Cascade Christmas Commentary:
This year in honor of Andy Rooney

For a number of years Cascade Policy Institute has published my short commentary about Welfare Santa, inspired by an Andy Rooney column written in 1991, the year Cascade was founded. This year is a little different. Andy died last month at the age of 92, and the Occupy movement has highlighted the “get something for nothing” mentality.

So this Christmas, in honor of a great writer, here is Cascade’s 2011 Christmas Commentary:

Do you believe in Santa Claus? By the time most of us stop believing in a literal Santa Claus, we are well on our way to believing in a figurative one that goes by the name welfare state or big government.

Have trouble feeding your family? Santa State can help. Need affordable housing or health care? Welfare Santa to the rescue.

What in the world got me to say such blunt things at Christmas? I put the blame squarely on Andy Rooney, who wrote a Scrooge-like piece for TV Guide back in 1991. Entitled “No, Virginia, you don’t need a Santa Claus,” it was Andy’s answer to the eight-year-old girl who in 1897 asked that question heard around the world.

If she’d written her letter to Andy, he’d have told her, “The sooner you give up on the idea that you can get something for nothing and learn to make it on your own, the better off you’ll be. Forget the fairy tales.”

Andy ended his piece by saying, “Sorry, Virginia, I’m sure you’re a nice little girl, but your future depends on you, not on believing in Santa Claus.”

Santa, you’re a swell guy, but we’ll take it from here. As adults, we need to trust in ourselves, make our own decisions, and not let others fool us into believing we can get something for nothing. Virginia, it’s not a bad thing to believe in Santa Claus, just don’t stop believing in yourself.


Cascade Policy Institute’s founder and Senior Policy Analyst Steve Buckstein is also Satirist-in-Residence at Oregon’s free market public policy research organization.

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  • Selfmade

    You can make it on your own. Don’t put the blame on anyone else. Work hard. Do something! Make a difference.
    Please.

    • Notworking

      How dare you! I have tried to work and not a single person will hire me! Not my fault. I do blame others – big banks and big corporations mostly.

  • Sol668

    Opposition to a set of conservative policies which have proven only to benefit the tiniest minority of individuals at the top of the economic scale…is not asking for something for nothing….but I understand the conservative need to misrepresent it as such…what other argument do you have in the most inequitable america in history?

    • Rupert in Springfield

      >what other argument do you have in the most inequitable america in history?

      1 – You mean other than the fact that income inequality has grown despite the fact that our economy has moved away from a laissez faire approach, to a more socialist approach, with  larger government, more regulation and  more of the federal budget going to social services than ever before?

      2 – Liberals put in two gigantic social spending programs and launched the costliest war in American history.

      Social Security

      Medicare

      The war on poverty

      Income inequality has only grown.

      So that’s two really good arguments right there. You got anything other than smart comments?

      • 3H

        Except…  you can argue, and I think convincingly, that the inequality would be greater.  I also don’t think it’s greater than it has ever been.  My sense, and this is a sense only, not based on statistics, that it was probably greater before the New Deal era.  But I’m willing to be surprised.  

        • valley person

          You don’t need to be surprised. According to data crunched by Piketty-Saez, the US has returned to the income disparity between the top 1% and everybody else that we had in the 1920s. 

      • None

        “You mean other than the fact that income inequality has grown despite the fact that our economy has moved away from a laissez faire approach, to a more socialist approach”

        Okay, enough is enough, I can’t call you “Rupert” any more, I have to call you what you really are, “Dupert,” because you clearly are a dupe of the right-wing machine.

        Since Ronald Reagan’s election, we’ve moved to a corporatist approach that favors those at the top. The top marginal tax rate in the 50s was over 90%. Now it’s 35%. In 1980 it was 70%.

        Capital has been concentrated in fewer and fewer hands as anti-trust enforcement has been spotty at best.

        Income inequality didn’t grow after Social Security or Medicare were put in place, and didn’t grow during the War on Poverty. It’s grown since the far-right policies of Ronald Reagan and George W. Bush have been put in place.

  • None

    Steve,

    It’s those who oppose tax fairness who are the “get something for nothing” crowd. And it’s the ones who already have a lot who you favor getting something for nothing.

    Taxes are the price we pay for a civil society. The rich actually have the most to gain by having a civil society, so it’s fair that they pay more. It’s part of the social contract. 

    At this time of year, when many celebrate the birth of Jesus, it’s amazing how many who claim to follow his teachings actually attack the poor and support the rich, which is the exact opposite of Jesus’ message.

    Those who celebrate the huge inequality that has developed over the last 30 years should be ashamed of themselves, and those who call themselves “Christian” should be ashamed to use that label.

    • Sol668

      Keep in mind todays conservatives knowlingly or not subscribe to the cotton mather notion of the “elect” that only a select few will gain entry to heaven…but how to know who those “elect” are…why god will of course reward them in this life with material success, as they will be rewarded with paradise in the next

      • Rupert in Springfield

        Um, so you are saying all conservatives believe in a religion that involves heaven? I’m just trying to get the religious stereotyping right here because this is a really idiotic statement.

        • valley person

          Not all, just the vast majority. And this is established by fact, not opinion. Of course also probably believe in a lot of other hooey as well.

          • try Again Dummy

            Established fact by who besides you? Oh – you have nothing to back your nonsense up with. OR was it a DNC or MoveOn poll? Bwhahahahhahahaha!

          • valley person

            Established fact through surveys. 90% of self described conservative Republicans are also self described Christians.

            http://www.gallup.com/poll/143231/conservatives-dominate-republican-party-skew-older.aspx

          • None

            Come on, VP, no fair arguing with ACTUAL FACTS. Here at Oregon Catatonalyst, we only allow established right-wing dogma, because we know that reality has a liberal bias, and we’re all about hating the liberal bias.

          • try Again Dummy

            Sorry schmuckle! A poll is nothing more than opinions based upon a set of questions. Or has logic escaped you completely?

    • Steve Buckstein

      Just because Justice Holmes said that “Taxes are the price we pay for a civil society” doesn’t make it so. I prefer economist Mark Skousen’s response:

      “Taxation is the price we pay for failing to build a civilized society. The higher the tax level, the greater the failure. A centrally planned totalitarian state represents a complete defeat for the civilized world, while a totally voluntary society represents its ultimate success.”

      From the well worth reading article:
      “Persuasion Versus Force”
      http://www.mskousen.com/persuasion-vs-force-by-mark-skousen/

      • Sol668

        Not surprisingly conservatives refuse to acknowledge the cohersive power of capital.  The power to force behavior by those who hold capital upon those that do not.
         

        • None

          Sol, not only do conservatives and “libertarians” fail to recognize the coercive power of capital, they live in a fantasy world where everyone has free choice and has the  same opportunities.

          They think that we live in this magical land where anyone can get in to Harvard or Yale, and that connections and birth to rich parents play no role in having more opportunities.

          Strike that. They fully realize that’s a bunch of B.S., but they argue otherwise.

      • valley person

        So Denmark and Germany are less civilized than the United States?

        • Steve Buckstein

          By Skousen’s definition, yes.

          • valley person

            Skousen needs to get out more. Does he have a passport?

          • None

            How about Steve Buckstein’s definition?

          • Steve Buckstein

            I agree with Skousen. That doesn’t mean that the tax level is the only definition of civilization, but it is one component.

            So Denmark and Germany might be more civilized overall than the US, but on the taxation component they are not. 

            Let’s not get off topic and try to quantify other components or we’ll be here through New Years, and I have another commentary coming then about a country that I hope we can all agree is less civilized than any we’re talking about here.

          • None

            Steve,

            If Denmark and Germany are more civilized than the U.S., “despite” their higher level of taxation, you have to concede the possibility that taxation is a relatively small factor.

            If taxation rate is a measure of being civilized, then we were far less civilized in the 1950s, when the top marginal tax rate was 91 or 92%. 

            In some ways, we were far less civilized, to be sure (though many on the right would disagree). On civil rights issues and freedom of speech issues, the 1950s were a bad time in this country.

            But the economy was running along swimmingly. How do you reconcile a booming economy with right-wing dogma that high marginal tax rates ruin the economy?

          • Steve Buckstein

            I’m not conceding that the level of taxation is a relatively small factor on the civilization scale. I don’t think there is some numerical scale with fixed relationships between various factors. I’m just saying that, everything else being equal, higher taxes mean that that society is less civilized than one with lower taxes.  Again, the reason is that taxation relies on force, and part of being civilized is dealing voluntarily with others.

            I assume that, if you could find a way to provide all services you want from government without forcing your neighbors to pay for them that you’d be willing to abandon taxation. You can’t figure out how to do that, so you fall back on forcing others to pay for what you believe are necessary services. I understand that, and I’m not condemning you for advocating this kind of force. I know I’ll be outvoted on this for the foreseeable future, but acknowledging that taxation is not the way a totally civilized society would behave is a start toward looking for ways to become more civilized.

