Reich is, of course, correct. I remember sitting in on an Econ class and hearing that assertion: remuneration reflects the person’s worth to the company. Which, of course, is baloney.
People are not paid what they are worth, they are paid what they can negotiate. And since unions have been decimated and unemployment is still high, that means businesses are in a powerful position to negotiate, and workers are in a weak position. On the other hand, people high up in the business are in a much more powerful position to negotiate for excessive pay—both the negotiation power and the excessive pay because they either are the ones who decide what pay is, or they hold sway over those people. So the workers are hit hard, and the execs are awash.
But what about the worth of a person to the business? True, a leader can make or break the business much more than could a rank-and-file worker. But then, if a company had mostly rank-and-file and just a handful of executives, they would likely do much better than a firm with mostly executives and only a handful of actual workers. The workers are at least worth what the executives are—and probably much more.
But that’s not how remuneration is decided: it is decided, at least in theory, on who is easier to replace. You can much more easily replace the rank-and-file, so they are valued less. And while you can just as easily replace executives, the illusion is that somehow they are magical in their value and deserve far greater pay.
The pay is certainly not based on what the employee generates. I recall once taking a management position at a conversation school. I was told that my performance for the year would determine if I got the same pay as the person I replaced. Despite having replaced two managers and then innovating a system that saved the school tens of thousands of dollars per year, I was told I would not get the promised pay based on a single mild disagreement I had with someone else in the office some time before, despite the matter never coming up at that time or any other. The idea that you are rewarded in step with what you generate may be true in some places of business, but not, I would wager, in most.
In business, the rule is not “what people are worth,” it’s not “what’s fair,” it’s not “what’s right.” It is, to put it simply, “what you can get away with.”
If businesses are not going to abandon that rule, as is apparent, then why should they expect workers to not begin playing by it?
Here’s how you keep wages down: make people who make very little angry at others who are trying to make their lives better.
It worked for Scott Walker in Wisconsin when he successfully cut the legs out from under teacher unions: by falsely claiming that teachers were lazy moochers luxuriating under massive teacher salaries and 3-month vacations (yeah, right), he made enough of the people of Wisconsin believe that the teachers were hurting everyone else and should not be allowed, therefore, to use their unions as a way to fight for better conditions:
“We can no longer live in a society where the public employees are the haves and taxpayers who foot the bills are the have-nots.”
That’s the trick: if someone down below is having some success at making things better for themselves, then instead of making everyone else feel they should also have better conditions, generate resentment against the ones being successful and make them get the same crappy wages and conditions as everyone else.
You have to admit, it’s a brilliant strategy for the corporations: get the people you’re abusing to force others to stand for even more abuse.
It’s happening in places where fast food workers are demanding $15 an hour. Many people in other professions are now apparently grumbling about how “burger flippers” are making more money than people who are trained as professionals in more serious jobs—but the complaints are about how the fast food workers don’t deserve it, and are not about how the professionals should be getting much more.
Which is idiotic. $15 an hour is a sustenance wage, it barely lets you escape poverty. It is not living high off the hog. If you’re an electrician and you’re making less than that, you shouldn’t be mad at the fast food folk—you should be pissed at your employer, and you should be asking yourself, “How can I do the same thing that the burger flippers did?”
I’m a paramedic. My job requires a broad set of skills: interpersonal, medical, and technical skills, as well as the crucial skill of performing under pressure. I often make decisions on my own, in seconds, under chaotic circumstances, that impact people’s health and lives. I make $15/hr.
And these burger flippers think they deserve as much as me?
Good for them.
Look, if any job is going to take up someone’s life, it deserves a living wage. If a job exists and you have to hire someone to do it, they deserve a living wage. End of story. There’s a lot of talk going around my workplace along the lines of, “These guys with no education and no skills think they deserve as much as us? Fuck those guys.” And elsewhere on FB: “I’m a licensed electrician, I make $13/hr, fuck these burger flippers.”
And that’s exactly what the bosses want! They want us fighting over who has the bigger pile of crumbs so we don’t realize they made off with almost the whole damn cake. Why are you angry about fast food workers making two bucks more an hour when your CEO makes four hundred TIMES what you do? It’s in the bosses’ interests to keep your anger directed downward, at the poor people who are just trying to get by, like you, rather than at the rich assholes who consume almost everything we produce and give next to nothing for it.
And that’s the point that everyone should be focusing on. Not how the person below you deserves less than you, but rather on how everyone deserves a decent living. And why you get paid squat while CEOs and shareholders deserve the lion’s share of the profits. Economic theory suggests that because CEOs have such critically important, one-of-a-kind talent, they deserve 300 times more than you. Really?
Sadly, when some CEOs with the right way of thinking actually try to make things better, petty jealousy fostered amongst workers can screw things up. Remember Dan Price, that standout CEO of the Seattle credit card processing firm? The guy who slashed his own salary and benefits so he could give everyone in his firm a “minimum wage” of $75,000 a year?
His business is failing. And you know why? Partially because enough selfish asshats critical to the company’s success were pissed that this gave them less of a raise in pay then people “below” them. That’s right: the boss actually raised the pay of some workers by thousands of dollars a year, and they quit because others who started later got a proportionally larger raise than they did.
