The states should be abolished.
Well, OK, maybe not abolished per se. But they are detrimental to the proper functioning of the economy, as they currently exist.
What raises this issue, not for the first time, in my mind is the worry, in Hoffman Estates, Illinois, about what may happen if the suburb's biggest employer, Sears, should pick up and leave.
Why should Sears do this? Because Hoffman Estates, and Illinois, dares to apply to Sears the tax rates that apply to everyone else. In Illinois, I mean. Other states will bid for the privilege of having Sears move its headquarters to their locales; and the primary thing they have to offer is tax breaks.
That's why Sears went from downtown Chicago to the boondocks in the first place, of course: the town of Hoffman Estates gave Sears zillions of dollars worth of tax breaks in return for Sears's relocating to their village, back in 1989. The deal expires next year, and so Sears is now seeking another tax exemption, from another state. Of course, it would also be willing to consider a suitable extension of its current tax exemption, in return for staying where it is.
States want companies like Sears; they employ large numbers of people (about 6,000, in the case of Sears), and this brings prosperity in the form of all the money that is spent locally by those thousands of employees.
Trouble is, those thousands of employees have multiple thousands of kids, who need schools. And the thousands of families need parks, and streets, fire departments, and infrastructure of diverse and complex nature. The employer, in the normal circumstance, pays property taxes on its facilities to help build those schools and hire those firemen.
When localities or counties trade long-term tax "holidays" to specific companies in return for the gift of a headquarters facility, or a big plant, to be located within their boundaries, they essentially render themselves hostage to the company.
So now, Hoffman Estates has a gun to its head: if Sears leaves, people will leave. Housing prices will fall; a big facility will become idle; schools will empty; and so forth. Sure, they need the tax receipts, but the village also needs the company's presence. And suddenly, the company has suitors from all over the country.
So states and municipalities enter into a bidding war for the prize of the company's presence on their soil. The states engage in a race where the winner impoverishes himself.
More on this later. But it seems obvious that, when you have dozens of different administrative districts (our states) racing to the bottom in this way, everyone is worse off.
Oh yeah: except for the big corporation.
Friday, October 14, 2011
Thursday, July 21, 2011
Afghanistan
This is old news, what with the current obsession with constitutional amendments mandating balanced budgets --a stupid idea if there ever was one; is it superfluous to mention it's a Republican brainchild?-- and sundry other posturing by our political class, which has come to resemble nothing so much as the characters in a play by ... oh, maybe Oscar Wilde. Or a skit by Ernie Kovacs, like the immortal (and faintly racist) "Nairobi Trio." But precisely because the situation in Afghanistan is, however temporarily, off the front page, I thought it would be a good time to review the bidding, as it were. And so I've chosen two articles that address different aspects of that war and that country.
The first, from the July 9, 2009 issue of the London Review of Books, is an historical review of Afghanistan's position in international conflicts. Rory Stewart focuses on the "Great Game" of the 19th century between the Russian and British Empires and Afghanistan's role. Here is that piece. Next is David Bromwich's article, "The Fastidious President," in the November 18, 2010 issue of that same publication.
The first, from the July 9, 2009 issue of the London Review of Books, is an historical review of Afghanistan's position in international conflicts. Rory Stewart focuses on the "Great Game" of the 19th century between the Russian and British Empires and Afghanistan's role. Here is that piece. Next is David Bromwich's article, "The Fastidious President," in the November 18, 2010 issue of that same publication.
Saturday, May 21, 2011
Tax Rates for 2014
Many of the problems vexing our country could be addressed fairly, expeditiously, and effectively by returning to the individual tax rate structure we had in 1954, the first term of President Eisenhower.
Here are the MFJ brackets for that year (there are actually many more brackets, approximately 25 in all; the missing ones are interspersed between these break points):
It’s time to try something old.
Here are the MFJ brackets for that year (there are actually many more brackets, approximately 25 in all; the missing ones are interspersed between these break points):
$0 - $4,000 20% $6,000 - $8,000 22% $16,000 - $18,000 34% $38,000 - $44,000 56% $70,000 - $80,000 69% $100,000 - $150,000 75% $400,000 - 91% |
Too steep? OK, let’s index these rates for inflation since 1954. Roughly speaking, the consumer price index (1982 = 100) was 25 in 1954, and is about 200 today, so prices have increased eight-fold in the past 55 years. So let’s leave the rates the same, and multiply the brackets by 8. For simplicity, let’s say the rate shown begins to apply when income reaches the amount indicated:
Income Marginal Rate
$32,000 20%
$64,000 22%
$144,000 34%
$352,000 56%
$640,000 69%
$1,200,000 75%
$3,200,000 91%
Let’s compare these rates with those actually in place in 2010:
Income Range 2010 Indexed 1954
Marginal Rate Marginal Rate
$0 - $16,750 10% 0%
$16,750 - $32,000 15% 0%
$32,000 - $64,000 15% 20%
$64,000 - $68,000 15% 22%
$68,000 - $137,300 25% 22%
$137,300 - $144,000 28% 22%
$144,000 - $209,250 28% 34%
$209,250 - $352,000 33% 34%
$352,000 - $373,650 33% 56%
$373,650 - $640,000 35% 56%
$640,000 - $1,200,000 35% 69%
$1,200,000 - $3,200,000 35% 75%
$3,200,000 - 35% 91%
Notice that people in the lowest brackets would see their tax rates vanish. From a public policy standpoint this is probably undesirable; so let’s insert a 5% and a 10% bracket at these low levels of income. Let’s also provide a personal exemption of, say, $10,000 for the first two people listed on a return –husband and wife, husband and husband, whatever—and reduce it to $5,000 for all dependents after that. That way, a family of 4 with an income of $32,000 would pay a 10% tax on the last $2,000. Nominal, sure; but it forces them to pay attention. And we should all be taxpayers, even if nominally so.
