You’ve probably seen the joke making the rounds:
A unionized public employee, a member of the tea party and a CEO are sitting at a table. In the middle of the table is a plate with a dozen cookies on it. The CEO reaches across and takes 11 cookies, looks at the tea partier and says, ‘Watch out for that union guy, he wants a piece of your cookie.
What has really been striking to me is the fancy dancing being done by those who favor busting unions but hated the idea of returning to the Clinton tax structure on incomes over $250,000. At the time, we heard that $250,000 per year is not rich. And, you know what. I can buy that. $250k per year is comfortable, and a lot more than most people make; but it’s not “go to hell” money where you can coast and ignore the rest of the world if that’s what you want to do. (Never mind for the moment that the plan wouldn’t start making a significant difference in your taxes until you were moving above $250k. You’d pay a few cents extra on your first dollar above $250k, but it’s not going to break you.)
Standing alone, the effort to portray people making in excess of $250k as “just folks” is probably at least an arguably defensible position. But, the position becomes indefensible when combined with the latest round of attacks on unionized public employees as being paid too much what with their fancy pants health care and pensions and whatnot.
As an aside, I believe that when the issue was increased taxes for people earning over $250,000, the argument was made that in such a fragile economy, we couldn’t deprive these people of economy stimulating income. Somehow that’s not a concern when the compensation of ordinary workers is at issue.
The favored angle of attack against public sector workers is to stoke the jealousy of private sector workers whose wages have stagnated over the past several decades. It’s an old game. Reminds me of the quote from railroad financier Jay Gould about how he could hire one half of the working class to kill the other half.
Richard Wolff, writing in the Guardian, has a pretty succinct article advancing the argument that the rich have done an effective job of soaking the rest of us over the past thirty or forty years. When folks bother to recall that income disparity wasn’t quite as stark in the 50s and that a working class wage used to do quite a lot for a family, the usual explanation was that post-World War II was simply different. Now that the rest of the world does not lay in tatters, our economy can’t yield that kind of wealth for everyone.
First, Wolff points out that the rich have dramatically reduced their tax burden since 1945, both absolutely and relative to the middle class and the poor. Second, since their tax burden has come down, their share of the total national income began to rise. He points out that the tax-the-rich years saw lower unemployment and faster economic growth than we’ve seen in years. He also notes a nice trick for people with money – once the government reduced taxes, it ran deficits wherein the people who got tax breaks got to loan that money to the government at interest. They have also been able to take that money and invest it in places like China & India in ventures that were then used to export jobs.
Robert Creamer takes a look at America’s post-war economic history and finds that:
This stagnation of middle class incomes has not happened because our economy has failed to grow over this period. In fact, real (adjusted for inflation) per capita gross domestic product (GDP) increased more than 80% over the period between 1975 and 2005. In the last ten years, before the Great Recession, it increased at an average rate of 1.8% per year. That means that if the benefits of economic growth were equally spread throughout our society, everyone should have been almost 20% better off (with compounding) in 2008 than they were in 1998.
But they weren’t better off. In fact, median family income actually dropped in the years before the recession. It went from $52,301 (in 2009 dollars) in 2000 to $50,112 in 2008. And, of course it continued to drop as the recession set in.
He also finds that the federal government has remained relatively constant as a function of GDP since World War II, median household tax burden has dropped slightly. Worker productivity has increased significantly while hourly wages has increased only 1% and median family income has dropped 0.9%. What has changed is that people who work for a living are getting a smaller and smaller share of America’s economic pie. “Virtually all of the increase in our gross domestic product over the ten years before the Great Recession went to the wealthiest 2% of the population. . . . . Between 1980 and 2004, real wages in manufacturing fell 1%, while real income of the richest one percent rose 135%.”
So, to conclude, I’m not sure that in the real world the CEO would be content with just 11 of the cookies. But, it’s a good joke.
