Tag Archives: income inequality

Irrational exuberance?

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[hulu http://www.hulu.com/watch/423753]

Frank Rich thinks so. Echoing his comments from mid-October (which I covered here), Rich insists that the post-election Democratic triumphalism is misguided, and that nothing has substantially altered the long-term prospects for Tea Party-style conservatism:

More seriously, if you look at the GOP’s suicidal talk right now, and the Democratic and liberal triumphalism, it’s very much a replay of what I wrote about in last month’s piece. After LBJ beat Goldwater in a far bigger victory, an out-and-out landslide, in 1964, Republicans moaned about being consigned to minority party status and possibly oblivion; Democrats talked about having won the war of ideas and demographics as well as the politics. (Goldwater only carried his home state of Arizona and a swath of the Confederate South.) Two years later, Ronald Reagan was elected governor of California, and four years later Richard Nixon became president. The core small-government credo of conservatives has been remarkably consistent and resilient ever since and still commands a majority following according to last week’s exit polling. What’s more, the GOP bench — Rubio (who’s very slick by the way), Ryan, Christie, Jindal, etc — is far younger than that of the Hillary-Biden post-Obama Democrats. This new Republican generation will find a way to put a kinder, gentler, Hispanic, female face on the GOP soon enough.

This is a depressing forecast. But it’s a useful counterpoint to jubilant predictions of Republican moderation (which I’ve expressed as recently as yesterday). Jonathan Cohn is on roughly the same page regarding the mindset of the American right:

It’s basically another version of the 47 percent argument—i.e., that 47 percent of the country is dependent on the rest of the taxpaying public. It was kicking around in conservative circles even before Mitt Romney invoked it at that now-infamous Florida fundraiser. And judging by recent commentary, it’s going to keep kicking around for a while longer. Last week, National Review’s Kevin Williamson concluded that “offering Americans a check is a more fruitful political strategy than offering them the opportunity to take control of and responsibility for their own lives.” Just today, Washington Post conservative writer Jennifer Rubin wrote that the Democratic Party won by “feeding its base cotton candy.”

It’s true that Americans, on the whole, are more enthusiastic about receiving public services than they are about paying for them. They always have been. And it creates real policy dilemmas, particularly as an aging population makes services more expensive. Do we scale back these programs or raise taxes to pay for them? Do we trust the marketplace to find efficiencies, or turn to the government? Conservatives need to be more forthright than they have been about their proposed answers to these questions: We can’t cut Medicaid by a third, as Paul Ryanproposed to do, without seriously harming low-income people. But liberals also need to confront some unpleasant realities. Over the long run, we can’t sustain the current level of benefits without asking the middle class to pay at least a little more in taxes.

But sometimes the argument about free stuff has a more insidious meaning—and you don’t have to strain to hear it. During the Fox News broadcast on Election Night, Bill O’Reilly declared, “It’s not a traditional America anymore, and there are 50 percent of the voting public who want stuff. They want things. And who is going to give them things? President Obama.” In case the reference to “traditional America” was too subtle, O’Reilly went on to talk about Obama’s strong support among blacks, Latinos, and women.

Tangentially, this “maker vs. taker” paradigm is no longer restricted to the United States: it’s taken on a global appeal. Fellow blogger Max Marder notes a very 47%-esque comment coming from a member of Israel’s new Yisrael Beiteinu-Likud party:

An article from Haaretz this afternoon quoted Likud-Beiteinu Knesset member Faina Kirshenbaum  Romneyesque’s diatribe against Israeli-Arab citizens:

“The Arabs are an economic burden on the state. They barely pay taxes and receive enormous budgets from the state,” Kirshenbaum told a German-Israeli sister cities conference held in Jerusalem by the Union of Local Authorities in Israel.

“The Arabs in the State of Israel pay NIS 400 million in taxes, but receive benefits worth at least NIS 11 billion,” she said.

“The Arabs in the State of Israel want equal rights, but they don’t contribute to the state. In order to receive equal rights, they must contribute to the state like every other citizen and serve three years, either in national service or in their communities.”

“Only 38 percent of Israeli citizens pay taxes, and a small portion of them are minorities. Tax-paying citizens of the state are carrying the rest of the population on their backs,” she added.

Kirshenbaum’s comments doubly mirror defeated presidential candidate Mitt Romney, who said both that a lack of Palestinian economic success vis-a-vis Israel was the result of cultural inferiority and that 47% of Americans were essentially moochers off of the state. What both Romney and Kirshenbaum miss, obviously, is that Israeli-Arabs are at best second-class citizens in the Jewish State. Israeli-Arabs, like African-Americans, are worse off than the majority because of historic discrimination, not laziness.

