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More on Those Tax Cuts For the Rich

As we previewed last week, the IRS came out with its numbers on 2006 taxes, and it turns out that the top 1% richest taxpayers earned 22% of the taxable income and paid 40% of the income taxes.  According to candidate Obama, this represents an unfair free ride for the rich.  These numbers increased from 21% and 37% in the last year of the Clinton administration.

I guess my question is, what's enough?  Already, half the country only pays less than 3% of the income taxes.  Do we really want a country where 50.1% of the people vote to live off the other 49.9%?

Postscript:  Yes, I know payroll taxes work differently and hit lower income folks pretty hard.  But then again, the Social Security program is supposed to be an insurance and retirement plan, not a transfer program. The left goes bananas when you suggest Social Security is welfare and not an honorable paid participation program.  So, like any other insurance, the premiums are flat rather than progressive.  You can't have it both way.

Posted on July 21, 2008 at 09:24 AM | Permalink

Comments

So many lies and half truths, so little time to debunk them!

First of all, it's true that the rich are paying more than the poor in income taxes despite all the tax relief they've had recently (not just income taxes, but lowered capital gains taxes). But that's why it's called "progressive" taxation.

And of course it's not fair! Welcome to planet Earth. If you want fair, you have to go to Jupiter. Only five-year-olds expect fairness, and even they don't always get it

But the rich are suffering *so* much! We must help them with more corporate welfare! Note: the U.S. has paid more for the non-working "Star Wars" weapons system last year than it paid in food stamps and other welfare. If minimum wage rose as fast as CEO compensation for the last decade it would be $25 an hour (source: NY Times).

For the record, median real wages have been stagnant for nearly 30 years. Lower wage earners have actually seen a decline in purchasing power. Meanwhile the top 0.01% of income earners have seen a 457% increase in real income (no joke). But still, it's so sad that the wealthy have to pay disproportionate taxes! I weep!

And of course Social Security is welfare. Only in America is the word "welfare" a pejorative. Social Security prevents what we had before it -- widespread poverty among the elderly, widows and orphans. But the rich with their 457% higher income aren't being fairly treated! (I weep even more!)

But is progressive taxation bad for the economy, for the public or for the common weal? The upper brackets in our income tax have *never* been lower, nor have corporate taxes. So economic performance is the best it's ever been, right?

Sorry, it's actually pretty crappy compared to the really high-tax-bracket eras in the 1950s and 1960s (91% and 70% top brackets, respectively). Remember those days when you could keep Mom at home to raise the kids, or even go to college by working part-time at the pizza place?

Even the modest tax increase put through by the Clinton administration produced superb growth and employment, especially compared with the current administration. This result, BTW, is why "supply-side" economics that was the Reagan excuse for lowering top income tax brackets was just baloney. It predicted the exact opposite of the Clinton era successes.

But lower taxes have provided more economic stimulus, and higher tax revenues, right?... Just like Grover Norquist says.

Again, this is a complete lie. You have to ignore not only the comparative economic results but the Reagan deficits to believe this. Reagan's deficits exceeded all previous administrations' combined. Until the current administration, it used to be the record, too. It's just not possible to have this result if tax collections were more.

Here's a look at why expecting good economic results from lowering those top brackets is pure, undiluted baloney, promoted by the "conservatives," the intellectually inadequate, and very wealthy people. This is from Ravi Batra's book "Greenspan's Fraud"

p.170 "...I staged a mock drama in my class to explain why cutting the tax burden of the wealthy is always bad for the U.S. economy. It was a rather difficult task, because Texas [Batra teaches at SMU in Dallas] is Bush country and my students were fond of their president, who has repeatedly lowered the top-bracket tax rates. ...

"[Playing the role of government,] I ... took a ten-dollar bill from my pocket, and handed it to the [mock] CEO as his tax cut, and extracted a promise from him to use the tax relief for investment expansion and to provide jobs to new graduates...."

"'But now [government] revenue has fallen by $10; so what should ...the government do to pay my bills?' I asked my class. Someone answered: 'You borrow money or raise other taxes.' 'Very good,' I replied. Then I asked the ... [ten] participants [playing the role of workers plus the 'CEO'] to pay me one dollar each as their new Social Security tax in exchange for future benefits payable upon retirement. I told them this was essentially what Reagan and Congress, following Greenspan's advice, had done from 1981 to 1983. This way I collected ten dollars, just enough to meet the government's deficit. The student CEO now had only $9 left as his tax relief.

"'Are you now ready to increase your investment by the amount of your tax cut?' I asked the CEO. 'Yes, sir,'came back a confident reply. 'Wait a minute,'I said, 'your sales have now fallen by $9, because your employees, who buy your goods, are that much short of money, while the government has no additional revenue to spend. your shelves are piling up with unsold goods. Would you, in your right mind, expand your business in these circumstances?' The student CEO paused, pondered the question a bit, and then said no.

"'In fact, you will fire some employees because of declining sales,'I added. The student agreed reluctantly.

"That year there were more than 100 students in my class. I said to them: 'Assume that you all own your own company; now tell me if you would expand your business and risk more funds in investment in the face of dwindling sales, even if the government substantially cuts your taxes.' Not a single hand went up.

... [p.172]

"'Let's now discuss the other option...Suppose we don't raise other taxes at all; then how does the government pay its bills? Obviously by borrowing money." After a slight pause, I said to my students, 'Remember ... [government] has already handed $10 to the CEO as the tax cut. Now, who has the money to lend...?

