How "Socialism" Could Work

Capital Gains Rate and Economic Growth in Succeeding Years

2010-10-20T14:55:00.002-04:00

Bruce Bartlett's new book

2009-10-14T16:39:00.002-04:00

I'm no economist, but I'm curious to read the upcoming book (The New American Economy: The Failure Of Reaganomics And A New Way Forward) by Bruce Bartlett on the need for Supply Side Economics to take a hike. This coming from the guy who authored a 1981 book entitled Reaganomics: Supply-Side Economics in Action.

This lengthy post from Mr. Bartlett, laying out the skeletal reasons for his new book, is intriguing. I'd be more intrigued if I understood more of it. I'm getting there. In the meantime, I leave you with this tasty tidbit:

The supply-siders are to a large extent responsible for this mess, myself included. We opened Pandora's Box when we got the Republican Party to abandon the balanced budget as its signature economic policy and adopt tax cuts as its raison d'être. In particular, the idea that tax cuts will "starve the beast" and automatically shrink the size of government is extremely pernicious.

Blog With I. Blog With Thee. Blog With Us. For I Am The Blog.

2009-10-08T11:50:00.004-04:00

I think the fundamental point of controversy in most of the important current policy debates (which you follow at the risk of severe nausea and internal hemorrhaging) is the issue of whether, and to what extent, public sector involvement in the economy is justified on economic and/or moral grounds. Really novel insight, I know. But we need to get the obvious out of the way first.

I’d like to focus primarily, but not exclusively, on the economic dimension of the debate. Our convictions with respect to ideas of “distributive justice” and “natural rights” inevitably inform our judgments on economy policy. But I’ve always gotten the impression that these moral and philosophical beliefs are nearly “undebatable” – you either hold a certain view or you don’t. It is very difficult to convince someone who places primary importance on the sacrosanct status of property rights that their view is misguided; it is equally difficult to convince someone who believes that socio-economic equality should be our ultimate goal that they are mistaken. Presumably, however, we all have reason to want a healthy, growing, sustainable economy which provides us with a high standard of living.

Not only are the economic consequences of public sector involvement in the economy a shared concern, they also have the advantage that they can be empirically observed and evaluated – at least to some extent. Subject to certain limitations (which will undoubtedly come up in future posts), then, we should be able to have a coherent debate – based on observable facts rather than convictions, and concerning a goal we should all share.

I think it helps to break the analysis of public sector economics into two parts. The first concerns the efficiency consequences of drawing resources out of the private sector and into the public sector (i.e., taxation and public borrowing). The second concerns the economic consequences of the things the government chooses to do with those resources. Of course, both questions have been extensively studied. And though, given the limitations of social science research, one can never be certain about these things, I believe one side of the debate is far more correct than the other. I’m going to try to support that judgment over the course of my blog posts.

Staying Sharpe

2009-10-08T10:32:00.002-04:00

So, after a few long discussions about how much I hate blogs, I have decided to revive the old blog. For the most part, I'm just trying to memorialize my thoughts into print, but I'm also trying to hang on to whatever policy analysis skills I've ever had. I hope some of the old participants will post as well.

In the words of old Guy Woody Corngood, "Let's do this."

Two Deceptive Arguments (revised)

2009-10-08T10:30:00.002-04:00

I've been hearing the following two conservative arguments quite a bit recently. I’d like to show that, while the factual assertions involved are true, they simply do not support the proposition they purport to.

Argument 1: The Rich Already Pay More Than Their Fair Share in Taxes (here and here)

Both articles purport to establish that our country's tax burden is already distributed progressively enough – indeed, perhaps excessively so. Both use an argument that goes something like:

“The top X% of income earners are responsible for over Y% of total Federal income tax receipts, while the bottom Z% are responsible for only 0.0003% (or some such low number).”

These facts, by themselves, do not say anything meaningful about the progressivity of the U.S. tax system. They do not reflect the distribution of any of the other taxes Americans pay, many of which are highly to moderately regressive (e.g., payroll taxes, sales taxes, gasoline taxes, tolls, property taxes, utilities taxes, vice taxes, service fees, etc.). Federal income tax receipts constitute only 45% of Federal revenues, while Federal taxes historically constitute about 2/3 (roughly 18% out of roughly 27%) of tax revenues collected at all levels of American government. That means that Federal income tax revenues constitute only about 30% of the country's total tax revenues, and the Federal income tax is one of the very few major progressive tax regimes (the Federal corporate tax, estate and gift tax, and state income taxes being the others).

In fact, 2/3 of Americans pay more in payroll taxes than they do in income tax. Social security taxes are assessed only on labor income and constitute a flat 6.2% on all income up to $102,000 (in 2008), while all capital income and wage income beyond that threshold amount are not subject to the tax. The Medicare tax is imposed on 1.45% of the full amount of a taxpayer's wage income. Once all taxes are properly included into the analysis and tax burden is represented in terms of a percentage of income instead of total dollar amount, this is what the U.S. tax distribution looks like.

This should be sufficient to establish that these numbers do not demonstrate anything meaningful about the U.S. tax system. But let’s go one step further, because there is another important flaw in this analysis. Even if we were to ignore all other taxes besides the Federal income tax, the figures would still prove nothing. Here’s why. Consider a "fictitious" society called the Reagan Republic comprised of A, B, C, D, and E. This society is characterized by enormous concentration of wealth and an explicitly regressive tax burden:

A makes $2 million a year and is taxed at 15%; A will pay $300,000
B makes $200,000 a year and is taxed at 20%; B will pay $40,000
C makes $75,000 a year and is taxed at 25%; C will pay $18,750
D makes $45,000 a year and is taxed at 30%; D will pay $13,500
E makes $20,000 a year and is taxed at 35%; E will pay $7,000

This society will pay a total of $379,250 in taxes. Despite the fact that the tax code is explicitly regressive, the following statements are true:

The top 20% provide 79.1% of government revenues
The top 40% provide 89.7% of government revenues
The bottom 60% provide 10.3% of government revenues
The bottom 40% provide 5.4% of government revenues
The bottom 20% provide 1.8% of government revenues

So even under a regressive tax code, the well-off can pay the vast majority of tax revenues. But as you can see, this is not because the rich bear a higher proportionate burden, but simply because their incomes are so much higher. So this argument essentially allows conservatives to leverage a major failure of the economic policies they support – the extreme economic inequality they have helped create (see Figures 1-8D)
– to support the proposition that the U.S. tax system is already progressive enough. This is ironic to say the least.

And while the numbers in my example were cherry-picked to prove my point, perhaps my assumed numbers are not so far off (see this and this and this and this).

Argument 2: The U.S. Economy Displays an Amount of Social Mobility Consistent with the Idea That It Is A “Meritocracy” (also see this)

The WSJ editorial relies on the findings of a Treasury Department study to try to show that “social mobility is alive and well” in the United States. The study used the following method:

“[It] examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.”

These findings are not particularly robust to begin with. But they're even less useful than they appear.

First, look at the way the study was conducted. Consider a college educated business major still making $28,000 at 26 at a company in Champaign IL, but who later gets an MBA and makes $200,000 at 45 as a VP of Marketing in Chicago. Or a 28 year old who works at Starbucks before figuring out that what they want to do is to get a masters in education and teach in a North Jersey school district (where they may start at >$50,000, and can go up to as high as $100,000). Or a son of privilege who does not work between 25 and 35, but rather lives off of the support of his parents or a trust (both of which would be counted as gifts and therefore not included in income) but later gets a gig as a token board of directors member on his father’s company’s board and earns dividends and capital gains off of inherited financial assets. Or a law student who has an adjusted gross income of $14,000 at the age of 27 but whose income will increase substantially once he starts working next fall (i.e., me). All of these people could very plausibly be counted in the lowest quintile during their low income years, and in the highest quintile during their later higher income years. But this isn’t “social mobility” at all. It merely reflects individuals' earnings life-cycles. All of the hypothetical people given above may be, and most likely are, the children of middle class (or higher) families.

Consequently, it is more appropriate to gauge the level of social mobility by comparing a group of people’s socio-economic status to that of their parents. Studies (1, 2, 3) that use this method consistently show that the United States exhibits a low level of social mobility relative to its first-world peers, countries which invariably have stronger welfare states and more "socialist" policies. Thus, conservative “meritocrats” must somehow account for the strong empirical implication that social democracy is more conducive to social mobility than free market capitalism.

A few more points should be made. The study only counted tax filers. Many very low income people (including the domestic chronically poor and immigrant laborers) do not file income tax returns (Table 3). These people are not counted at all, so the study totally ignores some people at the very bottom – people for whom we know the prospect of social mobility is the most far-fetched (p. 27). This feature will also bump down people whose income may not seem extremely low (like the hypothetical people I mention above) into the “lowest quintile” group, the group whose subsequent earnings form the crux of the study’s supposed implications. Furthermore, the statement that “the after-inflation median income of all tax filers increased by an impressive 24% over the same period,” paints a very misleading picture of reality. Overall median income growth has stagnated over the last 40 years (an average annual growth rate of about 0.54% from 1967-2008) despite significant increases in total family hours worked (an average annual growth rate of a little less than 0.75% from 1979-2002). Moreover, mobility may not necessarily represent the workings of a meritocracy. Indeed, some annual earnings variation may in fact reflect an undesirable degree of volatility in people’s incomes that it is attributable not to meritorious behavior (or the lack thereof), but instead to unforeseen financial disruptions. See Jacob Hacker’s The Great Risk Shift.

Perhaps it is fruitless to point out these (somewhat distressingly obvious) errors in reasoning of the WSJ editorial writers, but I do encounter these arguments frequently, and it will be handy for me to have this post on hand to counter them.

SDI and Average Annual Productivity Growth in North America, "Old" Europe, and Oceania, 1980-2006

2008-09-26T23:06:00.003-04:00

Source: OECD Factbook 2008. http://titania.sourceoecd.org/vl=4937052/cl=16/nw=1/rpsv/factbook/

SDI and Intergenerational Mobility

2008-09-26T16:44:00.008-04:00

The only countries for which the right data were available were:

UK {0.502, 0.001}
USA {0.300, 0.087}
France {0.623, 0.258}
Germany {0.482, 0.515}
Sweden {0.821, 0.658}
Canada {0.456, 0.887}
Finland {0.681, 0.915}
Norway {0.687, 0.944}
Denmark {0.784, 1.001}

x = SDI 2.0
y = Intergenerational Mobility (Scaled)

Source: http://www.economicmobility.org/assets/pdfs/EMP_American_Dream.pdf, p. 9.

Note: scaled scores are derived from each country's relative mobility statistic (i.e., the extent to which one's parents earnings predict one's own earnings). The scaling formula is [(country's statistic - minimum statistic)/(maximum statistic - minimum statistic) + 0.001]. 0.001 is added to each scaled score to avoid scores of zero, which screw up the nonlinear regression equations.

Tax Burden and Productivity

2008-09-23T21:25:00.007-04:00

SDI and Productivity

2008-09-23T21:22:00.006-04:00

2007 International Rankings, GDP per hour worked

2008-09-23T21:04:00.001-04:00

"Red" States = "Welfare Queen" States

2008-09-20T16:28:00.002-04:00

Source: Tax Foundation, http://www.taxfoundation.org/research/show/266.html

Note: Ratios are for 2005. I excluded DC, Virginia, and Maryland due to their abnormally large amounts of Federal spending due to the location of the Federal government.

Presidential Tax Plans

2008-09-17T00:09:00.002-04:00

Distributional Analysis

Revenue and Deficit Analysis

Revenge of the Naderians II: This Time, It's Personal

2008-08-27T12:09:00.003-04:00

Call me blinded by incandescent rage, but my other senses are in tip top shape and I detect the sharp tang of the Naderians in the current raucous incoherence of the PUMAs (Party Unity My Ass; a small step down in class and a considerable step down in patriotism from SEIU (Suck Eggs, Iococca. USA!)). As before, the commitment to empty principle over the well-being of actual, living human beings threatens to land the country in the Republican lap. McLoin's lap. As noted earlier in this blog, better is better than worse. Almost by definition, in fact. Holding out for the perfect and uncompromised manifestion of one's principles is a long wait in a democracy.

Although, in fairness to the dewey-eyed Naderites, they voted their (I would argue, unconscionable) conscience; the current crop of PUMAs don't seem limited to Nader-style rigidity. Some of them are apparently just Republicans with a strong sense of gender loyalty:

"The Hillary Democrats are moving on---to John McCain. You see, this is what the Obama coalition of rich white liberals and racist blacks doesn't understand: the Hillary Democrats don't subscribe to the crackpot social causes of the new left; they never did. They're FDR Democrats, not LBJ Democrats. They have no interest in placating racist blacks, illegal immigrants, Islamists, gay activists, environuts, etc. They're in it for good jobs, for fair taxation of the wealthy, for healthcare, and for proper regulation of industry."

Passing lightly over what fair taxation for the wealthy means here, I struggled to split the hair between African-Americans' support of an African-American being racism, while women's support of a woman is simply a laudable effort to shatter the glass ceiling. The way I was able to do it was to look closely economic and sociological data to reassure myself that there are no barriers to upward movement for African-Americans. This comforting conclusion, coupled with a reminder that historically African-Americans have never really faced the kind of systematic discrimination women now face (women only make 77 cents on the male dollar! Never in history did African-Americans face that kind of inequality!) and a close look at my income bracket, finally allowed me to wipe the tears of frustration from my cheeks and vote Republican.

It's about time I was fairly taxed. And that goes double (metaphorically, of course) for my capital gains.

In Case Anyone Didn't Catch It

2008-08-13T15:50:00.006-04:00

Perhaps you all have caught The Loin's new advertising campaign. Its theme is: "Obama is an oblivious rich elitist (though of course he has a mere fraction of The Loin's wealth) who wants to raise taxes on hardworking middle-income Americans." Obviously, this is not true.

Estimated Effect of Obama and The Loin's Tax Plans by Income Cohort

Original source here.

Startling New Poll

2008-08-12T16:22:00.004-04:00

Let me first start by saying this post is only marginally related to socialism, in that it demonstrates compelling reasons for forcing all citizens to pay into the kitty in order to pay for accurate and sustainable poll sources.

That said, I recently returned from a road trip with my two dogs to the east coast, and the 14-16 hours in the car each way enabled me to conduct, by far, the most extensive poll of bumper stickers east of the Mississippi. Although I would be happy to detail my methodology, I know that Ryan simply prefers to publish nice graphs, and so I will do just that.

Before viewing, know that my sample size was 12, which is obviously significant at all levels. Also, the first column is negative because I saw one sticker that said "Republicans for Voldemort" which, as we all know, is McCain's middle name (though he spells it SVoldemort).

So, without further adieu (clik for larger view):

In all seriousness, I saw no McCain stickers all across the states of Indiana, Ohio, Pennsylvania, New York, New Jersey and Hogwarts (except for the one). It certainly doesn't actually indicate anything about the race, but I thought it was interesting.

Once again, apologies to Ryan for hijacking his blog for utterly useless political commentary. I promise to return to socialism soon.

For All of the Howling, U.S. Taxes Not Overwhelmingly Progressive

2008-08-02T17:25:00.011-04:00

As an Obama presidency looms, we will all have to suffer through an onslaught of crooning about how an Obama administration would somehow tax the rich into virtual servitude. If only we could be so lucky.

Before we get too excited about what may happen in the future, it's good to get an idea of where we stand now. To get a baseline estimate of the present overall distribution of the country's tax burden, I found data on the percentage of income paid by each quintile (as well as the 80th - 94th percentile, the 95th-99th percentile, and the top 1%) in all Federal (i.e., the income tax, corporate tax, estate and gift tax, payroll taxes, and all other miscellaneous taxes) and all state and local taxes. You will notice that while the Federal tax system is quite progressive (though inadequately so, especially as to the very very rich), state and local taxes are, on balance, quite regressive. The result is that the U.S. tax regime, taken in its entirety, is progressive but not overwhelmingly so. Does it seem right that households making between $37,258 and $65,634 a year should pay an average of 25% of their income in all taxes while households making $601,907 and up should pay an average of 35%? That's an awfully modest increase in percentage tax burden for a ~10-fold or potentially much, much greater increase in income (to get an idea of the spread at the very top, hedge fund manager John Paulson made $3.7 billion in 2007).

I could not obtain state and local tax data for the top 0.1% (which starts at a household income of about $2.9 million a year), but the Federal tax burden of the top 0.1% (31.6%) shows that the percentage of income paid in Federal taxes increases very slowly as taxpayers' income increases dramatically. I'd be willing to wager serious bones that the overall percentage tax burden begins to decline as we move up the income ladder into the absurdly wealthy (i.e., households that make hundres of millions of dollars a year and therefore that will pay a negligible percentage of their income in state and local taxes and will receive most of their income in the form of capital gains taxed at the lower 15% rate under the Federal income tax code). I am not alone (read this and this) in this view.