This is normally the sort of post that makes folks argue about how it’s unfair to deprive the ultra wealthy of the right to acquire dynastic wealth. There is usually not a lot of dispute that the very wealthy are taking a greater share of the economic pie (though the proportions are usually glossed over). There is also not a lot of dispute that the income of the working class has stagnated (though you’ll usually hear about how the electronics now are so much better than they were then or sometimes how house sizes are better.) Some will argue about family incomes without recognizing that the family’s income is coming from two laborers instead of one.
Let’s see how this one develops.
Just a few rambling thoughts: worked my way through college “back in the day” @ 85 cents per hour that was raised to $1.00 per hour–had to work 40-60 hours per week but made it. Public employees: health care and pensions: taught school for many years and had by state law to pay 3% of salary into a pension plan –now there is bitching that I am getting too much back (and as a side note for a long period of time the state capped the return on teacher retirement @3% and got to keep anything over that); as a school employee and as a public official I strongly recommended that any raises should include health care and pension plans—one thing, part of equation was that some fringe benefits are not taxable thus a $1 raise could be a $1 raise rather than minus SS+local+state+federal taxes then have to buy health insurance.
Not really in response to you, Doug, but more of a general thought: I just grow weary of every policy debate turning into some discussion of absolutist platitudes that are abandoned at a moment’s notice to further some other policy.
If you want to debate the return of public unions versus the expense of them, I am all for it. But we don’t do that; our political process is currently based on outrage.
Take Boehner’s statement fir example. Two morbid ago, it was jobs, jobs, jobs. In response to Mark Zandi’s estimates of 770,000 jobs lost with the proposed budget cuts, he responded, “So be it.”
Demicrats do the same thing, though arguably not with the same arrogance.
None of it is focused on reasoned debate and problem solving. I don’t want someone in Congress who will fight, I want someone who can collaborate and solve problems.
Sure, I have sas steong opinions as the next guy, butnthat doesn’t mean that mynexoectations should be that they are universally fulfilled. That sort of arrogance should be reserved for despots and tyrants.
I don’t know that the current political climate is worse than other points in our history, say, the 1850’s, but the central issues seem much less weighty when you talk about tax rates and spending than the ownership of people. The issues before us just don’t seem to rise to the need for absolutism. My fear is that continued polarization will prevent us from ever reaching the economic possibilities a society like ours is capable.
So typing on an iPad is not my strong suit.
Fir= for.
Morbid=months.
Demicrats=Democrats
You get the idea.
Economies that “soak the rich” don’t prosper.
Black Bart x 2. Otherwise, I’d agree with Doug. CEO compensation is out of whack , and should be reduced. Still, CEO pay that is too high does not make public union pay that is too high, especially considering it is paid by taxpayers, acceptable.
It seems that in general, this debate is a variation on the age old question of the morality (and efficacy) of markets versus governments as instruments of the social will. Reasonable people can, of course, disagree, but there is a deeply problematic suggestion above that we are to accept almost any level of privilege and inequality produced by markets while also being deeply offended and suspicious of any privilege created by government. I just don’t accept that suggestion at all. Perhaps some people see only taxpayers, but I see citizens. Perhaps some people see only consumers, but I see workers.
The point has been made endlessly elsewhere as well, but if one tracks the levels of economic growth and the top marginal tax rate in the 20th Century, one can very easily come to the conclusion that “soaking the rich” is directly predictive of prosperity.
BB. How do you know that?
I don’t think anybody in the US has tried that in the 20th century. The economy didn’t seem to rely on your statement for its ups and downs in the last 140 years. Explain that.
That bit about how economies that soak the rich don’t prosper reminds me of that song line about who are you going to believe: me or your lying eyes?
It’s a matter of balance. I think you need some inequality to make the system run. Maybe like a positive and negative charge on a battery. But, after a certain point, the returns start to diminish. I think I’ve said it before, but I think a guy will work just as hard for $100 million as he will for a billion. At some point, you’re working flat out and additional compensation isn’t going to induce you to do much more. If you’re trying to design an optimally efficient economy, that extra compensation can probably be seen as “waste” inasmuch as it wasn’t necessary to induce you to work harder or smarter or take more risk.