"'Would you expand your business now?' I asked him again. 'No, I just gave the tax relief back to you.' 'Case closed,' I said. 'The CEOs demand tax relief so they would have more money for investment, but if the government borrows it all back from them to pay its bills, then they are back to where they were before the tax cut. So how can investment rise...?

...So in any case, the CEO benefits at the expense of ...all."

The bit about the government borrowing reducing business capital investment is exactly what happened during Reagan's trillion-dollar deficits. Reagan's "Morning in America" was an average business cycle recovery that was unusual in this one way: capital investment -- the engine of future productivity growth -- was flat because the deficits sucked all the oxygen out of the capital markets. See Paul Krugman's "Peddling Prosperity" for the details.

From the original post in this thread: "I guess my question is, what's enough? Already, half the country only pays less than 3% of the income taxes. Do we really want a country where 50.1% of the people vote to live off the other 49.9%?"

Answer: If wealthy people profit from the roads, courts, regulations, and other public benefits, why are they carping if it also pays the freight for widows and orphans too? Is a 457% increase in real spending power just not enough? And is 457% really fair? (Painting all recipients of government spending as welfare queens is the subtext here, but that point of view is only viable if you pull the coin from your pocket and say "My Precious!" too.)

From the original post: "Postscript: Yes, I know payroll taxes work differently and hit lower income folks pretty hard. But then again, the Social Security program is supposed to be an insurance and retirement plan, not a transfer program. The left goes bananas when you suggest Social Security is welfare and not an honorable paid participation program. So, like any other insurance, the premiums are flat rather than progressive. You can't have it both way."

Yes, "hit lower income folks pretty hard" is an accurate description of quadrupling the FICA burden to pay for those CEO's lower tax brackets. But the peasants are consoled because they believe it's only fair! (And they can watch Paris Hilton blow her 457% increase in income on cable!)

Incidentally, no "conservative" is willing to risk getting specific about government spending reductions that are significant. Never. (And by "significant" I mean big enough to be more than 5% of the budget. All earmarks put together are less than 2%.)

Social security is a regressive, regressive tax. You don't pay on income in excess of $90K. If this ceiling were lifted, it would just be regressive, and all the supposed problems it has would disappear too.

And sorry, you *can* have it both way [sic]. Whether it's supposed to be insurance or transfer, who cares? The current generation pays the retired generation's benefits. It's a transfer. Social Security also pays some widows and orphans' benefits. It's insurance.

Here's a little passage about what's really going on with this constant carping about "fairness" for the poor pitiful rich people earning millions:

"What are the implications of private control of public resources, such as education, in this instance, or health care, telecommunications, Social Security, etc.?

"NC: Well, there are actually two components to that, both of them leading themes of the Bush administration's domestic policies, and of reactionary policies generally. One of them is, to put it simply, to put as many dollars as you can in the pockets of your rich friends: that is, to increase profits for the wealthy -- to increase the wealth and power of concentrated, private capital. That's one driving force in the administration's policy. The other is to break down the social bonds that lead to people having sympathy and supportive feelings about one another. That contributes to transferring profit and decision making into the hands of concentrated private power. A component of that is to undermine the normal relations -- sympathy and solidarity -- that people have.

"Take Social Security. Social Security is based on a bond among people. If you earn a salary today -- somebody your age -- [young people of twenty or so] you're paying for the welfare and survival of your parents' generation. Well, okay, that's a natural feeling. If you want to increase the control of concentrated private power you have to
drive that out of people's heads. You have to create the kind of people that Ayn Rand is talking about, where you're after your own welfare and you don't care what happens to anyone else. You have to think, "Why do I have to care about that disabled woman across town who doesn't have enough food to eat? I didn't do it to her. That's her problem. She and her husband didn't invest properly; she didn't work hard enough, so what do I care if she starves to death?" Well, you have to turn people into pathological monsters who think that way, if you want to ensure that unaccountable, concentrated, private power will dominate the world and enrich itself. So, these things go together....There's a
pathological brand of what's called libertarianism which wants to eliminate that and turn you into a monster who cares only about yourself. And that's one aspect of undermining democracy, and undermining the attitudes that underlie democracy, namely, that there should be a concern for others and a communal way of reacting to community concerns." From http://www.chomsky.info/interviews/20080519.htm

Of course there will no convincing the addicts. "It's only fair that I get more money, and 457% isn't nearly enough (My precious!)"... But junkie logic is junkie logic.

And I can't promise sobriety would provide the kind of cocoon of comfort junkies experience regularly. When you leave the junkie world, the world gets unpredictable. But sobriety has its moments. You know, the blessings of experiencing life in abundance rather than the zombie-like existence every junkie calls living. Check it out, but don't expect comfort.

"Life is trouble, only death is not!" -- Zorba the Greek.

Posted by: Yoshidad | Jul 21, 2008 11:01:06 AM

"I guess my question is, what's enough? "

Gosh, I think I have know the answer to that since I read "Anthem".

What's enough is when all of the people who have jobs pay all of their income to support all of the wishes, desires, bad habits, and other needs.

This is not rocket science.

Posted by: Larry Sheldon | Jul 21, 2008 11:32:06 AM

“For the record, median real wages have been stagnant for nearly 30 years.”

Is this statistic concerning wage earners, people who are eligible to work, or all people? You can never tell when someone is using statistics to make a political point and they don’t spell it out.

Either way it's an impressive statistic. Especially given the large influx of legal and illegal immigrants who are or were earning below the median wage after entering into this country.

Posted by: clouse | Jul 21, 2008 11:57:33 AM

Yoshidad: do me a favor and tell me where your rant "points" are covered in the U.S. Constitution. In particular, can you tell me where "fair" is defined, much less mentioned? All your feel-good platitude crap makes me want to puke. You need your socialist nirvana and I want a society free of government meddling, like the U.S. was supposed to be. Yes, that includes corporate welfare. People like you are why I say the next American Revolution should begin. Today is better than tomorrow.

