Yesterday, Paul Krugman wrote something that allows me to discuss a long held theory of mine. He was writing about how the United Kingdom’s economy is finally starting to improve, The Three Stooges Do Westminster. This is in reference to a Three Stooges routine where Moe asks Curly why he is banging his head against the wall and Curly replies, “Because it feels so good when I stop!” Krugman’s argument is that the Cameron government for the last two years have imposed harsh austerity and now that they’ve pulled back, the economy is doing better. But rather than think that economies simply mend themselves if allowed, they think like Curly: their modest growth was due to the austerity (head banging).

Then Krugman gets to something that has greatly concerned me for years:

He is no doubt right. But the most important point is that this happens in the United States all the time and it works to the advantage of conservatives.

Here is the mechanism. Conservative economic policies are bad—or at least they have been for the last 30 years. Presidents have their greatest power in the first two years of their administrations. So they get to enact their bad economic policies early on. These are usually squeezing the poor (taking money away from them that they would spend) and gifting the rich (giving them tax cuts that they mostly will not spend). Thus, for the first two years we get Curly banging his head against the wall. But over time, the economy heals. So by the time that the Republican is up for re-election, the economy is finally starting to improve as it adjusts to the new bad conservative economic policies.

It is the opposite for liberals (or moderates as the case has been for the last 30 years). They actually have good economic policy ideas. In general, things get better when they enter office. But by the time they come around to re-election, the economy is stagnant or at least not improving as much as it adjusts to the new good liberal economic policies. Under Obama, it didn’t even take that long. It’s all complicated by other factors, but the overall framework is correct.

So our system benefits presidents who have bad economic policy ideas. Think about that. What can we do about it? Well, for one thing, we could have a better informed public. But it’s hard. I work very hard in my personal relationships to get people to stop fretting over little things (eg welfare fraud) and start focusing on big things (eg corporate fraud). But they don’t want to, because it is easier to despise that stuff they hear about every night on the news than the systemic corruption that the wealthy benefit from every day and that costs all of us poor people far more. Because if corporate fraud (and much else) is with us always, it ain’t news.

I know this is a temporary reprieve. But I really have to thank John Tamny from pulling me back from the abyss. There is nothing quite like blinding anger to help one out of a depression. I’m not expecting much; by tomorrow, I expect to be back down. But while I’m feeling relatively good, I wanted to take a moment to discuss something I saw today in the New York Times that I thought was hilarious.

The article is, Fed to Start Unwinding Its Stimulus Next Month by Binyamin Appelbaum. Now, the humor didn’t come from the author or the Times. It came straight from the Federal Reserve itself. As everyone outside Washington and Wall Street knows, the economy sucks and it is getting better at a glacial speed. So the fact that the Fed has decided that now is the time to start tightening—Taking the punch bowl away before the party gets out of hand!—is funny enough.

Are these guys and gals really that out of it? In a word: yes. But the high comedy is yet to come. The Times reports:

Remember: I was really depressed. Yet when I read that I howled with laughter! But you can be forgiven if you don’t see the hilarity. So let me explain. Before the 1990s, full employment was thought to be 5%. Since then, we have found that it is actually 4%. This is the unemployment rate that we can have without cause inflation. So the Fed saying that they will keep interest rates low “well past the time” unemployment reaches the still very high 6.5% mark is just ridiculous. And then they add that they will “especially” do this if the inflation rate continues to be below 2%. First, 2% should not be the inflation target; 4% should be. But the hilarity only builds, because it isn’t enough to hold interest rates down as long as inflation is at the long-run goal of 2%; it has to be below that rate.

In the end, what they are saying is that even though unemployment is ridiculously high, they are going to stop doing one of the things that can help that situation (bond-buying campaign). But we aren’t to worry, because they won’t stop doing the other thing (keeping interest rates down). Except that they will only continue to do that second thing as long as unemployment is super high and inflation is below target. John Edwards was right: there are two Americas. There are the clowns and everyone else. And the clowns are in charge.

