Wednesday, August 3, 2011

Does lowering taxes on the rich really benefit anyone else?

 
The Bush Tax Cuts have been in effect for ten years.  Taxes on the highest of income groups have been lower in general over the past 30 years or so, compared to the previous 30.

By using the criteria I find useful, and I think that most people find useful: the employment/unemployment rates, kinds of jobs created and lost, income levels, inflation rates, cost of education, disparity of wealth distribution, general quality of life for the society as a whole; we can ask the question: what effect has the policies of lowering taxes on the rich over the past 2, 5, 10, 20, 40 years had on the U.S. economy? Have lower taxes on the rich done anything for anyone other than the rich?


David Cay Johnston, formely of the NY Times, is a tax reporter who writes for various sources. I'll copy and paste a few interesting tidbits from one one of his better articles regarding taxes and their effects, and then I'll liist the URL so you can read the entire article. It's very good.

(Beginning of paste) " . . . Ari Fleischer, the former Bush White House spokesman, once said “50 percent of the country gets benefits without paying for them.”

Actually, they pay lots of taxes—just not lots of federal income taxes.

Data from the Tax Foundation show that in 2008, the average income for the bottom half of taxpayers was $15,300.

This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.

But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax-free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more.

. . . . . Social Security, Medicare and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners. That’s because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the exact same amount of Social Security taxes as someone who earns $106,800.

. . . . . . The Internal Revenue Service issues an annual report on the 400 highest income-tax payers. In 1961, there were 398 taxpayers who made $1 million or more, so I compared their income tax burdens from that year to 2007.

Despite skyrocketing incomes, the federal tax burden on the richest 400 has been slashed, thanks to a variety of loopholes, allowable deductions and other tools. The actual share of their income paid in taxes, according to the IRS, is 16.6 percent. Adding payroll taxes barely nudges that number.

Compare that to the vast majority of Americans, whose share of their income going to federal taxes increased from 13.1 percent in 1961 to 22.5 percent in 2007.

(By the way, during seven of the eight George W. Bush years, the IRS report on the top 400 taxpayers was labeled a state secret, a policy that the Obama administration overturned almost instantly after his inauguration.)

. . . . . In Wisconsin, Terrence Wall, who unsuccessfully sought the Republican nomination for U.S. Senate in 2010, paid no income taxes on as much as $14 million of recent income, his disclosure forms showed. Asked about his living tax-free while working people pay taxes, he had a simple response: Everyone should pay less.

. . . . . . The Heritage Foundation, the Cato Institute and similar conservative marketing organizations tell us relentlessly that lower tax rates will make us all better off.

“When tax rates are reduced, the economy’s growth rate improves and living standards increase,” according to Daniel J. Mitchell, an economist at Heritage until he joined Cato. He says that supply-side economics is “the simple notion that lower tax rates will boost work, saving, investment and entrepreneurship.”

When Reagan was elected president, the top marginal tax rate (the tax rate paid on the last dollar of income earned) was 70 percent. He cut it to 50 percent and then 28 percent starting in 1987. It was raised by George H.W. Bush and Clinton, and then cut by George W. Bush. The top rate is now 35 percent.

Since 1980, when Reagan won the presidency promising prosperity through tax cuts, the average income of the vast majority—the bottom 90 percent of Americans—has increased a meager $303, or 1 percent. Put another way, for each dollar people in the vast majority made in 1980, in 2008 their income was up to $1.01.

Those at the top did better. The top 1 percent’s average income more than doubled to $1.1 million, according to an analysis of tax data by economists Thomas Piketty and Emmanuel Saez. The really rich, the top one-tenth of 1 percent, each enjoyed almost $4 in 2008 for each dollar in 1980.

The top 300,000 Americans now enjoy almost as much income as the bottom 150 million, the data show. " (end of paste)

http://www.wweek.com/portl​and/article-17350-9_things​_the_rich_dont_want_you_to​_know_about_taxes.html 



(update: the above link no longer seems to work. But here is another URL that points to the same article:)

http://www.altweeklies.com/aan/9-things-the-rich-dont-want-you-to-know-about-taxes/Story?oid=3971382

In the mean time, what other empirical evidence can we look at?   How about job data:. The following piece is copied/pasted from an article in Alternet.

(beginning of paste) "A new report from the National Employment Law Project looks at the jobs created since the recession officially ended brings the focus sharply back to jobs, and its findings are frightening: 73 percent of the jobs created since the supposed economic recovery began have been in low-wage fields, where workers make between $7.51 (the national minimum wage) and $13.52 an hour ($15,621 to $28,122 a year for full-time).
In contrast, 60 percent of the layoffs from the Great Recession were in what the report calls midwage occupations, those that make between $28,142 and $42,973 per year.

“But in the weak recovery to date, employment growth has been concentrated in lower-wage occupations, with minimal growth in midwage occupations and net losses in higher-wage occupations,” the report notes.
This report further cements the argument that progressives have been making for a while: that corporations and the wealthy have bounced back in large part on the backs of the working people of the U.S., squeezing more work for less money out of American workers while returning to record profits, salaries and bonuses.
An economy built on low-wage jobs is inherently unstable and bad for everyone, not just the people struggling to feed themselves and their families on $7.51 an hour."  (end of paste)



If you recall some references to Robert Reich that I had used in previous posts, he talks about the issue of wages in his book "Aftershock", and this is exactly the problem we are having.  So, looking at the data from David Cay Johnston, and the data from the National Employment Law Project,  is it fair to say that - it is reasonable to question the legitimacy of the statement that "lower taxes on the rich creates jobs"?  Or more to the point - ". . creates good jobs"?   Essentially, this is a question on "trickle down (vodoo) economics".   

So let's debate the success or failure of tax policies!

Let me know your thoughts. 

83 comments:

  1. After I posted this new thread, I came across a blog I hadn't seen before, with an interesting and highly correlated post regarding the effects of the 2004 tax holiday. Well worth reading. It offers more emperical evidence dispelling the myth that lowering taxes creates jobs. It in fact expands on a piece of information reported by David Cay Johnston in his "9 Reasons" tax piece that I referenced earlier.

    http://viableopposition.blogspot.com/2011/08/americas-corporate-tax-holiday-2004.html

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  2. Lou Since I am Non American even though I live in North America? But I am a Canadian and that is some consolation I suppose...:-)
    I cannot in good conscience comment without prejudice on this topic as it pertains to your nations willingness to enrich the smaller % of your people in such an inequitable manner. Frankly no economists or analysts from outside looking in, has ever been able to understand it?

    I therefore submit a link to a piece I wrote relating to corporate taxation and some of the interesting facts about another part of this well worn propaganda about the horror of taxation and their so called malodorous effects on economies. Hope it fits within the debate. It includes a reference piece from a young and fat becoming prominent economist.

    http://www.jamesconvey.com/1/post/2011/05/corporate-tax-yay-or-nay.html

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  3. Lou,
    You are not going to get an argument from me about the “trickle down” philosophy. What I do find when people quote the “all the new jobs are low wage” mantra is that the effect of education is not addressed. People with college age education faired very will in this recession and thus did not have to be rehired. People that are not as well educated are the ones that loose out. They have to compete on a global basis with all the less educated people in the world.

    Now I will go on an anti-union rant

    Unions do have a responsibility in this outcome. Unions 30-50 years ago protected less educated workers and allowed them a better wage than if they were not protected. They did not encourage their members to get college educations for the self interest in loosing members. This worked well until the job picture in the US started to shift to a more service oriented economy requiring a more educated workforce. Was this corporate induced globalization? It does not matter. Globalization is here and it is real. We cannot go back. So the Union system is outdated just like our government systems. It’s time to reboot and upgrade to a new system.

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  4. JohnC... Your argument on Unions is so obviously unreasoned. Who exactly are "THEY"? You speak of unions as if they are some evil conspiracy to destroy America? Excuse me, but have you seen the employment numbers? Or the massive profit corporations are sitting upon? Does this not beg the question what the hell is going on? Why are people becoming poorer and the rich getting richer?

    Your point on "dumbing down" union workers is another political fallacy, as unionized employees are amongst the best educated and trained people in the country, in their disciplines!
    Added to which Labor demand in any economy sets the educational requirements within a society, (supply and demand)not the other way around! That Union scale (as in wages) actually helped the overall economic wealth and health of the working middle class during that 30 -50 years you are so fond of? And their employers, who could now depend upon contracted labor reliability, as America grew out of the depression years, is in fact the real empirical evidence, and is a matter of educational principle. Which economists, through intense study enforced, as a pillar of any healthy free market capitalist state. Your position is purely ideological John with very little factual validity to support it!

    On the other hand perhaps we should emulate the Chinese model: Here is a link to an article from 2009 for your continuing education as to the importance of the state and peoples Unions in the enriching of the populace and the nation. Unionization has never before been more necessary in America than today! Otherwise the marginalized state I have written of so often, will become a fact for the U.S.A. The middle class will disappear and Karl Marx's theory of labor vs Capitalism, will become a reality in America.http://www.jamesconvey.com/1/post/2010/09/chinas-bullet-train.html

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  5. John C (and Lou), Here is a piece form oct 7th 2009 from a very interesting source........... Makes "Union busting" by the right a bit of a typical boondoggle, as the real problems remain in the shadows!!

    Dead Labor

    Marx and Lenin Reconsidered

    By PAUL CRAIG ROBERTS

    “Capital is dead labor, which, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks.”

    --Karl Marx

    If Karl Marx and V. I. Lenin were alive today, they would be leading contenders for the Nobel Prize in economics.

    Marx predicted the growing misery of working people, and Lenin foresaw the subordination of the production of goods to financial capital’s accumulation of profits based on the purchase and sale of paper instruments. Their predictions are far superior to the “risk models” for which the Nobel Prize has been given and are closer to the money than the predictions of Federal Reserve chairmen, US Treasury secretaries, and Nobel economists, such as Paul Krugman, who believe that more credit and more debt are the solution to the economic crisis.

    In this first decade of the 21st century there has been no increase in the real incomes of working Americans. There has been a sharp decline in their wealth. In the 21st century Americans have suffered two major stock market crashes and the destruction of their real estate wealth.

    Some studies have concluded that the real incomes of Americans, except for the financial oligarchy of the super rich, are less today than in the 1980s and even the 1970s. I have not examined these studies of family income to determine whether they are biased by the rise in divorce and percentage of single parent households. However, for the last decade it is clear that real take-home pay has declined.