          • 3H

            All other things being equal, how much more force would it take to collect a 6% income tax than it would to collect a 3% income tax?

            Is the nation that levies a 3% income tax really more civilized than the nation that collects a 6% income tax?  

          • Anonymous

            Good point. On first glance i agree that there may not be more force needed to levy a 6% tax than a 3% tax.

            So let’s you and I agree to push for reducing US taxes down to 6%. If you agree, I’ll promise not to criticize you just because you wouldn’t go for 3%.

          • 3H

            LOL.. fortunatelyit was only for the purposes of illustration 😉

      • 3H

        The list of countries more civilized than the United States. From the  wikipedia  Please note that the tax rates are taken from the Heritage Foundation.
         United Arab Emirates 01.4  Kuwait 01.5  Equatorial Guinea 01.7  Oman 02.0  Qatar 02.2  Libya 02.7  Chad 04.2  Bahrain 04.8  Burma 04.9  Saudi Arabia 05.3  Angola 05.7  Congo, Republic of 05.9  Iran 06.1  Nigeria 06.1  Sudan 06.3  Afghanistan 06.4  Yemen 07.1  Algeria 07.7  Central African Republic 07.7  Cambodia 08.0  Guinea 08.2  Bangladesh 08.5  Haiti 09.4  Mexico 09.7 17.5  Pakistan 10.2  Gabon 10.3  Sierra Leone 10.5  Panama 10.6  Bhutan 10.7  Madagascar 10.7  Syria 10.7  Laos 10.8  Nepal 10.9  Indonesia 11.0  Niger 11.0  Guinea-Bissau 11.5  Burkina Faso 11.5  Ethiopia 11.6  Guatemala 11.9  Comoros 12.0  Paraguay 12.0  Tanzania 12.0  Federated States of Micronesia 12.3  Taiwan 12.4  Uganda 12.6  Hong Kong 13.0  Congo, Democratic Republic of 13.2  Ecuador 13.2  Liberia 13.2  El Salvador 13.3  Mozambique 13.4  Vietnam 13.8  Costa Rica 14.0  Armenia 14.1  Rwanda 14.1  Singapore 14.2  Lebanon 14.4  Philippines 14.4  Tunisia 14.9  Dominican Republic 15.0  Peru 15.1  Côte d’Ivoire 15.3  Mali 15.3  Sri Lanka 15.3  Benin 15.4  Mauritania 15.4  Malaysia 15.5  Togo 15.5  Honduras 15.6  Egypt 15.8  Zambia 16.1  Tajikistan 16.5  China 17.0  Thailand 17.0  Burundi 17.4  São Tomé and Príncipe 17.4  India 17.7  Azerbaijan 17.8  Nicaragua 17.8  Vanuatu 17.8  Cameroon 18.2  Kenya 18.4  Chile 18.6 18.2  Bahamas, The 18.7  Gambia 18.9  Mauritius 19.0  Senegal 19.2  Djibouti 20.0  Macau 20.1  Turkmenistan 20.2  Maldives 20.5  Malawi 20.7  Ghana 20.8  Lithuania 20.9 30.3 Uzbekistan 21.0  Jordan 21.1  Kyrgyzstan 21.4  Belize 21.6  Georgia 21.7  Fiji 21.8  Suriname 22.1  Morocco 22.3  Argentina 22.9  Albania 22.9  Cape Verde 23.0  Colombia 23.0  Saint Lucia 23.1  Uruguay 23.1  Belarus 24.2  Papua New Guinea 24.5  Solomon Islands 24.7  Venezuela 25.0  Samoa 25.5  Saint Vincent and the Grenadines 26.5  Croatia 26.6  Korea, South 26.8 25.6  Kazakhstan 26.8

        • Anonymous

          As I stated earlier, the tax level isn’t the only definition of civilization, but it is one component.

          I assume that you list the countries you do because you believe they are less civilized than the US. But you only show one component of such a calculation, the tax rate.
          Again, I don’t think there is some mechanical or linear formula to determine the level of civilization. I just believe that the rate of taxation is one component.

          Do you really think that if the US lowered its tax rate to that of some of the countries you list that we would become an uncivilized country, even though we had someof those low rates in the past when, most would argue, we were a civilized nation. Sorry it’s not black and white.
           

          • 3H


            I assume that you list the countries you do because you believe they are less civilized than the US. 

            I listed all the countries that pay less in taxes per GDP than the United States without picking any out.  But, yes, I would consider us more civilized than many of the nations on that list. Especially the ones that treat women and some minorities even worse than we do.   That would be, for me. a more important indicator of being civilized.

            “Do you really think that if the US lowered its tax rate to that of some of the countries you list that we would become an uncivilized country, even though we had someof those low rates in the past when, most would argue, we were a civilized nation. Sorry it’s not black and white.”

            Well, I don’t consider level of taxation, generally, to be in any way a significant indicator of the level of how civilized a  country is.  

            I would turn your question back on you.  Do you consider us less civilized now than when we were under lower tax rates?   What time period are you looking back at?  

            I think, all things considered, taxation is so far down the list that it does not constitute a significant factor in determining how civilized a nation is, or isn’t.   

          • Anonymous

            I understand that you don’t see taxation as a significant factor in determining how civilized a nation is.

            I don’t have any particular period in mind, although pre-1913 is interesting since we had no income tax at all. Of course other factors were worse then, but my whole point is that using force against others is not what civilized people should aspire to.

            And, contrary to what the IRS tells us, our income tax system is not voluntary – it does rely on force or the threat of force. I want that kept in mind when we have discussions of tax rates, who pays what, etc.

          • valley person

            Enforcement of every law on our books ultimately relies on the ability of the state to “enforce” (or force if you prefer) the law to be obeyed. Being “forced” to pay taxes is no different than being “forced” to obey a stop sign or not steal from someone.

          • Anonymous

            Not the complete story. Using force to protect your rights, such as stopping someone from stealing your property, is legitimate.

            On the other hand, initiating force to take something from someone else, i.e. taxes, is not a legitimate use of force, in my humble opinion.

            We can have an unlimited discussion on which uses of force are legitimate and which are not, but simply note that some are not and you’re on the right track. And, before you argue that “we voted to tax you” doesn’t cut it with me. We had that discussion earlier about democracy being two wolves and a lamb voting on what to have for lunch.

          • valley person

            Taxes are rarely if ever collected at the point of a gun. You are confusing a metaphor with reality.

            My version of your wolf and sheep is that there are far more sheep than wolves, or herbivores to carnivores, so your story is not consistent with nature, and since you believe in natural law, you ought to find a better story. 

          • Anonymous

            While there may be many more sheep than wolves, I haven’t seen many wolves attacked and eaten by sheep.

            Thanks for the suggestion, but as a thought experiment I think I’ll stick with my story.

          • valley person

            Yes, its about 99% to 1%. Ironic no?

          • None

            Tell you what, Steve, as soon as you stop using roads, the internet, public airwaves, airports, goods that are shipped via roads, air, or  shipping, drinking water, and breathing clean air, and as soon as you stop expecting police, fire, and military protection, I will START to consider that you are not getting anything of value for the money you pay in taxes.

            Until then, you’re just a spoiled brat who wants something for nothing.

          • Anonymous

            I’m not asking for something for nothing. I do value many of the services currently provided by taxes, and I am willing to pay for them. I just want you and others to consider that there are better, fairer, more effective and efficient ways to pay for those services.

            User fees if they remain government services. Privatizing or contracting out to private firms is another possibility.

            I understand that you will argue that these services are best provided by government, I simply disagree in many cases.

            Let’s not get into the details here. Just recognize that one can argue for lower taxes without being called a spoiled brat.

          • 3H

            But, pre-1913 we still had various federal taxes, yes?  And those were collected with the threat of force.  Tariffs, Excise taxes, etc…   Was the level of force any greater when we added the income tax?   A nation maintains and enforces its sovereignty through the threat of force.  Your argument isn’t so much against taxation as it is against the concept of a nation state. 

            The very concept of private property is maintained by force.  Wouldn’t we be more civilized if we didn’t have private property?  But then, that would be…. 

          • Anonymous

            As I replied to Dean earlier, it’s the initiation of force that I object to, which I believe taxation represents.  Using force to defend private property is legitimate.

            There is obviously a wide spectrum of actions that involve force and some may not be clearly initiation (wrong) or defensive (right) but you get the point. 

            The armed robber on the street demanding your wallet seems clearly the wrong use of force. Pulling out your gun to deter him seems legitimate. I view taxation closer to what the armed robber does than to your self defensive use of force.

          • valley person

            Taxing is not an initiation of force. It is a law that has force behind it as a last resort, just like every other law. No one has ever put a gun to my head to collect a tax.

            If you want to live tax free, there are islands out there for you. Or you could just learn to live poor enough to not have to pay. Free will and all that.