Were they happy that they got a raise? Were they happy that they now got paid better than industry standard?
Apparently not. They felt snubbed because someone else was getting the same as them.
“He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump,” she said. To her, a fairer proposal would have been to give smaller increases with the opportunity to earn a future raise with more experience.
A couple of days after the announcement, she decided to talk to Mr. Price.
“He treated me as if I was being selfish and only thinking about myself,” she said. “That really hurt me. I was talking about not only me, but about everyone in my position.”
You’ll have to forgive me, but that person is a first-rate dick. Seriously? Your boss does you and everyone at your company a solid, he cuts his own pay so he can give you a raise, you’re getting better than other people who do the same work as you… but you get all whiny, drive away customers, and leave your company in the lurch because you resent others who you feel aren’t as worthy as you?
Screw you, you selfish, self-absorbed prick, and don’t expect anyone to buy that self-serving crap about how you were really concerned for others and not justing resentful for yourself. You’re what’s wrong with labor today. You should have been happy that everyone was making a good wage, you should have been grateful to your boss for cutting his pay so you could get better, and you should have worked harder out of that gratitude—so that the company could be more successful, and then you and everyone else could get even more.
Not that this person was the only problem, or the main one: apparently, generosity is not widespread in the Price family, as soon after Dan Price made the wage increase, he got sued by his brother over money issues. Not, the brother claimed, over the wage thing. Right. It’s just a coincidence that the suit came just as Dan Price raised everyone’s wages.
So now, Fox News and many others are reveling in showing how the company that dared pay a decent wage is floundering, as if the boost in wages was the real culprit, instead of selfishness and greed amongst people who just wanted more for themselves and were willing to cripple the company out of spite if they didn’t get it.
Because instead of celebrating the little guy and wondering if the CEO really deserves 300 times more pay than the average worker, instead of noticing that CEO pay has risen 90 times faster than worker pay, we should instead get pissed off because someone who was working 70 hours a week and was still below the poverty line should win a raise that lets them not live in squalor, just barely. We should get angry at other workers because we didn’t get as big a raise. And instead of going to the CEO of the hospital where you work and ask if a small part of that billion-dollar profit the institution made could be directed to horrifically underpaid staff who do all of the critical work—instead, you should fight to shove the fast food workers’ heads back underwater. Just like the people of Wisconsin did when they thought, “My salary isn’t great, so let’s punish teachers!”
My company, as they’re so fond of telling us in boosterist emails, cleared 1.3 billion dollars last year. They expect guys supporting families on 26-27k/year to applaud that. And that’s to say nothing of the techs and janitors and cashiers and bed pushers who make even less than us, but are as absolutely crucial to making a hospital work as the fucking CEO or the neurosurgeons. Can they pay us more? Absolutely. But why would they? No one’s making them.
The workers in NY made them. They fought for and won a living wage. So how incredibly petty and counterproductive is it to fuss that their pile of crumbs is bigger than ours? Put that energy elsewhere.
Living in Japan, tipping is just something you don’t have to deal with. You don’t tip here, ever. Not at any restaurant, not for taxi drivers, not for deliveries, hotel service, nothing. It’s actually very nice, as you don’t have to research and remember complex rules about how much to tip which kind of service. You don’t have to deal with the fear of seeming like a cheapskate, or worry about how the person serving you will feel if it’s this much or that much. Here in Japan, paying for something is a stress-free process.
Honestly, to this day, I have no idea how much I would tip a taxi driver for a fare (is it different from short and long hauls?), or a bellhop to show me to my room (I have to ask family and friends when that’s something I have to deal with). I recall that 15% used to be the standard for restaurant tips, now it seems to be 20%.
This causes problems for me when I travel back to the U.S., as I have to break long-held habits. Once, some years back, while on vacation from Tokyo, I went to a restaurant in San Francisco with a friend who was also visiting from Japan. We ate, paid, and left. I realized I had left my jacket at the restaurant, so I went back. I told the waiter who had served us that I had forgotten my jacket. He said, “You forgot your tip, too.” Somewhat abashed, I got out a generous tip as I tried to explain why that happened; I am guessing he didn’t believe me, but whatever.
So I was a bit confused on more recent trips back when I would go to a place that had general seating, but I would instead order something for take-out. There would be a tip jar on the counter, and when I pad by credit card, there would be a line for the total, the tip, and the total with the tip, so that you would have to write the same amount twice, essentially making an outright statement that you are not tipping at all. I was rather taken aback when I first encountered it, and have never been comfortable with it—it seems excessively pressuring, like a few years back when many businesses asked out loud in the line at the register if you “wanted” to make a donation to a charity (which you usually had never heard of and knew nothing about) with your purchase, and to refuse you had to say it out loud in front of a line of people.
When someone waits on me, that deserves a tip. They have to show me to a table, be prompt with service, carry stuff back and forth across the restaurant, make sure your water glass is full, deal with complaints corrections, take care of the payment, maybe other things we don’t even notice. With a home delivery, well, they drive across town to deliver for you, presumably doing so promptly but safely. The standard is, special work is being done.
But a counter pick-up? Really? The person behind the counter is doing no more work than any other register person at any other store. Do you tip the check-out person at the supermarket? Do you tip the concessions seller at a movie theater? Nope.
