"The Liberal Hour"

Comments on this?:

The ’60s: Once Upon an Optimistic Time, by Barry Gewen, Book Review, NY Times: ...“The Liberal Hour” by G. Calvin Mackenzie and Robert Weisbrot ... [contends that t]oo many historians who write about the 1960s ... have focused on the decade’s very visible rebellions and disruptions — all that sex, all those drugs, all that rock ’n’ roll.

What is often ignored, they say, is the hard work of little-known politicians and bureaucrats who were methodically creating a ’60s revolution from within. ... Senators and congressmen ... were permanently transforming the country with a tsunami of social and economic legislation.

Granted, it’s more fun to read about Abbie Hoffman than about Edmund Muskie, but ... their overall argument is a valuable corrective to a lot of hackneyed thinking about the significance of the ’60s.

The “liberal hour” lasted only a few years, from 1963 to 1966, from the final days of John F. Kennedy’s presidency through the first three years of Lyndon B. Johnson’s, but in that brief period of time came two civil rights acts...; ...Medicare and Medicaid; pioneering environmental laws; education and immigration bills; stronger protections for consumers; a host of antipoverty programs, including food stamps and Head Start; new federal departments of transportation and housing and urban development; and other reform measures, literally hundreds. Washington hadn’t seen such legislative energy since the New Deal.

If it was poverty and want that drove the New Deal, it was prosperity that provided the momentum for the ’60s, and with it the confidence to take on any challenge. “In the early years of the 1960s,” Mr. Mackenzie and Mr. Weisbrot write, “national optimism reached epidemic levels.” Inspired by Kennedy’s rhetoric and Johnson’s acumen, hundreds of inside-the-Beltway role players set about to change their country and the world. ...

[I]t seemed that liberals would be on top for a very long time..., even a liberal century. Yet their moment quickly passed. ... What happened?

It’s not a question that lends itself to easy answers, but ... they come up with a powerful one: liberal overreaching. During the ’60s liberals were certain they could solve any problem — at home or abroad — with the right expertise, appropriate government policies, the application of reason and gobs of money.

“Do we have or can we develop a knowledge of human social relations that can serve as the basis of rational, ‘engineering’ control?” the eminent sociologist Talcott Parsons asked. “The answer is unequivocally affirmative.” Officials puffed up with a sense of their own omnipotence spoke of a “world New Deal.” Johnson himself exclaimed: “We’re the richest country in the world, the most powerful. We can do it all.”

Such arrogance led directly into the mire and jungles of Vietnam, the prime example of liberal overreaching... Suddenly, Americans were being called upon to make sacrifices, not only of money but also of blood, sacrifices that seemed endless.

It was little better at home. The legislation of the liberal hour was supposed to end poverty, heal racial divisions. Yet all at once, the cities were going up in flames. The primary beneficiaries of liberal largesse, it seemed, were ungrateful for the assistance, while Democratic leaders looked helpless in the face of riots and rising crime. Great Society solutions weren’t working, and so voters turned elsewhere.

“By 1966,” Mr. Mackenzie and Mr. Weisbrot report, “more than half of northern whites had come to believe that government was pushing too fast for integration.”

Johnson had come to grief because, to use Mr. Mackenzie and Mr. Weisbrot’s word, he had “overpromised.” Not every problem had a solution. Reasoning together didn’t work in the urban ghettos or the Mekong Delta. “The Liberal Hour” presents itself as a book about the brilliant legislative legacy of the ’60s, but by the end it has become a book about the legacy of the Johnson administration’s failings....

More optimistic than most of his optimistic countrymen, more confident and overbearing too, Johnson seemed incapable of understanding the virtues of skepticism and caution, the wisdom of pessimism. He never appreciated the limits of good intentions, especially his own. Like many a tragic hero, Johnson was brought down by hubris. And Democrats, Mr. Mackenzie and Mr. Weisbrot tell us, are still paying the price.

Have we just been through a period of "conservative overreaching"? Andrew Samwick quotes Warren Coats on the swing back to the left:

The Death of the Right?: As public sentiment swings back to the left what the public wants (domestically), I think, are largely free but better regulated markets and a better social safety net (health care and pensions). Those like me who think that too much regulation stifles beneficial market innovation and worry about the work incentive stiffing effects of excessive or poorly designed safety nets need to take note of these sentiments. The freedom for me to lead my life largely as I choose and to enjoy the fruits of my labor depends heavily on the willingness of my neighbors (fellow citizens and residents) to accept those rules of the game. Our society functions as it does because of a broad social consensus on the rules of public behavior. This consensus rests in part on each player’s confidence that if he fails there is a safety net that makes it worth his taking the risk of playing. We need to compromise what we consider first best for society (and Republicans and Democrats tend to differ on what this is) to the extent needed to preserve that broad consensus.

He goes on to say:

Congressman Barney Frank, Chairman of the House Financial Services Committee, epitomizes the best of the new left wing reaction to the Reagan Revolution. Frank is fully aware of the virtues of the market ... and the need to get the incentives right, but insists that market excesses and rough edges should be removed with limited and well focused regulation. His collaboration with Republican Treasury Secretary Henry Paulson to fashion a Housing Rescue and Foreclosure Prevention Law enjoyed sufficient bipartisan support to gain the President’s signature on July 30. The bill’s many provisions were generally sensitive to moral hazard problems and market incentives... There were things for both Republicans and Democrats to like and to dislike in this bill.[8]

Frank is a pragmatist who is willing to sacrifice his version of “the best” for “the good.” He sees a major victory for his preference for limited, market friendly regulations in the Federal Reserve’s new rules (Regulation Z – Truth in Lending) to prohibit “unfair, abusive or deceptive home mortgage lending practices.” ... These are not the sentiments of a wild eyed socialist and this is not a return to the heavy handed economic (as apposed to prudential) regulations of the 50s and 60s when government regulated, e.g., capital flows and interest rates on bank deposits. When asked why congress refuses to pass the no brainer free trade treaty with Columbia, which Frank has visited several times, he replied that “it has nothing to do with Columbia, nor the failure to recognize the benefits of trade. No trade liberalization deal will be passed by this Congress until more attention is given to compensating the losers. And don’t forget that today when someone losses their job, they also loss their health insurance.”[12]

For the next few years, maybe even a decade, until the next swing back in the political center, we can expect more regulation and more extensive safety nets. If we collaborate with market friendly Democrats like Frank, we can not only fix some of the genuine deficiencies with existing arrangements, but we can probably prevent some of the worst excesses of the over extension of government, until it is our turn again. ...

Would health care reform guaranteeing universal coverage be considered one of "the worst excesses of the over extension of government"? The "brilliant legislative legacy of the ’60s" produced important programs that are still with us today. If Obama wins the election, I'm not too worried about overreaching, I more worried about Democrats not reaching far enough.

Comments

[Ryan]

"Would health care reform guaranteeing universal coverage be considered one of "the worst excesses of the over extension of government"?

There are far worse/inefficient/wasteful/etc enterprises the Government can, and indeed does, undertake.

"I more worried about Democrats not reaching far enough."

That is quite the understatement. Moderation, in my opinion, has ruined the American social experiment. It prevents either side of an argument from claiming victory, but neither have to concede defeat. Worse yet, moderate positions are often championed as intellectually nuanced and pragmatic, while 'extreme' opinions are just the rumblings of fringe lunatics.

[hari]

*Republican Democracy* is what you have since those golden days when we're undergraduates in Bay Area!

