone finds your view interesting and is prepared to invest the time and energy to get some sort of nugget of merit out of it.
But that won't be me.
Have a nice day.
September 12, 2007 6:34 PM | Reply | Permalink
Wilkinson seems to be in a deep state of denial.
Yes, Reagan did in fact "vulgarize" supply side and present it as a magical free-lunch. "Voodoo economics" was the term HW Bush rightfully used before he got on the bandwagon.
Reagan claimed supply-side, specifically in the form up upper bracket tax cuts, without any other criteria, would auto-magically grow the economy and create trickle-down. He was famous for magical euphemisms like "shining city on a hill" and "rising tides" and "inviable hand" and such. As well as magical terms like "evil" personified by "welfare mothers with welfare Cadillacs" who were also of course black, and de-facto commies too.
Reagan stoked apathy towards government by claiming it could never be a part of the solution, in fact it was the problem. Reagan's message was basically that of Grover Norquist: government bad, market good. Taxes bad, market good. Social services bad, market good. regulation bad, market good. Reagan said government is the problem, stop taxing, stop regulating, stop services, and the market will make everybody happier.
When you say everything besides the market is bad, and the market is essentially the only good other than the military and the bare minimum of law to protect the wealthy and investments, that's the very definition of plutocracy. That's not a nuanced argument for government to more wisely allocate funds efficiently towards economic growth and "float all boats." That's as vulgar as supply-side gets. That is exactly the most vulgar aspect of popular supply-side dogma.
Reagan's supporting arguements were as vulgar. Key to supply-side distrust of government is to promote intra-cultural strife (racism, north/south & rural/urban divides, etc) which inherently disparage social programs and causes people to distrust one another and their government.
Hate to break it to you, but what liberals have been saying about Reagan for decades, that he was an intellectual lightweight, an actor, an ideologically zealous movement conservative in the worst sense, and that he was a puppet shilling for the plutocracy we now find ourself in, are absolutely true.
September 12, 2007 7:01 PM | Reply | Permalink
Funny you should mention that. That is the truth that few liberals are capable of facing. Jerry Brown, of all people, was finished off in his quixotic quest for the nomination by his flat income tax that would have gotten rid of the regressivity of the Social Security tax and indeed even increased the progressivity of the income tax.
Democrats are as capable of soaking the poor to pay the rich as Republicans.
Hogwash. Since when do police states value human freedom?
You are not for a police state as a Libertarian you say? Then tell us all how you plan to maintain order with even children, disabled, aged left only to the mercy of the alms-givers? The jungle is no place where civilized people want to live.
Actually that grand economic adventurer, Jimmy Carter, started the ball rolling and all his successors continued the downward spiral.
Gawdalmity, even the ugly criminal bigot, Nixon, looks like a giant compared to the midgets that followed him.
How about we get back to governing for the people rather than just for the rich and privileged?
Best, Terry
September 12, 2007 7:07 PM | Reply | Permalink
You can tell this book really offended Wilkinson somehow, which isn't surprising because Chait is really good at offending people. But this huge rant just reads like is just like the set of half-thought out notes Will took as he was reading. I'm not saying there aren't any good points here, but there are some really ludicrous ones here too. Which I guess is kind of acceptable in blog world, but, geez, normally Wilkinson seems to make more sense than this.
But there was also huge debt, and a comparatively small proportion of that growth went to the median American. What's the point of accruing gigantic debt in order to have no impact on economic performance? This is a situation in which the tax cutter needs to disprove the null hypothesis, not the redistributionist.
The 90s certainly weren't the worst of all possible worlds, but given the great magnitude of wealth disparity, it's hard to believe we couldn't have done better for ordinary people. I know that Wilkinson is a Rawls-inspired Libertarian and claims that the inequalities of our present system are good for everyone in general. But here's the liberal epistemological problem--given the immense amount of wealth that has gone to the top, it is extremely hard for us to believe that a little bit more distribution would destroy so much wealth that we'd end up giving less to the poor. (In fact, it seems perfectly plausible that a little more investment in human capital might actually create net wealth.)
Or, perhaps Chait believes that those incentive affects, while present, aren't as large as you think they are. Given the massive size of the inequality, the incentives caused by marginal changes in the tax rate would have to be irrationally large in order for redistribution to be counter-productive as a means for helping people below the median.