And let’s not be accused of being punitive on the middle class: keep the rates where they are now, up to an income of $144,000; and split the difference for the next bracket. Say, a 30% rate for incomes between $144,000 and $209,250.
It’s only when you get above $350,000 that taxes really start taking off. This is the area where, over the past 50 years, the brackets have simply disappeared. That is, those at the top are currently being taxed at rates far, far below what they would be had the 1954 rates been left in place and only adjusted for inflation. In other words, someone who earns $1 million today pays only 35% on his next dollar of income; had the tax rate schedule been maintained at historical levels he would be paying more than double that –75%.
Even in 1980, there was a 70% bracket, applicable to dividends, interest, and other unearned income; capital gains were taxed at 35%, and earnings at 50%. Note that these are the top rates in each case. Few people actually paid them; but the rates were there for the very wealthy.
No wonder the rich get richer, now more than at any time since the Gilded Age. And if you consider individual cases, why does it make sense that a physician, who earns a handsome but not egregious $300,000 per year, should pay the same rate on his next dollar of earnings as the CEO of a Fortune 100 company who makes $10 million?
Our tax structure has lost what is probably the most important feature of a voluntary system, namely equity. It is simply unfair, as it stands today. That lack of basic fairness has been obfuscated as we have had hammered into us all the notion that “taxes” are too high, by those at the top who have reaped substantially all the benefits of the tax restructuring of the past generation, and suffered essentially none of the ill effects of the tightening of the safety net and the rape of the economy by the economic elite (with the active collusion of the Congress).
Let’s get concrete. Say I’m a surgeon with a prospering practice, and my taxable income is $750,000 per year after all exemptions and deductions. What do I pay today, and what would I pay under this proposed alternative?
The 2011 tax rates compute a tax for our surgeon (assuming a joint return) of $232,808. Under the proposed scheme above, he would pay $331,900, an increase of $100,000. This is a big increase; on the other hand, it leaves him with “only” $418,100 after tax. This is about $1,145 per day. Most Americans don’t spend anything like that even when on vacation and paying for hotels, airplane tickets, and so forth.
Yes, I know that there are other taxes, like property taxes and payroll taxes and so forth. We all have expenses. But there are a lot of unmet needs in this society; and we did not achieve the prosperity of the 20th century –prosperity that has declined significantly for a large minority, if not an actual majority, of Americans since 1980—by failing to meet our needs as a society. Quite the contrary, it was only after we introduced steeply progressive income taxation, and social welfare programs, that our middle class grew and our society began to realize its potential. We have given up middling prosperity for the great majority in exchange for lives of unimaginable wealth and privilege for a thin slice of our population. In the process, we’ve distorted our economy and our polity, our overall standard of living has declined, we’ve come close to ruining our social contract, and we’ve steadily lost ground when comparing ourselves to other countries on almost any metric you choose: healthcare cost and outcomes, life expectancy, income inequality, educational achievement –even literacy--, social and economic mobility, and so on.
It’s time to try something old.
Sunday, May 1, 2011
Campaign Contributions and Regulation
Paul Krugman blogs about financial regulation in the context of political calculation and political contributions, and concludes:
"Of course, when the Times complains about how the administration’s explanation
validates the antiregulatory ethos that led to the crisis and still threatens
to block reform
you could say that this is the whole story of the Obama administration. Name your issue — fiscal policy, Social Security, financial regulation, foreign policy, Guantanamo — and the administration has effectively caved in to the other side’s framing."
This is a troublesome reminder of how regularly I have been disappointed by this centrist president who, while being tarred (I use the word advisedly!) with the "socialist" brush, has time and again compromised by moving from the center --having hardly bothered to argue forcefully his own position-- to the midpoint between the center and the hardest of hard right positions. It is a testament to the racism and xenophobia of the Republican base that the GOP continues to excoriate this moderate. Do they think for a minute that Hilary Clinton or Joe Biden, had they been elected, would have been half as conciliatory, half as willing to abandon their own views in favor of political compromise, as Obama? Ironic that the Right won't take "yes" for an answer.
"Of course, when the Times complains about how the administration’s explanation
validates the antiregulatory ethos that led to the crisis and still threatens
to block reform
you could say that this is the whole story of the Obama administration. Name your issue — fiscal policy, Social Security, financial regulation, foreign policy, Guantanamo — and the administration has effectively caved in to the other side’s framing."
This is a troublesome reminder of how regularly I have been disappointed by this centrist president who, while being tarred (I use the word advisedly!) with the "socialist" brush, has time and again compromised by moving from the center --having hardly bothered to argue forcefully his own position-- to the midpoint between the center and the hardest of hard right positions. It is a testament to the racism and xenophobia of the Republican base that the GOP continues to excoriate this moderate. Do they think for a minute that Hilary Clinton or Joe Biden, had they been elected, would have been half as conciliatory, half as willing to abandon their own views in favor of political compromise, as Obama? Ironic that the Right won't take "yes" for an answer.
Thursday, April 28, 2011
Defining Deviancy Down
From The New Criterion comes a piece that, for me, resonates even as I'm not sure what I think.
The burden of this short article is that we've sort of allowed standards to slip, in our universities, to the point that pretty much anything goes, not just in terms of behavior, which is lamentable enough, but also in what we consider worthy of study. We're not talking, here, about courses in comic books or tv sitcoms. No, this is about sex; and, more generally, about ennobling the marginal --not just accepting odd behavior and standards, but endorsing them enthusiastically as mainstream.
As I tried to pull out a quote or two from the article I kept failing: there are too many good quotes, and they reinforce one another in context in a way that taking a single one out of context could not do justice.
So you'll have to click on the link and read it. What interests me is (1) my instinctive agreement with the overall point --that deviancy, as Senator Moynihan wrote so long ago, can be (artificially) "cured" if we just redefine it. Moynihan's larger argument, pursued over several years of fierce controversy, is that some things are destructive of individual and social weal even if they are the habits of people whose legitimacy, as human beings, we want to go out of our way to acknowledge.