I just watched last night’s The Daily Show, and even though I don’t feel up to writing anything, I have to say something. Forbes columnist John Tamny was interviewed by Jessica Williams on the SNAP (food stamps) program. Okay, I understand: conservatives hate the poor because they are the poor. Whether they know it or not, conservatives believe a long ago destroyed myth that the morally superior are rich and that if people are poor, they deserve it. So the fact that Tamny clearly thinks this is no big deal.

What bothered me was his justification for getting rid of SNAP. He started, “I think food stamps are cruel… I don’t think anyone is happy if they are reliant on someone else…” Okay. That’s a standard conservative line that is stuck in the past, way before Maslow’s 1943 paper on the hierarchy of needs. But whatever. He’s a horrible person. He’s a conservative. There are lots of them around.

But then Williams asked him about hungry children. What should we do about them? This is where I lost it. He said, “I think if people were literally starving, you would see a massive outpouring of charity.” Got that? I really have no idea how obvious it is, so I’m going to lay it out for you:

1. It is cruel to allow people to be reliant on others.
2. Hungry people should be reliant on others for charity.

Let’s take this home, because John Tamny clearly hasn’t thought about this at all. Charity from the government is cruel but charity from anyone else is not. So when he says that food stamps are cruel, what he means is that they are cruel to him. He doesn’t want to pay for them. It has absolutely nothing to do with the self-respect of the poor.

John Tamny is one of the most evil men in the world. Sadly, he’s also a dime a dozen. Why Forbes (which is not a totally awful magazine) would pay him anything is beyond me. There should be laws against being vile in such a public and stupid way. I wish there were a way to exclude him from “polite” society. But I suspect that among his friends and coworkers, what he said on The Daily Show is not even embarrassing; it’s what everyone just knows.

This is the first in a series of articles about what we can do to reduce our unacceptable levels of income and wealth inequality.

I don’t have a fundamental problem with a capitalist economic system. It does seem right that if I provide the bicycle that allows another person to operate a package delivery service, then I ought to receive some part of the profits of that business. It isn’t much different than if I were to simply sell the bicycle. The problem we run into is that capital begets capital. There is an absolute limit on the amount of labor one possesses. There is little limit to the amount of capital one can possess. The state of technology and the law will determine just how divergent worker and capitalist will be.

Technology is not such a big deal, but it is worth thinking about. A society defined by the manufacture of chairs and tables is far different than one defined by the manufacture of computers. Automation really does exacerbate inequality as the demand for labor goes down. But thus far in our economic evolution, we don’t really see this effect. That’s because the law swamps this effect, but it may not always be so. Still, conservatives love to talk about this because they claim that nothing can be done about it. But if it really were a problem and if it eventually becomes a problem, there is much that can be done about it. For now, I want to talk about the law—specifically, the Estate Tax.

The Estate Tax and Dynasties

Perhaps the biggest problem with the accumulation of capital is that it can be transferred from generation to generation. This is no different from an aristocracy. A worker cannot bequeath his labor to his children. So they start at zero. A capitalist can and does bequeath his capital to his children. And indeed, if you look at the prominent billionaires in American culture, they all inherited huge fortunes: Rupert Murdoch, the Koch brothers, Donald Trump. This is not a story of meritocracy, and note that even if rich men were not allowed to leave any money to their children, their children would still have huge advantages over the poor in terms of education, social connections, and much more.

Right now, with income inequality being at its highest rate ever, we have an Estate Tax that is anemic at best. It is hard to be specific, because the law does change a lot. But currently, one can inherit up to $5,250,000 without paying any taxes on the money. (It doesn’t apply to spouses at all.) Above that amount, the tax is progressive, running from 18% up to 40%. What’s more, the percentage of dying people who owe any estate taxes was at an all time low (as of 2008, since Reagan) of just above 0.5% , even though the rich are richer than ever. The tax structured in this way is not meant to provide parents with security that their children will be taken care of. It is structured to allow the building of dynasties.

Foolish Arguments Against High Estate Taxes

The primary conservative argument against the Estate Tax is that it lowers the incentive of people to be entrepreneurial. That may be true, but the effect is clearly not large. Regardless, this goes along with the very silly conservative argument that people start businesses based upon how much in taxes they will have to pay if they are really successful. I understand that the super rich corporate raiders think about this stuff. But these are not the kinds of market activity that we should be encouraging. I simply cannot imagine someone considering opening up a doughnut shop or creating an Android app thinking, “I’d do it, but if I’m really successful, they are going to tax some of the money I give to my kids!”