Total Taxes Paid as a % of Income by Income Group

Am I wrong that this (i.e., the fact that the Federal tax code appears to have the potential to be somewhat fair while the state and local tax regimes do not) is another argument in favor of abolishing federalism? Just to speculate here, might it be the case that jurisdictional competition between states to attract higher income residents (or, more maliciously, to chase away lower income residents) is driving down the relative state and local tax burden on the well off? Higher earning New Yorkmen can move to Jersey or Connecticut or Chicagokaaners can move to Indiana to try to lower their state or local tax burden. But it's a little harder to leave the country 'cause your miffed at the tax burden (besides, where would you go? Seoul? Guadalajara?). I really struggle to see the benefits of our federalist system.

Note: The Federal data is for 2008, while the state and local data is for 2002. There probably are some minor comparability issues, but I seriously doubt that anything has changed very dramatically since 2002, or that there is any massive methodological difference between the two reports significant enough to alter the overall picture.

Also Note: The Federal tax burden percentage for the 80th - 94th percentile and the state and local tax burden percentage for the top 20% are estimates based on the percentages given for the most similar available income groups.

So, About This Minimum Wage Thing...

2008-07-25T00:34:00.015-04:00

As you may be aware, the Federal minimum wage was scheduled to increase to $6.55 yesterday. Today I had a Facebox e-debate of sorts which I think has helped me refine my position on the issue of income support for poor workers. I am very interested in other people’s take on my position on the issue.

Standard neoclassical economic theory tells us that a legally mandated minimum wage, if it is above the market clearing wage, will reduce employment, especially for the most marginally employable workers. The microeconomic rationale for this is pretty straightforward; if you forbid employers to pay any wage under $X/hr., they will fire or not hire employees who are worth any amount less than $X/hr. So the guy who is worth only $7/hr. loses (or never gets) his job when the minimum wage is increased to $7.50/hr. As always, the standard economic theory is plausible. But, also as always, it must be empirically supported to form the basis of informed policy-making. The magical curves and lines don't always get it right.

When I took a labor economics class in college, this study was relatively new and represented kind of a coup d'etat. The Krueger and Card study compared the effect of an increase in the minimum wage on employment in the fast food industry in one state with the level of employment in the fast food industry in an adjacent state that did not increase its minimum wage. Surprisingly, the study found that employment had actually slightly increased (relatively) in the state that had increased its minimum wage. Naturally, this sparked a great gnashing of teeth and back-and-forth debate within the economics profession

So today, a right-wing Facebox-friend of mine posted something to the effect that any increase in the minimum wage is an "inane" policy. In response, I drew his attention to the Krueger and Card study. He, in turn, posted a link to this study, which provides a pretty comprehensive survey of the minimum wage literature. The study found that almost 2/3 of the studies it surveyed, and 85% of the studies it found "most credible," showed a negative, "but not always statistically significant" effect of minimum wage laws on the number of people employed and/or hours of employment. The majority of the studies appear to have found that a 10% increase in the minimum wage leads to a roughly 1% to 3% reduction in the employment of low-skill workers, with significantly stronger negative effects on teenagers and young adults and much weaker negative effects on adults 25 and older.

The study appears pretty thorough and I think I buy its conclusion – i.e., there’s generally a small, negative effect of a minimum wage increase on the employment of low-skill workers. But it's important to bear these results in perspective. A 1% to 3% reduction in low-income employment is not the end of the world, particularly if we had an adequate social welfare state to provide for the subsistence of the unlucky 1%-3% (which, unfortunately we don't, but many other countries do). But it is a significant downside effect that we should take into account when thinking about income support issues. Interestingly, left-leaning economist Paul Krugman appears to share this concern ("...the centrist view is probably that minimum wages 'do,' in fact, reduce employment, but that the effects are small and swamped by other forces.").

I have proposed a fairly radical solution to all of these employment and income support issues (see #'s 1 and 6). But it's probably safe to assume that that's not going to happen any time soon. In the meantime, I think it's helpful to look at the issue the way right-of-center Harvard economist Gregory Mankiw does: as a tax on employers of low skill workers which directly funds a subsidy to low skill workers. Looking at it this way raises the obvious question - why should the employers of low skill workers bear the whole burden of this subsidy? Surely, income support of poor workers is more of a general social responsibility than the exclusive responsibility of poor workers' private employers, just as medical insurance and care is a general public and social responsibility (even if, in this country, it is an abdicated one) and should not be regarded as the particular responsibility of workers’ employers. Therefore it would be fairer and more efficient to simply increase taxes (disproportionately on high earners and very disproportionately on very high earners, of course), and then to use the proceeds to significantly increase the Earned Income Tax Credit (the EITC, or "negative income tax") for poor workers.

With respect to the relative efficiency of using a negative income tax policy instead of a minimum wage policy, consider this CBO report which found that a hypothetical increase in the minimum wage in 2005 from $5.15 to $7.25/hr. would have given an additional $11 billion overall to workers making somewhere between $5.15 - $7.24/hr. (of which, startlingly, only 18% were actually members of poor families in 2005, at least according to the notoriously low Federal poverty guidelines), only $1.6 billion of which (or about 15%) would have gone to workers in poor families. On the other hand, an increase in the EITC with the same overall income effect as the minimum wage increase would have cost the Federal government a total of $2.4 billion, $1.4 billion of which would have gone to poor families. If these estimates are reliable, the minimum wage is a very blunt instrument for supporting the incomes of poor workers.

So it seems to me getting rid of the minimum wage and drastically increasing the EITC (along with providing payments at least on a bi-weekly basis and not in one lump sum at the end of the year so the whole thing doesn't end up going to H&R Block or payday lenders) is the way to go, at least before we can push for anything more ambitious. The effect of this would be to allow employers to hire whomever they want at whatever price the employee will agree to, but to use the additional public revenues raised by a big progressive tax increase to bring everyone up to (at least) the poverty level. This way we fund the income support subsidy through the proceeds of a broad based progressive tax system rather than specifically punishing employers who happen to operate in low-skill industries by forcing them to pay for the whole burden, and a much higher percentage of the proceeds will go to workers who are actually in low income families. And of course then we would avoid the whole negative employment effect of the minimum wage (especially since, as we know, increases in tax rates generally have negligible effects on labor supply).

The bottom line for me is that the income support of the poor (ideally to the point where they are no longer “poor”) is a fundamental social responsibility, but that this responsibility would be fulfilled in a much fairer and more effective manner if the government (relying on high, progressive tax revenues) were to provide direct subsidies to poor workers rather than forcing private employers to serve as surrogate welfare agencies.

Social Democracy and Political and Civil Liberty

2008-07-21T23:48:00.012-04:00

"That government is best which governs least”
-Henry David Thoreau

There is a long thread in American political thought that associates "big government" (presumably a government financed by relatively high taxes and which controls certain markets and extensively regulates most others) with a decrease in the civil liberties (also known as "negative rights") enjoyed by its people. Though always influential, the theory has enjoyed a renaissance since the beginning of the Reagan era. But, beyond the simple “power will be abused” mantra, does the “small government” crowd have anything harder to point to (besides, obviously, comparisons to dictatorial communist regimes like North Korea and Cuba which no one advocates anymore)? To put the question more concretely, are decreases in the economic and regulatory prominence of the government associated with decreases in civil and political liberties in OECD countries?

The SDI index that I have proposed in earlier posts corresponds well with what most people would call “big government” – high and progressive taxes, high social, health, and education expenditures, strong organized labor and legislative labor protections (although organized labor is not itself a feature of the state, its strength often depends on state support and enforcement of the laws of union organization and collective bargaining). So we can try to answer this question by seeing if there is a correlation between SDI and various indicia of civil liberties (or the lack thereof).

In an attempt to provide a single figure to represent the degree of political and civil freedom enjoyed by the citizens of a particular country, I have calculated an “Authoritarian Regime Index” (ARI). The figure is comprised of scaled scores of the following:

30% - Incarceration Rate
30% - Law and Order Expenditures as a % of GDP
15% - Degree of Restriction of the Press calculated from Reporters Without Borders Ratings
25% - (-1) * The Economist Intelligence Unit's Index of Democracy

Note: Complete data was only available for:

Austria
Belgium
Czech Republic
Denmark
Finland
France
Germany
Hungary
Italy
Netherlands
Norway
Poland
Portugal
Slovakia
Spain
Sweden
UK
US

Therefore, only these countries are used in the analysis. I do not think this sample set presents any obvious problems in terms of comparability nor do I think it leaves out any country which would significantly tip the scales in one direction or the other. If anyone thinks otherwise, please let me know.

I have given the Economist's democracy index only a 25% weight because its criteria may overlap somewhat with the other three variables I use. Of course, there is certainly an amount of arbitrariness in this and all indices. But since I do not have the appropriate raw data available myself, I am giving both the Economist (an economically center-right publication) and Reporters Without Borders (more left-leaning, I think) the benefit of the doubt. And on the whole I think my weighting represents a fair balance of the criteria relevant to the level of political and civil "freedom" the people of a country enjoy.

ARI - 18 Country Sample (higher = authoritarian)

So, on to the big question. What is the relationship between SDI and ARI? If the R is positive, then "bigger" government is correlated with a decrease in civil and political liberty, as the "small government" people would predict. If it is negative, "big government" is instead correlated with greater civil and political liberty, and the "small government" crowd has a real empirical mystery to account for.

SDI and ARI

R = -0.788 (where 0.5 is the cutoff for a "strong" correlation)

Surprise, surprise. Using the countries I looked at, those countries with "bigger" government actually tended very strongly to be "freer," at least as I defined "free." As always, I would be very interested to hear any critiques or objections to my methods. But with a result this strong, it is virtually unimaginable that any suggested change would materially alter this clearly observable relationship.

Complements of Bruce Lee

2008-07-16T17:41:00.002-04:00

A friend of mine from law school posted this link on Facebox (sorry if you've already seen it on there). The graphs are not merely nice. They are delicious.

SDI 2.0 and Economic Performance - Pt. 1

2008-07-09T18:30:00.017-04:00

"Countries with low taxes, limited regulation, and open trade grow faster, create more jobs, and enjoy higher standards of living than countries with bigger, more centralized governments and higher taxes."

-President George W. Bush's "Tax Plan"

In my last post, I proposed a metric for evaluating how generally left-leaning (in the economic sense) a country is so that we can make informed comparisons between countries' attributes and their economic policies. I have adjusted that metric somewhat, and I now apply the following formula:

Taxes, Progressivity, and Redistributive Spending - 45%

30%: Tax burden/GDP
7.5%: Income tax/Taxes on goods and services
3.75%: Social spending as a % of GDP
3.75%: Social spending as a percentage of tax receipts

Labor - 25%

15%: Union density
5%: Employee dismissal protections (scaled average of OECD rating)
5%: Annualized minimum wage/GDP per capita

Health Care - 15%

7.5%: Government health care expenditures as a % of GDP
7.5%: Government health care expenditures as a % of total healthcare expenditures

Education - 10%

5%: Government education expenditures as a % of GDP
5%: Government education expenditures as a % of total education expenditures

Note that for health care and education, I gave equal weight to the amount of money the government spends (as a % of GDP) and the relative prominence of the government role in that area (by taking government expenditures/total expenditures). I think doing it this way captures the two distinct aspects of government involvement in these policy areas - one is how much government taxes and spends to provide certain services, and two, how much control the government wields over the overall "market" for that service. Similarly, for social spending I took the ratio of social spending to GDP and social spending to total tax reciepts. Here are the new results:

SDI 2.0

It's not surprising that SDI is strongly correlated (R = - 0.731) with lower income inequality:

SDI and Income Inequality

But what about economic performance? If Bush is right, countries with high SDI ratings should perform relatively poorly economically. One way to evaluate this claim is to look at the correlation between SDI and GDP per capita. It turns out that SDI is moderately-to-strongly positively correlated (R = + 0.481 where 0.5 is considered "strong") to GDP per capita.

SDI and GDP per capita

But this could simply mean that countries that have already acquired great wealth tend to take on more social democratic characteristics later on. In other words, it does not demonstrate that social democracy is the cause of these countries' economic success. So consider, instead, the average annual increase in GDP per hour worked from 1980-2006 (i.e., the rate of productivity increase since the beginning of the Reagan/Thatcher era). For the OECD 30 (excluding Turkey, for which data was unavailable), SDI is moderately correlated (R = +0.368) with faster productivity growth.

Note: the relevant data for former Eastern Bloc countries is not available for the Communist years, so productivity growth figures for the Czech Republic, Slovakia, Hungary, and Poland do not reflect the years before the fall of the Soviet Union.

SDI and Average Annual GDP per Hour Worked Growth, 1980-2006

Interestingly, this relationship becomes significantly stronger when you restrict the sample set to reflect only more "mature" economies like the U.S. and Canada, "Old Europe," (the non-ex-Communist countries, excluding the recently relatively poor Western European countries like Greece, Spain, Ireland, and Portugal) and Oceania (Australia and New Zealand). If we only consider this set of countries - an arguably more appropriate set for comparison given the greater economic similarities between these countries - the R = +0.527 (strong). This indicates a marked positive correlation between social democratic policies and recent produtivity growth in mature economies.

SDI and Average Annual GDP per Hour Worked Growth, 1980-2006 for "Mature" Economies

Once again, it is theoretically possible that this association reflects some alternative mutual cause, but no such cause springs to mind. The correlation is strongly suggestive of a positive relationship between SDI and economic performance, and it certainly gives the right (who do not seem to shy away from using comparative data nor suggesting that correlations directly imply causation) some serious explaining to do.

In later posts, I will try to use more data to shed some light on why it might be that high-SDI countries enjoy such strong economic performance and productivity growth.

Tax Burden and Economic Performance

2008-07-02T17:15:00.009-04:00

So I changed my sample set to reflect only those countries in the OECD for which the relevant information was available. Then I messed around with nonlinear regression equations and came up with some higher correlation coefficients. Here are the results:

OECD 30 Tax Burden as a Share of GDP

Tax Burden and GDP per capita.

R = +0.384 (medium strength)

Tax Burden and Average Annual Growth in GDP per Hour Worked (one measure of productivity), 1980-2006.

R = +0.388 (medium strength)

Tax burden is given as a percentage of GDP. Data available here.

GDP per capita is provided in 2007 USD (PPP). Data available here.

Annual growth in GDP per hour worked data here.

So a higher tax burden has a moderately strong positive correlation with both overall income per capita and the rate of productivity growth since the beginning of the Reagan/Thatcher era.

Good Wages = Good Business

2008-06-29T22:46:00.003-04:00

This is just an interesting article I read in Slate about the CostCo vs. Wal-Mart saga. The article does a good job summarizing the differening strategies.

The bottom line is that while CostCo. has not shown the high profit margins of Wal-Mart, it clearly has demonstrated a "slow but steady winsthe race" attitude, as the article mentions CostCo's long-term stock performance as solid and theoutlook is even slightly more optimistic than Wal-Mart's.

This comparison serves as an excellentexperiment and I actually think it provides evidence that government regulations that mimicked CostCo's benefit structure would not cause businesses to shut its doors or significantly hamper economic growth. (I don't have the graphs to prove it, but I think Ryan's graphs indicate precisely this point.)

Gas Prices Abroad

2008-06-29T22:16:00.004-04:00

Chris can probably testify directly to this, but the New York Times ran the above piece today about gas prices in the U.S. as compared to both oil producing countries and the nations of Europe. Ryan and I had been talking briefing about how Europeans have been used to paying over 4 dollars for gas for a while, and this chart indicates why. At least nearly half (and often more) of a gallon of gas in Europe is government tax.

Now, far from bringing these economies to a halt, this tax appears to have provided a steady revenue stream while at the same time encouraging conservation rather than consumption. And with continued (and obvious) evidence that higher gas prices increase reliance on public transportation, a higher gas tax seems like a double bonus. Whereas European citizens benefit from the tax by consistent, substantial investment in public transportation, the problem in the United States is that as oil compaies rake in the profits, they eventually push people people in the right direction (public transportation) but leave those people at the mercy of systems that generally are not adequately funded.

I hadn't intended to bring this around to Barack Obama, but I shamelessly will. The whole story reinforces the incredible short-sightedness of McLasik's plan to have a "gas tax holiday." Obama definitely scores a point on this one. The really ballsy position would be to reccommend a phased increase in the federal gas tax to match European levels. As gas prices will significantly rise anyway, all citizens should benefit from well-funded, viable transit alternatives rather than continue to be simply "taxed" by the oil companies.