    The main cause of this decline is the offshoring of US high value-added jobs. Both manufacturing jobs and professional services, such as software engineering and information technology work, have been relocated in countries with large and cheap labor forces.

    The wipeout of middle class jobs was disguised by the growth in consumer debt. As Americans’ incomes ceased to grow, consumer debt expanded to take the place of income growth and to keep consumer demand rising. Unlike rises in consumer incomes due to productivity growth, there is a limit to debt expansion. When that limit is reached, the economy ceases to grow.

    The immiseration of working people has not resulted from worsening crises of over-production of goods and services, but from financial capital’s power to force the relocation of production for domestic markets to foreign shores. Wall Street’s pressures, including pressures from takeovers, forced American manufacturing firms to “increase shareholders’ earnings.” This was done by substituting cheap foreign labor for American labor..........cont;

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  6. cont:
    Corporations offshored or outsourced abroad their manufacturing output, thus divorcing American incomes from the production of the goods that they consume. The next step in the process took advantage of the high speed Internet to move professional service jobs, such as engineering, abroad. The third step was to replace the remains of the domestic work force with foreigners brought in at one-third the salary on H-1B, L-1, and other work visas.

    This process by which financial capital destroyed the job prospects of Americans was covered up by “free market” economists, who received grants from offshoring firms in exchange for propaganda that Americans would benefit from a “New Economy” based on financial services, and by shills in the education business, who justified work visas for foreigners on the basis of the lie that America produces a shortage of engineers and scientists.

    In Marx’s day, religion was the opiate of the masses. Today the media is. Let’s look at media reporting that facilitates the financial oligarchy’s ability to delude the people.

    The financial oligarchy is hyping a recovery while American unemployment and home foreclosures are rising. The hype owes its credibility to the high positions from which it comes, to the problems in payroll jobs reporting that overstate employment, and to disposal into the memory hole of any American unemployed for more than one year.

    On October 2 statistician John Williams of shadowstats.com reported that the Bureau of Labor Statistics has announced a preliminary estimate of its annual benchmark revision of 2009 employment. The BLS has found that employment in 2009 has been overstated by about one million jobs. John Williams believes the overstatement is two million jobs. He reports that “the birth-death model currently adds [an illusory] net gain of about 900,00 jobs per year to payroll employment reporting.”

    The non-farm payroll number is always the headline report. However, Williams believes that the household survey of unemployment is statistically sounder than the payroll survey. The BLS has never been able to reconcile the difference in the numbers in the two employment surveys. Last Friday, the headline payroll number of lost jobs was 263,000 for the month of September. However the household survey number was 785,000 lost jobs in the month of September.

    The headline unemployment rate of 9.8% is a bare bones measure that greatly understates unemployment. Government reporting agencies know this and report another unemployment number, known as U-6. This measure of US unemployment stands at 17% in September 2009.

    When the long-term discouraged workers are added back into the total unemployed, the unemployment rate in September 2009 stands at 21.4%.

    The unemployment of American citizens could actually be even higher. When Microsoft or some other firm replaces several thousand US workers with foreigners on H-1B visas, Microsoft does not report a decline in payroll employment. Nevertheless, several thousand Americans are now without jobs. Multiply this by the number of US firms that are relying on “body shops” to replace their US work force with cheap foreign labor year after year, and the result is hundreds of thousands of unreported unemployed Americans.

    Obviously, with more than one-fifth of the American work force unemployed and the remainder buried in mortgage and credit card debt, economic recovery is not in the picture.

    What is happening is that the hundreds of billions of dollars in TARP money given to the large banks and the trillions of dollars that have been added to the Federal Reserve’s balance sheet have been funneled into the stock market, producing another bubble, and into the acquisition of smaller banks by banks “too large to fail.” The result is more financial concentration.

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  7. The expansion in debt that underlies this bubble has further eroded the US dollar’s credibility as reserve currency. When the dollar starts to go, panicked policy-makers will raise interest rates in order to protect the US Treasury’s borrowing capability. When the interest rates rise, what little remains of the US economy will tank.

    If the government cannot borrow, it will print money to pay its bills. Hyperinflation will hit the American population. Massive unemployment and massive inflation will inflict upon the American people misery that not even Marx and Lenin could envisage.

    Meanwhile America’s economists continue to pretend that they are dealing with a normal postwar recession that merely requires an expansion of money and credit to restore economic growth.

    Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He is coauthor of The Tyranny of Good Intentions.He can be reached at: PaulCraigRoberts@yahoo.com

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  8. Rememeber my question when Kraft bought Cadbury?.... Do we really need a bigger chocolatier ? (or how do you get the caramel in the caramilk bar?)

    How's this for a corporate rat leaving a "sinking ship"......:-) James

    Kraft announces plans to split

    Kraft Foods became the latest US company to decide to separate its businesses, announcing on Thursday that it would split into a North American grocery business and a global snacks company less than eighteen months after the $19bn deal to buy Cadbury, the British chocolate maker.

    The company said it would pursue a spin off of its grocery business, with revenues of about $16bn and brands such as Kraft’s eponymous macaroni and cheese, Oscar Mayer meats and Philadelphia cream cheese.............. Todays Financial Times London.

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  9. This and interesting article on 2008 IRS tax return data. It talks about the number of people with adjusted gross over $1 million

    http://politi.co/ok8wCn

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  10. Follow-up
    If I am doing my math correctly people making over $1M paid a total of $177 billion in tax. Increasing taxes on these people by 10% from an average of 24.4% to 34.4% would bring an additional $72.7 billion.

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  11. John C.... I did say I would stay out of the tax debate but have you figured out all taxation, as it applies to all income levels for both Federal and state? I don't see you posit any comment other than simply numbers?

    I was unable to access the link for politico that you show? Perhaps you could cut and paste it?

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  12. James, Here is the article. The Data comes from a summary of federal tax data. It does not include state data but in a majority of the cases federal income data follows the state income date but the tax rates are different (and much lower).

    My concern is not about the inequality issue at this time because there is really nothing we can do about it in short or medium term. My biggest concern is about the short and medium term deficit and debt situation and how to fix that. This is something that we can do something about and it needs to be addressed. Out of curosity, what are the tax rates and structure in Canada?


    <<>>>

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  13. BEGIN ARTICLE

    President Barack Obama and many Democrats are talking about raising taxes on the wealthy, and data released this week by the Internal Revenue Service offers new details about the number of Americans who fit that bill.

    People and households earning $1 million or more annually made up just 0.1 percent, or just over 235,000, of the 140 million tax returns filed in 2009, and just 8,274 returns were filed by people making $10 million or more.

    Though the tax rate for Americans earning a gross adjusted income of $1 million or more averaged 24.4 percent, up from 23.1 percent in 2008, that’s still lower than the 28.5 percent rate they paid in 2002 when President George W. Bush was in office.

    And, the data show, the 235,413 taxpayers who reported earning seven digits or more in 2009 took in a total of $726.9 billion — yet 1,470 paid not a penny of income taxes. In 2007, 959 Americans earning $1 million or more paid no income taxes.

    The returns filed in 2009 reflect income from 2008, the depths of the recession and financial crisis, and, under that backdrop, incomes fell sharply.

    The vast majority of tax return filers — more than 97 percent — reported incomes of less than $200,000. The average income was $54,283, a drop of more than $3,500, or 6 percent, from 2008. That put the average income at its lowest level since 1997.

    At the same time, the average tax rate declined from 12.5 percent in 2008 to 11.4 percent in 2009.

    The amount of unemployment benefits claimed on tax returns nearly doubled 2008-09, the IRS found.
    END ARTICLE

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  14. John C.... I disagree with your conclusions in the following statement.

    "..........My concern is not about the inequality issue at this time because there is really nothing we can do about it in short or medium term. My biggest concern is about the short and medium term deficit and debt situation and how to fix that...."

    Let me make my opinion very clear. The issue of American debt and deficits while important at this time, is nothing more than an ideological red herring, as it pertains to the largest economy on the planet. The Global essential need for this economy to resume growth, is the paramount issue! The Ideological nonsense, which you John, as well as many uninformed Americans accept as a real issue, is actually suffocating your nation! That is why the "Downgrade occurred". It was not the debt issue per se', it was the political idiocy that caused it! One must ask "why this unnecessary debate at this time?"

    We also "urgently" have to do something about the inequality issue John..........That is the issue! Pure and simple, if the middle class disappears your nation will become a marginalized society akin to a servile state! Poor serving Rich!

    A return to the economic dynamics of the Clinton era as regards the tax issue, (Those pesky Bush tax cuts again) would return the nation slowly to a more equitable leveling of economic stability. That is the first good step! Including a reduction in defense spending. Simply close some foreign bases for heavens sake!

    Then more stimulating investment mechanisms need to be included, geared toward infrastructure and energy development. These can be either/or Public funding or private, or preferably a combination of both. The current private sector appears too afraid to move? Claiming lack of confidence in the market? I believe their motivation is more about controlling the American people and their government, than any real fear! Opportunity certainly abounds as I have highlighted many times before. (Corporate crybabies)

    Then the immediate elimination of tax holidays for corporations, and in particular those that are actively divesting themselves of their US labor intensive holdings, for foreign shores and cheaper labor, such as the Kraft example I presented earlier. Companies actively participating in this practice, should be broken up by an independent body,(justice dept) that forces retention of the value base for the domestic good.
    This is what gutted the American Auto industry going back historically to the diversions in Japan and Europe. It is not something new?

    Next your nation needs massive investment into education and specifically advancements in the Sciences and related project development, with way less emphasis upon service industries such as finance and lawyers. We have an over abundance of these arrogant and selfish "wunderkinde" messing with our democracies essential economic matters.

    Finally and most important, is a simplification of the tax code and an introduction of a Value added dynamic (VAT)to the consumer tax regimens within the code. The elimination of the mortgage deductibility aspect of the domestic real estate tax code!
    Healthcare that is both universal and single payer and which eliminates the "for profit" aspects of the provision of coverage. This could be a minimalist coverage standard and allow for a private competitive marketplace for excess coverages and plans. (Private rooms etc etc etc.)

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  15. cont;

    The issue of tax rates John, is not the overriding issue for any economy. For example since you asked, our society in Canada has an expectation from our Government to maintain and govern a society that is based upon the principles of neighborly coexistence. To Canadians, hedonism and greed have always been considered "flaws" in human nature.

