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Blissex
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«the idea is to bail out Greece, after driving it into third world status.» The issue is whether Greece can afford being above third world status without constant transfer payments. Perhaps the "natural" level of prosperity in Greece is not that much higher than in Turkey or Tunisia. There are first-world countries (median family income $20k) where constant transfer subsidies push third-world level (median income $5k) regions up into second-world levels ($10k). Perhaps as I just read somewhere else the question is whether west Germans want to subsidize Greeks as they have been subsidizing east Germans or the northern Italians have been subsidizing southern Italians.
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«When the top marginal rates were halved, executives calculated that it was okay to take the profits normally invested in the company andgive themselves higer salaries and bonuses.» I reckon that switch happened mostly because of the change in policy towards making hostile takeovers easier. If hostile takeovers are difficult, most management will be able to count on a long tenure and their main incentive is empire building rather than profit maximization, will loot their company slowly, and they will also be more generous to their workers (buy them off). If hostile takeovers are easy, most management are terrified of losing their jobs to a raider, and will squeeze their company as hard as they can to get (theoretical) earnings out and thus be a difficult takeover target, or even have the high share price to take over other companies, and they will also be afraid of having a short tenure and will loot their company as fast as they can. There is a very clear difference across countries as to these two policy choices and their consequences. I suspect that once hostile takeovers are easy then business execs will lobby hard to have marginal tax rates, especially on capital gains, to be reduced, in order to make the most of the loot they extract as fast as possible from their employers.
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I was just trying to explain how comes that so many comments were hostile -- there are genuinely many people who think that the upper and middle classes are being brutally exploited by the working and lower classes. As to statistical soundness there can be many reasons why comments on the article are not statistically sound (e.g. most commenters may be outrage by its perceived immorality). Anyhow «Gallup says 66% of their independent statistical sample approve of a similar idea» is a well know but not very important factoid; what matters is not what a representative sample of American residents say, but whom is nominated and elected by a majority of swing voters and campaign donors in marginal districts. Majority-critical of voters and campaign donors and especially swing ones in marginal districts are very much to the right of the general population, and the 50% of those eligible to vote who don't vote and the 95% who don't support their candidates with donations don't matter much.
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«The American Dream is alive and well -- in Denmark!» But Denmark is the best example of a vicious Communist tyranny! They have 50% of GDP paid in tax. If you go around Denmark you immediately notice the consequences: the frequent patrols by tax police with their machine guns and polished jackboots; the squads of high income workers being marched by commissars of the people from the "enemy of the state" camps they are locked into at night to work into nationalized banks and real estate brokers; the barefoot children of businessmen desperate to sell matches at street corners trying to make some more money with which to pay their parent's tax bills; the dilapidated houses and infrastructure; the look of fear and despair on most people; the special blocks for hereditary welfare recipients with their well maintained, vast homes, the frequent deliveries of fresh t-bone steaks, the cadillacs parked outside. Denmark is just the best example of how a high tax Communist tyranny makes life so miserable for most of the population to benefit a few exploitative welfare recipients. :-)
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Taxes at local levels are actually regressive, and conservative interests want to make them even more regressive, essentially switching to per-head/household fees instead of mostly flat-percentage consumption etc. taxes. Ideally local taxes should be progressive too, and income related instead of consumption or head/household related, so they would be anticyclical too instead of hugely procyclical. But changing tax profiles at the federal level to counter that is by far the easiest and quickest solution, and it also compensates across states and municipalities, as it is about individuals rather than areas, avoiding special cases like areas with fewer than average high income or areas with higher than average low income residents. But this logic while economically and financially sound completely runs against the conservative plan to partition the country into mostly-rich very low tax localities and mostly-poor very high tax localities, with no federal (or state) level fiscal union among them. What really horrifies conservatives is the case of vicious mobs of beastly parasitic poor (mostly colored) voters electing commissars of the people with a mandate exploit brutally the scattered few hard working deserving rich (mostly white) voters among them, and fiscal and electoral segregation is their way to avoid that. The image that comes to mind is that arising from the common story of hard working (white) exploited suburban families struggling to get to the end of the month and yet save for their children university fees on 250k/year, while (colored) overlord families feast daily on t-bone steaks BBQs in their CRA funded mansions with scores of Cadillacs parked in front of them, while their kids vandalize dorms in the top universities they got in for free with affirmative action bursaries.