Just a Little Statistics Refresher

2008-06-26T21:53:00.004-04:00

The Wikipedia article on statistical correlation cites this book Cohen, J. (1988). Statistical power analysis for the behavioral sciences (2nd ed.) Hillsdale, NJ: Lawrence Erlbaum Associates which suggests that, in psychological research, these guidelines apply to interpreting correlation coefficients (i.e., the strength of the relationship between two variables):

Small: +/- 0.1 - 0.3
Medium: +/- 0.3 - 0.5
Large: +/- 0.5 - 1.0

The correlation coefficient is the square root of the coefficient of determination (R-squared), which is the number that appears on each of the graphs I have posted in the two previous posts. So for the following regressions, the correlation coefficients are:

Tax Burden & HDI: +0.432 (Medium)
Tax Burden & GDP/capita: +0.327 (Medium)
Tax Burden & Income Inequality: -0.582 (Strong)
Tax Burden & Absence of Social Mobility: -0.523 (Strong)
Income Inequality & GDP/capita: -0.440 (Medium)
Income Inequality & HDI: -0.422 (Medium)
Income Inequality & Absence of Social Mobility: +0.646 (Strong)

I think it's valid to use the psychology guidelines to help us interpret these results. So a high tax burden is highly correlated with social mobility and income equality and moderately correlated GDP/capita and HDI. Income inequality, in turn, is highly correlated with the lack of social mobility, and moderately negatively correlated with GDP/capita and HDI.

So I may have understated the strength of these relationships. They are actually quite strong.

"It's Just Human Nature"

2008-06-25T15:11:00.004-04:00

This is some amazing stuff. I'm not sure about you guys, but I find the original report a little mind-blowing, so here is a link to a more comprehensible synopsis. According to the latter report:

"In setting up this study the researchers wanted firstly to explore whether equity or efficiency was stronger to our sense of justice, and secondly, they wanted to find out how big a role emotions played in resolving such questions"

...

"The results showed that participants overwhelmingly chose equity over efficiency. 'They were all quite inequity averse,' said Hsu, who explained that the findings support other research that suggests people are fairly intolerant of inequity."

So which side has the upper hand in the "human nature" debate again?

Twiking the System

2008-06-25T14:23:00.003-04:00

A professor at the U. of I. has one of these. They look kinda awesome. Maybe we should ban all automobile traffic in the city besides emergency vehicles, cargo trucks, and buses, but allow these things (in addition to all those other things) on highways and in rural areas. The article is poorly written but the information is really interesting. Apparently they are classified as motorcycles for DOT purposes, so it's legal to drive them on the roads, and you can charge them in a standard electrical outlet. They can reach top speeds of 50-55 mph.

Such Prescience

2008-06-24T17:55:00.001-04:00

I mostly approve. These things could always be done a little better, but I like the direction they're taking. It would be even more helpful here.

Two Deceptive Arguments

2008-06-24T16:13:00.013-04:00

I've been hearing the following two conservative arguments quite a bit recently. I’d like to show that, while the factual assertions involved are true, they simply do not support the proposition they purport to.

Argument 1: The Rich Already Pay More Than Their Fair Share in Taxes (here and here)

Both articles purport to establish that our country's tax burden is already distributed progressively enough – indeed, perhaps excessively so. Both use an argument that goes something like:

“The top X% of income earners are responsible for over Y% of total Federal income tax receipts, while the bottom Z% are responsible for only 0.0003% (or some such low number).”

These facts, by themselves, do not say anything meaningful about the progressivity of the U.S. tax system. They do not reflect the distribution of any of the other taxes Americans pay, many of which are highly to moderately regressive (e.g., payroll taxes, sales taxes, gasoline taxes, tolls, property taxes, utilities taxes, vice taxes, service fees, etc.). Federal income tax receipts constitute only 45% of Federal revenues, while Federal taxes historically constitute about 2/3 (roughly 18% out of roughly 27%) of tax revenues collected at all levels of American government. That means that Federal income tax revenues constitute only about 30% of the country's total tax revenues, and the Federal income tax is one of the very few major progressive tax regimes (the Federal corporate tax, estate and gift tax, and state income taxes being the others).

In fact, 2/3 of Americans pay more in payroll taxes than they do in income tax. Social security taxes are assessed only on labor income and constitute a flat 6.2% on all income up to $102,000 (in 2008), while all capital income and wage income beyond that threshold amount are not subject to the tax. The Medicare tax is imposed on 1.45% of the full amount of a taxpayer's wage income. Once all taxes are properly included into the analysis and tax burden is represented in terms of a percentage of income instead of total dollar amount, this is what the U.S. tax distribution looks like.

This should be sufficient to establish that these numbers do not demonstrate anything meaningful about the U.S. tax system. But let’s go one step further, because there is another important flaw in this analysis. Even if we were to ignore all other taxes besides the Federal income tax, the figures would still prove nothing. Here’s why. Consider a "fictitious" society called the Reagan Republic comprised of A, B, C, D, and E. This society is characterized by enormous concentration of wealth and an explicitly regressive tax burden:

A makes $2 million a year and is taxed at 15%; A will pay $300,000
B makes $200,000 a year and is taxed at 20%; B will pay $40,000
C makes $75,000 a year and is taxed at 25%; C will pay $18,750
D makes $45,000 a year and is taxed at 30%; D will pay $13,500
E makes $20,000 a year and is taxed at 35%; E will pay $7,000

This society will pay a total of $379,250 in taxes. Despite the fact that the tax code is explicitly regressive, the following statements are true:

The top 20% provide 79.1% of government revenues
The top 40% provide 89.7% of government revenues
The bottom 60% provide 10.3% of government revenues
The bottom 40% provide 5.4% of government revenues
The bottom 20% provide 1.8% of government revenues

So even under a regressive tax code, the well-off can pay the vast majority of tax revenues. But as you can see, this is not because the rich bear a higher proportionate burden, but simply because their incomes are so much higher. So this argument essentially allows conservatives to leverage a major failure of the economic policies they support – the extreme economic inequality they have helped create (see Figures 1-8D)
– to support the proposition that the U.S. tax system is already progressive enough. This is ironic to say the least.

And while the numbers in my example were cherry-picked to prove my point, perhaps my assumed numbers are not so far off (see this and this and this and this).

Argument 2: The U.S. Economy Displays an Amount of Social Mobility Consistent with the Idea That It Is A “Meritocracy” (also see this)

The WSJ editorial relies on the findings of a Treasury Department study to try to show that “social mobility is alive and well” in the United States. The study used the following method:

“[It] examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.”

These findings are not particularly robust to begin with. But they're even less useful than they appear.

First, look at the way the study was conducted. Consider a college educated business major still making $28,000 at 26 at a company in Champaign IL, but who later gets an MBA and makes $200,000 at 45 as a VP of Marketing in Chicago. Or a 28 year old who works at Starbucks before figuring out that what they want to do is to get a masters in education and teach in a North Jersey school district (where they may start at >$50,000, and can go up to as high as $100,000). Or a son of privilege who does not work between 25 and 35, but rather lives off of the support of his parents or a trust (both of which would be counted as gifts and therefore not included in income) but later gets a gig as a token board of directors member on his father’s company’s board and earns dividends and capital gains off of inherited financial assets. Or a law student who has an adjusted gross income of $14,000 at the age of 27 but whose income will increase substantially once he starts working next fall (i.e., me). All of these people could very plausibly be counted in the lowest quintile during their low income years, and in the highest quintile during their later higher income years. But this isn’t “social mobility” at all. It merely reflects individuals' earnings life-cycles. All of the hypothetical people given above may be, and most likely are, the children of middle class (or higher) families.

Consequently, it is more appropriate to gauge the level of social mobility by comparing a group of people’s socio-economic status to that of their parents. Studies (1, 2, 3) that use this method consistently show that the United States exhibits a low level of social mobility relative to its first-world peers, countries which invariably have stronger welfare states and more "socialist" policies. Thus, conservative “meritocrats” must somehow account for the strong empirical implication that social democracy is more conducive to social mobility than free market capitalism.

A few more points should be made. The study only counted tax filers. Many very low income people (including the domestic chronically poor and immigrant laborers) do not file income tax returns (Table 3). These people are not counted at all, so the study totally ignores some people at the very bottom – people for whom we know the prospect of social mobility is the most far-fetched (p. 27). This feature will also bump down people whose income may not seem extremely low (like the hypothetical people I mention above) into the “lowest quintile” group, the group whose subsequent earnings form the crux of the study’s supposed implications. Furthermore, the statement that “the after-inflation median income of all tax filers increased by an impressive 24% over the same period,” paints a very misleading picture of reality. Overall median income growth has stagnated over the last 40 years (an average annual growth rate of about 0.54% from 1967-2008) despite significant increases in total family hours worked (an average annual growth rate of a little less than 0.75% from 1979-2002). Moreover, mobility may not necessarily represent the workings of a meritocracy. Indeed, some annual earnings variation may in fact reflect an undesirable degree of volatility in people’s incomes that it is attributable not to meritorious behavior (or the lack thereof), but instead the result of unforeseen financial disruptions. See Jacob Hacker’s The Great Risk Shift.

Perhaps it is fruitless to point out these (somewhat distressingly obvious) errors in reasoning of the WSJ editorial writers, but I do encounter these arguments frequently, and it will be handy for me to have this post on hand to counter them.

Help me out here...

2008-06-24T13:33:00.007-04:00

This NY Sun lidblower is a bit confusing. Solomont is rather misleading from the jump here. How can it be said that the "vast majority of drug development takes place within the private sector" if one of the co-authors of the study describes government-backed researchers and their counterparts in the private sector as "highly complementary" and with FDA Agent Pitts saying, "it would be hard to say which sector's work was more important."

Also, do the study's authors claim that there is something inherent in the private sector that gives it an advantage in drug development? Or is the advantage simply a result of the private sector's outspending of government funded research?

Update!!: Whoops! It seems we have a serious bias problem here. While trying to track down the actual study, I came across a hardhitting, fact-fucking blog to which Zzwycker is a contributor. Check out this entry from May 1, 2008: Alas, work has piled on, the usual array of office crises has intervened, and the defense of capitalism this year has proven more burdensome than even my rare and finely-honed bemused cynicism envisioned.

The Study!
Zzzzwycker's co-authors are from the Tufts Center for the Study of Drug Development, which was founded by a Dr. Louis Lasagna. I'm sure that's an alias.

Obama's Plan to Save Social Security

2008-06-13T17:54:00.003-04:00

Republicans will soon be warming up their "soak the rich" talking points after Obama's statement recently regarding the Social Security payroll tax.

Rather than raise the cap, currently at $102,000, Obama wants to reinstate social security payroll taxes for individuals who earn more than $250,000 a year. He calls it a restart level.

Although this isn't a perfect solution, because the plan only affects the top 3 percent of earners, it is at least a step to solidify funding for Soc. Sec. into the future. Also, because I don't have numbers to figure out how much revenue Obama's will bring in, as opposed to a plan which raises the cap to, say, $250,000, I don't know which is really the better approach. I do know that this plan, complete with the so-called "doughnut hole," is obviously more politically feasible.

If anyone has numbers on what different plan would bring in, please let me know. I'd love to take a look.

Link to article on MSNBC is here: http://www.msnbc.msn.com/id/25143640/

The "deracialisation" of American politics, according to Krugman

2008-06-09T10:41:00.004-04:00

Paul Krugman is annoying (and still showing a few sore loser cards in his hand) but today he had some interesting thoughts on Big Government and racism in America

Would You Cash Our Check? And You Will Do It.

2008-05-29T15:37:00.003-04:00

So I drove down to Fear’s Cape with my dad in a U-Haul this weekend to move a bunch of heavy furniture. I generally like to use drive time with my dad to bounce some of my political ideas and beliefs off him to a.) judge how crazy I am, and b.) try to gently nudge him leftward. The topic of the day was health policy.

Here were my proposals. First, I suggested that the government offer everyone a voucher to buy a gym membership at qualifying gyms (i.e., gyms that meet certain sensible requirements in terms of facilities and availability of a wide range of exercise programs, etc.). Regular exercise can obviously go a long way towards reducing the prevalence of very costly and highly unpleasant chronic conditions such as diabetes, heart disease, and cancer. Judging by personal experience, it has a noticeable effect on mental health as well. The government could very feasibly make the money spent on the vouchers back (especially if we had a single-payer health system where the government was on the hook for all the medical care that would later have to be provided) in reduced chronic care costs down the road. But even in the (unlikely, I think) event that it didn’t quite make its money back, it would still probably be worth it, as it would surely significantly improve the quality of life for many people. After all, one of the functions of government should be to spend money in such a way as to improve the life of its citizens. If we’re out a few bones preventing heart attacks and strokes I’m ok with that.

The question then becomes – if it’s such a good idea to make widespread exercise a policy priority, why not just make it mandatory? Even under the voucher system, you’d probably have to keep track of how often the voucher recipient actually goes to the gym and assess penalties for people who never go – otherwise the government would be just wasting its money paying gyms for nothing. So we’re already taking attendance and penalizing absenteeism. And any time you rely on subsidies to induce people to voluntarily do something that’s for their own good, you’ll still get some people who, for whatever reason, just don’t do it. It’s analogous to one of the problems with Obama’s “no mandate” health plan – under that plan we can still expect that a good number of people will simply act irrationally and not take advantage of the subsidies. Does it not make sense just to make these people do it? It will, on balance, make their own lives better and most likely reduce the costs of health care for all of us.

This may strike people as kind of authoritarian (sorta like mandatory gym class for our entire lives, with Mr. Burdsall scolding full-grown adult slackers). But if the benefits are as large as I suspect they may be, it still may make sense. And who knows, maybe by forcing the population into regular exercise we could develop USSR-style global athletic dominance. That’s gotta count for something. Winning a FIFA World Cup, a world rugby championship, and a world cricket title (on top of our dominance in traditional U.S. sports) would establish us as the Greatest Nation in History.

My second proposal was that we subsidize certain health care procedures. The idea dawned on me when I read that the French health care system (very sensibly) charges no co-pay or deductible for 30 kinds of preventative care services. But colonoscopies, prostate exams, and gynecological exams are still highly unpleasant, despite their absolute medical necessity. Some people avoid these procedures even when their insurance covers them completely. So “free” probably isn’t good enough to establish complete compliance. Maybe it would be worth it to give people a $50-$100 subsidy for such necessary exams. Once again, this is the way to go if we are committed to the idea of getting people to do things intended for their own good voluntarily through subsidies. We could always just make them do it and assess fines for failure to do so.

What do people think? I tend to lean towards the authoritarian method, but I could be convinced otherwise. And yes, I know the authoritarian method would be totally politically impossible. So would absolutely everything else I advocate on this Blague. I’m more interested in the question of what would be best in a political vacuum.

Attn: McGroinald lovers

2008-05-29T13:53:00.003-04:00

Suck on what Rutherford Mudcock has to say about Barnacle X. O'Barnacle

Obama: Secret Skull and Bones Cold War Dictator

2008-05-27T11:18:00.002-04:00

Geez it's amazing what kind of crap is out there... this from the blog of an ex-spook who fervently supports Clinton because Obama is an "African Arab."

http://www.lulu.com/content/2325554

Bk. Hussein Ob.: Moderate Liberal Christian Muslim Fundamentalist

2008-05-24T13:37:00.004-04:00

Not to get into the thankless and fruitless task of arguing with Hannity-ites, but this is kind of funny. My mom got an e-mail last night from one of her whack-job Republican cousins that quoted Obama as saying this in Audacity of Hope:

"I will stand with the Muslims should the political winds shift in an ugly direction."

Of course it does not provide a page citation, because then you would be able to look it up. But I found the offending quote, and here's what it really says:

"... mostly [immigrants] want affirmation that they, too, are Americans. Whenever I appear before immigrant audiences, I can count on some good-natured ribbing from my staff after my speech; according to them, my remarks follow a three-part structure: 'I am your friend,' '[Fill in home country] has been a cradle of civilization,' and 'You embody the American dream.' They're right, my message is simple, for what I've come to understand in that my mere presence before these newly minted Americans serves notice that they matter, that they are voters critical to my success and full-fledged citizens entitled to respect.

Of course, not all my conversations in immigrant communities follow this easy pattern. In the wake of 9/11, my meetings with Arab and Pakistani Americans, for example, have a more urgent quality, for the stories of detentions and FBI questioning and hard stares from neighbors have shaken their sense of belonging. They have been reminded that the history of immigration in this country has a dark underbelly; they need specific assurances that their citizenship actually means something, that America has learned the right lessons from the Japanese internments during World War II, and that I will stand with them should the political winds shift in an ugly direction."

(p. 261). Wow, what an insane and radical observation: law-abiding, pro-American immigrant communities would like to know that a candidate for political office will support them and recognize them as legitimate Americans. But of course people merrily forward the distorted version along without going a milimeter out of their way to find out whether its true or not (you can find out the real quote with a simple google search of the misquote in about 5 seconds - this isn't rocket surgery).

Anyway, F them. Shit like this helps me get over my left-wing Obama trashing. Let's get psyched up for the probable Pax Obama.

L'CHAIM! McCAIN!

2008-05-22T05:37:00.007-04:00

Here's another big fat reason why I am not reassured by polls putting Obama ahead of McBain.

Oh, Florida. How many leftist hopes can you dash?

You have an urgent message from GERONAMI!

2008-05-21T11:53:00.004-04:00

He doesn't have the oratory power of Cobra Commander, but the format is the same.

And like many on The Blogggg, he has serious misgivings about Barack Obama.

Who Is the Real Reverend Klein?