The context of that was the effort, in the '60s, to take positive note of, to affirm, the worthiness of ... well, the downtrodden: black people, poor people, those on the fringes of society. It had recently been discovered that people in these categories, although they might be different than "ordinary" middle-class, middle-brow, middling Americans, were no less entitled to all the protections of the polity, all the benefits that accrue to all citizens. Not just to the right, so belatedly, to vote and to eat at Woolworth's (never mind); but to consideration. A black woman deserves, a priori, to be called "M'am" if you would, in a similar situation, call a white woman so. That this was a revolutionary idea as recently as my young adulthood may sound strange now; but there it is.
So we learned to accept things that previously had been denigrated (which term shares a common origin with "Negro" and less polite slang equivalents, it's worth noting in passing): nappy hair (or processed hair), sure. We stopped using crude slang terms for certain automobiles. A fag became just a cigarette; and so on. We tried to look beyond the surface, to appreciate the person beneath.
And a funny thing happened: we started adopting the mores of those classes we wanted to "elevate." I know this sounds impossibly class-conscious and ethnocentric, but in fact we believed that the things the upper reaches of the society, speaking in social and socio-economic terms, valued and tried to uphold were more valuable than the habits of mind and habits of behavior of the lower classes. My father used to say, irritatingly, "Poor people have poor ways." But I still find it hard to argue with this, even when I can disagree with William Buckley (if I remember correctly) who responded to a serious sociological study entitled "The Culture of Poverty" with the cute comment that what was really in evidence was a poverty of culture.
So we got to a place where vulgar language was a mark of street-wise authenticity, so that we now find beautiful and seemingly intelligent young women (I know, I'm objectifying them!) talking like sailors. Now, a cunt isn't just an honorable if starkly explicit old English term for an anatomical feature; it's used to describe a person in her entirely.
So have we progressed?
In a recent conversation, a friend argued with me that the country began to disintegrate (my word, not his) when we started emphasizing the things that made us different from one another rather than the things that made us alike. But I think that, fifty years ago, the only reason we could talk so seamlessly about our similarities was that those who were different were so marginalized that they were invisible. And now we may be paying the price, in that we've allowed the pendulum to swing far to the other direction. There's no question that women, and homosexuals, and racial minorities, are better off now than they were in my childhood. And, for me, there's also no question that the progress from which they have benefited would not have happened had they continued to allow themselves to be ignored. And so, realizing that we had been ignoring (not to mention badly mistreating) them, we went out of our way to enfold them in what we saw as "our" consensus. Hell, I wore a dashiki in 1973, too.
The article that gave rise to this train of thought is concerned with college and university courses that elevate sexual ...oddities to the level of political statements or cultural affirmations that are worthy of analysis and deep thought. There are numerous examples, most of them pretty amusing. It is hard to see (1) why anyone ought to care about someone else's private vice (if that is what it is) or private behavior generally, and (2) why students ought to study much more than the Trivium and the Quadrivium. Everything else is more or less on-the-job training, anyway. We go to the zoo to regard oddities, after all; and zoos are more and more widely criticized because they inflict harm of one sort or another on what are, after all, creatures capable of feeling pain. So should we be any less respectful of ourselves? One can argue that prostitution, for example, ought not be a crime; but is it certain that, in consequence of such a liberalization, prostitutes ought to come before classes of undergraduates to explain their fee schedules? Undergraduates are, after all, even in our overly-enervated society, barely beyond childhood. Should they be allowed to play innocently before being given advanced courses on what are, for most people, less-than-obvious sexual exercises?
So where do I come down on this? I think we have to be cautious about enforcing the values of a previous generation just because they seemed, on the surface, to work for that generation and because the world was less noisier, arguably in consequence. I think we have to allow latitude for a wide variety of experiences and expressions. And I think that, over time, the worthy experiences and expressions will survive, and the others will not. But we should not jump to adopt every new thing: that is the shallowest faddishness. cultural styles, like ideas, have to prove themselves. We have, happily, a wide range of sub-cultures in this perhaps overly-permissive society; let them experiment and percolate up their best, and we can try it on after they've vetted it to some extent. Should professors bring the latest gadget into the classroom just because it's reputed to offer a different kind of orgasm (of whatever intellectual or physical kind)? Is that what a classroom is for?
No.
The burden of this short article is that we've sort of allowed standards to slip, in our universities, to the point that pretty much anything goes, not just in terms of behavior, which is lamentable enough, but also in what we consider worthy of study. We're not talking, here, about courses in comic books or tv sitcoms. No, this is about sex; and, more generally, about ennobling the marginal --not just accepting odd behavior and standards, but endorsing them enthusiastically as mainstream.
As I tried to pull out a quote or two from the article I kept failing: there are too many good quotes, and they reinforce one another in context in a way that taking a single one out of context could not do justice.
So you'll have to click on the link and read it. What interests me is (1) my instinctive agreement with the overall point --that deviancy, as Senator Moynihan wrote so long ago, can be (artificially) "cured" if we just redefine it. Moynihan's larger argument, pursued over several years of fierce controversy, is that some things are destructive of individual and social weal even if they are the habits of people whose legitimacy, as human beings, we want to go out of our way to acknowledge.
The context of that was the effort, in the '60s, to take positive note of, to affirm, the worthiness of ... well, the downtrodden: black people, poor people, those on the fringes of society. It had recently been discovered that people in these categories, although they might be different than "ordinary" middle-class, middle-brow, middling Americans, were no less entitled to all the protections of the polity, all the benefits that accrue to all citizens. Not just to the right, so belatedly, to vote and to eat at Woolworth's (never mind); but to consideration. A black woman deserves, a priori, to be called "M'am" if you would, in a similar situation, call a white woman so. That this was a revolutionary idea as recently as my young adulthood may sound strange now; but there it is.
So we learned to accept things that previously had been denigrated (which term shares a common origin with "Negro" and less polite slang equivalents, it's worth noting in passing): nappy hair (or processed hair), sure. We stopped using crude slang terms for certain automobiles. A fag became just a cigarette; and so on. We tried to look beyond the surface, to appreciate the person beneath.
