08 March 2009

Oh Noes! Teh Socialism!

Thank you, John Cole, for this useful bit of perspective:

The 2010 proposed rate of 39.60% = socialism.
The 2002-2008 rates of 35.00% = capitalist nirvana.
The 39.6% rate of the 1990’s = socialism.
Everything else = down the memory hole.

That Obama fellow sure is soaking the rich, isn’t he?

And I might add that the era of insanely high marginal rates included a number of years of robust economic expansion and a few recessions, as the normal economic cycles dictate.  I only mention this to counter the inevitable argument that higher marginal taxes are economic poison.


  1. Careful Shadowfax....you may get threatened with a glass of water to the face...
    I'm afraid that most people suffer from the WIIFM complex..What's in it for me.
    If I feel that the socialist government is going to take more of my hard-earned money, then it's bad for the economy....never mind that I'll eventually be saving EVEN MORE when I'm paying less for healthcare, energy and to send my children to school.

  2. One of the things that Republican talking-heads don't get is that excessive marginal tax rates reduce the number of hours that very productive people are willing to work. At marginal tax rates in the 70% range there is little incentive for doctors, small business owners, and others whose compensation is directly tied to the number of hours worked to put in additional hours when they only get to keep a small amount of it. Changing the rate from 35 to 40% doesn't really affect the decision to work all that much.
    An additional reason that lower marginal rates are important is that it affects the risk taking decisions that small business owners. I'll invest $40,000 in an idea that might bring in $100,000 if I get to keep a significant fraction of the earnings. If I only get to keep 10% of the return, then I'm going to want much higher returns or more certainty in the return before I invest. Low marginal rates encourage innovation and new product development.

  3. Good point John...another common blunder is that many don't know what marginal tax rates are.
    If you make $255,000 per year...only $6000 will be taxed at the 40% socialist rate. The $249K will be taxed at the 'poor man's rate'

  4. I only mention this to counter the inevitable argument that higher marginal taxes are economic poison.

    The extremely high rates listed are during the great depression. So, um, WTF are you talking about?

    We'll see if building roads and buildings in 5 years and doling out welfare like it's going out of style cures our current recession, kind of like how it didn't work in Japan in the 1990s nor during the Great Depression nor ever, actually. Just using Logic 101, I fail to see how this will happen. 1.2 trillion dollars of spending, at least half of which will be funded by China (unless they're smart and get out of our treasury bond market since this program will not work) on a program which has been tried in various decades in various countries at various times, all leading to failure!

    I hope investors buying these treasury bonds run screaming. Don't finance this bullshit, people!!! It. Doesn't. Work.

    I truly believe that the only way to stimulate this economy on a long-term basis is a decrease in marginal tax rates over the long term. No stimulus checks, just more disposable income in the hands of businesses and Americans in general. A bailout to some degree is probably necessary (taking into account that many of our banks that will be getting this money are probably insolvent with or without the money), a temporary increase in welfare spending is probably necessary, but everything else will just cause us to stagnate.

  5. Came across your blog

    "Hello (Shadowfax?)". Looks like we are both ER docs (though on opposite coasts) :-)

    Do you mind if I chime in? Econ is my hobby so to speak.

    While I agree with you Shadowfax in your assertion that IN THEORY raising taxes has nothing to do with anything, I am not sure if this is totally true in the short term.

    John, if people truly wanted to purchase your services AND you refused to work because of higher tax rates, society would just pay you more for those same services to entice you back to work at the higher tax rates. Society could afford it as it had all that money from taxing you so much. ;-)

    But of course, in the long run, the relative wealth difference between high income earner you and low income earner "poor person" would in fact remain constant (which would defeat the original reason to tax you in the first place).

    People confuse these issues often.

    Computerized models of societies clearly show that increasing taxes does absolutely nothing to alter the underlying Pareto wealth distributions within a society.

    Pareto wealth spreads are no different in America today than they were before the introduction of income taxes and capital gains taxes. But today we are taxes at 40+% (including Federal, State and local income taxes) and things are no different than they were over 100 years ago.