Talk about *authoritarian capitalism* and *democratic capitalism* - and whatnot - informs me that US elite are more or less lost to understand what affects the decline and (gradual) fall of America compared to its counterparts in Europe.

My understanding of the malady is a *dysfunctional* government structure and its *undemocratic* function - on a day to day basis.

The liberal hour tells not what ails the land of plenty today. The land today is stangulated by Republican Democracy.

[hari]

spelling - strangulated!

[Ryan]

Hari,

I'm not at all convinced dysfunction isn't the logical conclusion of all forms of government. Degree of misfunction is a completely different beast though.

[hari]

dysfunction -> govt run by K Street lobbyists and their bundels of cash....

It has nothing to do with *mis-function*. That implies construction or tooling problem or wahtnot.

[One Salient Oversight]

Would health care reform guaranteeing universal coverage be considered one of "the worst excesses of the over extension of government"?

Sheesh! I wish American economists on both liberal and conservative sides would actually take into account the experiences and evidence generated by decades of universal health care coverage in other Western nations.

To argue that "America is different" is to err on the side of manifest destiny and the belief that the rules are different for America for some strange, undefined non-empirical reason.

The good news is that other western nations have experimented and chopped and changed and expanded and contracted universal health care so many times that there is a wealth of data out there into what actually works and what doesn't.

Here in Australia we've just had 12 years of conservative government by a bunch of actual honest-to-goodness fiscally sound conservatives whose first step in government in 1996 was to cut federal spending massively and generate a budget surplus. Did these small government politicians dismantle Australia's universal health care system? Not at all (though they didn't exactly help it either). Here in Australia - like virtually all western nations - universal health care is not a left/right issue. It is accepted by all sides of politics and any party who suggests dismantling it will be punished in the next election.

If potential president Obama and the potential senate controlling Dems manage to get universal health care off the ground before the 2010 mid term election and manage to keep it running until the 2012 presidential elections, Americans would have had a few years of experiencing what other nations have as a right... and they will be VERY VERY KEEN to keep it. Moreover, if the Republicans keep opposing it in the face of massive popular support, they will find it very very difficult to gain any sort of congressional power.

Put simply - universal health care will be an absolute political winner for the Democrats. If it is set up correctly and with common sense, ordinary Americans will love it. The Democrats will gain substantial amounts of long-term political power as long as the Republican party remains ideologically committed to dismantling it once it has been set up.

And once the Republicans finally give in and begin supporting it, the crazies won't be controlling the GOP any more. Who wins in the end from a more moderate GOP? America does.

[PSP]

Hey! I had those professors. But, twenty-something years later, I once again have my doubts about their arguments. Basing my doubts on only the reviewer’s presentation of those arguments, however, leaves me on slippery ground once again.

Isn’t a traditional story telling arc of heroic legislative success brought low by hubris and ending in the tragedy of the Vietnam war just a little too trite? Nothing I’ve read suggests that Nixon’s “silent majority” and the later Reagan democrats consisted of war supporters. It was the susceptibility of the great society to accusations of taking your money and giving it to those “ungrateful ...” that permitted Nixon to triumph. Nixon’s unequaled cynicism allowed him to expand upon the great society (cost of living adjustments to social security for example), while visibly and vocally appealing to racists by attacking civil rights on issues like affirmative action and “law and order”.

My sense is that the tragedy of the war and its effect on liberalism was not that the public turned away from the great society, but that the anti-war folks like Mr. Weisbrot turned away from Hubert Humphrey at a crucial moment.

[chriss1519]

I've seen a lot of these articles lately claiming there's been this swing to the left. Certainly there is a lot of (apprehensive) disgust out there with the moribund Bush/Cheney administration, but I don't see where this is manifesting itself in some sort of leftist recrudescence. The discussions mainly identify the need to re-regulate markets (but not TOO much!!!) No talk of impeachment or addressing yawning inequality or truly ambitious proposals on climate change. Obama, the "lefist" candidate, runs from liberalism and wants to drill for oil now. Where is this upwelling of leftism all these op-ed columnists are trumpeting/fretting? If this is the pendulum on the left, I'd hate to see where the pendulum winds up in four years after the Republicans have finished turning the Obama presidency into Carter II.

says...

Couldn't they have come up with a better example of the "new" left than Barney Frank?

[save_the_rustbelt]

Seems to confirm my pendulum theory.

LBJ killed the liberal momentum with the Viet Nam fiasco, and the drugs and sex follies of the boomers helped to finish it off. Main Street wasn't quite ready for all that, and liberalism was channeled, by necessity, into an anti-war movement.

There are two big dangers with health care reform:

1) poor program design
2) good program design, but a poorly managed transition that causes chaos

[Alex Tolley]

STR:"There are two big dangers with health care reform:
1) poor program design
2) good program design, but a poorly managed transition that causes chaos"

Fortunately we already have Medicare as a baseline program that works and is well-liked by beneficiaries.

[hari]

STR - all you've to do is a cost/benefit analysis based on current HMOs and whatnots and, for example, a restructured universal mandated care we've here in Holland. Rates are fixed with insurers and those who don't have means to pay the fixed rates get official subsidy guranteed by force of law (IRS).

The Aussie above did a good job of outlining the benefits of a mandated healthcare system emanting from rest of western european countries with more or less similar per capita income - with a lot of restructuring and analysis.

The problem with American elite, including the guy who wrote the above piece, is essentially a factor of picking/choosing points for their own personal emulement/embodiement - disregarding the *cultural revolution* of genders which was sparked by our age group.

Humphery would have won, if not... he was also an egghead from of all places Minnesota. But he was given the mantle by none other than Reinhold Neighbur.

Anyhow, that's all now under the bridge....Let's deal with the reality of Republican Democracy!

[bakho]

No mention of Title IX and women's rights. (why was that omitted?)

He mixes too much together.
The liberal institutions, Medicare, medicaid, Women's rights, and end to Jim Crow meet societal needs and are popular.

Is it too much to admit that some of the legislation required changes in personal behavior in order to be implemented? Not enough thought was given to implementation, easing the transition and compensating people who lost as a result of the changes? Asking people to change their behavior annoys them.

People way underestimate the cultural changes that accompanied the women's rights movement and the behavioral and cultural chan Conservatives get much of their support for fighting the "culture wars". But they cannot deliver. Instead theyges that entailed. We are still fighting the "culture wars" and much of the rhetoric on the right has to do with differing views of the rightful roles and status of women in society.

Conservatives have been very good at rhetorically connecting liberal institutions (that are popular and meet needs) to social tensions that people must deal with in their daily lives. They cannot directly attack the popular institutions effectively so they resort to constructing straw men (Paris and Brittany) that they can attack. The conservative dilemma is getting voter support due to frustration and anger at social issues that government cannot legislate. They cannot deliver so their voters remain frustrated. Instead they use their power to chip away at liberal institutions that are popular. The entire agenda is unpopular and so conservatives are forced to run on wedge issues that distract the public from collective interest in problems the government can address.