And a funny thing happened: we started adopting the mores of those classes we wanted to "elevate." I know this sounds impossibly class-conscious and ethnocentric, but in fact we believed that the things the upper reaches of the society, speaking in social and socio-economic terms, valued and tried to uphold were more valuable than the habits of mind and habits of behavior of the lower classes. My father used to say, irritatingly, "Poor people have poor ways." But I still find it hard to argue with this, even when I can disagree with William Buckley (if I remember correctly) who responded to a serious sociological study entitled "The Culture of Poverty" with the cute comment that what was really in evidence was a poverty of culture.
So we got to a place where vulgar language was a mark of street-wise authenticity, so that we now find beautiful and seemingly intelligent young women (I know, I'm objectifying them!) talking like sailors. Now, a cunt isn't just an honorable if starkly explicit old English term for an anatomical feature; it's used to describe a person in her entirely.
So have we progressed?
In a recent conversation, a friend argued with me that the country began to disintegrate (my word, not his) when we started emphasizing the things that made us different from one another rather than the things that made us alike. But I think that, fifty years ago, the only reason we could talk so seamlessly about our similarities was that those who were different were so marginalized that they were invisible. And now we may be paying the price, in that we've allowed the pendulum to swing far to the other direction. There's no question that women, and homosexuals, and racial minorities, are better off now than they were in my childhood. And, for me, there's also no question that the progress from which they have benefited would not have happened had they continued to allow themselves to be ignored. And so, realizing that we had been ignoring (not to mention badly mistreating) them, we went out of our way to enfold them in what we saw as "our" consensus. Hell, I wore a dashiki in 1973, too.
The article that gave rise to this train of thought is concerned with college and university courses that elevate sexual ...oddities to the level of political statements or cultural affirmations that are worthy of analysis and deep thought. There are numerous examples, most of them pretty amusing. It is hard to see (1) why anyone ought to care about someone else's private vice (if that is what it is) or private behavior generally, and (2) why students ought to study much more than the Trivium and the Quadrivium. Everything else is more or less on-the-job training, anyway. We go to the zoo to regard oddities, after all; and zoos are more and more widely criticized because they inflict harm of one sort or another on what are, after all, creatures capable of feeling pain. So should we be any less respectful of ourselves? One can argue that prostitution, for example, ought not be a crime; but is it certain that, in consequence of such a liberalization, prostitutes ought to come before classes of undergraduates to explain their fee schedules? Undergraduates are, after all, even in our overly-enervated society, barely beyond childhood. Should they be allowed to play innocently before being given advanced courses on what are, for most people, less-than-obvious sexual exercises?
So where do I come down on this? I think we have to be cautious about enforcing the values of a previous generation just because they seemed, on the surface, to work for that generation and because the world was less noisier, arguably in consequence. I think we have to allow latitude for a wide variety of experiences and expressions. And I think that, over time, the worthy experiences and expressions will survive, and the others will not. But we should not jump to adopt every new thing: that is the shallowest faddishness. cultural styles, like ideas, have to prove themselves. We have, happily, a wide range of sub-cultures in this perhaps overly-permissive society; let them experiment and percolate up their best, and we can try it on after they've vetted it to some extent. Should professors bring the latest gadget into the classroom just because it's reputed to offer a different kind of orgasm (of whatever intellectual or physical kind)? Is that what a classroom is for?
No.
Saturday, March 26, 2011
Social Security: Threat or Menace?
Charles Krauthammer is on quite a soapbox, these days, arguing that Social Security is bankrupt and hence needs to be restructured, whether by cutting benefits, pushing back the retirement age (a favorite of those who don't intend to retire, and for whom, in any case, Social Security benefit payments would be the equivalent of the change they dump on the dresser every evening), or by some other means to keep it solvent.
Social Security, we are given to understand, is part of the deficit problem because, although actuarially speaking it works (that is, it has collected more money than it needs to pay out, and will remain in the surplus condition so defined for decades to come), it has made bad investments. Leave aside the likely Krauthammer response to a sudden discovery that, in fact, the Social Security Administration had been, these 30 years, stuffing the surplus into, say, Euros or the stock market: the System has taken the excess money it has collected and invested in government bonds, and the government --profligate Uncle that it is-- has simply squandered the money, leaving SSA with a bunch of worthless IOUs.
Krauthammer rightly points out that these bonds are owed by one branch of the US Government to another; and he scorns the notion that, in such a circumstance, the "full faith and credit" of the US means anything. "In judging the creditworthiness of the United States, the world doesn’t care what the left hand owes the right," he says. By this he means that, if the Treasury simply told the Social Security Administration to take a walk, those bonds are not going to be redeemed, the international markets would not care, and our financial position in the eyes of the world would not be changed.
Savor that thought: if the United States simply cancelled the Social Security program, the world would take no notice: financial markets would hum along without a hitch.
It is this kind of conceit that makes one wonder whether some opinion-makers have been too long ensconced in their think-tanks or faculty offices. It's not even necessary to construct the thought experiment in which fifty million senior citizens were told, one morning, that the checks would no longer be coming.
Well, Krauthammer would protest, it wouldn't happen like that. The government would be ... responsible (never mind that he is positing the opposite); it would cut benefits, or raise the retirement age, or, horrors, increase the payroll tax.
Fine. So his argument comes down to this: we must cut benefits now, or raise the retirement age now --he doesn't directly mention taxes; too painful for a rightie-- or else we will have to do so later.
As a call to arms, it falls a bit short of "The British are coming!"
But allow me to pursue the subject. Social Security, long hated by the conservative mainstream, is lumped in with the "entitlement" (a dirty word when it doesn't refer to Congressional perks) problem that is real, Medicare/Medicaid. The argument, of course, is this: Social Security is supposed to be self-funding.
Now hold that thought.