The instrumental significance of particularly large inequality is that it suggests--it doesn't prove, but it suggests--that redistribution would improve social welfare according to expected value (assuming DMU, as I always do) or maximin calculation.
Indeed, according to Thomas Hobbes' Leviathan, stability should be greatly improved by inequality--if one man rules absolutely, conflict is impossible. Posner frequently has a lot of Hobbes-ish positions on security issues. I suspect Wilkinson tends not to, though.
It's only a tax cut if I can take the money and spend it. I'm surprised more Libertarians didn't come out against private accounts--it seems like exactly the sort of private/public merge that tempts the government to intervene more in the marketplace. Imagine a market downturn or foreign competition suddenly endangers a great number of citizens retirement. Would the government be able to resist the pressure of voters to implement subsidies and trade barriers? It's less capitalism and more a sort of Managed Corporatism in which citizens are encouraged to trust large hierarchical corporations with their investments rather than become entrepreneurs themselves (the normal Social Security system at least offers a safety net for failed entrepreneurs).
September 12, 2007 8:08 PM | Reply | Permalink
"even the ugly criminal bigot, Nixon"
It is worth pausing to note that Nixon (who floated the idea of a negative income tax) would have cut off his hand before signing (as did Fat Bill) the "Effective Death Penalty and Habeas Corpus Gutting Act", or, for that matter, the welfare "reform" that turned on it's head the concept that we would like mothers (why not FATHERS too, but that's a question for later) to be able to raise their children without scrambling for a burger-flipping position preferably near to a 24 hour childcare center.
Clinton was not merely a Repugnant at heart, he was a Reagan Repugnant.
Nixon was to the left of Clinton on almost every civil rights, social rights and economic rights issue.
The horror, the horror...
(aside: Hey, Kayo, is that you??)
September 12, 2007 8:23 PM | Reply | Permalink
Wilkinson, Chait knows what Snow thinks he means. The point is that Snow's language in this case reveals something extremely ugly and dangerous about the way that he and other conservatives think.
Snow hardly needs your charity. Chait's point is that "we're in it together!" is what the used-car salesman tells the prospective buyer, or what Hu Jintao tells environmentalist protestors (the Harmonious Society!), or what Henry Clay Frick tells striking Homestead workers (before he orders his Pinkertons to gun them down). These people genuinely believe that their actions are in everyone's best interests, and that the "lower classes" are simply misguided and do not understand their own best interests -- which, obviously, include allowing the rich to get as rich as Croesus and to keep as much of their money as they possibly can. What a coincidence.
"All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out." - I.F. Stone
September 12, 2007 8:35 PM | Reply | Permalink
Was John Rawls a right-wing class warrior?
Ralwsian epistemology assumes 1) original position (theoretical), 2) Veil of Ignorance and 3) Rational self-interested agents.
Libertarians epistemology (say that of Nozick) assumes 1) original position 2) minimal government and 3) a system of just acquisition which starts from ORIGINAL AQUISITION, and progresses to Just transfer.
Needless to say both liberal and Libertarian doctrines accept Lockean fundamental right to PROPERTY.
Given this sketch, I'm not quite sure what you are trying to say? Are you a krypto liberal who thinks he is a libertarian or are you a full-blooded libertarian and believe that the social contract is silent on unequal distributions?
In any case as far as Rawlsian Liberalism is concerned, it is based on the fundamental concept of self-interested rational agent. So is Nozick's Libertarianism btw, except he does not put these agents behind a veil of ignorance as Rawls seems to require, but instead adopts a fanatical antigovernment stance, which is a tendentious reading of Locke in any case.
So for Rawls a Just society is not one which has minimal government. Rawls is indifferent to the size of government. He does not share Libertarian phobias about it. Locke only required government to be the least NEGATIVELY intrusive in an individual life. Libertarians, in my opinion, interpret Lock to mean that the government should be minimally intrusive in people's life whether it is for good or bad. An absurd idea.
The test for Rawls is quite simple: Inequality is to be allowed only if it is also to the maximal benefit of those who wind up in the poorest positions.
You seem to be of the opinion that the worker who actually physically produces the tangible products of society--i.e. The guy who is closest to Original Acquisition--is NOT the one who is contributing the most to the economy but it is the CEO--far removed from any physical labor--who makes salaries that are 400 times as much as the worker, who earns that salary--so you say-- because he is causally producing most of the Wealth of the Nation, which again is a rather absurd position. To put it bluntly: One can envision a society where physical labor produces wealth without the supervision of upper level management, but it is absurd--nay impossible---to imagine a society creating wealth WITHOUT the physical effort of human labor (i.e. without Original Aquisition).
