Increase Taxes to Boost Wages

Counter to what one would expect, raising taxes will boost wages and help repair the Great Divergence.
From Thom Hartmann's new book, "Rebooting the American Dream":

"High top marginal tax rates—generally well above 60 percent—on rich people actually stabilize the economy, prevent economic bubbles from forming, prevent the subsequent economic crashes, and lead to steady and sustained economic growth as well as steady and sustained wage growth for working people.3

On the other hand, when top marginal rates drop below 50 percent, the opposite happens.

As Beinhart noted, the massive Republican tax cuts of the 1920s (from 73 to 25 percent) led directly to the Roaring Twenties’ real estate and stock market bubbles, a temporary boom, and then the crash and Republican Great Depression that started in 1929.

Then, from the 1930s to the 1980s, rates on the very rich went back up into the 70 to 90 percent range. As a result, the economy grew steadily, and for the first time in the history of our nation we went 50 years without a crash or major bank failure. It was also during this period that the American worker’s wages increased enough to produce the strongest middle class this nation has ever seen.

Then came Reaganomics."...

More counter intuitive thought, from a guy at Cato, no less:

Shrink the Government by Raising Taxes:

"Running the numbers through a fine-toothed comb, Cato’s Niskanen was even able to determine the exact tipping point for taxes and demand for government services: 19 percent of GDP. Whenever taxes were above that point (FDR to Carter and during the Clinton years), government grew more slowly than the rest of the economy or even shrank. Whenever taxes were below 19 percent of GDP, government grew in size and spending (usually military but others as well) like a fat man at a pie-eating contest.

“I would like to be proven wrong,” Niskanen told Atlantic Monthly writer Jonathan Rauch. And Rauch noted, “The way to limit the growth of government is to force politicians, and therefore voters, to pay for all the government they use—not to give them a discount.” And that means raising taxes to a point above 19 percent of GDP. “Voters will not shrink Big Government until they feel the pinch of its true cost,” Rauch wrote."

The whole article is worth a read for those of us brought to reality by the Simpson/Bowles numbers. Speaking of, have you tried to balance the budget? This NY Times interactive thingamadoochie was fun to play with.... I was successful, and you can be too!

Nancy & Barry's Latest Success

Once again, the Democrats have managed to pass a reasonable bill without the help of Republicans. A shame they should sit this one out, as most all of the benefits are for small businesses. "They" (tea partiers or republicans? hard to tell the difference...) would have you believe that the expiration of tax breaks for the richest 2% will hurt small businesses, but in reality, only 3% of small businesses would be effected, the ones with the biggest profits.

Here's a sampling of what the Democrats (the only working party) passed:

Starting today, millions of small business owners will be eligible for up to eight new tax cuts, and within weeks, thousands of businesses will finally have access to the credit they desperately need.

The bill also includes key provisions the President has fought for since the beginning of this year:

-- Small businesses receive a tax write-off on the first $500,000 of new equipment investments;
-- More than a million eligible small businesses will be able to make key long-term investments that are subject to zero capital gains taxes;
-- Entrepreneurs who take a chance on a new idea can deduct the first $10,000 of start-up costs; and
-- The self-employed can deduct 100 percent of the cost of health insurance for themselves and their families from self-employment taxes.

I really like that last one, and added the emphasis.

What's the Republican/Tea Party alternative? Stop taxing the rich so much and deregulate everything. Oh, and starve all social programs (Social Security/Medicare), so that eventually they won't be sustainable, because they don't like the government "giving" benefits in the first place. But I digress.
What I really want to do is congratulate the Democrats on passing this bill, and the health care bill, and the finance reform bill. Nancy Pelosi may be vilified by the "right", but you gotta hand it to her... she has passed legislation that Democrats have wanted for ages, with almost zero participation from "the other side". That's why they hate her, because she has been successful. She's no crazy liberal, she won't even support legalized marijuana in her home state. She's reasonable, and willing to compromise to get most of what she wants, a real politician in the best sense of the word.
It makes me long for a Republican Party that would compromise on Social Security, and make a plan that keeps it strong for the long term....you know, like Reagan did with Tip O'Neil back in the 80's. Why is Reagan always the hero, unless he did something "today's conservative" doesn't agree with, in which case it's whitewashed over. Reagan helped save Social Security.... Reagan gave amnesty to illegal aliens.... Reagan ran up the biggest deficit ever.... Reagan ran from a fight in the Middle East. He was a great president, in large part because he was willing to compromise when the time was right, and make pragmatic decisions. Today's Republicans would rather "stop everything up" than get anything done, and I think that's a disservice. I hope they will once again consider the possibility of compromise, after all, compromise is the heart of politics, and the only way to get things done in a democracy.