2008-05-20T19:27:00.002-04:00

This guy has a nice take on the FagTax. His overview of the lack of assertiveness on the part of the left in tax policy is interesting as well.

But what you guys really need to read is his early take on Obama's health care plan. I think he is highly correct.

To Be Fair

2008-05-20T19:03:00.003-04:00

Obama's tax plan appears to be slightly but noticeably better than Klinton's. He expressly proposes increasing the capital gains rate to 28%, which is not good enough but is a start. And as the article states, he seems to want to concentrate on using tax provisions to give lower working class people a boost. Klinton's plan appears to focus on creating a bunch of kinda goofy tax incentives for the middle class.

Cops Gone Wild

2008-05-20T17:55:00.002-04:00

Thank goodness. As we hashed out quite thoroughly in e-debates past, I am no police-hater. Far from it. But the Philly PD needs to make a strong statement here. This kind of crap just plays into all the nonsense "don't snitch" crap. The PD cannot do its work effectively if it loses its political legitimacy by doing this kind of thing.

A Ban on Cluster Bombs

2008-05-20T13:00:00.002-04:00

Since this is sort of my own pet issue and future career, I thought I would draw the blogggg's attention to the fact that representatives from many of the world's governments are now meeting in Dublin to adopt a ban on cluster munitions.

For an interesting video on the subject, check out this link:
http://www.hrw.org/campaigns/clusters/video2.htm

For more-than-necessary details on the status of the convention and the primary documents, click here:
http://www.clusterprocess.org/

And to find out which countries are part of the minority who refuse to participate and/or have come out strongly against banning cluster bombs, just look out your window (if you live in the US, Israel, Russia, China, India, or Pakistan).

Strategic Politics is No Excuse

2008-05-19T20:47:00.002-04:00

See this. See especially #s 41, 48, and 49. Clearly, Obama and Klinton's sellout plans are a nod to the insurance lobby, not the electorate. This study was done in 2003, and if anything, the climate would be more favorable now.

Besides, the debate over this whole election seems to be more about symbolic and cultural politics ("why doesn't Obama wear an American flag pin?", "it would just be so great to finally have a black president.") rather than policy differences. There's no other way to explain the amount of rancor between the Obama and Klinton camps - two candidates with relatively small policy differences. If that's the case, how could Obama or Klinton possibly think that they could lose voters if they proposed a real health care plan? I doubt most Americans are even aware of the difference between Obama and Klinton's plans and a single payer system.

Once again, there's no excuse. None at all.

Obama: The False Prophet

2008-05-19T19:58:00.002-04:00

The Blogg Is Back.

The links below are old news, but interesting to note. For all the silly cultural wedge politics about Obama being a left-wing nut/Second Coming of Progressive Politics, on one key issue (maybe the key issue), he is substantially more centrist than Klinton.

http://www.nytimes.com/2008/02/04/opinion/04krugman.html

(this guy is a well-respected center-left economist)

http://www.huffingtonpost.com/rose-ann-demoro/sen-obama-please-no-mor_b_49920.html

(old and shrill in tone, but I think its underlying point is right)

I didn't necessarily recognize it right away, but the mandate thing seems to be an important difference. Maybe the West Virginia hicks weren't so stupid after all.

Now mind you, I will most certainly vote for Obama against McCain. Many times, if possible. But I think it's important to stay clear-headed about what he represents and what he does not. He is a centrist democrat, which is fine if that's what you support. But Obama is totally unsatisfactory from a social-democratic perspective, and I don't think he has any business enjoying the kind of rabid support from young left-wingers that he does.

Of course many people try to defend him on the grounds that "he needs to say this stuff to get elected." But I don't buy this. The Republicans don't seem to hesitate pushing for what they truly believe in, and it hasn't seemed to hurt them too badly in the post-Reagan era. If Obama believes in more left-wing policies then his policy recommendations should reflect that. He could compromise later on down the road if he had to. Besides, he's gonna get ripped up and down by the right-wing for "nationalizing healthcare" even under his current mushy pro-insurance industry plan, so he might as well throw something real out there.

Mike's Reply:

"I have to disagree slightly, of course. An important note in the second article is that Obama has already said that a single-payer system would be ideal. He would certainly support that plan. But, regardless of how outspoken or up front about it he is on that point, it is far from a political winner at the moment. Maybe after the election it will be a different story. (Hopefully with greater Dem majorities in both houses.)

Also, the mandate of coverage is the primary (only?) difference between the two plans, and Clinton's plan is no less a rearranging of the "deck chairs" than Obama's plan because it too still primarily relies on private insurance to cover everyone. Thus, to say that Obama's plan is "more centrist" is not necessarily true.

Republicans haven't been afraid to push their beliefs because for whatever reason the country has been behind them, and because their issues are generally the easy way and simple-minded solutions. (i.e. - "lower my taxes") Democrats generally have nuanced positions, and which require people to sacrifice things (such as tax dollars) that people are less willing to support. There is one big exception to this in current times. With respect to the Iraq War, although the solution is not necessarily simple-minded, the notion of "Get Out Now" is simple, and a majority of the country already backs it. Yet, "centrist" Dems have a point that there are logistical and possibly human rights issues that would have to be addressed, and makes their policy position (which requires a longer stay that the left would find unacceptable).\

My point is that Obama coming out strong for a single-payer system doesn't move the ball forward at all, especially if he isn't going to have a Congress that would pass it. I'm sure he's polled the issue, and right now it's probably a loser. It does no sense for him to grab on to an issue that issue going to allow him to win. However, once he gets into office, the House and Senate can put forth incredibly leftist plans that are closer to single-payer, and he can use the bully pulpit to drum up support for those plans."

My Reply to Mike's Reply:

Noting that "a single payer system would be ideal" is not a fair equivalent of "supports" or "proposes." What he truly believes in his deepest heart's soul is not a terribly relevant consideration with respect to his palatibility as a candidate for political office. His likely policy proposals and bill signings while in office, as predicted by his Senate term and his campaign proposals, are the only relevant considerations.

Klinton's plan sucks too, no question. Anything less than a hard push for a single-payer system is a nearly unforgivable offense for a Democrat in my book. But even if Klinton's mandate is the only difference, it is a significant difference both in terms of the likely effectiveness of the plan and how "left" or "centrist" it is. According to the research Krugman cites, Klinton's plan would cover more people at a greater overall cost (but at a lower cost per person) than Obama's plan. Advocating a public policy that delivers less public services to less people at a lower cost in terms of total public funds, as Obama does, is the very definition of "more centrist," at least as I understand the concept. Obama's mandate-less plan also allows better health risks (i.e., young and healthy workers) to opt out of the system and therefore put more pressure on the rest of the risk pool (i.e., "adverse selection"). The notion that better risks should have the right to opt out of a social insurance system (like, say, allowing high earners to opt out of Social Security) is a fundamentally anti-redistributive and conservative idea. Finally, the idea that the consumer is ultimately sovereign and should have the right to decide that buying healthcare is not in his or her best interest is a fundamentally conservative, free-market idea. Obama's plan observes this fiction while Klinton's "mandate" does not.

And I think it's a real chicken-and-egg thing with the whole "the American electorate just won't buy progressivism" thing. If it had been seriously pitched in the last 30 years by a charismatic, legitimate candidate with the whole might of the Democratic Party behind them, who knows where we'd be now? The fact is that the Republicans have effectively marketed a right-wing ideology for the last 30 years and the Democrats have poorly marketed a centrist ideology during that time. This was not inevitable, and there's no reason to just assume it couldn't be reversed if the will were there. If the polling doesn't support real social democratic policies right now then the Dems need to get out there and pound the pavement more, or else what's the point of having the party if it's just a mirror reflection of current polling numbers? Polling numbers probably support prayer and anti-evolution teaching in schools, banning gays from the military, and maybe even outlawing abortion, but you don't see Dems just conceding those issues. They push for them, as they should for a single payer plan do if they valued the policy goals and philosophy that support it. Besides, we all know it's the insurance lobby and not the polling numbers that provides the limit on healthcare policy.

Once again, the Democrats will be called anti-American socialists no matter how centrist they get. They might as well make proposals with some teeth if they really value social democratic policy goals. Bottom line for me: Obama's plan is both more centrist than, and inferior to, Klinton's plan, and the Democrats have no excuse for being so centrist that I'm willing to accept.

Faulty Contract Work in Iraq Kills Troops

2008-05-03T12:56:00.003-04:00

I just can't wrap my mind around this:

At least a dozen military personnel have been electrocuted in Iraq, many due to faulty wiring done by contractors like KBR, and many more have been injured.

Here's the full article:

http://www.nytimes.com/2008/05/04/world/middleeast/04electrocute.html?ex=1367553600&en=4b51a4db27685780&ei=5124&partner=permalink&exprod=permalink

National Brownout

2008-04-30T10:01:00.002-04:00

Things have gotten so bad I find myself learning from, nodding along with, and enjoying one of Thomas Friedman's columns, this one on using fiscal policy to influence energy policy:

http://www.nytimes.com/2008/04/30/opinion/30friedman.html?ex=1367294400&en=0588e238277893d6&ei=5124&partner=permalink&exprod=permalink

Après moi, le déluge

2008-04-30T09:36:00.002-04:00

I don't know whether to file this under the Bush Administration not giving a shit about black people, or not giving a shit about education, or both.

But there's a message of hope, and it should at least interest Lombard:

http://www.nytimes.com/2008/04/30/us/nationalspecial/30orleans.html?ex=1367294400&en=9e0660c1c1b21a8e&ei=5124&partner=permalink&exprod=permalink

Screw healthcare, give our forces in-inventory lethality against land combat vehicles NOW!

2008-04-23T11:58:00.003-04:00

Most of your 40 points about quality healthcare and education, clean air, safer streets, offices, and classrooms are just nowhere near as important a priority as this:

http://www.youtube.com/watch?v=OdR0rA9VBrI&feature=related

PS We learned in class that these self-destruct mechanisms designed to "reduce collateral damage" work about as well as the Popcorn function on your microwave.

They Can Have my Car When They Pry it from my Cold Dead Hands

2008-04-21T11:32:00.004-04:00

Not much action on the blog of late. Are you guys all at the MTV beach house for Spring Break or what?

With regards to gun control in America, I uncovered an interesting bit of info today while researching how to get a truck driver's license in Europe:

Until 1913, beginning with New Jersey, people in the US were not required to pass any tests or have a license to operate a motor vehicle.

Public outcry over the number of fatalities associated with unlicensed drivers eventually forced all states to adopt laws requiring licensing. And guess which countries were held up as examples of statutes successfully ensuring roadways and eventually used as a models for stricter American "auto control" legislation?

That's right, good old France and Germany...

Psy Ops Conducted on US Citizens

2008-04-21T11:17:00.002-04:00

This article in the NYTimes goes back to my post a few weeks ago regarding US TV news' instrumental role as Pentagon propagandists.

Very interesting take-away: in addition to obviously having a pro-military bias as former soldiers, many of the "retired generals" that appear as commentators on FOX or CNN whenever we bomb somebody are actually on the payrolls or boards of leading US defense contractors and weapons manufacturers.

Now do you suppose when the Pentagon pays for their flights to observe US forces in action in order for them to narrate indirect advertising for Lockheed Martin on CNN, that counts as government intervention in the marketplace?

http://www.nytimes.com/2008/04/20/washington/20generals.html?ex=1366516800&en=3ee97594863f8a01&ei=5124&partner=permalink&exprod=permalink

A Poll for the Choir

2008-04-16T11:24:00.002-04:00

Just out of curiosity, I am interested in your opinions (or statistical backup) on to what the Democratic candidates owe their supposed sure-fire victory this November.

Is it merely dissatisfaction with Iraq and the economy combined with identity politics and hype surrounding the first realistic female and black contenders?

Or does anyone want to make the case that the election of either of those two is proof of the beginning of a shift to the left among certain groups, potentially as blowback from "mistakes made" with Bush?

I'm not trying to prove a point (I haven't one), I am interested in a back-home perspective, and Lord knows I can't ask my parents.

McRibb Revisionism

2008-04-14T12:58:00.003-04:00

This is pretty cool. Apparently McCain is all about drawing parallels between the current economic crisis and the Great Depression, but the solution this time (as apparently back then) has got nothing to do with government and/or a certain president best known by his FDR'ing initials.

http://blogs.tnr.com/tnr/blogs/the_plank/archive/2008/04/14/mccain-to-america-quot-i-care-quot.aspx

The Gay Tax

2008-04-14T11:27:00.003-04:00

This is totally gay. Apparently we make gay domestic partners pay an extra tax surcharge.

Curiosity doesn't kill Jersey cats. US 155mm shells do.

2008-04-14T09:46:00.003-04:00

If this isn't proof that we've ruffled some feathers with this blog. They're hitting closer and closer to home:

http://edition.cnn.com/2008/US/04/13/artillary.cat.ap/index.html

The Final 400

2008-04-12T15:55:00.015-04:00

Check this out. "Punishing the rich" my ass. Apparently our substantially (but inadequately) progressive tax regime falls off the map once you get to the very, very top of the economic pyramid.

The top 400 taxpayers in this country paid taxes, on average, equal to 18% of their reported income in 2005. They paid 30% in 1995, and they have gotten much richer since then - they now make on average 235% of what they made in 1992. And in 2005 a third of the top 400 taxpayers actually paid less than 15% of their income in taxes. The comparatively small cut taken from the rich has apparently led Progressive Plutocrat Warren Buffet to extend the offer of a $1 million bet to every Fortune 400 member that they cannot show that members of the Fortune 400 pay, on average, a higher percentage of their income in taxes than their receptionists do.

This reduction in tax burden is largely a result of the steep cuts in the capital gains tax since 1997 (28% before 1997, 20% until 2003, 15% since). About 54% of the income of the top 1% comes from capital gains - the percentage is almost certainly much higher for the richest 400. The dividend tax cut obviously didn't help either. The result of these policies is that, since 1995, the annual tax burden of the very wealthy has decreased by $25 million per filer. That's a federal revenue loss of $10 billion annually. That's even enough to fund the war for 25 minutes.

Raw data here.

Interestingly, according to that bastion of left-wing thought, the Heritage Foundation, total federal tax revenue is just over 18% of GDP. That means the hideously wealthy bear an average federal income tax burden that is slightly less, as a percentage of their average income, than total federal government revenues as a percentage of total national income (GDP). Of course there are other significant federal taxes to consider in evaluating the burden any income group bears in financing the cost of the federal government, like payroll taxes and the estate and gift tax. But including these taxes isn't likely to change much. The extremely rich pay a comparatively miniscule percentage of their income in payroll taxes since so much of their income is not from work and the social security payroll tax exempts any work income over $101,500. And the estate and gift tax is tiny in terms of its effect and the amount of revenue involved. (1% of federal revenues vs. 35% for federal payroll taxes). Not to mention, it can be largely avoided with a modest amount of tax planning.

So it would appear that the average federal tax burden borne by the hyper-wealthy as a percentage of their income isn't much more than the burden borne by the economy overall, and it is almost certainly much lower than the tax burden imposed on most of the middle class. This is because anyone who earns all of their income from work pays 7.65% of their gross income in payroll taxes; so if you don't have any capital income and you pay more than 10.35% of your gross income in income taxes, you will end up paying a higher percentage of your income in federal taxes than people in the top 400. In other words, a single person (or a married person who files separately) who earns all of his or her income from working, makes more than about $61,500 a year, and takes only the standard deduction pays a higher percentage of their income in federal taxes than the average person in the top 400 does.

(Note: My analysis does not include the indirect burden of the corporate tax on the very wealthy. Including this amount in the analysis would increase the percentage burden borne by the very rich, especially since financial wealth is so heavily concentrated among the very wealthy. But I really don't think including it would change my analysis very much, since the corporate tax is only 10-15% of federal revenues and my suspicion is that the very very rich earn a disproportionate amount of their income from investments in exotic hedge funds and private equity funds, which are usually organized as partnerships and therefore not subject to the corporate tax. And I really have no feasible way of including it either.)

Noah Chompkins Interview

2008-04-11T16:37:00.002-04:00

So I got the chance to ask Chompkins a question or two on my friends' radio show. It was cool. I will add a link to this post if the interview becomes available online. He made a few points that are pretty basic, but very true and bear repeating.

1. Exploiting "comparative advantage" through free trade policies is not, in fact, how countries have actually successfully developed throughout economic history. They have developed through the use of high protective trade barriers and massive government intervention, subsidization, and direction.

2. The globalized, liberalized capital markets we have today actually move massive amounts of speculative capital all over the place rather than finance productive investment to any significant degree. They are a destablizing rather than productive force.

3. Most important technological developments that form the basis of our high standard of living have involved significant amounts of government research and financing.

4. Globalized capital markets also have had a huge hand in promoting global inequality. They allow investors to work as a "virtual senate," by withdrawing capital from a country en masse whenver they don't like that country's economic policies. If you look at the period in our history when we had some social democratic policies, it was during a period when we, and the rest of the world, had significant capital controls in place.