          • None

            Perhaps he could move to the United Arab Emirates or Kuwait.

            I’m not sure there’s any point in trying to have a conversation with someone who is unable to see that he is where he is partly by what he’s done, sure, but also through the efforts of many others, INCLUDING government.

            The self-centered delusion of “I did it on my own” is toxic, and leads to toxic positions like those of the CPI.

          • Anonymous

            I don’t argue that “I did it on my own.” I argue that there are better, less coercive ways, to pay for services currently provided by government.

          • Anonymous

            I’m glad no one has put a gun to your head to collect a tax. Me either. But refuse to pay; refuse an order to appear in court; refuse to comply at all and see what happens.

            I’m not arguing that I, or anyone else, should move to a place without taxes, or reduce my income to the point that no taxes are demanded. I’m simply arguing that we should look for ways to voluntary pay for more of the services that taxes currently pay for.

          • None

            You do voluntarily pay. You choose to have a job with a high enough income that you pay that amount of taxes.

    • Rupert in Springfield

      >It’s those who oppose tax fairness who are the “get something for nothing” crowd.

      The list of things the something for nothing crowd has demanded all should benifit from, but only some should pay for has grown quite long in recent years. Yet somehow Democrats still demand more and more of this.

      > It’s part of the social contract.

      Oh get over the social contract. You couldn’t produce a copy of it if I had a gun to your head, so stop saying something is in it and therefore I must obey.

      Listen. Nebulous contracts lying about which no one can produce is no basis for a system of government.

      Supreme executive power derives from the people, not some farcical judicial terminology.

      I mean look, if I claimed some watery tart had lobbed a social contract at me, and everyone now had to do whatever popped into my head, they would put me away wouldn’t they?

      >Those who celebrate the huge inequality that has developed over the last 30 years

      Who out there is celebrating wealth inequality? Can you name someone? I cannot think of a single person who has made such a pronouncement, nor can I think of a single parade, festival or even large group of dinner guest that would indicate there is any celebration such as you describe.

       

      > should be ashamed of themselves

      And those who try and make up mythical evil groups as a stalking horse should probably be ashamed of themselves.

      >and those who call themselves “Christian” should be ashamed to use that label.

      Why is this starting to feel like the school principle trying to make me ashamed of eating candy in class?

      Is there anything more tedious than some dullard running around the room insisting everyone should be ashamed if they don’t conform to his righteousness?

      This is a perfect example of how liberals so often resemble the shrieking man on the corner holding up a Bible, claiming some direct hotline to God and all are sinners, with him as arbiter.

      It’s nonsense, its dull, and it’s the same overstated inanity as when the school principle tried to make you feel shame and damnation because you chewed a piece of gum in class.

      • 3H


        I mean look, if I claimed some watery tart had lobbed a social contract at me, and everyone now had to do whatever popped into my head, they would put me away wouldn’t they?

        Yes, but you could still claim to be Alfred.

        • 3H

          Arthur.  LOL.. not Batman’s butler.

      • None

        “Who out there is celebrating wealth inequality?”

        Here’s Rick Santorum:

        ““They talk about income inequality. I’m for income inequality. I think some people should make more than other people, because some people work harder and have better ideas and take more risk, and they should be rewarded for it. I have no problem with income inequality.”

        Ask, and you shall receive.

    • Steve Buckstein

      “The rich actually have the most to gain by having a civil society, so
      it’s fair that they pay more. It’s part of the social contract.”

      They already do pay more. The top 1% of income earners (according to IRS data) earn about 20% of the income and pay about 38% of the federal income tax.  How much more “fair” do you propose?

      • valley person

        Perhaps so, but the federal income tax is only one tax among many taxes. When you add up all taxes, the rich pay a similar proportion of their income as everyone else other than the very poor.

        • Steve Buckstein

          I don’t recall seeing a source on that, but if it’s true that makes me feel better. Of course, for outliers like Warren Buffett (who tells us he pays a lower federal tax rate than his secretary) I think we should lower her rate (and ours) down to his right away. Fair is fair.

          • valley person

            The effective tax rate on incomes for the top 1% is only 5% at the state and local level.  It is almost 10% for taxpayers with middling incomes.

            The the bottom 20% pay TWICE (based on income) what the top 1% pay in taxes at the state and local levels. How can this be so? Because most states rely on sales and excise taxes, not income taxes, and even those with income taxes have pretty flat rates.

            Total federal taxes are mildly progressive, with the riches 20% paying about 25% of their total incomes in taxes, the middle paying about 15%.

            http://economix.blogs.nytimes.com/2009/04/10/more-on-income-levels-and-tax-rates/

          • None

            So you think it’s a good idea for someone who makes $1 million a year to pay the same tax rate as someone who makes $10,000 a year?

            Wow. 

            The thing is, in the long run, that policy helps no one, including the super rich, because of the kind of society it leads to.

            Steve, why don’t you try living in the libertarian paradise of Somalia for a year, and tell us how it works out.

          • Steve Buckstein

            Let’s quantify your question. At at 10% tax rate someone earning $10,000 would pay $1,000 in tax. The person earning $1 million would pay $100,000 in tax. Are you saying the inequality in the amount of tax these two people pay should be even greater?

  • valley person

    Paying into a common fund, government, and expecting a bit of economic and other security services in return is not asking for Santa Claus. That you would confuse one for the other says more about you and other so called conservatives than it does about our society.

    • Steve Buckstein

      “expecting a bit of economic and other security services…”

      A bit? If that were the case we’d have little disagreement. But when government becomes the dominant institution in society, and many expect it to provide everything from food, to shelter, to health care, to…then we have a major disagreement. 

      • valley person

        “A bit” is about all we get in the US compared with every other wealthy industrial nation, including a number who are presently kicking our behinds in the free market.

        Government SHOULD be the dominant institution in a democratic society. I mean, what else would be? Some Association of Very Rich People? The Banking Industry? The Chamber of Commerce? Labor unions? The church? Can you think of a single institution that should be more dominant in our lives than our government? And if you say “families,” consider that this is the case in the most backward parts of the world, where the clan system still rules, and women are stoned to death for getting raped. 

        What we (most Americans) expect Steve, is for government to provide food, shelter and health insurance (not care) as a last, not a first resort. Its a backstop for when people either temporarily (unemployment) or permanently (old, disabled) can’t hold things together on their own. I’ve been a mostly self supporting adult for nearly 40 years. But I had one short stint where unemployment came in quite handy. And i will soon take my turn with the geezers getting my SS check and Medicare. So will you someday, unless you plan to send the money back.   

        Yes, I know we have a major disagreement. Its a deep philosophical, moral, ethical and practical disagreement I’m sure we are never going to be able to bridge.

        • Steve Buckstein

          I agree that we’ll probably never bridge the gap between our views of government and society. I’ll simply add that I don’t propose any one institution be dominant in society. We might agree that when any one institution dominates our lives that the power and value of the individual diminishes.

          Government is unique, however, among institutions in that in our society it holds the monopoly on legal force. The church, the family, even your feared bankers and Very Rich People can’t legally force us to do anything without asking government to point the guns for them.   

          • valley person

            Because government holds a unique position,  and we grant it the right to use force against us, is exactly why it needs to be the most dominant single institution. Saying no institution should be dominant is a nice theory, but ignores a million or so years of human history. There is always going to be something that dominates  a society of people. It can be the biggest dude with the biggest club, religion, a hereditary ruler, a lord of the manor, or the company that owns the mine and the town. A society of complete equals isn’t in the cards.

            I agree that having a dominant institution may reduce the power of any individual. That is actually a good thing, because it prevents any individual from asserting too much power over others, which they tend to do given an opportunity. I don’t agree that having an elected, constitutional government the dominant institution diminishes the value of an individual. Quite the opposite, the value and dignity of an individual is better within a welfare state than as a vulnerable individual who can get tossed out into the gutter at a moments notice.

            The church, the banker, and very rich people have all in their turn used force to act against individuals who opposed them in the past. They did this by usurping the power of the state and directing it to their own ends.

            I’m curious. In libertarian land, what stays the hand of the rich? What prevents them from using wealth to assert power?

          • Steve Buckstein

            With less governmental power for the rich to “usurp” they will be less likely to effectively assert power against others. Government won’t be there to protect their monopoly power in the marketplace so it will be easier for upstarts to compete against them, and for everyone else to have more alternatives than shopping at the company store.

            With government as the dominant institution, you might be right that some individuals will be better off, but many individuals can be worse off as power is concentrated in the hands of those who capture that government.

            I don’t assume a society of “complete equals”, but I do aspire to a society where no one institution is so powerful that it can enforce inequality.

          • 3H

            But, the example of the 1860s to early 1900s would argue differently, don’t you think?  Government was smaller, and less regulatory, and yet the trend was for capital to accumulate into fewer hands.   Also, I think the greatest excesses of corporations occurred when there was little nor no over-sight.  They could pretty much do what they wanted.  Included murdering or beating up anyone who wanted to unionize.