More info on small business jobs bill.

Update: Despite the election returns, Obama's first 2 years were an outstanding legislative success, and it was worth it to lose!

National Review is Delusional

National Review does a hatchet job on our current president with their comparison to Reagan. In an article titled "Obama: More a Carter than a Reagan", the unidentified columnist (I wouldn't want my name on it either) goes off on supposed ways that Obama is not up to Reagan's snuff. But I will not let you get away with it this time, my nameless nemesis. Let's break you down:

"Both men faced seemingly intractable economic problems with no easy solution, but Reagan understood that curing the nation’s debilitating inflation was going to involve a good deal of short-term economic pain and political unpopularity, and he was prepared to endure that. By contrast, Obama has done everything in his power to avoid painful corrections — at great cost to future taxpayers."

This is patently false. Reagan and Obama both took actions that caused/will cause our national debt to grow significantly. It was OK then and it's OK now. Not the best place to be, but it beats stagflation (in Reagan's case) and the collapse of our whole economic system (in Obama's case). How do Reagan's debts come at a greater cost than Obama's debts?

"Reagan was candid about what needed to be done, according to the late Bob Novak’s reporting on the subject: “I’m afraid this country is just going to have to suffer two, three years of hard times to pay for the [inflationary] binge we’ve been on,” Reagan said. It is impossible to imagine Obama speaking such unpopular truths in public or in private after having so often expressed the opinion that a massive debt-fueled government-spending program would create millions of jobs and reconstruct an economy torn asunder by years of binging on debt."

Obama has been candid about the difficulties we face, not just to Bob Novak, but to anyone who would listen, obviously not the editors at National Review. And a report just came out that Obama's spending program did create over 3 million jobs, not enough to get us out of the slump, but maybe enough to begin to bring us back toward "normal". Yes, between Bush/Obama's TARP plan and the stimulus, we laid out a lot of money, but this deficit spending is exactly what Reagan did as well.

"We can look back now and say that the solution to stagflation was obvious, but that’s only because the Reagan/Volcker approach worked. At the time, the idea that simply raising interest rates would be sufficient to alter inflationary expectations was a contested proposition."

Is National Review suggesting we raise interest rates? Well, not exactly. Rates have been at the bare-border bottom since we started stimulating the economy after 9/11. The low rates, in large part, helped cause the housing/mortgage crisis. They're still so low that we have no power left to raise/lower it to stimulate the economy. That tool is useless now. Unless you think we need higher interest rates. Is that what National Review is advocating?

"Instead of forcing the bondholders of TARPed banks to share in the sacrifice, Obama opted for a slow-motion bailout that allowed banks to rebuild their balance sheets gradually by borrowing from the Fed at zero and lending to the government at 4 percent."

I am not sure that TARP called for the bondholders to "share in the sacrifice" when the deal was made....by the Bush administration. Had Obama tried to retroactively tax the bondholders, I'm sure "the right" would have been fine with that (rolls eyes). Let's face it, our economic train nearly came off the tracks... what if Goldman/Chase/CITI/BOA etc all were really allowed to face the pain instead of getting a hand from Uncle Sam? What if we had allowed every financial institution to cascade into the abyss we faced? It seems that is what National Review and the Tea Party folks are advocating, now that the bridge has been crossed, and difficult decisions need to be made.

"Instead of letting housing prices find their floor, the administration tried to prop them up with a variety of ill-advised programs."