5. Economic growth since ~1975 was slower than between 1945-1975, and post-1975 growth has been highly inegalitarian. Income for the middle and bottom of the income distribution has stagnated and even fallen since 1975, while it has increased immensely for the wealthy during that period. Furthermore, economic growth from 1945-1975 (which was egalitarian) was correlated with improving social indicators (infant mortality, life expectancy, health metrics, etc.), while economic growth since that time has actually accompanied the deterioration of such social factors.

Overall I was struck by how moderate-social democratic Chomsky came off. I agreed with him on just about everything he said.

Taxation of Business Income

2008-04-11T15:28:00.009-04:00

Sorry all, but I have another dry tax policy post. This post is in part to respond to some previous comments and in part to make some comments about the proper tax treatment of business income.

Brother Vorms had an interesting take on the dividend tax. I don't disagree with his conclusion, but when we're talking about dividend tax rates we have to remember that the tax code imposes an entity level tax on corporations (i.e., the corporate income tax). Bear with me here.

Federal Tax Treatment of Business Income

Dividends

Say Corporation X made pre-tax profits of $100 last year, and would like to distribute this amount to its shareholders in the form of a dividend. The tax consequences are as follows. The $100 in profit will be taxed at the corporate level at a rate of 35%. The amount left over for the dividend is therefore $65. There is no corporate tax deduction available for a dividend paid to an individual. The $65 dividend payment will then be taxed to the individual recipient at a rate of 15%, leaving a total after-tax payment of $55.25 (65 – [.15 * 65] = 55.25). This gives an effective tax rate of 44.75% on the dividend.

Interest

Say the same corporation has $100 in pre-tax profits before taking into account the payment of interest on debt. Further assume the corporation is closely held, and it owes the debt to the owner. Finally, assume the corporation owes $100 in interest to the owner in the current year.

The interest payment (if the debt is considered bona fide, which is a whole issue unto itself) is a deductible expense to the corporation. So the corporation will face no tax on the $100 of pre-interest profits ($100 in gross income offset by a $100 interest deduction). The interest income is then taxable to the individual owner at ordinary income rates. Assuming the owner is the highest marginal tax bracket (35%), the income will be taxed one time only at a 35% rate. The total effective tax rate is therefore 35%.

This same analysis applies to interest paid to bondholders. Interest on deposit accounts, savings accounts, CDs, money market accounts, etc. is also taxable only once, to the individual payee (i.e., at a maximum rate of 35%). Investors may be able to make more after-tax money by investing in high-dividend stocks than savings accounts or CDs, but this is because the pre-tax rate of return is higher for corporate stocks, not because the overall effective tax rate is lower.

Capital Appreciation

Assume again that Corp. X has $100 in pre-tax profits. Assume that in this case, however, the corporation decides to retain the earnings. The corporation is now holding onto $65 extra in post-tax dollars (remember, a corporation’s profits are subject to the corporate tax), so the value of its market capitalization should theoretically be worth $65 more (not necessarily a true assumption for a large publicly traded corporation, but it is probably true for closely held corporations. Anyway, the assumption is for simplicity’s sake and does not alter the analysis).

Say the owner of Corp. X’s stock (assume there is only one) wants to liquidate his interest after the corporation’s stock increases in value by $65. When he does so, he will face a 15% capital gains tax on the $65 increase in value (in addition to any previous appreciation in value). Concerning the increase in value of $65, he will owe capital gains tax of $9.75 (or a reduction of capital loss worth the same amount), again ending up with $55.25. Just like in the case of a dividend, he will face a total tax rate of 44.75%.

Although the treatment of capital appreciation (in the context of corporate stock appreciation only) and dividends is similar, there are some very important differences from a general policy standpoint. First, the capital gains tax is only imposed upon realization, so in the case of capital appreciation, the taxpayer gets the benefit of deferring the tax until he cashes out (i.e., the time value of the deferred tax amount). Taxes will be due immediately upon receipt of the dividend. So in present value terms, the tax burden on the capital appreciation is lighter. By the same token, however, capital gains can be washed away before the taxpayer cashes out. Dividends are cash in hand. So capital gains may be less desirable in some contexts because the gains are subject to future capital risk. But this is a matter of finance, not tax treatment. Strictly speaking in terms of the government's take, the tax treatment of capital gains is more generous than the treatment of dividends because of the deferral issue.

But the main difference between the two as a matter of general tax policy is that most capital gains are not in the form of appreciated corporate stock. An absolute majority of capital gains are in the form of appreciated real estate. A lot of capital gains reflect appreciated partnership interests or various other noncorporate investments as well. So most capital gains do not reflect income that has already been subject to tax (and recall from my previous post that most capital gains are not taxed at all). Dividends, on the other hand, are by definition (under the tax code, anyway) paid out by an entity that is in fact subject to the corporate tax first. So the reduction in the rate of dividend taxation is far more justifiable than the capital gains preference from the standpoint of ameliorating the “double taxation” distortion (i.e., the tax at the corporate level and then again at the individual shareholder level).

Partnerships, LLCs, and S-Corporations

Partnerships, LLCs, and S-Corps are not subject to an entity level tax. Items of income are allocated directly to partners, members, or stockholders. Therefore, X LP or X, LLC or X, Inc. (subject to subchapter S) will pay no direct tax on the $100 of income. The tax items “flow through” to the partners or shareholders, who will (again, assuming a 35% rate) once again face a total tax rate of 35%. And when an owner of an interest in any one of these entities sells the interest, any resulting gain (which, remember, was not subject to any entity level tax) will be taxed at the 15% capital gains rate.

Economic Distortions

So you can see that dividends are actually the least favorably treated form of business income, even with the 15% tax rate in effect. This is as a result of the separate imposition of tax at the corporate level. Now granted, this analysis is simplified for the purposes of demonstration. It assumes away evasion, mischaracterization, tax-exempt forms of income, and special deductions and credits. As a result of some combination of these factors, along with the fact that of course some corporations do, in fact, have no income in any given year, only 1/3 of all corporations pay any corporate tax at all in any given year. But this fact doesn’t change much.

Say a corporation successfully avoids tax at the corporate level by posting an artificial tax loss, and therefore any dividend payments will only be taxed once, at the 15% rate. But the same thing would happen in the context of capital appreciation: the $100 of income would only be taxed once, at a 15% rate, when the owner cashed out. And of course an S-Corp, LLC, or partnership can just as easily hide or legally exempt income as a traditional C-Corp can, so any income from these investments would never be taxed at all to the individual owners. The only difference is for interest payments, which would still be taxable to the individual recipient at the ordinary income rate (maximum of 35%) whether the corporation had a loss or not. And of course interest paid from a savings account or CD is always taxable at ordinary rates as well. But as long as the corporation paying the dividend has taxable income greater than or equal to the amount of the dividend for the year (which you would think it usually would if it’s going to be paying out a dividend), the dividend faces the highest effective tax rate. Furthermore, if the corporation didn't owe tax on the profits it used to pay out the dividend because the income was tax exempt interest on municipal bonds, the shareholder could have avoided tax altogether by just investing in tax exempt bonds directly.

So the tax code actually creates an artificial distortion against dividend income, not in favor of it. Interest payments are deductible in full by a corporation, while dividends are not; this creates a distortion in favor of debt and against equity. Some commentators say this leads to excessively high debt/equity ratios among American corporations. The taxation of both corporate income and dividends also creates a distortion in favor of corporate retention of earnings, since capital appreciation is not taxable until realized. And because income from corporations is subject to two levels of tax (the corporate level, and then the dividend or capital gains tax), the tax code creates a distortion in favor of partnerships, LLCs, and S-Corporations and against investment in traditional C-Corporations.

It’s interesting to note, though, that for all the howling about the burden of “double taxation,” the difference in tax burden is by no means in a 2:1 ratio; rather it is 44.75% / 35%, or 1.28:1. This is not “double” in terms of the actual tax bite. The use of the term always bugs me for that reason.

For what it’s worth, I personally think an ideal tax world would have no tax at the business entity level, and would simply allow each item of income to “flow through” to the individual owner(s). That said, I would subject such income to very high, progressive, and uniform rates of taxation – regardless of whether it is capital gain, a dividend, or interest, and regardless of whether the entity that paid it is a corporation or an LLC. This would eliminate arbitrary differences in effective tax rates. But since we live in a world that is very far from ideal, and since the corporate and dividend taxes are among the most progressive taxes in town (they only hit the people that own stock), I support the maintenance of both. The top 1% own something like 50% of the total value all outstanding corporate stock, so for now we should keep corporate and dividend taxes as high as possible if we value progressivity over economic purity (which of course I do). The only problem is that under current law we’re letting massive private equity and hedge fund partnerships totally off the hook by not requiring them to pay any entity level tax at all. If we’re going to stick to an entity level tax regime, this makes no sense.

And Vorms is totally right about the timing issue. Rich people do cash out capital gains en masse whenever rates are lowered. Sometimes right-wing economists use the increase in capital gains tax revenue immediately following a capital gains tax cut to support the idea that lower rates actually increase income. This is obviously ridiculous, because the increased revenue just reflects the fact that people have held off to cash out until the lower rates take effect.

The Federal Government: Corrupt as Hell?

2008-04-09T18:16:00.010-04:00

I think we can all agree that this kind of thing (original report here) is highly undesirable, is a breach of public confidence, and should be punished severely. But before we form a lynch mob with pitchforks and torches to demand the abolition of the federal government, let’s try to establish some context.

First of all, the amount of money we’re talking about here (i.e., money involved in unapproved transactions plus the value of unaccounted for property) is about $7.5 billion, or 0.28% of the federal budget for the year examined (FY2006). This is obviously a fair amount of money in absolute terms, but it’s by no means the apocalypse in the context of the whole federal budget. And this amount reflects all purchases that did not comply with proper approval procedure and all “pilferable” property that cannot be accounted for. Some of these purchases may well have been for legitimate expenses and some of the unaccounted for property may have simply been misplaced.

Another way to evaluate the extent of the problem is to take the amount of money involved, and divide it by the total federal workforce. If we divide $7.5 billion by the 2.6 million people in the federal workforce (including postal workers, who are included in the study), we get an improper payment of $2,885 per federal employee. This sounds like a fairly significant amount, but again, by no means earth-shattering. Moreover, the vast majority of these transactions are almost certainly made or authorized by people at the very top of the federal employment hierarchy, since these are presumably the only ones who can authorize major purchases on a regular basis (actually only about 300,000 federal employees have purchase card accounts). As an anecdotal example, one top executive at the Department of Agriculture was responsible for embezzling $642,000, considerably bringing up the average for everyone. And though this executive did embezzle quite a bit of money, it bears noting that $642,000 is peanuts compared to the amounts of money embezzled by private sector executives in the Enron era.

Finally, I think it’s interesting to look at how much different parts of the income distribution have to shell out to finance such improper activity. The top 1% of income earners in this country make, on average, $1.1 million/yr. and account for 40% of all federal income tax receipts. (Note: income taxes account for 69% of general federal revenue, i.e., excluding payroll taxes, so I only account for 69% of the cost of improper activity here. If included other taxes, the cost to the very rich would increase a bit but the cost to everyone else would stay about the same). This means that each person in the top 1% pays, on average, $690, or 0.063% of their income to finance improper federal purchases. Of the next 9%, or people earning between $100,000 and $350,000, each person pays on average $57.25 to finance such activity. And each person in the bottom 50% pays, on average, $1.04 towards such improper transactions; people in the bottom 40% don't pay anything at all. So when Uncle Gloz or Uncle Vinez come to town and talk about how their tax money is being wasted, you should ask them how much money they make. Because chances are, they’re paying less than the cost of a bottle of second rate champagne.

That said, by all means, we should implement tighter controls. If we have any of this crap, then we have too much of it.

Words of Wisdom

2008-04-09T12:46:00.003-04:00

I've been skimming Noam Chomsky's wikipedia entry recently in order to prepare to ask him a question on Thursday on my friend's radio show. I came across this awesome quote:

"Anarchists propose other measures to deal with these problems, without recourse to state authority. I agree. But this is irrelevant to the problems faced by the Ravenswood workers, poor people dying of TB, hungry children, TODAY. It would be a gesture of extraordinary contempt for suffering people to approach them with the suggested slogans, which translate into real life terms: down with OSHA and support systems, etc., because they interfere with the freedom of individual -- wait for us to construct a different society some day. And that gesture of contempt would be met with dismissal, or worse, and properly so.

"One can, of course, take the position that we don't care about the problems people face today, and want to think about a possible tomorrow. OK, but then don't pretend to have any interest in human beings and their fate, and stay in the seminar room and intellectual coffee house with other privileged people. Or one can take a much more humane position: I want to work, today, to build a better society for tomorrow -- the classical anarchist position, quite different from the slogans in the question. That's exactly right, and it leads directly to support for the people facing problems today: for enforcement of health and safety regulation, provision of national health insurance, support systems for people who need them, etc. That is not a sufficient condition for organizing for a different and better future, but it is a necessary condition. Anything else will receive the well-merited contempt of people who do not have the luxury to disregard the circumstances in which they live, and try to survive."

Read the whole interview here.

Looser Workplace Saftey Regulations: $100. Higher Productivity Through Violent Supervisors: $45. Avoiding USJD Prosecution: Priceless.

2008-04-09T12:36:00.006-04:00

NYTimes article about increase in "deferred prosecution" during Bush Administration.

Seems to be nothing more than: pay off the government and we'll overlook imposing criminal charges.

I sure hope the government uses that money wisely!

http://www.nytimes.com/2008/04/09/washington/09justice.html?ex=1365480000&en=58c28f6ae10c2e4a&ei=5124&partner=permalink&exprod=permalink

Distribution of Income Growth

2008-04-09T10:50:00.004-04:00

Do see this (original report here) on rising economic inequality by state. Interestingly, the analysis excludes capital gains, which of course are extremely concentrated among the wealthy. So it will substantially understate overall income inequality.

When I have time, I will put together a more detailed post regarding income growth trends since Reagan.

Americans Afflicted with 'Governmental Reliance Syndrome'

2008-04-08T10:13:00.003-04:00

The work of GOPUSA definitely has to become a regular feature around here.

Move over Star Parker, here comes Bobby Eberle of THE LOFT to tell you dumb fucks at Working Socialism to get over your bad case of GRS* right away!

http://www.gopusa.com/theloft/?p=687

*Governmental Reliance Syndrome, Source: GOP DSM V.

McFly??????

2008-04-05T07:04:00.003-04:00

In a similar vein, check out McTasty's new time-travelling TV spot:
http://www.johnmccain.com/service/day2_webvideo.htm

This probably also resonates with people living in the Inner Core of The Moon, but only those lunatics who have taken up residence there since first arriving in 1889.

I particularly like the football uniforms taken straight out of The Great Gatsby.

The Hilarity of the Brain's Mind

2008-04-04T14:40:00.002-04:00

You guys seriously have to read this. It is well worth the toil.

I'm not convinced that it has any actual meaning in human English. To the extent that it does, it could be filtered down into an intelligible (but stupid) sentence or two. Perhaps this is some lunar dialect, spoken and understood only in the Inner Core of the Moon.

Saving, Investment, Economic Growth, and the Capital Gains Preference

2008-04-04T02:16:00.006-04:00

Regular readers (all four of us) will recall an earlier post where I mentioned that labor supply is unresponsive to tax rates. This is to say, the whole “if the government taxes me more than X%, then I just won’t bother going to work!” hypothesis is not supported by empirical evidence. The other part of the tax-rates-and-economic-growth equation is saving and investment. Many argue that low rates of tax on capital income in particular (you know, the kind only rich people have to any significant degree) help encourage saving, investment, and therefore higher economic growth. This argument is particularly important to refute because under current law, capital gains are taxed at a special, favorable rate of 15% (compared to a top marginal rate of 35% for “ordinary income”), and many major Republican figures advocate the total elimination of any tax on capital gains at all. Since the argument is demonstrably false, this “capital gains preference” is nothing more that a massive handout (to the tune of ~$92 billion in 2006) to the rich.

The first part of the pro-preference argument is that it encourages saving. By increasing the after-tax reward for deferring current consumption and investing in a capital asset (e.g., corporate stock, a partnership interest, a house, etc.), so the argument goes, the preference provides an incentive for people to save more, making more resources available for investment (we’ll ignore the fact that many forms of saving, such as 401(k) plans, IRA’s, and interest on bonds or saving accounts do not enjoy special capital gains treatment, which seems totally arbitrary). This sounds theoretically plausible. But it overlooks two important wrinkles. For one thing, it ignores the fact that individuals face two countervailing incentives when the rate of return on saving is increased. First, as the preference proponents point out, they have an incentive to save more and consume less, since the relative return of saving has increased (the “substitution effect”). Second, however, they face an incentive to save less because they can get the same level of future consumption for a lower cost in terms of deferred present consumption. As a result, a higher return on saving could theoretically increase or decrease saving, depending on which effect is larger. The question is therefore an empirical one, and the answer cannot be blithely assumed. As it happens, the responsiveness of private saving rates to an increase in the rate of return may be “small or even negative.” (p. 57, “The Labyrinth of Capital Gains Tax Policy,” by Leonard Burman).

