I googled the title phrase and ‘Behold!’, here are the three links. Mike also sent them.
Cactus and his merry band of madmen and Megan McArdle
What happens to the cottage industry among Democratic-leaning armchair economists grinding out analyses proving that Democratic presidents are, like, totally awesome for the economy? Presuming that we’re stuck–as seem very likely–in at least a couple of years of really grinding low-to-no growth, Obama is going to destroy their figures. Are we in for a resurgence of belief in exogenous growth factors?
Now, of course, it may be that the economy starts growing like gangbusters in the next year. In which case I expect that Cactus and his merry band of madmen will continue with their arguments. But if, as most people expect, growth continues to stall for the next few years, it seems I can look forward to more explanations of why Democrats–and only Democrats–can be thrown out of the sample if they have low growth and betray The Faith; and why the economic results of Democratic presidential administrations–and only Democratic presidential administrations–are sensitive to exogenous starting conditions.
“Going back to 1952 at least, every Democrat, every single one, has increased the tax burden. Every single Republican lowered them.”-McArdle
I had some posts after that, perhaps time to revisit them, that showed that not only did the change in the tax burden correlate with growth, the change in the tax burden in the first two years of an administration’s term correlated with the growth rate in the final six years. And not in the direction McMegan likes to see. Sure, correlation does not imply causality, but it just so happens that Presidents under whom growth in years 2 – 8 was fastest also were the Presidents who found a way to go back in time to years 1 & 2 and raise the tax burden. Or something like that. Go figure.
by Kenneth Thomas
More New Books Highlight Plight of Middle Class
The situation of the middle class is a hot topic these days, and rightly so. In addition to James Carville and Stan Greenberg’s recent book, It’s the Middle Class, Stupid, new books are out by Donald Barlett & James Steele, Jeff Faux, and Mike Lofgren.Together, they advance our understanding of middle class issues significantly.
Barlett and Steele have been sounding the alarm about middle class decline since they wrote the first newspaper articles forming the core of 1992’s America: What Went Wrong? In The Betrayal of the American Dream, they tell the stories of everyday Americans, many of whom they kept up with after interviewing them for previous books. They date the beginning of the decline of the middle class to the 1970s, which I think is correct since that is when real wages for production and non-supervisory workers began their forty year decline. They emphasize the central role of Congressional and Presidential decision-making that has given us tax rules favoring the 1%, laws allowing private equity and other corporate raiders to raid pension funds and break contracts with unions and retirees, trade agreements, industry deregulation (which they see as highly destabilizing for the middle class), the destruction of retirement via the assault on pensions and their replacement with 401(k)’s, and the devastation of offshoring.
Their proposed solutions include raising taxes on the rich, and to consider instituting a financial transactions tax (also known as a Tobin tax, after its first proponent) or a gross receipts tax, which would be harder to dodge than the corporate income tax. Barlett and Steele argue further that we need to rebuild manufacturing and reduce the trade deficit, with high tariffs if necessary. They propose massive investments in infrastructure and education, including job training. Finally, they argue that the financial fraudsters who caused the 2008 financial crisis need to be prosecuted. Surprisingly, they say little about getting money out of politics, though they do mention it in their prologue as well as the well-funded corporate propaganda machine.
Jeff Faux, founder of the Economic Policy Institute, was fighting trade agreements long before mainstream economists were willing to admit that maybe free trade isn’t always good for everybody, especially workers in the United States. His book, The Servant Economy, is a dystopian vision of the future of the middle class if present trends are not reversed. His basic argument is what he calls an “end-of-empire story,” that the U.S. can no longer sustain subsidized capitalism, global military dominance, and middle class prosperity. He argues that the country’s former economic and military dominance gave it a “cushion” that was able to sustain the middle class, but that the pressures of international trade and global competition have eroded that cushion along with the nation’s ability to achieve all three of the goals mentioned above.
For Faux, much of the problem stems from the increasing U.S. trade deficit, which figures in prominently throughout the book. The rise of finance relative to manufacturing is a key problem as well, one which has made the Democratic Party more dependent on Wall Street Money, which led to Clinton ending Glass-Steagall and Obama treating bankers with kid gloves after he came into office. Worse, as we saw in the 2011 debt negotiations and other instances, the President has made it clear that he thinks there needs to be cuts to Social Security.
“Hope is not a strategy,” according to Faux, and he devotes an entire chapter to what he calls “the shaky case for optimism.” He foresees a “politics of austerity” that will mean cuts to middle class programs, the continuing loss of good jobs to the trade deficit, and slowly declining living standards and economic security for the vast majority of Americans for decades to come.. He calls cuts to Social Security and Medicare “a done deal.” To me, perhaps the single most depressing statistic in the book relates to the much hyped “onshoring” phenomenon: GE has moved some production from China to Louisville, but the workers there make $13/hour compared to the $22/hour they formerly made.
What, then, is to be done? In a talk Faux gave at the Economic Policy Institute August 15th, he explained that he didn’t see the need to give a laundry list of policy proposals because, first, he had done so in previous books, and second, there was no point in it unless we change government decision-making. Thus, it is essentially a one-point program, a constitutional amendment that ends corporate “personhood” permanently. This would also have the effect of overturning Citizens United. Without that, he argues, there is no hope.
Lofgren’s book, The Party Is Over, is a Republican-eye view of what went wrong, beginning with Newt Gingrich’s takeover of the Republican Party. While highly critical of the rightward, anti-science turn of his party, he argues that the Democrats are not much better, and have suffered from extremely bad messaging (he says the stimulus act should have been called the “jobs bill,” for example). Interestingly, his major recommendation is to cut trillions from defense spending and redirect it to infrastructure. Of course, he wants to get the money out of politics, too, but cutting defense is his most distinctive policy proposal.