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«There has been a very large change in the massive irish/jewish/italian groups: when they were working class (mostly male) factory workers they thought that the middle and upper classes owning those factories were exploiting them and the lower classes; now that they have become stock and property owning (mostly female) middle classes they think that the lower and working classes are exploiting them and the upper classes.» Before the Civil Rights Act the Democrats were the party of the enemies of the yankee elites (bosses and landlords) and of blacks: the irish/jewish/italian working class and the southern racists. The irish/jewish/italian working class would vote to support segregation (which also reduced competition for good jobs from colored workers), and the southern racists would vote for unions and welfare for white non yankee workers. Then around 1960-1970 something tremendous happened, and most colored voters started to vote Democrat, and most italian/jewish/irish middle classes and southern racists started voting Republican. «Mr. Messina/Cohen/Collins in their youth thought that the bosses and landlords were exploiters, and wanted wages up and rents down; Mrs. Messina/Cohen/Collins in her dotage think that the minorities and the poor are exploiters, and want wages down and rents up.» That is about the 1930-1970 period and then the 1980-2020 period, very clearly different in the graph of income distribution by decile that is often published.
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«the big corporations have stolen from their workers' retirement funds» That shoe hasn't dropped yet. There is still more time for extend and pretend, as much as 5-10 years. The really big issue as Karl Denninger has noticed is that debt (including private debt) is already way larger than GDP and has been growing faster than GDP, and debt interest payments are also growing faster than GDP. Most of that debt is owed to pension funds, private or public. Good luck.
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There is some "false consciousness" indeed, but I think that there is self-loathing too. Maybe the advertising got them to buy into the mini-objectivist point of view as hopeful John Galts, but once they bought into it and 20-30-40 years later discovered that they were not John Galt but serfs, they simply cannot switch ideology and condemn themselves. That's one of the consequences of selling your soul. If you corrupt yourself with the dream to be a really bad person (in your own view!) and then you find out that you haven't gut the guts and skill and luck for that, it becomes hard to renege on the whole discourse.
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«New Keynesianism from Lucas and Mankiw?» Whether you do this or not determines whether you are in or out. Also, it is actually Lucas and Samuelson (you are giving too much credit to Mankiw as an opinion leader). And Samuelson changed many of his ideas in later decades (IIRC he for example conceded on the outcome of Cambridge Capital Controversy).
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«a 55 year old with 20k in the bank and no pension plan is telling me how we should cut back on SS and follow the Paul plan for Medicare I just don't know what to say. It's ludicrous.» I think that is a crazy sort of intellectual honesty, as I think that most Real Americans like that are aware and self-loathing losers. During their younger years they bought so much into the idea that winners do whatever it takes, and losers deserve to lose (thinking that they would be winners because they had figured that secret to success). So when they find themselves 55 in that situation they feel that: * If they had the opportunities for cheating and stealing on a grand scale that Wall Street had they would have done the same, so they cannot criticize Wall Street for being a conspiracy of embezzlers, but only celebrate that team for winning. * They are losers and losers don't have any rights, even if it is themselves, and they invoke punishment on themselves to expiate their loserdom though suffering. Put another way, lots of people who buy into MLM schemes and Ponzi schemes have much the same attitude when they realize that they have been used.
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«Like Reagan before him, Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that income taxes would have to be raised in order to amortize the trust funds.» The other big change that enabled this was to bring the OASDI trust funds onto the USA balance sheet at the moment they were about to swing into huge surplus. It turns out that this plan (because it was a long term plan to destroy the New Deal) has been applied also to private corporations (with "contribution holidays" to corporate pensions plans when the Fed goosed asset prices up with bubbles, and closure of the pension plans when the bubbles bust) and most interestingly as to local government pension plans, as the Atlanta Fed research department observes: http://macroblog.typepad.com/macroblog/2011/10/state-and-local-fiscal-fortunes-follow-the-money-collected.html which I have already discussed in a previous comment: http://economistsview.typepad.com/economistsview/2011/10/signs-that-the-fed-will-ease-further.html#comment-6a00d83451b33869e20162fbcfb755970d This was a fully intentional plan to then
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Paine, the problem is that the current dominant politics is that welfare and even insurance is theft. The story used to be that the irish/jewish/italian working classes used to think that they and the lower classes were exploited by the bosses and landlords with the complicity of the middle classes. Now that those ethnic blocks are largely stock and real estate rentiers and think they are middle class, they feel exploited by the lower and working classes and feel class solidarity with their bosses and landlords. That is a phenomenal switch in attitudes that has radically changed the nature of both the Democratic and Republican parties. You cannot wish it away with «Popularize the notion of exploitation of the real producers» because most middle class voters really think that they and the upper classes are the real producers and the lower and working classes are the exploiters.