The next assumption is that Social Security, beginning this year or next, will pay out more than it will collect.
The conclusion is that this shortfall, a result of payroll tax collections being less than Social Security benefit payments, adds to the federal deficit and therefore must be corrected, within Social Security itself.
But wait, you will complain, that's okay: there's a huge surplus within the Social Security Trust Fund, from all those years up until today when the System took in more than it had to pay in benefits. Something sounds wrong here: either Social Security is a separate fund, entitled to draw as needed on its surplus, or its not. If it is, there's no imminent problem; if it's not, then it's just like any other government department --why single it out?
Think about this: if Social Security is not a separate fund, why should it be singled out more than, say, the Navy, or subsidies to corporate agriculture or Big Oil, for a haircut? No one ever warns that, next year, the Navy will be in a deficit position and so must be cut.
Here's the answer that dare not speak its name: Krauthammer and his chorus don't like Social Security. They like the Navy. The plan is to expand the military, because it goes where the really big money is, the money that goes into the pockets of those who don't depend on Social Security, will never miss it, and regard the dollars it pays out as a lost opportunity: the opportunity for more and greater tax cuts for themselves.
So Krauthammer wants it both ways, because it supports his agenda to have it so: Social Security is a "trust fund," and it must rely on generating a surplus (or at least on breaking even) to stay in business. But Social Security has no surplus --we spent that on other things-- and is not a trust fund, it's just one of the largest government expenditures, and so should be at the front of the line when those expenditures are cut.
Social Security is broke because it invested its funds in bonds that the government has the legal right to repudiate, without breaking a contract of the sort that is represented by government bonds in the hands of, say China. But because it is supposed to be self-funding (unlike the Navy), we must respect the fact that it is broke --we more or less intended this to happen, because we are inviting the government to act irresponsibly; leave aside the howls we'd be among the first to raise if it actually followed our advice.
And a final point: Krauthammer & Co. talk about the "solvency" of Social Security. They aren't serious, any more than they have ever been serious about the national debt. They don't want to "fix" Social Security so as to restore its solvency. They want any proposed fix to look so draconian that the program will be cut, will be allowed to wither, over decades, until it becomes our century's equivalent of the old WWII ration books: better than a poke in the eye, but it won't buy you much.
This is the political equivalent of killing your parents and asking for leniency because you are an orphan. But the unintentional irony of Krauthammer's position --he's just parroting the Party line-- should not mask its pernicious intent.
Social Security, we are given to understand, is part of the deficit problem because, although actuarially speaking it works (that is, it has collected more money than it needs to pay out, and will remain in the surplus condition so defined for decades to come), it has made bad investments. Leave aside the likely Krauthammer response to a sudden discovery that, in fact, the Social Security Administration had been, these 30 years, stuffing the surplus into, say, Euros or the stock market: the System has taken the excess money it has collected and invested in government bonds, and the government --profligate Uncle that it is-- has simply squandered the money, leaving SSA with a bunch of worthless IOUs.
Krauthammer rightly points out that these bonds are owed by one branch of the US Government to another; and he scorns the notion that, in such a circumstance, the "full faith and credit" of the US means anything. "In judging the creditworthiness of the United States, the world doesn’t care what the left hand owes the right," he says. By this he means that, if the Treasury simply told the Social Security Administration to take a walk, those bonds are not going to be redeemed, the international markets would not care, and our financial position in the eyes of the world would not be changed.
Savor that thought: if the United States simply cancelled the Social Security program, the world would take no notice: financial markets would hum along without a hitch.
It is this kind of conceit that makes one wonder whether some opinion-makers have been too long ensconced in their think-tanks or faculty offices. It's not even necessary to construct the thought experiment in which fifty million senior citizens were told, one morning, that the checks would no longer be coming.
Well, Krauthammer would protest, it wouldn't happen like that. The government would be ... responsible (never mind that he is positing the opposite); it would cut benefits, or raise the retirement age, or, horrors, increase the payroll tax.
Fine. So his argument comes down to this: we must cut benefits now, or raise the retirement age now --he doesn't directly mention taxes; too painful for a rightie-- or else we will have to do so later.
As a call to arms, it falls a bit short of "The British are coming!"
But allow me to pursue the subject. Social Security, long hated by the conservative mainstream, is lumped in with the "entitlement" (a dirty word when it doesn't refer to Congressional perks) problem that is real, Medicare/Medicaid. The argument, of course, is this: Social Security is supposed to be self-funding.
Now hold that thought.
The next assumption is that Social Security, beginning this year or next, will pay out more than it will collect.
The conclusion is that this shortfall, a result of payroll tax collections being less than Social Security benefit payments, adds to the federal deficit and therefore must be corrected, within Social Security itself.
But wait, you will complain, that's okay: there's a huge surplus within the Social Security Trust Fund, from all those years up until today when the System took in more than it had to pay in benefits. Something sounds wrong here: either Social Security is a separate fund, entitled to draw as needed on its surplus, or its not. If it is, there's no imminent problem; if it's not, then it's just like any other government department --why single it out?
Think about this: if Social Security is not a separate fund, why should it be singled out more than, say, the Navy, or subsidies to corporate agriculture or Big Oil, for a haircut? No one ever warns that, next year, the Navy will be in a deficit position and so must be cut.
Here's the answer that dare not speak its name: Krauthammer and his chorus don't like Social Security. They like the Navy. The plan is to expand the military, because it goes where the really big money is, the money that goes into the pockets of those who don't depend on Social Security, will never miss it, and regard the dollars it pays out as a lost opportunity: the opportunity for more and greater tax cuts for themselves.
So Krauthammer wants it both ways, because it supports his agenda to have it so: Social Security is a "trust fund," and it must rely on generating a surplus (or at least on breaking even) to stay in business. But Social Security has no surplus --we spent that on other things-- and is not a trust fund, it's just one of the largest government expenditures, and so should be at the front of the line when those expenditures are cut.