Taken together, these books are largely complementary, though each has its own distinct emphasis. Faux’s book, in my opinion, is the best of the three, though also the most depressing. His vision of a likely future is far too plausible to take lightly.
cross posted with Middle Class Political Economist
by Tom aka Rusty Rustbelt
Health Care Thoughts: PPACA Penalty/Tax
The Congressional Budget Office predicts in 2016 up to 6 million largely middle income workers will pay the PPACA “tax” or “penalty” or whatever we decide to call it, averaging about $1200. This is about 50% higher than previous estimates of impacted taxpayers. A weak economy plays into the increased estimate.
According to the CBO, most of the payers will be in the middle income workers. Does this constitute a middle class tax increase?
In this political season hot rhetoric is flying from both sides. Expect the charges and counter charges to continue.
Angry Bear has had a history of disagreement with Megan McArdle via her Atlantic magazine posts (starting in 2007), at one point being called Mike and his merry madmen in print by Megan McArdle (in exasperation?). Still. the madmen included Mike, Dan Crawford, Spencer England, Ken Houghton, Robert Waldmann, and other notables brought in to help. I will have a history up later when I can sort them out.
Megan McArdle is a Koch-trained conservative activist working as a business journalist and pundit. She earned her MBA from the University of Chicago, received journalism training at the Kochs’ flagship libertarian think-tank, the Institute for Humane Studies, and has used her position at The Atlantic and, most recently, Newsweek/The Daily Beast, to run cover for and promote Koch interests and the Republican Party agenda. In early 2009, a GOP outfit backed by the Kochs hailed McArdle for her “leadership role in … re-branding the Republican party.” McArdle continues to conceal the extent of her deeply conflicted relationships with the Koch influence-peddling machine.
Read more at Naked Capitalism.
*CORRECTION: Welllll, commenter rjs informed me that Samuelson is not an economist. He just sorta masquerades as one. Ooooops. Sorry about my gullibility there, folks.
OK just to bring it all together, in Boca Raton Mitt Romney demonstrated that he didn’t know the very latest news about quantitative easing.
On May 17 2012
Romney: Yeah, it’s interesting… the former head of Goldman Sachs, John Whitehead, was also the former head of the New York Federal Reserve. And I met with him, and he said as soon as the Fed stops buying all the debt that we’re issuing—which they’ve been doing, the Fed’s buying like three-quarters of the debt that America issues. He said, once that’s over, he said we’re going to have a failed Treasury auction, interest rates are going to have to go up.
He is discussing QEII and how interest rates will shoot up when it ends. It ended in July 2011.
Mitt Romney does not keep up with the latest news what monetary policy has been for the preceding 10 months.
But he will bring us recovery not dependency. Of course. He undependable.
Romney’s Dependency on Rightwing Cliché and Errors of Historical Fact Won’t Deliver Him (Political) Recovery
My lovely wife shared this link with me on Facebook. I got into a discussion in comments there with a right winger who suggested that $250,000 was a very reasonable estimate for median income in Boston.
As it turns out, median household income in Boston is $51,914, close to the national average, and way below the Mass. State average of $67,950. But right wingers live in a data-free world, so this is no surprise.
Another contention in comments at that site is that the middle class is undefined and undefinable. Not so. I define middle class household income as the middle quintile. This range includes the median and a band around it wide enough to hold 20 percent of the population. You might wish to concoct your own definition with a wider spread, but you’d better not be asymmetric around the median. Feel free to use the middle three quintiles, if that is your preference. But if your of concept of middle class gets very far beyond 50% of the population, you really ought to give more thought to what the word “middle” actually means.
Thinking about all this prompted a look at the various income quintiles. The data, through 2009, is available at the Census Bureau web site, table 694. This table provides historical data from 1967 through 2009 on the top income limit for the bottom 4 quintiles, and the bottom income limit for the top 5%, expressed in constant 2009 dollars.
Graph 1 presents this data. The 3rd quintile – my definition of the middle class – is between the orange line and the yellow line.
In 1967, the threshold for the middle quintile was $32, 848. By 2009, it had increased by 17% to $38,550. This is a compounded annual growth rate of 0.38%
In 1967, the top limit for the middle (and threshold to the 4th) quintile was $46, 621. By 2009, it had increased by 33% to $61,801. This is a compounded annual growth rate of 0.68%.
The threshold value for the fifth quintile increased from $66,481 in 1967 by 80% to exactly $100,000 in 2009. This is a compounded annual growth rate of 0.98%.
To reach the top 5% required an income of 106,684 in 1967. By 2009, this had increased by 69% to $180, 001. This is a compounded annual growth rate of 1.25%.
So my comment sparring partner and the current presidential challenger he seems to support are a bit off base. $250,000 in household income puts a family well above the 95th percentile. In fact, that is just enough household income to crack the top 2%.
My ongoing hobby of debunking right wing nonsense aside, the point of this post is mainly to inform.
There are two main observations:
1) While the bottom two quintiles haven’t changed much over the decades, entry to the third quintile has crept up a bit; and into higher categories it’s moved up a lot. We recognize this as stagnation in the bottom half and growing inequality in the top half, skewed powerfully to the top.
2) This data set stops in ’09, so Obama is outside the discussion. But we can see that all the way up to the 95th percentile, income growth was dead flat during the Bush administration. No wonder the 95% percentile feels so poor.
But — surely, some wealth was generated during those 8 years. GDP growth was positive at least some of the time. I wonder where it all went?
Cross posted at Retirement Blues.