(Note: the same competing forces apply to the question of tax rates and labor supply as well. Increasing taxes on work creates a substitution effect that discourages work but an income effect that encourages work, because more work will be necessary to earn the same level of after-tax income. This may be why tax rates have no significant net effect on labor supply.)

Second, this whole analysis recognizes only private saving and ignores the effect of a capital gains tax preference on public saving. The capital gains preference decreases government revenue (p. 2-3). If the resulting increase in the federal deficit (or decrease of the surplus) is greater than the increase in private saving, then the preference will cause a net decrease in total national saving. If it causes a net decrease in national saving, then interest rates will rise (because a larger amount of government debt will drive up the cost of borrowing) and the cost of capital for private business will increase. If the capital gains preference ends up increasing the cost of capital for private business, then it would defeat its whole stated purpose – i.e., to stimulate investment and therefore economic growth. It will not surprise you to learn that under any reasonable set of assumptions, a capital gains tax cut would in fact decrease public saving by more than it would increase private saving. (Id., p. 66)

There is another big reason why we should not be surprised that a capital gains preference would not increase investment: most capital gains are never taxed at all anyway. (Id., p. 51). This is because half of all individual capital assets held by individuals are either held until death or donated to charity. And on top of that, all capital gains attributable to foreign investors, tax exempt institutional investors like endowments and charitable trusts, and corporations, (which between them almost certainly amount to the greater part of U.S. investment) are not subject to the individual capital gains tax.

Since the preference most likely suppresses investment, it makes sense that capital gains tax rates do not have any empirically observable effect on economic growth rates. (Id., Figure 5-1, p. 82). And if this is the case, there is surely no sensible rationale for continuing the preferential treatment of capital gains. After all, any policy that ends up taxing the gains on assets that are so incredibly concentrated (the top 1% own ~40% of all financial assets) is repugnant from a distributive justice standpoint.

Bear in mind, part of the Box-Norquist-Sir Loin agenda is to totally eliminate the taxation of capital income altogether. So this battle is very current and highly significant for anyone who cares about our increasing economic inequality and our decreasing tax progressivity.

Charter Schools and Private Schools

2008-04-03T20:28:00.005-04:00

Take a look at these interesting links on education policy that came up in the comments on an earlier post. One is on charter schools and the other is on privately run schools in Philly; both compare the performance of each to traditional public schools. Not surprisingly (to us), both cast serious doubt on the free-market education agenda. Thanks to Casey for the Bland Corp. study.

Cuba Nueva

2008-04-02T19:39:00.003-04:00

I think this makes sense.

Cuba still has quite a way to go before consumerism gets out of hand. It's hard to argue with letting people use cell phones and computers.

Unemployment Adjustments

2008-04-02T12:21:00.003-04:00

Take a look at this on the deteriorating U.S. labor market.

Highlights:

If you include the underemployed (those who want full time jobs but can only get part-time work) and people not currently search for a job, the unemployment rate is 8.9%. I'm not sure how our European brethren reflect these concepts in their numbers but it's very possible that our unemployment figures are simply not comparable to other countries' figures, and that our relative labor market situation is not nearly as strong as official unemployment numbers would suggest.

Also, as a former professor of mine noted, we should incorporate the number of people we incarcerate into the unemployment figures. This would noticeably increase our relative unemployment rate, since we are so incarceration-crazed.

The bottom line: Be skeptical when economic right-wingers point to our relatively low unemployment figures as a way of justifying right-wing style capitalism.

McTasty's Economic Advisor: " We have learned that government is not the answer... freedom and competition are the answers."

2008-04-02T10:08:00.002-04:00

Thanks to column width I was unable to post this link in the comments part of our discussion of John McTasty.

http://www.washingtonpost.com/wp-dyn/content/article/2008/04/01/AR2008040102860.html?referrer=emailarticle

Rob Roy vs. H-K

2008-03-30T17:10:00.010-04:00

The denizens of the "left-wing" of the Democratic Party have spoken. They maintain that Hickory Klinstone is too friendly with business to be trusted to implement a satisfactorily progressive domestic policy agenda. Some have even gone so far as to say that, should O'Bama lose the Democratic Party's primary, they will not vote for H-K. Brushing aside, for the moment, the very significant fact that Rob Roy's foreign policy figures to be wildly more aggressive than Klinstone's, this view is drastically, dangerously wrong.

It is true that, for a short time early 2000's, Rob Roy was a pretty moderate Republican (he opposed some of Box's tax cuts, he supported Sarbanes-Oxley, he supported Campaign Finance Reform, he opposed torture; of course, he has "flip-flopped" on many of these issues since and has always been a foreign policy hawk). But this is no longer the case. With respect to Roy's domestic agenda, consider his tax plan:

http://www.americanprogressaction.org/issues/2008/pdf/tax_agenda.pdf

Some highlights:

He would make the disastrous Box tax cuts permanent.

58% of the benefits from his promised his tax cuts will go to the top 1%. As a reference point, "only" 31% of Box's tax cuts went to the top 1%. Under Roy's plan, the bottom 60% would get 4% of the benefit and the bottom 80% would get 9% of the benefit.

He would reduce the corporate tax rate from 35% to 25%, and he would allow the immediate expensing of corporate investment (rather than cost recovery through depreciation over the useful life of the investment). The result is that corporations could face negative tax rates on debt-financed investment (since they could deduct the entire value of the investment AND deduct the interest on the debt).

His tax cuts would cost $2 trillion in lost revenue over the next 10 years, thereby forcing draconian spending cuts. My educated guess is that those cuts won't be made in defense spending.

Under his plan, the difference between the rate of federal tax on labor income and the rate of tax on capital income would be increased. Capital income is already taxed less than half as much as labor income (14% vs. 30.5%). His stated goal is to totally eliminate the taxation of capital income.

As the report demonstrates, his agenda is 100% compliant with the Norquistian radical anti-tax movement.

Please, for the love of God and of anything that remotely resembles a left-leaning agenda, PLEASE vote for either Democratic candidate over R. Roy. At least Kleinstein promises to repeal the Box tax cuts on people making >$250,000, and to stop taxing carried interest (part of the compensation for the grossly overpaid general partners of hedge funds and private equity funds) at lower capital gains rates.

Raibeart Ruadh also opposes any kind of universal health care proposal and wants to at least partially privatize social security. See https://www.johnmccain.com/Informing/Issues/19ba2f1c-c03f-4ac2-8cd5-5cf2edb527cf.htm and http://www.johnmccain.com/Informing/Issues/0B8E4DB8-5B0C-459F-97EA-D7B542A78235.htm. In short, he is the most Criminal of All Garbages and must be stopped.

Word Verification

2008-03-27T16:48:00.002-04:00

I can disable word verification but it may lead to the appearance of ad-spam a la MySpace. You guys let me know want you want to do, and I will implement the Will of the People.

Tix out of McLoin's America

2008-03-27T11:57:00.003-04:00

From Kristof's (slightly less crappy than usual) column in todays NYTimes:

"...the big winner of the Democratic fist-fighting is Senator McCain. A Gallup poll released Wednesday found that 19 percent of Mr. Obama’s supporters said they would vote for Mr. McCain in the general election if Mrs. Clinton were the nominee. More startling, 28 percent of Mrs. Clinton’s supporters said they would defect to Mr. McCain if Mr. Obama were the nominee."

In light of this information, and the looming McLoin Presidency, let me again reiterate how easy it is to move to Europe. Anyone wanting specific bits of advice on how to secure unalienated life, liberty, and the pursuit of happines in France or Germany, complete with contacts in some cities, good addresses for apartment hunting and tested watering holes, don't hesitate to ask.

Massive Government Bailout?

2008-03-26T13:10:00.003-04:00

Pretend like the last time I was in an economics classroom was Spring of 2001, and that I've since filled my head with a lot of other stuff.

Can someone please explain to me why anyone would be so against Federal intervention as proposed by Klinton or Obama in the wake of the downturn and subprime business?

Is it just the same old "I want lower taxes, and smaller government, but I would like a check?" Or is there actually something to McLoin's objections?

I think I already know the disappointing truth, that the people against "unwieldy Federal intervention" to help Americans that got hurt by predatory lending are the same ones who are always really excited about massive Federal intervention when it's abroad and entails spending millions bombing the shit out of foreigners.

But another take, and one with more economics sagesse, would be nice to hear.

On Effort

2008-03-25T10:17:00.002-04:00

The link above is to a Michael Albert article responding to a critique of Parecon (particpatory economics) that raised many of the ideas against effort that have been described elsewhere in this blog. In case it doesn't show up as I planned, here it is again: http://www.zcommunications.org/znet/viewArticle/4346.

I would like to start by questioning the premise that markets are a suitable way for a non-capitalist economy to approach economics. Markets give heavy weight to individual preferences instead of focusing on group decision making. In markets we think our individual preferences can be aggregated to discern what we as a group desire. I believe, however, that we would see a much different group desire if the system of allocation were based on a decision making process that did not privilege individuality but a group consensus. Why rely on an invisible hand when we can ask ourselves what we want to produce and how much we want to consume?

Turning to labor markets specifically, I see nothing efficient in the way current labor markets work. Jobs are not paid based on their usefulness to society, nor are wages neatly tied to the investment that one makes in preparing for the job. We have privileged intellectual work (some of which provides little societal value) over any physical labor, no matter how necessary or arduous. This in turn skews how people are supposed to choose work. Again, markets have not led to our nation filling all of its necessary jobs. Markets only focus on the financial (extrinsic) rewards for a position.

Effort, although not a perfect solution, allows for a fair system of compensation based on the nature of the work and the individual's own time and sacrifice in performing the work. It does compensate all work, however. The work must be agreed upon as socially desireable or useful (no ranking of usefulness). Jobs aren't everything, remember. If you want to put a lot of effort into something that is not agreed upon by the community, you can, but you won't be paid for it. Much like this blog which must count for who knows how many hours worth of writing.

Measuring effort is not a utopian idea. We do it regularly in schools and jobs. Besides counting hours of work we get to know, roughly, our coworkers' or classmates' strengths and abilities along with their weaknesses. We can take hours of work and the communally agreed upon difficulty of the work as a base for effort. Albert suggests that for study intensive work (like doctors) the investment should be counted during the study, for which the student would be paid. So a janitor or a construction worker might receive more pay because of the physical difficulty and sacrifice, but how many people are willing to do that work for their entire working lives compared to the work of a doctor? If you are paid to study medicine, why not take more enjoyable work at less pay? You will also likely be able to enjoy working at a reasonably similar pace for a longer time.

Effort's moral basis is up for discussion. I believe that the difficulty of one's labor should be counted instead of the marginal productivity. Production should not be a goal in itself. Our current system is run on this principle - produce more to consume more. It is not a sustainable system. Focusing on effort may shift attention to ecological concerns like finding better methods of production that are not necessarily more productive, but do not ruin local land. Although a topic for future discussions, I really believe that we need an industrious revolution whereby we work harder, more harmoniously with nature, with democratic control of our labor while producing less. An example of this can be found in sericulture in Tokagawa era Japan. Discuss amongst yourselves.

US journalists in bed with military

2008-03-22T08:26:00.004-04:00

"War Made Easy" was on German TV last night and I found it to be pretty good. Pretty convincing evidence of lack of journalistic independence from government and military, which I talked about in an earlier post.

Maybe the films is old hat in the States. I'd never heard of it. Michael Moore-style editing but no slapstick and way more focussed on one issue and its potential solutions.

Here's a clip with Senator Wayne Morse(a.k.a., KFC's Colonel Sanders). Seems like even back when TV was only black and white, most of Congress, like today, had the backbone of a pretzel when it came to checking the executive branch:

http://de.youtube.com/watch?v=JiLV-Xeh8bA

Sarko l'Américain

2008-03-22T08:06:00.002-04:00

For anyone who thinks the French made their last great mistake with the conception of the Maginot Line, here's a short 60 Minutes interview with President Sarkozy. He has much to say about how socialism doesn't work. Also insists he's no silver-spooner and is instead a self-made man à l'américaine, but he's a bit too preoccupied with wiping the coke from his nose to be convincing.

At the end he walks out of the interview in a huff and insults his press secretary:

http://de.youtube.com/watch?v=2V7sxK-mUbQ&feature=related

Talking Point for Dealing with Uncle Love-It-Or-Leave-It This Easter

2008-03-20T14:15:00.004-04:00

This Easter, as family reunions bring us to a table of people with whom we share a bloodline but not necessarily political and economic philosophies, we're probably bound to hear the old familiar "this country is a place where if you work hard, and pull yourself up by your bootstraps, you can succeed. Look at me--I worked hard to get what I have..."

Well, here's a little riposte I've just developed that I believe to be unassailable, both for its fear-mongering "think of the children" element and for its non-partisanship:

"Well, if it's the case that anyone can succeed so long as they're willing, I challenge you to refuse to pay for your kids' education and leave all your possessions and inheritance when you die to the cause of your choice, because you know your kids will do just fine starting from scratch with a little can-do spirit and determination."

Your feedback on how to make it a more potent oratorical weapon is welcome.

Union Density and Productivity Growth

2008-03-19T18:16:00.004-04:00

Apparently there is no reason to think that high rates of unionization will suppress productivity growth.

Of course, by increasing the prevailing wage, high rates of unionization could theoretically lead to higher unemployment. But I have previously suggested my solution to that problem (#6 of the original 40).

"No wonder we are in a recession!!!!!!!!!!!!!!!!!"

2008-03-19T16:37:00.004-04:00

(exclamation points mine)Uhhhgh, this is freakin' stupid. I'm sick of reading these stories every March. I don't have time to elaborate since I have to "get back to work."

Meat Eating

2008-03-18T22:45:00.003-04:00

Mary sent me a good article about meat consumption.

http://www.nytimes.com/2008/01/27/weekinreview/27bittman.html?pagewanted=1&_r=1&sq=hog%20farm&st=nyt&scp=4

Also see:

http://www.un.org/apps/news/story.asp?NewsID=20772&Cr=global&Cr1=warming

Thou Shalt Not Question Thy Homeland

2008-03-15T08:28:00.003-04:00

http://edition.cnn.com/2008/POLITICS/03/14/obama.minister/index.html?iref=mpstoryview

Can someone please tell me what all the hubbub is about?

Will there ever come a time when it's not sedition to suggest that it's a little unfair for us to base all kinds of murderous shennanigans on September 11th as if we were just minding our own business, not harming anyone from 1945 to 2001?

Not to say "those people deserved it," but just as a matter of questiong our perceived role in the world as moral compass of the past century?

Executive Pay

2008-03-13T19:08:00.005-04:00

Check out this report:

http://www.faireconomy.org/files/ExecutiveExcess2007.pdf

Some highlights:

The average pay of Fortune 500 CEOs ($10.8 million, based on a survey of 386 companies) is 364 times the pay of the average American worker. This ratio was as high as 525 in 2000 during the high-tech boom but was "only" 107 in 1990.

The average pay of the 20 highest paid private equity and hedge fund managers ($657.5 million) is 22,255 times the pay of the average worker.

Over the past decade, inflation-adjusted CEO pay has increased 45%, while inflation-adjusted average worker pay grew just 7% and the hourly minimum wage declined in real value by 7%.

The average pay of the 20 highest paid American CEOs ($36.4 million) is almost 3 times the average pay of the 20 highest paid European CEOs ($12.5 million).

"World's Most Prosperous Nation"?

2008-03-13T14:36:00.012-04:00

I would like to point out a few more statistics that I believe shed light on the failures of right-wing economic policy and ideology. Specifically, they pertain to international and historical comparisons regarding our labor productivity.

First, we like to tout ourselves as the "world's most prosperous nation." http://www.whitehouse.gov/news/releases/2007/05/20070531-9.html. Even if we ignore the massive asterisk of our unparalleled economic inequality ("first you must ignore that which is unignorable"), this is not necessarily true. Actually, in 2006 Norway had the highest GDP per capita, but we were number 2 so I guess that's close enough. (Note: now Ireland has a higher GDP per capita, and if you want to include Luxembourg as a country, so do they.) See http://www.bls.gov/fls/flsgdp.pdf, Table 1. But scroll down to Table 4. Turns out for 2006 we were behind 4 other countries in GDP per hour worked (after Norway, which was by far the highest, Belgium, the Netherlands, and France; I'm sure now we are behind Ireland as well). Not that #5 or 6 is so bad, but I think this seriously calls into question the idea that we are the "world's most prosperous nation." After all, leisure has significant value as well, and obviously we have way less of it here.

Another way to see the fact that our economic prosperity indicators are inflated due to relative overworking is to compare median household income growth since the beginning of the Reagan era to the increase in hours worked over the same period. Our median household GDP increased 14.5% from 1980-2002, from $45,647 to $52,285. See http://www.epi.org/datazone/06/median_income.pdf. But the average hours worked for middle-income married couples with children age 25-54 has increased 17.1% over the same period, from 3,046 to 3,567. See http://www.epi.org/datazone/06/wrk_hrs_hus_wif.pdf. So for the typical middle-income family, it would appear that all of the increase in income over the Reagan & post-Reagan era is a mere reflection of an increase in hours worked.