Social Security is broke because it invested its funds in bonds that the government has the legal right to repudiate, without breaking a contract of the sort that is represented by government bonds in the hands of, say China. But because it is supposed to be self-funding (unlike the Navy), we must respect the fact that it is broke --we more or less intended this to happen, because we are inviting the government to act irresponsibly; leave aside the howls we'd be among the first to raise if it actually followed our advice.
And a final point: Krauthammer & Co. talk about the "solvency" of Social Security. They aren't serious, any more than they have ever been serious about the national debt. They don't want to "fix" Social Security so as to restore its solvency. They want any proposed fix to look so draconian that the program will be cut, will be allowed to wither, over decades, until it becomes our century's equivalent of the old WWII ration books: better than a poke in the eye, but it won't buy you much.
This is the political equivalent of killing your parents and asking for leniency because you are an orphan. But the unintentional irony of Krauthammer's position --he's just parroting the Party line-- should not mask its pernicious intent.
Saturday, February 19, 2011
Lies, and Big Lies (and Statistics)
From a January 27 editorial in the Wall Street Journal:
“Eighteen months after the recession formally ended, the federal deficit for fiscal 2011 (through September) is expected to increase once again, this time to $1.48 trillion, or 9.8% of GDP. That's a share of GDP topped since World War II only by the 10% reached in Mr. Obama's first year in office, when at least the recession was an excuse. The annual deficit in the 1980s never exceeded 6% of GDP.
As the nearby chart shows, the main culprit is spending. After falling slightly last year due in part to TARP repayments, federal outlays will climb again this year to 24.7% of GDP. Overall federal spending will have increased by $1 trillion in a mere four years. Without spending cuts, outlays will remain above 23% for the rest of the decade—starting to rise again once ObamaCare becomes fully phased in. (The outlay average from 1971 to 2010 was 20.8% of GDP.)”
There are so many objectionable comments in this piece that it is hard to know where to start. So I decided to focus on what has become received wisdom on the Right these days, and, because of the feckless acceptance by the Democrats of a Republican narrative, is generally understood to be true.
It is encapsulated in these sentences from the editorial:
"After falling slightly last year due in part to TARP repayments, federal outlays will climb again this year to 24.7% of GDP."
and
"The GOP-Obama tax deal will also keep revenues as a share of GDP below 15% in 2011."
The entire article is built on this comparison, and the accompanying chart. But it's misleading, as a look at the actual numbers would show. Here’s a summary:
GDP in 2011 is expected to be about $15 trillion. Federal Revenues will be about $2.3 trillion, or about 15% of GDP. Federal expenditures are expected to be about $3.6 trillion, or roughly 25% of GDP. So far, so good --precise numbers are surprisingly difficult to come by, at least in a half-hour of basic web-searching--, but this is as the article says, or implies.
By the way, according to the World Almanac for 2001, US federal government expenditures were $1,863,039,000,000 --about half of the projected 2011 level. Doubling in ten years sounds like a lot, but the old "Rule of 72" tells us that this would be an annual growth rate of 7% or so had it been spread evenly across the period. Still, population growth has been roughly 1% per year; so the increase is still substantial.
Federal government spending, as a percentage of GDP, was just under 18% in 2000; it grew slowly (okay, inexorably) for the first several years of the Bush II administration, until it was 19.38% in 2007, In 2009, it was 24.67% of GDP --it grew by more than four percentage points, or nearly 20%, in just one year, from 2008 to 2009 --way more than the ten-year average.
So what happened to government spending between 2008 and 2009, to account for that enormous growth?
Well, spending grew, all right: from 2.75 trillion in 2008 to 3.2 trillion in 2009. This is nothing to sneeze at; it's an increase of 16%. But GDP fell between those 2 years, by 2.5%. This made the growth more than a full percentage point higher than it otherwise would have been: had GDP merely stayed the same, spending as a percent of GDP would have grown by almost exactly 24% --still high; and if GDP had grown by even 2% (less than its average growth during the Bush II years), spending as a percent of GDP would have grown to 23.2%. Of course, if GDP had not fallen, we wouldn't have had a recession, and substantial amounts of the spending growth would not have occurred.
Revenues, meanwhile, went from 2.5 trillion in 2008 to an estimated 2.1 trillion in 2009. Correct: a drop of 400 billion dollars, over 15%.
So, when the WSJ article says, "As the nearby chart shows, the main culprit is spending," it is simply wrong. Revenues fell by almost the same amount that spending grew.
The fact is, if we step back, we had, between Bush's final full year (2008) and Obama's first (partial) year (2009), an increase in government expenditures of $450 Billion, and a drop in revenues of $417 Billion. So it's not too hard to see why the deficit "under Obama" has ballooned. And most of us, regardless of our opinion of federal spending, would not expect, or want, to see a drop big enough to make up that difference in a single year*.
*I would be in the minority, here: I'd be happy to see a one-year cut in defense from $700 billion to $200 billion. But then I'm a Muslim-loving socialist.
I admit that when you lay out the actual numbers it's not nearly as sexy as using the percentages. But it would be well to remember that percentages involve both a numerator and a denominator. It's easy to see what happened here; it's what anyone would expect in a huge, crashing recession.
And as long as we're looking at that WSJ chart of "The Spending Boom," we might just notice that, according to the chart, average revenues and average expenditures, as a percent of GDP, have been, since 1971, 3 percentage points apart. That's exactly what the chart projects for the future:
Ought Obama to have avoided spending as much as he did? Maybe you can argue that, although not many serious people do --certainly the Republicans in Congress, along with GWB, were happy to install the TARP back in the weeks before Obama was elected. You cannot seriously argue that Obama has been on some sort of unprecedented, breakneck spending spree.
But you can make it look like that, if your political agenda requires it.
[sources for the figures: http://www.
Thursday, February 3, 2011
Taxes and the Real World
Kevin Baker tells it like it is on the state of US tax policy.
