NOV
29
2012
The Bursting Of The Southern Strategic Bubble

Those of us on the left have been indulging in our share of Schadenfreude since the reelection of Barack Obama–or, more specifically, the defeat of the Republican party and the associate shadow-money campaign newly authorized by Citizens United. The wailing and gnashing of teeth on conservative media, all looking for something to blame, seems to point to a recognition that something was wrong in the narrative conservatives had been telling themselves about the country for the last few months, years, and possibly decades.

It recalls the same sort of recognition that swept through the financial establishment four years ago. I never thought I’d like to see the day Alan Greenspan would use the words like

“[The] modern risk management paradigm held sway for decades. The whole intellectual edifice, however, collapsed…

in his explanation of the financial meltdown. Watching GOP strategists sputter on Fox and in print leaves the same impression, that they understand that a generational shift has occurred, marking the death of the Southern Strategy as a viable national campaign tactic for the GOP.

These are merely iterations of a larger fractal pattern of disintegration. Since the end of the Cold War and the beginning of globalization, American institutions (like Lee Atwater’s government-by-race-baiting) and American capital have sought growth by leveraging existing assets rather than bother with creating real value. Under Bush I, I recall watching as we sold off factories and shed union jobs while American auto workers flipped Japanese cars over in the streets. And under Clinton, they decided the short-term steroid shot of deregulation was enough to get us out of a recession, and it worked. And so we became addicted to financialization, because we had sold off the tools to manufacture a real economy to buy overvalued financial instruments.

Matt Taibbi recently noted that with the rise of junk-bond trading in the 1980’s, all of a sudden the ability to make stock deals became more valuable than the ability to build a company, in real dollar terms. The financialization of American (and global) capitalism has, at its base, an important assumption: perceived value is real value. Rather than relying on dividends to make money, Reagan’s deregulatory program (updated by his successors continuously over the next two decades) and new technologies made it possible to leverage relative value of the companies themselves via stock trading, potentially making far more than any dividend.

When executives can pay themselves in stock, the incentive to game the system with numbers becomes not only irresistible, but necessary to compete against other firms in the financial markets. There are the numbers for the quarterly reports and then there are the real numbers. There’s mark-to-market value and there’s a bank balance in the Caymans. Bifurcating public from private was merely about splitting off bullshit from truth; when perception is the actual good being traded there is no objective reality, or not for very long, anyway.

Mitt Romney embodied this so-called ‘engine of growth.’ A brave new world where perception actually is money, where stock prices move more on rumor than truth. And as long as we had real wealth lying around to be exploited, the games kept making money. Romney’s leveraged buyout firm* borrowed money to buy companies, then saddled those companies with long-term debt to cover not only the purchase price but hefty ‘management fees.’ His earnings, which he still receives to this day, were couched in a myriad of tax-evasion algorithms, smuggled past international borders and tax brackets. And you can profit from this vampiric scheme by trading company stock! His positions and their positioning weren’t flip-flops, per se, but were agile responses to the market. And the donors needed to be reassured that their investment was going to return the end of their Obama nightmare, produced and distributed by the right-wing echo chamber.

The same mechanism that allowed homes to be overvalued, junk-filled MBSes to gain real monetary value despite the fundamentals, quarterly earnings reports to be redacted after they’ve served their illusory purpose, is the prime candidate not for Romney’s downfall, but his obliviousness. And watching Karl Rove’s sputtering meltdown on Fox News underscores the crash of a very real market—the post Citizens United vote-buying market. Rove’s portfolio famously yeilded a 1.26% return on a $104 million-dollar investment on the part of conservative moneyed interests.

In retrospect it should have seemed obvious that a man like Romney ran on a platform that required heavy suspension of disbelief. I liked to call it the “magic Republican” theory, which Romney himelf explained to donors:

They’ll probably be looking at what the polls are saying. If it looks like I’m going to win, the markets will be happy. If it looks like the president’s going to win, the markets should not be terribly happy. It depends, of course, which markets you’re talking about, which types of commodities and so forth, but my own view is, if we win on November 6th there will be a great deal of optimism about the future of this country. We’ll see capital come back, and we’ll see—without actually doing anything—we’ll actually get a boost in the economy. If the president gets reelected, I don’t know what will happen. I can never predict what the markets will do. Sometimes it does the exact opposite of what I would have expected.

Conservatism, in essence, is the same kind of scam as financialization; trading on a promise of past greatness that never was, leveraging some warm-and-fuzzy memories—or in many cases, second-hand memories—of American greatness passed down by crotchety old white folks. It can be like it was, but better this time! And so that ruthless Republican campaign operative, Lee Atwater, had the brilliant stroke of leveraging the distant memories of Southern plantation life into an electoral strategy that defined the GOP’s national appeal for the whole of my lifetime and perhaps yours. For conservatives, American greatness is a birthright in every sense;

“Remembering is a type of forgetting,” Milan Kundera once wrote.