But as we know, the real problem with our economy isn't that it's not productive. Our recent productivity growth has been strong, and classical economic theory tells us that increases in productivity should lead to proportional increases in wages. But it hasn't. U.S. manufacturing productivity has increased 182% since 1980, but manufacturing wages have only increased 32% over the same period. See ftp://ftp.bls.gov/pub/special.requests/ForeignLabor/prodsuppt01.txt and ftp://ftp.bls.gov/pub/special.requests/ForeignLabor/prodsuppt13.txt. So I guess the bottom line is that we cannot try to justify our immoral economic system on the grounds that it produces wealth on a scale unheard of elsewhere. It produces great wealth, no question, but not necessarily any more wealth than social democratic economies produce. And recent productivity growth has served to swell corporate profits instead of increasing wages or hour-adjusted average household income.

The Vatican Swings (to the Left)

2008-03-12T21:03:00.002-04:00

For those of you not on the Vatican's mailing list, I thought I'd mention that Pope Benedict must have been reading his Marx, because he came out with seven new "social sins," four of which are sound socialist policy, and three of which are extremely silly.

Without further ado, the new seven social sins are:

1. "Bioethical' violations ala birth control

2. "Morally dubious'' experiments ala stem cell research

3. Drug abuse

4. Polluting the environment

5. Contributing to the increasing disparity between rich and poor

6. Excessive wealth

7. Creating poverty

Sounds pretty good to me, except for the part about for the first three. And frankly, I think from a statutory interpretational position, the structure of #2 is troubling; that "morally dubious" bit seems to give us an unconstitutionally vague sin. You have committed a sin if you behave in a way that poses what may be an unrealized risk of sinful behavior. But full points on those last four.

Room for Legalized Prostitution in Those 40 Points?

2008-03-12T11:04:00.002-04:00

The legalization of marijuana is somehwere in that list.

Taking a hint from the latest sex scandal headlines, I thought I would ask the committee about how the reformed US economy and justice system sees prostitution.

Two Birds, One Stone: A Solution for Rational Utility Maximizers

2008-03-10T20:53:00.002-04:00

So, I was just having a conversation about the best way to persecute Mormons and I had a tremendous idea: mass imprisonment. Now, before everyone rains abuse down on me from their high horses--Josh, that's only one bird. Your promised bird to stone ratio was just Pie in the Sky"--let me finish. You see, we currently have a serious problem with our prisons.

No, really. We do.

We have lots and lots of people in there, the vast majority of whom are not, statistics show, Mormons, and the vast majority of whom are not being rehabilitated in any meaningful sense (although having a knife fashioned from a penitentiary toothbrush applied between the small ribs does effectively prevent the treatment's recipient from committing further crimes in the short run). We also have lots and lots of Mormons going on missions to far away lands, spreading the word about the Golden Tablets and wearing ties and just generally being extremely decent and kind human beings.

Imagine what good could be accomplished by combining these two groups. Rather than sending our Mormons to Asia and Eastern Europe, we would send them to Super Max. Imagine if one out of three prison inmates were a Mormon who had been imprisoned for absolutely no reason. What a positive influence they would be on the general prison population. It would be a soothing balm for our nation's criminal rash.

I urge you all to contact your Congress-persons.

Gets Shit Done Pt. II

2008-03-09T15:48:00.002-04:00

http://money.cnn.com/2008/03/08/news/companies/countrywide_FBI/index.htm?postversion=2008030810

Better cut taxes and put more money in the hands of the corruption-free private sector. Oh wait...

The Private Sector Gets Shit Done

2008-03-09T15:07:00.002-04:00

http://www.cnn.com/2008/WORLD/meast/03/09/iraq.water.ap/index.html

Nice work guys.

U.S. Government Spending on Healthcare

2008-03-08T20:09:00.008-05:00

Another interesting angle from which to see the cost ineffectiveness of our health system is to look at the amount of money our government spends on health care despite the fact that it does not provide universal health coverage, as the government does in every other First World country.

Direct U.S. government (federal and state) spending on health care totaled roughly $840 billion (40% of $2.1 trillion) in 2006. See http://www.cms.hhs.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp#TopOfPage. Additionally, employer contributions to employee health insurance premiums are not includable in employee taxable income (even though such contributions obviously constitute compensation and thus income under IRC § 61). So the federal government loses an additional ~$131 billion per year (2006). (I do not have a citation on this but I am taking it on the authority of a chart prepared by my former tax professor). $840 billion plus $131 billion = $971 billion. This figure represents ~7.36% of U.S. GDP for 2006, which was about $13.2 trillion. By comparison, Canada spends 7.47% (69.8% of 10.7%) of its GDP on its national health system. Put another way, the U.S. government spends roughly $3,200 per person on healthcare, while the Canadian government spends about $2,990 (USD) per person on its national healthcare system.

Remember that, by all accounts, Canada has the better system. See http://www.who.int/whr/2000/en/whr00_annex_en.pdf, p. 13. So we are paying for a decent universal health care system, but we aren’t getting it.

Note: this is not a true comparison of “apples to apples” because I do not include the amount of money Canada spends on tax subsidies to private employers that provide health insurance to their employees. I know they provide some such subsidy, but that it’s not nearly as generous as it is here. Anyway, my point was not to compare overall spending levels but to compare what our government spends to what a government has to spend in order to have a functional single payer system. To put it another way, my point is to highlight what we could buy with current government spending levels.

42. Separation of Press and State

2008-03-08T08:25:00.003-05:00

All throughout the various discussions on this blog, we've touched upon a lot of issues that to me highlight how desperately America lacks an independent, truth- and justice- driven, quasi-persecutorial media.

By indepedent, I mean from the state. Corporate ownership of media outlets doesn't bother me so much, so long as they're all forced to compete for the spotlight for their own unique bias.

I invoke truth and justice knowing full well they are abstract and subjective concepts, and do so only to point out that these should be the focus rather than entertainment or sensationalism.

Many of the messes we've gotten ourselves into over the past two decades (the only two I can remember) would probably have been avoided if we had a more politically-aware populous, spurred on by a media whose primary driver was to stick it to the powers that be and "hold their feet to the fire," as John Stewart often says.

Watching mainstream media coverage of a presidential election in France or Germany is overwhelming when you're used to American-style debates and interviews. Frankly, it's more boring then anything else, because I'm not used to politicians actually go on and on and on about the specifics of their programs and their benefits. I'm used to just listening to soundbytes.

In Germany and Britain, for example, journalists don't allow their questions to get deflected or spun. If it happens, the journalist recenters the debate and goes after blood. That they would all go dancing and drinking together in a ballroom after a debate is ludicrous.

The fact that Washington reporters so heavily rely on how their subjects favor them in order to get insider access and thus further their careers is shocking when seen from a Euro-perspective. The problem is exemplified by their obvious acquiescence in White House briefings or in interviews, or by the whole "Rapping MC Rove" White House Press Corps Dinner garbage.

If we are going to make McCain/Nader/Obama/Paul or into modern day Jesuses for their roles in turning the spotlight on where a politician gets his money and what kinds of company he keeps, then we ought to hold our journalists to the same standard.

Concretely:

- ban the White House Press Corps Dinners and other government sponsored socializing whose obvious only function is to create personal and professional bonds designed to prevent journalists from fulfilling a truly persecutorial oversight function with regards to the state

- ban gift-giving to journalists by public officials to journalists

- ban journalists from being allowed to travel in style with candidates/politicians/cabinet members at the former's expense. i.e., no riding the Straight Talk Express with John McCain. You want to cover his campaign? Rent a car and follow the damn thing. No more articles in the New York Times' Technology section about how cool the gadgets in Defense Secretary Robert Gates' command and control jet are, written by the reporter who got to fly around in it with him for a week. If necessary, create a separate media tax to subsidize journalistic expenses incurred, to be allocated by a branch wholly indepedente of the executive.

Think about the debate leading up to the Iraq War or the current coverage of the campaigns. Are we happy with that?

Are the changes proposed on this blog and the society we envision herein possible given the current framework through which we as a populace inform ourselves about our government and how we subsequently interract?

It becomes something of a chicken-or-the-egg debate. Do we have shitty superficial media coverage of important issues because the electorate doesn't really give a shit about depth and has a very short memory and attention span, or does the electorate not have the attention span or passion for in-depth coverage because we've never been given a taste for it?

I hate to get all Constitutional Fundamentalist, but given that invoking the Founders' original words seems to function pretty well if you want the American public to go along with all kinds of craziness, in closing allow me to quote ye olde First Amendment.

Once more into the breech, dear friends:

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

It would seem to me that a "free press" is guaranteed. The press we have right now seems to me to be anything but free.

I could do a better job on this but I have to leave work now.

The "True" U.S. Tax Burden

2008-03-07T16:53:00.011-05:00

"Mike H." made a great point (probably the best point in the last 40-50 years of blogging) in an earlier comment to the effect that, when comparing our tax burden to other countries, we should adjust the figure to reflect the privatized costs of healthcare.

As I said before, taxes constitute 26.8% of GDP (for 2005). See http://www.oecd.org/dataoecd/44/41/39494985.pdf. Health care accounts for 16% of GDP (for 2006, and the figure is due to steeply rise in the near future). See http://www.cms.hhs.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp#TopOfPage. Of course, some of that medical spending is government spending, so we have to adjust this figure to avoid double counting. According to HHS, the government accounts for 40% of U.S. medical spending (in 2005, perhaps the figure is a bit lower today). Id.

So our "adjusted" tax burden as a share of GDP is 0.268 + (0.16 * (1 - 0.40)), or about 36.4%. This means our tax burden is essentially equal to Canada's "adjusted" tax burden as a share of GDP: 0.334 + (0.107 * (1 - 0.698) = 36.6%. See http://www.who.int/whosis/database/core/core_select_process.cfm?strISO3_select=ALL&strIndicator_select=nha&intYear_select=latest&fixed=indicator&language=english and http://www.oecd.org/dataoecd/44/41/39494985.pdf.

Of course we're paying all that extra money for a garbage system. See http://www.who.int/whr/2000/en/whr00_annex_en.pdf p. 155. And the burden of these additional costs are mostly borne by whoever happens to need medical care, not society at large on the basis of income or wealth. Further, as Josh mentioned to me the other day, this figure understates the cost of our crappy system, because it doesn't reflect the cost of health care that is not provided because people can't afford it. Remember that 15.8% (in 2006) of our population has no health insurance and far more are "underinsured." See http://www.census.gov/prod/2007pubs/p60-233.pdf p. 18.

Nice work, "Mike H." If anyone else thinks of other adjustments that we should make (i.e., the cost of services provided by the government in other countries that we have to pay for privately here), let me know.

Would Raising Taxes Lead to "Economic Collapse"?

2008-03-06T21:09:00.006-05:00

So I spent enough time crafting this response to Mike (USMAilllini) that it’s gonna get it its own post. Below I reference a book that shows that there is no real evidence that the tax rate significantly affects economic growth or labor supply. I think that’s important enough to warrant a new post.

Proposition: "There would be an 'economic collapse' if we increased taxes as high as we suggest."

First of all, I never said people would work for the "common good." I definitely advocate allowing highly productive employees to keep part of the fruits of their productivity. As I say elsewhere on my blog, I would be willing to tolerate a, say, 5:1 ratio of richest to poorest individual. That's radically lower than the ratio now, but being able to buy 5 times as much as a "slacker" sounds like plenty of motivation to me. Think about it: that's literally five times as many Little Debbie cakes or Playstation 3 games.

I understand that you (Mike) are a highly motivated individual, and that you don't think you would work as hard if it didn't pay. But as you suggested to me yesterday, we have to step back from what we think our own reaction would be when we analyze this. Motivation is a complicated beast; it is not just a simple matter of how much money you get. Status, self-respect, and professional prestige come into play as well. Whatever it is that motivates us, the simple fact of the matter is that tax rates as a share of GDP do not have any tangible, discernible effects on economic growth rates. See "Taxing Ourselves: A Citizen's Guide to the Debate over Taxes" by Joel Slemrod and Jon Bakija, pp. 119-120. Nor do marginal tax rates have any significant effect on labor supply (almost none on male hours worked, some but not a huge effect on female hours worked). Id., p. 125. And it bears remembering that the U.S. experienced its golden days of economic growth when the top marginal income tax bracket was over 90%.

Of course people are going to work somewhat less (probably not that much less, but a little less - see above) if we significantly raise the top income tax brackets. But a.) what work we do may be more productive if we use the taxes to finance research, technological development, and generally accessible education, and b.) we work way too much now anyway. Look, for instance, at lawyers in big firms. They work long hours in exchange for gobs of money. As a result, they have some of the highest rates of alcoholism, drug use, depression, and suicide of any profession. If under my system they work 35 hours a week instead of 60, I'm fine with that. Similarly, if a few more mothers are going to drop out of the labor force to take care of their kids, I'm fine with that too.

Southwest Airlines: The Savior of All Capitalism

2008-03-06T11:54:00.002-05:00

http://www.cnn.com/2008/US/03/06/southwest.planes/index.html

No wonder they're so cheap.

The Left-Wing Looniness of Your Measured Humanitarian Peace Keeping Force

2008-03-06T10:09:00.012-05:00

Sometime in 2004 I signed up for email updates from the Bush-Cheney Campaign. It was just to see whose candidate-to-supporter dialogue was more vacuous, Bush's or Kerry's. They were about even, but Bush got serious cred for including so many photos of him in a bomber jacket or flightsuit.

Anyways, since then I've had my name and email address sold or given to about fifty right-wing extremist organizations. They send me regular updates on threats to liberty from gays and terrorists across our great land. But an email I received today from townhall.com struck me as particularly relevant to our debate on bringing the US military back under the control of the people.

Here's the email:

Dear GOPUSA Family of Activists!

Please find below a special message from Townhall.com. They have some important information to share with you.

Keep up the fight,

GOPUSA.com

Dear Friends,

I am outraged and you should be too.

Our troops are being forced to withdraw not from Iraq but from American cities and American college campuses.

The most recent example is the city council of Berkeley, California telling the United States Marine Corps Recruiters that they are 'uninvited and unwelcome intruders' in their city. They were actually trying to kick the U.S. Marines out of their city while giving special preferences to liberal protestors.

Please sign the Townhall.com petition and join me in telling liberal leaders that this treatment of American troops is an outrage.

I guess we shouldn't be shocked anymore by the Left. They can't seem to stop themselves from undermining our troops showing there utter complete disrespect for our Armed Services.

They try to hide it but they simply have nothing but contempt for our nation's military and the brave men and women who serve. Time after time, they show us just how much they distrust, dislike and outright despise our troops.

Senate Majority Leader called our troops failures and proclaimed that the 'war is lost.' Never wasting a chance to snatch defeat from the grasp of victory, Senator Reid ruled the surge a failed effort before a single additional soldier's boots had hit the ground.

On college campuses across the nation, including some of the most prestigious universities, ROTC students face a hostile anti-military environment. Many universities including Columbia, Harvard, Yale, and Standford have out right banned ROTC and force students to travel long distances to neighboring campuses for classes.

Sign our petition today and tell Berkeley, Harry Reid, Nancy Pelosi, and their liberal cohorts that we've had enough of their assaults on our troops.

It doesn't just show a lack of support for the troops but an passionate contempt for the men and woman overseas putting their lives on the line for our freedom and safety back here at home.

As a further insult to our men and women in uniform, the City Council encouraged residents of Berkeley to impede Marine recruiters attempting to go about their work, and awarded a reserved parking spot outside the Marine recruiting station to Code Pink, the extreme-left anti-war group.

The liberal City Council and Code Pink must not be allowed to disgrace our serving men and women.

It is not enough for liberals to slander courageous Americans as war criminals any more, they are turning hateful words into un-American action! The anti-war left is proving that they do not support the troops and in fact actively engage in anti-military behavior.

We must stand together with our military to prove that the majority of Americans disapprove of the Left's shameful behavior!

Sign our petition today and tell Berkeley, Harry Reid, Nancy Pelosi, and their liberal cohorts that we've had enough of their assaults on our troops.

Senator Jim DeMint has introduced the Semper Fi Act of 2008 in the United States Senate. The legislation would rescind over $2 million previously allocated to Berkeley. Congressman John Campbell (R-Cali.) has introduced a companion bill in the House.

Click here to condemn the City Council's actions and support the Semper Fi Act of 2008, which would revoke all federal funds allocated to Berkeley and transfer them to the Marine Corps budget!

These strong defenders of American values need your support in condemning Berkeley's City Council and supporting the Marines!

Sign our petition today and tell Berkeley, Harry Reid, Nancy Pelosi, and their liberal cohorts that we've had enough of their assaults on our troops.

We need your help to send a message to Harry Reid, Nancy Pelosi, academia and the city of Berkeley! Liberals won't stop here. Rest assured, they have attempted to demean military recruiters before and they will continue to unless we take action!