[paine]

"...more worried about Democrats not reaching far enough "

exactly

Frank needs pushing
and confrontation
and
he don't like it much

he has the comprehension in spades
a very quick sharp guy
but also
he has the stunting arrogance
of an able good guy
who's spent
too much time
playing the short and smelly end
of the stick
the insiders' art of the possible
can produce
a too acute too reflexive
sense of the impossible

we new progressive blood

spirits of change that haven't languished
in the shadow of rizzos reagans and kemps
that's the notion coded in 'bama-hope

dump the old place holders like the clan clinton
dump em
and their miasmic
regard for..." limits"

this great society retell
is precisely
the toxic conventional insight
that has emerged
to impersonate
the take away truths
of the lbj tragedy

its been
peddled for the last 30 years

time to get the broom

[hari]

If you consider McCains videos attacking Obama's lack of credentials to be C-C and whatnot, there is an element of last ditch attack to dismember the emerging personality of BO. It's a do or die strategy for Republican Democracy.

What's BO's answer? So for, not much....

If BO can avoid being identified with *The Liberal Hour*...
and focus on fundamnental reforms required to take the nation forward, I suspect he'll gain traction at cost of the GOP gang.

On foreign policy he seems to evidence a lack of gravitat - compared to the *white head*. This must be resolved to BO advantage - and may mean bringing in a vetran team of policy makers who understand the nuance of global security problems.
The current team is--for lack of a label--more of eggheads than vetran policy makers.

[save_the_rustbelt]

hari:

Do not overestimate the ability of the US Congress to design anything.

More importantly (my specialty is the nuts-and-bolts of US health care) none of the health reformers have given much thought to how we switch from system A to system B. They tend to take a macro view without understanding how the operations work now and how we could make the transition.

For example, it is easy for a politician or an economist to call for universal electronic medical records, because none of them have any idea how this could be done, the cost, the labor, the problems involved in moving several hundred thousand providers into new systems (and most EMR systems do not work all that well anyway).

[john jansen]

Ryan,

There was a Republican gent in 1964 who commented on moderation. He began with extremism:

I would remind you that extremism in the defense of liberty is no vice! And let me remind you also that moderation in the pursuit of justice is no virtue!

I believe that is from Barry Goldwater's acceptance speech in 1964. He went down to ignominious defeat in November 1964 but that election sewed the seeds for the Reagan triumph 16 years later. In retrospect the Johnson victory was the last gasp of the New Deal.

Since 1968 it has been about conservatism in various incarnartions. I think the 2004 election of Bush is the mirror image of that 1964 election in that it will be viewed as the highwater mark of conservatism.

The pendulum is about to swing leftward with this election and will probably usher in a 20 year period of activist government.

[ken melvin]

Seems a bit simple, this analysis of the sixties. Little context please. The sixties were the beginning of today. The time of 6 million displaced cotton pickers in the south, the beginning of automation, civil rights, the feminist's movement, .... Viet Nam a liberal event? Give me a break. And no mention of resistance3 to change, social mendacity, .... What if nothing had been done, or worse, things had been backward looking ala Ronnie? No. The sixties were about requisite change, one of America's finest hours.

[bakho]

Who is Abbie Hoffman and why is she fun to read about? Was she the Republican straw man (Paris Hilton) of her day? Was she a liberal or a Democrat?

Those are the questions I would have asked before Googling him. Why does such an obscure character get this kind of notoriety? I suspect it has something to do with straw men arguments about people to fear, a metaphor about social change and fear that rule of law is no longer respected?

[paine]

rusty
don't go prufrock on us

too much hand waving
--even informed even richly informed--
by folks
with detailed know how
and know what
and know' where its at '
can stall
the where it oughta get to

right ??

lets learn by doing it
even at first doing it partly wrong
if we have to

this isn't the early space program

plunging ahead
is a hot ticket
because
the end game is a sure winner

global results show
uni-med works everywhere ...eventually
so lets get it on brother...

[Denis Drew]

What is it that made Vietnam "hubris", but not Korea -- same casualty to population ratio -- and in 1950 Russia and China were flat on their backs; while by 1965 their common threat was at high tide (only 20 years after the two little countries that almost took over the world could not bite the two big countries off)?

LBJ's war on poverty wasn't "hubris" just because it did not reach effectively into the ghetto. Even though labor got a much better (relative) deak in the 60s (at half today's average income) that would not do you any good if you could not go downtown and get a job because of color -- which is exactly what LBJ (and MLK and the movement) was bringing to an end with the civil rights acts.

Further I would not say LBJ's era was about hope and idealism (was for some of course). Compared to FDR's emergency era where everybody was up in arms for the president to do something, LBJ's era was much more one of complacency. As everybody who was around then knows, all those acts that JFK couldn't push through Congress LBJ pushed through with his bribery/blackmail/cajolery/whatever-it-took steamroller (what Hillary was referring to when she was mistakenly blamed for dissing King) -- the most powerful Senate majority leader of all time at the age of 36 now had the presidency at his disposal.

But as my brother so eloquently put it: "When the blacks finally got on the up [economic] escalator, it started going down for everybody." Black people got to go to work just as work started to pay less and less. The minimum wage eventually dropped from LBJ's $9.90/hr to 2007's $5.35/hr (2008 dollars).

The latter reflected what LBJ and nobody else could contemplate: that American labor bargaining power was about to drop to zero -- that the checks and balances were about to disappear. If American labor had Europe's awareness of the need to defend itself in the free market (and knowledge of the easy modality: sector-wide labor agreements), nobody black or white would be talking about where liberalism went wrong today.

[paine]

"Viet Nam a liberal event?"

recall the oxymoronic phrase

kold war liberal

the C.W.librals of course
came in from the kold
PRECISELY
because of nam

MOST OF THEM
SHAMELESSLY NEVER RENOUNCING
their 20-25 year decisive role
in the rise and entrenchment
of the yankee-cowboy security state

the earth's
bigger evil empire
the one after
global freedom profits
the one stillin operaion today
still pounding its chest
still filling the sky
with its air pirate
bomb bluster

[paine]

d drew
some hefty points

[hari]

bakho - you're absolutely right. It's fear which drives the right into opposition. because they can't visulaize the consequences for the nation, as a whole. They seem to think in terms of Republican Democracy. That's it. Basta!

I just came across a new book being reviewed on website of WP dealing with Obama - the maniac! The authour is the same guy who attacked Kerry in print followed by Swift Boat. This book is surely selling like potatoes; and they're stocking up for sales during the Convention.

Anne shld get a link to the review and bring it on here...
It's a dismal fact of Republican Democracy. Race is an egregrious fact of life, and they are using it like as if it smells a lot more sour shld BO win.

I hope BO doesn't fall prey to their campaign and respond with detail reduction absardum of their *facts*.

[PSP]

I wrote:

"Nothing I’ve read suggests that Nixon’s 'silent majority" and the later Reagan democrats consisted of war supporters."

That should have been war "opponents." Ugh! I claim insufficient coffee as my defense.

[paine]

but rew sir
please
don't hurl the superiority
of west euro-cont
social corporatism at us
they exist
exactly
because of the kold war
not in spite of it

from 48 on
the kold war gub-parties
at core of the common market
got to play good cop
while we played bad cop

the future
for years to come
in germany italy france etc
looks like renewed class struggle

to which i cry

bravo

but
if the prolish wranglers
over there
aren't up to it ...

outcomes might look
very much like those
that cros channel
nation
of butlers parsons and cab drivers
the brits have pioneered

[paine]

"It's fear which drives the right into opposition"

its threat ...threat to position
to standing
to way of life etc

and
threat
in a change blind head
produces not just fear
but contempt and anger
and a call for action

[paine]

"Nixon’s unequaled cynicism allowed him to expand upon the great society (cost of living adjustments to social security for example), while visibly and vocally appealing to racists by attacking civil rights on issues like affirmative action and “law and order”."

hail the clever ruse of clio

nixon saved even expanded the dembot's
tranfers system
in order to ...destroy it

[anne]

PSP:

"My sense is that the tragedy of the war and its effect on liberalism was not that the public turned away from the great society, but that the [supposed] anti-war folks like Mr. Weisbrot turned away from Hubert Humphrey at a crucial moment."