    In economics we do not in general, hold with the American model that Human nature can be easily defined by "logarithmic calculus" as in your present economic and now, due to your university 'curriculae economica' of the past 30 years, your cultural belief system as well. Simply put, we believe in both the good as well as the flaws in human nature and we legislate our tax codes and our laws accordingly. Your system believes it can quantify human nature within a mathematical equation? Most Keynesians as well as the Austrian school hold the opposite position.

    Also Canadians understand the relationship between the costs and the results of their societal desires. Americans seem to want the best but need for someone else to pay for it? A very curious ideological reality particularly from the extreme right in your current governmental debates?

    In summation John the big picture again is very clear to most economists viewing the torrent of Political idiocy that has bedazzled the American public. The will simply to tell the truth is not apparent and this causes distress to the Global community. After all America led the world to believe they knew what they were doing?
    Even those of us that held differing opinions and were silenced by the power of this Global juggernaut, that was seemingly American economic acuity, are left speechless, by this latest expression of seeming juvenile delinquency? The fear being that perhaps we were not so wrong after all?

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  16. JohnC..... Forgot to add the following quip from Einstein: He could have been referring to economic logarithmic equations....:-)


    " As far as the laws of mathematics refer to reality, they are NOT certain, and as far as they ARE certain, they do not refer to reality."

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  17. James,
    I object to your implication that I am uninformed and your continuing attempts to portray me as an extreme ideolog. After all I get a lot of information from you and Lou on this and your website. Are you arrogant enough to think that just because I don’t agree with all of your ideas and theories that I am uninformed? And another thought – Why do you feel the need to insult when you are trying to persuade people in the validity of your arguments?

    I say this because I agree with most of the remaining parts of your comment. I have stated such when you have brought the issues up before. The debt issue is important but not urgent. The tea party is insane. The debt exposed the Congress for the knucleheads that they are. The downgrade occurred because we are letting insane people gain more influence in our government. We need more infrastructure and energy development. Corporations are purposely trashing the economy in hopes of electing more insane people. I think if you will look back to the period leading up the to the 2010 election they did the same thing. The tax holiday for corporations did not work last time and it will not work again this time. We definitely need to deemphasize finance and lawyers. We will have to work more on the democrats to get rid of the lawyers. Tax reform is essential but I have not formed an opinion of the VAT. I am sure you are aware that the insanes favor a National Sales Tax. I still favor a progressive tax system is the way to go because it puts less burden on the lower income people. I am surprised that you would agree with it. Our healthcares system definitely needs to be fixed.

    We need to improve education but I am not convinced that the current – union based - is the best vehicle. I like the approach that Obama has taken to emphasize results rather the teacher employment.

    I don't think any of these things address the "inquality" in the way you and Lou have portrayed it.

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  18. James,

    I am surprised to hear you say that tax rates are not an overriding issue for ANY economy. After all this was the explicit topic of this post and all the research that Lou has been doing lately. I now see why you did not want to weight in on the debate.

    I think that most Americans make economic decisions with an eye to the tax ramifications. A lot of people use this as rationalization for purchasing a home (the biggest investment of their lives in most cases). People use this in deciding how to save, whether to sell stocks, saving for college, buying solar panels for their homes, etc. This is not a major consideration but not having lived here your entire life I don’t think your realize how much we focus on it. Having said this I agree it is not a big picture item.

    I agree that Americans have become accustomed to getting something from their government for nothing. It’s not just the wacko’s that have a distrust of government. After all this country was founded to breakaway from government oppression. Our Constitution was set up and a check against federal government power. Americans in general expects people to be self sufficient but will help if there are unforeseen disasters like hurricanes, droughts and other major catastrophes. They are a little less hesitant to help people because they make bad decisions or take the easy way out. Americans (may I should say many Americans) are perfectly OK with someone making a quick buck by taking a big risk, as long as they don't come asking for a bailout if it goes wrong for them.

    What has happened over the years is that the world has changed and there is a greater acceptance of the government getting into the “social” aspects of society and excercising gaining more power over the govered. Our Constitution does not have the flexibility to embrace these changes so it is done by more “subtle” methods. Legislation here, a supreme court decision there, a presidential regulation. We really need a Constitutional convention or national referendum to decide if we are going to adapt more modern social ideas. This appears the way to address the "inequality" issue and why it will never be fixed without total USA collapse which could take the world with it.

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  19. John C.......... You are obviously an intelligent person and I do apologize for my emphatic prose, but it is becoming increasingly obvious that my country's economy as well as the Global economy, are being adversely affected by what you do admit, are the flaws inherent in the decision making processes of the the U.S system. Canada suffers greatly by the way, from any downgrade of the US economy!

    I get angry when the downgrade occurs, from what is obviously an unnecessary ideological conflict, brought on by nothing more than a cadre of fools that have been allowed to enter into this serious debate with Global consequences. Taxes and debt ceilings having nothing to do with their real agenda! That is exclusively political power. Todays Washington post has an interesting view on this issue. http://link.email.washingtonpost.com/r/JDFA9Q/QFBR9M/CDHX5E/LALDUE/UQZWX/E4/h

    In general, with the exception of a few well placed "right hooks" which I may well have deserved, you indeed have shown that we are in agreement on most of the issues. The overwhelming difference appears still to be the choice of society that is preferable?

    My contention still remains that given it's juvenile activity lately, the American Republic has not yet reached the level of maturity needed, to admit that it is on the wrong path and the society that has resulted from it's short time, as the unchallenged power of the World, is not in any way a desirable society in the eyes of most other democratic nations, with longer histories of strife and torment. This is probably becoming the real truth, or somewhat of a realization at least, for a large majority of Americans as well?

    The most frustrating part of this issue being, that the American people have refused it seems, to accept any good ideas from those trials of history from other nations? Healthcare, financial, etc etc etc etc, The details form a mountain of common sense social decisions, prevalent in so many other successful domains. But left behind and judged to be non American, therefore wrong!

    In other words your nation says NO to a more socially responsible dynamic and a less frantic community with a softer approach to what constitutes an equitable opportunity for all, to live meaningful lives within the confines of a more "love thy neighbor" style of society?

    U.S. left right ideologies are firmly and diametrically opposed to each other at present and it is clear that the vast majority of democratic nations have chosen, after hundreds of attempts at other dysfunctional forms of society, more of the "left" approach or a more accountable social dynamic if you like? A little more akin to what the original vision was of your own founding fathers and which is certainly still outlined in your constitution? It is it's very heart!

    Other nations do of course have internal problems and are dealing with them. The financial issues of this crazy conspicuous consumer society, birthed by trickle down economics and directly imposed upon markets around the world by the "wunderkinde" of the American financiers, has not in any way however, helped strengthen the pillars of democracy worldwide? It has made "being social" a more difficult challenge and has opened the door to civil strife and long dormant anarchistic and terrorist activity across the globe! .cont;

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  20. cont;

    That is the big picture John and the fact that.... "Our Constitution does not have the flexibility to embrace these changes so it is done by more “subtle” methods....." is a sad comment upon the fact that your origins were at one time, the envy of the free world, and it is your nation that has forgotten it seems, that your constitution is now and always has had, the built in impeccable ability to be flexible! It is a matter of choice as to the society that the people choose and therein lies the basis for my accusations as to "uninformed Americans".

    Ordinary people need to do the work to become informed and stop these charlatans from gaining power, or your nation will become that marginalized society that I have written of so often, and do dread terribly!

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  21. John C....... From my archives on VAT codes.
    http://www.jamesconvey.com/uploads/3/3/8/3/3383644/valueaddedtaxes_forbesarticle.pdf

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  22. Lou and JohnC . As to the overall debate about the wealth disparity and reduced taxes on the rich...... Perhaps a larger tax might have at least given them less cash for use to influence adversely the health of the overall economic reality? Which, no doubt about it, is what they have been and are doing!

    From "The Euro Zones time out is expiring" (Euro debate part 2), from my site @ www.jamesconvey.com originally posted November 7th 2010

    "..........That the US holds a much lesser position of credibility than Europe, with the emerging markets and the new forces of Global growth, seems to have escaped your attention and others from within the US?

    This was also the problem with Friedman when he posited disaster for Europe. He did not understand it's history sufficiently, and also missed the long term forecasts and Global indications for his own nations potential for disaster, when he supported the "Greed is good" trickle down nonsense, that became the in vogue economic, and empirical U.S. dynamic of the last 30 years?

    I do see difficult times ahead for Europe and I also see them "taking action" and therefore providing hope for improvement. I am certainly more convinced of their ability to weather the current and any encroaching storms.

    My major concern as an analyst, remains the health of the US "stalled" dynamics. The seeming intransigence of Americas corporate sector, to focus their efforts upon investment into their own growth engines and entrepreneurial dynamic, is a frightening economic factor? That they seem more attentive to active participation in gaining control of the ideological direction of their nation, and are "playing politics," rather than doing the nations business, should certainly give many cause for concern for the future of the US, as an economic power on the Global stage for this century?

    In this current atmosphere of uncertainty, I believe that a new Global economic format will arise and hopefully all nations will be participant in it's formation. Without trade barriers or isolationist punditry, or most frightening of all, the appearance of the ugliness of jingoistic nationalism and manifest destiny idiocy. The U.S has a long way to go to regain Global credibility and regardless of the focus upon Europe, it is the U.S that could so more easily become a marginalized society, as the current problems will ultimately come "home to roost"!..........."

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  23. James and John - this is an excellent discussion. I do not want to change the subject here, but I am going to reference an article that at least on the surface looks to not be directly related to the tax discussion. True, it is not related to taxes, but it has some outstanding points - and just as outstanding are some of the comments posted by various readers.

    So, the point I want to address here is the comment made by John that my sources seems to be biased. Just because I take data from a source that is perceived to be progressive leaning, doesn't mean the data is wrong, inaccurate or otherwise tainted. I use the data posted on these sites because they seem to reflect the reality that I see happening in the country. And I do not see much data that contradicts it. I see/hear a lot of rhetoric that attempts to contradict it, but not much in the way of meaningful data. (That being said, I saw John's post with some data regarding taxes, so I will look at it over the next week or so.)