In my view Libertarianism is morally flawed. It is a form of egoism.
September 12, 2007 8:55 PM | Reply | Permalink
Interesting comments. Does anyone find anything worthwhile in this screed?
The closest I've found to anything positive is...
Nice to know he's not a complete imbecile. Ah well, everyone is entitled to a bad day.
September 12, 2007 9:30 PM | Reply | Permalink
Several weeks ago, and purely by coincidence with Chait's book, my wife and I were nostalgifying about when we had first heard the term "supply-side economics" back around 1980. I said that from what I remembered, a big part of the argument was "incentives," namely that lowering marginal tax rates at the high end would give high-income people more motivation to work. She cut straight to an interesting point, by asking "Are these really the people that we want to have putting in more hours at the office?"
Wilkinson states that "the wealthy are generally those who create the most wealth" rather off-handedly, as though this statement is obviously beyond dispute. I'm not an economist, and I may generally be a bit slow on the uptake, but I see a strong case that just the opposite is true, so I don't think this kind of statement should be allowed to pass unchallenged.
Once we discount people who inherited wealth or otherwise won a lottery, who clearly don't need to have created anything, the typically highly-paid person might be an executive high up in a corporation who makes important strategic decisions. The shareholders hire this person with the perfectly rational motivation of having their equity become more valuable, as quickly and easily as possible. Now, what's the quickest and easiest way for this executive to improve his/her company's position relative to their competitors? Probably not by improving their manufacturing efficiency, which takes hard work and a correspondingly large amount of time.
The faster way, which we can presume the executive will prefer to take, is to somehow "game the system." I believe the official economists' term for this activity is "rent-seeking", which Wikipedia helpfully defines as "Rent seeking occurs when an individual, organization, or firm seeks to make money by manipulating the economic and/or legal environment rather than by making a profit through trade and production of wealth." Two popular choices, for example, are to suppress one's competition through monopolistic maneuvers, or to convince/bribe the government to change laws/regulations in a way that selectively favors one's firm. While these may improve the position of one corporation, and so rationally please one set of shareholders, they're clearly not good outcomes for one's civilization on the whole.
In general, when accomplished successfully rent-seeking behavior ruins the hopes of both economists and libertarians: resources are not allocated efficiently, and individual choice becomes more limited. In short, the more time and energy that goes into rent-seeking the worse off we all collectively become. And since it is reasonable to presume that highly-paid people spend a lot of their time rent-seeking, it follows that the more time they spend at work the worse off the country will become. So I say: dis-incentivize! Subsidize vacations for rich people! force them to spend more time with their families! The more we can keep them away from the office the better off we will all be.
September 12, 2007 10:03 PM | Reply | Permalink
(aside: Hey, Kayo, is that you??)
Naww. We just have the same name.
I was startled once when the late, great Jack Olsen asked me the same question. Jack was an unabashed admirer of the "two-fisted DA."
Best, Terry
September 13, 2007 12:09 AM | Reply | Permalink
Re: Nixon was to the left of Clinton on almost every civil rights, social rights and economic rights issue.
You can make the above point on economic issues, but not on other issues. On foreign policy Clinton was squarely in the same mainstream as Nixon (and all our presidents since FDR until the current disaster took ofice). On racial issues Clinton made no appeals to racism as Nixon very blatantly did with his "Southern stategy". And on social issues can you imagine Nixon siding with gays or willfully dissing the social conservatives of his day?
September 13, 2007 3:27 AM | Reply | Permalink
You also have multiple active login accounts.
September 13, 2007 3:54 AM | Reply | Permalink
More nonsense from TerryHallinan aka Terry Hallinano the (poorly attempted) stealth winger. (one account just not enough spam?)
Democrats have preserved SS as a social insurance system, where everybody pays in and gets a dividend.
A Republican strategy has been to attempt to make it a welfare system so as to then abolish it. Basically Republicans hate SS so much, and have failed with direct assaults so often, they hope to do anything to shift or change it in the hope it may become vulnerable. Truly vile, typically anti-democratic, weasel policies.
Josh Marshall has posted on that many times btw.
