"The wants of the Union are to be supplied in one way or another ... as far as there may be any real difficulty in the exercise of the power of internal taxation, it will impose a disposition to greater care in the choice and arrangement of the means; and must naturally tend to make it a fixed point of policy in the national administration to go as far as may be practicable in making the luxury of the rich tributary to the public treasury"
One frequent and frustrating line that often crops up in the comments section of this blog is that American labor has no hope, it should just accept Chinese wages, since price is all that matters. That line of thinking is wrongheaded on multiple levels. It assumes direct factory labor is the most important cost driver, when for most manufactured goods, it is 11% to 15% of total product cost (and increased coordination costs of much more expensive managers are a significant offset to any savings achieved by using cheaper factory workers in faraway locations). It also assumes cost is the only way to compete, when that is naive on an input as well as a product level. How do these “labor cost is destiny” advocates explain the continued success of export powerhouse Germany? Finally, the offshoring,/outsourcing vogue ignores the riskiness and lower flexibility of extended supply chains.
This argument is sorely misguided because it serves to exculpate diseased, greedy, and incompetent American managers and executives. In the overwhelming majority of places where I lived in my childhood, a manufacturing plant was the biggest employer in the community. And when I went to business school, manufacturing was still seen as important. Indeed, the rise of Germany and Japan was then seen as due to sclerotic American management not being able to keep up with their innovations in product design and factory management.
But if you were to ask most people, they’d now blame the fall of American manufacturing on our workers. That scapegoating serves to shift focus from the top of the food chain at a time when executives have managed to greatly widen the gap between their pay and that of the folks reporting to them.
It might even be informative, too, but my take away is that even with Brill's final chapter revisions to hundreds of pages of union bashing and the usual "break the union and privatize the schools" organized money approach to looting public education funding, he and his ilk have a thorough ideological commitment to doing nothing about childhood poverty. Impressively they place an even higher priority on that commitment than their commitment to excusing management for the outcomes of contract negotiations and blaming anything they don't like on teachers' unions.
:: posted by buermann @ 2011-09-01 15:40:37 CST |
Robert Morris' [the founding father, who declined Washington's appointment to Sec. Treasury and suggested Alexander Hamilton in his stead, etc.] ... daily effort was to crush the American popular-finance movement and elevate the bondholders. ... While Morris and the other investors (yes, "other" -- Morris was not only Congress’s Superintendent of Finance but also perhaps the biggest investor in the congressional debt he "superintended") portrayed their bondholding in terms of patriotic sacrifice, the investing class had actually turned up its nose when Congress first offered bonds in 1776, at a measly 4%, payable in Congress’s poorly managed currency. The investors came in only when Morris arranged for a French loan to underwrite federal bonds at 6%, payable in bills of exchange issued by big European banking houses and backed by their metal reserves, as good as gold. And he got Congress to accept its crap currency in exchange for the bonds! Quite a payday -- for the banking and creditor class.
Morris did manage to attract investors -- by and large the friends of Robert Morris. He kept the French deal secret but leaked it to his cronies, establishing a blue-chip sector of founding public debt held by high-finance government insiders. Morris then spent a decade trying to get that debt funded via national taxes, "opening the purses of the people," as Morris put it, in order to pay a small group of investors reliable 6%, in the equivalent of metal, tax free.
... The important point is that both liberaloid and rightist claims on founding positions are always, by nature, unnuanced, thus false, because the realities of founding positions don’t support anyone’s hopeful foregone conclusions regarding politics today.
The brain trust ... who framed the Constitution in order to grow the nation by funding a domestic national debt sought deeply regressive taxation and the consolidation of wealth.
:: posted by buermann @ 2011-08-21 16:05:20 CST |
And, he should have added, you still don't really know to whom you owe that mortgage payment. Or who legally owns the house. Doomed. There's a little grade in the road. We're going for the coasting record.
:: posted by buermann @ 2011-08-19 01:01:06 CST |
three cheers for neoliberal beer:
Jimmy Carter was our first neoliberal president, antecedent of the world to come, and the problem with neoliberalism is that everything looks like a nail. Deregulation and privatization is the answer to any functioning public system, regardless of whether it makes daily life less bureaucratic or improves market signals or generates any sort of efficiencies at all. Wave the hand and the market will provide, and what it doesn't this or that insufficiently funded allowance will be more than enough to fairly redistribute the gains of the redistribution. Here's your retraining allowance kid, go back to school, work hard, and earn your newly required state certification to be a dog groomer.
The only unalloyed good I think everybody can agree on, the one 100% success of neonatal neoliberalism, was drug liberalization. I'm going to go enjoy the fruits of our long march to freer beer.