As I was writing this post, The Nation kindly unearthed the original audio from Atwater’s infamous 1981 interview, to wit:

You start out in 1954 by saying, “Nigger, nigger, nigger.” By 1968 you can’t say “nigger”—that hurts you, backfires. So you say stuff like, uh, forced busing, states’ rights, and all that stuff, and you’re getting so abstract. Now, you’re talking about cutting taxes, and all these things you’re talking about are totally economic things and a by-product of them is, blacks get hurt worse than whites.… “We want to cut this,” is much more abstract than even the busing thing, uh, and a hell of a lot more abstract than “Nigger, nigger.”

The GOP has been dog-whistling for generations. There’s just one problem: there are now generations of GOP pups who think the dog whistles are music. They don’t get that you’re not supposed to believe in the words (take, for example, “states’ rights”) so much as the racist sentiment behind them. Welfare for the urban poor is bad, welfare for corporations is good. States’ rights are paramount unless they have to do with gay marriage or drug legalization.

There’s a particularly obnoxious strain of Republican racism (the type preferred by Breitbart and Tucker Carlson, et al) promotes the idea that the Republicans are the party of Lincoln and the only people who are racists are Democrats for supporting affirmative action. Theirs is an America where Crayola still sells “flesh” colored crayons and being white and male and Christian is the national default. They accuse the president, of all people, of being “divisive” and waging some kind of race and class warfare. How are the Democrats divisive when Romney’s support is 91% white? When the Republican campaign spoke rather plainly about their absolute need to get more than 61% of the white vote? Obama’s coalition of support was diverse in every conceivable way.

Every nation, including America, is a story we tell ourselves. This is the triumph of Anderson’s “print capitalism” — countries are built by a shared culture. As the modern European powers emerged, the principal medium was the novel, a shared literature. As newer nations coalesced, radio and eventually television became the principal unifiers of nations, the enablers of a shared narrative that bound people together enough to believe they have a shared history with other citizens we’ll never meet.

A nation-state like ours, though, may be unprepared for the disruptions of new media. Instead of a shared media environment controlled or at least largely influenced by a single national government, there is now unprecedented choice in entertainment and even news, all of which presents a unique challenge to any national project. With the internet, you can now completely envelop yourself in a shared solipsism, a virtual echo chamber in the cloud, where you can more freely associate than anyone ever dreamed.

The irresistable force of delusion can, on occasion, run into an immovable object in reality. An unfavorable election result, for example, or an overhyped IPO fallen flat.

*At Romney’s Bain Capital, they practice a management philosophy called “Six Sigma” which focuses on a numbers-driven approach to achieving excellence or some such double-talk. One of the most accurate gripes with Six Sigma is its focus on arbitrary numbers, and it was also one of the hallmarks of Romney’s “I’m a numbers guy” campaign. For example, the insistence that we must be spending 4% of GDP on defence. Why not 4.1%? Or, heavens forbid, 3.95%? I dunno, it sounds like a real number—5% would sound too arbitrary, 3% insufficiently manly.
AUG
22
2012
Something That’s Been Bothering Me For a Few Years Now…

Christine O’Donnell went on TV with her usual claptrap about how Obama is a Marxist and Soledad O’Brien (who is on a huge streak of calling Republicans out in exasperation lately) rolled her eyes. In the clip, we don’t see the subject get pressed too much further, but this has been annoying me for a long time.

These nostalgic Reagan-worshippers just can’t seem to let go of the last time they thought America was in control of the world again. As Reagan joins the assembly of conservative saints along with Ayn Rand and Mother Theresa, all that he opposed is bad, all that he stands for is good. (Besides arming mujahideen in Afghanistan, but you’re not allowed to talk about that any more. Let’s just all agree that Obama is a Muslim, OK?)

Socialism! That’s what my generation remembers as the bogeyman from that show on TV where what sounded like an aging Bullwinkle would get up in a president mask and intone against the Evil Empire and so on.

The Tea Party loves to talk about socialism. To wit, quoth Ms. O’Donnell:

“We’re a free-market economy that’s supposed to empower the individual, let each person use their gifts, use their rewards to create a better life for themselves, instead of what Barack Obama is posing, one that punishes hard work. A tax code that reduces everybody to exactly the same…”

No one else has the intestinal fortitude to say this, but what O’Donnell is describing is closer to socialism than capitalism. The key phrase here is ‘hard work.’

To begin with, no Republican politician seems to know what socialism or even Marxism is, so they assume nobody else does. As far as I can tell, socialism covers anything that is less friendly to rich people than Reaganomics. For the right, socialism has no definitions, no credoes, no theories, no working examples, and is lurking in the dark–waiting to eat your children at night.

That’s why when pressed, Republicans regularly fail to explain what it is that they oppose, other than Obama or “liberals” or “progressives” and other devil-worshippers. This isn’t an economic argument, but a series of ad hominems.

Let’s be very, very clear. Socialism does have a credo:

“From each according to ability, to each according to work.”

Note that this is a little different than the Communist credo, “from each according to ability, to each according to need.” Socialism is more concerned with the people owning the means of production than necessarily ensuring an equality of outcomes. It does try to limit the development of gross inequalities, though. “Redistribution of wealth” from rich to poor–during peacetime, anyway–is something that really only works on a capitalist society that has embraced some measure of ‘social democracy,’ which is a mixed economy with government services supported by progressive taxation.

