I would predict that the Democrats will turn out to be the more adaptive, the more flexible, the quicker to let go of dead or failed ideas, and that the Republicans will simply fail, fail, fail through a refusal to accept the ways in which they have failed ideas. So far, they've only doubled down, and tried to blame others for their own failings and failures.
IF you are at all familiar with our history, you know that when wealth and income are disproportionately redistributed to the extremely wealthy, with record high productivity by labor being unrewarded for that productivity (stagnant or declining wages, decreasing benefits including both health care and retirement funding), this mirrors the debacle of the gilded age in the latter 19th century and earliest years of the 20th century. That unfair distribution results in limited growth for the economy, catastrophic boom and bust cycles which are further destructive as we saw with the 2007/2008 economic crash and the earlier big crash of 1929 that resulted in the great depression. This is also consistent with rip offs we have seen through dirty dealing, dishonest business practices, unchecked ponzi scheming and general swindling. We see it in the effort to steal from creditors by hiding money prior to declaring bankruptcy, with the executives at Hostess giving themselves huge raises, as much as 300% increases in compensation, where there is NO merit basis for any raises whatsoever, and where hedge fund vulture capitalism has held sway extracting all value out of a viable company -- and then blaming the problems of their mismanagment and greed on labor.
I would encourage every reader of penigma to become familiar with a largely unsung American hero of our economic growth, Ferdinand Pecora, from the 1930s and the Pecora Investigation. Learn that history, and then understand why and how we need to apply those same lessons NOW, understand why we need a vigorous middle class to continue to be a thriving nation with a healthy, growing economy, and why that is NOT accomplished by putting more money in the pockets of the 1% to 2% the right wrongly defines as job creators. WE are the job creators, through demand and innovation, not the 1% or top 2%. We need a fair and stable playing field, and we get that through sound taxation policy which is NOT Republican tax policy, and we need it through more regulation and enforcement.
Most of all we need to stop mischaracterizing taxation or an appropriate size government by calling it too large. We have a large nation, and serving that size nation adequately can not happen through too small government. The problem is not the 47% who Romney demonized and denigrated; the problem is the 47% who voted for Romney and the failure of the party dogma that would select either Romney or McCain or Bush or the planks of their platform that is so wrong for Ameica, that has failed to learn the lessons of the failure of the gilded age and wealth inequality. Instead, they are attempting to completely undermine our democracy on behalf of the 1%.
Dead ideas on taxes
As the “fiscal cliff” drama heads toward its climax between Thanksgiving and Christmas, each party is in the grip of a dead idea on taxes that warps the conversation. That means that no matter who “wins” this showdown, the parties’ antique thinking guarantees that any deal they strike will be merely the first of much bigger future adjustments as the baby boomers retire. To see why, it’s useful to think of the United States’ tax debate as being trapped between the cobwebs cluttering Grover Norquist’s mind and those clouding Gov. Jerry Brown’s.
Norquist’s dead idea is that we can fund the federal government in an aging United States without higher taxes. Republicans love to say federal taxes should be what they’ve always been in the post World War II period — around 18 or 19 percent of GDP. That’s why they want spending to come down from today’s recession-inflated 24 percent of GDP toward post-war norms of around 20 percent. (Revenue has fallen off a true fiscal cliff to 15 percent of GDP, thanks to the sluggish economy). Balance the budget around 19 percent of GDP, Republicans say, and call it a day.
The flaw in this reasoning is that we’re on the verge of doubling the number of seniors on Social Security and Medicare. Ronald Reagan ran government at 22 percent of GDP when the United States’ population was much younger. Even after we take steps to slow the growth of our health and pension programs (which we must), it’s impossible to fund the boomers retirement at historic levels of taxation and balance the budget without decimating government activities devoted to non-elderly purposes — including the R&D and infrastructure that help propel future growth.
Sorry Grover — in an aging America, federal spending, and taxes, are destined to rise.
The Norquist-Paul Ryan reaction is to deny math and demography. They want to use this “historical norm” tax limitation and our aging population to force big cuts in the rest of what government does. But their equally powerful motivation is political: they desperately want to preserve the tax issue as the chief way voters can distinguish what Republicans stand for.
After all, if Republicans don’t stand for lower taxes, what contrast do they have with Democrats? How can they contest elections? Ever since 1980, when Reagan put tax cuts at the heart of the GOP agenda, the party’s had a great ride on the issue. But the aging of the population means this centerpiece of Republican economic “thinking” is now totally divorced from reality.
If Republicans can’t run on tax cuts, they’ll actually have to come up with other policies to improve Americans’ lives. As we’ve seen in their flailing since the election, the party is so out of practice at doing this that they’re not sure where to begin. But despite Norquist’s death rattles, the GOP ultimately has no choice.
Democrats have a dead idea on taxes, too: the notion that we can put our fiscal house in order only by raising taxes on top earners. Obama ran hard on this myth, but the prizewinner this year is Gov. Jerry Brown, whose Proposition 30 raises marginal income tax rates on top earners in California to a whopping 13.3 percent, the highest in the nation.