It’s a bitter irony that, following on the heels of one of the worst global recessions in modern history, the emerging narrative is that class warfare is being waged by the poor against the successful and wealthy. This seems odd, given the enormous bailouts staged in the United States and elsewhere simply to save this very same Team Successful from irreparable financial ruin. Clearly, no good deed goes unpunished.

I am becoming gradually convinced that one of the chief problems preventing genuine financial and tax reform in the U.S. is the massive blindspot that lower- and middle-class Americans have about…themselves. No one thinks of himself as a taker, but millions think that half the rest of the country is. How convenient, then, that all these nameless, faceless takers all turned out to have voted for Barack Obama. Maybe Frank Rich has a point.

(Video at the top is only marginally related to anything in this post, but I couldn’t let the opportunity to sneak it in slip away.)

How Occupy Wall Street got it wrong

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Thomas Frank (of What’s the Matter With Kansas? fame) laments the failure of Occupy Wall Street to coalesce into a genuinely effective movement:

Measured in terms of words published per political results, on the other hand, OWS may be the most over-described historical event of all time. Nearly every one of these books makes sweeping claims for the movement’s significance, its unprecedented and earth-shattering innovations. Just about everything it does is brilliantly, inventively, mind-blowingly people-empowering.

And what do we have to show for it today in our “normal lives”? Not much. President Obama may talk about the “top 1 percent” now, but he is apparently as committed as ever to austerity, to striking a “grand bargain” with the Republicans.

Occupy itself is pretty much gone. It was evicted from Zuccotti Park about two months after it began—an utterly predictable outcome for which the group seems to have made inadequate preparation. OWS couldn’t bring itself to come up with a real set of demands until after it got busted, when it finally agreed on a single item. With the exception of some residual groups here and there populated by the usual activist types, OWS has today pretty much fizzled out. The media storm that once surrounded it has blown off to other quarters.

Pause for a moment and compare this record of accomplishment to that of Occupy’s evil twin, the Tea Party movement, and the larger right-wing revival of which it is a part. Well, under the urging of this trumped-up protest movement, the Republican Party proceeded to win a majority in the U.S. House of Representatives; in the state legislatures of the nation it took some six hundred seats from the Democrats; as of this writing it is still purging Republican senators and congressmen deemed insufficiently conservative and has even succeeded in having one of its own named as the GOP’s vice-presidential candidate…

Occupy did lots of things right: It had a great slogan and a perfect enemy and it captured the public imagination. It built a democratic movement culture. It reached out to organized labor, a crucial step in the right direction. It talked a lot about solidarity, the basic virtue of the Left. But in practice, academic requirements often seemed to come first. OWS was taken as a proving ground for theory. Its ranks weren’t just filled with professionals and professionals-to-be; far too often the campaign itself appeared to be an arena for professional credentialing.

For the love of all things holy, stop distorting the tax debate

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Pulitzer Prize-winning author Buzz Bissinger has a column today on the Daily Beast titled “Why I’m Voting for Mitt Romney:”

By instinct I still cling to my Democrat roots. But I admit that as I get older, on the cusp of 58, I am moving more to the center or even tweaking right, or at least not tied to any ideology. Those making more than $250,000 should pay more taxes, and that does include me. But I also am tired of Obama’s constant demonization, of those he spits out as “millionaires and billionaires,” as pariahs. Romney’s comments at a fundraiser were stupid, but 47 percent of Americans do not pay federal income taxes. Yes, a majority are poor and seniors. But millions do not pay such taxes with incomes of more than $50,000, and whether it’s as little as $10, every American should contribute both as a patriotic obligation and skin in the game. This is our country, not our country club.

This constant emphasis on the “47 percent of Americans [that] do not pay federal income taxes” is as boring and repetitive as it is completely and utterly irrelevant. The fact that this figure continues to play a large role in our national tax discussion is proof positive of the utter lack of due diligence on the part of journalists around the nation, who’ve collectively abdicated their responsibility to readers by failing to dig deeper.

So for the millionth time, federal income tax rates do not matter. Total tax rates matter. Think about it: what is the central issue in today’s tax arguments? The key question is one of progressivity and fairness: how much, if at all, should tax rates rise with income levels? Should the poor have to pay the same percentage of their total income to their federal, state, and local governments as the rich do? Or should taxes paid to all levels of government rise relative to income, as income itself rises? Responses to this question are as numerous as respondents, and that’s OK.