With all this in mind, we can clearly see that ours is neither a purely capitalist nor in any way socialist economy; we have a social democracy whose social benefits are being threatened by the tremendous tax cuts pushed through in the years before and after the turn of the millennium. Wealth can also be redistributed from the commonwealth to private hands. It usually doesn’t turn out well.

Here’s the sticking point: our tax system actually does penalize (hard) work. But that’s not an Obama-instituted change; that happened most recently and shamelessly when capital gains taxes were slashed almost in half–between 1998 and 2003, that rate went from 28% to 15%. This is how a millionaire like Mitt Romney gets away with paying less than 15% in federal income tax while middle-class families might end up paying over 15%. Wages–money you make from actually working–are taxed on a totally different schedule that includes a top marginal rate of 35%. Reagan, by the way, hacked and slashed the top marginal rate on income from 70% all the way down to to 28%, culminating just after Black Monday happened on Wall Street; Bush’s slashing of capital gains preceded the collapse of 2008.

To quote the New York Times,

There was, in fact, only one time that capital gains were taxed at the same rates that were paid by people who earned their money by working. That was during the years 1988 to 1990, as a result of the Tax Reform Act of 1986 — a law championed by President Ronald Reagan.

To be sure, he changed his mind about unearned income in 1988. After Vice President George H. W. Bush, then campaigning to succeed Mr. Reagan, endorsed lowering capital gains taxes, the president allowed that might be a good idea. Mr. Bush and the Congress did lower them after he was elected.

In fact, someone who actually works for a living (regardless of how ‘hard’ they work) is being penalized for not investing instead of working a regular job. And investing is a totally passive way to make money; in fact, it’s such an easy job that it seemed not to make much difference whether Mitt Romney was actually ‘working’ at Bain Capital for three years as CEO. On the other hand, if the cleaning staff went on strike, people would notice. Mitt made $21.6 million in 2010; the average custodial worker in Boston makes about $29,000 a year.

If income was commensurate with work in this country, that would mean Mitt worked about 745 times harder literally doing nothing (passive income, remember?) than the guy who cleans his toilets. Even if we were to assume that executives work, let’s say, twelve-hour-days, Mitt would have made his janitor’s salary in a single day with 20 minutes to spare.

Even within the world of executives, anyone who has ever started a business can tell you that you can work extremely hard at an enterprise only to have it fail (leaving debt instead of income).

In a capitalist system, you are compensated for how hard your money works, not how hard you do. There are plenty of working-class people with more than one job who, for some reason, have yet to become millionaires despite the hard work and long hours. Not to mention the fact that small investors (and many large ones) who poured capital into the stock market in hopes of gaming the tax system have lost huge since gambling with securities (note the ironic name) became government-subsidized. Bubbles need cash influxes from small, less savvy investors, otherwise they don’t happen!

If O’Donnell, Obama, or any other politician wanted to actually reform the tax code to reward hard work (and not, say, try to make everyone ‘the same’ in some other way than “protected by the law”), they could achieve that goal very simply. End the corporate and capital gains taxes and have all income be taxed under the same schedule. Federally mandate sick and paid family leave to American workers, who work longer hours for lower benefits than any other industrialized country–and take the fewest vacations. Raise the Federal minimum wage, because nobody works harder than the people at the bottom of the corporate ladders. And if you want to get down to the nitty gritty, offer immigrant workers (who work harder than everybody else) a path to citizenship.

Stay tuned for more of my Summer Of Long-Standing Grievances.

SEP
30
2011
The Revenge of Icarus

In the summer of 2008, I wrote a short story that was intended to be a comment on what I thought was a coming depression, where overvalued assets would ruin the wealthy and force all those paper millionaires into destitution. I got some positive feedback from a literary agent, who thought I could turn it into a novel, so I spent the summer researching and plotting out a whole novel that was going to be a prophetic cautionary tale about excess and over-leveraging… and then Bear Stearns collapsed. As the economy actually began to falter, and later, as the Madoff affair unraveled, I decided that the effect was ruined and I should abandon the book, which now seemed like it would come off as a reaction rather than a prescription.

Anyway, since I’ve been a bit blocked when it comes to writing lately, why not drag out an old and moldy chestnut? Enjoy this three-year old morsel while I work on a real post about the economy. And, if you like it, let me know and maybe I’ll release (and maybe rewrite) the next pages…


The Revenge of Icarus

June, 2008

“Since Tragedy is an imitation of persons who are above the common level, the example of good portrait painters should be followed. They, while reproducing the distinctive form of the original, make a likeness which is true to life and yet more beautiful. So too the poet, in representing men who are irascible or indolent, or have other defects of character, should preserve the type and yet ennoble it. In this way Achilles is portrayed by Agathon and Homer.”

–Aristotle, Poetics

Chapter One: Zeus

It was a Tuesday when the Gods descended from Mount Olympus, having talked to their accountant and finally concluded that the whole affair had simply become too expensive.

Christianity had long ago killed off the tribute business. Zeus, to his eternal chagrin, had personally sworn to the other eleven that tribute from mortals would be a never-ending spigot, but what was once a mighty
stream of gold, incense and amazing barbecue all the time had slowed to a trickle of credit card solicitations and coupons for two-for-one haircuts. They didn’t even get fan mail any more, not even from
prisoners.