P.S.: the "non-working 'Star Wars' weapon system" really DOES work: http://www.youtube.com/watch?v=lvXV2QEdA34 . This is one thing that the Constitution DOES mandate: defense of the country. When it was first proposed in the 80s, computer technology was a far cry from today's technology. Things get better over time; that's how engineering works. Were it up to people like you, we would have banned airplanes in 1903 because Orville skinned his knee on the first flight.

Posted by: Doug | Jul 21, 2008 12:14:59 PM

One simple question Yoshidad. Where did all of the Star Wars money go? All of the money spent on Star Wars equals about what the US spends on pizza every year.

Posted by: Jim Collins | Jul 21, 2008 12:25:07 PM

that's quite a rant yoshi. but your example is just a fatuous story about an economy dominated by government spending and grants that is incapable of growing. what happened to that tax break for investment? didn't the investment yield jobs? if investors profited, what did they reinvest in? and if we add capacity, doesn't that reduce price making everyone better off as they buy what they want/need?

the reagan deficits were not caused by a drop in tax revenues. they were caused by a massive spike in spending that grew faster than tax receipts. but it probably would have been worse had taxes stayed high, as their would have been much less growth.

you miss some very significant facts:

the "poor" in this country have it better than just about anywhere. their lifestyles have improved so dramatically over the last 50 years that folks in housing projects have as many things as middle class citizens did in the 50's.

this is owed to dynamic economic growth. the accumulation of wealth is a consequence of this. some will accumulate more than others. this is fair. fair is not "everyone gets the same stuff" or "i get a free ride". fair is we all play by the rules and some win and some lose. nothing is perfectly fair.

attempting to make the world so (lower gini coefficient) has very real costs. the wealth of the overall society shrinks as resources are taken from the most productive portion of the economy and given to the least. this limits reinvestment and disincentivizes work and innovation. in general, gini coefficients show a positive correlation with growth.

there are two ways to make the lot of the poor better:

one is to give them a bigger slice of the pie by redistributing wealth.

the other is to grow the pie so their same % slice is now bigger.

to former leads to stagnation.

the latter leads to growth for everyone and while the former may yield quicker gains to the poor, it will be outstripped by the "grow the pie" scenario over the intermediate term.

the choice is pretty clear.

and cutting taxes has generally raised tax revenues.

imagine what will happen if the richest 1% of taxpayers decide to respond to higher taxes by working less, sending assets offshore, using more sophisticated tax strategies, or flat out leaving the country or not starting new businesses.

cut their tax receipts 10% and you have a massive budget crisis.

if you think this capital is not mobile, you need to think again.

the growth and prosperity we have enjoyed in the US really boils down to the fact that we have, for some time, been the best place int he world in which to get rich. this is not some manifest destiny or guaranteed future privilege. it is something we must work to maintain. we tamper with that formula at our peril.

already we are making it much to difficult for those with ideas in the rest of the world to move here and start a business. if we hamstring our own innovators as well or worse, encourage them to emigrate, you are going to find that your bigger slice of a smaller pie turns out to be a great deal less that what you had before. there is a reason why wall values growth opportunities more highly than share buybacks.

as for your analysis of social security, the demographics just don't play out. when it was put in place, the average life expectancy was 65. that meant few folks ever got it. now that the average recipient is getting it for 10-15 years, it's a very different ballgame. raised life expectancy has changed the ration of payors to payees dramatically. and gross mismanagement of what was supposed to be a trust fund has demonstrated yet again the precise reason why you never let the government near your savings. the fund has yielded negative real returns on investment.

i have no objection to means testing it or limiting it to the poor or whatever. but then it needs to be a transfer, not a paid participation program and treated as such. to keep it as paid participation, we need to raise the retirement age to 70 or 73 or whatever works. pretending it's all OK until we blow through all the cash and are forced into a reckoning is a terrible option (but one we seem doomed to pursue until e get some political cojones in this country). but it cannot possibly continue to exist as it currently does.

Posted by: morganovich | Jul 21, 2008 12:37:22 PM

correction "wall values" ought to read "wall street values"

Posted by: morganovich | Jul 21, 2008 12:43:39 PM

I think Yoshidad is missing the obvious problem. If the top 1% are paying 40% of all earned income taxes, it behooves the top 1% to find ways of lowering their tax load. If I earn $1,000,000 and I pay $400,000 in taxes, it is worth my my time and effort to pay out $100,000 to only pay $200,000 in taxes. $100,000 a year pays for a pretty snazzy tax attorney and a whole bunch of paperwork.

Didn't you ever wonder why all of those people in New York City own farms in the Mid-West?

http://farm.ewg.org/farm/region.php?fips=36000#search

Posted by: Xmas | Jul 21, 2008 12:57:10 PM

Yoshidad,

Your quoting Chomsky about Social Security being a "bond among people" is absolutely pathetic. What bond do I have with the retiree I saw tooling down the road in a $500,000 RV the other day? And what bond do I have with the woman who fled New Orleans after Katrina and now refused to look for a job because she was so comfortable in the hotel that FEMA (read me) was paying for for her.

The only bond with I have with these people is that every April 15th I am given a choice by my government. Continue to allow us to make decisions about where your money will go (to people such as I have described above) or go to jail. This is not a bond it is legalized theft. And in our "democracy" there is nothing that prevents the woman who lives in a hotel at my expense from voting to up my taxes for her benefit.