    I'm taking some time to get to my point. :) Here is an article in Alternet that basically talks about comments made by Noam Chomsky regarding the state of education in the U.S. Alternet is considered by conservatives to be a wacked out leftist web site. Well, I ask you to read the article - which includes some of Chomsky's actual words, and also read the comments posted by the readers, and tell me what you think of the value of the discussions in that "leftist source".

    http://www.alternet.org/education/151921/chomsky%3A_public_education_under_massive_corporate_assault_%E2%80%94_what%27s_next?page=entire


    I believe that the article and comments do have an indirect relation to our overall set of discussions, including this one on taxes, in that it goes to the idea that Americans (generally speaking) are not applying critical thinking to our political system and thus in the way they vote; vote about taxes, public education, regulations and many other issues.

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  24. Related to my previous comment, again at John: The data that comes from David Cay Johnston regarding taxes is mostly derived from government sources, the IRS, OMB, etc. Not sure how that can be considered biased. If Johnston is skewing the data himself, (purposely or otherwise), I believe that it would be very quickly pointed out by conservatives - who are by and large much better financed, and employ lots of people for the purpose of influencing the electorate with rhetoric.

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  25. Lou.

    As to the voting methodology of the average American. I whole heartedly agree with you that most voters, of the few that decide to vote at all, must approach the duty of voting, somewhat akin to a herd of ostriches that have spent most of the previous period with their heads firmly implanted in the sand!.......:-) How else can one explain the idiocy of the results?
    The greatest economy on the planet in the hands of people who pray to God for solutions, blame illegal illegal aliens for the unemployment rate, use racism as a tool to garner support for their policies, attack themselves, by electing "Union busting" ideologues to state and federal office, do not understand what the word "socialist" even means....etc etc etc ....... The list is of course endless....... Perhaps in Wisconsin today some sanity will reappear and your nation will waken up to the issues of real politics..... One lives in hope?

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  26. Lou .... I meant to add to the list that none appear to understand the fundamentals of conservatism either....:-)

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  27. Lou....... I also read the brilliant and so succinct article by Chomsky. While he tends to sometimes verge upon the radical edge of issues to make his points, in this case he has no need to apply radical thinking, to what is such an obvious dynamic, as the intended privatization of the educational system of the U.S. The battle today has been conjoined in your nation, between corporate style socialism and it's logical maturation, which is dominance of the American society at all levels.

    This is not a conspiracy, in as much as it is the logical path corporatism will follow, to protect it's existence and it's control of Capitalism as the engine of growth for the American nation. The results of this battle will settle for all time the type of society that will either be, a uniquely isolated and marginalized American community, or one that melds with a more socially responsible Global society. The pendulum swings!

    If corporatism wins this battle of wills, America will become the base from which it will, again as a natural evolution, attempt to enslave the Global economies and their social makeup to a similar fate. For me this is the worst nightmare and the real meaning of the biblical apocalyptic prophesies!

    It is certainly Orwellian in its constructs and as time passes and I watch the American ethos unfold, it appears to become more and more a likelihood and is indeed frightening in it's potentiality!

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  28. John C........I want to take up another point raised by you, as to the reason for the founding of the original 13 colonies as a separate and unique nation, The United States of America....... your quote:

    " After all this country was founded to breakaway from government oppression. Our Constitution was set up as a check against federal government power."

    I believe if history serves me at all, that your nation was not set up to breakaway from anything, other than "dominance of a foreign power" over the rights of a free people to divine their own path and plot their own destiny?
    Your constitution, again if history serves me, was a sincerely debated and conspicuously berated document, which was finally inked as a compromise of ideological beliefs, combining clear definition of the states and federal rights? The disputes between Jeffersonian and opposing Hamiltonian thinkers still remain to this day. Reflected in the ethos of libertarianism and secessionism. I believe Washington and ultimately Adams held sway in the debate, as regards taking the good from the British and french systems of government, finance and law. This was not 'dear to the heart' I am told, of the libertarian factions of those days? (even more so today...:-)...)

    I know little of the reality of your progressive "amendments" to the original document down through the years, but of it's origins the constitution was a singularly impressive example of free men willing to achieve common purpose through compromise. It's purpose was not to enslave but to enable I believe. This required by mandate that the Federal power was, in all of the most important ways, meant to be "superior" to that of any individual state and that the rights of the People were sacrosanct and protected by that Federal power?

    Am I not correct?...... with all due respect...:-)

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  29. Addendum to my previous....... Perhaps that is why the Federal government now finds itself under such vitriolic attack from the extremists on the right. Those that seemingly believe foolishly, that they represent "freedom" are rushing instead headlong into slavery to a corporatist controlled America? Washington and certainly John Adams and Hamilton, must be turning in their graves?

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  30. James,
    You wrote
    This required by mandate that the Federal power was, in all of the most important ways, meant to be "superior" to that of any individual state and that the rights of the People were sacrosanct and protected by that Federal power?

    This statement is completely wrong. The constitution is a document that limits the power of the federal government. Specifically, Article 1, Section 8 lists the powers that were given to the Federal Government. Everything else is left to the States or the people.

    And yes this is why the extreme right continually are looking for a smaller Federal Government and less Federal Power.

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  31. Lou,
    Data is not bias. Bias is when only certain data, the data that supports your position, is presented and the opposing data is ignored. I think that if you did some digging on the Hertiage Foundation or the Cato Institute websites you would find data that Cay “left out” in writing his article. By the way I consider Heritage and Cato biased as well. I do not use their data to support any conservative beliefs I may have.

    And, by the way, in defending your “non-biased” approach you forget to mention (left out) the references to the National Employment Law Project. Let me list a few of the Board of Directors:

    Laura A. Fortman
    Former Commissioner, Maine Department of Labor
    Nobleboro, Maine

    Elaise L. Fox
    President, United Food and Commercial Workers, AFL-CIO, Local 1657
    Birmingham, Alabama

    Lilia Garcia-Brower
    Executive Director, Maintenance Cooperation Trust Fund
    Los Angeles, CA

    James Haughton
    Community Activist, Fight Back
    New York, New York

    Jonathan Hiatt, Esq.
    Chief of Staff and Executive Assistant to the President, AFL-CIO
    Washington, D.C.

    Can you honestly tell me that this organization is not biased? At least you are consistant – every one of you posts has some sort of labor activist or public policy reference in it.

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  32. Lou,
    Wikipedia says that Chomsky refers to himself as a "liberitatian socialist". Is this your understanding of his philosophy?

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  33. Lou,
    Another PS. Where is your data that supports the notion that conservatives are much better financed than --- who? How far to the right do you have to be to be considered conservative?

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  34. John C........ MY statement on the power of your federal government is "completely wrong" ? Hardly addresses the entirety of my comment? is it not true then that the federal government has the duty via constitutional mandate, "to protect and defend the rights and safety of the people of the United states"?? Yes or no would suffice? If no I would need a pretty good explanation as to why the existence of the national guard for instance. Which is a federal force is it not? How about the FBI and The CIA etc etc etc.......

    Oh I forgot they will disappear with the FDA, FAA etc, etc just as soon as these current crop of lunatics in congress on the right get their way?

    In addition, on your listing for LOU and your assumption of their bias due to their prior or current occupations . What does it matter what anyones politics are, provided they are not a raving lunatic or some extremist nut bag, and that they have a 'common sense' approach to the issues in debate, that can lead to compromise positions, and that can be supported by the majority of the people?

    Besides being biased about something is not a sin, if that something is of value and in essence I believe, the pieces posited by LOU have a sincere level of truth in their approach to practical reality, while the other positions presented by the opposing pundits does not. If that is bias then I am all for it. I'll take truth over idiocy any day. That is democracy I thought?

    To some for instance and certainly in your country, I may seem to be a raging leftist? But my occupation for 44 years makes me a capitalist? I can assure you I have voted mostly conservative in my own country as well as liberal, with the exception of this last election when I voted for the NDP. (Who are now our official opposition)
    Your query as to how far right one has to be, to be a conservative, is the very essence of the folly of your system which, divisively I believe, forces people to choose either left or right, seemingly for generations? It causes fractious debate and an animus beyond understanding, that is hardly constructive or supportive of good will in political intercourse? A person's 'bias' is actually in reality their beliefs upon the issues of import that effect them and their families. It is not a sin nor is it Anti American.

    That the conservative movement in the US has morphed into this insane combination of media extremists, secessionists, encompassing mystic evangelism, racism, and all manner of ill advised political tactics and are supported by a wealthy cadre of self serving hedonistic charlatans, would certainly concern me as a conservative? The damage they have already done is evidence of their immature concepts of government and democracy.

    More so for sure than the previous or current employment, of middle class people fighting for their very jobs and the health and welfare of their families and their nation? Smear tactics are indeed a very real issue, and it seems that logic has gone out the window in the cultural debate methodology, of the excessively long US political circus. Too much name calling and not sufficient respectful discussion.... It borders on becoming a national dynamic of "hate thy neighbor" unless he agrees with you?
    Government is not the enemy.

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  35. John C...... P.S. Government is not the enemy .... ignorance is!

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  36. John C.....I am reposting a portion of our recent debate from my website blog some time ago regarding Unions. You are apparently insistent that they are somehow still a major cause of the American financial debacle? I continue to be amazed at your intransigence on this issue?
    Given that such a small % of workers are actually unionized comparative to say 30 years ago? And yet they and all workers continue to come under attack by the corporate and political sector, supposedly to reduce costs.... Why? Corporations have never been so wealthy and the States certainly need their people to work and pay taxes and be conspicuous consumers?... Things are a little 'topsy turvy" in this equation? Are they not?......

    (quote from past debate)
    ".............. Also a "public" job appears to be somehow of lesser importance than any other job in your country these days? Therefore not worthy of protection? School teachers, firemen, police, emergency crews,Air traffic controllers etc, etc, all appear to have fallen under a shadow of ideological suspicion, as somehow non essential to Americas well being?
    This really concerns me as it smacks of ideological punditry and is disrespectful of normally accepted community standards of decency?
    A worker, public or not, deserves protection as a citizen and as a taxpayer. Wouldn't you agree? It could be argued that public jobs are in effect among the most crucial jobs in any nation? Why is it suddenly these people have become 'enemies of the state' in your political dynamic at present? It makes little sense?