What’s more, the government does what it does. Would a high Estate Tax be worse for the economy than a high tax on earned income? Most clearly not. But in the conservative mind, if a trillion dollars of taxes on the rich results in the reduction of one dollar in “innovation,” then it is unacceptable. The opportunity costs are never considered. The fact that the poor could have a trillion dollars more money to spend and that this would lead entrepreneurs to create new products for them to buy doesn’t matter. Ever. That’s because the insistence of a low Estate Tax is at best about protecting entrepreneurship of the past, not of the future. (And in reality it is primarily about protecting past inherited and stolen wealth.)

Clearly, what drives the Estate Tax down is people who already have huge amounts of money who want to give it to their kids tax free. For the umpteenth time, these are not the entrepreneurs. Look at the difference. Joe Coulombe bought a small supermarket chain that was going out of business and created a whole new kind of market, Trader Joe’s. That’s entrepreneurship. Mitt Romney bought companies, saddled them with debt that often destroyed them, took his “cut” and ran. That’s not entrepreneurship. Now if someone can show me how the Joe Coulombes of the nation will just give up because the Estate Tax is too high, I’m willing to listen. But I think it is the Mitt Romneys of the nation who will be hurt and who thus lobby for an end to what they now call the “death tax.”

The only actual concern with regard to the Estate Tax is that if it were too high, the rich would find ways to avoid it. That is an issue that can be dealt with. Regardless, it could not be any worse a problem than it was in 2010 when there was no Estate Tax at all. Note: the Estate Tax has been much lower the entire time Obama has been in office than the entire time that Bush was in office. The Estate Tax was supposed to go up to 55% on gifts above one million dollars. But because of the Fiscal Cliff deal, it was lowered dramatically to 40% on gifts above five million. That is a difference in tax revenue of roughly $40 billion per year.

High Estate Taxes Promote Democracy

My main point is that a low or (as most conservatives wish) nonexistent Estate Tax increases inequality. It also puts further pressure on the government to spend less on safety net programs. All of the Debt Scolds are big on cutting Social Security and Medicare, but raising the Estate Tax is almost never mentioned. Simpson-Bowles don’t even consider it. Yet they are big on Chained-CPI which would save half that amount. And 55% isn’t that large. Throughout our booming post-WWII period, it was 77% with a deduction amount of only roughly $300,000 in today’s dollars.

Our current Estate Tax is unfairly generous to the rich. It exacerbates inequality and makes our country more class based. It is also undemocratic. We should at least raise it back up to 55% with a one million dollar deduction. We should look seriously at raising the amount to the previous 77% with a lower deduction. My intention here is not to “get the rich!” It is to put more sanity and fairness into our economic system. As such, I think that the Estate Tax itself should be much more progressive. When the top rate was 77%, the bottom rate was 3%. Now that the top rate is 40%, the bottom rate is almost half that, 18%. This situation exacerbates inequality among the wealthy—which is also an important issue. The Estate Tax we have now is more fitting to a feudal system than to democracy or meritocracy. It needs to be changed.

The following interview of Bill Moyers with Chris Hedges is really great. What is most interesting about it is that Hedges now repudiates what he wrote in Death of the Liberal Class. In that, he wrote the future of this civilization is hopeless and all we could do is document it and hope that if another rises, it will not make the same mistakes. Sadly, I often feel that way. But the Occupy Movement changed his mind and now he thinks that we can improve the system. It’s nice that he is feeling more optimistic. At the moment, I disagree. But tomorrow I’ll probably feel a bit more positive.

Check out this video. It is interesting from beginning to end:

Ed Kilgore over at Political Animal writes, Can the Right Unite in ’16? Basically, it is just an ad for TPMCafe article that looks more deeply at the hopes of the Republican Party establishment to unite behind a single candidate and not repeat their 2012 experience of everyone rushing to the bottom of conservatism. Remember how none of them would accept a deal with $10 of spending cuts for $1 of tax increases? Kilgore thinks they will have a hard time not repeating that experience.