To describe this state of affairs as a "social bond" is ridiculous. I have significant bonds with my extended family and friends. You can bet that if these people got in trouble I would be there with whatever help I could provide. This was the state of affairs before government took over with its own form of "social bond". Extended families looked after one another as did friends,communities and religious organizations.

And before you go off on your usual mindless rant about us heartless libertarians, remember that the U.S. we have the highest level of private giving of any country. When Chomsky decribes a "monster" who only cares for himself, he is sure as heck not describing me and the evidence would show he is not describing most Americans. Maybe he is describing himself? By substituting government action for the charitable actions of private individuals, Chomsky provides a form of guilt absolution for those who choose to be the heartless monster he describes. Why worry about the aged or victims of natural disaster when the goverment is taking care of the problem. Chomsky's quote looks suspiciously like projection to me.

Anyone who calls government coercion a "social bond" is someone who wants to substitute the judgement of the state for the things that private individuals have derived true meaning from over the years, such as family and religion.
Remember the "Politics of Meaning"?, it is a perfect example of this sort of pablum.

Posted by: JimK | Jul 21, 2008 1:26:30 PM

Yoshidad:

"What should the Government do to cover its bills when revenue falls?” CUT-CUT-CUT. Cut till it bleeds! Cut till it really, really hurts. The problem with falling government revenue, whether caused by tax cuts or economic slow down, is that governments never conceive of cutting spending. Did you know that for government, a "cut" in a program is defined as that program not receiving an automatic increase in spending; usually 3% to match inflation? In other words, the “department of education” has received a "cut in spending" when their budget does not go up every year. In the business world, doing more with less is standard operating procedure. Government cannot wrap its mind around that concept. Here in Arizona our witch of a governor is going to spend all of our rainy day fund, which the state has spend 15 years funding, in just the next couple of years in order to cover all of her pet social programs enacted just in the past few years. I say if the program has not been around for 25+ years, cut it. We got along fine without it for a long time and it can be reinstated when the economy picks up.

"Widows and Orphans" IMHO, being a woman and a wife, the widow can get off her damn ass and get a job if her husband dies. This is the 2000's not the 1930's. Women should be able to provide for their damn selves. Exception: Already retired or close to retirement age (55+) women who have only worked in the home. But a 45 year old widow – NO WAY. Five years of support to get her back on her feet and then it is the cold cruel world for her.

"What are the implications of private control of public resources, such as education, in this instance, or health care, telecommunications, Social Security?” Since when did health care become a public resource? The last time I checked, healthcare is largely provided for by private individuals and institutions. Government meddling here has only made the system worse for everyone in an attempt to make it better for a few. As for Social (in)-Security, my 401K and IRA are going to pay me back much better than my "investment" in social security. It is a Ponzi scheme that collapses as soon as the ratio of workers to retires decrease sufficiently to either bankrupt the system or create such onerous taxes as to reduce productivity. The FICA increases have been needed to keep SS from collapsing under the weight of the now retiring baby-boomers. BTW - SS taxes above $90,000 cannot be recouped by the payee. SS then becomes like any other transfer (read: WELFARE) program. Moreover, as far as SS being a sacred bond, what ever happened to adult children taking care of their elderly parents? It seems to me that the parent-child bond is far more sacred than my bond with the old woman living 3000 miles from here.

"What is wrong with 50.1% of the population voting to tax the other 49.9% if everyone benefits from roads?" Answer: At some point, the 50.1% realize that they can do it. When this realization crystallizes, the 50.1% vote to PAY themselves with overbudensome taxes on the other 49.9%. This stagnates the economy by essentially taxing the most productive and entrepreneurial. Look at Europe. After WWII, their economies grew even with burdensome taxes because Europe and the US were the only places with educated populations in which to invest. That all changed in the 90's with the rise of SE Asia. Europe's economy (aggregated) has essentially been flat over the past 15 years. Regulation (lack of dynamics) and taxes, even with lower economic risk, has made investment in other regions more attractive.

Bottom-line: You cannot cut taxes on people who do not pay any. The bottom 50% of the population is only paying 3% of the taxes. “Cutting taxes” on these people results in payments to them; i.e. welfare. You can only cut taxes on the rich because only the rich now pay taxes.

Posted by: NASCAR Wife | Jul 21, 2008 1:32:37 PM

clouse wants a more details for the quoted median wage info. Try this one: http://www.nytimes.com/2006/08/28/business/28wages.html (you have to click on the chart to see the years on the X axis)

Meanwhile, poster Doug is apparently bitter about government meddling, and wants only strictly constitutional public policy. He is also not impressed when I deny that "fairness" is an appropriate measure of benefits in responding to the initial post about taxation, which basically says progressive taxation isn't fair.

FYI, Doug, the terms of debate about such taxation do not include the constitution. Tax rates are outside the scope of that document. Economics too...not anticipated there. So let's keep our eye on the ball, shall we?

Notice, BTW, Doug that you -- and people like you -- do not respond to the argument actually made. All you've got is just distraction ("look it up in the Constitution!") and *name* calling. ("Dang Socialists! They're a-gittin' as uppity as the negros!") See how it works? I won't deny that reasonable people can disagree, and even do so agreeably, but what you're doing defines illegitimate argument.

P.S. As for whether SDI works -- well of course it works if you tell it where the target is going to be, when it's going to fire and don't use any countermeasures (radar interference, decoys, etc.). And under those conditions is the *only* time it has worked in any test. Period.

If you are really interested in SDI, Wikipedia has extensive coverage (http://en.wikipedia.org/wiki/Strategic_Defense_Initiative, and for more current weapons: http://en.wikipedia.org/wiki/Ground-Based_Midcourse_Defense).