[save_the_rustbelt]

"the where it oughta get to"

Paine, great phrase.

However, the world runs on details, politics does not.

[save_the_rustbelt]

LBJ's masterful work on civil rights was obscured by his clumsy stupid Viet Nam folly.

And us oldsters remember LBJ winning the 1964 election by calling Barry Goldwater a war monger, whilst LBJ's minions were drawing up plans to expand the war.

[Francois]

"The pendulum is about to swing leftward with this election and will probably usher in a 20 year period of activist government."

Activist? I don't know about you people, but I find the actual government to be quite the activist.

1) Massive building of the military
2) Gutting of environmental laws
3) Let's destroy the patient-doctor relationship (see http://scienceblogs.com/denialism/2008/08/theocracy_in_action.php)
4) Civil Liberties be damned (Patriot Act anyone?)
5) Since when competence does matter to be hired at the Justice Department?

And so on...

[paine]

"after the Republicans have finished turning the Obama presidency into Carter II "

way way too pessy

but getting the BLACK MESSIAH
elected in the first instance
might prove a task

my take
watch the bottom rise ...
indeed even if
we four years more
of repug white house hooverizing
its just a delay
the brake thru will....cometh
and
in spite of its .. tender footed leadership

recall pols are wind blown opportunists
trends in the zillion tracking polls
will embolden
even the peach fuzziest
geek freak freakiest among em
to
.......fearless bold long striding progressive action

[paine]

francois
your list reads like the heart throbs
of a promotion by merit besotted
goo goo

up with doctor patient rel ???

way way too many
small potato
shingle swinging
over educated med-pros
turn into massive cons
and grifterish gouge artists

i say

we brake down their tasks into easy parts
and
feed em out among specialized two year
post HS technicians armed with
soft ware "expert systems "
and prep-ing
us ass hol
care and repair needing innocent geefs
for mass produced pill protocols
or cheap human personal therapy
and /or
high speed robot surgeons

viva
the med factory paradigm

its kinda
like smiths pin factory

[paine]

"the world runs on details, politics does not"

that's why we delegate the real work
to out of the spot light
un sung guys and gals
like you ...
senior rustproof

[swells]

Well, I was late to work this morning so I had an opportunity to listen to the Dianne Rheim show on NPR. The gist was that our current national debt is 9.5 trillion dollars and included with the currently unfunded liabilities that will accrue over the next 30 - 40 years the total debt hole that we are in at present is 53 trillion dollars. One can listen to the show for oneself at

http://wamu.org/programs/dr/

I completely accept the notion that it is possible for countries to have universal health care. What I can't accept yet is the idea that the US can do it. We have no, I repeat zero, track record over the last few decades of being able to live within our means.

My quarrel isn't with universal health care per se, my quarrel is with the politics of the US.

To my mind, giving the government of the US yet another massive responsibility (when it can't handle the responsibilities it already has) is a lot like giving a 6 year old a loaded pistol.

[john jansen]

Paine,

How do you conjugate the verb "prufrock" ?

[PSP]

Anne,

A long time ago, I took a class on Vietnam tag team taught by Mr. Weisbrot and one of my favorite professors. Now admittedly, my memories of the class are somewhat hazy, but as best as I can recollect, he was sincerely against the war. I think the "[supposed]" is unjustified.

Now we know that Humphrey and Mayor Daley had both already decided that Vietnam was a mistake by 1968, but were both unwilling to cross LBJ and publicly side with those dirty hippies. Just think how different the world might be if they had publically declared their opposition and prevented the chaos of the ‘68 convention.

[ken melvin]

Swells - It's all about what we should be doing, priorities; 'snot about your particular hangups.

[save_the_rustbelt]

"Fortunately we already have Medicare as a baseline program that works and is well-liked by beneficiaries."

The federal government runs Medicare and Medicaid on a concept known as "cost shifting" a clumsy phrase saying that Medicare and Medicaid will underpay providers and expect private insurers to overpay enough to make up the difference.

If rates gravitate to Medicare rates (as they already are) too fast, and administrative expenses for providers do not drop very, very fast (unlikely) we will see a real mess on the provider side of this equation.

[swells]

ken melvin, to the extent my particular hangups are personal idiosyncracies you are correct. To the extent that my personal hangups are well-founded you are incorrect. Are you prepared to offer some reasonable explanation why 53 trillion in unfunded liabilities shouldn't be of concern or are you just hot air with an opinion attached.

[outsider]

outsider says...

"All that sex, all those drugs, all that rock 'n' roll"... Hate to bust the fantasy, but before I was drafted in early 1967 for Viet Nam girls didn't do anything, and drugs were nasty. When I came back all the girls wore round "virgin pins" and proudly announced they were "different" and "moral", and didn't do anything. Maybe San Francisco areas or somewhere else were different, but the fantasy only served to inflame the right, and provide the backlash we suffer today.

[Bruce Wilder]

"Vietnam, the prime example of liberal overreaching"

Liberal overreaching?!?!

Or, Liberal fear of the mad-dog Right and another episode of the "Nixon-McCarthy Hour", this one titled, Who Lost Vietnam?

McCain insists that we are "winning" in Iraq, and withdrawing will be snatching "defeat" from the jaws of lobbyists and military contractors. I'm sure there are Republican voters, convinced that Obama is abandoning the white voters of the Atlanta suburb of South Ossetia.

[Denis Drew]

Swells,
Can you tell me what time span this 53 trillions in unfunded liabilities is supposed to be spread over.

Is it anything like the 40 trillion in Social Security retirement short fall over 75 years that I have read of? The thing is, over 80 years, per capita GDP quadruples and population (those capitas) doubles = 8 X $14 trillion/yr = a GDP of $112 trillion/yr in 2008 dollars, 80 years out. Which renders the big Republican scare tactic of $40 trillion short fall -- spread out over 75 years, yet -- pretty harmless. That's Social Secuirty anyway.

[Bruce Wilder]

swells, the good news about the Republican success in channelling all economic growth in corporate profits and the wealth of the top 1/2 of 1% is that taxation targetting those who actually have money is so much easier.

[RW]

"...why 53 trillion in unfunded liabilities shouldn't be of concern ..."

Not sure where the notion that it's all 'unfunded' comes from (that's sometimes libertarian code for the erroneous belief that treasury bonds somehow change in nature based upon which account they're in) but setting that aside, and assuming my back of the envelope calculations aren't too far off, it looks like about 7/8's of those liabilities were created with Republicans in power -- mainly Reagan, Bush and Shrub -- so maybe if we just elected Democrats for awhile we could get universal health care and some other good things.

Worth a shot anyway and, who knows, if they're good enough maybe conservatives won't be able to take them away when they eventually return to power.