    That as a given however, I am not a great admirer of any excessive power in the hands of any group, union or not. I have expressed this before, and do criticize the sometimes excessive abuse by union movements. That is any excess, over that which I view as their essential original purpose and their still historical and now even more obvious necessity...................."
    http://www.jamesconvey.com/1/post/2011/07/followup-to-part-1-not-more-ayn-rand.html...comments.

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  37. James,

    Your question is:
    it not true then that the federal government has the duty via constitutional mandate, "to protect and defend the rights and safety of the people of the United states"?? Yes or no would suffice? If no I would need a pretty good explanation as to why the existence of the national guard for instance. Which is a federal force is it not? How about the FBI and The CIA etc etc etc.......

    The answer is No. There is nothing in the Constitution that makes the statement you suggest. The National Guard are state militia that can be used as a reserve military force for the US Army and Air Force. When used in the States the must be activated by the respective State governor not by the Federal Government with the exception of Insurrection or Rebellion. The National Guard was established from state militias well after the Constitution was written. As for the FBI, CIA, FDA etc. these again are Federal Agencies established by various methods well after the Constitution was written. None are explicitly set up in the Constitution and most were established under what has been referred to as the Commerce Clause of the Constitution. A bit of a stretch in some peoples opinion. As I stated before the Constitution is a document that was designed to limit Federal power. It is outdated and I doubt that any of the current Federal Agency’s or entitlement programs were ever envisioned by the writers.

    Please reread my query to Lou on his comments about conservative funding. You have misinterpreted it and used it to go off on an ideological diversion.

    Government may not be the enemy unless of course you live in Syria or Libya or similar situations.

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  38. James,
    Re your comments on bias. I did not say that I had a problem with bias. There are two things that I disagree with (1) people who claim to be non-bias but in fact are biased and present bias views and (2) people that have tolearnce for bias as long as it agrees with their bias.

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  39. James,
    You do not understand my bias against unions, mostly public unions, because you have not grown up and lived in California for the last 50 years. You have not seen your State go from being the most inovative to the most deficit ridden in the country. You no doubt will try to blame this on corporations but you would be completely wrong. Public unions and uncompromising liberal politics have destroyed this state.

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  40. John C Thanks for your notes.

    I have a confused opinion of the authority of your federal state it seems?

    Among other, too many to mention accounts of federal ordering of your national Guard into action? Initially my confusion may be partially based upon my youth when, as we all did, I witnessed the activation by the use of the national guard in the 60's in Fed Vs Georgia under Governor Geo Wallace. I always believed that the fed ordered the guard in to "protect the citizens" entry into an all white University at the time? Certainly they acted without any gubernatorial accord? Is this not so or is your history inaccurately recorded?

    As to bias. I understand your personal bias as you outlined it. My opinion has already been recorded as with the practical reality of any bias.

    This also shows itself in your bias about your own states demise at the hands, as you see it, of Unions and "liberal" policies? In that I never resided in your state for 50 years, I cannot in all honesty debate you with any degree of supreme confidence, that I am right as to the States experience, and I have also many times outlined my concerns about excessive Union power or any excessive power for that matter? Therefore I will not disagree that you may have some valid points in this case.

    I will say that your view is too narrow in this regard and that many other forces also caused this debasement in California and other states. I do recall the keating debacle in the 80's, which severely effected the real estate market in the whole of the southwest? ( I was involved with the Resolution trust at the time as analyst)That was certainly not a Union caused debt crisis. Again corporate uncontrolled greed at work.

    The same factors that gutted California, are similarly obvious now across the general economy of your entire nation! Again not caused by Unions but by corporate greed and the criminal manipulation of markets and the transfer of Jobs to cheaper labor jurisdictions elsewhere. One cannot blame the worker for the decisions of the corporate sector, who's mandate is to follow the search for cheaper labor to effect higher profits.

    This is simply a case of diametrically opposed realities coming into economic conflict and the right or wrong of either side is still to be decided, as it all comes down to the what kind of society the people of America desire, at their state and national levels? I for one am well satisfied that I prefer a society as we have here in Canada, that believes that greed and hedonism are basic flaws and that care for thy neighbor makes for a healthier political reality. I hope you choose to revisit your analysis of the causes for your state decline and perhaps look more closely at the overall economic factors involved.

    I know you will find systemic corruption of the entire financial system as I have, and certainly my analysis has led me to believe that the abuse of unionized labor is a "red herring" to deflect from the real causal factors for Americas (and Californias) decline, which are too numerous to outline on this blog.

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  41. John C... Your notes also clearly support my contention that your constitution, as I commented, is eminently flexible, if one looks at the history of your country and the application of its tenets?
    I must again also repeat that I do not "go off on ideological diversions" I state ideological realities perhaps that apply, and are occasioned by your comments, which at times are shallow and not in ay way substantively supported by real facts?

    One feels that your positions, being therefore somewhat "weak" require a full and complete analytically based response, to hopefully sway you toward a more workmanlike participation in the real debate before you, and an eventual epiphany about the greater picture facing all Americans at the polls........What kind of society do you want?

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  42. JohnC and Lou, A little "poetic" prose from Clarissa Pinkes Estes. From her testimony before Congressional ways and means committee on social formats 1996......

    "There are not two 'Ms to governing, as many PolySci courses have taught: 'Money and Management.' There are three M's. The third one is Mercy. The third "M" constitutes the difference between a country and a corporation."

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  43. James,
    I learned something today. It appears that JFK did activate the Alabama National Guard. I stand by my previous statements about the National Guard and I am anxious to research the rationale. I imagine it has something to with enforcing the Federal Civil Rights Act. It will also be interesting to determine who activated the National Guard during Katrina.

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  44. John C.......How about the national guard regiments secunded by the pentagon, to go to Iraq to increase the military presence in a foreign country?

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  45. James,
    The National Guard can be used as a reserve force for the US Army and Air Force. They can be called into service "to execute the Laws of the Union, suppress Insurrections and repel Invasions"

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  46. Iraq was an insurrection, or an invader? Or breaking the Laws of the Union?

    Please don't get me wrong but as I keep stipulating, the examples of the eminent 'flexibility' of your constitution are seemingly indeed legend. It seems for good as well as bad reasons ....? It all depends upon the era and the time and the politics does it not?.
    I am always reminded of the testimony at the Nuremberg trials by one of Hitlers henchmen;
    "Naturally, the common people don't want war, but after all, it is the leaders of a country who determine the policy, and it is always a simple matter to drag people along whether it is a democracy, fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. This is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in every country."
    Hermann Goering

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  47. John C..... Here is California story for you todays NY times.

    Just another one of these "all for the people" ideologues....... as he fills his own pockets with profits from the expending of public moneys for his own personal gain! Someone should explain to this hedonist the definition of " conflict of interest"............ as well as "corruption".
    This is the guy that wants to end corruption and excessive regulation in Washington?
    U.S. | August 15, 2011 New York Times article.
    The Champions: A Businessman in Congress Helps His District and Himself
    By ERIC LICHTBLAU
    "Representative Darrell Issa's private and business lives often overlap, with at least some of his government actions helping make him richer."

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  48. James,
    You are making good points about the constitution. It seems that it is so flexible its as if it was not even written?

    Interesting about Issa but I think the challenge is not to find someone in Congress who is doing what he does. The challenge is to find someone in Congress that is NOT doing what he is doing. And I don't think I need to tell you this but I will anyway. Issa is in the Federal Government so the things he does there do not really have a lot of effect on the deterioriation of the State of California -- if that was your point?

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  49. John C........ I realize that the malaise in the California economy is the result of many many years of excess and inept administrative policies by both State and local boneheads. Issa is just another politician in the long line that use their money to gain political office to gain more access to even more money!....... for themselves. Americans need to ask themselves how come so many politicians go into office seemingly as ordinary people with a cause and come out as millionaires with all the fixtures of the hedonist?

    This statement could be said for the entire US economy......... No one practiced the simple old adage "save for a rainy day." (Except maybe Eisenhower and Clinton)

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  50. Lou and JohnC...Thought you might enjoy my post to the WAPO comments section..... OPED on Gov Perry and his potential to win.

    ".......Oh dear here we go again! Against the backdrop of a western sunset, over the red dirt of a Texas landscape rides another 'white hatted' Cowboy, in the John Wayne American tradition. He surely must be a shoo in for high office, in as much as his Marlboro man image is just so, well so "American" !
    Let us not forget however that John Wayne was actually an actor and his real name was Marion, and that the Marlboro man died of throat cancer and had probably never seen a horse before the commercials were shot?

    Reality is what is needed and indeed perhaps a "Kennedyesque, fly me to the moon" moment, may well be required to lift the flagging spirits of the nation. But another Governor without intellectual honesty, from Texas? Really? Have we not already tried that? Really? Are the memories that short?
    This is not another Reagan nor even a John Wayne, neither of whom would have anything to do with this 2011 brand of the Republican party, if they were alive today. Get real people!!

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  51. LOU>& John C. As regards the original heading of this specific blog. Here is a snippet from what is probably the quintessential original economic theory on Capitalism as it pertains to tax and the spread of wealth.

    “WEALTH REDISTRIBUTION MAKES CAPITALISM WORK:

    “Wealth redistribution,” as many Americans like to call it, is actually written into capitalism:

    “The subject of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

    FROM —The Wealth of Nations, Book Five, Chapter Two, Part I: “Of Taxes”) Author Adam Smith the "Grandfather" of economics and basic capitalism.

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  52. Addendum: The "wealth of nations" dates back to 1770's Britain the predominant trading nation of that time.......... The tenets therefrom are still very much the basis for our modern approaches to economics. Just like your constitution however, disingenuous people choose to disregard the intent of the intellectual formation of the practical reality. They twist the inimitable truths present in both, to suit some ideological treachery that serves their selfish purposes and thereby degrades the strength of the original genius.

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  53. Hi Lou and James,
    Given all the news on the European debt situation I am wondering if either of you has any knowledge, any opinion or would like to start a discussion on wealth inequality and corporate behavior in Europe. Is it as prevalent as in the USA? To relate it to the subject of this post do the rich get special tax treatment in any of the countries of Europe?

    While the US may have a little (very little) breathing room on addressing its deficits I'm not so sure that some of the countries in Europe have the option of time in addressing these issues.

    James, you are the economist in the room. I have heard the threshold that deficits should be no more than 3% of GDP on a sustained basis and a total debt of more than 90% of GDP gets you into trouble. Do you subscribe to these numbers?