The argument is often made that these people are paid minimum wage. If that’s the standard, then why are only restaurant people afforded this generosity? Not to mention that servers get tipped because they get paid a pittance (well below minimum wage, often just a few bucks an hour) as the tips are expected to be their main income; cashier people, I understand, are paid a regular wage, as are the cooks.
I’m also pretty sure that a tip was never demanded for counter service when I was younger—of course, tip jars were hardly ever there, either. I’m not arguing that counter staff don’t need the money; however, a lot of minimum wage earners who never get tips deserve better as well. It just seems like an attempt by restaurants to justify paying more workers less, and/or an attempt by better-paid staff to get a gratuity simply because it is a close extension to an established but separate gratuity system.
I would be quite happy if America followed Japan’s example and just got rid of the system completely. Pay people a living wage ($15 at the very least for a minimum wage for whatever job), and just factor that into the prices.
Of course, what would probably happen is that the businesses would all pretend like the difference would cost them a lot more than it really would, and would take the opportunity to hike prices too much… still, the change would be a good thing.
Watching this, something occurred to me: when explaining how those terribly oppressed rich people should have their taxes cut, conservatives love to harp on the 47%, about how poor people get away with “not paying taxes.” What they mean, of course, is that poor people don’t pay income taxes. Well, federal income taxes. Well, in that one year where so many people lost their jobs. Usually it’s been more like 40%. Although most of that 40% do pay federal payroll taxes—typically only 14% of households don’t pay payroll taxes. And in fact, the poorest 20% of households pay more than 12% of their incomes in state and local taxes, and about 16% of their total income in taxes altogether. While Mitt Romney, who is worth more than $200 million and apparently works little enough to enjoy equestrian dressage, only paid 14% on his $13.69 million income, and that’s the only year he let us see, meaning he usually pays less than that.
But I digress. Suffice it to say, people who claim poor people “don’t pay taxes” have their heads up their asses. Let’s leave it at that.
But the video above, along with Oliver’s piece on civil forfeiture, made me realize that there are even more hidden “taxes,” and they’re not just lottery tickets. The heinous system of cities and their police forces shaking down citizens for as much cash as possible is perhaps one of the more significant overlooked taxes paid almost exclusively by poor people.
These videos also made me realize something else. Remember how, a few decades ago, we shook our heads at the kinds of countries—and we usually envisioned Latin American countries—where policemen typically shook down citizens for bribes and protection money?
Yeah, that’s right: we’re that kind of country now.
Congratulations, everyone who decided it was a good idea to cut taxes. This is so much better.
So, Republicans won more seats than before in the last midterm election, and now control both houses. One day after they started their new session, Mitch McConnell tried to take credit for the economic upturn that has been years in the making:
After so many years of sluggish growth, we’re finally starting to see some economic data that can provide a glimmer of hope; the uptick appears to coincide with the biggest political change of the Obama Administration’s long tenure in Washington: the expectation of a new Republican Congress. So this is precisely the right time to advance a positive, pro-growth agenda.
Yes. Sure. Because so many people were just so ecstatic and hopeful once Republicans gained their completely meaningless majority in the Senate. That’s what caused the economy to surge.
Look, I don’t even credit Obama with this, though the fact that more Americans are insured probably has a bigger effect than anything concerning Republicans. In the end, the economy will tend to swing around despite anything happening in the political sphere. However, if anyone in politics has the right to claim credit for what we’re seeing now, it sure as fracking hell is not the obstructionist, hostage-taking, shut-down-the-government pack of loonies that right now is strutting like a bunch of idiots who you know are going to self-destruct pretty soon.
If one counts out the recessions caused by U.S. economic concerns in 2001 and 2008, then it is noteworthy that 2 of the last three recessions in Japan—including the current one—have closely followed increases in the consumption tax.
It should also be noted that the initial consumption tax was accompanied by a lowering of taxes targeted at the upper end of the economic spectrum, and that in Japan, consumption tax has no exemptions for food or other necessities for lower-income people. Japan’s consumption tax just happens to remove large amounts of income just where it is needed most—not just out of personal needs, but out of the need for disposable income to fuel purchasing and therefore production.
If Japanese politicians want to raise the consumption tax yet again to 10%, as is currently planned, I think they would be well-served by doing so only after a 3-year experiment in which the tax is brought back down to 3% and original higher-end taxes reinstated. If the economy is doing worse after those three years (and not depressed by the world economy), then they can try a 10% consumption tax.
But seriously. 288,000 jobs, 5th straight month of 200,000 or more added jobs, unemployment back down to 6.1%.
We still took dramatic damage since 2001 and 2008 that has not been repaired. We are still crippled by debt. Taxes for wealthy people are still too low. Spending on infrastructure is still too anemic. Jobs still pay less. Who knows, maybe if Republicans in Congress hadn’t obstructed Obama for the past six years solid, maybe things would have improved a lot more—though Obama did not exactly try nearly as hard as he should have.
Bottom line, economies recover sometimes just because they do. But the political bottom line is, for better or worse, whoever is in office when something happens, they get the credit or blame.