    So raising taxes really does not even achieve the primary goals of taxing people, even if it is done "progressively". It works for a little while, but then the market adjusts.

    But where raising taxes CAN be a problem in when it creates MORAL HAZARD in the short term.

    One example: As a result of feeling more secure because John and Shadowfax have been taxed more to pay for my health care bills, I now proceed to eat more cheeseburgers than I otherwise would have as I know John and Shadowfax will now pay for my cardiac bypass.

    If I had to pay for the bypass myself, I would not have been able to pay for one and the fear of this kept me from eating cheeseburgers.

    So now we have more non-productive consumption as a whole in society (and are therefore that much poorer).

    As Margret Thatcher once cleverly noted- “The problem with socialism is that you eventually run out of other people’s money.”

    Wealth and economic growth ONLY come from savings and successfully channeling that savings into improving social productivity (i.e. moving even more meat in the ED spo to speak). This blog nicely summed the issue here.

    Of course the problem with this view is that people (and markets) are often not rational, e.g. they might just eat those cheeseburger even if they don't get better health coverage, etc...

    Anyway, "hello" from a fellow ER doc

  6. Don't forget the talk about eliminating the social security cap. If that happens then we have a marginal rate of appox 70% in California:

    39.6% federal
    15% social security (double for the self employed)
    13% Californias new increased rate
    1.5% medicare tax

    F*** it. I am going to quit working so hard. I am going to hoard what I can and not put an extra dime into the economy. Or just cheat on my taxes like all good politicians do.

  7. Thai you said:
    "society would just pay you more for those same services to entice you back to work at the higher tax rates"
    That may be true for people who work for wages, since if the supply is reduced and there are no substitutes the price will increase. It might be enough to induce people to add hours to their work week. However, given the severe shortage of ER docs, the market isn't clearing now. So there is no reason to expect that society will entice any docs back to work with higher wages.
    But in my case, I don't work for wages. If marginal tax rates are too high, society will never know what products or services I'm _not_ producing, because I won't make them. So society won't have the opportunity to bid up their price. Innovation suffers when rates are too high.
    A side effect of high marginal tax rates and low capital gains tax rates is that most people I know spend a lot of time figuring out how to move expenditures around to minimize taxes when they could be doing something productive with their time.
    Increasing the marginal rate from 35% to 40% isn't that big of a deal. However, uncapping FICA would effectively raise the marginal rate to 55%, plus another 4% in California and that becomes a big deal to me.

  8. Say what you want, Shadowfax, but the people are speaking. The Tea Parties are bustin' out all over (except the East Coast, of course).

    But to be fair, the problem at hand is not just a Democratic one. God knows ol' Obama inherited one hell of a mess from the Republicans. The problem (and this is my view) is that Americans have become too complacent with our professional politicians. Perhaps now, America is maturing and realizing that professional politicians with their political cronyism and back-room deals parlayed to assure re-election shouldn't be taken for granted.

    Take a minute to read this essay by Bretigne Shaffer. It's well-crafted and makes some important predictions about the economy without pointing too much blame to the right or the left.

  9. Makes you really reconsider the hellish pit of impoverished filth the American people lived in under that Commie bastard Eisenhower, doesn't it?


  10. An out of work Banker friend of mine (who is pretty much a fiscal conservative as you might imagine) had a good point. If you cut taxes to someone (a wealthy person) by say 5% or even 10% but their life savings are down by 30%, they are not suddenly going to run out there and start spending! Thus the stupidity of thinking that tax cuts are always the answer to increase spending. Oh, I guess then you will say to cut taxes by 40% and have the country go bankrupt.

  11. I have no axe to grind here since I will NEVER earn 250,000, but I can't help wondering why, if it so good that those who do earn over 250 K pay more, don't Shadowfax and all such supporters voluntarily pay more than the due amt on April 15? After all, if it is "good" that others pay more, shouldn't they be willing to pay more also for that same good?? Just wondering??