            Where, historically speaking, or now, has it ever worked as you envision? 

          • valley person

            What makes you think the rich won’t simply create as much government as they feel they need to have effective control? You can try to limit government to limit their reach, but they can ramp up government in those areas that suit them. So government will indeed be there to protect their monopoly power because they will make certain of that. Upstarts will be quashed in their cribs.

            What you aspire to I’m afraid is pure fantasy. A few rich people are not just going to sit around and count their gold coins. They are going to use that wealth to exercise power. A weak government is an invitation to them. Not a deterrent.

          • JoelinPDX

            The thing is “the rich” know that less government is better government. They simply aren’t interested din more and bigger government.

          • Steve Buckstein

            If a weak government is not a deterrent to the rich, and a strong government is captured by them to lord it over the rest of us, then I guess we’re toast.

            As I believe Robert Higgs has amplified on Madison’s famous statement:

            If men were angels we would need no government. If men are not angels, then having a government is worse than not having one.

          • valley person

            We are only toast if we allow wealth to dictate our politics. Since the non wealthy have the numbers, we don’t have to allow that to happen.

          • None

            Steve,

            If you truly want no government, you’re welcome to move to Somalia.

            Please write and tell us how it turns out.

          • None

            Steve, since you seem to think that the best government is either no government or one that only provides for common defense, why don’t you show good faith in this and call for the abolition of corporations, since the limited liability they enjoy is a creation of government?

          • Steve Buckstein

            I didn’t say that defense is the only proper function of government, just that it is one.

            Getting into government’s role in creating/protecting corporations is beyond the scope of this post, and beyond my interest level right now. Sorry.

          • Ardbeg

            I’m not going to disagree that government should be smaller, but…your solution is to shrink it to make it harder for the rich to usurp it?  Can’t be done!  The money drives the bus.  Can we agree one job of the gov is to provide for the defense (military) of the country?  There will always be defense contractors with their lobbyist, campaign contributions, etc.  And no, you cant have a society without a dominate institution. Show me a society in the last 2000 years without something that you would call the dominate feature.  If I have a choice between a democratic government (a government!), a church, or a dictator; I’ll take the democratic government.  What would you prefer?

          • Steve Buckstein

            We can agree that defense is a proper function of the US Government, but that represents a fraction of it’s total power and size today.

            Sure, as Churchill said, democracy is the worst form of government…except for every other.

          • None

            Right.

            And as a more-or-less democratic country, we’ve decided that our government will do much more than provide “defense.”

            And, in fact, the “Defense Department” is a misnomer.

            The invasion of Iraq had nothing to do with “defense.”

            The first invasion of Iraq had nothing to do with “defense.”

            The covert wars in Central America had nothing to do with “defense.”

            The overthrow of democratically elected governments in Chile, Iran, and Guatemala had nothing to do with “defense.”

            But I have not seen you post a single thing calling out the excesses of the military-industrial complex.

          • Steve Buckstein

            I agree with you that the examples you set out are not proper defensive functions of our government. I generally concentrate on fiscal issues, but if it makes you feel any better, I’m much closer to Ron Paul’s foreign policy positions than most other current presidential candidates.

          • Ardbeg

            Stop making sense! You will confuse 1/2 the population.

          • 3H

            But.. I think maybe you’re underestimating the power of economic force.  Which The Banks and the VRP have.

          • 3H

            And just to clarify…  the rich and powerful, even in this country, have had their private forces or have been able to convince government to use force. Yes?  The Pinkertons, the private armies operated by mine owners, even the range wars, were to one degree or another private examples of force used in the United States.  

            In other cases, such as moving native populations off of lands that had value, or using local police to harass and conceal acts of violence against minorities, the power and the rich have been able to use the governmental instruments of power.   I don’t think it’s as cut and dried as you like to make it out to be.

        • JoelinPDX

          Yep, isn’t it great that we only get “a bit” rather than having to put up with all the crap they have to put up with in France or the UK.

  • A lot of literature is starting to come out about the details of Obama administration discussions on economic policy in his first two years. The best details come from reporters on the far left like Ron Suskind whose progressive bonafides gave deep Bob Woodward like access to first hand accounts. Their own opinions tend to draw the conclusion that Obama has failed because he has not been progressive enough, but these progressive reporters are professional enough to lay out the facts of what actually was said. 

    Obama did not appoint any advisers to give the kind of free market advise that Steve Buckstein would provide. Christina Romer and Austan Goolsbee are solid progressives with no philosophical qualms with big government and the welfare state’s redistributing transfer payments, but they are also serious economists concerned more with empirically verified facts and data driven solutions. When policy options popular among Obama’s political operatives threatened the greater good, Obama’s economists did their best to object, often standing united as a “faction of the facts” brigade as one reporter called them. 

    A good example of the point Steve Buckstein is trying to make can be found in the origin of the payroll tax debate. (Let’s remember that the payroll-tax is the term that emerged in 1986 to describe workers’ contributions to their Social Security accounts) When Obama’s Council of Economic Advisers saw what Nancy Pelosi was putting into the stimulus bill, they warned Obama that most of it threatened to contract GDP. Stunned, the President asked how that could be. Romer informed Obama and his political advisers about the breakthroughs in macroeconomicis that had been occurring over the past year. They explained how Valerie Ramey at UCSD had shown that most stimulus spending had actually had a multiplier of between 0.6 and 0.8. If the stars align for the perfectly timed shovel ready project to finance a project with the highest possible return on investment the most that could be hoped for would be to basically break even at 1.1. Romer pointed out that little in the Recovery Act even fit that bill. Larry Summers added that when putting together a stimulus package we should take the heed of the Hippocratic oath to “first do no harm.” the something for nothing mentality ignores the mounting evidence that such harm is even possible. 

    Romer tried to offer positive alternatives. In a room full of progressives, doing nothing was not an option. Romer pointed out that she had tried to massage the data to teas out the highest possible spending multiplier but the best case scenario she could ever find was 1.4, not much higher than Ramey’s, but Romer’s own research had found that tax cuts provide a multiplier twice that. (Here is a link to Romer’s working paper which she coauthored with her husband just before she got her job offer from President-elect Obama: http://emlab.berkeley.edu/users/cromer/draft1108.pdf note their finding as to how tax increases are more contractionary than spending cuts) Romer argued the problem was that Congressional Democrats had not added much by way of tax cuts that would actually stimulate the economy. Trying to frame a pragmatic argument for Obama’s political advisors, Romer suggested including tax cuts to at least help compensate for the losses that so many of these spending projects would present.

    Romer pounded the table on adding personal and corporate income tax reductions. The political folks shot back a unified message of fine, but we are only going to lower taxes for the poor and lower income Americans. A CEA staff economist had to explain to them that the lower 47% of income earners already pay no federal income tax, and of the upper half of income earners that do pay taxes, the highest 1% already pays almost half of the Treasury’s revenue – when it comes to tax cuts that is where the money is. It was Rahm Emanuel that asked “what about the payroll tax?” The CEA then warned that the Social Security Administration was already about to go cash negative nearly a decade before the most pessimistic projections had forecasted and lowing worker’s contribution to their Social Security accounts will threaten the social insurance nature of the program by lowering the Social Security Administration’s future allocations to these workers’ eventual benefits. The CEA did not like the payroll tax but Nancy Pelosi did. 

    The CEA could not get the corporate income tax rate lowered, but it was able to get the Obama administration to ask Congress to allow the accelerated depreciation of capital expenditures. One capital good that depreciates in value faster than most others is a Gulfstream jet, and thus the birth of the “tax cuts for corporate jets” that was actually proposed for by Obama’s own CEA and included in the 2009 stimulus bill to compensate for the silly stuff like the Milwaukee light rail which turned out to be neither shovel ready nor at $205 million per mile likely to see a return on investment. 

    In term’s of the desire to get something for nothing, I think this is what Rooney and Buckstein are talking about. There is no evidence to support the necessity of these government transfers for the purposes of economic stimulus. It is also hard to argue that the richest Americans are not paying their fair share. No doubt they benefit disproportionally than the rest of us from good roads and the rule of law but the cost of maintaining roads and fighting lower and lower crime rates are a vanishingly small fraction of the disproportionate amount of taxes they are already paying. Getting something for nothing involves the hope by progressives that transfer payments have no negative externalities, that lower income Americans can enjoy public goods financed entirely by higher income Americans and suffer no disadvantages. The state of our current economy, and the warnings that Obama’s own Council of Economic Advisers gave him that warned of this outcome demonstrate this is not the case. The cost of those sweet nothings have been great. 

    • valley person

      So the former senior writer for the Wall street Journal, who also had enough inside access to the Bush Administration to write 2 books on its inner workings, is “far left?”