His point is straightforward. And, if I may elaborate a bit ---
The Republican religion (aside from Religion) has become "no tax increases of any kind --only tax cuts!" This makes it impossible to have a serious discussion about what kinds of adjustments ought to be made to a tax system that has become, some would argue, both a drag on our economy and an inadequate tool to support the operation of a modern state.
The system is a drag on the economy because political considerations have produced enormous imbalances, like direct government subsidies to gigantic oil companies that, year in and year out, are the most profitable organizations in the world; subsidies to corporate agribusiness --they were sold as, and maybe even meant for, help to the mythical "family farm--; artificially low tax rates to pharmaceutical behemoths who end up paying 5%.
The irony of this is that the Republican chant is always "small business;" yet small businesses, if they are profitable, and if they are operated as regular, taxable corporations, actually pay the highest rates, much higher than, say Eli Lilly or Pfizer.
In another arena, individual taxes, the imbalances are equally stark: a marginal tax rate of 28% on a doctor or small businessman who earns, say, $200,000, and a tax rate of 35% on an athlete or big-time Wall Streeter with earnings of $10 million. No rational person would say that this makes sense.
The trouble is, because of the no-tax religion, the Republicans are always in the position, even when they agree with the above, of saying that the only solution they will even discuss is to lower all rates.There's never an appropriate tax.
In other areas where sensible tax regimes would strengthen the country from a geopolitical perspective while helping reduce deficits and spurring "innovation" --another Republican totem--, sensible policy runs up against the same "no tax increases" refrain. So we have the lowest gasoline tax in the world, outside Saudi Arabia, and we consequently have huge barriers to change of any kind in the economic system that imports billions of gallons of gasoline, millions of barrels of oil, per day at enormous cost in terms not only of absolute dollars but also in terms of an unfavorable balance of payments, the support we provide to fundamentalist, autocratic regimes around the world who sponsor active hostilities against us, and the stifling of development in promising alternative technologies, which are being developed for sale to the world by China, instead.
Mr. Baker does a service by pointing out, from a relatively conservative vantage point, the destructive influence of the current Republican fixation on the status quo. Unfortunately, he is up against a force that is probably insurmountable: the need to get re-elected, and, in the process, to nurture the illusions of millions of self-styled (but inaccurately labelled) conservative voters, while doing the bidding of Big Oil, Big Pharma, and others who support the Congressional lifestyle.
Friday, January 21, 2011
Socialist Death Panels
From the blog "Texas on the Potomac," reporting on the comments of U.S. Congressmen from that state's delegation concerning the House vote to "Repeal the Job-Killing Health Care Law Act:"
Rep. Jeb Hensarling, R-Dallas, chairman of the House Republican Conference:
"The American people don't want it. It's personal.
"Here's my story, two days ago, I was in San Antonio, Texas, and my mother had a large tumor removed from her head. They wheeled her away at 7:20 in the morning, and by noon, I was talking to her along with the rest of our family. It proved benign, thanks to a lot of prayers and good doctors at the Methodist hospital in San Antonio. My mother's fine. I'm not sure that would be the outcome in Canada, the U.K., or anywhere in Europe.
"No disrespect to our President, but when it comes to the health of my mother, I don't want this President or any President or his bureaucrat or commissions making decisions for my loved ones. Let's repeal it today, replace it tomorrow."
Now, first of all, this holder of one of the highest offices our nation has to offer believes that the reason his mother's tumor was benign was "thanks to a lot of prayers and good doctors ..." Prayers? Well, okay; if they'd been doing a better job of praying maybe the lady wouldn't have had the tumor in the first place. But good doctors? I know a lot of doctors, but I don't know of any who can make a malignant tumor benign. So we have to question Rep. Hensarling's understanding of how things work. Not in medicine; I mean, in the Universe in general.
But to move on, Hensarling, 53, doesn't want Obamacare. Specifically, he doesn't want the government making decisions about his mother's health care. Presumably, his mother is at least twelve years older than he, and so is most likely a Medicare beneficiary. Medicare, unlike private health insurance would have done, did not require that her surgery be pre-approved in order for the hospital and the surgeon to be paid. It did not, as some private insurers do, place limits on the pain medication or other drugs she could have in connection with the surgery. And unlike most private insurers, Medicare will in all likelihood pay the physician within 30 days.
Hensarling was pretty happy with his mother's government-provided health care. And, of course, as a congressman, he also has government-provided health care, and top-quality care at that, just like Mom.
He just doesn't want the rest of us to have it.
Monday, January 17, 2011
Universal Coverage: A Suggestion
As I understand it, the argument in the big lawsuit being brought against the President's health care plan is this: Under the Commerce Clause (in Art. I, Sec 8 of the U.S. Constitution), the federal government has the right to regulate commerce among the states.
This has been interpreted very broadly, to reach almost all economic activity that occurs within the U.S.
The lawsuit, however, argues that this rule provides only the power to regulate commercial activity that is taking place, or might take place; there is no power to compel that any particular activity be undertaken by anyone.
Example: You can be forced, if you, say, sell beef at wholesale, to abide by various federal restrictions on how beef cattle are slaughtered, packaged, graded for quality, and so forth. But if you grow vegetables, or just have some idle acreage, you cannot be compelled to begin raising and selling beef cattle.
To a layman, this argument makes some sense. Of course, the government has the power to tax; but by definition, taxes apply to economic activity, not inactivity. [this may need a separate examination]
It would be unfortunate, from my perspective, if this argument were to prevail. The individual mandate is key to the Affordable Care Act, for well-rehearsed reasons that go like this:
They key point in all this is that you can sign up whenever you want to. And this is a mistake. First of all, it's not true now even for Medicare participation: if you don't sign up within a specified time after you become eligible, you will be charged more to join; and if you miss the window for signing up, it will remain closed for a time.
This could easily be applied to private insurance under the Affordable Care Act:
There are details to be ironed out, including notification, what to do with people who don't sign up but then join a company that provides coverage, and so forth. These are, I think, administrative matters that can be resolved fairly easily.