September 13, 2007 4:02 AM | Reply | Permalink
The tech boom was really a one-time event. The silicon revolution was like the industrial revolution. It was a convergence of technology trends, many going back decades and even centuries.
The tech boom and prosperity of the 90's was not a product of Reagan's policy. It can't be credited to any short term economic policy. Not Reagan, Bush, or Clinton. Nor was the collapse of the USSR, which was inevitable due to rot and centrifugal forces.
However, the massive increase in debt and military spending can directly be attributed to Reagan and Republicans. If Reagan had poured that into stimulus, for example to build more universities and fund peaceful technology, like biotech for example, then I'd be praising him as a visionary. But what he actually funded was useless. The B2 is typical of Reagan's spending. Junk designed for a cold war already over, with no civilian application. A huge waste of funds to accomplish nothing. May as well have built tractors like the Russians for all the growth it spurred.
September 13, 2007 4:24 AM | Reply | Permalink
"...it does conjure an image of Old World aristocratic stratification, wherein the upper classes seldom pull anything but money from their vassals' purses."
I've news for Will. It's the USA where inequality is more heritable than in Britain or the Nordic countries.
BTW, feudalism in the sense in which "vassal" has a clear meaning was extinct in Europe by 1500. Karl Marx' confusion of feudalism with the much broader idea of the seigneurial system has not been shared by serious historians since Marc Bloch.
September 13, 2007 6:27 AM | Reply | Permalink
Has huh?
Has Josh posted on what a fine idea it is to tax every penny undocumented day laborers make to send to the richest segment of the population while excluding the vast majority of the income George Bush, Dick Cheney, Bill and Hillary Clinton and others of their privileged middle class "earn?" The "illegals" don't even get the pretense of a share in the imaginary Social Security funds or, more laughably, "lockbox."
No more potent mechanism for looting the poor and harming the very youngest to pay the wealthier segment of the population exists than the funding of Social Security.
Is Jerry Brown part of the half-Vast Rightwing Conspiracy too you think, Kozmik?
Best, Terry
September 13, 2007 6:39 AM | Reply | Permalink
I dunno, I think Social Security negotiations collapsed before they started just because Bush promoted mistrust all around with his bad faith private accounts schemes. A middle-class welfare program as opposed to a lower-class welfare program could stand a good chance of surviving and accomplishes many of the same goals that a straight social insurance system does.
I mean, lets be clear--Social Security already is a redistribution system given that it's indexed according to changes in wages rather than changes in prices--prior generations of retirees got more than they paid in. Normal welfare systems lose because they redistribute from the middle class to the lower class. This system sticks around because it redistributes to the old middle-class. I think we could make both the payouts and the FICA tax way more progressive and still preserve middle class support for it. Indeed, making the tax more progressive is the most important part--since we've been using the FICA tax surplus to fund the government, it's regressivity seems like a gross injustice.
September 13, 2007 6:40 AM | Reply | Permalink
How horrid of you. Are you claiming some soldier in Iraq is worth more than the Commander Guy, who was saved from risking his life as part of America's most productive class?
BTW is everyone aware that the DOJ is busily engaged in deporting the widows and relatives of undocumented soldiers killed in Iraq and Afghanistan? Don't need those unproductive parasites any more apparently.
Best, Terry
September 13, 2007 6:55 AM | Reply | Permalink
Bait and switch. Bait and switch. As if any but the richest Americans were even nominally paying the 70% rate and left with "just three thin dimes" of every dollar they earned.
Such is Republican "populism" - rich man's lies told in a folksy manner. Do we want this guy in our big tent? I suppose so, but it's asking an awful lot.
September 13, 2007 6:58 AM | Reply | Permalink
The true master of the technique was Ronald Reagan.
Sam Donaldson, who boasted often of Reagan dodging the great Sam Donaldson, was eager to proclaim that the largest tax increase in history from Reagan was not even a tax since it was paid mostly by lower wage workers.
It was all about marginal rates you see, not about who paid and who received.
Got to do all you can for the most productive class: mainly the inheritocracy.
Best, Terry
September 13, 2007 7:19 AM | Reply | Permalink
Whether you see Social Security as regressive or progressive depends entirely on whether you examine it as an open or a closed system.
As a social insurance plan (closed system) it is not regressive at all. All workers pay at the same rate (6.2% with employer match) from the first dollar to the cap for a set of disability, survivor and retirement benefits that scale according to lifetime earnings. A minor amount of progressivity is built into the payout but this isn't a transfer per se, more of a reallocation of future real wage growth.
