Tuesday, December 14, 2010

The Onward March of Democratic Socialism

That's what you'd think of the Obama tax deal if you listened to Rush Limbaugh. You know the tax deal? The one that preserves the American subsidy for the richest people while stagnating the most dynamic economy in the world for the last decade? The cornerstone of the failed economic policies of the last Republican President? Yeah, that one. Though Rush says Obama just wants to pass the tax deal to see it fail over the next two years. As if the damn policy had worked for the last 10.

You know, I'd love to concentrate on the many court cases and political hyperbolies that continue to surround the Health Care Bill, but this Obama tax deal, as a piece of legislation, has incurred by far the most fascinating reactions from partisans on either side.

Krauthammer, flustered with this deal as well, calls it Stimulus II, and seemed to rail against it, and chiding GOP support for it because it gave away the store to Obama. Though Rush Limbaugh believes it gives away the store, it isn't as big a stimulus as Krauthammer makes it out to be. (Damn it is difficult to keep up...) Because no one can agree with President Obama on legislation, and still be sufficiently right-wing to qualify for the "conservative" label in America these days.

Of course, I think Krauthammer and Rush are right to be ticked-off: the President got more out of this tax deal than he had any right to expect. The GOTP, after two years of lunatic political marketing, got into office and started behaving as if reality should be a factor in decision-making. That's got to throw some true-believers (like Krauty and El Rushbo) for whom reality is optional, for the ideological loop.

The craziest thing about the whole tax deal? The folks who Rush and Kraut consider Democratic Socialists (or worse) hate the tax deal worse than they do. Independent Senator Bernie Sanders engaged in a pseudo-filibuster, and voted against the bill in the Senate this evening. He was joined by 5 members of the GOP caucus, and 9 Democrats.

I can understand a Democrat not liking extending Bush's failed economic policies. That's got to sting a little, when you have two years to get something done, and fail to do so because your leadership doesn't own a calendar. But when you get your fanny paddled as hard as they did in November, you have to accept a change in the political climate. I think a lot of Democrats are being ridiculous for going against it as hard as they are. It is literally killing their credibility with independents in the center to act this way. Which is actually pretty fascinating, from an objective point of view, because this is an almost perfect example of how the GOTP kicks Democratic ass on narrative and national conversation, without having to do much heavy lifting.

Despite all the vitriol from the extreme right-wing, you'll only hear about how much Democrats hate this bill. It doesn't matter how much I agree with Brook's column there, look at where his focus is.

Cluster liberals in the House and the commentariat are angry. They have no strategy for how Obama could have better played his weak hand — with a coming Republican majority, an expiring tax law and several Democratic senators from red states insisting on extending all the cuts. They just sense the waning of their moment and are howling in protest.

That's how "conservative" marketing works, folks. If all the GOTP think something's bad, the Democrats are intractable liberals who are to blame. If there is a split like this between the GOP and the TP on a policy, then it is the intractable liberals within the Democratic Party who are to blame. Please pay no attention to the reality bending insanity on the right - pay attention instead to our current pragmatic, centrist Democratic President aggreeing publicly with our former pragmatic, centrist Democratic President, and how the "bad" Democrats are acting.

Not one word about how the right-wing and their commentariat are angry, or why. To be sure, there are a few exceptions, but even that downplays the split on the right as "pockets of resistance."

Pockets of resistance to a tax deal with overwhelming bipartisan support.

By doing this, the right pleases its base with some red meat (though just outside the view of Joe Public) and passes its policy legislation, kneecaps what should be a huge victory by the Democratic President (whom they despise) and further promote the "liberal is a dirty word they want to raise your taxes" narrative all at the same time.



patsbrother said...

Taxing someone less is not a subsidy. Get out of that vat of kool aid you be bathing in.

Cousin Pat from Georgia said...


patsbrother said...

Um, care to read that definition one more time?

What you just cited to supports the assertion that "[t]axing someone less is not subsidy."

(Thanks, I guess.)

Cousin Pat from Georgia said...

"such as a tax allowance"

Subsidies are tax allowances.

patsbrother said...

Click on "allowance".

Mavric said...

For those of us who just got off work and are bleary eyed and a little slow at the moment, what does it matter if we call the tax cuts subsidies or not?

Dante said...

It's an important distinction because you can't foster a divisive, class-envy atmosphere without TEH EBIL RICH. One of the ways to foster that class envy is to point out something TEH EBIL RICH are getting that you're not. When the real things they get aren't enough to gain traction politically, you have to make something up somewhere, hence the "subsidy" they get for the government not taking their money. And this is nice because by extension as long as the government allows them TEH EBIL RICH to exist, they're getting a "subsidy" by this new definition of the word because they still have money in their pocket at the end of the day which by this definition is a government subsidy.

Cousin Pat from Georgia said...

Yes, it is all about class warfare and TEH EBIL RICH. < / rolling eyes > The "class warfare" card is like the righ-wing version of the "race" card.

