David Brooks Bemoans the Low Standards of Living in Australia, Canada, Germany, Holland, Sweden, Norway, Denmark and Finland
In his NYT column today, David Brooks employs his standard column-writing formula of plucking two or more unrelated facts from their context and specifics, putting them into a sequence, and–voila!–suggesting a causal relationship, or at least a relationship of some sort, and therefore some conclusory fact.
This time around, he does it in the service of suggesting that the House Congressional Progressive Caucus’s proposed fiscal plan, written “by people hermetically sealed in the house of government”. Unlike, say, the Ryan plan, written by Paul Ryan, who has spent most of his career in manufacturing.
The CPC plan calls for raising the top income tax rate to 49%, taxing investment income at the same rate as other income, closing a variety of tax loopholes such as the carried-interest gig, taxing estates at their pre-2001 levels, and eliminating the corporate money-laundering-through-foreign-shell-subsidiaries option. It also proposes additional expenditures on such things as infrastructure and education. Brooks says all this means that the CPC members “believe that government is the [economic] horse, the source of growth, job creation and prosperity.” Not a source, but the source. Because this is a zero-sum game.
He first claims that these high tax rates for the top bracket, when coupled with other taxes–state and local taxes, sales taxes, gas taxes–would amount to about 60% of their income. But Brooks being Brooks, he then says, without explanation, that the rates would be “80 percent or 90 percent of somebody’s top marginal earnings.” Somebody’s, maybe, but it’s certainly not clear who’s. Anyway, this would “begin to change behavior and [we would] wind up with a very different country.” Which I don’t doubt.
“Higher taxes,” he says, “will produce long-term changes in social norms, behavior and growth.” Not necessarily bad changes, though, since no one is actually talking about taxing 80% or 90% of anyone’s income. No one serious in this country, anyway. But what would a David Brooks column be without a sleight of hand or two?
Brooks offers an illustration to buttress his argument:
Edward Prescott, a winner of the Nobel Memorial Prize in economics, found that, in the 1950s when their taxes were low, Europeans worked more hours per capita than Americans. Then their taxes went up, reducing the incentives to work and increasing the incentives to relax. Over the next decades, Europe saw a nearly 30 percent decline in work hours.
Yup. Those 40-hour-a-week labor laws here and in Europe sure lowered standards of living. Bring back sweat shops! Foxconn, not Siemens, is what we want our companies to be modeled after.
“A study last year by the economists Michael Keane and Richard Rogerson,” Brooks continues, “found that tax rates can have a surprisingly large influence on how much people invest in education, how likely they are to create businesses and which professions they go into.” No doubt. Get rid of the carried-interest break and start taxing hedge fund managers’ income at the same rate as salaries from working as an engineer, and some people who had planned to go into finance might instead go into engineering. Which would be awful for our society. And raising taxes to the rates they were when state universities received about 70% of their funding from the government rather than most of it from tuition, as they do now, might allow students to borrow–er, invest–far less to go to college.
I myself don’t favor a top tax rate as high as the 49% proposed by the CPC. Nor do I claim that the top tax rates in each of the countries I list in the title of this post has top tax rates that high. But what’s so striking and revealing about Brooks’s column is its utter untethering of actual standards of living from his litany of loose declarations of fact and silly conclusions. There is no apparent recognition in that column that the purpose of fiscal policy isn’t abstractions but personal and societal well-being.
There is, though, on the New York Times’s website today, in the Opinion section, a lengthy, detailed column that actually does exactly that, This one is not by a political pundit but instead by an actual working economist, albeit not one who Brooks would even read, much less cite: Joseph Stiglitz.* And, lo and behold, it demonstrates using relevant, rather than disembodied, facts and statistics, that the government-horse thing isn’t a zero-sum game after all. Unless it’s being ridden backwards by the Tea Party or saddled by a pundit who doesn’t work too hard even though he doesn’t live in Europe.
Raise David Brooks’s taxes a bit and he’ll cut his workweek from 20 hours to 15. Praise the lord.
*Stiglitz also is a Nobel laureate, by the way.
maybe we could just deport him to the Cayman Islands.
They have a lower tax rate there.
Sounds like a plan, Dale,
When 76% of your wealth generation is intangibles and more than half of that is your justice/legal system and the rest is your education system, then yeah, Government is the horse and not the wagon.