It’s absolutely absurd, on the other hand, for people to continue basing their tax system preferences on deliberately misleading data. Federal income taxes cover only one portion of total tax liabilities. There are, additionally, payroll taxes, state taxes, and local taxes. And this is the key problem with using only federal income tax rates as indicative of anything.

The Republican Party knows this. It’s why its standard-bearer, Mitt Romney, insisted on the self-victimization of the 47% who don’t pay federal income tax — because it’s a number that sounds incredibly high, a number that advances the GOP’s agenda and lends legitimacy to the accusation of “class warfare” against Barack Obama.

The problem is that, just as one would expect, isolating the most politically advantageous portion of Americans’ total tax liabilities produces a phenomenally distorted piece of data. (Imagine if the Democratic Party insisted its national platform was widely supported throughout the entire nation, based on a poll conducted exclusively among New York City residents. This is an extreme hypothetical, to be sure, but it’s illustrative of the type of thinking being used by Republicans to disguise the truth about taxes.)

So what is the total income and tax intake of Americans? Here’s a helpful graph, courtesy of Mother Jones, that includes 2009 income and tax data:

Notice a couple things. First, the bars are not equally distributed: the first four pairs represent the lowest four quintiles of the American population by income level, while the last four pairs collectively constitute the top 20%. This is necessary because the top income quintile dwarfs the other quintiles, and leaving it in one piece would render the graph more difficult to interpret in a useful way.

Secondly, the share of total taxes paid by each slice of the population is roughly equivalent to its share of national income. In other words, our tax system is much, much less progressive than Mitt Romney & Co. would have us believe. And this is why, when politicians and — even worse — journalists start throwing around numbers like 47%, it would behoove us to look into the data instead of taking it at face value. It also means that, if anyone’s conducting class warfare, it certainly isn’t Barack Obama.

 

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Obama and the super-rich

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A couple days on the Internet is a lifetime anywhere else, and so I realize that Chrystia Freeland’s phenomenal New Yorker piece “Super-Rich Irony” has already been read, digested, and analyzed by countless cybernetizens for several days now. That said, it is, I think, such a crucial article that I felt the need to post something about it as well. “Super-Rich Irony” demonstrates just how fragile a grip on reality the wealthiest among us have, and the implications of this collective delusion are enormous.

Here’s one particularly illuminating passage:

Although he voted for McCain in 2008, Cooperman was not compelled to enter the political debate until June, 2011, when he saw the President appear on TV during the debt-ceiling battle. Obama urged America’s “millionaires and billionaires” to pay their fair share, pointing out that they were doing well at a time when both the American middle class and the American federal treasury were under pressure. “If you are a wealthy C.E.O. or hedge-fund manager in America right now, your taxes are lower than they have ever been. They are lower than they have been since the nineteen-fifties,” the President said. “You can still ride on your corporate jet. You’re just going to have to pay a little more.”

Cooperman regarded the comments as a declaration of class warfare, and began to criticize Obama publicly. In September, at a CNBC conference in New York, he compared Hitler’s rise to power with Obama’s ascent to the Presidency, citing disaffected majorities in both countries who elected inexperienced leaders.

Later on, a helpful summation of the über-wealthy’s view of Obama:

The President, in Cooperman’s view, draws political support from those who are dependent on government. Last October, in a question-and-answer session at a Thomson Reuters event, Cooperman said, “Our problem, frankly, is as long as the President remains anti-wealth, anti-business, anti-energy, anti-private-aviation, he will never get the business community behind him. The problem and the complication is the forty or fifty per cent of the country on the dole that support him.”

The full article is worth a careful read. But the sheer audacity of these accusations is breathtaking. Here’s Leon Cooperman, a man who makes his money speculating on the financial markets, discussing Obama’s lack of qualifications:

Cooperman’s pride in his work ethic is one source of his disdain for Obama. “When he ran for President, he’d never worked a day in his life. Never held a job,” he said. Obama had, of course, worked—as a business researcher, a community organizer, a law professor, and an attorney at a law firm, not to mention an Illinois state legislator and a U.S. senator, before being elected President. But Cooperman was unimpressed. “He went into government service right out of Harvard,” he said. “He never made payroll. He’s never built anything.”