Of course, just because Fox can’t find anything bad to say, doesn’t mean they give Obama any credit at all—a search of their main article on the story or otherarticles shows they do not mention Obama once, even indirectly, alongside good economic news. The opposite holds for bad news, naturally.
On a related topic, Obama shows promise to finally dig himself out of the hole that Bush dug for him. In the past, it has been a reliable fact that job creation under Democrats has been better than under Republicans—so consistently so that the poorest-performing Democrat (Kennedy) did better than the best-performing Republican (Nixon).
Obama’s problem: In his first year, his performance was crippled by Bush’s disastrous recession. Although Obama immediately turned job prospects around for the better, he still had to pull up out of a record-breaking dive. In that first year, 4.3 million jobs were lost. No fault to Obama, as I said, but he gets those losses put onto his portion of the ledger.
As it turns out, with the latest reports factored in, Obama has added a total of 4.8 million jobs net—and more than 9 million jobs if you don’t count the first year. Which is more fair—Obama only improved things, he did not create the abyss he dragged us out of. Obama’s record looks even better when considering that Republicans in Congress not only obstructed but did everything they could to sabotage things, up to and including the debt default threat, which did serious damage.
Compare this with Bush, who only added a net of 1.1 million jobs over 8 years. More fairly, if you count from February 2002 to January 2010, assuming it takes a year for one’s policies to get started and wind down, Bush lost 1.3 million jobs. But the official record, however undeserved, is +1.1 million.
Obama has overseen job gains of 1.4 million in the past 6 months alone, and 2.5 million in the past one year.
Alas, even at that rate, by the time he leaves office, he will only have added only an additional 7 million jobs or so—maybe a total of 12 million jobs added, net, over his eight years. That would probably end up being only a 1.1% average increase over his term, placing him of Ford or Coolidge territory.
Sadly, even if you don’t count that first year of climbing out of the hole, his yearly average job creation would only reach about 1.8%, still below Reagan (2.1%) and Nixon (2.2%).
Unless job creation really takes off and we regularly see numbers over 300,000 until January 2017, Obama will break the trend of Democrats always performing better than Republicans.
To hear Perry and conservative-cheerleader NewsMax tell it, Perry’s Texas is a paradise for all. 37% percent of all new jobs in the U.S. have been created in Texas since 2009, and it’s all supposed to be because of low taxes and low regulation:
Texas Gov. Rick Perry tells Newsmax that he attributes the “Texas Miracle” — the Lone Star State’s relatively robust economy during the economic downturn — to a “light” tax burden and a favorable regulatory climate. …
[Perry states:] “The men and women in Texas know something now after a decade-plus of our governorship and our policies being implemented by a Republican House, Senate, lieutenant governor and speaker. We’ve kept our tax burden as light as we could and still delivered the services that the people of Texas desire, and we have a regulatory climate that is fair and predictable.I cannot tell you how important is predictability and stability in the regulatory climate.”
Oil and gas prices are high, which sucks for the nation, but benefits Texas’ economy
Texas has a high birth rate and migration rate, artificially raising job numbers
Texas made off like bandits from the Obama stimulus, with half of the job growth coming from education, health care, and government sectors
Texas used $6.4 billion in stimulus money to help balance the state budget, more than all but 2 other states
And since the stimulus money is running out, Texas is now facing huge budget shortfalls, which it plans to mitigate in part by slashing Medicare and education spending—in a state which already has rock-bottom health care and education stats.
Certainly, Texas is great for businesses and wealthy people—but is horrible for the majority of people in the state:
Texas shares with Mississippi the highest rate of minimum-wage workers in the U.S.
26% of Texans have no health insurance, the highest rate in the country
Deregulation of health insurance has led to sky-high rates
Texas has the 4th-highest poverty rate of any state in the nation
Texas’ unemployment rate, at 8.2%, is higher than the national average
Texas has fewer adults with a high school diploma than any other state; is 43rd in the nation in graduation rates, and 45th on SAT scores
I guess that when Perry says that the people of Texas are getting all the services that they desire, he figures Texans don’t “desire” education or health care. Or, likely more accurately, none of the people Perry associates with are lacking in any such services.
But the kicker is in the tax rate, when all taxes are taken into account. The state has no income tax, but it does have a high sales tax, and overall, its tax rates are extraordinarily regressive. Here is Perry’s so-called “light” tax rate, compared with California’s:
The poorest 20% of Texans pay four times more of their income in taxes than do the wealthiest 1%. That’s pretty shocking.
California’s is pretty regressive because it has an even higher sales tax, but that is attenuated by the income taxes. There is no such balance in Texas, meaning that the state’s tax burden falls chiefly on the poorest people—who also get the crappiest education, the least health insurance, and the worst pay.
So the message is clear: if you want all the benefits of third-world cheap-labor exploitation but don’t want to leave the U.S., Texas is your destination!
What’s most scary: this is the model for what Perry and many other Republicans want to bring to the whole country.
Bill Maher had Carol Roth on his show, yet another of the long line of conservatives calling themselves “independents,” talking deficit reduction we somehow never heard when Bush was in office. One of her points was about how Obama has raised the debt by “6 trillion dollars over the last four and a half years,” and despair that we have to raise the debt ceiling at all.
