Analysis Domestic Policy Economics Op-Ed Review

income tax apologists’ own analysis shows the rich don’t pay their fair share

No one’s much surprised, but the Democrats are losing opportunities in the messaging war on tax reform. In a gleefully titled “reality check” oped, Fox News and Townhall contributor Guy Benson recently referenced an old USA Today fact check which called the Democrats’ rhetoric ahead of the Trump tax cuts “misleading.” It’s news now because of a Bloomberg piece analyzing 2016 tax data made available by the IRS in August. While that piece is not as hostile to progressive taxation as it might be, it is itself misleading in several ways and clearly seeks to emphasize to the same startling result from Benson’s piece: just over half of federal individual income taxes are paid by the top 3% of taxpayers when ranked by gross adjusted income (AGI).

Benson seizes on this to assert that the “Left’s political stories about ‘fair shares’ and ‘millionaires and billionaires’… [are] not grounded in facts and omit crucial perspective.” But it is Benson and his tax cut apologists — making claims like “we have a federal spending problem, not a revenue problem” — who lack crucial perspective. A careful reading of the very Bloomberg analysis that motivated Benson’s opinion shows just how bad a revenue problem our nation has.

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Jonathan Chait’s Nonsensical “Case” Against Bernie Sanders

Jonathan Chait, a smug, center-left blogger of some note among Democrats and moderates, recently weighed in on the Democratic primary. The article, with the self-congratulatory title “The Case Against Bernie Sanders” is worth exploring in some detail because of its bad logic, exaggerated arguments, and extreme cynicism. Ultimately, no one should be convinced by his “case.”

2012 Analysis Economics Election Foreign Policy Review

The Final Debate, or How I Learned to Stop Worrying and Love Israel


The third and final presidential debate of this election cycle was to be about foreign policy, just as the first (and the only other which wasn’t a Town Hall format) was to be about domestic policy. That didn’t really come to pass in earnest, and it also happened that this final debate was pretty flat. I think the main reason for that was the broad agreement that both candidates have on their approach to foreign policy: both love Israel, both fear and want to look tough on Iran, and both think America is the greatest thing to have recently happened to the world. This is obviously a bad position for Romney to find himself in as he attempts to convince us that we need a leadership change, which explains how much the debate pivoted back to the economy in variously clever and tired ways. A few interesting things happened, including a few zingers from Obama, but the tone after the tension of the second debate — and the last one before the election — was one of measured caution.

2012 Analysis Domestic Policy Economics Election Review

Prez Debate II: The Wrath Of Mitt

If there was one conclusion most of the pundits drew from the first presidential debate, it was that Obama was functionally asleep and let Romney walk all over him. If there was a second conclusion, it was that Jim Leher was functionally asleep and let Obama and Romney walk all over him. So it isn’t surprising, especially after announcing that it would be the case, that Obama was much more aggressive and challenging for this match-up,  the first and only Town Hall-style debate we’ll see this election. Romney must have known this, so he upped his game as well, and tensions ran high. Obama won the debate by being engaged, articulate, and right on the issues. But he got help from Romney, who emphatically lost it by over-correcting and quite frankly embarrassing himself.

2012 Analysis Economics Election Foreign Policy

Congress keeps it real for the Olympics

ABC News reported on Wednesday that America’s rugged, heroic Olympic athletes will be decked out in some classy duds designed by Ralph Lauren this year for the opening ceremonies in London. The BBC offered the next day that “the classic navy blue blazers, white trousers and skirts, and red-accented ties and berets may have a distinctly American look” that will no doubt have every Real American biting their lips to hold back tears of nationalist joy. But there’s a catch: the uniforms, while designed in the United States, were made in China.

Oh boy, cue the outrage!

Analysis Economics

now he’ll investigate the banks?

The State of the Union speech last night was, as it was certain to be, filled with vague notions about reform and platitudes about the inherent strength of America. But one item under discussion was concrete, focused, and surprising:

Tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.

As I said, this was quite a surprise, which is itself quite sad. Recall that Obama campaigned on a return to the rule of law after its manifold abuses under Bush. After the Supreme Court’s June 2008 ruling in the case of Boumediene v. Bush, which upheld the right of habeas corpus even for suspected terrorists being detained in Guantanamo Bay, Candidate Obama said this:

The Court’s decision is a rejection of the Bush Administration’s attempt to create a legal black hole at Guantanamo – yet another failed policy supported by John McCain. This is an important step toward reestablishing our credibility as a nation committed to the rule of law, and rejecting a false choice between fighting terrorism and respecting habeas corpus.