Again, Cooperman runs a hedge fund. The guy’s enormous net worth has been accumulated via a series of (mostly lucky) life and financial decisions that put him in the right place at the right time. This is a point Freeland makes very well:

Between 1991, when Cooperman founded Omega, and the 2008 financial crisis was the best time in history to make a fortune in finance. Cooperman’s partners who stayed behind at Goldman Sachs are hardly paupers—and those who stuck around for the 1999 I.P.O. are probably multimillionaires—but the real windfalls on Wall Street have been made by the financiers who founded their own investment firms in the period that Cooperman did.

Cooperman was lucky enough to study at Columbia Business School, then he jumped to Goldman Sachs and eventually became a partner there before founding Omega. Was it hard work? I’m sure. Community organizing is also hard work. Making it as an elected official is enormously hard work. So is working at a law firm and teaching at a law school. All of these positions, in fact, have at least as much of a direct and tangible impact on people’s lives as moving futures contracts on a trading floor does.

So to hear Obama’s work qualifications disparaged by Cooperman — many of whose wealthy peers have collectively pillaged the American economy, been bailed out by the very victims of their recklessness, and have continued onward without showing remorse and (more devastatingly) without serving prison terms for the blatant fraud they perpetrated on their clients — should enrage any thinking American. To hear Cooperman tell it, the rich have quietly suffered untold abuse and recriminations under Obama’s Third Reich. And yet, what is this?

His Administration supported the seven-hundred-billion-dollar tarp rescue package for Wall Street, and resisted calls from the Nobel Prize winners Joseph Stiglitz and Paul Krugman, and others on the left, to nationalize the big banks in exchange for that largesse. At the end of September, the S. & P. 500, the benchmark U.S. stock index, had rebounded to just 6.9 per cent below its all-time pre-crisis high, on October 9, 2007. The economists Emmanuel Saez and Thomas Piketty have found that ninety-three per cent of the gains during the 2009-10 recovery went to the top one per cent of earners. Those seated around the table at dinner with Al Gore had done even better: the top 0.01 per cent captured thirty-seven per cent of the total recovery pie, with a rebound in their incomes of more than twenty per cent, which amounted to an additional $4.2 million each.

When I hear the term “class warfare,” I think of men like Leon Cooperman: hallucinating by the bright lights of their own tainted, zero-sum “successes,” they bemoan the centrist policies of the president whose meek statements urging the rich to “pay their fair share” may be the last, best hope of a society lurching towards banana republicanism. And when that breaking point arrives, the very rich will fall alongside everyone else. They’ll have no one to blame but themselves.

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David Brooks discovers inequality, recoils in horror

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English: David Brooks

From yesterday’s New York Times column:

Equal opportunity, once core to the nation’s identity, is now a tertiary concern. If America really wants to change that, if the country wants to take advantage of all its human capital rather than just the most privileged two-thirds of it, then people are going to have to make some pretty uncomfortable decisions.

So far, so good…right? Granted, Brooks is a little like the guy who shows up drunk to a party at 4 AM just as everyone’s sobering up enough to drive home. But at least he made it there, right?

Well, not exactly:

Liberals are going to have to be willing to champion norms that say marriage should come before childrearing and be morally tough about it. Conservatives are going to have to be willing to accept tax increases or benefit cuts so that more can be spent on the earned-income tax credit and other programs that benefit the working class.

Political candidates will have to spend less time trying to exploit class divisions and more time trying to remedy them — less time calling their opponents out of touch elitists, and more time coming up with agendas that comprehensively address the problem. It’s politically tough to do that, but the alternative is national suicide.

And there we go again with the false equivalencies. What does marriage have to do with inequality? Brooks prefers to look at cultural explanations, because cultural-religious rifts are his specialty. (“There are two types of people in America: let’s call them Big-Government Jack and Libertarian Jill,” would be a fairly representative rhetorical style of his.) But even though one huge reason for the current trend towards banana republic-ism is staring us right in the face — tax policy — Brooks prefers to look at something — marriage norms — that might influence something that might influence something that might influence something that might influence inequality. Ever heard of Occam’s Razor, boy?

What makes it so infuriating is that Brooks has a pulpit at the Times, and he consistently uses it to chide Obama for being too enthralled with the idea of government, too ambitious with his proposals, too far left for the nation. But then one day Brooks wakes up to discover inequality, and…yup, turns out marriage norms are the problem.

Time to wake up and start agitating for the policies Obama’s been proposing: sensible, reasonable (by any historical standard) tax proposals that attempt to reverse income inequality and restore some semblance of a little thing we call upward mobility. Call a spade a spade, David Brooks, or risk becoming another Tom Friedman. And the world doesn’t need another Tom Friedman.

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What luck looks like: a primer in three parts

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Part I:

Nick Hanauer’s taxable income is, he tells me, “tens of millions. In a bad year it can be $10 million.”