First of all, the $6 trillion number only comes from adding the full spending for 2009—which was George W. Bush’s budget, not Obama’s. And what Obama did spend over that was expressly to deal with the massive economic catastrophe Obama inherited on day one.
That’s a favorite ruse conservatives love to play: conflate the tail end of Bush with Obama’s own record, as in “Obama gave us a $1.4 trillion deficit,” or “Obama drove the unemployment rate up to 10%.”
A less contrived total deficit would be $4.7 trillion over five years. So, where did that come from? Did Obama just say, hey, let’s generate $4.7 trillion dollars in spending that wasn’t there before?
Of course not. Almost all of the debt under Obama has been from the money that, again, George W. Bush and Republicans in Congress committed us to. The Bush tax cuts for the wealthy. The wars in Iraq and Afghanistan. And then there was the damage caused by the fiscal cataclysm Bush handed Obama in early 2009.
The fact is, Obama has done almost nothing but cut the deficit since he came into office:
Deficit in $ Billions
$ Change in Billions
But that’s not good enough for Roth; she was appalled that Obama’s spending was still raising the debt ceiling at all: “[The debt ceiling is] going up because the government overspends, because they refuse to balance the budget…. If they didn’t overspend, we wouldn’t be hitting the debt ceiling.”
So, what was Obama supposed to do, cut $1.4 trillion dollars in one year? To wipe that out in even five years would require raising revenue and/or cutting the budget by $282 billion per year, every year. Something unprecedented, save possibly for coming off of wartime spending at the end of WWII.
When Bush was in office, most of that time being when Republicans also controlled both houses of Congress, deficit spending went up more often than it came down (up 5 years, down three years). When it went up the first two years of Bush’s budgets, it went up by huge amounts: $286 billion and $220 billion.
The three years the deficit went down under Bush, it went down by $94, $70, and $87 billion dollars, an average of $84 billion a year—something conservatives at the time hailed as little short of genius. Under Bush overall, the deficit increased $192 billion a year—and we did not hear conservatives complaining even a tenth as much as they do now.
Under Obama, the deficit has fallen an average of $110 billion per year.
Even under Bill Clinton, while he was creating a surplus, it went down only $70 billion a year.
So, what exactly do conservatives expect from Obama, when they themselves are entirely mute on where this money should be cut? Of course, we know where they want to cut it: Social Security and Medicare, the exact programs they claim they want to “save.”
We know where Republicans do not want to cut it: from the military, where almost all of the waste and overspending exists. In fact, they want to increase our ludicrously high military spending. They not only want to stay in Iraq and Afghanistan, they want to start a new war in Iran—and wanted to invade Syria, at least until Obama said he’d take action there.
And we know where Republicans do not want to raise revenue: from millionaires and billionaires, and from corporations making tens of billions in profit every year with many of them paying no taxes at all on those profits.
So when a conservative whines about how Obama is spending us into oblivion? I would suggest trying to speak facts to them, but they would almost certainly not listen, and would instead probably spout the same utter bullshit like Roth was on Maher’s show.
This is Krugman’s chart showing the U.S. budget as a percentage of potential GDP. To accentuate my point, I highlighted Republican administrations in red, and Democratic administrations in blue. There’s a pattern there, though it may be hard to discern if you are conservative.
For the past thirty years and some, conservatives have claimed that the best way to create jobs and stimulate the economy is to cut taxes for wealthy people. From “trickle-down” to the recent drive to cut or eliminate the capital gains tax, the idea is that if you put more money into the hands of wealthy people, they will invest in business, thus creating jobs, leading to a stronger economy with more people paying taxes on greater incomes. Presto! A revived economy and more revenue collected by the government.
This has always struck me as one of the most obviously stupid ideas I have seen. Let me paint a little scenario with two variations.
Let’s say you have a depressed economy. People are not buying products, let’s call them “widgets.” They want to buy widgets (who doesn’t?), they just don’t feel they can afford to. Then there’s a Wealthy Person, who has tens or hundreds of millions of dollars. That person wants to invest in what will give the best return on his investment.
Variation One: you cut the taxes of the Wealthy Person. Both income tax and capital gains tax. The Wealthy Person gets a few million dollars extra that he would have otherwise paid in taxes, adds it to his pile of wealth. So, what happens? Will the Wealthy Person invest that money in a widget factory, thus creating jobs? No: nobody is buying widgets. Investing in a widget factory would be a stupid investment, bound to fail. Cutting capital gains will not lead the Wealthy Person to invest in a business which will fail. It’s not like the Wealthy Person did not already have lots of money to invest; if they weren’t putting it into widget factories before, why will adding a little more to their fortune change anything? The Wealthy Person will take that money and instead apply it to investments designed to increase his personal wealth even further, not to investments that are designed to create jobs or stimulate the economy.
Result of Variation One: the economy is still depressed, you have less tax revenue, and more debt—and some very pleased Wealthy Persons.
Variation Two: you don’t cut the taxes of the Wealthy Person. In fact, you raise his taxes to a marginal rate of 50%. Then you take that money, add it to the money that would have gone to the Variation-one Tax Cuts for Wealthy Persons, and apply all of that to give tax cuts to the lower-middle class and assistance to the working poor. Suddenly, the people who want to buy widgets have enough money to do so. They start buying widgets, and suddenly demand outstrips supply. Building a widget factory is suddenly a prime investment.