But let's not bullshit the bullshitter here, mon cher. SDI or GBMD is something that has never worked in anything resembling a combat situation. Worse still: As currently conceived, it is even an offensive weapon that breaks the Mutual Assured Destruction standoff.

In other words, as an added bonus to its non-working status, it provokes a whole new weapons race. If you want to really understand the military's R&D and acquisitions procedures, I recommend Senator William Proxmire's book "Report from Wasteland" to you. A real eye-opener.

Anyway, SDI is just more subsidy for the military-industrial complex, I say, for a non-working weapons system in the context of a defense budget that exceeds the rest of the world's military expenditures put together -- for a military that still can't keep us out of a fight.

Could we at least agree about that one?

Jim Collins asks where did all the Star Wars money go? Answer: To the military-industrial complex. Where else? Is this the most productive thing we could do with it? What about all those alternative energy sources we could perfect? Or a cure for AIDS? Or tastier pizza?...8^)

If your point is that some workers got a job because Star Wars money was spent making weapons, I say "sure." But is that the best use of their time?

Posted by: Yoshidad | Jul 21, 2008 1:48:30 PM

Q: "is that the best use of their time?"

A: they thought so.

are you making the claim that you can better allocate resources that the free market? or that any government can?

if so, please provide an example of that EVER working.

Posted by: morganovich | Jul 21, 2008 2:15:26 PM

oh, and regarding fairness yoshi, please define what you are talking about as you are not making and sense. what do you mean by fairness?

are we talking about a fair system? because then everyone ought to be treated the same way. this argues against progressive taxation.

are you talking about a fair outcome? because in that case, you need to define fair. does fair mean we all get the same? how is that fair to those who work harder or are more innovative? identical outcomes is horribly unfair. why should a squirrel who gathers no nuts get a share of those gathered by one who did? and if he does, isn't that a strong incentive to free ride? what happens when all the squirrels do it?


Posted by: morganovich | Jul 21, 2008 2:27:23 PM

It's so incorrect to tax the rich. For example the hedge fund manager who made over a billion dollars last year really should get relief from the back breaking 15% tax he had to pay.

Posted by: Ed | Jul 21, 2008 2:36:16 PM

This is not for Yoshidad sake, because he has eyes and does not see, ears and does not hear, but for any reasonable person that thinks the 50's and 60's was great economic times.

I wish I knew where this good life of the 50's and 60's was that Yoshidad talks about. I missed out on that. As for me and my friends there was only one family car, nobody I knew could afford to fly, bus was it. When my Uncle died in 1960 I went to the bank with my Dad were he had to take out a loan to fly to California and then only he could go to his brother funeral. We didn't have a TV until 1957 and then that was a small black and white with only 2 channels (could not receive the NBC channel). No family vacations, the only time I stayed in a motel was 4 time in 1957 on a trip to California to visit family, and the next time was 1969 on the next time to CA.

Cars, manual transmission, a radio, a heater and nothing else. No automatic transmission, no power steering, brakes, windows, mirrors, not rear defroster, no cup holders, no air conditioners, no seat belts until mid 60ties, unless you could afford a Caddy. Nobody I knew could.

Houses was smaller, we had a four room house (not number of bedrooms) until my mother went to work (yes not all mothers stayed at home) and then my parents added two more rooms.

No ipod, mobile phones, internet, video games, no computers, no calculators, no voice mail or answering machines, no microwave oven, no dishwasher (unless rich), no vcr or dvd, no tivo, I could go on. I did get a record player for my birthday but it was not a stereo.

No malls or supercenters.

As for working your way through college with a job in a Pizza Shop, that didn't happen except in the movies.

My parents saved to send me and my sister to college, there was not the grant money and loans that is available today. I had an easier time putting my daughter through college than my parent had with me.

As for health care, cancer was a death sentence, when someone got cancer, you started preparing for the funeral, no chemo. When I was born there was no vaccine for polio, measles, chicken pox or mumps, everyone had to get a smallpox vaccination. I had to suffer through measles, mumps and chicken pox, it was not fun. No access for people in wheelchairs. No MRI or CT scans, no ibprofen, no oral medicine for type II diabetics (my grandfather had to use insulin), no CPR, no crash carts, no bypass surgery, no transplants, no Laparoscopic surgery and I could go on.

As for women opportunities, not much, the girls in my class was told that the opportunities for them in the workplace was nursing, teaching, secretaries, seamstress and all the "traditional" "woman" jobs.

What was the job choices, where I lived you could work in a steel mill doing hot dirty back breaking work, or you could work in the coal mines doing cold, dirty back breaking work and die of black lung like by grandfather or in a mine collapse like a friend did. I preferred my software development job, sitting at my desk in a nice air conditioned office.

If I had a choice, I rather grow up today than in the 50ties.

Posted by: Will H | Jul 21, 2008 2:36:29 PM

Well Yoshi, I guess I was part of the "military industrial complex" that benefitted from Star Wars then. Funny for some strange reason I'm not a millionaire, I don't have a secret bank account. What happened to all of that money? Oh. Wait. I'm sorry. I EARNED a paycheck at that time. I was also TAXED like crazy. How about reading something besides the Socialist Manefesto? Maybe a good Economics textbook? I'm sure that someone here can reccommend a good one. By the way Yoshi, I left the "military industrial complex" in 1990, when the Russians gave up. Now I work in advertising. Better money. I'm still taxed like crazy though.