I’m not really interested in that question. I really don’t think that Romney lost the 2012 election because he was so conservative. Again, we come back to the political science basics. The economy wasn’t good, but it was getting better. The couple of jobs reports before the election were good. There was a feeling that the economy was on the mend. And it was true. If it weren’t for the Sequester, the economy would probably be doing pretty darned well by now.

I will grant one political aspect of the election. Mitt Romney had one claim to fame: his healthcare law in Massachusetts. Long before the formal campaign started, he had repudiated it—at least on the national level. (Funny thing: conservatives always say the states are the “incubators of democracy”; but it’s really just a cover for doing nothing.) So the one thing that Romney could claim to have accomplished, he wouldn’t admit to; and even if he had, Obama had already done it.

This is all very bad news. It means that if the economy tanks in mid-2016, the Republicans will probably win the White House. They could nominate Louie Gohmert. It wouldn’t matter. Well, maybe a little. But let’s remember that most liberals were happy when the Republicans nominated Reagan. Now sure, there was the hostage crisis and Reagan’s “charm,” but mostly it was the bad economy that got Reagan elected president.

So I don’t particularly care how the Republicans go about getting their nominee. And really, what are the choices? Chris Christie is a supposed moderate in the party, and his policy positions are as extreme as any other conservative. The issue is the economy and it always will be.

There is a bit of good news though. The demographics are changing in this country and fewer and fewer people would want their neighbors to know that they vote Republican. So as long as we all get out there and vote, we win. Or at least we win as far as we are allowed to by the moderate to conservative Democrats we elect. I’ll have more to say about that soon.

Paul Krugman asked a question in his column yesterday, Why Inequality Matters. The question: “So the president was right. Inequality is, indeed, the defining challenge of our time. Will we do anything to meet that challenge?” I have an answer to that question: no.

I know that sounds cynical and I don’t mean it that way. Eventually, I do think we will do something about the defining challenge of our time. But not now and not from President Obama or even from Paul Krugman. Inequality will be dealt with when we people simply won’t take it anymore. I was reminded of this recently while watching Manufacturing Consent. In it, Noam Chomsky says that movements aren’t led by people like him. Movements come about and when they do, there are people around who appear to lead, but that’s just an illusion.

I don’t think that’s always true. And I think that leaders really do help movements grow. But clearly, the civil rights movement of the 1960s would have succeeded with or without Martin Luther King. But regardless of that, people like King have an actual stake in the fight. I have an actual stake in the the level of income inequality in this nation. Of course, I’m no leader. But a leader in this fight must share my stake. I think Obama and Krugman are both good men, but they are also men who benefit from income inequality.

Paul Krugman has a net worth of about $3 million. That’s not unreasonable, but it is about 50 times the net worth of the average American. Is he worth that? I don’t actually think so. I don’t think he has anything to give to society that others do not. He’s valuable, but not unique. Similarly, Barack Obama is worth about $12. That is unreasonable when you consider that the wealth comes mostly from his books. Krugman is a real prize compared to Obama. Krugman just might be worth 50 of his fellow Americans but Obama is certainly not worth 200 of his fellow Americans.

But the point is that for both men, inequality is something that is theoretical. Neither will ever have to worry that they won’t have a job. And so they will not be our leaders. They might help out by providing a little intellectual stimulation or giving a good speech. But we need our own Lech Walesas. Most of all, though, we the hundreds of millions of individuals who are harmed by our inequality problem to rise up. We have to be prepared to say, “Income inequality is the defining issue of our time and we need to do something about it now.” That includes giving up on people like Obama who claim to be for the working classes, but who are just more New Democrats with their conservative ideas. And we will get there. We are only a generation away. I see that clearly. My generation is not doing well, but also not badly enough to rise up. Those in their 20s are doing quite badly. As they make it into their 30s and 40s, they will not accept this.

Obama is right that income inequality is the defining issue of our time. And Krugman is right to ask if we will do anything about it. But what matters is what we do. And eventually, we will do a lot.