What about your Wealthy Person? You just raised his taxes. He won’t have enough money to invest in the widget market, right? Wrong. He’s a Wealthy Person. Which means he has lots of money. He doesn’t need a government tax cut. You can raise his tax rates to much higher than 50%, that’s not going to stop him from wanting to make more money. He’s got piles of cash, so no matter what, he’ll want to invest that in whatever gives the best return. When people start buying widgets, he’s going to build widget factories. And even if somehow his assets are all tied up somewhere, there are things called “banks.” These banks love lending money to people with lots of collateral and who want to invest in a booming business.
In short, no matter how high you raise his taxes, the Wealthy Person will not have any problems investing in a booming market.
Result of Variation Two: a revived economy, more jobs, stable revenue—and Wealthy Persons who are still making money and increasing their overall wealth.
Where am I getting things wrong here, beyond the simplicity of the scenario? How does this math not work out?
Conservatives today have a favorite bugaboo: “redistribution of wealth.” By itself rather innocuous-sounding, it is clear code for a variety of evils: taxes, stealing, and downright, outright communism. It has now commonly been replaced with the term “confiscation.”
What is strange is that redistribution, in its conventional form, is mostly admired, including by the very people who demonize it. Most people favor a progressive tax system, for example. Those who loathe redistribution nevertheless claim that the free market will redistribute, imagining that the wealth will circulate with wealthy people paying handsome wages in exchange for labor—as false a myth as you can find, of course. They approve of redistribution, they just naively and foolishly believe that wealthy people will do it unbidden—many even credulously believe that that is what is happening right now.
What is not usually spoken of is the only alternative to redistribution: pooling of wealth. Most of the wealth in a society being drawn to one place and staying there. Not funding jobs or infrastructure, not moving through the economic engine. Just sitting there, its only purpose to draw more money to the pool.
If you think that redistribution is distasteful, then the effects of pooling are downright catastrophic. We’re seeing many of those effects right now, and they are going to get worse. And as wealth pools more and more, the usual corrective measure of higher tax rates will affect it less and less, because tax only reaches wealth that moves. To reach pooled wealth, you need the estate tax, which takes generations to reenter the economic cycle—and which wealthy people are clamoring to eliminate.
The economy is an engine; capital is the fuel. Should wealth pool, the engine will stall. Redistribute, and the engine runs with efficiency. Even Romney understood the basic principle, he just believed, like so many conservatives, that the fuel runs between capital investors and corporations—from one part of the top to another part of the top—with money to workers being a by-product, if anything—instead of the actual path it must take for an economy to be dynamic, which is from bottom to top and top to bottom.
A necessary observation is that while the bottom is forced to spend upward to live, the top has no such built-in force, and unless forced to redistribute downward, the top naturally tends to collect wealth and remove it from circulation. Conservatives have been systematically dismantling the forces we had created to accomplish this, including taxes and unions, thus making downward redistribution voluntary—which, in real terms, means the minimum necessary and no more. And the minimum is too slow a trickle to make our economy run.
At the gut level, most people seem to know this. But too many people now have bought in to the scam that somehow managed redistribution is evil and destructive.
For decades, farm bills have had two major pieces. One piece offers subsidies to farmers; the other offers nutritional aid to Americans in distress, mainly in the form of food stamps (these days officially known as the Supplemental Nutrition Assistance Program, or SNAP).
Long ago, when subsidies helped many poor farmers, you could defend the whole package as a form of support for those in need. Over the years, however, the two pieces diverged. Farm subsidies became a fraud-ridden program that mainly benefits corporations and wealthy individuals. Meanwhile food stamps became a crucial part of the social safety net.
So House Republicans voted to maintain farm subsidies — at a higher level than either the Senate or the White House proposed — while completely eliminating food stamps from the bill.
To fully appreciate what just went down, listen to the rhetoric conservatives often use to justify eliminating safety-net programs. It goes something like this: “You’re personally free to help the poor. But the government has no right to take people’s money” — frequently, at this point, they add the words “at the point of a gun” — “and force them to give it to the poor.”
It is, however, apparently perfectly O.K. to take people’s money at the point of a gun and force them to give it to agribusinesses and the wealthy.
In the previous post, I pointed out something very similar. In the 2012 election, Republicans proposed tax cuts that would have heavily favored the wealthy, including capital gains tax cuts, a 20% income tax cut (new top rate: 28%), and a 30% corporate tax cut, on top of a slew of new loopholes for corporations, eliminating the estate tax and slashing the gift tax.
Romney tried to sell it as a “fair, flat” proposal that would cut things evenly for everybody—except that in reality, the top 0.1% would have gotten a 13% cut (just in personal taxes, not counting corporate savings) while the lower-middle class and the poor would have received less than a 1% decrease in their tax burden.
In the same year, Republicans also tried to raise taxes—something they had purportedly pledged never to do—on more than 20 million lower- and middle-class families. They tried to kill a tax credit for 11 million families paying for college for their kids; they tried to end child tax credits for as many as 12 million families; and they tried to end the Earned Income Tax Credits for as many as 6 million families.