Brooks, as usual, is wrong in so many ways that one can hardly decide where to start the critique. Certainly I would agree with all that Beverly says about the deceitful and insipid character of the Brooks editorial style. His reference to Edward Prescott is a good case in point. Prescott was awarded his Nobel Prize many years prior to any of his current theorizing. More recently he has been soundly criticized for his astounding suggestion that the current economic malaise was brought on by workers’ fears that Obama would raise taxes causing a reduction in labor supply. Huh?? Unemployment was through the roof, but the labor supply was a problem due to fear of increasing taxes on workers’ income? That’s a rhetorical question meant to point out that Brooks must accept the collateral damage brought on by referencing an economist who may have lost his luster. Brooks has used Prof. Prescott in the past. He doesn’t mind beating a long dead horse so long as he can refer to a long past award for excellence.
And then, of course, Brooks’s reference to the two budgets and suggesting that the one from the Democratic Progressive Caucus has something to do with its authors having been sealed in the house of government. In case Bev’s sarcasm isn’t obvious to all, Mr. Ryan hasn’t done a day’s work that hasn’t been connected to government or people elected to government. The far right is certainly correct on one count. Government that includes the self serving likes of Paul Ryan is at least one person too big. And David Brooks continues to spin tall tales. Did his nose always stand so far out from his face?
No, you’re wrong, Dan. Ryan worked at McDonald’s as a teenager. He liked the private sector so much that he decided to … leave it as soon as he graduated from college.
I have to add, that I have absolutely no problem with raising the top rate to 49%. In fact, based on my posting or the 1936 tax table and Mike Kimel’s (cactus) work the 1936 tax table put the effective tax level right where Mike’s work showed the best economic results.
That’s the fact Jack. 🙂
High marginal rates have two beneficial effects on an economy. First and most obvious it raises more revenue. Less apparent, but certainly a result is the depressive effect those high rates have on the extraordinary levels of income paid to high ranking executives. Granted that much of the highest incomes are from gains and dividends. Still corporate executive pay in the millions per year has become average. it is self perpetuating as corporate board compensation committees seek “competitive” compensation and use sector averages to justify sky high incomes that Louis XVI would have been proud to receive. Tax the excess and close the loop holes that may result.
But its all academic until the voting population gets the message that it is they who are getting the shaft from the current tax structure and the likes of Brooks who promote the misinformation about that structure and the economy in general.
I don’t know what the top rates are in Canada, in Australia, in Holland, in Germany. But their progressive tax rates seem to work well in each of those countries, in enabling and effectuating high standards of living, decent social safety nets, and much less inequality than we have here.
And, considering that those countries don’t have a huge defense budget like we do, maybe our rates should be slightly more progressive, not less progressive, than theirs.
Beverly
I am not happy with “more progressive,” though i think “the rich” need to pay more taxes until “the deficit” is no longer an issue.
It is clear that the rich have more money than the poor, so that is where taxes will have to come from… at a progressive rate.
But demanding “the rich pay” (for everything i can think of) has become an excuse for not bothering to think about anything on the Left.
Especially when it turns out that “more progressive” means “don’t tax me… i am just scraping by on 100k.”
but yes, if i had to vote between you and Brooks, i’d vote for you.
Dale, in at least most of the countries I mentioned, the tax rates are more progressive than ours (i.e., the rates are higher for people with larger incomes), but people with incomes of about $100,000 (to use your example), and people with lower, but still middle-class, incomes also, pay more than they do here. And they get a lot, and have a higher standard of living, including excellent healthcare and a decent social safety net.
Echoing Dan B a reversion to 1936 top rates may not only hit the peacetime sweet spot in terms of the growth/revenue balance it also would seem to justify both the subsequent war time boosts in top rates (to not only pay for the war nut to capture some of the artificial growth from the resulting economic stimulus) and the 1964 reversion to something closer to 1936 as a response to the reduction in Public Debt per capita we saw in the post war years as that war debt was paid down.
That is it more or less establishes the principle of peacetime rates vs war time rates and that if the militarists insist on giving a big F-U to the Ilsms of this world they can pony up the tax to pay for their Glorious Adventures.