To be fair, Brown knows that relying so heavily on a handful of taxpayers is bad policy. His original plan was to raise sales taxes as part of a broader budget patch, but the teacher’s union planned a rival ballot measure aimed squarely at the rich. Wealthy attorney Molly Munger backed her own tax plan as well (that’s what we do out here in California — everyone who’s anyone tries to govern by proposition).
Brown reckoned that if there were three tax hikes on the ballot, they’d all fail. So he cut a deal with the unions to get behind one that resembled theirs. “He came to this compromise because he had no other political choice,” says Dan Schnur, director of the Jesse M. Unruh Institute of Politics at USC.
As a result, while Prop 30’s passage saves schools from devastating cuts for the time being, Brown has planted the seeds of future trouble. Follow the numbers: let’s say federal tax rates on top earners go back to 39.6 percent from 35 percent. Add in Obamacare’s new 3.8 percent tax on investment income and new 1 percent higher Medicare payroll tax on the same folks. Then toss in new top state rates of 11.3 to 13.3 percent (up from 9.3 and 10.3), and presto! Marginal tax rates for self-employed people in California earning $300,000 and up (who pick up both “sides” of the payroll tax on a chunk of their earnings) could reach 55 percent or more.
That’s dicey. It will almost certainly affect incentives and behavior. Yet Prop 30’s new inflow of $7 billion a year in a $100 billion budget won’t fix the state’s long-term budget woes, which are driven by spiraling health costs and massive unfunded health and pension benefits — not to mention sweetheart deals like those won by the powerful unionized prison guards, on whose slim ranks California now showers three times more cash each year than it devotes to its system of higher education.
The point? At both the state and federal level, middle class benefits and government services can’t be funded in a sustainable way just by ratcheting taxes ever higher on the top. Eventually middle class benefits and services must be supported by the middle class.
So we’ll need higher taxes, Grover, but not just on the rich, Jerry.
Neither party is ready to give up its dead idea yet. Which means we won’t get the debate we need anytime soon. That debate is this: Given that tax hikes in an aging United States are inevitable — including on the middle class — what’s the best and fairest way to do this with the least harm to economic growth?
This is the real “tax reform” conversation we need, and it would take us far beyond the approved Simpson-Bowles vocabulary that limits tax reform to the mantra of “lowering rates and broadening the base.” For starters, in an aging America we should be looking at slashing payroll and corporate taxes to boost jobs and growth and raising taxes on consumption, dirty energy and financial securities transactions to fund the government we want.
Whether we avert, postpone or go off the cliff next month — or some blend of all three — this is the conversation we’ll still need to get to in a few years.
IF you are at all familiar with our history, you know that when wealth and income are disproportionately redistributed to the extremely wealthy, with record high productivity by labor being unrewarded for that productivity (stagnant or declining wages, decreasing benefits including both health care and retirement funding), this mirrors the debacle of the gilded age in the latter 19th century and earliest years of the 20th century. That unfair distribution results in limited growth for the economy, catastrophic boom and bust cycles which are further destructive as we saw with the 2007/2008 economic crash and the earlier big crash of 1929 that resulted in the great depression. This is also consistent with rip offs we have seen through dirty dealing, dishonest business practices, unchecked ponzi scheming and general swindling. We see it in the effort to steal from creditors by hiding money prior to declaring bankruptcy, with the executives at Hostess giving themselves huge raises, as much as 300% increases in compensation, where there is NO merit basis for any raises whatsoever, and where hedge fund vulture capitalism has held sway extracting all value out of a viable company -- and then blaming the problems of their mismanagment and greed on labor.
I would encourage every reader of penigma to become familiar with a largely unsung American hero of our economic growth, Ferdinand Pecora, from the 1930s and the Pecora Investigation. Learn that history, and then understand why and how we need to apply those same lessons NOW, understand why we need a vigorous middle class to continue to be a thriving nation with a healthy, growing economy, and why that is NOT accomplished by putting more money in the pockets of the 1% to 2% the right wrongly defines as job creators. WE are the job creators, through demand and innovation, not the 1% or top 2%. We need a fair and stable playing field, and we get that through sound taxation policy which is NOT Republican tax policy, and we need it through more regulation and enforcement.
Most of all we need to stop mischaracterizing taxation or an appropriate size government by calling it too large. We have a large nation, and serving that size nation adequately can not happen through too small government. The problem is not the 47% who Romney demonized and denigrated; the problem is the 47% who voted for Romney and the failure of the party dogma that would select either Romney or McCain or Bush or the planks of their platform that is so wrong for Ameica, that has failed to learn the lessons of the failure of the gilded age and wealth inequality. Instead, they are attempting to completely undermine our democracy on behalf of the 1%.
Dead ideas on taxes
As the “fiscal cliff” drama heads toward its climax between Thanksgiving and Christmas, each party is in the grip of a dead idea on taxes that warps the conversation. That means that no matter who “wins” this showdown, the parties’ antique thinking guarantees that any deal they strike will be merely the first of much bigger future adjustments as the baby boomers retire. To see why, it’s useful to think of the United States’ tax debate as being trapped between the cobwebs cluttering Grover Norquist’s mind and those clouding Gov. Jerry Brown’s.
