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…

“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).

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:

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:

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.

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 CMS, and lovingly tended to it for years, writing my own features, plugins, editors, themes, search engines, and so on. Then, at some point not long after I switched hosting servers, I broke the software and lost the ability to post through my precious software I’d spent years making. And honestly, I didn’t feel like fixing it.

I had started to submit work (largely unsuccessfully) to magazines and so forth, and eventually stopped writing for a bit. Then I worked on massive exposes of shadow conspiracies bent on world domination, but struggled to a) find the right news hook and b) trim down my fantastic account of killer robots feasting on the flesh of terrified hordes to less than 3500 words.

So, this blog will be filled with shorter posts from now on. I’ve got a custom WordPress install and I’m nearly done cleaning out the archives of nasty bits of leftover formatting (if you find an incomplete or funny-looking post, leave a comment). I’ll be adding cool new features by the by.

Lots more to come!

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 exploring new boundaries in civil discourse. Talk about exercising their liberties—if Joe Wilson had been Cynthia McKinney, they’d have dragged him out of the Capitol in handcuffs. Often behavior is perceived in ways that have more to do with the perpetrator than the crime.

If the Democrats had been as vehement over the plan to invade Iraq as the Republicans are about health care reform, we’d never have gone to war. But then again, criticizing the President used to be treasonous merely by virtue of the office; now it seems like a lot of plain ol’ folks out there think Obama is committing treason merely by being the President.

So health care reform will be a valiant and pointless struggle, because the Democrats don’t need Republican support to pass the bill. In fact, the President ought to say to those Blue Dogs who think they’ll be vulnerable in the coming elections, “vote against it if you think your constituents won’t like getting health care, run as a maverick and see how far it gets you.”

And so, of course, a conservative Democrat comes out with a plan that does not include the public option, and the left is howling because it doesn’t go far enough while the right howls about the government taking over healthcare. At least we have achieved one great accomplishment already: making sure no one can ever propose a single-payer option ever again. It worked! Hooray! Idiots.

Let’s be clear. This is not about bringing down “costs.” I get sick to my stomach whenever people talk about the need to control healthcare costs, because if the problem were costs, the whole debate would be over already. The crisis is not about healthcare costs. It’s about healthcare prices. Medicare costs aren’t what’s bankrupting Americans, it’s the profit margins collected by for-profit medical care. When the government runs the plan, prices and costs are roughly equivalent—about 2-3% off. When a corporation runs health care, the prices are whatever they can get you to pay and the costs are as little as they can spend. The greater the gap, the more money the corporation and its employees make, typically about 30% (i.e., a gap 10-15 times larger than government-run healthcare).

Obama’s common-sense rules about requiring insurance companies to behave like human beings are great, but it will end up increasing prices unless there is a real public option. Insurers make money by eliminating risks; when it comes to healthcare, that means eliminating people from coverage. “But won’t insurance companies make more money because now they’ll be insuring tens of millions more people?” Not if those are the people who they have very carefully figured out are going to end up costing them money. Healthcare is expensive now and isn’t going to get any cheaper any time soon, no matter how much “cost-cutting” we engage in. If the government’s plans end up offsetting the losses by insurance companies who must now insure unprofitable patients, we’ll be lucky, but we all know that no matter what happens, prices for healthcare consumers will go up.

If you want a glimpse into the minds of the people you trust to run your healthcare, you should be watching the debate play out on CNBC or Fox Business Channel. There, it’s the poor beleagured insurance companies that are the victims, only trying to protect themselves from vicious, lying packs of diseased hustlers who sign up for insurance knowing that they have a preexisting condition. Insurance prices are going to go through the roof (just like they did in Massachussetts, where Romney instituted mandatory coverage) and we’re all going to get screwed, all because Obama wanted to make nice with people whose votes he does not actually need. Inelastic markets don’t work the same way elastic ones do, and nobody shops around for healthcare providers after their heart attack.

Repeat after me: a corporation cannot take the Hippocratic oath. Would you take your healthcare from someone who is barred from taking the Hippocratic oath? I’d rather not, entrez-nous, because it means that by definition they don’t have my best interests at heart. The incentives are misaligned; which is no surprise considering that we are the only Western nation that has an “employer-pays” system. I mean, sure, employer-pays would be a fine idea, if your employers were prohibited from firing you. But they’re not. These health plans were introduced as a substitute for wages in the postwar boom period, but now it’s clear that companies are no longer reaping any benefits from running their workers’ health insurance plans. And now we’ve gotten to the point where one sixth of America’s economy is holding the other five ransom.

If you want to make a meaningful compromise—that is, with the insurance and healthcare companies directly, as opposed to their stooges in Congress—take a page from the President’s playbook when dealing with a real sensitive issue; federally-funded abortions. With characteristic subtlety and nuance, Obama flat out said we weren’t ever going to cover abortions. Well, where does that leave people who need abortions? At the mercy of the market, I suppose, and that’s the idea I want to examine.

If the healthcare industry simply cannot bear to compete with government-run healthcare, it shouldn’t have to. Instead of including a para-governmental “public plan” in addition to the panoply of existing government health plans and having it compete with private health insurance, the government ought to assume control of some parts of healthcare ought right, and let private insurers compete for others as long as they meet federal guidelines.

I say this because as I watched the President chicken out on abortion, it occured to me that I feel the same way about New Age “medicine” as I suspect pro-life conservatives feel about Planned Parenthood. The thought of federal dollars going to fund acupuncture or healing crystal treatments makes me, well, sick. At the same time, if you listen to health care reform opponents, America has the best system in the world because everybody’s getting Lasik^TM surgery nowadays.

So, here’s my proposal: the government should cover all catastrophic illnesses and emergencies (like they do now anyway in ERs across the country), all surgeries and medications. Private insurers, coops, sewing circles, witch doctors and other HMOs would compete to cover doctors visits, wellness, testing and preventative care, but most importantly, all elective surgeries, all ‘non-traditional’ medicine, all vitamin supplements, placebos, palm readings, gender reassignments, urinalyses and tattoo removals. It’s not exactly single-payer, but it is unlike it enough to qualify as “unique,” which is much more important to politicians than whether or not it works.