I haven’t tried it and maybe don’t have the numeric chops but it would seem relatively easily to isolate the cost of war fighting and subsequent paydown in explicit terms of cost and need of offsetting revenue. And as recognized in many previous War Taxes to explicitly take much of that revenue as a clawback of excessive war profits. Because one thing we know for sure and have since Shaw wrote Major Barbara: war is good business for munitions makers which in these days includes the tanks planes and ships that carry them.
Because when Cheney famously said in reference to Reagan’s spending that “deficits don’t matter” the clear subtext was “not to the military-industrial complex as long as marginal rates stay low and profiteering is left uncontrolled”
Beverly
i agree with you about O and “leadership.”
i also note that you note that taxes for the “middle” are higher in some of those better run countries. that was my point.
i do not agree with Bruce that maximizing “growth” is a sufficient reason to take money away from people who think they earned it.
talk about specific policies with specific benefits for specific people, and then how to pay for it.
but “growth” is too vague to be meaningful (see Zetland’s piece), and even “education” may not be quite the holy grail it seems to be in the eye of the poor confiding voter.
personally i’d like to see education that “works” in terms of making a more human life possible for those who “receive” it. what i saw during my career as an educator and educatee was more like a cattle drive with a lot of pretentious preening useless idiots living off the spoils and not much evidence that the beneficiaries were getting anything they or anybody else valued.
and i am not sure i know what a “higher standard of living” is. More plastic toys from Wal Mart?
i hate to sound like the “defender of the rich” here, because i know that is what i will be blamed as. what i am really trying to get at is some more actual real thinking beyond the familiar, useless, and counterproductive slogans of both the right and the left.
PS: Those countries I mentioned also have much better education systems, including affordable access to college, and much less inequality (partly because of the better education systems).
I believe they all also have lower unemployment rates.
What really, really angers me is this idea that overall standard of living shouldn’t be considered, and that actual evidence, both from the history of this country and examples elsewhere in the world, shouldn’t be considered in the debate. Obama certainly has played a part in the failure of these things to be a meaningful part of the pundit/pol/general-news-media conversation.
And, btw, I agree with the rightwing and the self-styled centrists that Obama has not been a leader. I just disagree that his failure as leader is in not simply delegating to the Tea Party the fiscal policy of the federal government. I think, instead, that his failure as a leader has been in effectively delegating to the Tea Party/Repubs and centrists decisions about what the fiscal conversation IS.
I’ll go even further: Considering how fundamental this debate is, and how critical a point we’re at in it, I think his failure to lead the discussion–via use of facts; i.e., statistics, evidence, illustrations–is a real tragedy for this country.
(I deleted and then reposted this, in order to make a change.)
Actually, Dale, there are pretty standard, accepted measures of standards of living, which include such things as life expectancy, access to quality healthcare, poverty levels, equality/inequality spreads, quality of education and access to decent k-12 education and to college (including affordability and widespread access), levels of household savings, decent living conditions for the elderly, and access to quality child daycare.
It doesn’t have all that much to do with measures of consumption, or even, say, house size.
Well that means
i replied to your comment before you (re) posted it.
i read Major Barbara as a child. part of the “education” i was able to give myself when i didn’t have to go to school or do homework.
one thing Major Barbara shows us is that nothing much has changed in the last hundred years.
as for school education, David Brooks is “educated”, so is Larry Summers… are you sure this is what you want?
Beverly
and i would accept your “measures” of standard of living as a place to begin. Though I don’t think most of them would hold up upon close examination.
And I am afraid that what most people mean by “standard of living” is “mo’ money.”
Moreover It seems to me that you, and others here, accept the basic values of “the rich” and even “the right,” except that you want to take some of their ill-gotten gains and spend them on stuff YOU want.
coberly, You protest too much. I think I want to do projects with you. You see, I think I am worth a lot more than you so if we make a dollar in our enterprise I get 99 cents and you get a penny. It’s just because I think I earn it and you don’t earn it so much.
In short, I have never really been able to make much sense of your argument so I just ignore it. Maybe I should continue to do so.
Don’t be ridiculous, Dale. What the sequence of our posts means is that you’re clairvoyant, and that instead of spending so much time reading and commenting on AB, you should be hanging out a shingle for tarot card readings. Think of how quickly you would become one of the 1%. (For income tax-rate purposes, I mean; not necessarily in, say, stock market picks.)
