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.
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:
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:
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 was going to say something about the whole Bill O’Reilly lawsuit and pursuant scandal, but more sober reflections reminded me that I ought to respect O’Reilly’s innocence until proven guilty. What’s indelibly funny, whether the allegations are true or not, are the things O’Reilly allegedly said as per the defendant. The Smoking Gun has got this covered in spades. I can’t even reprint what O’Reilly supposedly said for fear of inviting a horde of perverts from Google looking for “falafel loofah mitts.”
From the way O’Reilly misquotes people on his show, I was really tempted to quote from his detective novel sex scenes, but actually, I have an even better idea I’ll tell you about in a minute.
Next up in our sampler is the flack Kerry’s getting for his comment about Mary Cheney, the lesbian daughter of Dick Cheney:
KERRY: We’re all God’s children, Bob. And I think if you were to talk to Dick Cheney’s daughter, who is a lesbian, she would tell you that she’s being who she was, she’s being who she was born as.
The next day Lynne Cheney (and our right wing punditry) excoriated Kerry for… umm…
“Now, you know, I did have a chance to assess John Kerry once more and now the only thing I could conclude: This is not a good man,” she said at a rally outside Pittsburgh. “Of course, I am speaking as a mom, and a pretty indignant mom. This is not a good man. What a cheap and tawdry political trick.”
What was that trick again? Mary is part of Cheney’s campaign staff. Her last job was at the Coors Brewing Co. as the ‘gay and lesbian corporate relations manager.’
How dare Coors bring up the fact that Mary is a lesbian! That’s a cheap and tawdry political trick! And as for Dick Cheney repeatedly bringing up his daughter’s sexual preference on the campaign trail? You guessed it–proof that Dick is not a good man.
What’s apparent is that Lynne considers the word “lesbian” to be an epithet and discussion of her sexuality to be an insult. To wit, a 2000 interview with ABC via Salon:
On Sunday, the issue of Cheney’s sexuality took an odd twist, when her mother Lynne denied ABC’s Cokie Roberts’ assertion that Mary Cheney has “declared that she is openly gay.” An irritated Lynne Cheney shot back: “Mary has never declared such a thing. I would like to say that I’m appalled at the media interest in one of my daughters. I have two wonderful daughters. I love them very much. They are bright; they are hard-working; they are decent. And I simply am not going to talk about their personal lives. And I’m surprised, Cokie, that even you would want to bring it up on this program.”
OK, so far, nothing new. But did you know, speaking of novel sex scenes, that Lynne Cheney’s 1981 masterpiece, Sisters, includes a lesbian sex scene? Is this the smoking gun which proves homosexuality is hereditary? Just kidding–the truth is that I couldn’t give a flying fuck if homosexuality is a choice or not. That’s a debate for religious people.
Rounding out our scandalous sex sampler: Antonin Scalia comes out for orgies to reduce stress, and Alan Keyes (of whom we can only conclude that he is not a good man) goes after gay parents, having already bashed Mary Cheney for being a lesbian:
U.S. Senate candidate Alan Keyes told a rally Saturday that incest was “inevitable” for children raised by gay couples because the children might not know both biological parents. “If we do not know who the mother is, who the father is, without knowing all the brothers and sisters, incest becomes inevitable,” Keyes told the Marquette Park rally held to oppose same-sex marriages.
Keyes, although he may be a bit fuzzy on probabilities, makes an excellent point. This is why I assume he will join the burgeoning national movement to end adoption on these exact grounds.
I was reading this Salon article about the chaos in Iraq and how the terrible planning of the neocons in the White House made this quagmire possible.
Then my mind wandered back to that O’Reilly-Franken-Ivins forum (which you can download here in mp3 format). What, I hear you cry, could the connection possibly be? Here, let’s start off with the quote by Bill O’Reilly that keeps repeating in my head:
Bill O’Reilly: The difference between Ms. Ivins and myself is that I don’t think the government can help you all that much in your life, all right? I don’t believe that all the big government programs, that are set up to benefit the folks, most of them never get to the folks. I was a high school teacher, I know where the money goes, it doesn’t go to the kids. You want more money? fine. It ain’t going to the kids. It’s discipline, it’s structure, it’s paying the teachers a better wage, it’s training the teachers better, all of those things. So, I see the world as a world that self-reliance matters. That’s what should be taught, all right? That’s where I’m coming from. You know, we talk about the tax and the deficit, well, you know, the left now is screaming, the deficit, the deficit, the deficit, I’m looking at them going, look, you guys are driving the big government programs ever since the Great Society of 1964. I mean, those are massive spending programs, many of which failed dismally, and the corruption, here in California, for example, in the MediCal program, is astronomical. It’s a giant waste. Safety net yes, nanny state, no. All right? And I don’t believe in income redistribution, all right, I don’t believe in taking money from me, all right, who started out–[garbled interruptions]– who started out with nothing, all right, and then giving somebody else, and then not regulating what that person does with it…
We see here that O’Reilly is staking out a classic American conservative vision–taxes are fundamentally, philosophically illegitimate and that government programs are intrinsically wasteful and unnecessary.
This kind of thinking is wilfully naive. Whenever people say something like this, the first thought that pops into my head is, “have you ever lived in a country that doesn’t have a government?” Only softies who live in governed countries could possibly take for granted the idea of government’s necessity (and the corresponding necessity of taxes).
The thing is, we know O’Reilly doesn’t fully believe his own bullshit. He condemns big government spending programs and throwing money at problems, yet in the same rant he says we should pay teachers more, provide them with more training, and establish a “safety net” (The key to unlocking this self-contradiction, I believe, is that the only thing he really means is, “I don’t believe in taking money from me.” Not in my backyard and neither in my checkbook!).
What does this all have to do with Iraq, I hear you cry? Reports on life in Iraq now do sound terrible; violent crime, riots, looting, no water, no electricity, massive unemployment, foreign companies coming in to take oil profits, etc. But you could easily put a positive conservative spin on it–this is a country with no taxes, no economic regulations, and the overwhelming majority of families own firearms (as mandated by old Ba’ath party policy). Fundamentalist religious influence on politics has never been greater.
The U.S. is doing its part, too–I call it blitzkrieg privatization. Since Saddam’s corrupt Ba’ath state basically ran everything, the fall of the government has resulted in chaos and disruption of previously state-owned utilities and oil fields. But don’t worry, American private enterprise will be airlifted in on a white helicopter soon.