Rich-soaking socialism has never produced a “optimally efficient economy.”
Leftists incorrectly imagine there is a defined pile of a hundred pennies distributed among 100 people. If one person has ten pennies, then nine people have none. Their solution is to redistribute the pennies.
Rich-soaking socialism doesn’t work because there is no pile of pennies.
A) Taxing wealth isn’t “socialism”.
B) What is a leftist? If you think I’m one, that explains much about your cognitive skills.
C) Making up cutsie little examples that have no bearing upon reality only appeals to those who neglected critical thinking skills in school (no doubt a teacher’s fault, because it couldn’t possibly be laid at the feet of the lazy student).
D) If there are only 100 pennies, then the somebody who grabbed ten pennies isn’t really creating any new wealth, just hoarding what he has. Not very market-driven capitalism, now is it? Somebody is experiencing a conceptual failure, I’m thinking. Last time I checked, the idea was to make those 100 pennies create more pennies. If somebody has buried his ten pennies in the backyard (or maybe in the Caymans), perhaps some “redistribution” might lead to somebody else increasing the total number of pennies. At least they might try.
Paul C. –
Fair point about private versus public sector jobs that would be relevant if it weren’t for TARP, TALF, AIG, Bear Stearns, BoA, WAMU, National City, GM, Chrysler and all the other bailed out concerns. Back when there was a proposal to limit those CEO’s compensation to $250,000 Republicans were universally against it.
Once again, platitudes where they are convenient.
You’re making the case for BB’s point and simultaneously ridiculing him for it: There is no defined pile of pennies. Hardly worth attacking his cognitive skills when you in turn make the exact same point.
Furthermore, are you actually suggesting that the bulk of our “nation’s wealth” (also a misnomer considering the wealth belongs not to the nation but to individuals) is being hoarded in tax-elusive offshore accounts or in hidden strongboxes? I’m inclined to blow the “bullshit” whistle on that note, just from taking a cursory glance at the volume of money that flows throughout our various stock exchanges on a daily basis. Most of our “nation’s wealth” is, in fact, busy at work generating more wealth (or at least trying to).
Marc D.: Funny how you should mention Republicans being against the $250k limit to compensation (how many years ago was that BTW?), but you conveniently ignore that Republicans were also generally against TARP, GM, Chrysler, etc.
Second, last I checked, most of the bailouts you mention (which I will state for a second time that Republicans were against) were loans to be paid back, not expenditures. That fact is critical, yet missing from your partisan comment.
Speaking of which, I find it telling that of the 12 comments currently on this thread, the only ones that discuss “Democrat” or “Republican” are the two comments made by you. This particular thread is about policy, not politics. Note and understand the difference. Attempts to slam a particular party are a bit out of place in a policy discussion.
Sorry, Andrew. It’s tough to sound sarcastic sometimes here. And anyway, if it’s OK for BB to make stuff up, why can’t I? Seems a wee bit unfair, doesn’t it?
My point was that BB is making stuff up that doesn’t hold water. That’s it. Nothing else to see.
Sorry if I made it too confusing.
I don’t know about BB’s points not holding any water varianguard (I also strongly disagree with your “A” point, perhaps you meant “income”, not “wealth”?). While Black Bart’s statement was a bit strong for my taste, you could look at the ten planks in the Communist Manifesto and recognize that America has probably instituted over half of them. This may, or may not institute “socialism” (which has multiple definitions), but Marx might consider it 1/2 way to communism.
It’s okay to disagree with me, Paul C.
I, don’t require dissenters to pack it in and leave town forever.
I’m also not insinuating that you (personally) do, but others more aligned with your apparent political philosophy seem to think that’s a valid method for political “debate”.