Posted by: Jim Collins | Jul 21, 2008 3:15:26 PM

Hey, this is getting to be like one of those multiple chess games... Slow down!

morganovich says Ravi Batra's story is "just a fatuous story about an economy dominated by government spending and grants that is incapable of growing. what happened to that tax break for investment? didn't the investment yield jobs? if investors profited, what did they reinvest in? and if we add capacity, doesn't that reduce price making everyone better off as they buy what they want/need?"

Yoshidad answers: The short answer is "no." The evidence of the U.S. economy in the 1950's and 1960's is enough to refute any objection you have to Batra's story of why lowering taxes on the wealthy is a loser for the economy. That wasn't a story, that was history.

Maybe you don't remember the time when your wife didn't have to work, and you could send your kids to college without borrowing on your middle-class salary... That period -- which had very high marginal tax rates -- refutes what you say, in spades.

Meanwhile, the Reagan tax breaks for the wealthy yielded an average business cycle recovery with flat capital investment, and average job creation -- no miraculous growth. When Reagan came into office, the U.S. was the world's largest creditor. When he left, it was the world's largest debtor. When he came into office, it also had a trade surplus; when he left, a trade deficit. And there's certainly worse employment growth today with W's cut-the-tax policy. Nothing you're looking for appears when you examine what happened.

Conversely, after increasing marginal income taxes on the wealthy, the Clinton years produced higher investment returns, better employment creation, and better capital investment. This isn't controversial any more than the assertion that average people did better in the 50's and 60's than they're doing today.

There are reasons to discount Clinton's contribution to all this economic improvement, but there's no doubt whatsoever that when it was proposed, it was derided by the tax-cutting supply-siders as something that was going to send the economy to heck in a handcart.

So, sorry, I'm not buying your arguments. Neither are any reputable economists.

Xmas writes that the rich will take lots of time and attention to lower their taxes if you raise their rates. This doesn't seem controversial, but my guess is that the implication here is that raising rates is a waste of time because the rich will just get some fancy tax shelters.

That would be true, Xmas, except the ultimate tax shelter is lower rates, and the rich have been lobbying successfully for that for years. Who do you think pays Grover Norquist to go around saying that lower taxes mean the government gets more revenue? (And if you believe that, I'll give you some lead bricks to make your balloon go higher.)

JimK writes: "Your quoting Chomsky about Social Security being a "bond among people" is absolutely pathetic. ... And what bond do I have with the woman who fled New Orleans after Katrina and now refused to look for a job because she was so comfortable in the hotel that FEMA (read me) was paying for for her. The only bond with I have with these people is that every April 15th I [can pay my taxes] or go to jail. This is not a bond it is legalized theft. And in our "democracy" there is nothing that prevents the woman who lives in a hotel at my expense from voting to up my taxes for her benefit."

Dear JimK: Yours is exactly the argument made by the American Confederacy. The only answer to you is that, without what you call "theft," the modern nation state is not possible, and democracy as we know it is doomed. The consent of a majority of the governed says "pay income taxes" so unless you want to secede, I suggest you pay.

And I'm not questioning whether it's possible to legitimately disagree about the desirability of nation states, but where there's national sympathy, then there's something other than compulsion to urge people towards national defense. Compulsion is what Saddam had -- remember how effective that was in motivating his troops?

National sympathy also is a sentiment that keeps people from trying to pass off tainted food as healthy (thanks for the dog food, China!), and we'd all better hope that such a sentiment is at least possible, or we're in a world of hurt, because most of us don't grow our own food, or build our own homes, or make our own medication, etc., etc. Better hope those folks doing for you are honest -- either that, or move back to the cave.

Anyway, we fought a civil war about this very kind of issue (similar in kind, if not identical). The agreement that prevailed was that a majority of people gets to decide, and you have to go along or go to jail. You can call it theft or patriotism. I suggest the latter for your own benefit, but it's your decision, either way.

That's not to say I'm that thrilled about all the things the government is doing, either, BTW. But bringing up welfare queens, and ignoring the corporate welfare is really egregious -- and far beyond pathetic -- IMHO. It's straining at a gnat, swallowing a camel.

Non-working Star Wars got more than all the crooked welfare queens, and legitimate welfare recipients put together. And that was just one of many weapons systems. B-2 bomber, anyone?

Oh yes, and the multi-trillion-dollar war on terror? Some studies say terror is up 700%(ouch!)... Effective, no?

As for social cohesion, let's also remember that precious few of us are more than a mugging or a bad disease away from sleeping in a refrigerator box, too. Are you sure you want to roll those dice without a safety net, or with one that's just your family? That's worked so well in Mexico, don't you think?

Personally, I think what you call welfare is just a cheap way to buy social peace. It's very cheap compared to the military, and it handles a lot of the dysfunction natural to any human society.

What do you think we should do with all the schizophrenics and drug addicts, anyway? Send 'em to the ovens? OK, Mr. Hitler, but let's consider the possibility that there's at least an alternative that might include morality.

And drug arrests since the 1980's are up in the U.S. 1100%, so we're doing the concentration-camp thing now. Drug use is down 50% (not 1100%). Canada hasn't increased its incarceration rates like the U.S. and has experienced a similar drop in crime. But what the heck, even though it isn't working, let's continue to imprison people. What do you say? Maybe we could torture them too...?

NASCAR Wife writes: "What should the Government do to cover its bills when revenue falls?” CUT-CUT-CUT. Cut till it bleeds! Cut till it really, really hurts."

NASCAR wife makes what might be legitimate about specific programs. What about all those earmarks, for example? A toilet paper museum in Albany? Some other idiotic thing...