Those programs have not worked well, but that's more the fault of the banks. Obama has tried to institute help for homeowners in need, but it requires cooperation from the banks. Maybe National Review is advocating more regulations to force banks to do what is needed? I hope so.

"Obama decided to shake things up even more by borrowing at record levels to effectuate a bailout of insolvent state governments, passing a raft of new financial regulations, and attempting to pass a total overhaul of the way the nation uses energy."

Say we don't borrow the money. State governments go unfunded, teachers lose jobs, national parks close, Medicaid payments stop, emergency responders get cut, roads and bridges go without repair, the economy slows more. Good plan, National Review! So, after the greatest near collapse of our economy, you're suggesting we don't "pass a raft of new financial regulations"? Yeah, 'cause things were going so well the way they were, right National Review? Total overhaul of the way the nation uses energy? Why, that sounds like something that could be beneficial in the long run....creating jobs and securing our own energy needs.... who does this Obama think he is??

"So far, we have seen no evidence that Obama’s unpopular policies will pay those kinds of dividends."

Yeah, well so far, Obama is only a year and a half in...like Reagan was in 1982.

You know, this article never even compares Obama to Carter.... what a misleading headline. It should have been "Obama: We will never think he's that great, even if he turns out to be better than Reagan".

The article misses out on a couple of other points. When Reagan took office, our biggest competitor the USSR was bogged down in a difficult war with Afghanistan. Fast forward to Obama's, and guess what....we're the ones fighting a difficult war in Afghanistan. Plus one in Iraq. Kinda makes Reagan's first years look like a cakewalk.

Except Reagan got shot early in his first term. And he deserved and got lots of sympathy. But he was still at the same place in the polls then as Obama is now.

Once Reagan's plans went into effect, yes, the economy grew and that was terrific, but we didn't conquer the deficit spending until Clinton in his last year. Reagan's "heir" George W. Bush blew it all. And it's not like Reagan's policies didn't create problems of their own.... the plight of the many homeless in the 80's comes to mind. And ultimately, Reagan's core belief that regulations were the problem has been proven false, even by the likes of its proponents, Alan Greenspan and David Walker. Obama will make mistakes too, and some bad things will happen no matter what choices he makes, just like happened with Reagan. (Can you spell mujaheddin? Me, either. Thanks spell check!)

I liked Reagan in the 80's and I like Obama now. We don't have to destroy one to appreciate the other.

Memorial Day Story

The UNC-Chapel Hill online library is fascinating, and I came across a great story that is fitting for Memorial Day. What do Ronald Reagan, Gerald Ford, George H.W. Bush, Jimmy Dorsey, Kate Smith, Charlie "Choo Choo" Justice, Paul "Bear" Bryant, Otto Graham, and Ted Williams have in common? Naval Pre-Flight School in Chapel Hill 1942-1945. Click through to read the story.

Bush Waterboards Reagan

What did Reagan do regarding waterboarding? He prosecuted and jailed the offenders. As I've said before, George W. Bush ain't no Ronald Reagan.

"George W. Bush's Justice Department said subjecting a person to the near drowning of waterboarding was not a crime and didn't even cause pain, but Ronald Reagan's Justice Department thought otherwise, prosecuting a Texas sheriff and three deputies for using the practice to get confessions.

Federal prosecutors secured a 10-year sentence against the sheriff and four years in prison for the deputies. But that 1983 case -- which would seem to be directly on point for a legal analysis on waterboarding two decades later -- was never mentioned in the four Bush administration opinions released last week."

So Bush's Justice Dept. purposely ignored the Reagan precedent on waterboarding. Bush II should have emulated Reagan more... it seems to me he had none of Reagan's compassion.

Angry Left Can Step Off

Interesting Alternet article called "Enough of 'Barbituate' Left Cynicism, Obama Is a Victory over White Supremacy" by Tim Wise for the neo-lefties out there....you know that kind of liberal that's always a downer. I particularly liked this part:

At some point, the left will have to relinquish its love affair with marginalization. We'll have to stop behaving like those people who have a favorite band they love, and even damn near worship, until that day when the band actually begins to sell a lot of records and gain a measure of popularity, at which point they now suck and have obviously sold out: the idea being that if people like you, you must not be doing anything important, and that obscurity is the true measure of integrity. Deconstructing the psychological issues at the root of such a pose is well above my pay grade, but I'm sure would prove fascinating.