He remembered the first time a girl he was trying to screw asked him to sign an autograph for her grandmother. “She totally, like, used to worship you and stuff,” she had said.

Back in the halcyon days, Zeus was constantly telling anyone who would listen, Olympus was truly a paradise of unimaginable delights. Las Vegas? Tijuana? Xanadu? Olympus put them all to shame, he would groan, usually while drunk.

Ambrosia on tap–they even had the toilets and showers running ambrosia for a few weeks once, just to do it, but it started to solidify in the pipes and they had to get Hephaestus–that ugly bastard–to fix it. And that
son-of-a-bitch proceeded to bring it up at literally once a week for the next millennium.

There were slaves, of course, to attend to your every need. And not those flea-bitten prisoners of war or twelve-year-old virgins you find nowadays, but real go-getters–accountants and gourmet chefs and Lit.
grad students–the real creme de la creme. And forget about pay-per-view. If you wanted to see a boxing match (or, more likely, olive-oil wrestling), you literally clapped your hands and all of a sudden there’s a two-bout fight in the middle of the courtyard. You even got to fix the odds if you felt like picking up some extra cash that day.

There was a constant revenue stream from the temples back then, and Zeus wasn’t shy about explaining that most of the money came from temple prostitution. Thankfully the gods had thought to invest a little bit of that money, the interest from which was now their main source of income. What was literally a spare change dish near the dawn of Greek civilization had, through compound interest, provided adequately for the Twelve for the past few hundred years. But what with the cost of olive oil and horsewhips and computers and everything else these days, cost-cutting had become commonplace on the Mount. Slaves’ largely unskilled labor was fine for wicker baskets and such, but they made shitty knock-offs when it came to modern luxuries such as designer clutches and private jets.

The first things to go were production values for public appearances, which in retrospect might have hurt them the most in the long run. When you show up at someone’s house demanding they sell their teenage son and/or daughter to you in sexual slavery until the end of time, you’d better show up as something really impressive, like a bull or a shower of gold. If you’re in body paint, it’s real gold leaf. You’ve got
imported silk kimonos and linen tablecloths and edible flower arrangements and ham sandwiches and a cask of upmarket grappa on a wagon in case they give you a rough time. And, if there is any trucking
involved whatsoever, naturally you have to use Teamsters.

In his new life, Zeus resolved, at least his conquests wouldn’t be expecting him to do any of the fancy stuff like turn into a Minotaur or pay child support. He would just be an anonymous aging playboy, on permanent retirement. Maybe I’ll go to the south of France, he thought, or South Beach. Trade the gold leaf for some bronzer.

“Nowadays I can barely afford a gold lame Speedo,” he said out loud. One of the movers turned around because he thought Zeus was talking to him, smashing face-first into another mover carrying a one-armed statue of Hera in an embarrassing pose that the avant-garde sculptor Galen had given Zeus as a birthday present. Hera’s remaining arm snapped clean off and skidded across the marble floor, neatly clipping Zeus in the shin.

“Aagh! Dammit!” he thundered.

“Oh Jesus Christ, I’m so sorry Mister Ze–” said one of the movers, as Zeus turned him into a toad.

“You want a piece of this?” he huffed at the other mover, whose former colleague was now jumping on his face. The mover screamed, so Zeus turned him into a toad, too. It was kind of a knee-jerk reaction,
but he went with it because when you turn toads like that back into people… let’s just say it’s better to let them stay toads. And just as he thought that, they seemed to calm down and stop jumping and ribbiting and just sat there on the broken statue in a daze.

“Stavros?” inquired one of the workers from around the corner, “Stavros? Other Stavros?”

Just how many of these bothersome idiots were there, Zeus wondered. When a fourth worker came in the opposite doorway, he gasped at the broken statue; but Zeus assumed that he was gasping at the fact that his two friends had been turned into toads, so he turned the young man into an alligator.

Alligators eat toads, right? Zeus thought.

This whole thing was really becoming bothersome, so he walked out onto the balcony, to enjoy the view from the above the mountain for what he thought would be one last time. As he looked out onto Greece and the Mediterranean, he remembered the first time he had seen this view, when he moved into the place all those eons ago. A young and relatively naive prince from some tiny island in the Mediterranean, he had worked his way up to Thunder God in the Levantine circuit, under the name “El” (his first agent told him, “keep it simple, stupid!”). The Levantines were OK, but they weren’t as wealthy as the Assyrians or the Egyptians, who had their own thing going.

So he moved to the Greek mainland, made a big show of banishing his “father” Cronus to Tartarus (later New Jersey), and took over what was then a rather small and motley crew of local charlatans in a largely fragmented market. Zeus saw the opportunity in that. He was an entrepreneurial sort by nature, and the thought that he could lead the Greeks to being a real regional player. He had succeeded beyond his wildest dreams, and now… was he leaving success behind or was success leaving him?

“No, I’m a survivor,” Zeus said out loud, again. “I’ve always been able to roll with the punches.”

Like when he took that buyout offer from the Romans. It was just too much money to pass up, and not only did it pay out in spades, it made him a worldwide household name–except that it was the funny name those
slick Italians called him, “Eee-yoo-pit-er.” Sure, it sounded a little fruity, but everybody got weird new names and the dough kept pouring in.