You can always find an example of stupid government. It's like shooting fish in a barrel. All their meetings and documents have to be public. (Question: Were there any stupid decisions at Enron, or Adelphia, or Global Crossing, or Worldcom, etc., etc. etc.?)

But the trouble with this argument is that it is fundamentally dishonest. There are no budget items that it's politically possible to cut that are also large enough. All the earmarks put together are less than 2% of the budget.

So I'll believe any of you courageous budget cutters if you can tell me something that would even make a 10% difference. You can't. Period. Not even the "courageous" Republicans currently holding up the California budget have such a thing. (They want to cut something, but they won't say what. And they're going to stamp their tiny feet and hold their breath until you guess what it is. Nyah!)

BTW, lower revenue sharing from the feds is showing up all over the place in higher local and state taxes. Even the tax cuts are baloney.

Oh yes, and let's not forget that confining the discussion exclusively to taxes and spending is misdirection popular among the "conservatives." What about eliminating the depletion allowance -- a special write-off for oil companies? Silence. And when W buys a money-losing baseball team, cons the Arlington Texas voting public into gifting them a stadium, then sells the team for millions more than he paid... Is that a taxable event? Or is it spending? (Answer: neither, but it's 75% of W's net worth). See David Cay Johnston's "Free Lunch" for enough examples of this to make you grind your teeth.

Anyway, if you exclude Social Security, Medicare, interest on the national debt, and the military, then you only have 15% of the Federal budget to cut. Where shall we begin? The FBI, or the Federal Courts? How about the CDC? Is that crickets I hear?

Look, I'm not denying there's waste. It's a *human* activity. How could there not be waste? There is no difference just because it's government.

But the thinking of (sigh) people like NASCAR wife is that there's something significant to cut that could get the consent of a majority of the governed. Remember that little civil war thingy? It said majority rules.

No such thing exists. Social Security and Medicare...you gonna cut those? Pulleese! Bush shut up about it when his privatization plan was exposed as baloney. No majorities are available for any of these things.

The military is really the only legitimate cut-able thing, and Bush and the neocons have made it orders of magnitude more expensive. So where's the spending-cutting beef here? Three trillion dollars for Iraq and still counting... Again, a fundamentally misguided argument, used by the people spending more on the only really cut-able thing.

So if NASCAR wife says "I say if the program has not been around for 25+ years, cut it." she's excluding interest from the national debt, Social Security, Medicare, but maybe not the military. What do you say NW? Will you go for a 15% cut in the military like Kucinich proposed? My bet is that she doesn't go for it. Any takers?

Meanwhile, the point about "nobody's investing in Europe" is refuted by a) the more expensive euro, in dollar terms, and b) things like European stock index funds (see the trend in http://quicktake.morningstar.com/FundNet/Snapshot.aspx?Country=USA&Symbol=VEURX), for one example.

In other words, you're making things up, not making a legitimate argument.

NASCAR Wife *loves* the rich, too: "the 50.1% vote to PAY themselves with overbudensome taxes on the other 49.9%. This stagnates the economy by essentially taxing the most productive and entrepreneurial."

Again, even the supposed majority of crooked welfare Negroes are not paying themselves more than a single weapons system. The $372 billion in tax breaks Bush proposed went mostly to the wealthy. The upshot of recent decades of tax cutting is that the biggest gainers are quite obviously the very, very rich (457% for the top 0.01% while median real wages stagnate!), so you're straining at a gnat, swallowing a camel.

BTW, if the "entrepreneurial" were so valuable, then CEO compensation would be related to performance. Sorry, not even *that* bit of urban legend is true. (See http://www.commondreams.org/headlines05/0412-10.htm, for just one of many, many examples).

So let's review, shall we: No matter what reality is, y'all can deny it. That's your prerogative.

But it's really not controversial to say that average folks did best in the 1950s and 1960s when marginal taxes on the wealthy were highest. It's also not controversial to say that the results of George W. Bush's tax-cutting was less than stellar in producing results in the real economy (OK, we're doing swell now with stagnant real wages and the sub-prime meltdown...Yup!).

Bush's results were at least less-than-Clinton, and at worst a huge bit of welfare for the wealthiest among us.

And it's not at all controversial to say that W's $372 billion tax cut was orders of magnitude bigger than anything paid in welfare, and certainly orders of magnitude squared bigger than what was paid in illegitimate welfare claims (estimated to be no more than 15% of welfare, at the high end).

So my conservative brothers and sisters, once again, you have conflated a mass of urban legend and marketing with reality. This resembles nothing so much as the dog's breakfast but should not be mistaken for being in touch with reality outside the Matrix.

But this is the kind of thinking that got us to this point: As a consequence, we're "borrowing money from China to buy oil from the Persian Gulf to burn it in ways that destroy the planet. Every bit of that's got to change." - Al Gore (because you need to hear from him)

Thanks for playing.

Posted by: Yoshidad | Jul 21, 2008 3:38:23 PM

It’s painfully clear that Yoshidad is a communist.