[swells]

Dennis Drew, you are perfectly right to be skeptical. That is such a huge sum, how can it be accurate? It's approximately 4 times the entire annual GNP of the US if I remember correctly which is ~ 13 trillion per year but I could be wrong about that. Going off memory. It's supposed to be over the next 30-40 years if I remember what I heard on the Dianne Rehm show correctly. You can listen for yourself at http://wamu.org/programs/dr/

Bruce Wilder, yes it makes targeted taxation easier. However, even if we took 100% of the income of corporations and rich people, that won't bridge the shortfall to the best of my knowledge. The figures I heard are that the tax burden will have to be double what it is now by or before 2030 and that was on everyone. I have to tell you, with what I pay in taxes of one sort or another, that puts the tax rate in the neighborhood of 70% for me or over 100% of income for wealthier people, and I don't see how that works. Can you really tax people more than they make? Or even 70% of what they make? It would seem that growth, and robust growth at that is the only possible way out but how much growth will we really get if tax rates are way higher? And even if we get that growth, what happens to the environmental challenges we face or educational opportunities?

RW, we are coming off the worst, most mismanaged, most immoral 8 year period of government in my lifetime if not in the history of the republic. A candidate who is likely to continue much of that is very, very close in the polls with a candidate who is, as far as I can tell, the antithesis of that. The exact degree of cupidity among the US voting public is unbelievable. Why should your point about who did it allay my concerns. The fact is the US public has proven repeatedly that selling it a completely bogus bill of goods is actually quite easy to do. This does not inspire confidence in me.

[cm]

STR: Not to be unsympathetic, but what are all those med professionals going to do when the punch bowl gets smaller? Go into real estate or get a "business administration" degree and become another middleman?? Retire at 50?

No, most of them will continue going to work every day and doing their job for reduced spoils, like the rest of us.

If there is any semblance of a "market", their cost structures will adjust. To whom will medical equipment makers sell if not to doctors? To whom will office space owners rent when the doctors are closing shop and there are no other takers?

Each of us is more or less stuck in their specialty and what they are good at (there is a new term that I recently learned, "asset specificity", look it up). You have to adjust to external forces, if being out of business is not a desirable option for you.

Of course "market failure" is possible, and we may end up with empty doctor offices, unemployed doctors, and medical equipment/material makers having to close their shops.

But short of mass bankruptcies, my question is what else are all these people going to do that is more lucrative?

[ken melvin]

And the receivables?

[gc]

Bruce Wilder:

Is South Ossetia the area between Buckhead and Mid-town? Or, perhaps it is the area around the airport. Now it is beginning to make sense why we are all "Georgians" now; everybody has to spend time changing flights at Hartsfield.

[anne]

Allow me to be kind, because I am that sort of person in that sort of mood; I am in a mood that is kindly. The thesis of the book is so much rot in which the way change was wrought had nothing to do with local activism and everything to do with political or semi-political representatives and administrators whose hearts were of the people and by the people because like me that were kind. Was that a kind enough assessment?

[Dickeylee]

Swells, we had a top tax rate of 90% in the 1950's, under a Republican, and the S&P grew at an annual 17% for his 8 years in office. I'm not advocating a return to that tax bracket, but an increase is a coming my friend, count on it. How else to pay off this Trillion dollar war?

[swells]

Okay, I found what is called a Citizen's Guide on the web. It's put out by the people doing the I.O.U.S.A. film. Not lightweights (a former Comptroller General among them). It's preface says: "This Citizen's Guide is intended to provide a clear and concise summary of where our nation stands financially and where it is headed fiscally. The facts are clear and compelling--the federal government's financial condition is worse than advertised and we are on an imprudent, irresponsible and unfair path. Washington policy makers are mortgaging the future of our country, children and grandchildren. As the graph on this cover demonstrates, tough choices will be required sooner rather than later because time is not currently on our side."

It can be downloaded at: http://www.pgpf.org/resources.dyn/PGPFCitizensGuide.pdf

It seems to me that information in this document is either pretty good or it's not. It would be good if some people here could look at it with a critical eye and point out inaccuracies, etc. Is it a bunch of conservatives trying to sell the US public a bunch of hogwash or are they just mistaken or are they onto something important?

[anne]

The object here, as a theme of supporters of Barack Obama, is to deny the efficacy of local activism in bringing political change. Even now, where Obama has pointed menacingly but vaguely to the excesses of the 1960s, Obama is being wishfully taken as symbolic of the "end of Black politics." So, the history and efforts of a Martin Luther King come to count for nothing as history is properly revised to fit the denial of history.

Am I still being kind enough?

[paine]

"abandoning the white voters of the Atlanta suburb of South Ossetia"

not a bad idea

[paine]

"...if we took 100% of the income of corporations and rich people.."

now yer talkin

[paine]

anne

the sweet tooth
be sharp as well today

bite baby bite

[swells]

dickeylee, was that 90% tax rate on ordinary income, capital gains or both? I ask because if it was on ordinary income then it makes a lot of sense that people would have tried to maximize capital gains which could have led to the 17% rate of growth for the S&P as people desperately tried to get income that wasn't "ordinary".

If it was 90% on both, then that would be sort of confounding to my understanding of how people behave.

[swells]

dickeylee, I did a little research. Captial gains and ordinary income were treated the same under Eisenhower. However, after tax loopholes, etc. the real rate of taxes paid by people making $750K per year, equivalent to 5.2 million today, was about 51.6%.

It seems to me that that might be workable. Unfortunately, by the time one adds up one's taxes it's not that far from what people are paying today. I'm talking income tax, FICA tax, medicare tax, state tax, local tax, sales tax, gasoline tax, excise tax, etc.

You add that up, I suspect that most middle class people are really pretty close to paying 50% today.

[macburger]

swells says...

Okay, I found what is called a Citizen's Guide on the web. It's put out by the people doing the I.O.U.S.A. film......

Is it trying to sell the US public a bunch of hogwash or are they just mistaken or are they onto something important?

It is a bunch of conservatives who are not satisfied with all the plunder yet, they want to dip into your begging bowl.

You do not get it. Obama is a liberal? He is actually the same Clinton, Rubin, Summers brand Republican lite kool-aid..

When Delong is considered the left and Mankiw the right of sensible policy, there will be no change. Delong is on the right, and Mankiw on the extreme right. The success of the right today is because it created two rightwing parties - and paints one of them as leftist according to Jesus Christ. Labour is screwed by both, Jesus Christ or not.

The answer is to drive the rightists out of the pseudo-left party. Shills like Summers, Rubin, and Delong need to be unmasked as the tools of corporate pigs used to undermine labor.

Till then its more of the same, distractions like Bill Clinton/Obama aside.

It is coming. Bragging rights and chest-thumping will need to yield to the pocket-book. The "centrist" middle will eat crow. They will not do it willingly, but they will.

[swells]

macburger, while your post was entertaining, do you have any er, actual arguments to advance? Which graph in the document was wrong and why? Believe me, I understand better than most perhaps how the current system functions as a system of spoils and plunder. Do you have any real reason to think it will become something different than it currently actually is? If you are counting on the US public to start making rational decisions, I wish you well but I see no evidence of it happening.

[JeffF]

"You add that up, I suspect that most middle class people are really pretty close to paying 50% today."

You suspect incorrectly. It is right around 30%.

Here is one posting which eventually shows the graph, it is the sixth from the bottom:
http://rationalrevolution.net/articles/american_income_taxation.htm

(I was actually looking for a NYT graphic of the same thing, but found this instead, and it agrees with various others I have seen)

[JeffF]

OH, btw the NYT graphic was better because it continued to break out the top 1% showing how at the very top end total taxation actually drops in the US. This is primarily because of the lower long term capital gains rate, and the lack of SS/Medicare taxes on capital gains.