    And what is the magic of 250 K? Is that different than 249K or 150K or whatever other number that you want to pick? It seems so obvious to me that this is simply a way to pit one against another as we see our hard earned money being taken from us. The person making 250K is not a bad guy because of his/her earnings, and there is no reason to penalize that group. How about we simply SPEND LESS in Washington and call it even??

  12. Nurse K,

    If you would actually look at the graph, you would see that the extremely high marginal tax rates run all the way through the '50s and '60s. And despite the flat-earthers who now find it politically convenient to claim otherwise, every serious economist on earth agrees that government spending *was* instrumental in ending the Great Depression.


    Thanks for commenting. I agree that the *intent* of a progressive tax rate should not be wealth redistribution. If you say it wouldn't work, either, well, that's beyond my knowledge. My view is simply that the burden of government should be borne primarily by those who have benefited most from the protection of the government.

    Out of curiosity, what is your hypothesis for the dramatic polarization in wealth distribution over the last thirty years, if not due to the flattening of the tax structure?

    I do not buy the moral hazard argument -- at least not the example cited. It supposes that someone will ignore a direct personal threat (death by heart attack) due to the fact that they won't have to pay for the costs of the heart attack. While people will neglect their health, there doesn't seem to be much evidence that they will do so more because they have no out-of-pocket costs. As Happy Hospitalist says, FREE=MORE, i.e. people with no co-pays tend to overutilize health care.

    Dr Wes,
    Given that the Obama tax plan includes a cut for 95% of taxpayers, and an increase for 5% of taxpayers, I kinda doubt that you'll see massive street protests outside of Michelle Malkin's fevered imagination.

    bear in mind, as pointed out above, that *only* the dollars above $250K are taxed at the higher rate. To SPEND LESS in DC would have been a good solution, but after eight years of Bush, that ship has sailed. He was recklessly irresponsible, and borrowed & spent his way through a boom. Now we have a recession, and Obama will follow the advice of every serious economist and deficit spend to try to re-start the economy. Either way, in the end, taxes will need to go up on *all* of use, above and below $250K, in order to pay for the Bush years and this recession. Even commie reds like myself realize that the very wealthy won't be able to pay off the entire federal debt by themselves. Ultimately, there will be a middle class tax hike, sorry to say. Either that, or Nurse K will be proven correct and the dollar will collapse.

  13. Ummmm, maybe I'm dumber than even I think, but when I pay taxes, I look up my gross and it gives me a % to pay. If I am in the 40,000 bracket, I pay a % of the TOTAL, not a % that was above a certain cut off and the rest at a lower %. So if the higher % cuts in at 250K, then that % is on ALL the amount, not just what is over 249,999.99
    So Shadow, didn't kick in any extra on 4/15. huh?? Didn't think so. And why did you have to throw in Bush...I didn't mention political parties, and frankly don't care about political parties.
    And just as an aside, there were well over 250 well known ecomomists who flatly stated that spending was not the correct thing to do. Judging by the continued collapse, I'd say so far they have been shown to be correct.

  14. it's known as marginal tax rates and can be found here

  15. So Shadow, didn't kick in any extra on 4/15. huh?? Didn't think so.

    Wow, even (some) doctors play with strawmen?

    (Oh, what a great verfication word: evili!)

  16. Shadowfax, I actually have the opposite view as you on progressive taxation- if it works, use it.

    To be clear, it does work in the short term. The problem is society readjusts so that it doesn't work at all in the long term.
    (Same kind of thing we see with ANY other tax, such as property taxes and home values, etc...)

    Your question: "Out of curiosity, what is your hypothesis for the dramatic polarization in wealth distribution over the last thirty years, if not due to the flattening of the tax structure?"

    My answer: that is a big question!