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  54. JohnC...... I refer you to my debate with Bryan Rich (repeated on this blog)as to my opinions about Europe. I believe I do mention my comparative level of comfort about their future, versus the US's economic challenges. Bottom line they are more capable of solving their problems, through compromise solutions. Already evident from the latest negotiations between the leading 'healthy' nation states.
    That Europe's problems are in fact caused by a too loose structure, that was weak to begin with, will now either see them fix that historical weakness and move ahead (which I believe they are now doing) or they will once again fall into economic aggression against their neighbors. Which can lead to all manner of posits even war! I don't think Europe will ever again follow this path.
    I am less convinced that the US does not face a worse economic and domestic anarchistic threat, which has not been helped by the current ideological divides?

    As to the percentile ratios of debt to GDP.

    This is again somewhat of an ideological red herring, as the most important matter that faces any economy, and has a more direct bearing upon the ability of an economy to incur debt, as well as grow in a healthy manner, has more to do with the productive equations and the balance between the health of the consumer equation in relation to the demand cycles. There are also significant factors relative to the liquidity of the banking (sovereign reserves) and the management of risk in trade and currency liabilities. (Proper definitions of liquidity and proper valuation of asset bases being prioritized. "reference the property market" for example)
    continued:

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  55. cont;

    In simple words one cannot separate one factor from an economy and say it is good or bad, without knowing all of the significant factors that must be functioning and present in any growing healthy economy. For instance, in America at present debt is high. It always has been so relatively speaking! This has not been, in the past, of any real significance, given the historical economic truth of the growth of American industry and it's leadership position, in competition with it's substantially weaker global economic combatants.
    This would not now even be such an issue if the rest of the economy and the state were moving in the right direction ie; entrepreneurial and state and corporate investment into growth and education and technological development, and thereby responding to and maintaining a role in the global competitive challenges of the marketplace? America has fallen behind and continues to ignore this lack of progress, within the entirety of it's sovereign state. Revenues to the state have accordingly declined dangerously, as debt levels increase and banking liquidity (Sovereign)is questionable. (Thus the downgrade)
    The ideological nonsense has not helped this equation, as it has been solely focused upon disparate issues, not really prevalent to the pure economic need of the state and it's peoples.

    You know of course that my position is that this is an overbalance, caused by excessive corporate malfeasance and the inability of the state to maintain healthy balance sheets, due to the denuding of the essential revenues needed, to maintain a solid balance of sovereign valuation of the assets of the Nation/People. In essence the people/Nation are broke while the core of the economy, the 'corporations' are sitting aside and watching the writhing agony of the national economy? Secure in the knowledge that they can function in the new Global dynamic without the burdens of any citizenship responsibility, for the health and welfare of the American state or it's peoples.
    Your great county is in essence being betrayed by it's own creation. The Corporation today is in reality, a stateless entity and yet the American supreme court awarded it the rights of citizenship equal to any individual? Opening further the floodgates for their economic power to be brought to bear against the peoples inalienable rights. I find this so curious and so frightening.
    John as with any economic dynamic the key factor is "GROWTH". American growth became too expensive to maintain it's competitive edge, against the new economic realities of a growing world. For you and other Americans the blame is a matter of opinion of course? I have made you adequately aware of mine I believe.....:-)

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  56. John C and Lou I believe you will find this excellent piece echos somewhat my frustation but it is done with perhaps a better brand of sardonic wit...:-) James

    By Stephen Baker,
    "Corporations are people, my friend." - Mitt Romney, Aug. 11, campaigning in Iowa

    I've been thinking about people I know. Apple comes to mind. It's terrific at electronics and has a great eye for design. It's far richer than everyone in my neighbourhood. Another person I've known for years is General Motors. It almost died awhile back. Enron, which passed away in 2001, wasn't an especially nice person, or an honest one. But people will be people.

    You might find this hard to believe, but these people - the kind with CEOs and corporate headquarters - need money more than we do. For them, money is like oxygen or food. If they come up short, they get eaten or die. So you really can't blame them for laying us off, slashing our medical benefits or moving our jobs offshore. They do it to survive. On the other hand, you shouldn't take them too seriously when they talk about, say, clean air or early childhood nutrition. If anything threatens to cost them money, they tend to line up against it, because every dollar they lose leads these people one step closer to extinction.

    Now, there was a time that the government was considered a person, or at least "the people." It looked out for the population's welfare and education. It built roads and chipped in for retirement. This turned out to be an enormous and expensive job, and before long we began hearing that government was not the solution but the problem. Its taxes and regulations got in the way. If it didn't back off, people like GE and Exxon Mobil would take their jobs elsewhere. Government was not the people, it was a thing - a bad thing, at least for certain people.

    Fortunately, government is run by politics, and politics run on the very stuff that these people are built to amass: money. So they can weigh in, advertising their agenda and investing in politicians who see things their way. Their argument is simple: If they aren't free to make lots of money, they'll go somewhere else where they can, leaving the rest of us in bad shape. The best way for them to make money is to shrink this thing - the government - that has its hand in their pockets and always seems to be writing irksome and expensive new rules..........

    continued;

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  57. .......cont;

    Money is so important to these people, sad to say, that it can cloud their judgment. A decade ago, a number of them chased the illusion of everexpanding wealth and ended up making a boatload of bad bets. Two of these folks, Bear Stearns and Merrill Lynch, were eaten. A third, Lehman Bros., died. Others faced grave danger and threatened to carry the economy down with them. So the people held their noses and asked the despised government - that thing - to save them. The government borrowed trillions of dollars to do just that and avert economic collapse. Yet that rescue appeared to make the government even more dangerous. It now was deeper in debt, which meant it might have to raise taxes on the very people it rescued.

    Fortunately, these concerned people got relief from the courts. Early last year, the Supreme Court ruled that everyone - all kinds of people - should benefit from the 1st Amendment right to free speech, which included giving unlimited and secret campaign contributions.

    Given this opportunity, some people had more money to give to politicians than the rest of us. And naturally, the first Congress elected following this ruling tended to its patrons' interests. Who wouldn't?

    The politicians promptly carried the battle to their donors' enemy - the government - and came within a whisker of starving it of funding.

    In the end, it appears, the government of the people, by the people and for the people, might not perish from the Earth.

    But it will at least be brought to heel - by and for a different kind of people, the kind with shareholders and CEOs. And now - wouldn't you know it? - as we emerge from the bitter battle over the government debt, some folks, like Exxon Mobil, Johnson & Johnson and Microsoft, find themselves with a higher credit rating than the battered United States government.

    You might call it the people's victory.

    Stephen Baker, a former senior writer for Business Week, is the author most recently of Final Jeopardy: Man vs. Machine and the Quest to Know Everything.

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  58. James,
    Thanks for your commentary

    I understand your points on Europe’s ability to work cooperatively. I will admit to being uninformed on this matter but is does seem to me that European leaders are grow-ups as opposed to the infants we have in the Congress.

    However, my concern with Europe is growth. You indicate that this is a key economic dynamic. Do you feel relatively confident that Europe can grow their way out of the current situation? Particularly with the austerity measures that I read so much about? Again, uninformed on this, but are you certain that the lack of growth is not what got them into the current situation?

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  59. John C
    Again I did not say that "the lack of growth" was the sole reason that got them into this situation? Their economies in Europe are no less burdened by the greed and Faux economic beliefs (Trickle down) of the past.They are as I note, taking the difficult steps to "tighten their belts" to throw off this horror of conspicuous consumerism and accumulation at all costs dynamic, that was created and imported from Wall street. Their banking systems were infected by the same "virus" that infects the US. Do not forget however that Europe is a work in progress and that it can and I believe will expand to include massive increases in population (consumers) as it grows geographically to encompass eventually all of the European continent. America "by Choice" will never find it easy to merge economies with it's neighbors for all the obvious reasons. Not the least of which will be foolish pride and arrogance.

    They (Europe)are however, regardless of the painful civil consequences of street riots and general strikes etc, admitting their errors and moving forward toward a hopefully leaner and more efficient Global system, which will eventually and logically include all of Asia soon and America also......... hopefully?

    Provided the right wing extremists don't continue their stupidity and keep on blaming "big Government" as being the culprit. This is the inanity of these teaparty libertarian Jeffersonian loyalists.
    It has ever been so in your political history. Unfortunately they now have significant control of the supreme court and the wealth of the nation at their disposal, to influence events to their favor. Unless the American people awaken and see the real truth and vote them decisively into line!
    My commentary below links to several pieces on Europe.

    I repeat I am not worried about Europe as Asia will stand by them because of their inherent belief in practical and equitable economics, and a common market approach, based on a sensibly regulated capitalism and banking sector, will develop as a result. This could place America in a marginalized position, contrary to this developing global desire for controlled growth and the equitable dispersal of wealth.

    http://www.jamesconvey.com/uploads/3/3/8/3/3383644/irelandeconomicwoes.pdf
    http://www.jamesconvey.com/uploads/3/3/8/3/3383644/eurozoneexpiring.pdf
    http://www.jamesconvey.com/uploads/3/3/8/3/3383644/greec_gm_articleby_georgewill.pdf
    http://www.jamesconvey.com/uploads/3/3/8/3/3383644/greek_deficits.pdf

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  60. John C....... The simplest debate to have would be one that discussed whether or not America believes that libertarian philosophies, which posit that human nature is in and of itself sublime and needs little or no outside forces to hinder it, with regulation of any kind which will then, by natural progression, create and sustain a society, more perfect in form than other current states of democracy.....?

    Or the I believe the more democratic purist belief, that human nature being left in a state of such perfect freedom, is therefore dangerous and unpredictable is precisely why it must be controlled by a central regulatory body, for the protection of the community and the people.
    The little big question from the old debate between the ancients Aristotle and Plato if you will ?

    I believe that human nature in it's wildest form cannot be predicted and therefore must be controlled for the good of the State and the people. My entire community in the economic realm with some notable exceptions, is ruled in general by this hypothesis. That Unregulated human nature has always run wild and followed dangerous paths, and as such, that takes it's followers regularly "like lemmings" off of cliffs to their ultimate destruction.