[Cynthia]

Speaking of South Ossetia, the Rose Revolution, so far, isn't turning out to be all that rosy for Saak and the Georgians. While Russia wasn't being very neighborly by bombing Georgia into submission, the Bushies, including the Israeli neocons, were being even less neighborly by using Georgia as a pawn to prevent Russia from gaining any more power in the Caucuses -- thereby preventing Russia from giving Iran any more power in the Middle East.

So Putin can't, by any stretch, be described as sweet, but he did manage to come way from this conflict smelling like a rose. And I'm sure he'll do everything in his power to make sure that Saak's next move is to the Hague to stand trail for war crimes against humanity.

[save_the_rustbelt]

"But short of mass bankruptcies, my question is what else are all these people going to do that is more lucrative?"

A good share of physicians over age 55 may retire.

A good share of rural FPs will move to cities to work in hospital systems, making a problem a bigger problem.

Nurses are already fleeing to other pastures when the physical and emotional strain out-weight the really good compensation.

Beware the law of unintended consequences.

In the long run the medical market will adjust, in the short to medium term it could well be a cluster mess.

I have an odd situation, if the feds make a really giant mess my consulting fees will go up accordingly. What should I wish for?

[swells]

Jeff, thanks a bunch for the link. However, it seems that what is being referred to is federal taxation. If one adds in state, local, sales, permits, licenses, property taxes etc. the total rate of taxation is way closer to 50% on the middle class than it is to 30%.

Again, really good info to have.

[JeffF]

The appropriate chart is titled:
"Effective total tax rate by group - 2004 (Federal + State + Local)"

As I said, it is the sixth from last chart.

[JeffF]

BTW about 1/4 of the way down the page is a plot of total federal taxation for various income groups over time since 1948, though only the 1% and middle quintile go all the way back. The rest kick in in 1980.

[swells]

Jeff, thanks for pointing out my error. I counted the wrong direction or something. Still 30% doesn't really reflect the tax burden. One still has to add in things like property taxes, sales taxes, licenses, permits, gas taxes, etc.

Adding those in still probably get you closer to 50% than to 30%. Sales taxes by itself, in my area, is 7%. Then you add in property taxes, car registration fees, taxes paid on gas (I don't know maybe that is included in excise taxes, doesn't seem to say) and you're over 40% pretty quickly.

Probably it is under 50% but I think it's way over 30%. In any event, I brought the point up in the following context. The people who wrote the Citizen's Guide I mentioned say that Federal taxation rates will have to double by or before 2030. So, if we say that federal rates are say 20% of the 30% you mention, and we say that with everything else being added in (on top of federal, state, local, things like sales tax, etc. ) results in a real tax rate of 40% then we would be talking about a tax rate of 60% by 2030 ( 40% + 20%) if current unfunded liabilities trend continues.

How many middle class people do you know who could afford to pay a real tax rate of 60% when all the money that they pay to government is taken into account?

[swells]

Jeff, additionally I can see one other point of taxation that isn't reflected in the charts you link to. This is somewhat dubious and I'm not sure I understand it but when we buy something, part of the price we pay seems to me to have to be composed of taxes that whoever produced it paid. That is part of their costs and as such is part of the price. So, if you take into account that the end consumer actually is the person paying the tax component of the for sale price, that would seem to indicate an even higher effective tax rate on end consumers than even the 40% figure.

Don't know if that is a kosher idea or not.

[Winslow R.]

I see CM addressed most of this but I see this STR's statement so often I'm posting anyway.

Rusty wrote: "The federal government runs Medicare and Medicaid on a concept known as "cost shifting" a clumsy phrase saying that Medicare and Medicaid will underpay providers and expect private insurers to overpay enough to make up the difference."

Dreamt up by some doctor but having no economic reality.

Medical prices may be seen as set by the market but government is the monopoly supplier of money and is therefore the price setter. Government sets price and quality standards for the basket of good and services it desires and then all other prices adjust.

Doctors will try and get government to set price and quality standards as high as possible until everyone wants to be a doctor. Any increase in government spending on doctors, shifts the price structure in their favor and if not 'balanced' with cuts to other areas of government spending, will lead to inflation in the overall cost structure.

Doctors can choose to supply the government demand for various services or withhold service and have that demand met by new quality standards that allow nurse practitioners or various medical technicians to supply those same services at a lower relative price (and possilby lower quality).

The determination on whether the doctor supplies the service depends upon the relative standard of living the doctor can earn by doing something else.

Point is the doctor's price point, to provide a service, must fall if the government/private parties aren't willing to pay.

A good analogy is the treasury market. The government offers to borrow money for 30 years at 4% and everyone else adjusts their prices accordingly. The government gets the best deal.

[Winslow R.]

STR wrote "I have an odd situation, if the feds make a really giant mess my consulting fees will go up accordingly. What should I wish for?"

Your self interest is to mess up the system, yet you realize it is in society's interest for reform to succeed.

The classic Republican dilemma.

[swells]

Winslow R., I take your point. But, I was reading a review of various health care systems around the world the other day. It's at http://www.cato.org/pubs/pas/pa-613.pdf

On page 9, it says Frend doctors make on average about $55K a year. I don't know, this doesn't strike me as much compensation for the kind of education a doctor needs to have or for the excruciatingly long apprenticeship they have to serve at very low pay.

Let's put it this way. I wouldn't become a doctor for that kind of pay.

[save_the_rustbelt]

Winslow:

I know a lot of Democrat lawyers, consultants and CPAs who have the same dilemma as me.

[save_the_rustbelt]

Winslow:

About your economic treatise above.

Are you talking about an ideal system, what you hope the system becomes, or what you think the system is now?

'Cause much of what you say makes no sense, if you are trying to reflect current reality.

[Lee A. Arnold]

Well Mark, we're going to have to educate the Democrats too, because they're not too goddamn smart, either.

But you asked for comments on these items. Readers of the reviewed new book would do well to read The End of Liberalism by Theodore J. Lowi (1969, 2nd edition 1979,) an unexcelled ideological exegesis which locates the seeds of the "interest group liberalism" that came to a head in the 60's in the period over 60 years before that, and would (I imagine) define the recent conservative reign as a continuation of interest group liberalism, except for the interest groups it services -- big business, religious fundamentalists. It is much larger than the Democratic/Republican distinction.

(Lowi's book The End of the Republican Era predicted the end of the Republican era in 1995 -- a year after the Republicans won back the Congress! How's that for prescient? --2nd edition, 2006)

Meanwhile, Warren Coats writes that the swing back to the left is a "public sentiment," but that doesn't cover it. He is overlooking his own theoretical problems, and his next words provide a clue. "Those like me who think that too much regulation stifles beneficial market innovation and worry about the work incentive stifling effects of excessive or poorly designed safety nets need to take note of these sentiments. The freedom for me to lead my life largely as I choose and to enjoy the fruits of my labor depends heavily on the willingness of my neighbors (fellow citizens and residents) to accept those rules of the game. Our society functions as it does because of a broad social consensus on the rules of public behavior."

Coats lets himself off the hook with the adjectival phrases "too much" and "poorly designed," yet he might be pressed to come up with good evidence for the blanket assertion in the first sentence.

The experience of the last 200 years shows that, on the whole, welfare states see no reduction in economic growth (read Growing Public, vol. 1 by Peter H. LIndert.) And perhaps they have seen a larger increase in "quality of life?"

As for the second sentence, upon living life the way he pleases: as a stand-alone statement, this is becoming a recipe for disaster. People who espouse it, and nothing in addition, are going to see the end of freedom.