:: posted by buermann @ 2011-08-18 16:57:26 CST |
awaken mustakrakish, the lake troll, awaken, awaken, awaken:
Apparently Warren Buffet said something about his taxes being too low for the 50 billionth time and now everybody suddenly cares, one way or the other.
Ten years ago Bill Gates Sr. got 120 millionaires to sign his petition opposing the Bush estate tax cuts and their creation of an even worse idle aristocracy than we already have: Buffet refused to sign because it didn't go far enough.
In 2006 people stopped talking about how Buffet should just give more money to the government if he likes taxes so much and instead blathered on about Buffet's gift of much of his fortune to the Gates Foundation. "Isn't that nice," everybody nodded in agreement, "rich people are so awesome."
Many people support a flat tax, calling it a "fair tax". You can ignore the original and subsequent arguments for the progressive taxation of privilege and rents. You can go ahead and ignore the thoughts of the more liberal founding fathers who need not be quoted. You can ignore the more conservative founding fathers, of whom you may need some reminding. You can ignore that the primary expense of the state is, one way or another, the protection of property, and that those who have benefited most by that protection, and likewise have the most to lose, should pay some greater share in return for its favors. You can ignore the uncontroversial economic fact of the decreasing marginal utility of every dollar of income, and that to tax a fair share of the last dollar requires a higher proportional levy than that on the first.
But nobody comes out and openly supports regressive taxation, because such a policy is morally and ethically and politically depraved, worse itself than the original sin of taxing anybody at all.
And what Warren Buffet has been complaining about for years is that we have had, for a long time, a regressive tax system, justified in its existence only by the fallacy of argumentum ad accountum, in which the middle and upper classes pay higher effective rates than the kleptocratic class of the uber-rich, who barely pay the effective tax rate of a janitor earning a little over the federal poverty line.
Reading the commentary on this recent complaint you'd think people just woke up at the bottom of a swamp, unable to fathom the fact that we have an incredibly regressive tax system that robs everybody and gives to the incredibly wealthy, making them incredibly wealthier.
:: posted by buermann @ 2011-08-18 15:41:31 CST |
One of the causes of inflation, any textbook will tell you, is a general decrease in supply. Idle, unproductive resources, say 15 million of them, and historically low capacity utilization, will generate inflation no different, all things being equal, than printing too much money to put them back to work.
I've never witnessed an inflation hawk, or anybody else for that matter, complain about the inflationary force generated by shortfalls in production.
We could also talk about the CFMA and the Fed's printing money to re-inflate asset prices pushing rich people's money into rolling speculative long positions in commodities markets and pushing up the consumer price index, but even if the financial sector wasn't the pit of unmitigated fraud that it is, you'd expect a little inflation from all this idle capacity after national income has (mostly) recovered: somebody is making money again, but that money is self-evidently chasing fewer goods and services than it could be.
:: posted by buermann @ 2011-08-18 09:42:29 CST |
rick perry is a red:
As I was saying, Republican executives have no problem saying all the wrong things and doing the right thing. Private employment down? Rail against government and increase public employment. The rubes won't care because you invoke the mystic chants of the order of the skewed laffer curve and have the R in front of yer name. They can't be expected to care about facts when there are miracles involved.
:: posted by buermann @ 2011-08-17 12:59:39 CST |
I'm not completely sold on neo-chartalism, but grant that outside econ textbooks the basic premise is beyond dispute. It's something of a relief that now that Paul Krugman has finally stopped offering strawman arguments that MMT doesn't predict inflation he's instead resorted to making completely incoherent, self-contradictory arguments about the dangers of printing money.
In any case I'm pretty sure the neo-chartalist responds to inflation (or, presumably, strong signals thereof) by cutting deficits -- is this not their point, that you raise deficits until you hit either some arbitrary level of employment or some arbitrary level of inflation, whichever comes first, not some arbitrary level of fear, "uncertainty", debt ratio, or interest paymens -- so Krugman's new argument is still sort of an Aunt Sally.
:: posted by buermann @ 2011-08-16 15:29:46 CST |
well, that's one way of putting it:
Reviewing the rules on the Affordable Care Act's monthly tax credits (paid directly to the private insurer) for folks below 400% of the federal poverty line Timothy Jost notes that they may end up owing large lump sums in repayments at the end of the year if their annual income rises, and if they end up above the thresh hold they would owe the entire $5,000 subsidy back at the end of the year. This would, needless to say, damage household finances.