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«argument here that needs to be made, for both economic and marketing purposes, which your article omits.» As to marketing an article with a title containing the words "spread the wealth" seems designed to trigger anti-socialist feelings. Mark Thoma's article title will be quoted many times to prove that all liberals are about is socialism and the gulag, STEALING OTHER PEOPLE's PROPERTY. As to: «So the point of progressive taxation is not to "punish the rich" or "reward the lazy" as conservative pundits often proclaim, but rather to afford the children of the less wealthy an equal opportunity to succeed as those of the rich» That's the usual kissing of the babies as an excuse for whatever. But most Real Americans don't see why the children of the American poor should be more deserving of equality of opportunity than the children of the Afghani poor, and they doubt very much that American liberals want to use progressive taxation to give poor Afghani children the same opportunities as poor American children. There are compelling arguments for progressive taxation are far more practical and far less hypocritical than kissing the babies, for example: * Taxation profiles are voted upon democratically, and paying taxes is entirely voluntary. If you don't like what your fellow citizens want to pay in taxes, take personal responsibility and move to another country that offers you a better deal. * The goal of taxation is simply to raise money/suppress private demand for whatever % of GNP a country wants to spend via the State, and therefore something like that same % may be desirable to raise in taxation, and most of that % is made by the richest taxpayers. * Most non-income-tax revenue is raised by regressive taxes, so to achieve a flat tax take income taxes should be progressive. * It is a proven fact that even fairly high levels of progressivity in taxation have little impact on the economy *either way*, with data showing that periods of highly progressive taxation in general had a better economy than those with less progressive taxation, whether it is correlation or causation. * Progressive taxation represents a weak form of insurance against misfortune: if your income drops, you pay a lower percentage. That is a very compelling even for the rich, for many of which income is highly volatile, and for the middle classes, for many of which their current high paying job would be difficult to find again.
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I have been reading quite a few of the comments on MSN and they seem mostly genuine, even if many predictably are of the welfare queen/strapping young buck type (what pious dogooders might call "pettily selfish"), and some contain very important points: «(Incidentally when Liberals raise hopes and disappoint people, watch out. Remember WATTS, NEWARK, DETROIT...this is next. Then you get Nixon and Reagan again. Saw it before.)» Apart from PATCO the other thing that triggered a mass switch of the newly-prosperous irish/jewish/italian middle classes to hard right attitudes were the minority riots. This poster obviously still remembers them vividly. They generated so much fear and revulsion.
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«You should realize that there are armies of privately funded sock puppets that monitor key words on mainstream news websites and portals like MSN.com and Yahoo.com.» Maybe, but also there are a number of unpaid volunteers that do that. Because the attitude that the middle and upper classes are being exploited by the welfare queens and the strapping young bucks is *very* common. The politics of "F*ck YOU! I got mine" are very common. There are quite a number of people who think that Mozillo, Fuld and Cayne are just winners who did whatever it took and would have done the same if they had the opportunity and cannot really criticize those winners for what they did. Pious dogoody liberals are not that popular, especially among female middle/upper class middle/older aged voters who own property and are relatively safe and just want the government to give them more tax free capital gains, not more welfare to the parasites. There has been a very large change in the massive irish/jewish/italian groups: when they were working class (mostly male) factory workers they thought that the middle and upper classes owning those factories were exploiting them and the lower classes; now that they have become stock and property owning (mostly female) middle classes they think that the lower and working classes are exploiting them and the upper classes. Mr. Messina/Cohen/Collins in their youth thought that the bosses and landlords were exploiters, and wanted wages up and rents down; Mrs. Messina/Cohen/Collins in her dotage think that the minorities and the poor are exploiters, and want wages down and rents up. This change has profoundly altered the nature of USA politics. The comments above are the result, and so is the massive shift to the right of the Democratic party, as a large part of their historical ethnic base has moved from tenant to landlord, from worker to rentier, and many of those have moved to the hard Republican right too. My usual quotes from Grover Norquist: http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=11699 «The 1930s rhetoric was bash business — only a handful of bankers thought that meant them. Now if you say we’re going to smash the big corporations, 60-plus percent of voters say “That’s my retirement you’re messing with. I don’t appreciate that”. And the Democrats have spent 50 years explaining that Republicans will pollute the earth and kill baby seals to get market caps higher. And in 2002, voters said, “We’re sorry about the seals and everything but we really got to get the stock market up.» http://www.enterstageright.com/archive/articles/0903/0903norquistinterview.htm «The growth of the investor class--those 70 per cent of voters who own stock and are more opposed to taxes and regulations on business as a result -- is strengthening the conservative movement. More gun owners, fewer labor union members, more homeschoolers, more property owners and a dwindling number of FDR-era Democrats all strengthen the conservative movement versus the Democrats.»