    There isn't one answer, it is one of those "all of the above" responses (kind of like why are health care costs increasing). But if you wanted a list of a few of the main reasons in order of importance:
    1. Globalization and increasing global economic integration
    2. Immigration
    3. Fiat currency asset bubble appreciation
    4. America's need to acquire most of its energy (oil especially) from abroad
    5. Changes in the birth rates of different social groups in America
    6. You get my point...

    ... And when you disagree with my moral hazard argument yet use a moral hazard argument to support your disagreement, I am a little confused?

    Do you mean to say you have a more "nuanced" view of Moral Hazard?
    A view akin to a kind of B.F. Skinner like stimulus response relationship varying on degrees of temporal relationship?

    Where the time between a behavior and a reward-punishment is short, the relationship is strong, where the time between a behavior and a reward-punishment is long, the relationship is weaker?

    So to use our two examples:

    The difference in moral hazard between no co-pay encouraging more health care consumption is a strong one because they are closely associated with each other in time, while the relationship between free health care and more cheeseburgers is weak one because the moral hazard relationship created is one over a VERY LONG time frame.

    If this is the difference you are suggesting, I couldn't agree more! (If it is not, I am a little confused- I might remind you that the uninsured with chronic illness spend far less on their chronic illnesses over the course of their entire (often shortened) lifespans than the insured do- yet they do still spend a lot of money.Much more money in fact than those who don't have any chronic illnesses whether they are insured or not, as we would expect because they have a chronic illness).

    But when you talk about things like tax policy and public vs. private health care, you are talking about long term changes, not short term ones.

    If you want to use tax policy to demand co-pays, that is fine. It is clear that we do have some of the lowest out of pocket expenses in the world.

    This does not invalidate my point.

    And what kind of statement is this:

    "Bush... was recklessly irresponsible, and borrowed & spent his way through a boom. Now we have a recession, and Obama will follow the advice of every serious economist and deficit spend to try to re-start the economy."?

    First of all, the big increase in spending under Bush was the kind of spending liberals wanted. Even Krugman calls a spade a spade here. The Liberals are more than a little disingenuous on this issue as the can't have it both ways.

    Complain about an increase of defense spending from 3.4% to 4.6% of GDP as "spendthrift" if you want, though I might suggest you go back and review the record of military spending as a %GDP for all nations for all of history and decide whether you really think 4.6% is high from ANY historical perspective (even for America).

    "Spendthrift" means 1.3% GDP on the military?

    We have been handed a budget with a spending deficit of 10% GDP for this year alone.

    I abhor dishonesty. We don't tolerate it in medicine, why tolerate it in political discussions.

    As for any "for" or "against" Keyensianism and its "the solution to debt is more debt" debate, my posting has already become way to long so I will leave this one alone.

    But I will add that the word "serious" can be more than a little misleading in how it is used.

    For the record, I voted for Obama

  17. Thai,

    thanks for thoughtful response; I'm in a hurry and apologize for brevity.

    Re: Bush:

    My complaint was not the spending per se, but that he *borrowed* and spent through (largely) boom times. For example, he fought two wars off-budget, and made no efforts to find funding for it. He put in place the drug benefit with no funding source. My limited understanding of econ theory is that you borrow & spend in a recession and pay off the debts in better times. No?

    As for Moral hazard -- yes, you are right that it is the long time lapse and weak correlation that makes me dubious of the moral hazard argument, esp the fact that the threat to health is more compelling to most people than the theoretical cost.

  18. And yet we all know the truth about cheeseburgers (myself included) and continue to eat them (myself included).

    I suspect that IF Bush was allowed to decide spending on his own, he would have given a balanced budget and even cut taxes. You or I might not have like his choices of how to spend money, but I suspect it would have happened.

    But the system is designed so that one person can't do that, it is designed to only permit group decisions.

    Sometimes groups can't reach agreement.

    Remember (or if you were unaware), war is fractal.

    We are witnessing why

  19. Thai, I think it's important to distinguish between spending that benefits the country (repairing and rebuilding infrastructure; hiring more policemen, firemen, and teachers; unemployment benefit extension so people can keep up mortgage payments and continue to eat) and the kind of spending that almost exclusively benefited defence contractors and other kinds of private corporations to which work was outsourced.