It neglects the combination of two facts: (a) the increasing crowding and complexity of the world are causing accelerating network effects of social transaction costs and ecological externalities, plus (b) the ongoing division of labor is making people evermore narrow in their intellectual competences. Consequently, things are getting worse, the common culture is becoming more simple-minded, and no individual has enough information to deal with it.

I think most people would agree that we are starting to damage the planet by living life the way we have chosen. The current question is what to do about it.

Were he to write an answer to this objection, perhaps Coats would say that prices will naturally communicate all the relevant information -- the standard Hayek/M. Friedman response. But this is false, and it is false even if we correct for certain "market failures" (and note that those corrections themselves are often a process of institutional expertise.)

Because there still remains the problem that prices carry only allocative information -- so some things still aren't included: and the lopsided distribution of income, the unquantifiability of most ecological externalities, and the narrowing of knowledge competences mentioned above, all conspire to destroy the system.

There are only three ways to inform the world: (1) price transactions, (2) governmental and nongovernmental institutions, of various law-giving, regulatory, and redistributionist sorts, and (3) better, comprehensive, synthetic education -- for absolutely everybody.

From the conservatives and libertarians we only hear about the first one. This will bring disaster.

[Winslow R.]

"'Cause much of what you say makes no sense, if you are trying to reflect current reality."

What part?

[swells]

Lee Arnold, great post. Here's a question I would like to ask. In the absence of better, comprehensive, synthetic education how do we begin to make the requisite changes? I take it we both agree that the education you recommend is currently lacking in the US public to large degree.

Currently, the voting populace is extremely susceptible to manipulation that offers huge possibilities for those with power to game the system to their advantage. That seems to me, perhaps naively, to be what currently happens.

How do we get past the hump?

[paine]

market failure

okay but what if markets can't be
simply re-engineered to succeed
if
pigou taxes and emission warrents
wage floors and hour ceilings
credit regs and insurance mandates
aren't enough ???

what if hi fi systems left
free to evolve
are so intricate
so dynamically innovative and non linear
so prone to system wide crisis
and yet so intricate
we gotta state plan em
..you know
in public design our next sequence of steps
make markets so smart
they aren't really markets any more

[JeffF]

Swells, you are starting to frustrate me.

The state and local taxes you mention are included. The seventh from the bottom chart is the total of state and local taxes by income group. It includes property taxes, gas taxes, sales taxes. It may be missing drivers license fees and the like, but those are considerably smaller than the taxes and some of them aren't really equivalent to taxes.

The Washington state tax structure study report is an example of analysis of state and local taxation for a particular state. The first chart in chapter four shows the total of all major taxes as a share of income for various income groups (note Washington state is unusually regressive because it has no state income tax):
http://dor.wa.gov/content/aboutus/statisticsandreports/wataxstudy/Chapter_4.pdf

You don't pay 7% of your income in sales taxes, you pay 7% of the fraction of your income which is spent on things where the sales tax applies. I imagine that less than 25% of your income, so the portion of your total income that goes to sales taxes is likely under 1.75% and, as I said earlier that is already included in the just under 30% total taxation rate for the middle quintile.

Apportionment of corporate taxes is a place for a bit of wiggle room. Tax analysts sometimes portion it out to consumers, business owners, and employees with the portions being pretty much invented out of nothing. However the total of corporate income taxes and excise taxes is only 10% of federal revenue, vs 85% for the various taxes on individuals, so if we simply add 10% to each categories taxes as a share of income the middle quintile would see an increase of about 1.5% of income. The third quintile's total taxes as percent of income would then be 29.5%.

Anyhow accept reality. Taxes aren't nearly as high as you previously thought. Go forth with a worldview which is more accurate and make better decisions.

This is no great shame. There is a very comprehensive marketing campaign trying to get you riled up about taxes and repeating lies to you over the decades to produce your vague sense that taxes are much higher than they are. However if in your transition from ignorance you choose to embrace willful ignorance rather than knowledge you should be ashamed.

[paine]

"only three ways to inform the world:

(1) price transactions

(2) governmental and nongovernmental institutions,
of various
law-giving, regulatory, and redistributionist sorts,

(3) better, comprehensive, synthetic education
-- for absolutely everybody-- "

bold and brave effort to reach the comprehensive high ground .....

change (1) in analogy to (2)'s
governmental and nongovernmental institutions
to
price and non price transactions

and the level of generality begins to lose
an essential degree of discern-able definition

[paine]

"increasing crowding and complexity of the world are causing accelerating network effects of social transaction costs and ecological externalities "
its kinda like at a cocktail party...
as the room fills up and we're forced closer together
we spill more on each other

[macburger]

swells says...

macburger, while your post was entertaining, do you have any er, actual arguments to advance? Which graph in the document was wrong and why? Believe me, I understand better than most perhaps how the current system functions as a system of spoils and plunder.

No you don't. For that to be true, you have to first determine whether you are the plunderer or the plundered.

You seem to live in a mythical reality, where you believe that if taxes were essentially done away with or reduced, your income would still remain the same, and your world would remain the same. In short, you get a windfall. Yeah, right.

[Julio]

paine:"It's fear which drives the right into opposition"

its threat ...threat to position
to standing
to way of life etc

fear is enough
it is enough to make us all "the opposition"
plant seeds of fear
and the threats will grow
from the collective imagination

seeds of divisiveness
carried even by the warm breeze of good intentions
hiding in innocouos language
George (O., the wise one) warned us

the young black man
looting the korean store
in watts
he'll never be a hardworkingamerican
maybe not even a bravetroop

we still want to give him the best
medical care we can afford,

right??

i mean
he was born

right??

[Julio]

Winslow R:Your self interest is to mess up the system, yet you realize it is in society's interest for reform to succeed.

The classic Republican dilemma.

The classic plutocrat's dilemma. Republicanism is just the tool du jour.

[Dickeylee]

Swells,
A $750K income in 1955!??! Or a %5.2M income in 2008? What kind of sleight of hand is this? So what percentile would both fall in, 1955 OR 2008? A $750K income in '55 would be about 2000% 0f median, and even after a 90% income tax w/no deductions would leave you $75K, or still 70 plus thou above median. So do you think Mickey mantle struggled by 1955, or what?

[Ex-Worker]

No one ever paid the 90% income rate except Rockefeller. Therefore, it had no disincentive on capital or investment.

Until the 1960's you could LEGALLY send money abroad and earn foreign investment income without paying any taxes or even reporting it to the IRS. Hence Swiss banking.

Or you could capitalize a corporation and have it earn your income at lower corporate rates. If you were in a position to earn 90%, you could hire a lawyer to incorporate.

These many loopholes have incrementally closed in the decades. Sending or even keeping money offshore, is now a very risky act with substantial penalties. Certainly not worth the risk at 15 or 20%. At 70%, different story.

And btw, the US is the only developed country to tax citizens residing in foreign countries for greater than a year on their foreign earned income. Not France, Germany, Britain or any other social democracies do that.

[Lee A. Arnold]

Paine, absolutely right. Any institution sets up transactions (or transformations) which are informed by the expectations of the individuals under the institution. This goes for markets, business firms, governments, Social Security, churches, the Boy Scouts.

Conversely, every transaction type must occur under a central institution of some kind. With market transactions, it's just the rules and contract laws of the market.

I am drawing a picture of it, here:
http://www.youtube.com/watch?v=GrVsLdTtepM

Education is also an institution, covering the transactions of learning, etc.