Why a cap? For the same reason that states mandate minimum liability coverage on auto insurance. At some point the State interest in mandating insurance coverage stops, societal needs for a minimum level of dignity for disabled people or seniors is met.
Now viewed as an open system, that is as a government program to provide disability and retirement it appears to be regressive. Why should a societal need be met simply from wages and capped at that? Which if we were having an honest open discussion about building a Public Pension plan on Social Democratic principles would have a point. But we are not, instead we are working within a political system where universal health coverage for children is somehow not a matter of obvious societal consensus but a threat to capitalism.
Social Security as designed is buffered from the normal budget process. It either can or cannot pay for its benefits from its income, but it is not exposed to the "We can't afford X" (where X is normally defined as social programs) vs "We can't NOT afford Y" (where Y is normally defended as any cost-plus weapons program however unneeded or even unwanted by the military).
Would be friends of Social Security who would suggest removing the cap or somehow otherwise breaking down the current barriers in the interest of "progressivity" need to sit down and shut up. You are only working to assist those who have hated SS since 1935 and have constantly sought to undermine it with the goal of destroying it. If you actually cut through the rhetoric and examine the financials you will see that Social Security by any rational measure is not broke, certainly not now when it is running a $192 billion surplus, and in all likelyhood not ever. Here are two things you need to know to understand Social Security 'Crisis'. 75% of 160% = 120%. 1.7% Ultimate Productivity. Don't understand the significance of either? Well that would not be surprising, generally the opponents of Social Security simply refuse to talk about numbers at all and for a simple reason: they don't have them.
Social Security is insurance paid by workers for workers. It isn't perfect by any means but as currently configured it is walled off from those who oppose any social solutions to any social problem. If you want to restore progressivity to the overall tax system go after those hedge fund guys, or tax capital gains as regular income. Just leave Social Security alone.
(The best ongoing discussions of Social Security are not to be found at Duncan's or Josh's, certainly they did some heavy lifting in 2005 but now their attention has shifted. Try Angry Bear or Economist's View instead.)
September 13, 2007 7:46 AM | Reply | Permalink
I think the point was that the funding of SS is a regressive tax and SS benefits flow to the wealthy, truly wealth redistribution form the poor to the rich, and Democrats will defend that system to the death.
Yes, we all realize the reason for that support is the political sleight of hand that you point out.
September 13, 2007 7:52 AM | Reply | Permalink
Has anybody that's ever gone around wailing "property rights" ever thought about just how many different kinds there are and all of the ways they vary from each other? Most are legalistic inventions made up either for the purpose of accumulating wealth or providing structure for the economy to function within. Nothing wrong with this, provided they work and work somewhat fairly.
Libertarian: someone who believes in the objective existance of complex law lacking a society to construct that law and make it mean something.
Kevin Russell Cook
September 13, 2007 8:30 AM | Reply | Permalink
As a fantasy that today's workers are storing up indulgences that will be honored by politicians in the future is dreamscape.
Regressive taxes are regressive.
Even many rightwing troglodytes are coming to realize an antiquated health care delivery system is a terrific drag on business as well as harming the health and welfare of the population. Lack of universal healthcare is a threat to capitalism.
Or lie down and die perhaps?
Best, Terry
September 13, 2007 8:32 AM | Reply | Permalink
Actually, a new exhaustive study (via Andrew Sullivan) suggests the opposite is true. Reductions in marginal tax rates have a large positive impact on growth right away -- in the first couple of years after the break takes effect -- and therefore make up a substantial part of revenue lost through tax cuts, but the economy then may reach some sort of equilibrium at the new tax rate and it no longer has a stimulative effect.
I agree that these kind of efforts to boil the world down to good guys and bad guys -- Democrats bad, Republicans evil -- are pointless at best and at worst are attempt to avoid real discussion of the issues by trying to smear the character of the entire group of people taking the other side of the issue.
I must, on the other hand, disagree with the notion that the rich represent the greatest wealth creators. Take any company or even small business and it's wealth creation is a product of all those participating in the production of the company's products. In that company, as in the country as a whole, the richest are merely those that secure most of that wealth -- perhaps in the case of a CEO because they shoulder more responsibility and maybe even contribute more in terms of enhancing productivity and wealth generation through strategy -- but in the case of shareholders or owners they often secure it for no other reason than the fact of their ownership.