Seymour Hersh has written a really interesting article in the London Review of Books, Whose sarin? It is about the actual intelligence that we have about the sarin attack. It turns out that the Assad regime was not the only group that has the ability to make the stuff. In particular, there is the al-Nusra Front. They are “a jihadi group affiliated with al-Qaida.” What’s more, They have “mastered the mechanics of creating sarin and was capable of manufacturing it in quantity.” Could they have been the source of the sarin attack?

As you may remember, I was skeptical of the reporting on the use of sarin by the Assad Syrian government. Hersh throws a whole lot of uncertainty on our government’s case that it was so. I’m not convinced one way or another at this point. But there is something really important here that goes way beyond the specific issues of this attack. Hersh shows conclusively that the Obama administration was playing with what intelligence it did have. It was cherry picking information exactly the way that the Bush administration did in making its case for war with Iraq.

This doesn’t come as a surprise. It seems that one of the great perks of occupying the White House is that you get to start wars for no reason in particular. And unlike many of my liberal friends, I don’t think there is a whole lot that distinguishes Obama from others. Soon, I will be writing about a political test that I got a bunch of readers to take. The possible scores range from -10 (extremely liberal) to +10 (extremely conservative). Obama got a score of +6, only slightly more liberal than Mitt Romney, who got a score of +7. Think about that for the next week and get back to me.

Hersh tells the story of al-Qaeda groups growing in strength in the Syrian resistance, and that the intelligence agencies are actually more concerned about that than they are about the Assad regime. That makes sense. Assad may not be great, but he’s fairly stable. And revolution in Syria is going to mean huge numbers of casualties, even compared to what we’ve already seen. But none of that really matters; the Obama administration continues to be in favor of overthrowing the Assad government.

So what is this all about? Regime change? I’ve come to hate that term. For one thing it means that we here in the United States know better what governments different countries should have. I’d be on board with that, if it weren’t for our utter hypocrisy. Why are we not in favor of regime change for Saudi Arabia? That’s a vile regime. But they are our friends, so they’re just fine. Anyone who thinks that international politics has progressed since the time of the Greek city states, is naive or just stupid. And now, we have quite possibly made the situation in Syria far worse:

That’s just like America: disarm a stable government and give the advantage to the terrorists. Go team!

I was looking at cartoons about income inequality last night and I came upon a number of them that I’d like to share. Click on them to go to the original websites. They all highlight different aspects of the problem. As Estragon said, “Nothing to be done.” That’s the conservative answer to income inequality: nothing can be done, and even if something could be done, we shouldn’t do anything. It is for the best that there be high levels of inequality. Why? Because!

Raise the Minimum Wage?

How could the companies possibly afford to raise the minimum wage? After all, profits are at all time highs! We need to wait until profits go back down, and when companies aren’t sitting on piles of cash. That’s when things will be “normal” and companies can make a good decision about how much they can pay. Of course, then they won’t be able to pay more because profits aren’t high enough and they aren’t sitting on such large piles of cash.

Start at the Top!

If you want to become rich in America, the surest way is to have a rich daddy. Just ask Tagg Romney. But the next surest way is to start at the top with the minimum wage:

What?

The big thing about the way that we think about economics in this country is that it is “natural.” But there is nothing natural about it. Income distribution is 99% determined by our laws. I understand that the rich don’t see that, because it would be very inconvenient to see that. But there is nothing natural about this:

Family Legacy

We have an economic system that just so happens to make some people unreasonably rich. No one would look from the outside and say, “That’s the way it should be!” Our economy is like a board game. If you are very good at it, you do well. But if the game were different, you wouldn’t do so well. Is the sorta free market economic system we have the best one? I don’t think so. This is a good example of just how “free” and “meritorious” our system is:

Shared Sacrifice

This is my favorite. I hear this coming from liberalish pundits all the time, “We all need to sacrifice!” How does that work exactly. For the poor, an economic downturn means they lose their jobs. In a normal cultural system, in a downturn, people would work more and harder. But in our screwed up system, they aren’t allowed to work at all. Of course the conservatives and “liberal” moderates aren’t sacrificing except that maybe their investments aren’t growing quite as fast as they’d like. “Shared Sacrifice” (which I’ve heard Obama say so much that it sickens me) is just another way of saying, “Screw the poor!”