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So there this story about the Fed buying securities at risk-adjusted or nominal prices reminds me of the ultimate analysis of the current mess, by "bullbust" in 2008 in a comment on Mark Thoma's blog, which is still there but I reproduce here for the record: http://economistsview.typepad.com/economistsview/2008/02/why-bubbles-occ.html#comment-6a00d83451b33869e200e550a0c5a68834 bullbust says... ---------------------------------------------------- The state of received wisdom (as elucidated by various actors) 2004-2007. ---------------------------------------------------- Fed: There is no bubble (various Fed Research papers) Fed Chairman: There is no bubble, we have any number of studies which say so. [ we can always claim we never heard about the NINA loans blasted 24x7 on the radio, news and internet] And we don't know what a bubble is, we only know about the busts. Economists (99.9% of them) What bubble? Rational Homo economicus cannot be an economic actor in a bubble. Economist Jim Hamilton: I redefine the term bubble, and according to the new definition, this is not a bubble. Economist Brad Delong; I think there is no bubble, even though all the data says there is no bubble. I like my feet in both camps, so that when the no bubble crowd is proved wrong, I wont be. NAR/brokers/Homebuilders; Buy, or you'll be priced out. The Fed, the govt, and all the economists state there is no bubble Stock Market: If there is a bubble, the Green-bum put will bail us out. Wall Street pigmen: We better take the loot in this bubble and run before it all comes down. The govt will do the cleanup. Greenspan has stated that this is the official policy of the Fed, and Bernanke has no balls to change it. Economists Roubini, Volcker, Dean Baker: This house of financial chicanery is going to come down and it will end in tears. Jim Rogers, Buffet: Invest in anticipation of a collapse in housing and the dollar, and the middle class getting screwed by inflation. Middle-class pre-bubble owners: Stratospheric housing prices are great, because we get free money. It is a great thing that given todays prices, we cannot buy the house we live in, with our current income. (just read the comments on this very blog by the boomer middle-class on housing topics). Roubini et. al. are chicken littles. Gold nuts and Austrians Beware, there is going to be inflation, as all this debt cannot be paid. Buy gold. ---------------------------------------------------- State of received wisdom today, by the same actors ---------------------------------------------------- Fed: Banks are bust. Did'nt we tell you we only know busts? We need to bail them out. Bail out the banks, and we wont have to change anything. We can repeat this bubble. And we will never ever mention that we created this bubble with our mop-up-bubble policy, or that there was anything wrong with what we did. If we admit it the bubble con game will be over. How will we serve the pigmen then? Fed Chairman: There is no inflation, we have any number of studies which says core inflation is what matters and even that is overstated. [ we can always claim we never heard bread and milk prices, or metals] Economists (99.9% of them) How does rational Homo economicus become an economic actor in a bubble? We have never seen this before, it cannot be explained. Economist Jim Hamilton: There would have been no bubble in a free market. It is all because of the GSEs. Economist Brad Delong; Inflate, inflate. It may be unjust and arbitrary, but its better than having the system break down. If the system breaks, it is our economic theory, on which the system is based, that will get discredited. And I want a Fed post one day. NAR/brokers/Homebuilders; Buy,prices are at the bottom. Buy now or you'll be priced out. The Fed, the govt, and all the economists state ther is no bubble Stock Market: buy, buy, buy. The Green-bun put is here. Buy, so that we can dump it on you. Wall Street pigmen: You better bail us out. If you don't, we'll bring the whole house down. That's an empty threat, but you don't have the balls to call us on it, and, Bernanke is our bitch anyway. Economists Roubini, Volcker, Dean Baker: Told you so. Jim Rogers, Buffet: Told you so, and if you listened, you would have minted money. Middle-class pre-bubble owners: Inflate, inflate, inflate. We are so stupid that we think its good for us. Gold nuts and Austrians; Even we can't believe you would be that stupid, that it makes us seem smart in comparison. Posted by: bullbust | Link to comment | Feb 29, 2008 at 07:49 AM