The simple fact is, people are inspired by Obama not because they view him as especially progressive per se (except in relation to some of the more retrograde policies of the current president, and in relation to where they feel, rightly, McCain/Palin would have led us), but because most folks respond to optimism, however ill-defined it may be. This is what the Reaganites understood, and for that matter it's what Martin Luther King Jr. and the civil rights movement knew too. It wasn't anger and pessimism that broke the back of formal apartheid in the south, but rather, hope, and a belief in the fundamental decency of people to make a change if confronted by the yawning chasm between their professed national ideals and the bleak national reality.

In other words, what the 60s freedom struggle took for granted, but which the cynical barbiturate left refuses to concede, is the basic goodness of the people of this nation, and the ability of the nation, for all of its faults (and they are legion) to change.

I know a lot of U2 fans that did this....once Rattle & Hum came out, U2 was crap. Too bad they didn't stay tuned, what a great ride it's been in the U2 camp since then.
Let's hope we get a similar ride from Obama. We can all at least hope, right?

Republican Perspective

P.J. O'Rourke spells it out for the Republicans in his latest on CATO:

"Let us bend over and kiss our ass goodbye. Our 28-year conservative opportunity to fix the moral and practical boundaries of government is gone--gone with the bear market and the Bear Stearns and the bear that's headed off to do you-know-what in the woods on our philosophy.

An entire generation has been born, grown up, and had families of its own since Ronald Reagan was elected. And where is the world we promised these children of the Conservative Age? Where is this land of freedom and responsibility, knowledge, opportunity, accomplishment, honor, truth, trust, and one boring hour each week spent in itchy clothes at church, synagogue, or mosque? It lies in ruins at our feet, as well it might, since we ourselves kicked the shining city upon a hill into dust and rubble."

Oh, he goes on from there. Republicans owe it to themselves to read this one.

W, You're no Reagan

"Mr. Reagan, like Mr. Bush, had gone through his share of second-term blues, including scandal (Iran-contra) and a hit to his job approval. But Reagan rebounded in his final year-plus in office – in part by cutting deals with Congress (and the Soviet Union) – and ended his presidency with job-approval ratings above 60 percent. Perhaps not coincidentally, he pulled off a rare feat: He was succeeded by his vice president, George H.W. Bush.

The current President Bush has shown no such inclination to compromise with the Democrats lately, instead using or threatening to use the veto pen early and often, particularly on spending bills. On Tuesday, Bush signed one, Defense appropriations, and vetoed one, the Labor-Health-Education appropriations bill, on the grounds that it was $10 billion over budget and funded 2,000 special projects.

Bush went after Congress in a speech Tuesday in Indiana: "Their majority was elected on a pledge of fiscal responsibility, but so far it is acting like a teenager with a new credit card."

Bush went 5-1/2 years before his first veto, but his apparent goal now is to reestablish his bona fides as a fiscal conservative, after spending big earlier in office."

Good luck with that 60% approval rating, George.

George W. Ain't No Ronnie

Steve Chapman , of the Chicago Tribune has an interesting take on George W., from Human Events, the mostly conservative site that features Pat Buchanan (yay!) and Ann Coulter (boo.....nah, hisssss):

"Ronald Reagan used to tell the story of a boy so optimistic that when he woke up on Christmas morning and was confronted with a huge mound of manure, he gleefully began shoveling. "There's a pony in here someplace!" he exclaimed.

For President Bush, when it comes to Iraq, every day is Christmas day. He's been shoveling for more than four years but still fully expects that pony to pop out at any moment. On Capitol Hill, though, even Republicans are starting to suspect that the malodorous pile is that and nothing more."

Even some (real) conservatives are starting to see that George W. ain't no Ronnie.

