Lately I’ve been seeing a lot of things in the op-ed pages and in our political discourse that can be summed up in just two words.
If only…
…we were a country of fewer than 10 million people, 90% of whom were ethnic Danes and Lutherans. Whether he realizes it or not that’s the underlying message of Paul Krugman’s recent New York Times column. Small nation-states in which the overwhelming preponderance of the people share a common ethnic, religious, and historic heritage have levels of social cohesion, preference, and agreement that make all sort of things possible that just aren’t acceptable and plain won’t work in large, diverse countries. How do I know that social cohesion makes a difference? Most of the welfare fraud in Denmark as well as an enormous proportion of the violent crime are being perpetrated by Denmark’s recent immigrants and their children who just don’t feel the attachment and sense of common purpose the Danes feel with each other.
If only…
…we could increase the effective tax rate solely on the rich high enough that we could afford a lavish welfare state even with all of the waste, fraud, and abuse that’s typical in America and so much rarer in Europe. We can’t. We don’t know how to do it. Bernie Sanders has based most of his campaign on that premise. Unfortunately, “the rich” (defined as the highest 1% of income earners) don’t have enough money even if taxed at 100% to satisfy the promises he’s been making. You’d need to start taxing the top 10% of income earners, possibly the top 20%. Details are in pretty short supply.
If only…
…there were “moderate rebels” in Syria we could support. If only there were a political solution there. If only there were a choice other than between Assad and DAESH.
If only…
…the policies that Democrats are running on at the national level would get them elected at state level.
If only…
…Republican misbehavior excused Democratic misbehavior.
If only…
…Illinois politicians were more concerned about prudent stewardship of the people’s money than they were in looking out for #1.
The list is practically endless.
If wishes were horses, beggars would ride.
Despite the hurling of intent based insults back and forth by those of predominantly “left” or “right” pursuasion, the divide is really over faulty assumptions, a lack of sense for practicalities or legitimately held principles. (Eg religious beliefs). It’s a natural outgrowth of diversity. People who make ads showing grandma being thrown over the cliff, or claim greed, stupidity, homophobia, racism “war on women” etc over every policy dispute self identify as crass, even if for some it’s simply their job.
“If only” is a state of the world with which I am not familiar. I can only think of one practical reaction: maximize liberty and minimize it’s diminishment by – to steal a phrase – men of zeal. I don’t think we are headed that way, certainly not in the Democrat Party, and not by the corporatist Republicans.
Our country somehow persists on delusions ranging from freedom and democracy in the ME to Dutch social policy. I’m at the point where I don’t care about ideology anymore – I just want coherent policy that is reasonably achievable. This is a low standard that , unfortunately, few pundits, politicians or their supporters can meet.
Bernie Sanders has based most of his campaign on that premise.
I heard Sanders come out the other day and say that he was going to raise the payroll taxes on everyone. He’s not just for progressive taxation, he’s for regressive taxation as well.
I really wish someone would give me an explanation for why removing money from the private sector (the effect of taxation) is a good idea right now.
The US government isn’t working well. At the local level, things are dominated by the 1% and NIMBY-ism. The lackluster economy isn’t going to improve any time soon. We seem to have 50-50 splits over abortion and immigration and foreign policy choices.
Nor surprising that a lot of political discussion winds up “If only…”
I think Bernie Sanders simply views government as the rightful primary provider of various goods and services, financing be damned. I suspect he comes to that conclusion by closing his mind at the point of market failure or reliance on private charity, without considering that his alternative is probably worse. I, of course, think he’s sadly mistaken. I will give him credit for one thing – everyone should have some skin in the game. As a certain economist noted long ago, voting a tax increase on your neighbors is like three wolves and a sheep voting on what’s for dinner.
I think Dave is making a similar point to one I’ve made for years. That the private sector is almost always an inherently better steward of resources than the public sector. Certain tasks may only be practical as government functions (That same economist quipped “I’ve resigned myself to the fact that the military may only be administered centrally as a government function. I’ve also resigned myself to the fact that I will therefore pay $3 for every $1 in military services I receive.”) or local economic conditions may permit largesse. I’m not impressed that now is one of those times. Further, such largesse never seems to go away, inevitably grows, and sets the predicate for…….more largesse.
I think we’ve gotten way out of balance.
If only we had the right politicians and bureaucrats………..
Sander’s doesn’t plan to pay for any of his policy proposals. The plan is to compress spending power at the top with taxes and expanding it at the bottom with federal outlays. The taxes are an inflation buffer.