And, since I doubt I could convince you otherwise in an anonymous, electronic forum, I’m Ok with your disagreement. At least I’m hoping it’s still a free country?
There are a lot of economic fallacies in this post. Just to start, let me ask Doug to consider ways that households have changed over time, so that comparing “family income” today vs. in the past might give you a skewed view of what has happened.
I’d ask Doug secondly, what is “income”? Does that include fringe benefits? What changes to benefits over the last 30 years could skew the income statistics?
This post comes across as kind of apocalyptic. Could there be simpler explanations for the statistical “problems” that Doug cites?
Paul C. : My first comment was utterly non-partisan ( or perhaps bi-partisan) in pointing out a consistent problem with this discussion. My second comment was partisan insofar as i simply pointed out an inconsistency in the argument that public employee compensation should be capped. Because it is R’s promoting that view, it is entirely reasonable to mention that.
And how long ago did this happen? 2008/2009.
You failed to address the inconsistency in that most of the same people arguing to cap union pay did not want to cap bailed out CEO pay. Completely inconsistent view.
Not all bailouts were to be repaid. TALF lost money because it allowed Fed borrowing against worthless assets. The guarantee to JPMC for Bear was not to be repaid. The WAMU bailout will not be repaid. Doubtful that Chrysler’s loan will repaid. AIG will mostly never be repaid.
In spite of all of this, the managers used taxpayer money for bonuses and sfeety nets. With nary a sound from the majority of Congress or the Administration (Bush 43 or Obama).
As for your policy discussion – I see nothing in your responses that even hints at a proposed policy, other than a “ditto” for a glib, and demonstrably false premise of “soaking the rich.”
The Reagan tax bill, as well as the highest marginal rates in the 1990s were between 4% and 9% higher than current rates, yet GDP growth was higher.
During the 1950’s and 1960’s, highest marginal tax rates were at least 2x higher than the status quo, but it was the golden age of American manufacturing, growth and the middle class.
High tax rates did not cause this, but it certainly derails the idea that a high tax rate cripples an economy. It simply didn’t happen.
That was fairly mild, and with reasonable questions. I was expecting more of an ass-kicking from you, Buzz, when I was composing this.
I don’t know whether these stats include “fringe” benefits. But, I’d say they ought to include them on both ends (past and present) to get an apples to apples comparison.
At the end of the day, I don’t think the purchasing power of the average American has kept pace with that same American’s increase in productivity. And, I think the value of that increased production has been captured, by and large, by the very wealthy — the top 0.1 or .001% — from the statistics I’ve seen thrown out. The increased wealth for these folks has also come in the form of decreased taxes which has led to increasingly pinched government funding, mostly to the detriment of the less wealthy. The parts of government that matter most to the very wealthy are still adequately funded. (The courts still enforce contracts; the police still protect banks; the roads still transport commercial property).
Without economic training, I can’t argue this point very well, but my suspicion is that wealth pooled at the top is not as productive as wealth more widely distributed throughout the population. We have a cycle going on at the moment that is ratcheting down taxes and squeezing wealth upward. Eventually, there will be an inversion when the cycle becomes unsustainable. I don’t know what form that inversion will take. The French Revolution is probably an extreme example of that sort of thing. The New Deal is probably a less extreme example.
In an ideal system – one designed by me of course, despite my very notable limitations in this area – a person’s profit from an economic activity would bear some relationship to the value the person produced from that activity through labor, ingenuity or risk. As it is now, I think the system looks more like a pyramid where the upper levels can appropriate the value created by the lower levels. And, as I write that, it feels like I’m getting too close to what little I remember about the Marxist labor theory of wealth. A little bit of that is the price you pay for getting the pyramid built in the first place. Too much and the system becomes unstable. What’s too much? Good question. Maybe we’ll find out.