Notice the dig on McCain; this was about a week after Clinton had conceded the democratic nomination to Obama, so the latter was shifting into general campaign mode after an unusually long primary season. Then in the same vein, we have this from his inaugural speech:

Our founding fathers faced with perils that we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience’s sake.

The very next day, he reiterated in a press conference that “transparency and the rule of law will be the touchstones of this presidency.”

But what happened next? Certainly no investigation of the economic collapse. University of Missouri law professor William Black says the evidence of Wall Street criminality is so blindingly obvious that the Obama administration must believe they can get convictions, and that only “willful blindness” of that evidence could explain that

there were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here.

The Wall Street economic crisis is so involved that I won’t go into details now. Suffice it to say that the lack of prosecutions has upset many. CBS News’s program 60 Minutes featured an interview with Obama last month. Steve Kroft pointed out how “there’s not been any prosecutions, criminal prosecutions, of people on Wall Street,” opined that any civil action which has been brought has been viewed by many as “a slap on the wrist, fines” (more on this shortly), and asked the president if he was “disappointed” by all that. Obama’s response was a dodge:

You know, I can’t, as President of the United States, comment on the decisions about particular prosecutions. That’s the job of the Justice Department. And we keep those things separate, so that there’s no political influence on decisions made by professional prosecutors. I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn’t illegal.

Glenn Greenwald excellently deconstructs the hypocrisy of this statement by documenting out how Obama did influence decisions not to prosecute Bush war crimes — apparently, according to one of Obama’s transition aids, because his team believed there might be reprisals and revolts if he did. But how can the president say he doesn’t influence Justice decisions and then say publicly that some of the Wall Street behaviour in question wasn’t illegal? That sounds like influence to me. And can we believe him when fewer than two months later, the same man asks his “Attorney General to create a special unit of federal prosecutors and leading state attorneys general” to “hold accountable those [on Wall Street] who broke the law?” That is a huge comment on prosecutorial decisions. In fact, it is a directive that amounts to “political influence on decisions made by professional prosecutors.”

A specific example might help to show what a dramatic reversal this will be (if it happens), not only in word but in deed. In late 2010, good evidence of widespread illegal foreclosures emerged. Banks were foreclosing on homes even while the mortgages were in the process of being renegotiated. In some cases, banks were foreclosing on people and seizing their homes when those banks didn’t legally own the delinquent mortgages they used as justification. Foreclosures were carried out by bank officials without verifying paperwork and sometimes using fake credentials — so-called robo-signing — in violation of laws requiring notaries be present. Banks even changed locks on or broke in to people’s homes to keep residents out and remove their belongings. The practices were so rampant that all 50 states’ attorneys general launched investigations, and as a result many banks halted some or all of their foreclosure proceedings. Yet the response from the Obama administration was to urge cautiously continuing foreclosing while the investigations were ongoing!

And what about those investigations? The state AGs decided to work together, but on a ‘fast track‘ according to the venture’s lead attorney. A settlement idea arose relatively quickly in consultation with the administration whereby the banks would pay a collective fine to the tune of $20 billion dollars — an absurdly small sum given the size of the industry and the magnitude of its crimes, but one which the banks still pushed back against for being too high — but would be spared from civil and perhaps some criminal liability. That’s right, a fast tracked deal for a small fine that releases the banks from further legal proceedings, championed by attorneys general whose job it is to investigate wrongdoing!

A single state AG refused this deal as being too kind to the banks. One might think that a lone dissenter could be ignored, but this AG happened to be the one from New York, the seat of the industry and one vested with special subpoena power under New York state law he intended to use. Amazingly, the Obama administration increasingly pressured him to stand down and accept the deal. Three cheers for the rule of law! Luckily, that deal seems increasingly less likely: my own Senator Cantwell has publicly called for full investigations before any deal is inked.