Posted by: Mesa Econoguy | Jul 21, 2008 4:07:37 PM

actually yoshi, you are just flat out wrong.

the example you cite from batra is so fundamentally incomplete that of course it provides the wrong answer. it fails to account for growth. bigger pie = everyone does better.

the period you describe in the 50's and 60's was not nearly so rosy as you describe and benefited from a one time massive tail wind of the US getting to sell the rest of the world all the things it needed to recover from a world war. this allowed for poor policies to survive because the underlying situation was so good.

then we got the 70's. remember the seventies? no growth. massive inflation. horrid taxes?

the 80's were a massive accomplishment coming out of that disaster. i grant you that too much was spent by the government, but the solution to that is cut spending, not raise taxes. congress's refusal to push through any of reagan's cuts was largely to blame there. and where did all the innovation come from that allowed clinton to preside over a boom?

the 80's. loads of primary research into optics was done with government funding. the entire telcom/internet boom was made possible by the invention of the erbium doped fiber amplifier. this made wave division multiplexing possible. THAT caused a massive surge in telcom capacity and drop in price which made all the wild efficiency gains of the post internet era possible.

tax cuts don;t drive immediate revenue growth. obviously, there is a short term decline. but it winds up ahead in the intermediate and long term as it drives more growth so ultimately, more taxes get paid. an incremental 1% to growth rate over 20 years at a given tax rate DWARFS the gains from raising the tax rate 5 percentage points on the rich. if you don;t think tax cuts can cause such growth, you have no idea what ened the 70's.

and i have no idea where you get your information on "reputable economists" but speaking as a 25 year wall st veteran with loads of friends among top world economists (and an advanced econ degree of my own) i'm here to tell you you need to check your facts. you are utterly misinformed. are there some academic economists that agree with you, certainty, but i think that if you examine their success in actually predicting the future and the responses of the economy to policy changes, you will realize that their opinions do little to successfully forecast reality.

Posted by: morganovich | Jul 21, 2008 4:15:58 PM

Yoshi, where do I begin?

First, an observation. It is clear that you have an acute case of wealth-envy and enjoy participating in class warfare.

Second, some questions. For the past 28 years (since Reagan took office), the rich in our country have been paying a larger and larger percentage of income taxes, while the poor are paying less and less. In 2005, the top 10 percent of income earners (sorted by Adjusted Gross Income) earned 46% of all income, and paid 70% of all income taxes. Yet, this disparity is not 'progressive' enough for you. Please tell me what is 'fair' about 10% of the people paying 70% of the taxes? They sure don't use the country's infrastructure 7 times more than the average person? What percentage of income taxes should be paid by the rich in order to make it 'fair'?

I will not refute the fact that the rich are getting richer in this country and that the income gap is widening. But it is not due to low tax rates and it is certainly not within the authority of the federal government to close it (unless you favor tyranny).

Please tell me where you got the idea that the 'civil war thingy' resulted in 'majority rules'? Last I read, it was about slavery (masqueraded as States Rights) and the ability of states to secede. The fact is that the Union won the war by having a greater ability to wage war than did the Confederacy. It wasn't because a 'majority' of voters decided the southern states couldn't secede or own slaves. Also, our founding fathers crafted a document that insures the majority does not trample upon the rights of the minority. So, take that argument and toss it out the window. I for one, do not accept it.

Posted by: Damon Gentry | Jul 21, 2008 4:23:13 PM

oh, and regarding your questions of what to cut, it's not fair to joust against straw men and assign opinions to others that they have never espoused. i don;t see the "conservative" programs/issues you attack championed here. readers of this site are not generally conservative. they are libertarian. but for cutting the deficit itself:

that's easy. freeze the budget immediately in all categories. raise it only by specific vote for specific projects. that will turn our deficit into a surplus in a few years.

all earmarks - gone.

all government subsidies for all businesses, agriculture, research etc - gone.

SS - private accounts, no longer an unfunded liability. break up the current fund into accounts for those who have paid in to date.

medicare - comprehensive measurement and reorganization around cost benefit. most medical expense comes in the last 9 months of life, and by most i mean 75%+. cut all of the horribly expensive procedures that have very low marginal benefit and we can afford all the healthcare everyone else needs.

welfare etc - limit duration, require work

legalize drugs. tax them.

lower taxes. invite in business and innovation from abroad.

want to see a great example of how well this works, take a look at what ireland has done in the last decade. THAT is what cutting taxes and attracting business can accomplish. in a decade they have gone from one of the highest tax nations in europe to the lowest. and their growth has leapt from the bottom of the chart to the top. to top it all off, transfers as a % of GDP have dropped through the period while median income has risen. everyone is better off.

government is a terrible provider of goods and services and a massive distorter of economies and disrupter of growth. the less they meddle, the better off everyone is in the long run.

Posted by: morganovich | Jul 21, 2008 4:30:54 PM

Yoshi are you saying minimum wage should be indexed to reflect the rate of CEO pay?
Are you suggesting any time one occupation becomes more in demand and the pay goes up the government should raise minimum wage? Or would you rather just add a maximum wage? Or just have government limit what CEOs are allowed to earn?

Did you know that if Radio Shack employee pay increased at the same rate as MLB starting pitchers pay over the last 20 years Radio Shack employees would be making over 900,000 per year?????!!!!!!

Posted by: josh | Jul 21, 2008 4:54:22 PM

Please do not feed the YoshiTroll. It only makes his posts longer and more frequent. Thank you.

Posted by: Dr. T | Jul 21, 2008 4:57:03 PM

Well said morganovich, and similar background here.

"If Mr. Obama does succeed in raising tax rates on the rich, we'd also wager that the rich share of tax payments would fall. The last time tax rates were as high as the Senator wants them -- the Carter years -- the rich paid only 19% of all income taxes, half of the 40% share they pay today. Why? Because they either worked less, earned less, or they found ways to shelter income from taxes so it was never reported to the IRS as income."

What part of that do you not understand, yoshalist?

Get that thru your thick skull you idiot.

Posted by: Mesa Econoguy | Jul 21, 2008 5:26:49 PM

morganovich: What kind of health care system do they have in Ireland?

http://en.wikipedia.org/wiki/Health_care_in_Ireland

Posted by: Fay | Jul 21, 2008 6:04:18 PM

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