      Why would Obama want free market advice from Steve Buckstein? Nothing against Steve, but what are his economic bona fides?

      Workers are not contributing to “their” social security accounts Eric. There are no such accounts. Workers are buying old age pension insurance. Their (our) “contributions” pay for today’s retirees, and if enough is left over they pay for T-bonds, also known as the trust fund.

      Here is some evidence on the effectiveness of the stimulus spending, including transfers.

        http://www.nber.org/papers/w16759.pdf

      You seem to make the same argument Steve is making about the rich paying so much already. As a percent of income, all taxes included, they barely pay more than anyone else.  At the state and local levels the poor pay much more of their income than the rich do.

      • JoelinPDX

        I’ll take Steve’s bona fides on the economy any day over Obozo’s so-called expertise. I mean, really, GW Bush had more economic smarts than Obozo.

        • JoelinPDX ignores the rules

          The posting rules for oregoncatalyst.com are as follows:
          No personal attacks.

      • Dean, Suskind is about as far left as you can openly be and still be a reporter on the level of Meacham, Halperin, and Woodward. He actually wrote three books about the Bush administration. The Way of the World was about Bush foreign policy too just like The One Percent Doctrine. They were all devastatingly negative and I loved them because I was no fan of Bush either, but even for someone who was, the quality of his work is for all to enjoy. His best skill is to convey the perspectives of his primary sources largely unfiltered. He then renders a progressive conclusion, but the the substance of his work is pure gold. The Price of Loyalty was basically a ghost written memoir of Paul ONeill. He was a staff reporter for the Wall Street Journal as many progressives have been.

        On Social Security, you seem to confuse what the folks at the Social Security Administration do and what you think they should do. If an unmarried person never works and thus never makes FICA payments that person will never qualify for an old age pension. Of those who do work, the payout varies per person based on what they have paid (up to a cap). Social Security’s assets are shared just like any other defined benefit pension plan, but your Social Security number is your account number and the statements they mail you are real numbers. I assume that the payroll tax cut was worded in a way to continue crediting the money to each individual worker as if it had been paid, but I am not sure. If it the case that it does, the CEA staff economist that warned reducing contributions would lower benefits was wrong in an accounting sense, but the solvency part was absolutely correct. By statute, Social Security is not authorized to pay out more than its current revenue and the value of the Treasuries that have been credited to its trust fund. 

        I am sure you would like it to all be fungible, but with the payout going cash negative in less than half the amount of time the most pessimistic forecasts suggested it would and with the payroll tax cut now seemingly permanently compounding this negative cash flow, 2036 could very well be a mere ten years away. At that point the statutory limits of its funding will matter, and our Madisonian form of government will force entitlement reform on us in a way that is at variance to what you think it should be.  

        There is too much irony in your providing us a link to Feyrer and Sacerdote’s paper for me to believe you actually read it. It was one of my primary sources for this article that I wrote for the Catalyst this past summer: 
        http://oregoncatalyst.com/11936-keynesian-failure-stimulus-package-national-tragedy.html The graphic that I used at the bottom CAME FROM THEIR PAPER and can be found on the wikipedia entry for the Recovery Act. They start their paper off by criticizing the discredited Blinder Zandi model that Moody’s Analytics uses to show net job creation from the Recovery Act. 

        Anyone who has read their paper would know that Feyrer and Sacerdote’s results conclude that the Recovery Act contracted GDP just as Obama’s CEA warned it would. They identify a window in their estimate of the multiplier that was 0.5 to 1. Thus they confirmed Valierie Ramey’s work with slightly more negative results. Like Ramey and Romer, these guys are progressives and want to find a way to make government intervention work, but they are responsive to evidence and data so their estimation of how the stimulus bill COULD have had a positive multiplier is not likely to make Democratic political operatives happy. Feyrer and Sacerdote estimate that spending on education and law enforcement is so contractionary, that if it was removed from the bill the Recovery Act could have had a multiplier as high as 2. Don’t expect to find a link to their work on the NEA’s website, or a Democratic administration to act on their advice.  

        The ability to jump back and forth from aggregate data to disaggregated data is so complex methodologically that Ramey, Barro, and Romer have stuck to the aggregate while reserving the reasonable assumption that some government programs are better than others. Feyrer and Sacerdote experimentally ventured into this territory and generated some interesting results. 

        To do what Feyrer and Sacerdote are trying to do in a definitive way will require vector autoregression which they do not use, but I like their simplistic approach despite its obvious flaws. In fact they spend more time describing their methodological flaws than anything else. 

        What they did was analyze state spending to try and create time series relationships between spending per capita and job creation that is separated by government agency so as to estimate how different kinds of spending yields a different kind of multiplier. This would be a terrible approach for the nation as a whole, but since variance can be squeezed out of 50 separate states, there is some merit to this. They then construct a model of assumptions from state spending and apply it to federal spending to estimate what the federal multiplier was, and more importantly estimate how it could have been higher. You did at least read the abstract right? 

        They show the net impact of the Recovery Act was negative, but they find that direct payments to people have some stimulus and spending on education and law enforcement is highly contractionary. Construction projects were somewhere in the middle. According to their approach, the higher the price of labor in a government agency that delivers a public service the more contractionary the multiplier will be. Because so much of the stimulus was devoted to supporting state and local governments’ ability to pay the wages of teachers and police officers Feyrer and Sacerdote argue that IF AND ONLY IF the Recovery Act had excluded spending on education and law enforcement it might have had a multiplier as high as 2 – not a study I expect to see posted on a bulletin board in Nancy Pelosi’s office. 

        There are two serious flaws to their approach. First and foremost is an inability to differentiate between high cost but high return on investment public services and low cost public services that actually cause harm. University professors appear to destroy GDP in their numbers, but Feyrer and Sacerdote’s method cannot tell the difference between a professor of computer science and a professor of art history. Low cost transfers of money appear more stimulative if the compensation of the workers that do the transferring is lower. 

        There is a big problem with this. What if low wage Unemployment Office workers are paying a computer science major to take 99 weeks of paid vacation? The substantive work of Alan Krueger, Obama’s current CEA chairman has shown how this harms the economy and even paying an art history major who is basically unskilled labor not to work has a negative return as well. 

        Ramey, Barro, and Romer were able to make empirical measurements on government spending because of their use of Chris Sims’ VAR. This is a technical skill that not everyone who studies economics has been trained in. Since it won the Nobel prize this year, I expect it to become more common. The data needed for such an analysis lags, but by the end of the decade don’t be surprised if Ramey, Barro, and Romer share a Nobel of their own. As I have pointed out to you before, there are left wing economists like Krugman and Stiglitz who have never in their lives published any original research on macroeconomics in a peer reviewed journal spouting all kinds of ideological talking points, but of the rare winner of the Nobel for substantive work on the macro economy it always seems to have verified a limited government conclusion. 

        What Feyrer and Sacerdote show is that the price of delivering public services has a material impact on its stimulative effect. They have provided an innovative method of demonstrating what should have been obvious to anyone. Since patronage political spending is what happens in the real world of constructing stimulus package sausage, it is hard to see how they have provided usable knowledge for improving government counter-cyclical fiscal intervention. If Steve Buckstein was a member of Obama’s CEA he would have been able to point this out too, but data driven economists, regardless of their political persuasion, reached the same conclusion and warned Obama in stark terms. Now we have a progressive reporter whose book Confidence Men practically makes us a fly on the wall to hear it ourselves.

      • Dean, Suskind is about as far left as you can openly be and still be a reporter on the level of Meacham, Halperin, and Woodward. He actually wrote three books about the Bush administration. The Way of the World was about Bush foreign policy too just like The One Percent Doctrine. They were all devastatingly negative and I loved them because I was no fan of Bush either, but even for someone who was, the quality of his work is for all to enjoy. His best skill is to convey the perspectives of his primary sources largely unfiltered. He then renders a progressive conclusion, but the the substance of his work is pure gold. The Price of Loyalty was basically a ghost written memoir of Paul ONeill. He was a staff reporter for the Wall Street Journal as many progressives have been.

        On Social Security, you seem to confuse what the folks at the Social Security Administration do and what you think they should do. If an unmarried person never works and thus never makes FICA payments that person will never qualify for an old age pension. Of those who do work, the payout varies per person based on what they have paid (up to a cap). Social Security’s assets are shared just like any other defined benefit pension plan, but your Social Security number is your account number and the statements they mail you are real numbers. I assume that the payroll tax cut was worded in a way to continue crediting the money to each individual worker as if it had been paid, but I am not sure. If it the case that it does, the CEA staff economist that warned reducing contributions would lower benefits was wrong in an accounting sense, but the solvency part was absolutely correct. By statute, Social Security is not authorized to pay out more than its current revenue and the value of the Treasuries that have been credited to its trust fund. 