Granted they have taken a risk and should receive something, and that risk contributed to the production of wealth, but only in part. The question liberals ask is how much of the wealth does each contributor deserve. The market is unconcerned with this question. It tends instead to distribute according to economic power relationships.
September 13, 2007 9:39 AM | Reply | Permalink
Re: As a fantasy that today's workers are storing up indulgences that will be honored by politicians in the future is dreamscape.
Recent and not so recent history demonstrates that any attempt by the politicians to alter Social Security in any way that may damage it even slightly results in swift public disapproval and, if persisted in, leads to electoral failure. I see no reason why future politicians would be any more likely to risk electoral ruin by welching on the promises of Social Security payments. Frankly, I think it more likely they would convert to Islam and replace the Constitution with Sharia law. Let's be realistic here, OK. Social Security will survive because the people will demand it survive.
Re: The tech boom was really a one-time event.
Similar such revolutions have happened in the past and will happen in the future. My bet is on alternative energy being the next one.
September 13, 2007 9:55 AM | Reply | Permalink
Whether you believe that the rich represent the greatest wealth creators depends upon whether you believe that the free market tends to allocate wealth according to what one contributes to the economy. Since a complex economy such as that in the United States makes it difficult if not impossible to analytically determine what one individual contributes to the economy, it becomes a matter of ideological faith.
The term “free market” is the equivalent of a curse word to most who contribute to this site, so it is not a surprise that most people here think that the “rich” are parasites on the economy.
September 13, 2007 10:19 AM | Reply | Permalink
As with any ponzi scheme, it gets harder and harder to pay the newer entrants.
The first Social Security recipients worked a few weeks to gain benefits. Already there has been welshing on future benefits with retirement age raised in the future.
Some of those paying today are excluded from the system (the undocumented). As the population ages, there are fewer workers and more payees. As wages take a smaller and smaller share of income, a smaller and smaller portion of the population is asked to make a greater and greater contribution.
All projections are subject to qualification. Only fools and prophets know the future for certain. There appear to be more fools than prophets.
Given that, we do know that money is taken from workers and given to retirees (and other beneficiaries). Higher wages and capital income is excluded. There is no fund or lockbox that is anything more than a slush fund. The only thing in any fund is an IOU which can only be redeemed by future taxes.
Will the younger workers of the future be willing or even able to share the burden or perhaps more reasonably be unable to resist the burden placed on them by the old and others who prefer not to pay their share and can escape payment (the wealthy and powerful)? No one can give you a foolproof answer but I know no younger workers who think their retirement through Social Security is secured as older workers and those of us already retired do.
I agree with you BTW that green energy could be a real boon to the economy rather than a drag.
Best, Terry
September 13, 2007 10:35 AM | Reply | Permalink
Valdron, you made a new friend! Go check out The Corner at National Review Online.
September 13, 2007 11:30 AM | Reply | Permalink
Oh my! How could you miss mentioning Reagan's supreme boondoggle SDI or "Star Wars"? That's a wonderful gift that keeps on taking to this very day. Talk about Hollywood fantasy as policy. And unlike the monstrously wasteful and out of touch B2 it's never even sort of worked!
But if there's one thing that make me taste bile in the back of my throat it's intellectual pissing contests about taxes and how far up the "public" colon the "pointed stick" goes. Not because conversations about taxes are bad, they're actually good. No, I get all queasy because as the conversation winds almost incoherently from the past to the present and attributes this or that nugget of economic wisdom or folly to this guy or that, there's a big ole 900 pound gorilla sitting there (right behind Joe Q. Public) with that pointed stick firmly clenched in his hairy ape mitts. Government waste.
I see far less meaning in the superficiality of the "bigger" or "smaller" government debate. It's mostly a cosmetic argument with plenty of contradictory evidence that merits both sides bow their heads in shame (if they had a conscience). I'm sure we've all heard the sage expression - It's not the size that matters, it's the motion of the ocean! Big or small, if the government is as wasteful and incompetent (or impotent if you like) as our has been in recent decades everyone (except the rich I suppose) suffers. The amounts of money wasted to corruption or insider bro-deals every year in our nation is simply staggering...staggering. In just one example - while Reagan was attacking single mothers (and their Cadillac's) he was pissing billions away on SDI. Now someone please explain to me who was screwing the nation harder. I clearly remember the term "Voodoo Economics" and it appears that everyone has now been turned into zombies if no one sees that all this math simply does not add up.