His parents made good money in the pillow trade, and after college he set up a few okay businesses. But then one day he met a girl who was dating a guy. She said, “You two are going to be friends.”

The guy had a business idea. Nick loved the sound of it. He invested all the money he had on hand—$45,000 cash. The guy was Jeff Bezos, and the business was Amazon.com.

Part II:

The “Moneyball” story has practical implications. If you use better data, you can find better values; there are always market inefficiencies to exploit, and so on. But it has a broader and less practical message: don’t be deceived by life’s outcomes. Life’s outcomes, while not entirely random, have a huge amount of luck baked into them. Above all, recognize that if you have had success, you have also had luck — and with  luck comes obligation. You owe a debt, and not just to your Gods. You owe a debt to the unlucky…

Your appointment may not be entirely arbitrary. But you must sense its arbitrary aspect: you are the lucky few. Lucky in your parents, lucky in your country, lucky that a place like Princeton exists that can take in lucky people, introduce them to other lucky people, and increase their chances of becoming even luckier. Lucky that you live in the richest society the world has ever seen, in a time when no one actually expects you to sacrifice your interests to anything.

All of you have been faced with the extra cookie. All of you will be faced with many more of them. In time you will find it easy to assume that you deserve the extra cookie. For all I know, you may. But you’ll be happier, and the world will be better off, if you at least pretend that you don’t.

Part III:

“You built a factory out there? Good for you,” she says. “But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.”

She continues: “Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

The 2012 presidential election will be, in part, about how much we as a country ascribe to the importance of luck in our everyday lives. Universal healthcare is, in many ways, a hedge against bad luck. To an extent, all entitlement programs are about mitigating the volatile luck of the draw.

Americans have never really been believers in luck, and that’s part of the reason we became who we are: no excuses, best foot forward, all that jazz. But it’s also given us a massive blind spot, and it’s in times like this that the problem becomes glaringly obvious.

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Stephen King gets feisty

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Via the Daily Beast:

What some of us want—those who aren’t blinded by a lot of bullshit persiflage thrown up to mask the idea that rich folks want to keep their damn money—is for you to acknowledge that you couldn’t have made it in America without America. That you were fortunate enough to be born in a country where upward mobility is possible (a subject upon which Barack Obama can speak with the authority of experience), but where the channels making such upward mobility possible are being increasingly clogged. That it’s not fair to ask the middle class to assume a disproportionate amount of the tax burden. Not fair? It’s un-fucking-American is what it is. I don’t want you to apologize for being rich; I want you to acknowledge that in America, we all should have to pay our fair share. That our civics classes never taught us that being American means that—sorry, kiddies—you’re on your own. That those who have received much must be obligated to pay—not to give, not to “cut a check and shut up,” in Governor Christie’s words, but to pay—in the same proportion. That’s called stepping up and not whining about it. That’s called patriotism, a word the Tea Partiers love to throw around as long as it doesn’t cost their beloved rich folks any money.

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The New York Times: socioeconomically tone-deaf as ever

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From today’s “Opinionator” with Gail Collins and David Brooks:

David:  I once conducted an interview with a businessman in a small town and I pulled up in my Audi A6, which was a very nice car but not super luxury.

Sir David Brooks is wrong about the “not super luxury” part. The 2012 Audi A6 is, in fact, currently ranked #2 by U.S. News & World Report in the “Luxury Large Cars” category and retails, on average, between $41,245 and $49,346. According to the U.S. Census Bureau, the median household — not individual — income (averaged over the period 2006-2010) was $51,914. So an Audi A6 costs somewhere between 79% and 95% of the average American household’s pre-tax income.

Look, I am not one of those people who decry rich people for being rich. Hell, I don’t have a problem with rich presidents, politicians, or candidates. In some cases it may even reduce corruption by limiting the political sway of outside contributions. But New York Times writers really need to stop playing the “seriously, we’re not rich” game that has been increasingly played by the American upper class (including, too often, by writers for the Times). It’s absolutely fine to be wealthy. It’s not fine to pretend to be a member of a more modest social class.

I’m just going to stand back from this one and watch it all explode

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I’ll say this for the guy: he has a “spectacular” sense of timing. In the great debate over economic fairness, income disparities, the unjustness of the tax system, and other such issues, it seems that the last thing the majority of the country is interested in hearing is a spirited defense of the status quo. But maybe I’m wrong. We are the nation that turned Glenn Beck into a superstar, after all. What’s the matter with Kansas, indeed.