        I am sure you would like it to all be fungible, but with the payout going cash negative in less than half the amount of time the most pessimistic forecasts suggested it would and with the payroll tax cut now seemingly permanently compounding this negative cash flow, 2036 could very well be a mere ten years away. At that point the statutory limits of its funding will matter, and our Madisonian form of government will force entitlement reform on us in a way that is at variance to what you think it should be.  

        There is too much irony in your providing us a link to Feyrer and Sacerdote’s paper for me to believe you actually read it. It was one of my primary sources for this article that I wrote for the Catalyst this past summer: 
        http://oregoncatalyst.com/11936-keynesian-failure-stimulus-package-national-tragedy.html The graphic that I used at the bottom CAME FROM THEIR PAPER and can be found on the wikipedia entry for the Recovery Act. They start their paper off by criticizing the discredited Blinder Zandi model that Moody’s Analytics uses to show net job creation from the Recovery Act. 

        Anyone who has read their paper would know that Feyrer and Sacerdote’s results conclude that the Recovery Act contracted GDP just as Obama’s CEA warned it would. They identify a window in their estimate of the multiplier that was 0.5 to 1. Thus they confirmed Valierie Ramey’s work with slightly more negative results. Like Ramey and Romer, these guys are progressives and want to find a way to make government intervention work, but they are responsive to evidence and data so their estimation of how the stimulus bill COULD have had a positive multiplier is not likely to make Democratic political operatives happy. Feyrer and Sacerdote estimate that spending on education and law enforcement is so contractionary, that if it was removed from the bill the Recovery Act could have had a multiplier as high as 2. Don’t expect to find a link to their work on the NEA’s website, or a Democratic administration to act on their advice.  

        The ability to jump back and forth from aggregate data to disaggregated data is so complex methodologically that Ramey, Barro, and Romer have stuck to the aggregate while reserving the reasonable assumption that some government programs are better than others. Feyrer and Sacerdote experimentally ventured into this territory and generated some interesting results. 

        To do what Feyrer and Sacerdote are trying to do in a definitive way will require vector autoregression which they do not use, but I like their simplistic approach despite its obvious flaws. In fact they spend more time describing their methodological flaws than anything else. 

        What they did was analyze state spending to try and create time series relationships between spending per capita and job creation that is separated by government agency so as to estimate how different kinds of spending yields a different kind of multiplier. This would be a terrible approach for the nation as a whole, but since variance can be squeezed out of 50 separate states, there is some merit to this. They then construct a model of assumptions from state spending and apply it to federal spending to estimate what the federal multiplier was, and more importantly estimate how it could have been higher. You did at least read the abstract right? 

        They show the net impact of the Recovery Act was negative, but they find that direct payments to people have some stimulus and spending on education and law enforcement is highly contractionary. Construction projects were somewhere in the middle. According to their approach, the higher the price of labor in a government agency that delivers a public service the more contractionary the multiplier will be. Because so much of the stimulus was devoted to supporting state and local governments’ ability to pay the wages of teachers and police officers Feyrer and Sacerdote argue that IF AND ONLY IF the Recovery Act had excluded spending on education and law enforcement it might have had a multiplier as high as 2 – not a study I expect to see posted on a bulletin board in Nancy Pelosi’s office. 

        There are two serious flaws to their approach. First and foremost is an inability to differentiate between high cost but high return on investment public services and low cost public services that actually cause harm. University professors appear to destroy GDP in their numbers, but Feyrer and Sacerdote’s method cannot tell the difference between a professor of computer science and a professor of art history. Low cost transfers of money appear more stimulative if the compensation of the workers that do the transferring is lower. 

        There is a big problem with this. What if low wage Unemployment Office workers are paying a computer science major to take 99 weeks of paid vacation? The substantive work of Alan Krueger, Obama’s current CEA chairman has shown how this harms the economy and even paying an art history major who is basically unskilled labor not to work has a negative return as well. 

        Ramey, Barro, and Romer were able to make empirical measurements on government spending because of their use of Chris Sims’ VAR. This is a technical skill that not everyone who studies economics has been trained in. Since it won the Nobel prize this year, I expect it to become more common. The data needed for such an analysis lags, but by the end of the decade don’t be surprised if Ramey, Barro, and Romer share a Nobel of their own. As I have pointed out to you before, there are left wing economists like Krugman and Stiglitz who have never in their lives published any original research on macroeconomics in a peer reviewed journal spouting all kinds of ideological talking points, but of the rare winner of the Nobel for substantive work on the macro economy it always seems to have verified a limited government conclusion. 

        What Feyrer and Sacerdote show is that the price of delivering public services has a material impact on its stimulative effect. They have provided an innovative method of demonstrating what should have been obvious to anyone. Since patronage political spending is what happens in the real world of constructing stimulus package sausage, it is hard to see how they have provided usable knowledge for improving government counter-cyclical fiscal intervention. If Steve Buckstein was a member of Obama’s CEA he would have been able to point this out too, but data driven economists, regardless of their political persuasion, reached the same conclusion and warned Obama in stark terms. Now we have a progressive reporter whose book Confidence Men practically makes us a fly on the wall to hear it ourselves.

        • valley person

          Suskind may be as far left as one can go and still be taken seriously my teh MSM, but that only shows the limits on the ability of the actual far left to  wedge themselves into the national political dialogue. Suskind may be a liberal, but liberalism is not “far left” by any stretch.

          Eric, I understand how social security works. We each “buy” a level of insurance that depends on how much we put in. But we don’t put money into an “account” that has our name on it. This is not a distinction without a difference. It goes to the core of Republican attempts to convert SS into an individual account system. In your view, we seem to have already done that. Didn’t happen.

          The trust fund account is being temporarily backfilled by general funds. Meaning the government is borrowing money (selling bonds) out of one pocket to buy other bonds (SS Tbills) to stuff into the other pocket. As long as accounting doesn’t penalize the entire working population by deducting from their credits, there is zero impact on either the trust fund or the eventual payout to individuals. But, as we both know, this isn’t not exactly a long term sustainable means of finance.

          The temporary SS tax cut has nothing to do with SS per se. It is simply a means to get more money circulating to help tide the economy over until the private sector economy recovers enough to fully employ everyone who wants a job. Its Keynesian deficit spending, and is believed to be effective because it puts most of the money into hands of people who will spend, rather than save it. Unemployment comp is even more effective.

          At some point, whether in 25 or 10 years, our government reps will indeed have to make some changes in SS. The choices have been well analyzed elsewhere. The core problem is not financing the system. There are many ways to do that without significantly cutting benefits.  The core problem is that we have one party, Republicans, who want desperately to dismantle the most effective and popular New Deal/Great Society anti poverty program in the nation. And the other side, democrats, who will defend it to the death or kill the one remaining reason for existence of their own party.   If both sides agreed on the value of the program itself, the finances could be settled in short order. (And I suppose, if Grover Norquist was disappeared for a few months).

          The stimulus funding package was trying to achieve a bunch of objectives, including job creation. But clearly some, retention of teachers and police officers for example,  was simply intended to preserve still existing jobs and vital public services. The CBO has weighed in on actual results on job creation/retention as well as GDP influence (another very important goal of the stimulus was to arrest the GDP decline) and they concluded that the stimulus was net positive on both counts. 

          Right wing arguments against the stimulus seem to fall into 4 categories:

          1) It was completely ineffective. Wrong on facts according to the CBO and numerous analyses, including the one you and I both cite.

          2) It may have had short term benefits but will have long term negative effects (a reasonable argument to make that relies on modeling future uncertainty to demonstrate, but to me besides the point that we have an economic emergency today, so even if dealing with this sacrifices a bit of future growth, its worth it). 

          3) Printing money is inflationary. Since we have increased the monetary base by what…40% over the past few years, and we have no inflation, this argument (with apologies to Ron Paul and the entire Republican partay) appears to have been proven wrong by facts in evidence. But then Ron Paul has been proven wrong for 30 years straight, so nothing new.

          4) It violates our principles on keeping government small. Can’t argue with that one. But I don’t share those principles.

          Yes, “politics” were part of the stimulus bill. Politics are also part of the defense bill, the farm bill, tax policy (who’s ox gets gored and who gets the best breaks), the Homeland Defense bill, and every other bill that makes its way through the sausage factory. Every one of them could be more economically efficient.

          “Discovering” that a bill that by economic necessity was rushed through debate got larded up with measures that were less effective than other measures might have been had such a bill been entirely technocratic may seem like an ah ha moment, but only if you just landed from Mars. 

          • I concede Suskind is no Leninist, but he is well to the left of Obama and is critical of him from a left-wing perspective not unlike what one would find on the pages of Nation magazine. 

            The way you describe Social Security that prompts you to put quotation marks around the word “buy” could be used to describe any DEFINED BENEFIT pension plan. All defined benefit plans have accounts with a person’s name on them, Social Security is no exception. You just spent a lot of verbage arguing that Social Security is not a DEFINED CONTRIBUTION plan, but nothing I said implied that it is. Do you understand the difference? 

