The idea that the unemployment problem is due to lack of effort on behalf of the unemployed rather than a lack of demand is convenient for the moralists, but inconsistent with the facts. The problem is lack of demand, not the means through which we smooth the negative consequences of recessions.
But what really irks me is the implicit moralizing, the idea that people deserve to be thrown into poverty. Someone who gets up every day and goes to a job day after day, often a job they don’t like very much, to support their families can suddenly become unemployed in a recession through no fault of their own. They did nothing wrong — it’s not their fault the economy went into a recession and they certainly couldn’t be expected to foresee a recession that experts such as Casey Mulligan missed entirely. They had no reason to believe they had chosen the wrong place to go to work, but unemployment hit them anyway. And since one of the biggest causes of foreclosure is an event like unemployment, it’s entirely possible that this household would lose its home, be forced to declare bankruptcy, etc., and end up in severe poverty if there were no social services to rely upon.
What moral lesson is being taught here?
Imagine what the size of the deficit would be without FICA! Ponder the meaning of these lines at a time when corporate profits are at record highs, and unemployment levels are at record highs!
Now, lets look at the data in a totally different way, to put all this in perspective. Here, each source is presented as a percentage of the total Federal Tax Receipts.
Can’t tell you exactly what I might have expected, but it sure as hell wasn’t this. Pick your inflection point – either ’77 or ’84 will do. Since 1977, the percentage of the total paid by corporations has wobbled around a bit, but averaged 11% of the total. The percentage coming from personal income tax has been 50%. Obviously, the amount contributed by FICA is 39%. Let’s have a look at trends since 1977.
The corporate tax trend is basically flat at 11%. The contribution from individual taxes is actually at a slight decline. Meanwhile the trend for contribution from FICA has steadily increased for well over 30 years!
Are you as shocked as I am?
Here, to put the perspective in perspective, is a look at total receipts, on a log scale.
I’ve placed a couple of best fine lines, a blue one through the entire data set, and a red one through the period 1958 to 2000, which seems a little more regular than the entire set. At the far end, we had the Great Depression and WW II. At the near end we had Bush tax cuts, Bush wars, an the ensuing Great Recession. Surprisingly, the red line has a slightly lower slope than the blue line. Not surprisingly, total receipts have been close to flat for the last decade, as the Bush tax policies have succeeded in starving the government.
1) During the post WW II golden age, the corporate contribution to total tax receipts, though continually declining, was typically far greater than during The Great Stagnation – the period since roughly 1980.
2) The FICA contribution to the total, despite a break point to a lower slope circa. 1980, has grown steadily since WWII. It is now virtually tied with personal income tax for the biggest contribution chunk.
3) Since the turn of the century, tax cuts and a stagnating economy have caused a huge gap in tax receipts. Grover Norquist’s plan to destroy government by starvation is working like a charm – at the Federal, State, and local levels.
4) Not shown here, but obvious if you think about it or look for the data, is the decline the growth in government spending, at all levels – for everything except defense – since 1980.
If, like Norquist, you want life without government, take a look a Somalia. Or dig out A Distant Mirror by Barbara Tuchman and see what life in Europe was like in the 14th Century – a time when society deteriorated, there was little or no effective government, and roving bands of thugs terrorized peasants, kings, and even the Pope.