PS: Who the hell is Major Barbara? And was she part of the 1%?
Beverly
Major Barbara was a play by Shaw in 1905, referred to here first by Bruce.
AnnaLee
you hurt my feelings. often you have seemed to agree with me.
as to what is so hard to understand about what i am saying here today… well, it does tend to go against everything you have ever been taught, so i guess i don’t expect you to understand it.
a good deal of the “inequality” in the world is the result of criminal behavior, or what would be criminal if the criminals did not make the rules.
that doesn’t mean we should all become “equals in criminality,” or even muscle in on the criminals and make them an offer they can’t refuse.
meanwhile i am inclined to believe that at least “some” rich people made their money honestly and are willing to do their share for the general welfare.
and I personally, though quite poor, have nothing to complain about. i do not envy them.
Oh, gosh. Yeah. It struck a vaguely familiar ring, Dale. Should have googled it; then it would have struck a more familiar ring. It tied in with family lore. My grandfather (father’s side), who was by no means an alcoholic, but who did enjoy enjoy a drink now and then, used to (according to my mother, who wasn’t all that crazy about her mother-in-law) grit his teeth and walk out of the room calling my grandmother, not quite flatteringly, “Carrie Nation.” My grandmother was a good, old-fashioned teetotaler (my mother used to sort of speculate about cause-and-effect re my grandfather’s appreciation of martinis (or whatever) and my grandmother’s Carrie Nation impersonation.)
It sort of came to a head, I was told many times growing up, when my grandmother (that one) said she would not attend the wedding if there was the traditional Jewish wine at the ceremony, and my religious-Jewish other grandmother said she would not attend if there was not the wine, since without the wine if wasn’t a real Jewish ceremony!
The solution? Grape juice! My father, who proposed the idea, was a regular Solomon.
Anyway, I vaguely remember a Major Barbara tie-in reference to this, somehow. I guess my grandmother feared thatif my grandfather didn’t foreswear alcohol, they’d end up at the Salvation Army. In London!
Beverly
yes, but it does sound rather like the argument we are having.
“hey brother, pour the wine.”
AnnaLee,
try this.
say i own a logging business and i employ 100 workers, whom i pay 20 dollars an hour.
i pay myself one dollar an hour for each of the 100 workers.
That means they earn about 40k per year and I earn 100k.
note this puts me in the “top 1%” of at least this group. it also means i make considerably more than my workers.
my workers pay a 15% income tax… about 6000/yr.
if i paid a 15% income tax that would be 15,000 per year. but i understand that i “can afford it” so i pay a 30% income tax, or 30,000 per year.
that still leaves me with 70,000 compared to their 40,000.
since you tell me this is “unequal” i agree to pay them an extra 75 cents an hour… giving them 20.75 per hour. This leaves me with “only” 25 cnts per hour per worker, or 25 dollars per hour.
is this “equal” enough? no? then i’ll pay them each an extra 79 cents per hour, giving them 20.79 per hour, and leaving me with 21.00 per hour.
is this “equal enough” for you?
say it is. then what happens to the extra 15k I was paying in taxes when i was making 100 dollars an hour?
and what happens to the guys who make fine furniture? oh, hell, they can work for Wal Mart.
But anyway me and my workers are now “equal” and they are making 79 cents more per hour than they were.
happy now?
Now me, I don’t need the extra 79 cents that bad.
As long as the workers are making a “living wage” and not being forced to work in dangerous conditions, I can’t get too excited about “equality.”
And you will note that unlike the example you offered above, I am not making 100 times as much as they are.
Concentrate on laws that protect workers from slave wages and worse than slave working conditions and from fraud or sharp practice and i think we’ll make more progress toward a “higher standard of living” than if we run around demanding “equality.”
The problem with the super rich today is not that they have too much money, but that they have too much power.
And David Brooks is still a sleazy idiot.
OOPS
minor egregious error in above note to AnnaLee. doesn’t change the point.
After spilling deep family secrets online, in stream-of-consciousness fashion, no less, pour-the-wine sounds good to me. I’ll have a glass of that nice Shiraz I know you have in your wine cabinet, Dale.
And David Brooks most definitely is still a sleazy idiot. I’ll drink to that.