Oh, those Romans, with their money and orgies and vomitoria. Those guys knew how to party. It was like a ridiculous fad that no one knew how to stop–all of a sudden his neighbors on Olympus were running around in tunics with their little horse-drawn mopeds and drinking cappuccinos. But hey, they kept building new temples and private apartments in Rome, and you were constantly meeting girls from every corner of the globe. It was a fairly happening scene in its day, Zeus thought proudly.

Zeus watched some workers take apart the gazebo and realized he had spent so much time agonizing over having to pack all this stuff that he had forgotten to find a new place to live.

He decided to call his son Stavros, the God of Time-Shares and Vacation Rental Properties (Greece and Albania).

JUL
18
2011
Are Marginal Academics Going Crazy?

The Wall Street Journal’s most popular article today was an editorial by one Professor Michael J. Boskin entitled, “Get Ready for a 70% Marginal Tax Rate,” and it was a doozy. It hearkened back to bygone days at university, when we carelessly tossed haphazardly written bullshit under the professor’s door a minute after the deadline, filled with neat little tricks and techniques designed to give the appearance of substance to whatever flimsy excuse for an argument we had to present that week.

Maybe it’s because Boskin’s article reads like a sophomore homework assignment. “First, as college students learn in Econ 101, higher marginal rates cause real economic harm,” he tells us. (I guess they don’t teach history students the same thing.) Good, we’ve established an axiom. But Professor Boskin, how can we tell?

The combined marginal rate from all taxes is a vital metric, since it heavily influences incentives in the economy—workers and employers, savers and investors base decisions on after-tax returns.

So, the metric for how much higher marginal tax rates are affecting the economy is… the combined marginal rate? Leaving aside the circular logic for the moment, questions arise: how are these tax rates combined, and what is a marginal tax rate, anyway?

The current top federal rate of 35% is scheduled to rise to 39.6% in 2013 (plus one-to-two points from the phase-out of itemized deductions for singles making above $200,000 and couples earning above $250,000). The payroll tax is 12.4% for Social Security (capped at $106,000), and 2.9% for Medicare (no income cap). While the payroll tax is theoretically split between employers and employees, the employers’ share is ultimately shifted to workers in the form of lower wages.

Later, he gives us a sample question, assuming taxes will be broadly increased across the board:

It would be a huge mistake to imagine that the cumulative, cascading burden of many tax rates on the same income will leave the middle class untouched. Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%.

How does that work? Well, I got out a calculator (you can, too! it’s interactive!) and checked the professor’s math:

60,000×(1−(.095+(.153÷2)) = 49,710

49,710÷60,000 = 82%, or 18% tax rate before federal taxes

Federal taxes take 25% off the rest, leaving 62% of 60,000;

100-62 = a 38% effective tax rate.

How did he get to 45%, I hear you cry? Well, 60,000×(1-(.095+.153))×.75 ends up being a 43.5% effective rate, which is 45% if you round up to the nearest odd number, for some reason. But that would mean Boskin is counting the full payroll tax, half of which is paid by the employer, entirely as lost income in terms of the total tax bill. Why, by those standards, the teacher is actually making $64,590 a year (instead of $60,000 as stated). Also, our teacher takes no deductions whatsoever.

With failures in math and logic, the bigger problem lies in the fact that nowhere does Boskin say what “marginal” tax rates actually are and how they might differ from the other tax rates he yammers on about throughout the piece. Marginal taxes are those paid on the portion of income above a series of cutoffs. So, for example, California’s citizens face a haunting marginal tax rate (on wages only, not capital gains) of 44.1% including state and federal taxes; but that’s the most anyone can pay in taxes anywhere in the state (barring property, sales and other sin taxes, of course). Now I bet you’re wondering, how many people actually pay that rate? Well, here’s a look at income inequality in the United States:

Top Percent Share Of Total Pre-tax Income 1913-2008

Source: Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913-1998,” Quarterly Journal of Economics, 118(1), 2003. Updated to 2008 at http://emlab.berkeley.edu/users/saez.

The bottom 99% receive between 76-79% of the wages (which is what we’re talking about here) and the same source as the graph above says that in “9 out of 10 households — income [is] below $104,696” and that the average income for these bottom 90% is $30,374 (which includes capital gains). By smoothly transitioning from the injustice of taxing the absolute richest people in the country–a.k.a. the “marginal tax rate”–to the inflated woes of a poor beleaguered California public servant (who is making, one might point out, just about twice the average for the bottom-90% bracket) and threatening Wall Street Journal readers with a projected 70% marginal rate on wages, Boskin has all the bluster he needs to distract from the argument’s essential flaws. One that jumps out at me is the following paragraph:

Nobody—rich, middle-income or poor—can afford to have the economy so burdened. Higher tax rates are the major reason why European per-capita income, according to the Organization for Economic Cooperation and Development, is about 30% lower than in the United States—a permanent difference many times the temporary decline in the recent recession and anemic recovery.