I don't mind paying taxes if they will be used for the good of the nation in a meaningful and at least marginally thought out manner. But this is simply not happening. We pay our taxes, big businesses get "incentive-ized" free rides under the guise of "helping the economy", and all that money disappears into the beltway vacuum and the rich segment of the population's pockets. The general public has little or no idea where all those dollars go and I'm inclined to think that most politicians no longer know either. It's certainly not being invested back into this country in a manner that actually helps everyone (and propping up the Airline industry or bailing out the banks recently don't exactly qualify in my book.) The average citizen is watching their world crumble around them. From rotting infrastructure to privatized everything. It's my personal nemesis "the market" that seems to be running the show and it's terrible at it. What the public is left with is an empty bag and a 900 pound gorilla fiendishly smiling as it pokes that stick a little deeper.
At least that's this non-economically inclined person's perspective!
September 13, 2007 11:47 AM | Reply | Permalink
What "free market?"
Surely you jest. The market is rigged with subsidies for those that need it least and, ironically, tend to be the ones that complain the loudest if one thin collective dime goes to a war widow with a diabled child.
"Free Market."
Good one.
CSPAN junkies visit http://spannerbackup.ipbhost.com
September 13, 2007 3:05 PM | Reply | Permalink
Like I said, most people here think, "free market" is a curse. What is your alternative?
September 13, 2007 5:03 PM | Reply | Permalink
Sure there is government waste. There is huge private sector waste also. And in many cases the private sector is far more wasteful.
Look at Halliburton, the VP's company. Mr Republican Free Market Guy's company is just an enormous blood-sucker.
Anyone working in Corporate America knows petty corporate executives are just as bureaucratic and wasteful as in the public sector. If not worse, because they usually have looser budgets.
It's really bogus to frame the debate as "government" waste. It's human waste. And there is copious waste and bureaucracy in the private sector.
The private sector is most efficient at high risk competitive industries with short product development cycles. Like high tech for example. like the Ipod or automobiles.
Government is better at standardizing services in low innovation industries, where competition would be redundant. Natural monopolies. Like medical insurance for example. And in long term research for the betterment of humanity where information sharing is vital, and where competitors hiding research is unhelpful. Like fundamental research at universities.
September 13, 2007 5:43 PM | Reply | Permalink
btw, for example of government efficiency, look at the Post Office, Medicare, and Medicaid for example.
Try getting Fed-Ex to touch anything for 32 cents. Or deliver packages for USPS rates. And the USPS creates good jobs with benefits, which has other societal benefits.
Medicare and Medicaid have almost no overhead, and deliver insurance payments to the same hospitals for the same procedures from the same doctors. For profit medical insurers have huge overhead, advertising budgets, enormous executive salaries, legal departments to fight claims, tremendous bureaucracy and paperwork which creates more bureaucracy for doctors and hospitals and drive up health care costs.
For some examples of private sector waste, and outright fraud, look at Halliburton, ENRON, and Merryl Lynch to name a couple examples. ENRON was one of the most important companies in America, and it's whole game, it's reason for existence, was to cheat people and manipulate the market. Merryl Lynch was complicit, and also exists basically to collect rent on capital and manipulate markets.
If you want to see where the waste is going in America, it's the blood suckers in the market, and especially in finance and insurance. People who make nothing but rig the system to get a cut of everyhting.
September 13, 2007 6:02 PM | Reply | Permalink
I'm not sure it's necessary to frame it "human waste" as that is an obvious truth (most of us are human I think!) I will stick to my point and my guns by labeling this as government waste. It is appropriate to label it as such because it is the government who imposes the taxes and is responsible for distributing those funds across the broad spectrum of services, investments and advancements. At least that's what it's supposed to do correct? I think these people have simply ceased carrying that people are watching them rob the bank.
But none of this labeling is perhaps terrible accurate given the incestuous orgy occurring between the most powerful from the corporate world and the very core of our governmental mechanisms. In many cases these are the same people driven by greed, self preservation or simply a broken idea of how human beings behave and they are receiving government appointments or even running for office. The more I see and read the more I actually think we are in fact now a Plutocracy. And the revolving door just keeps spinning.