Don McCanne of PNHP comments:
There is a profusion of complexities in the Affordable Care Act that adversely impact patient-consumers, many of which Professor Jost has described in this and other articles. Although, as an academic, he has limited his advocacy to supporting rules that benefit patients, we don’t have to limit our own advocacy so narrowly.
:: posted by buermann @ 2011-08-15 17:27:21 CST |
it's crazy, but it just might "work":
I've been joking for a while that we'd seriously be better off with some wingnut Republican President because since Ford -- and Nixon wasn't all that shy either -- they've done nothing but run huge deficits. They always find some bullshit excuse to ignore the smell of their own shit and blow it out the top, and at this point it's probably more important to run large deficits than, well, insert any remaining pet cause they might actually be worse on than Obama.
[Modern Monetary Theory, neo-chartalism] is not just theoretical. In effect its greatest practitioner, without admitting to it, has been the Republican Party in the U.S., but only when in power: it cuts taxes to the wealthy and increases spending on prisons, the military, and war, and lets the deficit increase. And it works.
A Democratic President in thrall to Wall Street combined with an intransigent GOP congress is about the worst possible fiscal combination we could have. I'm pretty sure it's worse for financial reform, too, which is more important for anybody who still has a job, but carrying on about that seems greedy when there are tens of millions of people who need income. I prefer moochers and welfare queens to those embroiled in counterproductive toil, so I hesitate to say they "need work". Democratic congress, Republican white house, is the order of the election. It won't do anything to stop our conversion into a banana republic, to the extent that there's anything left to convert, but hey, the republic was doomed anyway.
Which brings us to a complaint: nothing I've read from the chartalists addresses what an Austrian would call the misallocation of capital or a Keynesian would call who knows what, the "animal spirits" of government directed unutilized resources, perhaps. They have their individual preferences, of course, but the theory seems neither here nor there. Yes, you could put everybody back to work building more houses than we know what to do with and bombing sand into glass like W. did, but what are we going to do with the extra houses and surplus glass? Where are we going to hide the bodies? And the answer springs forth: we will hide the bodies in glass houses.
When they talk about financial assets I have to keep reminding myself that they're not talking about real assets, or real liabilities compared to financial liabilities. They're not talking about the market value of the collateral, or the inflation adjusted value of the debt instrument. Fair enough, but can't net financial liabilities be created when you're keeping the books in an ocean of fraud?
:: posted by buermann @ 2011-08-15 01:54:55 CST |
Here's a clue: you can't. You slashed taxes to record lows and everybody thinks you raised em. You've been pegged and you're going to get pegged and it doesn't matter what you do or say so you might as well just do what you're going to do and stop worrying about the opinions of a bunch of clueless dipshits who don't know and don't care.
:: posted by buermann @ 2011-08-13 21:36:58 CST |
The question becomes: Why is S&P given so much credence?
The ratings agency has not been particularly important because of its predictive powers. Ratings agencies were part of a system that urged governments around the world to slash social programs and loosen regulations on business for fear of the wrath of international investors.
In the early 1990s, according to Canadian investigative journalist Linda McQuaig, Canadian corporate executives encouraged ratings agencies to threaten a downgrade of their nation’s credit as an inducement for cutting social spending and lowering high-end tax rates. It worked.
And today we are seeing that Republicans use ratings agencies to support their conservative agenda: that the government can’t spend so much on entitlements such as Medicare and Social Security. Benefits of public employee unions must also be slashed, public assets privatized and the disruptive power of unions countered.
The government, this argument insists, needs to be run like a business — and rated like one. That would make sense to S&P, whose parent company is run by Terry McGraw, who moonlights as a leader of the Washington corporate powerhouse, the Business Roundtable.
S&P’s downgrade may ultimately provide cover for the Democrats leadership, as well. They now have the excuse that can justify to supporters why they have no choice but to break promises made to senior citizens, unions and the public. For example, House Democratic Whip Steny Hoyer has been giving speeches for years advocating entitlement cuts.
You could have put a lot of Washington Democrats up on that stage, and asked them if they would have accepted $10 in new taxes or new stimulus in exchange for $1 in cuts to Social Security, and you probably would have gotten much the same response: hell, no.
Obama *just* offered the same cuts to social security that his half-democrat debt commission did, a .03% reduction per year in the COLA, reducing SS by some $112B over the next 10 years (and much, much more in the infinite horizon by which social security is routinely, mistakenly declared bankrupt, thanks to the wonders of compound interest). He offered that $112B in cuts in exchange for an increase of... $1T in new tax revenue over the same period. That's a $1.12 cut to $10 in revenue. The Democrats just fucking offered exactly what Matt Bai postulates here and it was the Republicans, bless them, who said hell no.