You're no Ronald Reagan

A (True) Conservative Case for Exiting Iraq (from an October 7 speech delivered on the House floor by Representative Ron Paul, a maverick Republican from Texas):

"In truth, our determined presence in Iraq actually increases the odds of regional chaos, inciting Iran and Syria while aiding Osama bin Laden in his recruiting efforts. Leaving Iraq would do the opposite-- though not without some dangers that rightfully should be blamed on our unwise invasion rather than our exit. Many experts believe bin Laden welcomed our invasion and occupation of two Muslim countries. It bolsters his claim that the U.S. intended to occupy and control the Middle East all along. This has galvanized radical Muslim fundamentalists against us. Osama bin Laden's campaign surely would suffer if we left....

We should heed the words of Ronald Reagan about his experience with a needless and mistaken military occupation of Lebanon. Sending troops into Lebanon seemed like a good idea in 1983, but in 1990 President Reagan said this in his memoirs: "…we did not appreciate fully enough the depth of the hatred and complexity of the problems that made the Middle East such a jungle… In the weeks immediately after the bombing, I believed the last thing we should do was turn tail and leave… yet, the irrationality of Middle Eastern politics forced us to rethink our policy there.""GWB ain't no RWR. Reagan could admit mistakes because he made them earnestly and with conviction. And that's part of what made him great, and made people love him even if they disagreed with his politics. I'm not sure how we can get out of Iraq, but it is interesting to ponder Paul's opening salvo:

"Supporters of the war in Iraq, as well as some non-supporters, warn of the dangers if we leave. But isn't it quite possible that these dangers are simply a consequence of having gone into Iraq in the first place, rather than a consequence of leaving? Isn't it possible that staying only makes the situation worse? If chaos results after our departure, it's because we occupied Iraq, not because we left."

Jerry Falwell Responds to watts4u2 blog

WorldNetDaily: The GOP is not a church

The week after I posted this:
"I miss Reagan, and it angers me that some Republicans see W as the "new
Reagan". George W ain't no Ronnie, folks. Sure, he's firm, determined and
won't he back down. It's just that he was wrong to push this war, wrong in
the planning for the aftermath, wrong not to listen to the right advisors,
and wrong if he thinks the $400 Billion spent on this war could not have
done much more for our safety had we used it here in America"

Jerry Falwell writes:
"At this moment in time, I would say that conservative people of faith are as energized behind President Bush as we have been behind any president in history. President Bush – like Ronald Reagan – has won our hearts because of his moral clarity, his unswerving integrity and his desire to intrepidly defend our nation against militant terrorists who seek to destroy us. (Fighting a "sensitive" battle against terrorism just doesn't seem plausible.) "

How can Falwell justify this war when the reasons given for going to war have proven false? And why the backhanded jab about "sensitive"? Certainly Jesus would have prefered we treat prisoners at Abu Grabe with sensitivity, in fact, that was at the core of Jesus' teachings, no? Turn the other cheek? The only way it makes sense for Jerry Falwell to defend this war is blind allegiance to the Republican Party and/or he wishes for the Christians and Muslims to battle it out in a race to armageddon.

Reagan was right. He hastened the end of the Cold War, got the economy moving, and gave us optimism.
W is a failure. Led us into unjust war, gave tax breaks mostly for the wealthiest while running the largest debts ever, and he plays on fear. I think he's a normal, good hearted person doing what he thinks is right. But he's not right. He's wrong.

Reagan came into office with unemployment, interest rates and inflation all over 10%. Just imagine! By the time he left office, all were well under control and communism was all but finished in Europe.

W inherited a budget surplus and with 9/11 was given the opportunity to unite the world in a common goal to stop terrorism. Instead, he launches a vandetta against his Daddy's arch-rival, while his puppeteer and his cronies rake in the profits from running the war. At least when Reagan made a mistake, it was a heartfelt (yet misguided) effort to save hostages, not a Bible-toting crusade against anyone who could be considered a terrorist. Like Ted Kennedy?

Ah, thanks Jerry, it's good to know you still push my buttons.