That incestuous relationship has direct effect to your assertion that the private sector is more efficient at high risk "competitive" industries. Interesting. Firstly it is often very heavily subsidized by the government through any number of means such as direct funding, contracts, and of course leviathan tax breaks. And secondly they are also protected from competition (both foreign and domestic) with any legislation they may need in order to aid in their continued operation and hopefully future growth. I don't see any of this as desperately competitive nor is it exactly what I would define as "high risk". But then it is difficult to drown while running through a sprinkler no matter how scary and dangerous you try telling people it is.
This all in turn feeds the beast of governmental inefficiency. You state the government is better at standardized services in low innovation industries. You also mention medical insurance as an example which of course we all know our government ISN'T providing. Why isn't it? Why isn't the government doing ANY of those so called low innovation things very well if at all? Well perhaps in part because of that incestuous relationship thing. These are ex or soon to be CEOs of some of these very same industries. There's no incentive for our government to be efficient because it is by and large being run by the same greedy and arrogant people who will one day bleed the country dry through privatization.
As I've said on numerous occasions, I'm no economist. I have no working or even rudimentary knowledge of economic theory (micro or macro or marco polo). But I'm very in tune with the obvious, or so I like to believe. And it is obvious that this table is rigged. The house is pulling 21 every hand and just taking everyone's money. We can argue about how watered down the drinks are or how hot the girls serving them are (or aren't) but the game is still going on. It's great if you are the house (or one of the "whales" with a courtesy suite on the top floor) but for the rest of us it's pretty damned obvious they're cheating. And we're getting pretty damn broke because of it. It's gotten so bad that they've rolled up their sleeves and are showing us all the aces they have up there. And that just makes me mad! >:P
September 13, 2007 6:52 PM | Reply | Permalink
Riiiiight. It's the undocumented immigrant workers paying into SS keeping you awake at night. What's your next tactic to attack SS? Wait, I'll just check the list of Norquist talking points.
And Jerry Brown is really a card carrying member of the Heritage Foundation, and a great way to generalize left policies, right? Suuuuure. No cognitive dissonance there.
Calling you a Stealth Republican is flattery. You're stealthy like a flatulent elephant.
September 13, 2007 6:55 PM | Reply | Permalink
TH the stealth Republican. Everything the guy posts has a Republican poison pill.
For example, here he sounds like he's pro-universal health care, and then damns SS. But in threads dedicated to universal health care, he totally disparages it, as well as SS.
TH is a chronic liar and a troll. He also has multiple logins.
September 13, 2007 7:01 PM | Reply | Permalink
HAHA!
I'm looking at the Post Office and I see them automating much of their services and raising the price of MY stamps every 6 months so that corporate bulk rate fees don't go up. Thank goodness for that too. Otherwise there might be no mountain of junk mail for the postman to deliver to me!
September 13, 2007 7:01 PM | Reply | Permalink
Baloney. That's a complete fabrication from someone who would say anything to torpedo SS, and really flags you as a troll, which I and others have pointed out before as well.
September 13, 2007 7:03 PM | Reply | Permalink
Whether you believe that the rich represent the greatest wealth creators depends upon whether you believe that the free market tends to allocate wealth according to what one contributes to the economy.
I hope not, because I believe in a mixed economy so I kind of like the free market, but your argument is clearly false. Look at the scientists who develop the ideas that make their employers and investors rich. This happens because their investors are far richer and more diversified, and are therefore in a stronger bargaining position with middle class researchers and engineers. We live in a society in which the best way to make money is to have money. Social insurance might actually strengthen the position of the idea makers and laborers who actually build wealth by putting them in a stronger bargaining position with capital and land owners.
September 13, 2007 7:10 PM | Reply | Permalink
re: "You can make the above point on economic issues, but not on other issues"
probably fair enough, though I'm not sure under which column to put the gutting of habeas corpus--not an example of Clinton's economic conservatism but his authoritarian streak (vide, eg. the "death warrant flight" during the New Hampshire primary.)
BTW, just how did Clinton "side with Gays?" Surely not by abandoning within days his committment (for which good consideration was exchanged in votes, money, and shoe leather from the gay friendly community) to end the loathsome discrimination against gays in the military.
"DADT" is an abomination.
September 13, 2007 11:17 PM | Reply | Permalink
deleted, posted in wrong place.
September 14, 2007 5:03 PM | Reply | Permalink
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November 12, 2010 1:41 AM | Reply | Permalink