They have consistently tried to slash unemployment insurance payments, and now are trying to eliminate food stamps for millions of families below the poverty line—while at the same time fighting for the most generous possible handouts to wealthy people and corporations.
Tell me, exactly what do Republicans have to do to get most Americans enraged at this kind of crap? Do they have to ritually slaughter a poor family and feed their flesh to billionaires on live TV or something?
This post is from a year ago. Maybe I should re-post this annually, or even monthly. It bears seeing again, and again. Recommend this. Share it. Post it. It’s the Truth.
Precisely. I’ve also been reading Thomas Frank’s Pity the Billionaire, which deals with the same topic from a different perspective.
The frustrating thing is, this should be so obvious, as obvious as the fact that the Laffer curve was full of crap. And yet millions, even a majority, buy into the bull.
Money naturally circulates upward; in order for an economy to work well, there must be some kind of mechanism to circulate the money back down. Conservatives think that jobs will perform this function all by themselves, even as they try to destroy unions, deny workers benefits, and otherwise minimize that precise flow downwards. In fact, a healthily progressive tax system and good working conditions are what create jobs and a prosperous economy.
The best way to stimulate the economy is to inject the money into the lower half of the economic cycle; injecting it into the upper half is counter-productive.
Taxing the rich is not only a good thing, it is a necessary thing. Government spending on infrastructure, education, and supporting the poorest among us is not just a good thing, it is a necessary thing. If you truly wish to have a robust economy.
But just as we still prosecute the same old drug war despite decades of studies telling us that decriminalization and treatment would be light-years better, we still bridle against the bloody obvious in economics.
We know it’s a fact that dollar for dollar, food stamps are the most effective stimulus mechanism, followed closely by unemployment benefits and infrastructure spending, and yet most of the nation seems to accept Republican whining about how that will destroy the economy.
It is just as solid a fact that dividend & capital tax gain tax cuts, corporate tax cuts, and the billionaire-slanted Bush tax cuts are among the absolute worst stimulators–and yet we somehow allow right-wingers to insist that these be given a priority.
We’ve tried it the Republican way for 30 years and we have nearly destroyed our economy. Now right-wingers complain about how they have never gotten a chance and how liberals have ruined everything. They are absolutely wrong. Tax rates for the wealthy and for corporations should rise, for their own good as well as everyone else’s. Tax rates for the middle class should stay the same (being as low as they are) or be eased. Money should be spent on infrastructure, scientific & technological research, and education.
In case you were wondering why “Top 10” and “Top 20” lists are so popular right now, it’s the same reason why regular articles which are not that long are broken up into four parts, or why sites like the Christian Science Monitor offer so many “fun” quizzes and tests: to get money.
It’s all about the ad count. The more times you can make a reader visit a new page, the more ads they are exposed to. Numbered lists are perfect for this: each item gets its own page. Make it interesting, and you get 10 or 20 times the number of ads you can reasonably get away with on a page.
Quizzes (can you pass a citizenship test?) are even bigger traps: users are drawn into finishing these as they get no payback until the very end; this is abused when the number of questions is not initially revealed and the test goes on and on and on…. Alternately, sites can double the ad views by giving a page to each answer as well as to each question.
However, any quiz or numbered-item article should be approached with caution; they are the go-to gimmick these days, and are made not because they have anything interesting to forward, but simply because it’s time for a new one.
I understand that sites have to find a way to pay for everything, but there comes a point when it goes a bit too far.
You know what would probably pull in more money from ads? Stop making them distracting. I’d love to see an ad service that guarantees no ads will move, jump, cycle, or otherwise distract from the primary focus of the page. If they did that, I would switch off my ad blocker (as would perhaps millions of others) and, if the ads were designed right, I would probably start clicking on them.
But if Top 100 lists draw in enough yokels and lets those with ad blockers sail serenely past… well, so be it.
Passing these tax cuts will worsen the long-term budget outlook, adding to the nation’s projected chronic deficits. This fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research. Moreover, the proposed tax cuts will generate further inequalities in after-tax income.
Well, a decade later later, and it has come to pass exactly as they warned. Well, not exactly—conservatives made it much worse. Bush and his cronies twiddled their thumbs while 9/11 unfolded, then bungled the war in Afghanistan, which should have taken at most a few years, mostly screwing up by starting the even more expensive and completely unnecessary war in Iraq, and then deregulated the economic sector so badly that we nearly imploded. Not that we didn’t know this from the beginning.
Conservatives made this debacle happen, and now they want to use it to further their agenda of dismantling the social safety net.
Of course, conservatives will deny all of this. They’ll make the claim that Clinton wrecked the economy, that 9/11 was unexpected and unavoidable and we had to spend more on security and wars, that the 2007 subprime mortgage crisis was caused by black people who were too greedy and the Democrats who forced banks to loan money to them, and that the debt all magically appeared on January 20, 2009.
The LA Times suggests:
Here’s another idea: Let’s join hands and walk to the bottom of the cliff together. It’s not very far down. The deficit and national debt will be reduced; Social Security, Medicaid and, for the most part, Medicare will go on unharmed; America will go back to tax rates that worked better than the cuts we’ve been living with; and Congress will actually be forced to do something for a change: Republicans and Democrats will have to work together to repair those programs damaged by sequestration, rather than filibuster or chant talking points to make their way around the hard decisions.