“I really wish someone would give me an explanation for why removing money from the private sector (the effect of taxation) is a good idea right now.”
Because right now is different. In the past, private money went toward building new plants, into research, buying new equipment, etc. Now we have a situation where new wealth is largely going into the finance sector. Wealth is being used to protect the interests of the wealthy, rather than create productive new business. (Which for some reason confuses those who claim to believe in markets and think incentives matter. That the wealthy should mostly use that wealth to protect their own interests always surprises conservatives and libertarians.) Wealth is being used to create think tanks and to purchase, oops, I mean sponsor politicians. I suspect that the reason for our innovation lull is linked to our increase in inequality, with only our very wealthy continuing to see income growth. Stop and think about it. If continued rapid growth in income for the top 0.1% was actually good for the economy, would we even be having this discussion? Wouldn’t it be self-evident that it was positive and be reflected in the massive increase in private investment and growth we are always told will happen?
To be clear, I am not talking about an increase in payroll taxes. I also fully concede that Dave may be correct. Policy is largely made by the wealthy for the benefit of the wealthy, who now own the press and much of the rest of the media. It may not be possible to do much about it now that they are so powerful.
Steve
“Because right now is different. In the past, private money went toward building new plants, into research, buying new equipment, etc.”
So if we taxed more that tax money would go into new plants, research, buying new equipment, etc.?
“Wealth is being used to protect the interests of the wealthy, rather than create productive new business. .”
Taxation does what exactly to address that problem?
“Wealth is being used to create think tanks and to purchase, oops, I mean sponsor politicians.”
Except there’s not any evidence to support the theory that wealth matters much in election outcomes.
“I suspect that the reason for our innovation lull is linked to our increase in inequality, with only our very wealthy continuing to see income growth. Stop and think about it.”
I have stopped and thought about it. I still don’t see how taxation solves the problem. You mention incentives, that is probably a more effective line of effort.
Just to be clear, my belief is that tax policy should revolve around funding the necessary functions of government, not attempting to right perceived wrongs. That’s why I’m skeptical of proposals to tax the so-called “1%” – those proposals are sold as a kind of justice to claw back ill-gotten gains. IMO that is bad policy.
Not to mention that relatively little of government spending is redistributed to the poor. Much, much more is redistributed from the 1% to the next 9%. On behalf of the poor, of course.
Further to Andy’s and Dave’s last comment could you, with some specificity, Steve, tell me what it means that “wealth goes into the finance sector?” The last time I looked the “finance sector” was a conduit to put capital providers and users together, along with the management of risk while deploying said capital. You know, loans, stocks, bonds and other securities, M&A, project finance………. Heh. You know, financing.
From where I sit its a nice grousing line, but has no meaning.
I don’t know what steve meant by it but I think there’s a legitimate concern over the amount of money going into financial instruments, increasing the income of the investment banks but not reflected in a commensurate increase in productive capacity. You sometimes see this discussed under the heading of “the social benefit” of the financial sector.
A couple of other financial practices of questionable value:
(1) I fail to see any theoretical value to the polity as a whole to credit default swaps, which are non-insurance insurance policies in which the government makes certain the very rich never have to pay for their own mistakes;
(2) High frequency traders seem to be doing nothing less than manipulating the markets so the HF traders can take money away from the less well connected.
An idea regarding (1): I’m wondering if Bernie Madoff might not have gotten away with it if he had spent some money on CDSes with AIG and the timing had been a little different. That’s an idea for the next clever grifter to work on….
CDS’s are insurance policies, but they are not restricted to the principle parties. It would be similar to purchasing life insurance for your neighbor and encouraging him to smoke, eat fatty foods, and play in traffic. Naked shorts and futures speculators who never take delivery are similar perversions.
Each of these has a proper function. Some regulation is needed, but without a firewall between the money creation spigot and the credit creation machinery, you will never control it.
As to the financial sector investing in the US, I would be interested to learn which non-financial or service related industries are getting the investment funds, or possibly, it is being invested in unicorn factories where they employ all the centaurs and leprechauns. It is probably all shielded by an invisibility cloak created with the magic fairy dust.
A manufacturing economy requires environmentally unfriendly factories and everything needed for those factories. It also requires blue collar workers, and these tend to be white, male, racist, misogynistic, homophobic, stupid, xenophobic, and hairy. A financialized economy fixes both these problems.
For investors with money, this is the best way to make money. For the left, it provides the expanding economy needed to expand the government.
The rich are getting richer because the idiots in charge keep doing more of what has not worked, and they hope that if they just do enough of it, it will work. The rich are only doing what they have been doing and are expected to do. If taxed more, the idiots in charge will need to ensure the rich make more money.
