This graph comes from an article by Cathie Jo Martin and Alexander Hertel-Fernandez that appeared at Vox on Wednesday, How Sweden Fights Inequality: Not by Taxing the Rich. According to the authors, “The figure below makes this point clearly, showing that the more progressive a country’s taxes, the less the country does to reduce inequality.” But it doesn’t show that. And the article is very annoying in providing such a provocative graph with no scale and linking to a report where it is not at all clear what data the authors used to make the graph.

Indeed, the OECD report that Martin and Hertel-Fernandez link to says, “Despite the substantial gains of high-income earners in some countries, income taxes played a relatively minor role in moderating trends towards higher inequality. The reason is that trends towards lower income taxes, on the one hand, and more progressive taxation, on the other, had opposite effects on redistribution and partly cancelled each other out.” So it doesn’t seem that the OECD is making the argument that they are making.

But there is one most frustrating thing about the article: what do the authors mean by “household tax progressivity”? I’m open to their basic argument, which is that taxes are a shared responsibility and we American liberals have to accept that the middle class has to pay more in taxes to have a properly functioning government. Of course, I also know that overall taxes in the United States are not that progressive. (See also: Is “Tax Day” Too Burdensome for the Rich?) So are the authors looking at total taxes? And why are they looking at household taxes rather than individual taxes? This is all extremely annoying because they are making a highly controversial statement. They really need to back up their claims.

As a result of this, I didn’t write about the article. I wanted to wait until someone more versed in these issues came to my rescue, and Matt Bruenig over at Demos did so today, Sweden Does Soak Its Rich. The article is just a tad technical, but I think it is well worth reading. On the central issue, he shows that if you look at tax rates to compare progressivity, you will get a situation where low tax rate countries appear to be the most progressive.

For example, he shows that a country with the lowest tax rate of 1% and the highest tax rate of 10% would rate as very progressive: ten to one! But a country with the lowest tax rate of 15% and the highest tax rate of 30% — just a two to one progressivity index — is actually far more redistributive. Thus, the graph above is almost definitional: countries with high levels of taxation will necessarily have low progressivity indexes.

The best case scenario here is that the authors were just looking for an exciting and counter-intuitive bit of data to make headlines with. And this is a problem with the Vox commitment to #SlatePitch journalism. But I’m inclined not to see it as a simple error, but rather as an ideological ax grinding away. Regardless, it isn’t true that Sweden is some unknown free market paradise where the poor are saved.

Redistribution

Speaking of the poor, the Vox article also claims that the reason that the Nordic countries have a low poverty rate is because they use all that redistributed money to “increasing the skills and earning power of low-end wage earners.” Ah, yes: the old conservative canard that the poor just need to get educated and all problems will be solved. It’s a silly argument that I’ve discussed many times. But Bruenig takes a different approach to the issue.

He shows that the before taxes and transfer programs, the Nordic countries have about the same level of people living in poverty as in the United States. (Poverty is defined as those with incomes less than 50% of the median income in a country.) In fact, Finland has distinctly more people living in poverty. But if you look at the situation after taxes and transfer programs, things look very different. In these terms that are, you know, what actually matter, the United States has roughly twice as much poverty.

Of course, there are other aspects of tax policy. The low tax rates in the United States have caused CEOs to be paid far more than they used to and far more than they are paid in other advanced economies where the top tax rates are higher. Consider what Thomas Piketty had to say about the issue:

There are a lot of reasons that go into our high level of inequality. But clearly, what Cathie Jo Martin and Alexander Hertel-Fernandez are offering up is exactly the opposite of what needs to be done. But like so much of what passes for serious debate in this country, arguments that say exactly what the rich want to hear get big distribution — even in supposedly liberal publications like Vox. It is sad. For all those people asking, “Why can’t we have an honest conversation about…” There is your answer. If an honest conversation would make the power elite uncomfortable, we can’t have an honest discussion about it. And that pretty much means we can never have an honest discussion about anything. Because most of our social ills come down to the fact that we have an extremely unfair society. And that is the last thing the rich want to talk about.