Besides the intentionally misleading wording that leaves the reader to decide whether the OECD specifically blames higher tax rates in Europe for the comparative difference in per-capita income with the U.S., or whether they just operate a website that features statistics for the whole of the European Union (or maybe even all of Europe as a continent), the truth is that the rich can be so burdened. Not only can they be so burdened, but the idea that lower taxes on the extremely wealthy somehow translate into economic benefit for the rest of the economy is flat wrong. You can see exactly how flat I mean:

Average After Tax Income by Income Group 1979-2007
Source: Congressional Budget Office, Average Federal Taxes by Income Group, “Average After-Tax Household Income,” June, 2010.

You see, no matter what the after-tax income of the top marginal earners, since 1979, it hasn’t made one lick of difference in real take-home pay for the rest of us. On the other hand, the wealthiest 5% now make what the wealthiest 1% used to make way back then, and the top 1% themselves are taking in money on what, to the rest of us, looks like a vastly distorted curve.

1979, it turns out, was not only the year Reagan began to return our country to greatness by running for president, but also the year average wages basically stopped growing. Here’s the best part. Baskin acknowledges this problem, and then waves it away as if trying to swat a persistent mosquito:

Some argue the U.S. economy can easily bear higher pre-Reagan tax rates. They point to the 1930s-1950s, when top marginal rates were between 79% and 94%, or the Carter-era 1970s, when the top rate was about 70%. But those rates applied to a much smaller fraction of taxpayers and kicked in at much higher income levels relative to today.

There were also greater opportunities for sheltering income from the income tax. The lower marginal tax rates in the 1980s led to the best quarter-century of economic performance in American history. Large increases in tax rates are a recipe for economic stagnation, socioeconomic ossification, and the loss of American global competitiveness and leadership.

Back to the history books: in the 50’s and 60’s, when we were doing the exact opposite of “economic stagnation, socioeconomic ossification, and the loss of American global competitiveness and leadership,” marginal tax rates were between 94% and 70%. Not to mention the entire article is a long strawman directed at imagined increases in taxation connected to the weight of our deficit, $1 trillion of which were awarded as tax breaks to the wealthy in the last 10 years–and look how well that turned out.

So Boskin fudges the facts and the figures and the history and drips a little Milton Friedman blood on the altar of no-taxes. Who is this guy, anyway? Only last year, Boskin issued a screed on the same WSJ editorial page savaging the totalitarian impulse to destroy the truth with faulty numbers:

Politicians and scientists who don’t like what their data show lately have simply taken to changing the numbers. They believe that their end—socialism, global climate regulation, health-care legislation, repudiating debt commitments, la gloire française—justifies throwing out even minimum standards of accuracy. It appears that no numbers are immune: not GDP, not inflation, not budget, not job or cost estimates, and certainly not temperature. A CEO or CFO issuing such massaged numbers would land in jail.

Well, at least his motives are purely scientific–Boskin is, after all, a humble Stanford economics professor. It’s not like he’s in that rareified top echelon of earners who are actually paying the top marginal tax rate, he’s just a neoclassical economist with a real ideological fervor, right? Wrong.

Boskin happens to be a member of Exxon Mobil’s board of directors and has been for over 15 years. He also sits on the boards of Oracle, Japan’s Shinsei Bank, and European telecom giant Vodafone. He also happens to be the Friedman chair and a fellow at conservative think-tank The Hoover Institution, named after one of America’s favorite presidents (definitely in the top 100). So, this guy knows a thing or two about corporate number-crunching. And, history!

In Argentina, President Néstor Kirchner didn’t like the political and budget hits from high inflation. After a politicized personnel purge in 2002, he changed the inflation measures. Conveniently, the new numbers showed lower inflation and therefore lower interest payments on the government’s inflation-linked bonds. Investor and public confidence in the objectivity of the inflation statistics evaporated. His wife and successor Cristina Kirchner is now trying to grab the central bank’s reserves to pay for the country’s debt.

Most interestingly, Boskin was once head of the Boskin Commission, which convinced the government that… here, I’ll just let Wikipedia explain, it’s easier:

Its final report, titled “Toward A More Accurate Measure Of The Cost Of Living” and issued on December 4, 1996, concluded that the CPI [Consumer Price Index] overstated inflation by about 1.1 percentage points per year in 1996 and about 1.3 percentage points prior to 1996.

The report was important because inflation, as calculated by the Bureau of Labor Statistics, is used to index the annual payment increases in Social Security and other retirement and compensation programs. This implied that the federal budget had increased by more than it should have, and that projections of future budget deficits were too large. The original report calculated that the overstatement of inflation would add $148 billion to the deficit and $691 billion to the national debt by 2006.

I guess Stanford’s Irony Department is really great.