:: posted by buermann @ 2011-08-12 13:52:49 CST |
better late than never, even if it's too late for most people:
Converting foreclosures into rentals could have been done before the families were kicked out onto the street, but that'd be socialism for people who need it, not people who bought it.
This could bring in a couple billion a year in revenue, and by removing inventory from the market shore up home prices far more efficiently than the $20+ billion tax credit or the fuck knows dollar HAMP scam that's subsidizing banks to dick around their customers even more than usual.
:: posted by buermann @ 2011-08-10 02:34:47 CST |
that strain of skepticism about the government should probably be taken with a grain of skepticism:
The role of Democrats should not be to convince people that government is great; it should be to help people reach their potential -- and government is a tool to do that. There has been a strain of skepticism about the government in the American character since the founding. Only the New Deal changed that significantly, but we have been returning to the norm ever since then.
This is the core of the left's critique -- the country doesn't agree with us, so take what political capital you have and use it to convince people to agree with us. But the presidency is not a Brookings lecture series; it's about governing the country and making a difference.
Is it really outside the scope of the job to explain to his clueless constituents what the government does? Damn near half of us think medicare just falls out of the sky like a rainbow of skittles. Easiest marks on the planet and this asshat is pretending to fret over the con. It doesn't cost any political capital to explain what the government spends taxes on while the President is exhorting us that he is powerless to help anybody because governments do not create jobs. He invested his political capital selling out the Treasury to the banks, conning home owners into HAMP, and buying the Heritage Foundation's healthcare reform bill from the insurance and drug sectors. Perhaps that's paying off in campaign donations, but it's not doing much to help anybody else.
And a Brookings lecture series? This President? I can't call it the pot and the kettle or I'll be called a racist, so we'll merely refer to the appeal to hypocrisy. What is called a speech by this administration is nothing but a maundering lecture of the kind you'd give a six year old who's asking questions you don't know the answers to. 'On the one hand eat your peas, on the other hand tighten your belt. Now, I know some people will say it won't do any good to fill ourselves full of peas first and tighten our belts later, and it's going to be a little unpleasant for everybody, but that is how we will meet the stringent conditions of destiny's victory. Jesus bless the conglomerated banks of 'murka.'
:: posted by buermann @ 2011-08-07 02:24:18 CST |
campaign finance deformities:
Next the Supreme Court will cite the success of voluntary disclosure when determining whether the government has the authority to enforce transparency requirements -- were it ever again to attempt to require any -- in campaign funding.
It's sort of perpetually amazing how conservatives will argue for some seemingly sensible, less good alternative one decade and then abandon it the next -- declaring to heaven almighty that it is communism and tyranny -- once liberals are stuck advocating for that alternative rather than accepting something even worse. So we have the Heritage Foundation's mid-90s healthcare reform bill denounced as Kenyan socialism and nowhere to go on campaign finance but opaque volunteerism. By 2020 liberals will be fighting to keep markets self-regulated rather than self-deregulated.
:: posted by buermann @ 2011-08-06 05:05:25 CST |
Study after study shows that people are grossly misinformed about where their tax dollars go -- they think it's all welfare and foreign aid and corrupt waste (and in the defense budget a great deal is after all exactly that) -- and this gross information failure that creates so much incoherence in our politics could be in large part remedied with simple line-item withholding. Just breaking this chart down at the department level would be a good start. Conservatives will still have a hard time understanding the difference between insurance and welfare programs, and most still won't know what most of these departments actually do with the money, but at least people will look at that pay stub and see some glimmer of reality.
:: posted by buermann @ 2011-08-05 18:36:10 CST |
dear closeted socialists, it gets better:
:: posted by buermann @ 2011-08-04 17:54:40 CST |
manners are no substitute for the right diagnosis:
Wealth defense is a constant even in civil-oligarchy regimes that have robust welfare states. In Finland, for example, the top 0.5 percent of the population owns 71.6 percent of the capital market, compared with 41.4 percent in the United States. The Scandanavian countries have high taxes, but these are consumption taxes, which burden the entire citizenry rather than concentrating on the rich. The extremely rich have always managed to ensure that they shared their tax burdens with the merely prosperous. Similarly in America, where the top tax bracket starts at $250,000. Bill Gates pays the same nominal rate as his dentist.
Once the various methods of tax avoidance are taken into account, it becomes clear that America’s tax system is actually regressive: in 2007, the top 1% of taxpayers paid an effective rate of less than 24%. The top 1/10 of 1% paid less than 22%. The top 400 incomes paid less than 17%. (246) The marginal rate for some hedge fund managers, five of whom earned more than $1 billion in 2007, has been zero, because they operated through offshore partnerships that let them defer taxes. ...