I've said it before, and I'll say it again, a progressive tax structure is not designed based on class warfare. This is not about "sticking it to the rich" because they are rich. This is about charging them a higher rate of taxes because their high incomes allow them to experience exponentially greater returns on public projects.

Building better roads and infrastructure generally benefit everyone. But the very wealthy make exponentially more by having effective infrastructure that delivers their goods to markets. Our Navy patrols the globe to keep shipping lanes open, so wealthy individuals can move their products to more markets.

Roads, infrastructure and the US Navy (just a few examples) are all expensive, high ticket price items. The very wealthy stand to benefit from those high ticket price items exponentially more than other income brackets - why shouldn't they pay a higher percentage of their income towards the cost?

As we have recently seen, there are limits to the "cut taxes = expand economy" model. There appears to be a floor. If your markets are not making up for the revenue lost to low tax rates (as planned), you end up having to find other streams of revenue or cut spending.

Neither the GOP (from 2001 to 2006/8 nor the Democrats 2006 - Present) nor the GOTP (2011 - until) have indicated any serious initiative to cut spending or build any consesnus for doing so.

Therefore, we must conlcude that the American people (who elect these folks) are OK with spending at current rates, despite their complaints (actions > words). If that is to be believed, the low tax rates on the highest income earners counts as a subsidy, because we are sacrificing revenue as a matter of policy so these individuals can benefit economically.

Dante said...

"This is about charging them a higher rate of taxes because their high incomes allow them to experience exponentially greater returns on public projects."

I would assume it's wealth, not income, that allows someone the opportunity to reap greater returns on public projects. But going by the income assumption, what are the numbers? Where's the curve? You indicate it's exponential but I doubt that starts at 0. How does our current tax bracket system stack up against that curve? Or are you just assuming this assertion is correct because it seems right (like my wealth assumption)?

Mavric said...

Now that I have slept a little, here are my thoughts with no particular pretext at cohesion:

1) Granting universal tax breaks is not a subsidy. Everyone gets benfit. Granting one industry/company/person a specific tax break while others have to factor said tax into their cost structure is a subsidy, even by patsbrother's standards.

2) Our entire society is based around the more money you have, the easier it is to keep it. From better car insurance to bank accounts with higher interest rates and less fees, to hiring accountants to find tax loopholes, you keep more of your money if you have more to spend.

3) @Dante: of COURSE you can't foster class envy without the EBIL RICH. Without them, who would there be to envy? Honestly, there are plenty of things that the rich do to stoke that fire without anyone else's help. In Macon, I can't tell you how many times I've seen poor/middle class lose because the rich person has been pressing his case with *insert official here* at the Idle Hour Country Club. Is it legal? Probably not, but if you don't like it, sue them...oh wait, you're poor.

4) @paT: part of the advantage of being rich is not the expotential way they benefit from government services, but instead their ability to take advantage at all. The working poor don't have the same access to reliable cars for interstate travel, grant money for college or to start a business, or the ability to buy any big ticket item eligable for tax rebate from the federal government. BEFORE anyone goes and shows their behind about welfare and medicaid, I would first like to point out that those programs are subsistance programs, not live comfortably programs like the shockjocks would have you believe. Second, that it's often a full time job keeping benefits with the bureaucratic nightmares involved keeping you struggling to only stay a little behind.

Mavric said...

@ Dante: Good question. There may be a study somewhere describing the wealth to benefit relationship, but I doubt it. The benifits to being rich are scattered all throughout society to such a degree that any tax brackets are arbitrary in my opinion.

Cousin Pat from Georgia said...

Nah, I just make this stuff up as I go along.

I see wealth and income as fairly similar, but I can also understand your point. Wealth > income, because wealth constitutes items other than just dollars on the check.

I'm grossly oversimplifying economic theory by my distinctions, and I do run the risk of making intuitive explanations. That being said, I know that wealthy folks do not build invest billions into industries for me to patronize out of the goodness of their own hearts.

I do not know the exact rate of exponential return, but if it didn't exist, we wouldn't have incredible income disparity or a need for compound interest. My specific ignorance does not discredit the idea of progressive taxation, however, any more than progressive taxation is hateful to those in higher brackets. I feel that if right-wingers are free to attack progressive taxation with intuitive and oversimplified political marketing, I am free to use the same to defend policies as I understand them.

With economies and markets and subsidies that change, the optimal tax rate for higher (and lower) brackets also change. In just the past century, we have seen the rates change from unsustainably low to unsustainably high - but they were sustainable for at least some period before an economic change forced a tax rate change.

You can't just keep taxes on a downward trend for every economic interest forever. Sometimes, counterintutively, raising taxes can strenthen a weak economy (increasing investment in infrastructure and education by confiscating stagnant wealth) and lowering taxes can weaken a strong economy (as wealth is free to be spent on luxury items at the expense of necessary infrastructure and education).