If the rich had iron ore instead of money, taking a percentage of their ore production would affect everything downstream – steel, automobiles, spare parts, etc., and redistributing it to poor people would not help the poor. It would be too costly to gather the ore from around the country. It would be lost. In order for the government to keep the economy from contracting, it would need to allow the rich access to other government land for mining.
If the government wanted to expand the economy, it need to allow the rich to have access to more government land, but this would make the rich even richer. Taking a portion of the ore as a tax would reduce the economic expansion. Heads the rich win. Tails the economy loses. Take your pick.
I realize that it is not a perfect analogy, but in a financialized economy, you are not taxing profits. You are destroying raw materials.
Haven’t times changed? Free enterprise produces prosperity. It also produces winners and losers. Now I know what they say, you haven’t lost until you give up or die. But geez, big business is entrenched. It’s global, most of us have to join a team, (existing business) or our prospects are dim. As to socialism, do we really have to fight till we die because we cannot afford our meds, our heat bill, our food? We all age, and shit happens. I think socialism is a choice we can take or leave as we see fit. It does not produce wealth, but consumes it. But, that is what wealth is for! I am a participant in Central States Pension Fund. 34 years of contributions. Looks like I bet on the wrong horse. Running out of $ soon. No bailout, and rightfully so, yet now my wife and I will become wards of the state. Eligible for SSI, food stamps and housing, (I hope).
Socialism requires a wealthy host for it to work. It can never work in a third world country. In Venezuela, it should work if the theory were valid, but even with their resources, Venezuela does not have the stored wealth needed for it to last.
Capitalism requires a functioning government, and it is not a natural state. It can never work in a third world country. In Somalia, Libya, and Afghanistan, libertarianism should have sprung forth full grown, but because humans are animals, the only way for libertarianism to function is to beat the human animal on its head and shoulders.
CDS’s are insurance policies, but they are not restricted to the principle parties.
No, it isn’t insurance. For it to count as insurance, the backer of the CDS has to take proper steps to be certain they can cover the instruments they hand out on some sort of actuarial basis. I could sell a shit load of CDSs tomorrow with no money backing them up at all and it would be perfectly legal. (Or it would have been in early 2008.) That’s pretty much what AIG did, and it was paying those suckers out on a 100 cents on the dollar basis that let us know that our government was never going to let the financiers fail. They’re fucking GOLD, man. Years of buying off pols finally paid off.
But geez, big business is entrenched. It’s global, most of us have to join a team, (existing business) or our prospects are dim.
Join a team and your prospects are still dim, as the companies would much rather put you out of work and hire some alien, legal or otherwise, to do the job for less. And thanks to our soon-to-be Speaker, that is going to be made even easier. We’re going to end up looking like a strange cross of Qatar with the all-but-slave labor from overseas coupled with the mass indigenous population of Saudi Arabia. Not going to end well, but I don’t care much. I’m not likely to make it to sixty in any event, so I won’t be here for the biog finale.
@Icepick
They mimic insurance, but if you want to nit-pick, there can be no insurance in a credit based monetary system. You cannot store money in a bank safely. It is invested in something. You cannot buy gold safely. It is a commodity. You cannot stuff it under the mattress. It is unsound. The same forces that make the primary instrument unstable affect the stabilizing instrument.
The counterparties did not do proper due diligence regarding AIG, but apparently, that was not necessary. They only needed to understand their government puppets.
At the time, most people believed what happened could not happen. This is no different than people believing that today is not happening. Nobel prize winning economists refuse to accept reality. Instead, an alien invasion is proposed as the solution. Most people would rather sacrifice their children before giving up their most cherished beliefs.
CDS’s should have been regulated as any other futures contract. It would not solve the problem, but there would be tools to manage the problem.
Wall Street does what the vast majority of people want them to do. The politicians never do anything to change what they do, and the voters never elect different politicians to change what they do. Wall Street provides the funds for the bread and circuses that the politicians dole out to the masses, and while some deny it, all cry out for more.
“my belief is that tax policy should revolve around funding the necessary functions of government, not attempting to right perceived wrongs. “
That’s just too much common sense for the current generation of voters to digest.
“Socialism requires a wealthy host for it to work.”
And when that wealthy host is no more what is plan B?
“Capitalism requires a functioning government…”
I think it also requires a populace who understands the fundamentals of how capitalism works, rather than a populace who feeds off of liberal propaganda encouraging a more feudal state of government dependency and coveting what others have.