America’s oligarchs are unusually greedy: the Bush tax cuts, a major source of our huge federal deficit, were spearheaded by rich Republicans who decided that their enormous gains in the 1990s boom just weren’t enough for them. Winters can’t account for this, because, as he himself shows, oligarchy is a constant across civil regimes. America’s fetishizing of the wealthy and powerful, its contempt for the weak and needy, and its eagerness to thwart its own legitimizing narrative of equal opportunity (as I write this, college aid for the poor has just barely escaped the budget ax), needs a different explanation....
Winters offers a valuable perspective on how inequality persists, but he can’t explain the peculiar cruelties of modern American politics.
I think I find this dissuasive. Since the founding of the republic we've had something of an oligarchy, by this standard, and the problem we face now is an oligarchy that's been muscled over by the kleptocracy of high finance and doesn't seem to realize it.
:: posted by buermann @ 2011-08-04 17:21:53 CST |
managing government finances "just like families do":
:: posted by buermann @ 2011-08-04 15:51:05 CST |
labor gap :
if the employment to population ratio were the same as it was before the banks destroyed the economy we'd have 12 million more jobs right now. If the employment to population ratio stays where it is now that number will keep rising by about 1.8 million per year due to population growth. The loss in tax receipts from, say, 12 million shitty $35k/yr jobs, is approximately the $100 billion they've cut from the budget. We've done fucked ourselves Jim, get up and hump yourself.
:: posted by buermann @ 2011-08-04 13:57:55 CST |
Dear Wall Street:
It's your bed, we wish you'd unchain us from the bedposts so you could sleep in it.
:: posted by buermann @ 2011-08-04 13:22:32 CST |
The cost of borrowing overnight in this market tumbled below zero Thursday, after starting the day at around 0.08%.
That's some serious flight from risk.
:: posted by buermann @ 2011-08-04 13:04:16 CST |
and always whirling, whirling, whirling:
This bit of official GOP agitprop is so on target and so withering you kind of have to give them some credit: "Pivoting in circles". As near as I can tell the press corps' cliche of calling a politician's attempt to talk about something else not a segue or spin or turn but a "pivot" started with W, but I guess that's just another way in which the Barry never falls far from the Shrub.
:: posted by buermann @ 2011-08-04 01:04:43 CST |
"It was the price of liberty. The faith of America has been repeatedly pledged for it, and with solemnities, that give peculiar force to the obligation":
The Constitution came about precisely to enable a newly large government -- a national one -- to tax all Americans for the specific purpose of funding a large public debt. Neither Alexander Hamilton nor his mentor the financier Robert Morris made any bones about that purpose; James Madison was among their closest allies; and Edmund Randolph of Virginia opened the Constitutional Convention by charging the delegates to redress the country’s failure to fund -- not pay off, fund -- the public debt, by creating a national government.
Beginning during the War of Independence, and continuing throughout the 1780s, American nationalists committed themselves to a small class of upscale high financiers (largely identical with the American nationalists), who had bought bonds from the confederation Congress in hopes of earning regular, tax-free, 6% interest payments -- not in the Congress’s crashing paper currency but in hard, cold metal or its equivalent, stable bills of exchange. Morris, Hamilton, Madison, and others believed that swelling the debt to immense proportions would make a coherent nation out of thirteen squabbling states and make that nation a player on the world economic stage. Their plan to do so depended partly on making military-officer pay a pension, thus turning the entire officer class into public bondholders -- and giving Congress new power to tax all Americans to support that debt.
Hamilton is often reflexively presented as finding inventive ways to pay down the national debt. His real accomplishments were of course “funding and assumption” -- absorbing the states’ war debts in the federal one and funding that huge obligation via nationally collected and nationally enforced taxes.
Hence the all-important provisions of the Constitution giving Congress very broad powers to tax and acquire debt. To 18th-century American nationalists across the political spectrum -- to our founders and framers, that is, from Hamilton to Madison, from Morris to Randolph, from the financiers to the planters -- national taxing and borrowing were ineluctably connected to the very purpose of national government.
Nobody has to like it. But the original intent of the Constitution involved sustaining and managing public debt via taxation.
It’s hard to imagine liberals bringing to debt-ceiling and balanced-budget debates the painful realpolitik of our national origins, which show the Constitution existing, originally, to finance the investing class and yoke that class’s interest (in every sense) to national power.
:: posted by buermann @ 2011-08-02 20:06:55 CST |