So after years of not investigating Wall Street crooks (while accepting huge campaign donations from them), pressuring those who would into giving into a fast tracked wrist-slap, and then claiming administrative separation as a justification for it all when asked, Obama now claims a total 180 in his State of the Union speech. Why? This is a reelection year, so it might just be empty rhetoric, another campaign promise to break. Or it might be a ruse to get Holder to start an investigation that he knows won’t be properly funded in time and money and then have a convenient scapegoat in either Holder or Congress. Maybe he just couldn’t resist the siren song of a 360,000-strong petition delivered to several of his local campaign offices. Whatever the reason, here’s hoping he means what he said. Let’s just see.

Analysis Economics Op-Ed Review

Michael Tanner’s (latest?) incomprehensible snow job

Michael Tanner, a senior fellow at the Cato Institute (a fiscally conservative small-government think tank co-founded by billionaire asshole Charles Koch), has a new op-ed in the National Review Online, that preeminent organ of right wing opinion. It caught my attention with the provocative headline “The Income-Inequality Myth” and is sufficiently horrible (for many reasons which I will discuss below) that it deserves a sound deconstruction.

Tanner’s off to a wicked start by including a CBO graph from October 2011 that shows the share of income ‘after transfers and federal taxes’ for the top 20% of American income earners grew roughly 10% from 1979 to 2007, while falling about 2% for everyone else. Maybe the point is that it might have been worse since the rectangles aren’t that different? So far I’m not convinced that income inequality is mythical, but if that isn’t bad enough, the first two paragraphs aren’t a substantive analysis of why income inequality is a dirty leftist lie, but rather a purely ad hominem broadside against Occupy Wall Street and a summary of a dystopian Vonnegut short story about a society which employs a “Handicapper General” to ensure that its citizens live in perfect equality.

Finally we get down to business: “most studies of inequality” have it all wrong, Tanner asserts, and he knows this thanks to studies about how the tax code has evolved over time done by one of Cato’s own, Alan Reynolds! As near as I can tell through the confusing and poorly worded summary of Reynolds’s findings, changes to capitals gains taxes and the 1986 tax reforms resulted in more wealth becoming taxable income. Basically, the rich aren’t getting richer, it just looks that way since more of the vast wealth they already had is taxed these days! Meanwhile, poorer workers are increasingly being compensated in less tangible “non-cash benefits” like health care and pensions, which are often not taxed, so pay hasn’t risen as sharply as it might have otherwise and the data are skewed. Tanner even repeats a claim that any perceived inequality can be explained away when you consider how ludicrously expensive health care has become. Yippee? Most obnoxiously, he seems to suggest that when you account for “non-cash social-welfare benefits such as food stamps, housing subsidies, and Medicaid” that “the gap between rich and poor may not be nearly as large as thought.” Allow me to rephrase: “Yes, you may be so crushingly poor that you can’t even afford housing and food, but an inadequate and shrinking safety net virtually makes up for that, so quit whining! And hands off the Benz.”

But then, without warning, Tanner shifts from arguing that inequality is just a talking point for Obama, a “significant misreading of the data,” to admitting it exists and that it is all the fault of “high-school dropouts” and “large segments of our society [that] remain unprepared for a 21st-century economy.” Whatever the reason for this inequality that suddenly does exist after all, Tanner tells us not to blame the Bush tax cuts or “tax cuts for the rich.” Why not? Because anonymous “studies” tell us it isn’t their fault!

Get ready to shift gears yet again, because now the discourse becomes not about whether income inequality exists, but rather about how inequality is good for us! In order to see this comes a three-part assault on rules of logic and composition.

First, we get a hypothetical scenario in which everyone’s income is magically doubled, and we avoid the ensuing catastrophic inflation troubles (as well as a discussion of how that was possible, or even that it would be an issue) to discover we have eliminated “an enormous amount of economic hardship” but at the expense of increased inequality! Wrapping up the thought experiment is Margaret Thatcher condescendingly channeling Ayn Rand (is there any other way?) in this choice straw man assault: “So long as the [income] gap is smaller, [those who would obsess over inequality] would rather have the poor poorer.” Yes, nothing like those bitter, success-hating liberals to ruin a perfectly good plutocracy.

Next, we get a rousing defense of live-and-let-live, reward-driven capitalism, but with a twist: the economic pie is not fixed, implying a zero-sum game; no, “in reality, though, the size of the pie is infinite.” Yes, in reality, pie is infinite in extent! It gets better in the very next sentence, where we have suggestions for the sort of ambitious risk-takers “ever striving for more” that we need to “make it grow.” That’s right, we need to grow an infinite pie! Surely his point is clear enough if you’re willing to assume he meant something other than what he said, but shouldn’t we expect better metaphor from a man the New York Times called “a lucid writer and vigorous polemicist”? After all, the Times is usually top-notch at telling it like it is.