            Social Security is behaving like any other underfunded defined benefit pension plan. When an institution public or private has this problem it eventually runs into a choice to either adjust benefits or fund it more. There is not enough of a majority to either slightly adjust benefits now or make the program more redistributionist than it already is. Since so many of the folks who support the program are in denial of its finite statutory funding limits and we now know how quickly even the most pessimistic forecasts can suddenly be found over-optimistic with little warning, in a remarkably short amount of time our Madisonian form of government will force a radical reduction of benefits when Social Security’s book of Treasuries has been exhausted. You are essentially admitting this when the best you can hope for is to wish that Grover Norquist would go away. He could be hit by a bus tomorrow, but the increase-the-funding caucus is not growing any stronger. Indeed the often touted popularity of Social Security is trending the other way as the millennials grow old enough to be included in pols and the GenXers grow old enough to vote at the rate boomers do now. Don’t bet on Social Security being more popular than it is now ten years from now. And there is the rub, opponents of entitlement reform fail to realize that the best terms they are going to get are now, but their strategy is to delay reform.  

            When you provide a link to Feyrer and Sacerdote’s NBER paper that concludes the Recovery Act had a multiplier of between 0.5 to 1 and say claims that the Recovery Act was ineffective have been proven false by “facts according to the CBO and numerous other analysis including the one you and I both cite” it is like Baghdad Bob telling western journalists that the American tank over there is a captured American tank. Do you know what a multiplier of 0.5 to 1 means? 

            You are developing a reputation of clinging to any conclusion you think supports your argument but ignoring the premises that the authors use to get there. In the case of Feyrer and Sacerdote, I think I know what happened. You thought they were saying the stimulus had a multiplier of 2 when in fact their paper estimated that the stimulus COULD have had a multiplier of two if all the wasteful elements that team Pelosi put into it were removed. That is exactly what the CEA tried to tell Obama! Of course Christina Romer’s own research suggests that if the stimulus only consisted of tax cuts with no spending increases it would have had a multiplier of 3. 

            Regarding the CBO, that once upon a time was a credible source. It became deferential to the party in power under Bush when it low-balled the costs of Medicare part D. The way it has remained deferential under Obama has been its us of Moody’s Analytics for its modeling. Moody’s: those smart guys who rated mortgage backed securities so well. I have told you before they are in the business of forecasting for people who are selling something not for people who are buying something. Paul Allen hired Moody’s Analytics to forecast the amount of jobs the building of the Rose Garden Arena would create. The first thing Feyrer and Sacerdote do in their paper is dress down the CBO’s approach, pointing out that because CBO’s model to analyze the effects of the Recovery Act ASSUMES a multiplier of 1.5 of course it is going to conclude it was effective, but Feyrer and Sacerdote point out: “This conclusion however could have been written before the ARRA [American Reinvestment and Recovery Act] was implemented, knowing only the intended policy path. Their methodology does not take into account the actual path of employment after the passage of the bill.” 

            So to convince us that the stimulus was effective you cling to the CBO’s pronouncement that after assuming the Recovery Act was effective it then calculates how many jobs it “saved or created” and then you provide us a link to a more rigorous paper that calls the CBO out for its circular reasoning and shows how the multiplier was at best 1 where it did nothing or at worst 0.5 where it then shaved about $400 billion off our GDP growth. Who are you trying to convince with that?

          • valley person

            Ok, Suskind may be to the left of Obama. That isn’t very far left given that Obama was elected with 53% of the vote, putting him pretty close to the center of gravity of American politics.

            On the multiplier, lets face it Eric. Economists are all over the map on what number should be assigned to what action. Will people save a portion of their tax cut or spend it 100%? No one knows. Will a new or repaired bridge have knock on effects by decreasing commercial transport costs? Sometimes yes, sometimes no depending on the bridge.

            I don’t know where you got Roemer using a 3 times multiplier for the tax cuts. What I’ve read says the administration used 1 for tax cuts, which is a whole lot less than 3. Did they really ignore her to that level? Why? Why wouldn’t they assume the higher number to make their stimulus seem more awesome?

            A lot depends on what happens to interest rates as a consequence of borrowing for the stimulus. I’m pretty sure interest rates have gone down, not up since the stimulus passed, which is the opposite of what your side predicted by the way.

            Disparage the CBO all you want. They are the agreed upon neutral party here.

            If you want to know whether the stimulus “worked,” you can also consider the nations that went the other direction and cut spending, like Ireland, Greece and Spain and Britain, and look at what has happened to their GDPs compared to ours and countries that did choose to spend more.  Britain has averaged about .5% GDP growth over the past 2 years. Ireland has been around negative 2%. So much for budget cutting during a recession.

      • I almost forgot the issue of the disproportionate tax burden the wealthy carry. Of course when the CEA was trying to explain to Obama that only the upper half of income earners pay Federal taxes, they were indeed only talking about Federal taxes. However, the wealthiest among us pay more of state taxes as well.  

        When you cite an average upper state income tax bracket of 5%, keep in mind that is after the deduction of federal taxes. That is not a 50 state average because only 9 states allow this deduction. 

        When I see the claim being made that state taxes are regressive, I notice that not all the sources of state revenue get mentioned. There is no mention of corporate taxes, capital gains taxes, dividend taxes, or property taxes. Of all the things that get forgotten, the biggest one is how much of the revenue of the states comes from the federal government itself. 

        Keep in mind that in defining what is regressive and what is not, many on the left reject a flat tax code for being regressive simply because it taxes fails to tax the wealthy at a higher rate. If we simply taxed everyone the same rate, the wealthiest would still be paying far more in taxes than the rest of us an amount that also likely exceeds the actual consumption of public they need to earn their higher income. If anything perhaps they deserve a volume discount for being so productive. On this entirely normative question, there never seems to be any real criterion that defines what the JUST rate is beyond the demand for more and more. Higher is always better than lower. Don’t tax me tax the man behind the tree!

        • valley person

          My data source used the 5% number as a 50 state average, factoring in the deduction for federal taxes.

          State taxes ARE regressive if the data I presented to you are correct. A poor person paying 11% of income versus a rich person paying 5 or 6% of income is mathematically regressive.

          Corporate taxes are not on any individual tax return (except for the legal point that a corporation is a person). I’m not sure if capital gains taxes were factored in or not, but when they are at the federal level they decrease progressivity, as Warren Buffet has demonstrated. 

          Yes Eric, a % of a higher amount leads to a higher number. BFD. This is not progressivity in taxation as it is understood by economists. A flat tax would redistribute that tax burden further away from the rich and towards the poor. Merry Christmas and Bah Humbug. Are there no work houses?

          • The average state income tax bracket for top income earners if 5% across all 50 states? Your data source told you that or did your conclusion source tell you that? There is a lot of urban legend about state taxes because they are so difficult to measure. They are difficult to measure not only because there are 50 states, but there are thousands of cities and counties. Most of the writing on this subject comes from non-rigorous let alone biased sources. 

            What is missing is a compreshensive calculation like we get on the federal level where we can analyze IRS data to find that the top 10 percent of income earners pay more than 70 percent of the Treasury’s revenue intake. On the state and local level there are no doubt taxes that only the wealthy pay like a surcharge on fine art in New York, and taxes only the poor pay (though I cannot think of any). I can think of local taxes that the poor might pay more than the wealthy such as a tobacco tax, and I have always considered the lottery to be a tax on people who cannot do the math. What is missing the the level of analysis we get at the federal level where all the revenue that goes to each state is broken down by its source.

            To do this for every state, county, and municipality to create a national average would be extremely laborious to demonstrate something we probably know intuitively already – that state taxes are less progressive than federal taxes. But for anyone to claim that all the revenue going to state and local coffers is net regressive would require the burden of proof to be placed on the person making that claim, meaning they need to show more than a sweeping conclusion; they need to show their math. 

            Corporate taxes are very significant, because they tax the assets of shareholders IN ADDITION TO the capital gains taxes and dividend taxes they pay. It is in effect a tax on retained earnings. Warren Buffet only pays a 17% rate if you intentionally ignore what he is paying in corporate taxes. I know a lot of people who like to ignore details like that to massage data. Such people run for reelection every couple of years. Another detail that gets overlooked is how high Buffet’s secretary’s income is. Another thing that gets overlooked is that when Warren Buffet’s secretary incurs a capital gain she pays the same rate Buffet pays and Buffet draws a small salary as CEO of Berkshire Hathaway that is taxed at the same or a higher bracket than his secretary. 

            Like I said, in the normative argument of what is or is not a JUST rate of taxation, an actual criterion is often missing to weigh such claims. The criterion of equality under the law is an attractive criterion that can be applied to tax law perhaps explaining why a flat rate is so fundamentaly attractive to many politically independent people who have no ideological predisposition to demand we squeeze as much as we possible can from the wealthy. 