    The former, which Obama seeks to set in motion, is fractal in its own way in that numerous related benefits circle outward from the core expenditure: additional jobs, for example, and along with those, additional consumption of goods and services (demand) and the jobs that are sparked by that. Plus, there is the very real but difficult-to-measure financial benefit of not having the main bridge or highway in one's town suddenly collapse and kill people. For starters.

    The latter kind of borrowing and spending, which was, as Dr. Shadowfax points out, during a boom time, mainly enriches the aforementioned contractors. If there is any lasting benefit to the nation, I can't think of any. And since this will surely bring up the the question of whether we are "safer" for having invaded Iraq, and isn't that a benefit, I would say no. Because even if the invasion had turned up WMD's and had not engendered a tentacular insurgency, there is nothing to prevent other individuals, terrorist groups, or countries down the line from harming Americans and/or American interests. To some degree, it's the Skinner theory again: when a greater length of time passes between the act (terrorism, amassing nuke material, acting like an asshole to the bordering country, whatever) and the punishment (the full force and throw-weight of America, F*ck Yeah! raining down on houses, schools, and mosques), the relationship between act and punishment is weaker. But I submit that when political and, more saliently, religious ideology enter the equation, no amount of punishment on any timetable is going to stop violence committed in the name of fundamentalist fanaticism. And addressing the cause of that--religious fundamentalism that teaches young, poor desperate people that they, too, can go to Paradise if they'll become a suicide bomber--is akin to counting the seeds in a sunflower.

  20. Shadowfax said:

    "My complaint was not the spending per se, but that he *borrowed* and spent through (largely) boom times."

    How would Bush spend if he didn't borrow, unless he raised taxes?

    I am pretty sure he didn't want to spend but we both know he couldn't slow it down. We all know he didn't want to raise taxes, his only option was to borrow.

    I am all for calling out Republicans on the hypocrisy of their spending insincerity, I am all for holding them accountable if they are unable to control it, but as they were unable to control it, you are saying their only choice was go go along with it with it AND raise taxes.

    Why is this worthy of any additional criticism over those who wont control spending.

    Bush was backed into a corner he refused to accept and he acted as his conscience told him.

    I might again remind you that our financial problem are all as a result of too much consumption. We have had a negative savings rate as a country for years, our consumption is getting to the point it is threatening our very existence on this planet and he is the irresponsible one if he refuses to concede the only honorable thing to do is just accept it and pay for it?

    I certainly even agree that borrowing added jet fuel to our national spending problem, but from a conservative's point of view, it is/was kind of a "protest vote" against the spending in the first place. From their point of view, it is better to starve the beast now then let it kill us all by a thousand cuts.

    Madison rightfully noted that eventually Democracy would become a tyranny of the majority. This doesn't mean minorities don't have means of fighting back. ;-)

    From my point of view, I might suggest Americans have developed this rather selfish/consumeristic way of thinking which goes something like "I wouldn't pay for that myself" so instead I will demand that other people pay for it instead.

    And while there is always an element of "we need to help each other out when things get tough", this view is still predicated on the fact that we expect our neighbors to pay the rest of us back once they get back on their feet. If they simply refuse to get back on there feet, it is reasonable for society to take a rather grim view of such behavior.

    But this is most decidedly NOT what is happening from an inter-generational perspective in America.

    The elderly are demanding a golden parachute in retirement and a level of medical care they never gave their own parents. Further they refused to save enough for their medical care and retirement when they were younger even though they knew this would happen from the day social security, medicare, private pension insurance, pension guarantee benefit corp, etc... were set up (go back and read the original congressional debates- which the republicans lost)

    They knew it would be a while lot easier if they made changes from the beginning and planned ahead for all of this, but they just pushed it off for us to solve when it was too hard for them to refuse themselves what they had refused their parents.