Dante said...

The simplest definition of net income is the value X where X=Y-Z with Y being your gross income and Z being the expenses to make that Y income. If we're going to tax income by its simplest definition, then there would be some value R where 0 < R < 1 that we would multiply by X to get our tax. If there are other factors that affect income, that's fine, but they need to be justified for it to remain an income tax, hence my questioning. The proof of burden on progressive taxation is squarely on the pro-progressive taxation side.

I'd also wager that if this rate of change does exist, it's logarithmic, not exponential because I can't imagine for example someone making $3 billion being a billion times more beholden to public works than someone making $2 billion, but then again that's just a guess. That doesn't change my primary point that if we're going to tax income, then let's tax income. If we're going to go regressive and tax use, then let's not pretend it's an income tax.

Cousin Pat from Georgia said...

We tax things other than income in this country. But for just the tax rates on the income, that would be one way to come up with a formula. That's a way I'll leave to the economists.

The reaon I prefer the progressive income tax over the regressive use tax is simple: with a dynamic market, you can't quantify all the values of certain usages.

The idea is not to stifle innovation, it is to pay for government and priority public projects.

And you may have me on the logarithmic vs. exponential increase syntax. Good on ya. But it doesn't change the fact that the wealthier individual is able to make more money off public infrastructure. Yes, he takes the investment risk and sets up his market, and works to make his product valuable, thereby earning his money. And he should be rewarded for that work. But he didn't build the infrastructure that supports his investment and earnings all by himself - we all chipped in for that. He gets more utility out of it.

He an I use the same infrastructure, but his rewards are far greater (exponentially or logarithmicly) than mine. The infrastructure is more valuable to him than it is to me. Ergo, I have no problem with his income getting taxed at a higher percentage than mine.

Dante said...

"The reaon I prefer the progressive income tax over the regressive use tax is simple: with a dynamic market, you can't quantify all the values of certain usages."

So a better option to a system whose main failing is that it can't be quantified with 100% accurately is a system that can't be quantified at all. You deserve an honorary PhD in Logical Analysis. Yeah, just assuming that someone who makes more money than you must therefore be taxed higher makes much more sense. If that's not wealth envy, I don't know what is.

Cousin Pat from Georgia said...

I've done my best to explain this in cold economics and reality, for I need no emotional or envious responses to jutify my thinking. We have no way to know the exact monetary value of every little bit of our society's dynamic social and physical infrastructure which is ever-changing, so we are left with oversimplifications and assumptions.

One of the most accurate and workable taxation systems to date that reflects this reality is the progressive income tax. I accept that it is not the most efficient system or the most optimal solution. I accept there may be alternatives (though I haven't heard any I think would work in a realistic scope).

But it is not class warfare. If we were engaged in class warfare, this nation wouldn't have the dynamic economy it currently does.

Dante said...

"I've done my best to explain this in cold economics and reality, for I need no emotional or envious responses to jutify my thinking."

No, you've merely explained what you think based on what seems right with no proof whatsoever that it is right. That's far from economics or reality. It's the very same visceral reaction you get so angry with the other side of the political isle using.

Cousin Pat from Georgia said...

Yeah, I just make this stuff up as I go along. Didn't I already say that?

It comes from years and years of reading about it, following arguments and counterarguments. And observing how the real world works. I don't need tremendous study to make these observations, because I'm not proposing anything radical - I'm explaining a system that already works for us. Someone already did the legwork and I don't have to.

That's a lot different from the "other side" proposing we change things based on nothing more than falsehoods and utopian fantasy, proposing we return to policies associated with eras of less prosperity.

Wealthy people's wealth came from somewhere, just as it is sustained somehow. Someone had to work to create it, someone had to work to maintain it, and someone had to work to expand it. But lets not act like their position isn't made stronger by the system we currently have in place.

There were wealthy folks before progressive taxes were introduced, there were wealthy folks around when top marginal tax rates were up around 90%, there are wealthy folks around when the tax rates go down. Through all economies and all world events, they kept investing, kept earning and kept maintaining. Our system is set up to encourage that sort of thing by rewarding it.

Folks in areas with better infrastructure and more economic dynamism enjoy more dynamic growth of wealth than those living in areas of failing infrastructure and less economic dynamism. Progress prone communities tend to progress. The sun rises in an easterly direction and sets in a westerly direction. I don't need start charts to prove that.

Folks in areas with greater stability and economic liberty end up investing more and risking less to develop more markets in those areas, thus creating more wealth.

Do the wealthy not benefit from common public investments? Do they not benefit proportionately more than someone in my situation, or someone not lucky enough to be in my situation?

Build a road, and I can drive on it. But someone with wealth can invest in businesses at either end, and transportation in-between. We both paid for it, and we both use it. I use it to maintain my wealth, driving to work. But someone with wealth uses it to create more wealth. They get proportionately and demonstrably more out of that common investment. That ain't rocket surgery.