Norquist’s dead idea is that we can fund the federal government in an aging United States without higher taxes. Republicans love to say federal taxes should be what they’ve always been in the post World War II period — around 18 or 19 percent of GDP. That’s why they want spending to come down from today’s recession-inflated 24 percent of GDP toward post-war norms of around 20 percent. (Revenue has fallen off a true fiscal cliff to 15 percent of GDP, thanks to the sluggish economy). Balance the budget around 19 percent of GDP, Republicans say, and call it a day.
The flaw in this reasoning is that we’re on the verge of doubling the number of seniors on Social Security and Medicare. Ronald Reagan ran government at 22 percent of GDP when the United States’ population was much younger. Even after we take steps to slow the growth of our health and pension programs (which we must), it’s impossible to fund the boomers retirement at historic levels of taxation and balance the budget without decimating government activities devoted to non-elderly purposes — including the R&D and infrastructure that help propel future growth.
Sorry Grover — in an aging America, federal spending, and taxes, are destined to rise.
The Norquist-Paul Ryan reaction is to deny math and demography. They want to use this “historical norm” tax limitation and our aging population to force big cuts in the rest of what government does. But their equally powerful motivation is political: they desperately want to preserve the tax issue as the chief way voters can distinguish what Republicans stand for.
After all, if Republicans don’t stand for lower taxes, what contrast do they have with Democrats? How can they contest elections? Ever since 1980, when Reagan put tax cuts at the heart of the GOP agenda, the party’s had a great ride on the issue. But the aging of the population means this centerpiece of Republican economic “thinking” is now totally divorced from reality.
If Republicans can’t run on tax cuts, they’ll actually have to come up with other policies to improve Americans’ lives. As we’ve seen in their flailing since the election, the party is so out of practice at doing this that they’re not sure where to begin. But despite Norquist’s death rattles, the GOP ultimately has no choice.
Democrats have a dead idea on taxes, too: the notion that we can put our fiscal house in order only by raising taxes on top earners. Obama ran hard on this myth, but the prizewinner this year is Gov. Jerry Brown, whose Proposition 30 raises marginal income tax rates on top earners in California to a whopping 13.3 percent, the highest in the nation.
To be fair, Brown knows that relying so heavily on a handful of taxpayers is bad policy. His original plan was to raise sales taxes as part of a broader budget patch, but the teacher’s union planned a rival ballot measure aimed squarely at the rich. Wealthy attorney Molly Munger backed her own tax plan as well (that’s what we do out here in California — everyone who’s anyone tries to govern by proposition).
Brown reckoned that if there were three tax hikes on the ballot, they’d all fail. So he cut a deal with the unions to get behind one that resembled theirs. “He came to this compromise because he had no other political choice,” says Dan Schnur, director of the Jesse M. Unruh Institute of Politics at USC.
As a result, while Prop 30’s passage saves schools from devastating cuts for the time being, Brown has planted the seeds of future trouble. Follow the numbers: let’s say federal tax rates on top earners go back to 39.6 percent from 35 percent. Add in Obamacare’s new 3.8 percent tax on investment income and new 1 percent higher Medicare payroll tax on the same folks. Then toss in new top state rates of 11.3 to 13.3 percent (up from 9.3 and 10.3), and presto! Marginal tax rates for self-employed people in California earning $300,000 and up (who pick up both “sides” of the payroll tax on a chunk of their earnings) could reach 55 percent or more.
That’s dicey. It will almost certainly affect incentives and behavior. Yet Prop 30’s new inflow of $7 billion a year in a $100 billion budget won’t fix the state’s long-term budget woes, which are driven by spiraling health costs and massive unfunded health and pension benefits — not to mention sweetheart deals like those won by the powerful unionized prison guards, on whose slim ranks California now showers three times more cash each year than it devotes to its system of higher education.
The point? At both the state and federal level, middle class benefits and government services can’t be funded in a sustainable way just by ratcheting taxes ever higher on the top. Eventually middle class benefits and services must be supported by the middle class.
So we’ll need higher taxes, Grover, but not just on the rich, Jerry.
Neither party is ready to give up its dead idea yet. Which means we won’t get the debate we need anytime soon. That debate is this: Given that tax hikes in an aging United States are inevitable — including on the middle class — what’s the best and fairest way to do this with the least harm to economic growth?
This is the real “tax reform” conversation we need, and it would take us far beyond the approved Simpson-Bowles vocabulary that limits tax reform to the mantra of “lowering rates and broadening the base.” For starters, in an aging America we should be looking at slashing payroll and corporate taxes to boost jobs and growth and raising taxes on consumption, dirty energy and financial securities transactions to fund the government we want.
Whether we avert, postpone or go off the cliff next month — or some blend of all three — this is the conversation we’ll still need to get to in a few years.
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