Finally, we get some stirring quotation from Nobel Prize winner — and former Cato Institute fellow! — F.A. Hayek, who concluded that rapid progress requires inequality and would “be impossible without… some far in front of the rest.” No rationale is provided for this view, but I guess we should take Hayek’s word for it. After all, Nobel Prize winners are always deserving, and it provides a nice segue into a closing platitude about how we all want a “prosperous, growing economy, with less poverty.” Amen!

However, a cursory inquiry into the context of this Hayek quotation yields significantly more insight than Tanner is willing to impart through his spare reproduction of it. Taken from Hayek’s 1960 work The Constitution of Liberty (which coincidentally made the National Review‘s top 10 list for best 20th century nonfiction), a lengthier reproduction (with the bit Tanner cherry-picked in bold) is worthwhile to see that Hayek was not talking about the virtues of income inequality at all:

New knowledge and its benefits can spread only gradually, and the ambitions of the many will always be determined by what is as yet accessible only by the few. It is misleading to think of those new possibilities as if they were, from the beginning, a common possession of society which its members could deliberately share… it will have to pass through through a long course of adaptation, selection, combination, and improvement before full use can be made of it. This means that there will always be people who already benefit from new achievements that have not yet reached others.

The rapid economic advance that we have come to expect seems in large measure to be the result of this inequality and to be impossible without it. Progress at such a fast rate cannot proceed on a uniform front but must take place in echelon fashion, with some far ahead of the rest. The reason for this is concealed by our habit of regarding economic progress chiefly as an accumulation of ever greater quantities of goods and equipment. But the rise of our standard of life is due at least as much to an increase of knowledge which enables us not merely to consume more of the same things but to use different things, and often things we did not even know before. And though the growth of income depends in part on the accumulation of capital, more probably depends on our learning to use our resources more effectively and for new purposes.

Tanner has taken the sentiment completely out of context. If anything, I would guess that income inequality is, in Hayek’s view, a tragic artefact of the slow pace of innovation, imperfections and lag time in distribution, and a reluctance to adopt and apply new modes of knowledge and information; not an indispensable precondition for progress. The inequality Hayek refers to is that of access to “new knowledge and its benefits,” and he even criticizes the view that “growth of income” depends mostly on “the accumulation of capital” and the “accumulation of ever greater quantities of goods and equipment.” Tanner’s use of this quotation in concluding his thesis — self-aggrandizingly calling it out as coming from “another Nobel Prize winner” — is shamefully dishonest.

Now I don’t want to make a habit of writing a critical op-ed twice as long as the one it criticizes; if I did that every time some horrible op-ed came along, I would have no time to do anything else. But this Michael Tanner hack seems to be a big deal. I’d never heard of him before I stumbled upon this disgrace, but according to his Cato biography, Tanner has written several books that were well-received, frequently appears in prominent newspapers and on cable television, has testified to Congress many times, and helped Cato to launch the “Project on Social Security Choice, which is widely considered [by whom?] the leading impetus for transforming the soon-to-be-bankrupt system into a private savings program.” Obviously that last remark allows us to take anything Cato has to say with a grain of salt, since so-called experts disagree about the viability of Social Security. But the point is this guy matters to the mainstream media (despite his opening salvo in this piece against the mainstream media), and more importantly, to the conservative masses.

But more than that, this op-ed in particular is the sort of thing that poisons the discourse on a centrally vital topic. Citizens United wouldn’t be such a horrible decision with democracy-altering power if wealth distribution weren’t so wildly skewed toward corporation-people and the top hundredth (and even more, the top thousandth) of income earners. The fact that it is, and is only likely to get worse, is among the worst properties of American political life today. So purveyors of noise like Cato Institute senior fellow Michael Tanner, whether out of thinly veiled self-interest or the almost inconceivable notion that they actually believe this shit, are a huge problem that needs to be reckoned with. No wonder he starts out with a baseless attack on Occupy Wall Street, one of the few groups that has been able to halfway decently sound this alarm. It is important to see that dishonest, illogical tripe like this miserable op-ed is about the best the right wing has to offer to justify its transparent greed.