    And now the people pushing back on all this are described as irresponsible/evil? (And "yes', they were dishonest on how they tried to portray many of these issue- it seems society has simply become too polite and is unable to face difficult choices anymore, even when the choices get tougher the loner we wait)

    Our problem will never be a lack of consumption. Our problem will always be too much consumption (look at the Cod fisheries off New England or the Salmon fisheries off your coast for evidence if you don't believe me).

    And now the market is taking the punch bowl from the party, the majority is saying we want to figure out how to keep the consumption going by taxing more?

    Why not simply cut back on the consumption instead? But we both know why, we both know we don't want to because it would cause a rather unpleasant recession/depression and we know we are not allowed to have anything ugly and "unpleasant". Somehow the graciousness of our neighbors will prevent this, as we cannot stop ourselves from our own behaviors.

    litbrit, I do take a little offense at your view that those who educate our kids or put out house fires are somehow "better" (or economically more important) members of this collective we all live in than those who service our troops.

    It is as is if you are saying those organ systems in your body which service your brain or liver are somehow "more important" than those organ systems which service your immune system. I might suggest to you you need all of them.

    I might further remind you that 9/11 was yet another brutal reminder of how much our nation needs an immune system.

    You can certainly disagree with America's entry into Iraq (I do), you can disagree with its entry into Afghanistan (I do not), you can legitimately disagree with ANY military conflict you so chose, but your individual disagreements do not validate a view that military spending is somehow either unnecessary or economically less important than other types of spending. To be blunt: no protection, no country, period.

    I have seen an awful lot of people die from weak immune systems over the course of my career. I do not want this nation to suffer the same fate.

    And I do understand there is a big difference in the ways we spend our money. But spending money on something we don't really need more of is still a waste of money (because we don't need it).

    Do we suddenly need more fire fighters because we are in a depression? If we are seeing a lot more arson, I might suggest we need less arsonists than we need more fire fighters.

    I understand some roads need repair, I also understand that a society built around suburban sprawl is a terribly energy inefficient society. Fixing these suburban roads, or worse yet laying more of them down, does not resolve this fundamental fact.

    There is not a nifty jingle that anyone can give you around spending which will lead to success. I might suggest such jingles were part of the reason we got into this mess in the first place.

    And I also understand what the Keynesians are doing. I understand the problem of the liquidity trap, I understand their steadfast belief in the importance of fiscal stimulus to augment monetary policy when it looses effectiveness. Understanding does not mean I agree with it.

    And, as a friend of mine likes to remind me when I go off into theory land, the road to hell is paved with the sincerest belief that "in theory, there shouldn't be much difference between reality and theory".


  21. Thai,
    I understand your concerns and agree with some of your points: yes there is a huge consumption/ lack of saving problem in this country. But perhaps I am misunderstanding, but you propose that as a nation we cut consumption and wait until the wounds heal?
    I don't want to dwell on the past administration, but you believe that the spending in Iraq was necessary? Whereas the spending that this administration is doing is digging us further into oblivion? My belief is that the spending now...or as you say "Fixing these suburban roads, or worse yet laying more of them down, does not resolve this fundamental fact."
    The roads may not be needed right now in a depression, but fundamentally, this will provide jobs...be it the bricklayer himself, the person feeding him lunch, or the healthcare he is able to pay for. He will be earning money to spend. As for the two wars we are currently bogged down in...look, I've been to Iraq twice, Afghanistan once. I see the spending first hand...I can guarantee you, that maybe 35% of that spending goes to equipment, 15% to troop pay. The rest? Ever heard of KBR? Kellogg, Brown and Root the very same one in which Halliburton (Cheney? ring a bell?)owned. Well KBR controls everything in these two countries thanks to the 'no-bid' contracts. If you think the $700 Billion in TARP is anything....try to guess how much money this company (and Cheney of course) took in the last 6 years.
    What the last 2 months has laid out is a fundamental shift from the Reagan, supply-side, trickle-down economics, to a demand-side, give more money to the masses, while laying the foundation to cut spending on foreign oil etc. Yes, the 95% got their tax break, the 5% got their tax increase, but eventually, everyone's taxes will go up. But at the same time, we'll be spending less on foreign oil, less on education, less on healthcare.