    Thus it has been with the unregulated American financial dynamic since the fall of the Berlin wall and the end of the Soviet state. Evil as it was, it had up until that time, acted as a counterbalance to American and western power. Once that threat was removed, America as the dominant party then shifted toward empirical dominance of the Global wealth dynamic as well as the political, and the disaster of that unregulated force is now before us. Human nature being what it is, the greed and hegemonic forces rushed to fill the vacuum left behind, without fear of ridicule and absent of any belief in what their actions would do to global social values.
    And now we are at the crossroads again of a major shift in Global power. The vast majority of whom appear to want a more socialist or liberal form of stable democracy, with a leveling of the heated economic dynamic caused by this just ended unregulated unfettered (free human nature) dynamic. A new capitalism that is once again a tool used for the progress of mankind as a whole and not for the benefit of those few who can define equationary mathematics and turn the dynamic to their sole and selfish benefit.

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  61. JOhn C and LOU.... I watched Pierce Morgan last night and his interview with John Huntsman..... I think I finally heard from a true conservative with honest beliefs and a clear understanding of the need for compromise in politics. A decent American with a real honest intellect that could bring real debate to an encounter with an equally brilliant O'Bama in a real test, that would lead to a debate we could all feel a part of.
    In my naivete' I imagined him actually winning his parties nomination and then I woke up this morning and realized what the reality is, as I witnessed all the boo birds attacking him from the extreme edges of their partisan insanity! They seemed to want to eat him alive? insanity!

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  62. James,
    Another point of agreement between us. I have been following Huntsman since he entered the race. A very sane person in the insane political system we have here.

    His strategy seems to be to show respectible in New Hampshire and South Caroline and then do well in Florida. It will be interesting to see how it pans out.

    It baffles my mind that two presidential frontrunners are on record as opposed to raising the debt ceiling!!! I think that if Huntsman continues to point out just how unreasonable their positions are he may have a shot. But then again can I put that much faith in the American people?

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  63. John,
    Not if the press or media on the extreme edges, continue only to show support for the radical minorities debate. Unfortunately as Churchill posited; " if you want to know about the dysfunction of democracy, spend 5 minutes talking to the average voter"

    The "smart" or sensible American voter, is often neutralized by this dynamic and I believe that is why you have, always it seems, a 50/50 split in almost every case in your recent history. I am no expert but from outside one cannot help but feel despair, that the real debate between the real thinkers never gets the attention it should? And you often end up with a result that splits the American people almost equally, due solely to ideologies, as opposed to common sense or practical reality?
    For my part I would find this splitting into one of only 2 camps very very frustrating...... But then again it is implicitly an American dynamic. It is for you to opine as to whether it works for you or not I suppose...:-)

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  64. JohnC and Lou.... More economic debate as to the Europe.

    My comments today to Ron Rowland @ Weiss marketing who along with Bryan Rich continue their rants about the failure of the Euro.

    Dear Ron, I have one word for you............. Nonsense!

    You nor Bryan Rich nor anyone at Weiss it seems have any real understanding of the differences between the European dynamic and the American dynamic. Europe has the will to do what they were unable to at first accomplish.
    That is a unity of purpose, around sovereign responsibility as well as economic responsibility. Eventually this will lead to a unified Europe in every way. The prior 50 years has simply proven that the decision to transition from separate states into a true union, the desire at first of the sensible majority, has now been proven as correct, with this latest financial turmoil having highlighted the flaws that stopped this unification from occurring sooner.
    A truly united Europe and a stronger currency standard will result and may well become the new reserve currency for trade at some early point in the future. Particularly as Russia and other eastern states realize that their currency instability and the exposures to inflationary pressures can be eased, by choosing a more stable trade dynamic ruled by the Euro dollar. Given the weakness of the American dollar and it's declining underpinnings I cannot conceive of any other outcome for Global trade.
    I therefore feel you have "hitched your wagon to the wrong team" in your ongoing commentaries as to the death of Europe. Asia has more reasons to support a healthy Europe as well, perhaps even more than it's tenuous support of the US dollar at present.

    James M. Convey
    Senior Analyst
    AYIKO Group GmbH

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  65. JOHNC.and LOU........
    Todays New York Times
    BUSINESS DAY | August 27, 2011
    Bernanke Blames Politics for Financial Upheaval
    By BINYAMIN APPELBAUM
    ".....In his much-anticipated speech, the Federal Reserve chairman said the nation's long-term prospects were strong, but suggested that the United States fiscal system was broken............."

    I hope you can access this article, as Bernanke, although he couches his words carefully as usual, agrees with a lot of my own and other economists comments, as to the damage being done by this partisan nonsense, mainly from the republican party. This should hopefully make those diehard supporters of these idiots see a different and more realistically practical light?

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  66. Lou and JohnC...... Even rich Frenchmen can see the writing on the wall!

    I am not a masochist but the rich must pay more
    By Maurice Lévy
    Like all of us, I have watched in recent days as economists and oracles wail a chorus of lament on every screen, in every newspaper. First came thedowngrading of the US credit rating, in effect the downgrading of a nation. Then came the stock market crisis. The same thing would soon happen toFrance, pundits of all kinds claimed. Our era of prosperity was over. Europe was in decline. We were doomed.
    Such talk was intolerable. I have run a company for 23 years; I am accustomed to tough competition and downturns. But I cannot simply accept decline. Yes, our countries have been living beyond our means. The social model of western European societies is not sustainable without strong growth. We are trapped by our handouts and welfare support, and the price is unfeasible budget deficits and mounting debt. But France and Europe also have enormous assets. I believe strongly that we can maintain our rank, economically and in every other way.
    There is fundamental work to be done that can cut our public deficits and, above all, our government expenditure. Cuts in public spending will be painful and, unfortunately, of necessity much will be borne by the programmes’ target populations: the middle class and less favoured people. It seems to me only fair that the most privileged members of our society should take up a heavier share of this national burden. So I called for an additional tax on the rich. I am not a masochist; I do not love taxes. But right now this is important and just. So what could I do? I took up a pen and started writing. Just as no French government in the past 35 years has been able to resist running a deficit, with the exception of finance minister Thierry Breton (2005-07), no government has truly reformed our country’s abundant and complex social systems and bureaucracies. They may have made sincere attempts but with the exception ofPresident Nicolas Sarkozy’s reform of pensionsand the non-replacement of 50 per cent of civil-servants going into retirement, these efforts have not yielded results.
    As I started to write on this issue, across the Atlantic the Sage of Omaha,Warren Buffett, was writing his own article, on more or less exactly the same point. We had not spoken to each other on the subject; we did not read each others’ drafts. Perhaps even more surprisingly, a number of US business leaders joined his campaign; and in France, a number joined my call. So perhaps the tide has changed, as the wailing pundits claimed; but perhaps the new cycle will not be one of decline but of clear-thinking and solidarity.....cont;

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  67. cont; ....... Clearly any added taxation of the wealthy should be carefully dosed so as not to discourage entrepreneurial flair and the fair reward of success. Also it should be clear that increasing taxes will not resolve public deficits. Such a tactic would be futile – rather like the daughters of Danaus trying to fill a sieve – and could only encourage greater self-indulgence. A resolution of public finances, in France and across Europe, can only be achieved if we revise our social model and institute vigorous reforms, possibly including privatisations, with the revenue dedicated to debt-reduction. It is because of the inevitable ensuing pain that the privileged should also make an exceptional contribution.
    Our countries must become more competitive. In the 1990s, French industry had a 10 per cent competitive advantage over Germany because the cost of labour was lower. Today France’s labour costs exceed Germany’s by 10 per cent. They have been swollen by the 35-hour limit on the work week and the burden of social welfare contributions for programmes such as family subsidies – which would be more fairly funded by the entire population, via sales taxes such as value added tax. There is a long list of reforms needed.
    Is this a programme of that dreaded word, rigour? I prefer to talk of vigour. Probity in the running of public funds will set an impressive example for the broader population. If the wealthy can endure higher taxes without complaint, the less privileged may feel able to bear the pain that sharp-edged reforms will entail. I never thought I would find myself saying this, but it is time to increase my share of taxes.

    The writer is chairman and chief executive of PublicisGroupe and president of the Association Française des Entreprises Privées

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  68. Lou and JohnC .... Credit where credit is due...:-)

    The previous article is courtesy of the Financial times. London, today

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  69. Lou and James,
    If you are not alreadyb aware of it this website has a lot of data on inequality on it. I have not had the chance to review much of it but it may be of interest to you.

    http://www.stanford.edu/group/scspi/cgi-bin/facts.php

    I'm off for a couple of weeks. See you when I get back.

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  70. John, that Standford site is very good. I was not aware of it. Thanks for posting the URL.

    I look forward to continuing our conversations when you get back. It will give me a chance to catch up to some of the recent comments by James and yourself, as I've been away and disconnected myself for much of August.

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  71. John C

    What really stands out, if you use linear modeling as I do in my discipline, is the single inclusive periodic table that shows the gradual deterioration over 30 years, of the representative economic value to America, of it's own middle class? Putting this together with the linear model for the poor and one sees clearly, the declining of the entire populace as a unit?
    Excluding of course the small sector that resides in that upper bracket at every linear position, who have seen steady growth of wealth and position from start to finish in all of the modeling graphics. This Stanford study is not as exact as models used in economic analysis, say by the OECD, or the IMF or the United nations, for example, but the results are strikingly similar.
    Bottom line 'res ipsa loquitor' The facts speak for themselves!

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  72. Lou and John C. Source the washington post. Today "special report"
    Let all those who defend the "wealth inequality gap" as some minor issue, and that access to health facilities is being served by the American heath system answer to these statistics! Things as i said they would be, are now worse! I am on record that the "Mish mash" system that is inaccurately called obama care, is no different than the previous system, in that Insurers are not forced to insure the whole population regardless of status or employment position. "Profit cares not for those who cannot pay!"
    "................The Census Bureau reports the number of Americans in poverty jumped to 15.1 percent in 2010, a 17-year high. About 46.2 million people, or nearly 1 in 6, were in poverty. That’s up from 43.6 million, or 14.3 percent, in 2009. It was the highest level since 1993.

    The number of people lacking health insurance increased to 49.9 million, a new high after revisions were made to 2009 figures. Losses were due mostly to working-age Americans who lost employer-provided insurance in the weak economy..........."

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  73. John C.& Lou ... More evidence that inequality is the most important issue facing America or any state for that matter. Sourced from local and national writings in various journals and news items plus the original writings of the 2 Authors. Including my own comments interspersed.

    "........... Among the most renowned commentators, other than a large number of practical economists, Stiglitz etc, are two non economist British Professors of social epidemiology, Richard Wilkinson and Kate Pickett.

