In the interest of putting up good arguments *against* my general point of view (which I posted in “Shut up or Cut”, here’s the always-sharp-but- often-wrong Robert Reich. As with most tribal viewpoints, Reich makes several correct points and connects them in ways that are fairly rational. HOWEVER, what you miss with this type of analysis is the full and bigger picture that emerges when the many other factors in an economy are included. It’s a game super smart folks like Reich play super well, but for me it undermines their long term credibility since he’s more advocate and politico here than economist. Reich is a left wing economist and therefore focuses too narrowly on distribution issues as in this video. Compare with the CATO boys – the “right wing” economists who focus too narrowly on the *production* side of the equation. They largely ignore income distribution issues and mostly whine about how tax and government inhibit economic development (good points, but too narrow). On balance I line up more with the CATO views because I think they are far more representative of the forces and ideas that created our massive, vibrant, and mostly successfully economic powerhouse, but I’d like to see more from the right about the desirability of a more level income distribution. NOT so much because it would seem to be “fairer”, but simply because it is likely to create more stability both economically and culturally. So I’d agree with Reich about that part at least.
Also frustrating is how conveniently Dr. Robert ignores a real “solution”. Seems he’s saying we should “eat the rich”, a solution left wing folks routinely call for that history suggests will fail, especially in the dramatic form they invoked in places like China 1949, etc. Arguably China’s economic resurrection and rise of what will become the world’s largest middle class is almost entirely a product of the capitalist reforms invoked over the past few decades – reforms that allow people to reap the benefits of their innovations which in turn put more people to work at higher wages. Calling for a ‘stronger middle class’ is just fine, but he knows better than most that the rise of the very prosperous and successful US middle class came as a result of the spectacular productivity the US enjoyed even before the WWII economic boom. To me the issues we face are not the “us vs them” I’m hearing from the left, rather “how do we optimize the economy”, which I’m hearing from nobody. Solutions are simple, people aren’t. The simple solution in 30 seconds:
1. Cut defense spending 5% per year for the next decade, stabilizing in 2022 at half the current spend. Don’t worry hawks, we’ll still be number one in spending. Some of this savings would go to improved care for Veterans and families- an obligation we should never overlook.
2. Cut Social Security spending 2% per year for the next decade by eliminating most benefits for the wealthiest 25% of recipients, most of whom have other full pension and/or significant resources.
3. Cap medicare and medicaid spending at current levels and phase in a system much like that in France or Italy or Canada.
4. Increase capital gains tax to 17.5% maximum, 5.0% minimum.
… oh, and we can throw a massive tax funded national pizza party afterwards, because these reforms would lead to a staggering revenue surplus until we phased in the inevitable tax cuts we could afford by cutting our big ticket items of defense and unneeded entitlements …
Reich’s mostly correct on the facts, AFAICT. Inflation does reduce real wages (ie raises, when they happen, don’t keep up with loss of buying power—or increased prices). He’s also correct that the wealthy are making more now than they did 20 years ago, and paying less taxes per capita. We might not care for his schtick too much, but the evidence supports his assertions .
CATO? that’s like glibertarians, right. The only thing I generally agree with glibs on is reducing the DoD budget and protecting civil liberties–yet the GOP/TP has had no problem increasing the DoD budget and …with FISA, etc I don’t think they’re that big on the US-Con, either. Watching a bit of the GOP debate the other night (as much as I could stand), Ron Paul seemed ….like a wingnut of the first order. They all did, but Doc Paul was probably the leader on the quackometer–well, at least until Miss Palin enters the race.
Although he’s got *some* facts right, I think he’s looking so narrowly it won’t help solve the problems, which stem more from wasteful spending than from tax policy. Speaking as a NON rich guy I’m still very frustrated with the idea that the rich somehow “owe” a lot more taxes simply because they pay a lower percentage than in the past. That’s just a political talking point, it’s does not follow logically. Early taxation was trivial compared to now, and the trend is to continue bloating the bureaucracy past the sustainable point, which we reached years and years ago (ie current spending is not sustainable). The great thing about spending modification is that it solves both problems. Higher taxes are likely to create a host of additional challenges with economic systemic productivity.
As with many liberal economists Reich makes some normative assumptions (like about equality, etc)–but is that wrong? Which is to say, yes, a Nihilist–call him Swinelein– can always say…so what? The rich have benefitted from supply-side, and Swinelein’s rich, so, what’s good for Swinelein economically (say, slashing taxes, programs, etc) IS…good, according to Swinelein (who has read his Ayn Rand and Darwin as well). Most rightists and teabaggers (and not a few democrats) think in those terms–ie they are Swineleins. There are no obligations to be altruistic, etc. Social Darwinists would tend to reject Reich.
But poor and middle class people could argue–just from egotistic reasons–that supply side and “AynRandism” does not help them, over the long run (ie, Reaganomics was good for a few, for only a short time. Sort of like a casino). And I think that’s the case. A few working class people might like the anti-bureaucratic aspects of the TP/GOP, but most realize some govt. programs, health care, social security, higher taxes on the wealthy to pay for it–will be in their best interest, though that sort of bureaucracy is not as heroic or aristocratic as Swinelein’s ideology. In other words, economics tends to be site-specific.
I’m all for progressive wealth redistribution, but at what point do we stop doing it? Contrary to what many simply assert without reviewing the data, only a small portion of govt costs are paid by the “bottom half”. This is really a debate about how to tax upper middle and rich Americans – poor and middle don’t pay much in taxes. Reich and most “liberals” simply assume Govt spending is righteous. Even if we grant that, are we going to shift 100% of that cost burden to the rich? If yes is that likely to preserve the high productivity of those people as the bureaucracy keeps growing?
The current spending is unsustainable – we all know that. The current taxation system could easily support a reasonably sized government – ie one with reductions in unnecessary defense and entitlement spending.
Are financiers, executives, entertainers highly productive??? I don’t think so. The Forbes 400 list features very few real “workers”–even say, doctors or lawyers, or engineers. The billionaires are entrepreneurs, mainly–hustlers, people who won in finance, development, software, entertainment. In the case of the Waltons, a grocery store monopoly–the one Walton gal just married in. Her man gets killed in a airplane crash, and she gets 20 billion. Capitalism with a capital C.
I don’t begrudge successful professionals. Dr. McX deserves his big house on the hill–probably. Same for the professors, or real engineers, etc On the other hand big..entrepreneurs are more akin to..gamblers, IMHE. Making the very wealthy entrepreneurs (ie Forbes 400 types) shoulder the burden is not wrong or unethical. Even something like mandatory philanthropy could be instituted–take half of the Koch bros wealth, or the Google gang– and we could save social security. And tax their vacation/luxury properties at higher rates, etc. Above a few million and you’re no longer an average citizen–yr a tycoon.
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