            As my criterion I offer equality before law knowing full well that an equal rate for all income earners will result in the wealthy paying far more than the rest of us. What have you offered us Charles Dickens? In a sense the character of Ebeneezer Scrooge harms your argument. He harms it because he does not exist. The real wealthy are incredibly generous. Money left in their hands yields more public goods than the patronage spending of government sausage making would otherwise yield to society. Dollar for dollar private giving to the arts, sciences, and charity are more efficiently distributed than budgetary appropriation. Indeed Warren Buffet has given his fortune away to the Bill and Melinda Gates foundation which is far more effective than any government agency, but Buffet, Gates, Jobs, Bezos, and the rest create positive externalities with the money they INVEST even if they never gave it away. Your claimed concern for the poor is directly challenged by the rigor of analysis that Ramey, Romer, Barro, Feyrer, and Sacerdote have found happens when we try and get something from nothing! It is therefore you that have a cold hearted indifference to the poor. Your quest to tax the wealthy more is more akin to another 19th century novel, Moby Dick. You willfully ignore evidence that there are negative externalities to progressive taxation. You are willing to harm the poor if it means you get to catch your wealthy whale. 

          • Steve Buckstein

            “You are willing to harm the poor if it means you get to catch your wealthy whale.”

            I couldn’t help repeating this, Eric. It’s an insightful analysis of what comes out of what Doug Bandow and others have labeled The Politics of Envy. 

            Of course, Dean and others who share these views will deny that they envy the rich, but their faulty analysis enables others to do so.

          • None
          • valley person

            Steve and Eric should study this graph and offer their interpretation.

          • Anonymous

            I’ll offer economist Steven Horwitz’ interpretation of this graph, which is from the publication “The State of Working America”, since he’s studied it:

            “The problem with the data in “The State of Working America” is that it does
            not account for the fact that individual households move up and out of poverty
            and are then ‘replaced’ by different households. Most of the households in the
            bottom fifth are made up of people who have recently entered the labor market
            and are on the first rung of the income ladder, such as recent high school
            graduates and new immigrants. The vast majority of American households do move
            up, and over the last 30 years most Americans have gotten significantly richer
            in absolute terms.

            sources:

            http://www.chuckroger.com/2011/02/04/the-poor-are-getting-poorer-is-a-baseless-claim/

            http://www.tulsaworld.com/news/article.aspx?no=subj&articleid=20110129_11_A19_TeEooi608391

          • valley person

            That doesn’t explain the graph, it tries to explain why we shouldn’t worry about growing inequality of groups, because individuals might not stay within a group.

            But this is belied by another fact, that income mobility in America is actually quite low. If you are born poor in America you are more likely to stay poor than in most other advanced nations. And it ignores the fact taht median household income in AMerica has gone DOWN, not up, since 2000. Thus 1/2 of Americans are poorer, not richer than before.

          • Anonymous

            See my response in  comment posted at the end (as of 12:15pm Thursday.

          • valley person

            So if I deny that I envy the rich that must mean I actually do envy the rich right? You get to have it both ways?

            Sorry to disappoint you. I’m personally well off enough, have everything I want or need, and don’t envy others who have more.

            Wealthy people don’t carry a disproportionate tax burden. As I’ve pointed out, statistically at the state and local levels they carry far less of a burden in proportion to their incomes than everyone else. Yes, the top 1% pay much of a single tax, the federal income tax. But they pay far less as a proportion of their income than they did 3 decades ago, and they pay less than they did a mere decade ago. At the same time, the top 1% has experienced nearly all of the growth of national income there has been over the last 30 or 40 years. 

            Those of us who argue for higher taxes on the rich do so for 3 very practical, non ideological reasons.

            1) The nation is taxing 60 cents for every dollar we spend. So either the federal budget is cut by 40%, or we raise somebody’s taxes, or both. I don’t see anyone, not even Paul Ryan, putting a 40% national budget cut on the table now or into the future.

            2) The richest 1% have gained the most over the past 3-4 decades while the rest have stagnated. The richest 1% control nearly 40% of all wealth in America. And most of that is in the richest 1 of that 1%.

            3) The rich have been able to skew the tax code in their favor, and this needs rebalancing.  The very rich (.01%) get their income from capital gains, not work. The capital gains tax is only 15% at the top. This is why Warren buffet and people like him pay such a low % of their income in taxes compared with others.

            As for this “harming the poor” argument, it is so full of crap its hardly worth responding to. But suffice it to say that nations with much higher tax rates on the rich have far less poverty than the US, so your argument is ridiculous on its face unless you can provide a plausible explanation as to why this is so.

          • Anonymous

            I didn’t mean to imply that I get to have this both ways. I take you at your word that you don’t envy the rich. But your arguments make it easier for others to do so.

          • valley person

            I think by turning the argument towards this idea of “envy” you want to deflect the substance of my points.

            99%, probably more, of Americans are not rich. This 99% plus (apologies to OWS) make our living from wages, businesses, or retirement income, including Social Security. Public policy should be made to further the economic interests of this portion of the American public, which is nearly everyone.

            The right argues that the interest of nearly everyone is best served by letting the rich keep as much as possible, because they are the engines of economic growth. The left argues that it is public infrastructure, education, and economic security that are the engines of growth and a prosperous society.

            For the record, I think both sides have some merit. I just think my side has more merit.

          • Anonymous

            My point about envy isn’t trying to deflect the substance of your points, but simply to point out what i believe to be a driving force for some people who argue that the rich aren’t paying their fair share.

            While I believe that many of the “rich” are jobs creators, i would argue that they should be able to keep as much of their own money as possible even if they never created one job. Same as I’ll argue that you and I should be able to keep as much of our own money as possible no matter what we chose to do with it.

          • None

            Okay, Steve. I’m waiting for your public announcement that you’re going to stop using roads, airlines, public transportation of any sort, and you will not purchase any goods that are shipped using roads, seaways, or air.

            Until that time, you’re just a spoiled brat who wants something for nothing.

        • valley person

          “Of course when the CEA was trying to explain to Obama that only the upper half of income earners pay Federal taxes”

          A double false claim that is also misleading. There are many federal taxes in addition to the income tax that nearly everyone pays. But even the income tax alone is paid by 53% of households, which is more than half. And of the households that do not pay income tax, most are either poor or retired, so their non payment is temporary, not permanent. The poor will pay if an when they earn more, and the retired have already paid when they were working.

          “When I see the claim being made that state taxes are regressive, I
          notice that not all the sources of state revenue get mentioned”

          The data I gave you are for all state and local taxes paid by individuals. Not for all state and local income sources. Corporate taxes have been on a downward track for decades. Capital gains taxes are included, as are property taxes, where paid by individuals.

          Every flat tax ever proposed has been regressive, for the simple reason that upper income people do not earn income the same way that working people do, and they have multiple ways (and always will) to avoid paying taxes on parts of their income, so if you flat tax everyone at say 20%, they will be able to shelter part of their total from that 20%, thus paying less tan 20%, while ordinary people cannot do so because ordinary people cannot afford lobbyists or tax attorneys or financial advisors. 

          “an amount that also likely exceeds the actual consumption of public they need to earn their higher income.”

          I’m not sure what this means exactly, but I suspect it means the rich use less government services, therefore they should pay less? I’ve heard Rush Limbaugh make that argument. I’m surprised to hear you make it. What, you want to tax people on their food stamps? Merry Christmas Eric.

          What is the “just” rate of taxes? From the left, I would say it is what is necessary to fully fund the services needed to keep people out of poverty, or to alleviate their poverty if we can’t keep them out of it, to provide everyone with good education and health care, to have the best public infrastructure in the world, a clean environment, and a stable middle class.   I’d like the rates of taxation to be set so everyone outside of poverty pays something, but that something goes up proportional to ones wealth and income.

          In other words, there is no magic number. Its a number relative  to public need and private ability to pay.

  • Anonymous

    In response to Valley person’s assertion above that “that income mobility
    in America is actually quite low” I’ll quote from this longer commentary on this and related issues:

    “One common argument is that inter-generational income mobility in
    Northern Europe is higher than the United States. But even if that were
    true, it hardly proves that income mobility is low in the U.S, because
    those studies they cite find extremely high mobility in for example
    Scandinavia. Also a homogenous country will always appear to be more
    mobile than one made up of lots of groups. Not surprisingly,
    inter-generational mobility among Scandinavian-Americans in the NLSY97
    is far higher than the U.S average.

    “Equally important, I believe
    these results are a statistical artifact. In Scandinavia, the income
    distribution is highly compressed. This means that even small and
    meaningless changes in income between parents and children appear as ‘mobility’.”

    Source: “American Mobility is High and Increasing”
     http://super-economy.blogspot.com/2011/11/income-mobility-is-high-and-increasing.html

  • Howdie

    The Occupy Movement is not about people wanting to get something for nothing, its about Wall Street and the one percenters taking something for nothing.

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