Of course the institutions don't have to be absolute -- they can be focused on one area, and/or hierarchically embedded, and/or epicentrically overlapping for checks-and-balances in complicated situations.

The trick will be getting people to understand that the institution of market transactions is not the only one which can add to freedom. The essential point is that institutions of almost any kind can reduce costs which are otherwise intractable.

You jumped a step ahead. The "new institutional" economists, of course, fell a step behind, and narrowed the definition of institution to mean the market institution only -- which makes writing to economists difficult as well.

[kthomas]

"...Was that a kind enough assessment?"

No. I say you switched to decaf today. C'mon, anne, go for the jug.

[Patricia Shannon]

The idea that the Vietnam war was due to liberals is so bizarre. How can someone who would believe such a thing be capable of writing it down? But then, there are groups of people who believe aliens or angels are going to come down on a specified day and rescue them while the rest of the world perishes.

[swells]

JeffF, sorry I don't mean to be frustrating. However, I must say that I don't see what you see in the document. The graph to which you refer doesn't say that sales tax is included it says state and local taxes are included. Now, does that or does that not include items like sales tax, property tax, etc.

If I look at the chart above it for NC, I see that it says that 10.5 to 11.9 percent is the state and local tax burden for NC. Since the state income tax rate is ~ 7% and the sales tax is 7% and property taxes are about 2K per year on a 200K property, (about 1% of value or 4% of income for someone making 50K per year), then the 10.5 to 11.9 percent doesn't seem to add up. I mean, you are basically at 11% just from state income tax and property tax and that doesn't include taxes on vehicles, sales taxes, etc.

Still, your basic point seems to be mostly valid. So, for sake of argument let's say that your position is entirely correct. Let's say that the total tax burden on a middle class person is 30% per year and that 20% of that is federal taxation. If that federal taxation is doubled by 2030 to pay for the 53 trillion of unfunded liabilities that currently exist, then middle class people will be paying 50% of their total income in taxes.

What would that do to growth, which is, to my eyes, the only real way to get ourselves out of the predicament. I quite frankly laugh when I hear conservatives spout the Laffer curve line that says cutting taxes increases tax revenues. I also laugh when I hear people pretend that increasing taxes has no real effect on growth.

[swells]

JeffF, I would also like to point out that the FICA portions of the federal taxation rate only include the so-called employee portion. If a person is self-employed, they pay both the employee and the employer portions. It really makes no sense to me to exclude the employer portion for employees. That is a cost to the company of your employment and companies definitely look at the total compensation package (if they didn't they wouldn't be cutting back on health insurance or increasing the employee contribution to paying premiums, etc). My basic point is that the employer part of FICA really comes out of the employees' pocket as well since it effectively reduces the employees income. That's another 6.2% right there.

I really don't mean to be frustrating but I can't really agree that 30% is the average burden. I'm fairly typical of a middle class taxpayer and I pay a good bit more than that.

[swells]

dickeylee, no sleight of hand. You said that the top tax rates in 1950 Eisehower era were 91%. Actually the top tax rate was 93% one year. My point about that was that people who make a lot of money didn't really pay 91% or 93%. What they really paid was 51.6% on average. The 750K in 1953 is equivalent to 5.2 million today, at least according to the article I was quoting. See for yourself at:

http://www.toomuchonline.org/articlenew2006/Feb13a.html

[swells]

dickeylee, a further comment. Back during the Eisenhower era, he was trying to put the country back on a sound fiscal footing after the debt run up from WWII. All I'm really saying is that with our current debt run up, etc. that something very similar is going to have to happen. But, taxing rich people at the same sort of rates that were in effect in the 50s isn't going to be enough. The article makes pretty clear that doing so for the time period it covered would produce about 208 billion more in taxes. The deficit for 2009 (the acknowledged part) is about 482 billion. And that deficit projection doesn't even account for supplemental funding for Iraq war, etc.

It's pretty clear that taxes are going to have to go way up for everyone. Now, I don't pretend to say that a 50% is intrinsically a bad thing. Like any other price, it depends on what you get for your money whether it's worth it or not.

When I look at education, infrastructure, defense, health care, etc. I don't think we are getting our money's worth for the vast sums we spend. My own opinion, and it is only opinion, is that we don't get our money's worth because the system is corrupt and a lot gets siphoned into the coffers of campaign contributors and other narrowly constituted vested interests.

I like the idea of universally available health care but I am hesitant to get behind that idea if my opinion is well-founded. That's because I have no real confidence that we will get our money's worth out of the political system that we have.

If I think money is being wasted, mismanaged and effectively stolen, why should I want to put more into the institutions that waste it, mismanage it and steal it?

[reason]

swells...
so why aren't you concentrating on solving the real problem (the corrupt, disfunctional political system) rather than attacking the symptom (wasted tax money)?

[swells]

reason, hum, that is what I thought I was doing here among other things. I'd sure have an easier time of selling my ideas if I were hanging out on libertarian blogs or conservative ones. To put it simply, one person can't do it alone. What I would like to see is the liberal agenda adopted in an efficient way. The people here want to adopt a liberal agenda but, to my mind, don't pay much attention to efficiency. There seems to be a blind faith that getting the government to do something will make things better. It well could but only if the government does things efficiently.

The liberal agenda is the right way to go but liberals need to address the issue of how to keep government from functioning as a system of spoils generation for that to happen.

[reason]

Swells,
now to some extent I agree with you, because that is what I have been saying for a while (and what for instance David Brin has been saying). But nothing will happen unless the general public believes
1. the screwed up democracy is THE major problem with the country
2. they can do something about it.

It just takes a substantial proportion of the country to vote for a democratic renewal ticket. At least Obama is a step in the right direction in that he doesn't come the Washington establishment. (And that, given my mistrust of his policy positions, is the only reason I favour him. But I don't have a vote.)

But as Paul Krugman has pointed out, there is a difference between the parties, as long as movement conservatives control things, things will get worse (because of ideological appointments and poor legislation).

[reason]

Swells
And as for Libertarian sites - I have yet to read there proposals for improving our Democracy. They mostly are just AGAINST democracy as far as I can tell.

[swells]

reason, understood. I guess one of my concerns is that both movement liberalism and movement conservativism are both at this point simply special interest groups. The special interest wrangling (or, as Madison would have called it in Federalist # 10, factions) is, in my opinion the root of the problem.

[Ex-Worker]

No rich person (except than the 1950's equivalent of random lottery winners) paid the 90%+ rates.

I'm not saying that inequality hasn't increased, or that the rich have a bad lot, but you are comparing apples and oranges comparing 1953 vs 2003 individual income tax rates.

In 1953, the maximum corporate rate was 52% (still high) http://www.irs.ustreas.gov/pub/irs-soi/02corate.pdf. 52% is the highest rate most "rich" would pay. You could LEGALLY run earned income (and many expenses) through a corporation, which was popular strategy until the Reagan tax cuts made it more costly.

The data verifies this- the corporate tax was a much greater percent of government revenues in 1953 than 2003 despite larger reductions in the top marginal rate for income than for corporate.

Of course, if you were in the top bracket in the 1950's, you could also move personal or corporate investments to Switzerland (or Canada) and legally pay 0% on capital gains and income earned outside the country.

I've not seen 1 academic studies focused on top rates (including Dicklee's source's source) consider what people ACTUALLY PAID in 1953. They also generally ignore the ability of the rich to change the form of their income from corporate/ personal. I doubt the data is even available in pre-CPU days.