What's the catch? It's a big one: What do we, as a society, do with the person who fails to sign up, and then has a catastrophic accident, or a stroke, or gets cancer?
I'm sorry; but I suggest that we have to be harsh here: these people are on their own.
No, we won't leave them to die in the alley outside the ER entrance. But they will receive maintenance care ("palliative care") only, unless they pay, in advance, for any extensive treatment, curative or otherwise. And they (or their estates) will be billed for that care.
So, you don't have to have health insurance. But you do have to face the consequences, just as those who now rail against this requirement would presumably prefer.
This has been interpreted very broadly, to reach almost all economic activity that occurs within the U.S.
The lawsuit, however, argues that this rule provides only the power to regulate commercial activity that is taking place, or might take place; there is no power to compel that any particular activity be undertaken by anyone.
Example: You can be forced, if you, say, sell beef at wholesale, to abide by various federal restrictions on how beef cattle are slaughtered, packaged, graded for quality, and so forth. But if you grow vegetables, or just have some idle acreage, you cannot be compelled to begin raising and selling beef cattle.
To a layman, this argument makes some sense. Of course, the government has the power to tax; but by definition, taxes apply to economic activity, not inactivity. [this may need a separate examination]
It would be unfortunate, from my perspective, if this argument were to prevail. The individual mandate is key to the Affordable Care Act, for well-rehearsed reasons that go like this:
- The system will depend on the availability of private insurance for everyone not covered by Medicare, Medicaid, or similar government programs; and the lack of a "public option" means that tens of millions will not be so covered, and so will have to seek private insurance.
- Private insurers are required to offer coverage to all comers, on substantially comparable terms, so that everyone will have access to coverage.
- To avoid "adverse selection" --a situation in which healthy people stay away because of the cost of insurance-- everyone not only can, but must, buy insurance. Subsidies exist to support those who may not be able to pay for the coverage.
They key point in all this is that you can sign up whenever you want to. And this is a mistake. First of all, it's not true now even for Medicare participation: if you don't sign up within a specified time after you become eligible, you will be charged more to join; and if you miss the window for signing up, it will remain closed for a time.
This could easily be applied to private insurance under the Affordable Care Act:
- Everyone is allowed, but not required, to sign up for health insurance;
- If you fail to sign up, any insurer with whom you subsequently sign up can charge you a premium based on how long you went without coverage.
There are details to be ironed out, including notification, what to do with people who don't sign up but then join a company that provides coverage, and so forth. These are, I think, administrative matters that can be resolved fairly easily.
What's the catch? It's a big one: What do we, as a society, do with the person who fails to sign up, and then has a catastrophic accident, or a stroke, or gets cancer?
I'm sorry; but I suggest that we have to be harsh here: these people are on their own.
No, we won't leave them to die in the alley outside the ER entrance. But they will receive maintenance care ("palliative care") only, unless they pay, in advance, for any extensive treatment, curative or otherwise. And they (or their estates) will be billed for that care.
So, you don't have to have health insurance. But you do have to face the consequences, just as those who now rail against this requirement would presumably prefer.
Thursday, January 6, 2011
The Gamble
The Congressional Republicans, clearly, have drunk the venomous Kool-Aid that has poured forth in an ever-increasing torrent from the likes of Limbaugh and Beck. [Q: why are the most listened-to voices on the radio not, somehow, part of the "mainstream media?"] They have accepted anger and denial as their governing philosophy. Having done so, they now must substitute symbol for substance, spectacle for plot (although "character," in the personae of some of the wing-nuttier new members of the House, looks promising as well).
Among the first items in the order of business:
Among the first items in the order of business:
- Read the Constitution on the House floor. The Constitution has become, for the Tea Party, what Mao's little Red Book was to the Cultural Revolution. It is Holy Writ, inerrant, universal, timeless. It's every word is sacrosanct. Well, okay, not every word: they skipped the part about slaves counting for 3/5 of an actual human being in determining population for purposes of Congressional apportionment. [It occurs to me to wonder: if a slave was the bastard child of his owner and an unfortunate slave-girl, would that child be counted as 1/2 x (1 + 3/5)?] Only the parts we like (or must pretend to like, such as the 13th Amendment) are holy.
- Pass "The Repealing the Job-Killing Health Care Law Act." And whatever we do, let's not record any votes on the specific provisions of the Law, which everyone likes. We'll just repeal the whole thing. And the CBO's analysis that such repeal will add to the deficit? The CBO is wrong, because its conclusion is inconvenient. So we don't have to find the cuts we promised to find to match any and all increases in the deficit.
These are just two of the growing list of things the Republicans in the House will spend their time on. There are others, and they fall into two categories: Symbolic gestures, and reformulating their own campaign promises, including the Pledge to America, so that they can be excised from the public mind like gangrenous tissue.
The symbolic gestures won't hurt anyone. Sure, some of them will make some people look ridiculous; but that's in keeping with what has become the Republican style of late. No, the symbols are fine, and it's hard to avoid the suspicion that they are getting so much play just now, in part, out of a fervent hope that symbols will be enough.
And here is where the gamble comes in. Having cynically used the most extreme of the excesses of an ignorant, jingoistic, hopelessly confused minority as their rallying cry, the Republicans must now hope that they won't actually have to deliver. They'd like to; but they can't. They can't lower taxes and balance the budget. They can't cut spending, win in Afghanistan, and bring back full employment. They cannot remove the regulations (whatever poor shades those might be) that are "killing jobs" and stifling entrepreneurship while helping the middle class return to prosperity. They can't turn back the clock.
Unfortunately, this is what they have promised to do. The risk is that those who voted them in will expect them actually to deliver. The gamble is that, as voters often do, these voters will forget what they asked for, and accept instead the clever naming of bills that will go nowhere, the subtle but persistent disrespect for, and de-legitimizing of, a president who won 53% of the popular vote, and the fulminating against socialism in the form of government regulation.
The gamble is the Republican hope that Republican voters don't really care about substance.
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