(1) I now understand your first comment meant “those CEO’s” to mean only the CEO’s of the bailed out companies. I still disagree with your comment that the two need to be consistent, but obviously you do. My biggest differentiation between public employees and CEO’s of bailed out companies is that public sector employee salaries are entirely paid by the govt. every year, while the bailout was just that, a one-time bailout to prevent a disaster that was also considered a loan, not a handout (since you seem to care, I guess I should add that it was mostly resisted by Republicans). Even if some of the loans go unpaid, there is a difference between a loan that goes bad and intended compensation. I guess you can also make the argument that CEO’s can have an impact of hundreds of times their salary, but that is a nuanced argument.
(2) People who advocate higher taxation always point to the 50’s and 60’s, a time of very high taxation and economic growth. The obvious point that seems unrecognized about this time period is that the U.S. was the only game in town. Britain, France and Germany were all in post-WW II shambles. China was an agricultural society. Russia was the communist backwards country that couldn’t do anything right, and we had literally nuked Japan’s capabilities. Who else was going to build? Today, society is global, and the reason nobody advocates for the high tax rates is because it is so obvious that these high tax rates would be a de facto shipment of jobs and industries.
All of this being said, we need a more balanced budget. The way to do that is to raise taxes, since we won’t make meaningful cuts anywhere else. So, let’s raise taxes to Clinton levels. Just recognize that when we do that, we are guaranteeing that our country won’t expand economically as much as it could.
Doug: I think poor purchasing power has kept up with increased efficiency…. in some areas. For example, I saw a stat recently that we spend less and less of our income on food. The problem is other things, like cars, which are more and more costly. Of couse, some might argue that federal requirements for automobilies, like air bags, are a big reason why cheap new cars don’t exist.
P.S. to my comment to Marc…. Let’s also not forget that while marginal tax rates were indeed about double what they are currently, that was before phase-outs gained their current popularity. Depending on what tax breaks a person posesses, today’s marginal tax rates are a lot higher than the official “35%”.
BS:
People at the top of a company don’t count their salary into the success of a company. Companies can be going into the crapper and the CEO & team will still draw insane paychecks while laying of workers.
How in the world does the taxes that those at the top end pay affect jobs in the US?
In fact, I’ll take the opposite track. Let’s assume that I run a small business and make $400,000. If I’m taxed heavier on the income over $250,000, then wouldn’t I have an incentive to hire another person, write off their salary as a business expense, and then get about the same amount of money for less effort? To me, low income taxes hurt jobs!
Andrew,
varangianguard March 7, 2011 at 7:54 +00006
He either wasn’t paying attention or wasn’t able to comprehend.
Or both.
If liberals would think they wouldn’t be liberals.
Jason:
That part of my comment was in relation to corporate income taxes (where our 35% is 2nd highest, after Japan. Coincidentally, have you seen Japan’s stock market performance over the past 15 years or so?).
Large multinational U.S. corporations are taxed on U.S. income seperately from foreign income. If manufacturing exists overseas, the income isn’t considered as U.S income, and avoids taxation. These manufacturing jobs are some of the jobs that are being shipped overseas, not small “mom and pop” companies like the example you mentioned. It’s hard to ship my local mom and pop hardware store to China (or wherever). :-)
I don’t know how much it matters one way or another to this discussion, but I don’t think this is a historically accurate statement. President Bush, of course, signed the law; and, in the Senate, the Republicans supported TARP something like 35-14.
In the House, where Republicans were more powerless and, therefore, had more freedom to vote philosophically instead of based on practical considerations, it was split pretty evenly with a slight majority in opposition – 91 – 108.
I didn’t give you the ass kicking because I think that we’ve argued some of these issues before, and I think that you know my views. I just want you to consider that these statistics don’t show what you think that they show.
I’d just like you also to consider that “the rich” work a lot harder than you think that they do, and that “the poor” could better themselves by working more themselves. That was the conclusion that my “ultimate household regression” post came to (
Maybe you’re right, but I have a hard time believing that folks making, say, $1 million per year are working harder than those making, say, $250,000 per year. ($250k because that’s where the tax increases were going to start.)