MAY
12
2011
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DADDY WENT AND LOST HIS LEG STOP THE POOR INVALID IS A TERRIBLE POKER PLAYER


 
MAY
06
2011
Meet The New Boss, Same As The Old Boss

I’ve decided to resurrect my dear old blog, now a rambunctious and neglected eight-year old–today! On May 6th in 2003, I decided to start a blog instead of sending my friends links to stuff via Instant Messenger. Back, then, I had to carry these posts uphill both ways; I built my own blog software and […]

SEP
22
2009
This Ought To Be A Healthy Debate

So the President unveiled his health plan(s) to what I thought was an incredible display of bravery on the Republicans’ part, and I’m jealous. I remember what it felt like to torture the substitute teacher from the back of class, yelling out “you lie!” and holding up signs and so forth. These people are really […]

AUG
20
2009
According To My Careful Prosthesis

Like you, I was very concerned about the well-being of crazy right-wingers this summer. Their favorite party out of office, a Democratic super-majority in the Senate, the stock market dragging its feet—how were we, as a nation, going to keep these people off the streets? By staging a gigantic nation-wide debate about healthcare, that’s how. […]

MAY
06
2009
Web 2.1

Usually I talk about politics here, with slight detours into science or arts or things like that, but on the sixth anniversary of Casual Asides, I’ve decided to turn to the foundational element of this blog: technology—specifically, the World Wide Web. Six years is a long time on the Internet, and even longer in the […]

MAY
04
2009
Why Doesn’t Somebody Pull Out A .45 And–Bang!–Settle It?

A modest proposal for extreme and Constitutional gun control: The right is losing a considerable amount of ground in the culture wars—every poll released in the last year shows America lurching to the left on traditional issues for conservatives from gay marriage to economic regulation to opening relations with Cuba. But there is one issue […]

APR
05
2009
The Democracy of Racism

Later this month in Geneva, the United Nations will be holding what it calls the Durban Review Conference (a.k.a. “Durban II”) to “evaluate progress towards the goals set by the World Conference against Racism, Racial Discrimination, Xenophobia and Related Intolerance in Durban, South Africa, in 2001.” Part of the agenda at Durban II will be […]

OCT
27
2008
How Can America Break Free Of The Two-Party System?

The economic turmoil of the past year hasn’t just thrown Wall Street into disarray—it’s causing ideological havoc in Washington. The two major parties are just as confused by the crisis as the rest of America, and party lines are becoming blurred just at the point where the Democrats seem poised to steamroll the Republicans on […]

OCT
08
2008
If You Plant Ice, You’re Gonna Harvest Wind

A few years ago, I bet a friend that the Dow Jones Industrial Average, an index of the leading American companies’ stock prices and one of the most celebrated economic indicators on Wall Street, would dip below 10,000 ‘points’ as a result of the oncoming credit crisis. Today I called him at work and said, […]

SEP
16
2008
Drill Up, Stupid

The component of the price of oil due to speculation was always kind of an unknown quantity. At the height of the oil bubble this summer, with prices at $150, someone suggested to Congress that up to a third of the price was actually due to market manipulation (a.k.a. “speculation”) by financial institutions, many of […]

JUN
21
2008
Top Ten Myths About Ecology

Since I spent most of my last appearance on Sirius’ Blog Bunker and all of the previous post talking about oil without too much emphasis on the greenhouse gas part of the equation, I think it behooves us all on the left side of the political spectrum to deal with the fallacies of global warming […]

JUN
20
2008
Driving Like Jehu

What drives oil prices? Everyone has a theory that suits their ideological niche—Democrats blame lack of regulation, Republicans blame too much regulation, and the rest of us wonder why prices aren’t higher than they are already. Earlier this month, Congress got an earful from a variety of oil experts on both sides of the ideological […]

JUN
01
2008
I Don’t Believe In Bullshit

In 1517, a young monk named Martin Luther, began a new era in Christianity by declaring his independence from what he saw as the excesses and iniquities of the Roman Catholic Church. Having kicked off the Reformation by nailing an itemized list of complaints to a church door, Luther challenged not only the orthodoxy of […]

MAY
06
2008
Knock On Wood

It’s Casual Asides’ 5th anniversary. Consider (with the new word count feature at the bottom of each post) that at this point, I’ve written about 260-odd posts and hundreds of thousands of words, enough to fill a decent sized book. That’s gotta be worth something, right? I pause here to consider that although I like […]

MAY
03
2008
Bulls in the China Shop

It’s hard to watch the news lately, because it’s just an interminable vivisection and slow broil of the Democratic candidates, thanks to Hillary’s stalwart refusal to do the math. C’mon, folks, it’s all on CNN’s delegate counter game, which has helpfully added a feature which lets you see exactly why Clinton needs a 66% margin […]

MAR
09
2008
Any Minute Now, Amos ‘n’ Andy Broadcasts Will Reach Planet X!

Dear readers, exciting things are happening. Here’s a quick review of the past few months. That Book I’m Always Talking About For the last two years, I’ve been writing a non-fiction book—it’s what I’m doing when I’m not posting here. When people ask me what the book is about, I usualy say something like, “it’s […]

DEC
05
2007
Casual Policy Suggestions

It’s time for me to tell you what’s good for you, besides the obvious—cod liver oil, plenty of sunshine, and switching to a ‘light’ cigarette. Start Snitching The greatest thing about the immigration debate today is that everyone involved in debating it in the media is totally full of shit. You have your Lou Dobbses, […]

NOV
06
2007
Why I Am A Pacifist

I missed the anti-war rally last weekend. I’d call it a peace rally, but nobody’s really for ‘peace’ anymore; the majority of the country still thinks the war in Afghanistan was justified, and they’re even receptive to bombing Iran. Even the majority of the country who is now against the Iraq war isn’t really against […]