Update (10 October 2014 10:00 pm)

Mike Konczal just wrote, Does the USA Really Soak the Rich? He explains what’s really going on in the Vox article. The authors are looking at how much of the tax revenue comes from the top 10% of earners. So in the United States, it is 45% of taxes; in Sweden, it is only 27%. Thus: taxes are more progressive in America! This is even worse than I thought. As Konczal points out, the reason that the top 10% pay more in the US than in Sweden is because this group in the US makes a whole lot more money (relative to the bottom 90%) than this group in Sweden. He shows that there is a clear linear correlation regarding this. This makes the Martin/Hertel-Fernandez argument totally disingenuous. Their graph above is basically a correlation with itself.

The big problem with the budget deficit is not that it is an economic problem. Nor is it that the people care about it as a policy issue. They don’t. The problem is that the Democratic Party elites care about it and they allow conservatives to use it to enact bad, conservative policy.

I’ve thought about starting a series of articles, “What Will Krugman Write Next?” Because if you read his blog and you have similar interests, it is very easy to predict what his next column in The New York Times will be. And yesterday, I knew it would be on the Congressional Budget Office (CBO) announcement that the federal deficit would be $200 billion dollars less than they had predicted. I wrote about it on Wednesday, Deficit’s Down and So Are Debt Scolds.

Krugman started his column, Secret Deficit Lovers, with a facetious question, “What if they balanced the budget and nobody knew or cared?” This brought to mind a conversation I had with my conservative father and his ultra-conservative girlfriend back in 2009. They were moaning about the federal deficit (“Trillion dollar deficit!”) as though it were Obama’s fault. Of course, like most conservatives at that time, they had long before repudiated Bush the Younger. You may remember at that time that the standard claim by conservatives was that Bush’s problem was that he was not a real conservative. It’s the same old thing: conservatism never fails; it is only failed.

Anyway, at some point I mentioned that the only reason we had a budget surplus under Clinton was that we had a really great economy. They just stared at me. It took a while me to figure out what the problem was: they didn’t know that the budget had been balanced. It surprised me, because there really was much made of this fact at the time. And they probably did know at the time, but they were very old at this point — in their late 70s — and the only news they listened to was Fox News, which gave them a constant diet of budget hysteria without any historical context.

Let’s leave aside the fact that Americans don’t actually care about the budget deficit. They don’t even understand it. During those periods when the media get them to notice it, they see it as an issue of morality, not economics. It’s the whole, “American families have to tighten their belts so the government should too.” The fact that this shows a shocking lack of understanding of macroeconomics doesn’t really matter. Let’s just focus on the issue that Americans don’t pay enough attention for it to matter.

The vast majority of Americans remember Clinton fondly. But they don’t remember his policies at all. They remember two things. First, they remember Monica Lewinsky because, hey, sex. But they don’t hold this against Clinton because, hey, sex. Second, they remember that the economy was doing great and his presidency was the first time since Carter was president that they saw their wages actually go up faster than the rate of inflation. That’s it. They don’t associate any of this with any policy. And it is a good thing too, because Clinton wasn’t responsible for the great economy; crazy old Alan Greenspan with his heterodox economic ideas was.

Similarly, people remember Reagan fondly because — well, to be honest, I’m not sure why. The economy was good under him, but that didn’t “trickle down” to most Americans. And again, his economic “miracle” was due to the Federal Reserve under Paul Volcker and not due to Reagan’s policies. What’s more, Reagan slashed taxes on the rich, but he raised them on the middle class.

The point is that people don’t care about policy. They care about the state of their lives. This is why I’ve always marveled at Obama’s obsession with being the “adult in the room.” The people never give him credit for that. Similarly, the people never turn against the Republicans for their childish antics. In fact, I saw a poll recently that found that most Americans trust the Republicans over the Democrats on the economy. This is despite the fact that our continued poor recovery is directly related to Republican policy.

Every year since Obama has been president, the deficit has gone down. Economically speaking, this was a huge mistake. And as I’ve noted, this is largely due to policy forced on Obama by the Republicans. The government should have been spending money to get the economy going again. Once it did that, it could balance the budget with tax increases and spending cuts — if that were even necessary (Clinton’s budget surplus was due entirely to the booming economy, not his budget deal). But regardless of the reason: under Obama, the deficit has gone down every year.