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«One wonders when the economics people will stop claiming that money is capital and that it has some sort of intrinsic value that is not imparted by government enforcement.» But there is government enforcement, and therefore capital gains which are just "money" redistribute income by putting more money in the hands of someone. Via a series of policy debt bubbles pushing up asset prices the USA has been running a very determined (30 years) redistributive policy, to redistribute purchasing power from people without property to people with property, and from people with less property to people with more property (something that the people with less property are too stupid to understand). If we both earn 50k/year and I have a house value 100k and you have a house values 200k and they both double in price, I have made 100k and you have made 200k in "money", that is without any corresponding increase in output. Which means that while previously each of us was able to buy 50% of whatever output we produced in total, now you will be able to buy 250k of it and me only 150k of it, that is you will now get 62% of our combined output and I will get 38%, or a massive redistribution in real income. Sure, that 300k (100k+200k) of extra "money" capital gains does not correspond to any new "capital" or new "intrinsic value", but it is spendable and it does involve a massive income redistribution. Because it is spendable (because of government enforcement or whatever). The people with with $1m 401k or $1m house screw hard the people with the $100k 401k or the $100k house when stock or house prices bubble up, and all of them screw hard the people with nothing in their 401k or no house. "money" may not represent any greater accumulation of capital or generation of output, but it does represent purchasing power for sure in practice. Why do you think therefore people wrote whatever it took to borrow whatever they could to buy assets knowing that the Fed, the Rubinistas, the Republicans would do their best to bubble up asset prices?
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The whole issue in this fantasy is whether the bonds being bought are priced risk-adjusted or at par. Since the core of the debate is about the Fed buying MBses rather than Treasuries, the difference between risk adjusted and nominal price matter a whole lot. Because if the Fed buys at 100 securities with a potential market value of 50 something will be wonderful for someone. If the Fed will be buying at 50 securities with potential market value of 50, it is going to be a wash. Basically it is the old story: is the Fed going to monetize the massive overhang of losses on the colossal amount of existing debt? Or even more basically: who is going to take the enormous cramdown that is being delayed so artfully? The Fed (that is the dollar), debtors or creditor? All this "MBS easing" is really about the Fed taking the cramdown to save the creditors.
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No, that argument does not work. Because libertarians make a magical distinction between transactions validated by money and transactions imposed by force of arms. Their idea is that the jackbooted thugs of big government can put the gun to your head, while the owners of a plot of land or a housing association can just sue you, and *then* the jackbooted thugs of big government put a gun to your head in their behalf. The much better argument is to point out that being a resident in a given city is a BARGAIN OF MUTUAL BENEFIT between FREE AGENTS, and if you don't like the zoning restrictions in one city you are entirely FREE TO TAKE PERSONAL RESPONSIBILITY and move to another city offering you a better bargain. The key point in free/non free bargain is whether you can refuse them. Nobody forces you to work at Wal*Mart; if you don't like it there, you think the pay is too low, or the work too hard, walk away. The same argument applies exactly identically to a condo or a housing association or to a city or a county or a state. You don't like income tax in New York? You are free to find a better bargain in Texas. You don't like the bylaws of Atherton? Buy a ranch in Montana. From a libertarian point of view: if you can opt out it is a freely agreed bargain of mutual benefit, not a violation of your rights. Whether it is Wal*Mart or a city.
«much of the productivity comes from increased capital use or better management, in which case it seems more legitimate that the returns go to shareholders or managers respectively.» If you ask many a business owner or a manager, they will tell you that ALL productivity (not just all productivity increases) comes from capital and management, as workers are not contributing anything themselves. The idea is that nobody worries about the increase or decrease of the earnings of the cattle in a farm, even if their productivity (meat, milk, ...) increases, because without the farmers and their bankers the productivity of the cattle would be zero. Sure, you need to feed the cattle or the workers, and play muzak to keep them relaxed and more productive, but those are just the costs of keeping them going, and minimizing those costs is an important goal.
One thing that is very wrong with this picture is that it is about WEEKLY earnings instead of HOURLY earnings. The picture about HOURLY earnings is far more interesting, especially as number of hours worked per week has not stayed constant, especially for "white collar" work.
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May 22, 2011