OCT
13
2007
Fall Behind

Dear readers, you may be wondering what I’ve been up to, since lately dispatches are few and I never call anymore. Well, I’ve been working on a book. If you want a copy of the proposal, e-mail me and I’ll send it to you. For the purposes of this website, the proposal is to be […]

AUG
29
2007
The Rotting Corpse of King Croesus

Now that News Corp has all purchased the Wall Street Journal and late capitalism is experiencing yet another paroxysm—er, market correction—I think it behooves us all to consider the fate of the lowly Glass-Steagall Act of 1933. You see, way back in the 1920’s the market was booming—everybody was getting rich speculating in the market […]

AUG
20
2007
Everyone But Thee And Me

Welcome to another edition of actual casual asides, seasoned as usual with gotchas and I-told-you-sos. Ask Not For Whom The Bell Tolls… The United States and our allies have no rational interest in disclosing how many people we’ve killed in Iraq and Afghanistan if that number is inclusive of civilians. “We don’t do body counts,” […]

JUL
31
2007
The World Would Swing, If I Were King

The foreign policy spat between Barack Obama and Hillary Clinton couldn’t have been scripted better for the mainstream media. It’s also the reason why watching politics in America drives me crazy. The great triangulation has begun. Lyndon Johnson had the Texas two-step, and the Clintons have the Sister Souljah moment. It’s one of their ways […]

JUL
17
2007
Is Virginia As Lost As Anbar?

Sometimes, it’s too easy. What kind of idiot protests that the surge is working? “AJStrata,” for one, who wrote this charming piece of tripe which I cannot help but “fisk.” So, let’s get into it: The signs abound that Iraq is stabilizing. The massacres of Muslims that al-Qaeda and the Mahdi Malitia [sic] inflict are […]

JUL
12
2007
A Rose By Any Other Name

Sometimes I wonder how many times I can restate essentially the same points about Iraq. I’ve been doing it for over four years now. I suppose I should derive some satisfaction from the fact that the majority of Americans are now against the war. Unfortunately, that’s like the majority of Americans being against the Big […]

JUL
05
2007
Oh, Pobrecito!

When will Americans learn that prison just isn’t fit for rich people? Apparently, it was these last few weeks. First there’s the Paris Hilton in-and-out again with the overcrowded California correctional system. When asked why Hilton was being released a second time before her setnece had been served, an official mumbled somehing about ‘health concerns’ […]

JUN
29
2007
Homework Over Summer Vacation

There’s been so much stuff going on in the past month, both in the world and my own life, that I feel like I fell behind in the news somewhere around the beginning of June. Hence, no posts; I’ve been working on some other things. But There are some things I’d like to address, briefly: […]

MAY
28
2007
They’ve Plucked, They’ve Sown, They’ve Hollowed Him In

The thrashing of Iraq continues. Today is Memorial Day, when America traditionally celebrates the deaths of its military men and women by going to the beach and wearing funereal shades of white and so forth. Speaking of symbolic dates, I propose a new slogan for the anti-war marchers for the summer season: “Out By September […]

MAY
18
2007
Change A Light Bulb, Save Darfur

I can’t quite put my finger on why I’ve singled Republican Presidential candidate Duncan Hunter out as my bête noire, but I have, so deal with it. Hunter isn’t as dangerous to civil rights as, say, Sam Brownback, or as connivingly amoral as Rudy Giuliani, but there’s something about him that just rubs me the […]

MAY
10
2007
If The Hoods Don’t Get You, The Monoxide Will

As I mentioned earlier, the Democrats don’t have enough backbone to do.. well, nothing, and let the Iraq war end in 180 days. So, they’re going to continue to fund the war in some fashion, likely by insisting on “benchmarks,” which is now the catchphrase du jour . As with everything else about the American […]

MAY
06
2007
Four More Years

Today is this blog’s fourth birthday, and as you can see, I’ve done a bit of a redesign. The old design was intentionally cluttered, because that’s how my desk looks. But I figured that, as I say at the bottom of all my e-mails, “non sunt multiplicanda entia praeter necessitam,” which means not to multiply […]

MAY
03
2007
Ask the Cop in The Woodpile

Yesterday as I was watching Fox News, I heard a small but sharp explosion and the clatter of plastic shrapnel. The batteries in my VCR remote, which I last remember replacing sometime in college, decided that they’d had enough. A cursory examination of the debris showed the batteries were supposed to expire in 2012, with […]

APR
26
2007
Cannon Fodder

C-SPAN is getting better and better with the Democrats putting the investigations front and center. I have to say it’s thrilling to watch Republicans squirm after years of this bullshit going the other way. Kucinich, bless him, is even going after Dick Cheney with articles of impeachment. I am a big fan of this approach, […]

APR
14
2007
Gender Divides

There are a few topics I try to avoid on this blog; Israel, monetary policy, cats. But I suppose the most glaring omissions are feminist concerns (closely followed by Darfur, a topic about which I have long struggled to write without much success). I’m not going to offer some lame excuse like “I just don’t […]

APR
11
2007
Barbarians at the Logic Gates

Let me state at the outset that I am a huge, huge fan of both Tim O’Reilly and Jimmy Wales. I own several O’Reilly books, and obviously I use wikipedia all the time. I respect them immensely, and we should all bow before their superior technological wisdom. Except in this case: A widely forwarded New […]

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