But as Krugman pointed out, a recent YouGov poll found that over half of Americans think the deficit has increased under Obama. Less than one-fifth were correct that it has gone down. That means over 80% of Americans either give Obama no credit for reducing the deficit or they blame him for supposedly making it worse. And remember: the budget deficit has not gone down a little; it has been cut in half.

Of course, Krugman’s article is (like mine on Wednesday) an attack on the deficit scolds. They supposedly do know and care about the deficit. But I have a hard time getting too excited about them. It’s always been clear that they are disingenuous. If Obama had gotten his cherished Grand Bargain, the result would have been that the people didn’t care about what happened to the budget. And the long term policy effects would have been that once the economy was doing better and Republicans got control of Washington, all those cuts to Social Security and Medicare would remain. But the money saved from starving seniors would be used to give new tax cuts to the rich.

Krugman is right when he says, “So let’s say goodbye to fiscal hysteria.” But it really isn’t “us” who need to say goodbye to it. It is the Democratic Party elite who need to say goodbye to it. Because “we” never cared about it in the first place.

Jonathan Cohn brought up a very disturbing in issue in an article yesterday, The 5 Key Questions About Obamacare, Answered. The disturbing issue is not Obamacare or the questions about it. It is what Cohn was responding to: Peter Suderman.

I’ve written about Suderman a couple of times before. He’s a libertarian who writes for Reason and other publications. And he isn’t bad. He’s a smart guy. But he hates Obamacare. Well, let’s be honest: he would hate any kind of real healthcare reform. I’m sure if you got down to it, he hates Medicare and Social Security and pretty much everything the government does. He does, after all, write for Reason.

Cohn noted that Suderman brought up some real issues like the fact that a lot of new people are getting health insurance through the Medicaid expansion, which means that they are more likely to have difficulty finding doctors to treat them. You see, Medicaid doesn’t pay that well and so a lot of doctors avoid Medicaid patients. Of course, this is kind of a non-issue. What is harder: finding a doctor when you have Medicaid or finding a doctor when you have no insurance at all? This is all very typical of Suderman.

The question is why he is even allowed to write about Obamacare. He doesn’t like it because he doesn’t like it. Reading him write about what’s wrong with Obamacare is like listening to a 14-year-old hip-hop fan explain why classical music sucks. You aren’t going to learn anything about classical music; all you are going to hear are a bunch of excuses to justify why he doesn’t like classical music. That’s fine. Not everyone needs to like classical music. But it would be a waste of time to listen to this young man’s justifications as though they were something like actual music criticism.

As I discussed earlier this year, Another Libertarian Gets Trapped Talking About Practical Matters, Suderman will never get to the point of accepting Obamacare. His problem with the law is not practical; it is theoretical. And when all the practical complaints are exhausted, he will still be left with his theoretical opposition to the government being involved in healthcare — or pretty much anything else.

It bugs me that Cohn gives Suderman respect that he clearly doesn’t deserve, “Still, many of the flaws and complications that Suderman chronicles are very real and need to be accounted for.” I come back to this all the time. Conservatives insisted that we have this “free market” neoliberal healthcare reform policy. For example, one of Suderman’s totally valid complaints is that even though premiums will in many cases go down in general, individual premiums may go up and people may not be astute enough to realize that they must shop around next year just like they did this year.

But that’s the thing with neoliberal policy: it requires that people constantly be out there in the marketplace making sure that they are getting the best deal. Neoliberalism doesn’t care that people have actual lives to live because it sees people only as actors in the economy. And the reason we are stuck with neoliberal policy is that conservatives like Suderman demand it, even though in the end, they never support it. The libertarian take on healthcare reform is that we should do nothing, but if we must, we should go with neoliberal policy that harnesses the “magic of the market.” And with a major assist from the New Democrats who never tire of being “fooled” by conservatives into embracing policies conservatives demand, we get bad conservative policy that conservatives aren’t even willing to support.

So we have to put up with Suderman’s constant attacks on Obamacare. And those attacks will continue until Suderman just gives up and settles on his theoretical argument, which no one will be interested in publishing. Reason already has leather jacket wearing Nick Gillespie to write its theoretical articles, “The government has no business interfering with the private contracts people make!” But not to worry, there will always be new conservative poisoned legislation for conservatives to spend years complaining about. Suderman’s career is guaranteed!