I can see where the affluent are probably working harder than the poor, but I don’t necessarily see that the rich are working harder than the affluent.
And, my position in life absolutely has something to do with this perspective. I know affluent people who are working hard, and I know poor people who aren’t working much at all. (And, vice versa, incidentally.) I simply am not acquainted, to my knowledge, with anyone making on the order of $1 million+ per year.
Maybe my sense is skewed because I live in the Chicago area. My neighbors are doctors, lawyers, entrepreneurs and such. My next door neighbor is a serial entrepreneur, he’s on maybe his 5th or 6th restaurant (he has 2, in fact, right now).
I have no idea how much he makes, but I certainly think that he could be up there in a good year. Dude works like a dog. He’s got the whole family working over there.
Nobody in the neighborhood is “independently wealthy” in the way you are insinuating. Everybody is working hard for the money.
OTOH, my brother works for the axis of evil in Manhattan (Goldman Sachs), and he has had trouble buying an apartment. He’s gotten outbid on a number of occasions by trustfunders, all of whom work as “activists” or artists or other occupations that you can only have if you have an outside source of income.
Check out this blog: http://www.halfsigma.com and search “value transference”. This dude has probably blogged about what you are kind of insinuating.
So it appears my memory was off by 4 votes. Still, Democrats were much more supportive of TARP than Republicans, who voted about evenly for and against it.
Bush approved it, which is a big deal. In the Senate, substantially more Republicans were for TARP than against it. Only in the House, where they were powerless in any case, was the vote about even for Republicans.
TARP simply wasn’t a Democratic initiative, mostly opposed by Republicans. The people responsible for making policy – in a mostly bipartisan fashion – supported it. I’m pushing back on this point a little bit because the meme of Obama’s bailouts has grown a little too easy; and the memory of the first big TARP bailout being just as much a Republican thing as a Democratic thing gets lost in the narrative.
Ah, I see now.
Unable to deliver a cogent rebuttal (or an incoherent one, for that matter), BB goes straight for the ad hominem approach, based upon a complete lack of information, which I suppose is a problem in fora such as this.
So, in the interest of at least hoping that your future insults strike truer, let me explain some things to you.
1) I am not a “liberal” in the meaninglessly generic manner you tend to lump anyone who doesn’t agree with your overly simplististic, vacuous arguments.
2) In point of fact, I am actually fairly conservative in fiscal and defense matters. Just because I thought your attempt at an analogy with the pennies was both pointless and inane doesn’t make me a wild-eyed communist.
3) Like most Hoosiers, I stand closer to the political middle than to either ideological extreme. Yes, I stand farther to the left than you do apparently. So what? Still doesn’t make me a socialist, communist, or any other bogey-strawman you might want to throw out in a lame attempt to discredit me.
4) Want to successfully insult me? Perhaps you should try leaving the playground nyahs-nyahs behind and write something with at least a modicum of substance?
Yeah, Bush did approve it. I guess bush is a Republican, in the same way Vichy was the French govt. during WW II. It is technically true, it fell in the face of all their historic values, and it was historically bad.
If you think Bush’s approval means something, you might want to note that Bush vetoed a grand total of 12 bills during his time in office. That’s 1.5 per year for those keeping track per year. By way of comparison, Clinton vetoed 3 times as many and Bush’s dad vetoed 3.5 times as many even though Daddy Bush spent only 4 years in office.
Bush was a big government guy that had no idea about fiscal restraint, limited govt. preservation of rights (even conservative ones like gun, property, etc.), or any other historic Republican values. Bush did as much damage to the Republican name as he did to the country.
Sure, it is hard not to admit that a bunch of Republicans liked TARP and all the bailouts, but a bunch didn’t, and it was supported in much higher numbers by Dems than Repubs. I lost track of why this matters, but this was certainly interventionist policy, not the standard for a free market group like Republicans.