    In their 2009 book THE SPIRIT LEVEL: WHY MORE EQUAL SOCIETIES ALWAYS DO BETTER, Wilson and Pickett analyzed data from 23 wealthy countries and 50 U.S States. They concluded that the more unequal a society was "by income", the greater the health and social problems it faced.
    The higher the income inequality, the lower the literacy rates and health indicators. The one thing that did rise; the levels of violence!

    (From their book)"..... The association between inequality and violence" they wrote " is strong and consistent. The evolutionary importance of shame and humiliation provides a plausible explanation of why more unequal societies, suffer more violence..........."

    Conservative minded economists, most notably in the U.S, savaged the books premise. Claiming that they cherry picked their data to fit a theory (Where have we heard that before? Maybe climate change or Global warming?) But it was in their book that they specifically focused upon the United Kingdom, as being one of the most economically unequal societies. Two years later England exploded into rioting?

    From a local perspective for me. My city Vancouver B.C. has been consistently voted as amongst the top 3 best places to live on the planet. However, The conference board of Canada, in no way an organization of radical left wing thinking, reported that almost 17% of Vancouver's populace were low income earners, The highest % among our nations major cities. It also reported that the inequality was accelerating and growing faster than all cities, except Edmonton (oil capital Alberta) Vancouver is polarizing economically!
    The conference board followed up with a report that looked at income inequality on a global scale. While Canada still ranks as moderate it was only behind the U.S and both nations are on the cusp, of moving into the ranks of nations with "high" income equality.
    Vancouver however remains one of the most dynamic growth cities on the continent. Begging the question that if great wealth is created by great growth and prosperity "lifts all boats", as the libertarian and trickle down economists argue,. Why is the exact opposite the reality? It seems instead with this ever increasing wealth gap, that unequal prosperity eventually actually swamps us all, rather than keep us afloat!

    Concentration of the great wealth of any capitalist society in the hands of so few, is the harbinger of economic regression. To support this argument is not difficult, given the current condition of the older richer Global economies. An interesting point to consider for example, is that the share of wealth of the top 1% of earners in the U.S., just before the Great depression was identical to that top 1% of earners in 2007. just prior to the economic meltdown! Additionally it can be claimed with a fair degree of confidence that income inequality leads to the fracturing of the social fabric. Indeed given Global violence and the vitriolic ideological divisions, one cannot argue that the fabric of good will has indeed become threadbare?

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  74. That's great stuff James, thank you. I will use the reference to Wilkinson and Pickett. In the mean time, I am listing a reference to an article in the FT times. (James, you are the one who got me started on this publication.) :) It is yet more info regarding the decline of the middle class the skewing of the economic pie to the small upper few percent of income earners.

    http://www.ft.com/intl/cms/s/0/3ad27dd6-df87-11e0-845a-00144feabdc0.html#axzz1YiC6313T


    John C - have you read "All The Devils are Here" yet? I would love to know your thoughts about the book after you've finished it.

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  75. Even though I've created a newer post at this point, I think this particular thread has more life. For that reason, I am posting a link to what I think is one of Paul Krugman's better recent articles in the NY Times. It's worth while because this discussion on taxes is fraught with misinformation and misleading statistics. I hope you read this Krugman piece and let me know your thoughts:

    http://www.nytimes.com/2011/09/23/opinion/krugman-the-social-contract.html

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  76. Lou,
    I did finish All The Devils are here during my vacation. The book seemed to be more about the personalities involved in the building of the crisis than how the crisis was addressed when it finally broke out. I was hope for a more detailed account of the actions taken during the crisis but I did like the book. I believe that the Sorken book “too big to Fail” deals more with the actions during the crises.
    In reading the book I was pleased that much of information that I have read and listened to about the crises was reinforced by this book. The book offered much more detailed. I’m not as misinformed as James and possibly you think I am. I’m just not good at communicating that to you guys.

    I really enjoyed the that the book started out at the very beginning explaining how securitized mortgages got their start and a little history on the start of Freddie Mac and Fanny Mae and how they evolved into big players in this market. The book went into the role of the Rating Agencies and also the laws passed by Congress to continue to develop and grow the securitization market.

    But mostly the book was a detailed biography of the heads of the major banks and financial institutions, the regulatory agencies and other institutions that facilitated the crisis. People like Roland Arnall, of Ameriquest, Angelo Mozilo and David Sambol of Countrywide, Joe Casano of AIG, Jon Corzine of Goldman Sachs, Stan O’Neal of Merril Lynch and many others.

    Most of the heads of the financial were characterized as mostly “clueless” (much like the “mediocre men” that James has referred to in this forum). They did not keep track of the mounting risk in their businesses from the various securities that their companies were investing in. There is always the question as to whether they were aware of the risk but choose to roll the dice expecting Uncle Ben and Sam to bail them out or whether they were just clueless. I imagine there was a lot of both.

    The biggest modification to my point of view from this book (and it is tough for me to admit this) was the information on Goldman Sachs. I went into this book thinking of Goldman as the “giant vampire squid” and I still do but I gained a whole new appreciation of how well they manage their risk and their company. They knew the crisis was coming and took measures to protect their company. They may not have know the magnitude of it but they knew. Once they realized the magnitude they managed that very well. If you subscribe to the phrase “keep your friends close and your enemies closer” you will want to keep Goldman very very close!!

    The book did not really change my opinion that we have the best government that money can buy but it did very little to present evidence of this. It also reinforced my belief that Wall Street is a completely separate and more dangerous aspect of the corporate world than other sectors.

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  77. On your next topic of "ideas being like a virus" as well as more grist for the issues we have been discussing on this blog. I have a question for you and John, given his comment about Wall street and GoldmanSachs

    : I would love to see a modern day economist or politician tackle this issue in the public view?

    Given the advent of the "idea", that one can now use logarithmic calculus, (very intrinsic in G&S' trading rooms) within our financial system and it's increasing widespread application, in the lightning speed era of this electronic age. Now almost exclusively used for monitoring and dynamically forecasting trade and economic variances, that aid the speculative graphic and enable even greater wealth creation, but only and seemingly exclusively for those poised to advantage themselves;

    The Question.......

    Wherein does one find, within this modern dynamic, that equation which monitors and adjusts trade and investment for the demands of the human or "social need?" How also does this viral system nurture the funding need for the entrepreneurial seeds, that are essential for a modern capitalist society to survive............?

    This "idea" which has become "like a virus", the sentinel model for financial methodologies on Wall street and elsewhere, and has during it's reign, managed to create the unequal social wealth dynamic, that is now of such a magnitude, as to present a real danger Globally for the disappearance of the nucleus of any healthy capitalist society.......... that being a competitive and striving middleclass?

    This is a question that seemingly is being deliberately avoided in todays political debates? And yet nothing appears to be changing to control this virus and it's continuing damaging rule over all of our lives.

    JohnC......That Goldman were quicker to recognize some of the risks, still does not explain their anti social decisions to allow their industry, their peers and competitors, as well as the nation's finances to implode, simply to protect themselves?
    To excuse them because they appeared not to really comprehend the potential disaster, is akin to forgiving a teenager who understands fire, but has cheerfully and ignorantly chosen to endanger his entire environment by playing with Gelignite without first understanding it's properties? Personally from a "managing risk" perspective, I think they have no excuse at all!

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  78. Welcome back everybody......... james

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  79. This is by my former nemesis Bruce Bartlett. Him and I have sparred over the years. It seems he has certainly stepped over the line lately with both his books and opinions on taxation. He served Bush Senior and Reagan as economic policy advisor. He is an economist I believe?

    Financial Times - Comment

    Why Obama is right to back Buffett
    There is no evidence that lower tax rates on the wealthy stimulated growth in the 2000s, one reason Bruce Bartlett says the president is right to ask the rich to pay more
    http://link.ft.com/r/YIQXNN/B5DRGD/CVWMU/5VCWOM/2O2MY6/QR/h?

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  80. Here is an archival piece I wrote to Bruce Bartlett on his Forbes article on VAT. Note the date of my commentary (over 2 years ago). Not much has changed..:-)


    http://www.jamesconvey.com/uploads/3/3/8/3/3383644/valueaddedtaxes_forbesarticle.pdf

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  81. To both James and John, I think this topic (Taxes on the rich) has more room to run, although we may end up continuing it via a new post I'm going to write at some point on a related topic.

    John - related to your comments regarding All The Devils Are Here: If I correctly understood your intent, it sounds like we do have some common ground here. :) But like James, I'm a litle confused on what appears to me to be a kind of respect you have for Goldman because they were smart enough to protect themselves - even though this happened at the expense of their own customers!

    An analogy in my mind would be someone (call him person A) who hires an attorney to bring a law suite against another party (call him person B) because B scammed money from A. The attorney wins the case for A, but then takes all of the money in question for himself and leaves A in the dust. Goldman sold out their own customers for profit. I don't see how there is no criminal activity in their actions. There is certainly very questionable moral/business ethics involved - but that is grossly understating what happened. And obviously, these people don't use moral ethics to guide their actions anyway. Ethics, it seems, is for the chumps.

    On a related thought, part of the motivation behind many of the Occupy Wall Street protesters is that not one executive from Goldman or the other major banks have even been indicted over the financial crisis.

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  82. James, question for you: Can you give me/us an example of the "linear modeling " you mentioned that you do in your busienss? It may be a technical kind of question, but I'd like to understand some of the modeling techniques you use in analyzing economic data.

    Afterall, this entire issue is predicated on understanding the meaning of the data and its impact on people. It's the lack of understanding of the numbers (by most people) that allows the inequities to continue.

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  83. Lou. I just now noticed this question? Linear modeling is a fancy way of saying, come to a logical conclusion given the accepted parameters of the issue being modeled. I;e Equationary physics, Economics, Financial table modeling, human resource statistical data etc etc
    Sources used by the scientific communities are many and varied.. Dependent upon your specific discipline. They are always based upon mathematical premises. The "Gini coefficient" is one example common to all modeling. The "Study of cycles" is another. Quantum math/Physics offer varied models today not available 30 years ago say. Basically any cyclical data or proven repetitive historical event data of any kind is prevalent in the analytical sciences. The sun rises the sun sets etc etc etc. Forecastable certainties vs possible and quantifiable risk. = X
    Hope this helps.

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