Townhall needs your help to defend the honor of our troops in harms way and our honorable recruiters here at home.

Because the Left consistently denigrates the service of our armed forces, we need to make it clear to the Berkeley left-wingers that we support and admire the brave men and women serving our nation and respect their contribution to the cause of defending and spreading freedom!

Please sign our petition today and tell the Left that we've had enough of their disgusting assaults on our troops.

Sincerely,

Jonathan Garthwaite
Editor-in-Chief,
Townhall.com

Two Retorts

2008-03-06T00:41:00.020-05:00

I generally want to use this blog mostly to focus on affirmative policy suggestions rather than rebuttals of conservative views. But two factual claims came up in a class of mine today that I can't resist responding to.

I. Most poor people do not work and the U.S. is more or less a "meritocracy."

Whether the first part of this is strictly true or not depends on how exactly you define "poor." But I think it's hard to look at all the facts and say it's really true in any meaningful sense.

Most low income families in the U.S., or families making less than 200% of the federal poverty guideline (which is not regionally adjusted), do work (where a "family" is a couple or a single parent with at least one child under 18, and a "working family" is a family where each family member 15 and older either has a combined work effort of 39 weeks or more in the prior 12 months OR all family members age 15 and over each has a combined work effort of 26 to 39 weeks in the prior twelve months and one currently unemployed parent looked for work in the prior 4 weeks). 71%, in fact (9,658,195 out of 13,622,425; this means 29% of all U.S. familes are "low income") See http://www.workingpoorfamilies.org/xls/WPFP_Conditions_Low-Income_Working_Families.xls Table 1.A.1a. The people who did the study obviously have an agenda (http://www.workingpoorfamilies.org/) but they base their data on Census and BLS data. I think that their definitions are reasonable and their figures are legit.

Bear in mind that 200% of the poverty rate was only $38,700 for a family of four in 2005 (the poverty threshold was an unbelievably paltry $19,350 for a family of four - sounds way too low to me). See http://aspe.hhs.gov/poverty/05poverty.shtml. 200% of the poverty threshold is not much at all, but it's too much to qualify for Medicaid in Illinois and most other states. See http://www.illinois.gov/PressReleases/ShowPressRelease.cfm?RecNum=3355&SubjectID=47.

On the other hand, a narrow majority of families that make less than 100% of the federal poverty threshold are not "working families" (2,825,230 out of 5,982,095, or 47% do work). See http://www.workingpoorfamilies.org/xls/WPFP_Conditions_Low-Income_Working_Families.xls. But in 2004, a majority of all individuals living below the poverty line (37 million people, or about 12.5% of the population) were either children (13.5 million) or working adults (7.8 million people). See http://www.nccp.org/publications/pdf/text_672.pdf p. 3 and http://www.bls.gov/cps/cpswp2004.pdf p. 1. And of course all of this is to say nothing of mental illness, crippling drug addiction, other medical disability, the lack of employment opportunities in economically depressed regions, simple faultless unemployability, or a whole host of other really good reasons why a poor person may not be able to work.

As to the second (implicit) part of the claim, I'd like to throw out a few more references to give some broader perspective. The U.S. has the lowest rate of social mobility (as measured by how strongly your parents income determines your own) in the First World. See http://www.suttontrust.com/reports/IntergenerationalMobility.pdf p. 6 Table 2. We have a very poor UN Human Poverty Index (HPI) rating compare to our peers (17th out of 19 among "highly developed" countries). See http://hdr.undp.org/en/media/hdr_20072008_table_4.pdf. We have the worst income and wealth inequality in the First World. See https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html and http://multinationalmonitor.org/mm2003/03may/may03interviewswolff.html. And of course we have the third to lowest tax as a share of GDP percentage of all OECD countries (a close third behind Mexico and South Korea). See http://www.oecd.org/dataoecd/44/41/39494985.pdf p.1. I see these facts as part of a pretty clear story. Others may disagree.

Additional Note: While I'm pointing out things we're not very good at, I might as well round out the set:

1. We have a ridiculously high homicide rate and gun homicide rate.

http://www.guncite.com/gun_control_gcgvinco.html

Note that these figures are from the late '90's when our crime rates were historically low.

2. We have the highest infant mortality rate in the First World.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2091rank.html

Note that we have a higher infant mortality rate than Cuba.

3. We have the highest per capita incarceration rate in the world (the entire world, that is).

http://www.cnn.com/2008/CRIME/02/28/prison.population.ap/

4. We have the highest per capital spending on health care in the world but the 37th ranked health care system in the world.

http://www.who.int/entity/whr/2000/en/annex01_en.pdf

These figures are for 2000, the last time the rankings we're done. I'm sure we wouldn't be doing any better now.

Perhaps it is no coincidence that, in a addition to being a very low tax country, we have extremely low private sector unionization rates.

http://www.nber.org/papers/w3342.pdf?new_window=1 p. 43, Table 2.

The figures are somewhat dated but I'm sure things haven't changed very much.

II. The U.S. is at the point on the "Laffer Curve" where lower tax rates will produce higher government revenues.

In a rare moment of clarity, George Bush Sr. called this theory "voodoo economics." Obviously, at some unbelievably extreme tax rate (say 95%), government revenues would go up if you decreased the tax rate. But we are nowhere near this point. Remember that ~$860 billion in Bush tax cuts (that went disproportionately to the very wealthy, I might add)? They have significantly decreased federal government revenues and increased gross national debt. See http://www.washingtonpost.com/wp-dyn/content/article/2006/10/16/AR2006101601121_pf.html; http://en.wikipedia.org/wiki/Image:USDebt.png; and http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm. So, no, tax cuts do not pay for themselves.

Musings on the Legal System

2008-03-05T13:09:00.010-05:00

I haven't contributed much as of yet and for that I apologize. This paragraph or two hopefully will ease people into my later posts where I become nearly intolerable.

The legal system in my mind is broken. It functions, but serves few interests outside those who use it the most, the wealthy (in civil contexts, at least). There are probably thousands of small things that could be done to rectify small points of injustice, but I'm not terribly interested in those reforms. I think that there are systemic issues that must be tackled first, otherwise we'll burn out on the small stuff.

The biggest problem in my mind is money. Those who have it, get better treatment, better lawyers, and better law. The lawmaking side should be reformed to eliminate some of this bias, but that's a topic for another day. Solely within the judicial system we can eliminate some of the worst problems with money. The first of these reforms would be to eliminate private lawyers from courtrooms.

The expense of private litigation lawyers creates a disparity in the quality of argument and the time exerted on legal thought. Pay great lawyers enough and they can conjure up some very well done (although morally reprehensible) arguments for you. This mercenary system should be replaced by public litigators (both criminal and civil) who are assigned cases on first come, first served basis with exceptions. For example, lawyers should be able to turn down cases for lack of merit, provided that the court agrees that there are no meritorious arguments available (although the plaintiff could still proceed pro se). Likewise, lawyers should have the opportunity to decline to take a certain number of these cases for personal reasons. Otherwise, some sort of conflict rule should remain to make sure that lawyers aren't invested personally in the case they receive.

Secondly, as part of the public litigator set up, lawyers' assignments should be rotated from plaintiff to defendant (or prosecutor to defendant in criminal cases). This measure would help to eliminate structural biases in the way clients are represented. No more hardened attorneys who have ceased to see all sides of an issue. I am most familiar with this problem in the criminal setting, but I imagine that civil attorneys that only represent certain industries or advocacy-based groups have similar problems with tunnel-vision.

Other problems I'd like to propose for discussion are the following:
undoing the complexity of the law (and thus making lawyers less necessary);

challenging the individual bias in legal thought by including

communities and other group interests as actionable;

eliminating the adversarial nature of our legal system in favor of other ways of resolving differences;

making all of the judiciary accountable through elections and perhaps
impeachment processes.

Finally, I would like to suggest that criminal law in particular needs attention. As a post mentioned earlier, we have more people in prisons here than any other western industrialized country. Two changes which I will quickly propose and then leave on the table are to eliminate prisons except for the most heinous crimes and the eventual elimination of a distinct criminal system.

Punishment has little use in a utilitarian sense (a philosophy to which I do not ascribe). It neither efficiently prevents future wrongdoing nor deters others from similar conduct. My main concern, however, is with its moral implications. For most actions which we label "crime," I would prefer restoration for the victim (or society if no individual person or persons are harmed), rehabilitation of the criminal, and a program where the criminal would assist in the elimination of similar behaviors. This last point is important. Whether the causes of crime are psychological, environmental (like poverty), or otherwise attributable, those who do not commit them are less likely to understand how to prevent them without input and assistance.

As to the elimination of the criminal system, as such, I see very little reason why a system that is not based on punishment, but on restoration and rehabilitation, would need rules that are distinct from what we term civil law. Perhaps others do, though, and I would love to hear why.

An Open Invitation to People Who Are Wrong

2008-03-05T11:00:00.003-05:00

This blog has turned into an agreement-fest. We need some radical leftists and right-wingers to disagree with us. I plead with you all to roam the Earth to find people who disagree to read and comment.

Chavez and the FARC

2008-03-04T16:52:00.001-05:00

What do you guys think of all this nonsense in Venezuela/Colombia/Ecuador?

http://www.cnn.com/2008/WORLD/americas/03/03/ecuador.colombia/index.html?eref=rss_world

As a measured sympathizer (with some significant misgivings) of Chavez, I find this development troubling. His actions seem to represent more than a mere technical assertion of Ecuador's terriorial integrity; they seem to amount to substantive, if implicit, support for the FARC. Now the FARC has been classified as a terrorist organization by the EU (in addition to the U.S. and Colombia) and has been accused of "flagrant disregard for lives of civilians" by Human Rights Watch. And of course it funds its activities through kindappings, cocaine production and trafficking, and extortion. So I'm not sure the FARC is really anything besides a (very powerful) organized crime syndicate with a token ideological agenda.

Anyway, my guess is that this, from Venezuela's point of view, is a case of "the enemy of my enemy's friend is my friend." But supporting paramilitary groups that try to advance compatible ideologies through highly objectionable methods is something that the U.S. has been rightly and roundly criticized for (say, for example, supporting fascist death squads in Latin America or anti-communist terrorists in Cuba). I don't think the analysis changes for left-wing groups that resort to terroristic tactics. Your ideological goals may be commendable but if you indiscriminantly attack civilians or engage in international drug trafficking to advance these goals, you should not enjoy the support of sensible leftists. Besides, I have to question the sincerity of anyone's socialist convictions who condones extorting, kidnapping, and killing civilians.

Anyway my guess is that this is probably all posturing, and it will fizzle out in time. But Chavez should probably exercise more discretion in terms of who he associates with, and he shouldn't go out of his way to provoke a military response from the U.S. That could jeopardize his highly laudable domestic agenda.

How Many Militaries Does One Man Need?

2008-03-04T16:26:00.001-05:00

Try this one on for size, Internet Populace: we need to get rid of the gaping divisions between the branches of the armed forces.

First of all, there are all kinds of redundant systems we can probably live without. I don't know that we really need air force helicopters and navy helicopters and army helicopters and marine helicopters; air force special forces and navy special forces and army special forces and aquatic mammal special forces (http://usmilitary.about.com/cs/navy/a/navydolphin.htm).

Now, I get that specialization is a good thing, let's us do all sorts of fancy killing where meat and potatoes killing won't cut it, but there is no way that Navy Seals aren't learning a lot of the same things that Airborne Rangers are picking up. Don't they all have their own training bases? Is there any way we can't throw all these guys into a lecture hall, consolidate all the different Advanced Knife Kills: Negotiating the Brachial Plexus subsections? How negatively will increasing class size affect our U.S. News & World Report rankings of national special ops forces? And can't we make up that difference with a higher percent participation in alumni donations?

How swollen is military spending with redundant projects? Is there seriously any doubt in anyone's mind that the air force and the navy both have extremely expensive projects in development for a next generation fighter plane? And is there any doubt that those planes are not the same? And probably couldn't be serviced with the same parts? And probably one takes unleaded and the other takes premium? If you're out there, then you've got a more generous soul than yours truly, because I just assume that we've got billions of dollars being flushed down nearly identical but incompatible toilets.

And these redundancies aren't doing us any favors on the business end of the business either, I can't imagine. How many lieutenants do you need to navigate to get an inter-branch mission rolling? How many different requisition forms? I seem to vaguely recall stories have of there being problems at one point because different branches operated on different radio frequencies or something equally trivial. This game of military telephone can't be making life any easier.

Which brings me (sort of) to the problem of inter-branch competition. I like to imagine a world where all the people in the U.S. armed forces see themselves as being on the same side. As it is, you can't raise the air force's budget without raising the navy's budget, which means that the army will hold it's breath until it passes out unless it gets a bump also, and now here we are again, the marines locked in the bathroom and refusing to come out because they always knew we loved the others best.

This is no way to raise a family.

"Checkpoint Cool"

2008-03-04T12:33:00.003-05:00

You guys should check out Chris' blog. He has some interesting things to say about gentrification in Berlin. Although he usually posts in German, he provides an English translation of each post below it.

http://www.checkpointcool.blogspot.com/

Meditations on the Stealth Fighter-Bomber

2008-03-03T17:44:00.008-05:00

Poking through the exhausting backlog of posts and comments, I noticed Thesis 13 of the February 15th post and felt compelled to say something about the F117-A Stealth Fighter-Bomber. This is an impulse that also springs up in when confronted by statements about the relevance of dogfighting in modern warfare or by the sight of many heads bowed in silent grief, such as found at your standard funeral or Gallagher show.

It strikes me that spending a lot of resources on $122 million stealth fighter-bombers that apparently have been equipped with the cutting-edge ability to explode midair entirely without the assistance of the enemy (http://www.cnn.com/US/9709/14/f117.crash.update/) may not be the most effective use of our tax dollars. I would be amenable to alternative applications of billions of dollars, for example effective personal body armor for our stone-age infantry who still rely on actual enemy bullets in order to be destroyed. I will also concede that there might be room in the education budget for another billion dollars or so, but after that we're going to have to start employing more teachers or something, and I'm not going down THAT primrose path thank you very much.

And the F117-A Stealth Fighter-Grenade is not the only way the military has been shoving the metaphorical pennies our nation has given it as its metaphorical allowance deep up its metaphorical nose. There is also:

1) missile defense (I will say nothing more about this one);
2) the destroyer (when was the last time we needed a destroyer? Aircraft carrier, alright. Submarine nuclear platforms? Mmmmm.... fine, I'll even give you that one, but destroyers? As far as I can tell, destroyers serve the important military purpose of providing targets for explosive-packed speedboats driven by men with extremely optimistic expectations from the afterlife.);
3) the Stryker personnel vehicle (sales pitch: "Like the Bradley, but way more vulnerable! And more expensive! Act now to get your free flame decal!");
4) and the $640 military toilet seat (http://query.nytimes.com/gst/fullpage.html?res=9B0DE4DA153EF935A25751C1A961948260).

Oh, and also the needless expense of maintaining a military capable of fighting a two-front war. That too.

See, a two-front war isn't really going to be a problem for a sensible country. As my police-officer friend said in defense of small clip-capacity on his service weapon, "if I need more than eight bullets, I'm screwed anyway and I probably did something wrong to get that way." If we find ourselves in a two-front war, is there any way we didn't have it coming? I don't see Europe AND Asia reaching the point of physical violence without some serious shit-stirring on our part, in which case we get what we get.

I can think of two applications of U.S. military might. One is peace-keeping/nation-building. As the three-ring circus in Iraq has demonstrated, peace-keeping/nation-building calls for a somewhat different skill set than war-making. For one thing, it requires a different set of rules of engagement. A knowledge of local customs and ethnic politics is also helpful, as is the ability to speak the local language, provided it doesn't require employing homosexuals.

The second use of our military is killing people. For that, I'd go with an expanded special forces program. Heck, since we wouldn't have to have so many people, we might even be able to pay them something competitive with Blackwater salaries.

Oh, but that wasn't the point I started this to make. The point I started this to make was in rebuttal to a comment to that post way back when, expressing concern for our economically vulnerable military-industrial complex and their beleaguered R&D personnel. And what about the myriad technological breakthroughs we civilians enjoy as a result of military spending? Where would we be without the internet, you ask? Well, you smug, internet people, I ask you, why not simply modify our work orders? Rather than

Dear Secret Underground Laboratory:

Please develop a computer-to-computer communication system for military use.

Love,

The Pentagon
xoxo

try something like:

Dear Secret Underground Laboratory:

Please develop a computer-to-computer communication system for civilian use.

Love,

The Pentagon
xoxo

I see no reason why we can't simply spend those billions of dollars we're currently spending on self-opening stealth pinatas on non-military research and development ("all you double-dome engineers, your next assignment is to get me 500 miles a gallon. And the biological weapons division is hereby assigned to curing male pattern baldness.").

So, in conclusion: peace-keeping forces to address peace-keeping situations, highly trained killing forces to deal with killing situations. Spontaneously-combusting stealth fighter-bombers to deal with fireworks situations.