  22. Shadowfax,
    If I may also answer your question on: "what is your hypothesis for the dramatic polarization in wealth distribution over the last thirty years, if not due to the flattening of the tax structure"
    One-word answer: WALMART.
    In the sense that this country does not produce anymore...just look at the jobs lost in the current mess we are in...manufacturing and construction. The right likes to tout that 70% of jobs are created by small businesses...but I couldn't find any relevant data...but how many small businesses actually manufacture? Besides the service industry...which yes, we are a service economy, the majority of the small businesses are in effect...mini-Walmarts.

  23. Joegrind said:

    "you believe that the spending in Iraq was necessary? Whereas the spending that this administration is doing is digging us further into oblivion?"

    This is most definitely NOT what I said. I am sorry if I was less clear, I am not in favor of Iraq.

    As for waste and inefficiency of private contractors vs. government contractors- "yes", I am opposed to waste everywhere.

    Having said this, if we didn't throw money at those people, they wouldn't be there in the first place (which is a variant of the same point I was making to John earlier when I said "if people truly wanted to purchase your services AND you refused to work because of higher tax rates, society would just pay you more for those same services to entice you back to work at the higher tax rates.")

    Were you there as U.S. military or as a private contractor or in some other role?

    Because I am sure I needn't remind you that U.S. military recruiters were/are having a very hard time recruiting Americans to join the military and go to Iraq.

    Our military does not pay our troops very well. Certainly not very well for the degree of risk they are taking.

    As a result, we can't find people to go over there and do all the work that needs to be done.

    If the U.S. military can't recruit people, how do you expect it to provide supplies and nation building equipment and expertise to the soldiers and people of Iraq.

    No soldiers, no one to do the work.

    Just wishing the U.S. military or some branch of the state department "do it" because we think they can do it better and cheaper does not make it so. I am quite certain the state department has a terrible time getting its staff to go to Iraq.

    that a private contractor does need to pay a lot and does not necessarily do the greatest job is still not an indictment of the need to provide services to the U.S. military.

    Go ahead, criticize the lack of open bids, I probably will agree with you. I just don't know enough about the details of all the procurement to Iraq.

    But criticism is not a solution to a very difficult (and real) problem.

    And "yes", prevention is worth a pound of cure. We shouldn't have gone there in the first place.

    I do not pick on this administration more than the last (though I will remind you they are spending a whole lot more money than the last). I never believe in throwing good money after bad whenever it happens.

    I just think the way the debate has been framed is straight out of bizarro world.

  24. And the last thing we need is more manufacturing. There is already too much stuff int he world.

    Have you seen the all the cars piling up all over the world no one wants to buy. You want to make more of them?

    That will lead to the end of this country's economy.

    I agree with your Walmart assessment (I put globalization #1 on my list, and realize I am not anti globalization).

    But the problem is most certainly not manufacturing. America manufactures more than it has ever manufactured in the past.

    There just aren't any jobs in manufacturing anymore.

    Robots replaced the American worker.

    Look up for yourself what % of the American economy manufacturing represents. Look up yourself what % of the DOW or S&P 500 manufacturing makes up.

    Don't confuse the issue with jobs.

  25. Well robots replaced workers to an extent, but the vast majority of those jobs became obsolete when it became far cheaper to import.
    I was in the Marine Corps on all three tours and I saw the spending...those contractors are getting paid...150K-250K tax free...10 times that of the troops, but I guess they 'volunteered' as opposed to us being ordered...but I have no regrets...I signed up knowing the consequences and did my time.
    Criticism is so easy when no-one offers any solution...so until the Republicans can come up with something better than a tax-cut, I'll be hoping Obama succeeds.