Perhaps America is on the brink of a fiscal opportunity.
Well, my streak ended. Unemployment ticked back up a point this month. So, while I was right much of the time, I was wrong on this one. Still, not bad for someone who knows next to nothing about economics. All this means, however, is that the three-quarters lag is not the only variable; people re-entered the workforce in enough numbers to bring the rate back up.
As a result, it’s not necessarily bad news for Obama—in addition, the jobs number were much higher than expected, and previous month’s numbers keep getting bumped up. This, plus Obama’s performance governing during Hurricane Sandy will likely help him this Tuesday.
In the meantime, Obama seems to have solidified his place in the battleground states; it is looking less and less likely that Romney will pull a victory out of this.
In March, upon seeing February’s numbers, I wrote:
The bad news for Obama is that, for the next 4-6 months, unemployment will not be so hot–it may drop a point or two over the next 4-6 months (numbers might show a drop in June or July more than other months), but may not really start to change again until just before the election–which is the good news for Obama. The rate should start dropping regularly come September, when we see the numbers for August.
Based on nothing but a guess, I would say that the unemployment rate will probably be between 7.6% and 7.8% come November. The last three months, all good gainers, will show up in the unemployment rate in the three months leading up to election day.
Then here’s what happened:
So far: wow. I really did call it, didn’t I? It dropped a few in the 4-6 months following February’s numbers, the started dropping regularly when the numbers for August came out, and fell into the range of 7.6 ~ 7.8%. I’m willing to bet that the figure will be 7.6 or 7.7 % in next month’s report.
Question: will this put a damper on Romney’s fueled charge post-debate? It certainly subtracts from the ammunition he could have fired if the rate hadn’t dropped 0.3%…
I wrote the above last night but fell asleep before finishing up… and awoke to a series of reports I could hardly believe: job truthers.
A lot of people on the right are now crying foul, forwarding the conspiracy theory that Obama faked the jobs report, in “Chicago style,” whatever that’s supposed to mean.
Betsey Stevenson, the former chief economist in the Labor Department, wrote this morning, “Anyone who thinks that political folks can manipulate the unemployment data are completely ignorant about how BLS works and how data are compiled.” Alan Krueger, the chairman of the White House Council of Economic Advisers and one of the nation’s preeminent labor economists, told Bloomberg today, “No serious person would question the integrity of the Bureau of Labor Statistics. These numbers are put together by career employees. They use the same process every month. So I think comments like that are irresponsible.”
So: the polls show your guy behind? They’re faked! It’s a liberal conspiracy which includes Rasmussen and Fox News! The unemployment rate drops? Fake! A socialist conspiracy from the Bureau of Labor Statistics!
Frankly, I’m surprised they didn’t call Hurricane Isaac, which hampered the GOP convention in Tampa, a liberal conspiracy. It’d be just as realistic a call. Blame it on Al Gore.
It has all the elements on the key issue, the economy. It answers the 4-years-ago question just well enough for people to remember without getting too bogged down in details. It mentions the hemorrhage of jobs in 2008 and the growth (though tepid) since; it fails to mention the effect of the stimulus directly, but it is implied. It then paints the differing plans, again hitting the key points. This is a well-planned and -crafted ad. Yes, it glosses over the down points, but that’s what campaign ads do—but even on this point, it does the rare campaign trick: admit you haven’t done as well you you intended while still not sounding like it was a failure. Obama can thank Clinton for planting that seed.
What it does, most importantly, is to win the argument on the economy. That was Romney’s only real hope: blame Obama for the recession. It was, in fact, the Republican Party’s chief goal, as you recall. But here we have Obama beating Romney on that, and it reflects in the polls, which show no advantage for Romney on the issue. Republicans have, amazingly, lost their advantage on security, the military, and foreign affairs as well. The GOP led us in to the recession, into huge debt, and into two massive, costly, and lengthy land wars in Asia while governing over a time of fear and crisis. For all the lingering pain, it’s felt better under Obama, and bringing Clinton out reminds us of the 90’s, now almost a golden age. Obama can say he’s brought back job growth, rescued Detroit, ended the Iraq war, killed bin Laden and brought down Gaddafi. What’s left for Republicans to attack against? Obama can even go on the offensive in these areas, most bitingly against Romney’s tax plans.
Romney would certainly deny that he is planning the tax hike for the middle class, so you could conceivably call Obama’s claim in the ad a “misrepresentation”—but certainly not a “lie,” and I would even argue the term “misrepresentation.” Romney promised deficit-neutral tax breaks for the rich which, mathematically, can only be achieved with the tax hike on the middle class. Romney denies this, claiming that economic growth will magically rocket upwards to a point where all the money falling from the sky will make the break deficit-friendly, but that’s BS. And Romney has failed to take back his pledge about the tax break. Ergo, he may not be directly proposing a tax hike and may utterly deny it, but it is the certain result if he keeps his promises. If I say I will drive my car off a cliff by deny it will crash in the ravine below due to magical flying abilities, it is safe for others to claim that I propose to crash my car in the ravine.