Let Them Eat Cake

But leave it to Dilbert to put it just right: let them eat cake. Of course, it isn’t the employee who really doesn’t deserve a promotion who is the problem. The problem is the corporate system itself and the way that it enriches the rich beyond all reason. And despite what Milton Friedman used to say, this system is not also making the poor richer. But I’m sure if he were alive, he would just come up with a new apologia for why our unconscionable inequality was good. Regardless, let the rich eat cake:

And really: die. That’s when the rich do their best work.

Not that I really care about the 2016 campaign, but No More Mister Nice Blog is reporting, Iowa Republicans Apparently Live in Their Own Information Bubble, Not the Beltwy’s. It looks at how Iowa Republicans are looking at potential 2016 presidential nominees. They are big on Paul Ryan, which is just short of the most boring thing I’ve ever heard. Much of that is just that he’s attractive.[1] Big deal.

What was more interesting, but no more surprising was, “Iowa voters are apparently not obsessed with the post-2012 media flavors-of-the-month, Chris Christie and Ted Cruz.” The reason for this is simple, although most political observers just don’t seem to get it. Both Christie and Cruz are assholes. That doesn’t play most places.

Rural areas tend to be more conservative for a number of reasons. One is that they aren’t terribly diverse. It is so much easier to think that black folks are bad if all you ever see are black men charged with murder on the television news. What’s more, in low crime areas, people tend to take an over-sized approach to law enforcement—they want to “throw the book” at people for small crimes. These are unfortunately aspects of rural populations. But one fortunate aspect is that the people generally have a more rigid idea of decorum.

Ted Cruz, for all his Texas “charm,” comes off as the Princeton University elitist that he is. Every time I see him on the television, I’m not struck so much by his being wrong as I am by how he seems to be talking down to me. I get the very same thing from Rand Paul, who also doesn’t come off too well in Iowa. They both come off like they are trying to school me in basic economics. “If only you fools would read your Friedrich Hayek a bit more carefully, you’d understand how the world really works!”

I understand that Paul Ryan thinks the exact same things, but that’s not how he comes off at all. In fact, if you really listen to him (and I’m afraid most liberals do not), you will hear all kinds of populism coming from him. He talks about the unfair tax code and about how working people are being kept down. Sure: all his solutions will only make matters worse, but his pitch is directed at the middle classes and wanting to save them. The same goes for Rick Santorum, who has great economic rhetoric (and whose economic policies would actually be more populist).

As for Chris Christie, well what do you expect? The only reason the Villagers are so fond of him is that they see him as a “third way” kind of guy. He gets the same treatment that John McCain does. He’s a conservative, sure. But he doesn’t hate the gays! Except he does. He doesn’t want to limit access to abortions! Except he does. He doesn’t want to destroy the environment! Except he does. He’s also corrupt. But none of that matters, because to the beltway crowd, he seems reasonable. Of course, part of that is just that he’s a governor in a blue state. What do these people expect? Did they think he was going to go out of his way to prove how conservative he was during a re-election campaign?

As for the people in Iowa, I’m sure that he comes off as the very rude man from New Jersey that he is. He’s the guy that yells at reporters and teachers and anyone else who asks him a question that he doesn’t like. And don’t forget: he’s big. And that just makes him seem like a bully—which he is! The only places that Christie is likely to do well are the places that will be won by the Democrat in the general election: New Jersery, New York, California. So if the national Republican Party is stupid enough to nominate Christie, have at it. But it would seem that the people in Iowa are a bit smarter than that.

Afterword

I am well aware that there is right now a highly paid team of political consultants who are simultaneously working on ways to make Christie look more traditionally conservative (that is, fascist) and less like a total asshole. I just don’t think that second part can be done.

[1] I saw a blond woman on television talking about income inequality and how she dug herself out of poverty. All I could think was, “Yeah, but almost no one is gorgeous like you are. Do you really think your looks have nothing to do with your being on television?” Looks matter enormously in everything.