  26. As an addendum to my last post..here's David Brooks (one of the few republicans I can agree with on a daily basis)

  27. Joe, thanks for your service. I really do appreciate you are out there watching our collective backs. Please accept my great admiration for the protection you were willing to lay your life on the line to provide to us. I assure you there are many docs I know that take the responsibility of our jobs as seriously as I am sure you take yours. We too "do our duty".

    As for a solution to this debt mess, there is no solution. All options are bad.

    The greatest debt the world has ever witnessed will simply unwind and there is nothing we can do to stop it.

    The choice we must make as a collective is whether we want it to happen quickly or slowly and whether we are prepared to live with the consequences of either of these choice (they both have upsides and significant downsides)

    There is no escaping this debt collapse.

    Sometimes in life you just have to face the hard facts.

  28. litbrit, I do take a little offense at your view that those who educate our kids or put out house fires are somehow "better" (or economically more important) members of this collective we all live in than those who service our troops.

    Thai, I never said or implied anything of the sort, but I am sorry to have omitted members of the armed services from the group of various types of worker that I mentioned. I am, myself, the product of a military family, with two grandfathers (British) and a father-in-law (American) who served in WWII, and numerous other extended family who serve, or served. In discussions about military spending, I think I tend to leave this out because it weakens my argument if I have a vested interest in funding the military.

    To your point: of course our military is necessary--vital--and the members of our military deserve proper pay (not one-tenth the pay a parallel private contractor like Blackwater receives) and they also deserve the best medical care possible (not languishing in Walter Reed with cockroaches running around the room, as my friend Anne wrote about for the Washington Post, along with Dana Priest), and they deserve to come home to a home, not a foreclosed home.

    None of this happened under Bush. So you can see why any defense of that president tends to inspire a brusque reaction.

    My maternal grandfather, to whom I was especially close, was always admiring the American military, having worked closely with them during the war. But he would have been horrified at the way this country treated its soldiers returning from Iraq. Absolutely horrified. As for private contractors, I can't even imagine what he would think. As they say, it's probably just as well he didn't live to see it.

  29. Please forgive my misunderstanding but if I read you correctly, even with your clarification, you are saying just this.

    You say:

    "The former... (has) numerous related benefits circle outward from the core expenditure"

    And then you say:

    "The latter kind... mainly enriches... contractors. If there is any lasting benefit to the nation, I can't think of any."

    It is hard to claim that spending money on more firefighters that we don't really need is any more beneficial, or has any more of a "lasting effect" on the U.S. economy than spending money on "black ops" private military contractors that we may or may not need.

    I know a number of people who work for military subcontractors. I am quite certain that the money Uncle Sam gives their companies for services rendered and which the companies turn give to their employees as salary, does create a lot of local spending in the region these private contractors live.

    The left pocket-right pocket nature of money shuffling seems to me the same whether it is wasted on firefighters or military subcontractors.

    And this issue doesn't change whether we take the money from our children to waste (when our government borrows it) or we take it from other people in society today (when we tax them to waste the money). It is the same either way. Waste is waste.

    Of course one might argue that military spending as a % GDP is low from a historical perspective right now (whereas it may or may not be low from a fire enforcement perspective, I really don't know). To the extent hiring private "black ops" military contractors trains a whole sector of our society in the needed skills of warfare, it may actually be a really good investment.

    The fact our money went to train private military people vs. public military people does not change this simple fact either. We would have still trained our people in skills we might need.

    Again, I am not in favor of Iraq. IMO it is a waste of money.

  30. A good detailed analysis of the history of American taxation:


    Bottom line: It's not a fair "progressive taxation" when HENRY's are paying the same rate at Bernie Madoff and Warren Buffet.

  31. Buckeye --

    Amen. Thanks for linking that!

  32. Buckeye, agreed, thanks.

    If you come across a similar analysis but also adds in tax loopholes, I would greatly appreciate it if you passed it along (I have been looking for such an analysis for years without success).

    Loopholes were obviously much greater in the past.



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