Tuesday, May 30, 2006

Trickle-Down Economics: Four Reasons Why It Just Doesn't Work
By Mehrun EtebariJuly 17, 2003

We’ve all heard the claims that cutting tax rates for the richest Americans will improve the standard of living for the working class. Supposedly, top-bracket tax breaks will result in more jobs being created, higher wages for the average worker, and an overall upturn in our economy. It’s at the heart of the infamous trickle-down theory.

The past 40 years have seen a gradual decrease in the top bracket’s income tax rate, from 91% in 1963 to 35% in 2003. It went as low as 28% in 1988 and 1989 due to legislation passed under Reagan, the trickle-down theory’s most famous adherent. The Clinton years saw the top bracket hold steady at a higher rate of 39.6%, but under the younger Bush’s tax-cut policies, the rich are once again paying less. The drastic change in tax policy that has taken place since the early 1960s gives us a great opportunity to study and evaluate the claims that lower taxes for the rich translate to more wealth for the average American.

We can compare changes in the top tax rate with the real GDP growth rate (a measure of the growth of the entire U.S. economy), and three measures of how life is for the average working American: annual median income growth, annual average hourly wage growth, and job creation. If cuts for the rich were really the magic elixir for the economy and the middle class that the Republican consensus claims it is, we would see an increase in the four indicators whenever the tax rate dropped. However, this is not the case. Such a trend occurs sometimes, but the opposite happens at other times!

Let’s look one by one at comparisons of key economic indicators to the top tax rate.
1. Cutting the top tax rate does not lead to economic growth.

This graph shows the fluctuations of the real GDP growth rate over the period, indicating the performance of the U.S. economy as a whole. It is true that growth increased drastically after the 1982 tax cut, reaching as high as 7.3% in 1984. However, as the Reagan-Bush, Sr. administrations went on and taxes for the rich were slashed even further, growth fell to negative levels during 1991, at the heart of the last recession. And, two of the three years with the highest growth were during the 1950s, when the top tax rate was 91%. Overall, there seems to be no close relationship between the top tax rate and the GDP growth rate, and statistical analysis backs this up: the correlation coefficient between the two variables is 0.03, meaning that there is essentially no connection. (If tax cuts were strongly related to GDP growth, we would see a coefficient close to –1.) So much for upper-class tax cuts boosting the economy; now it’s on to median income growth.

2. Cutting the top tax rate does not lead to income growth.

Again, we see inconclusive evidence for the power of tax cuts. We do see small peaks in median income growth, a good measure of how the average American household is doing, after top-bracket tax cuts in the mid-1960s and early 1980s, but we also actually see income decreases after the tax cuts of the late 1980s, and strong growth after the tax increase of 1993. It is true that in the year with the worst median income decrease (3.3% in 1974), the top tax rate was 70%. However, it was also 70% in the year with the highest median income growth (4.7% in 1972)! Once again, the lack of connection between the two measures is backed up by a correlation coefficient near zero: 0.06, to be exact. And yes, yet again, the coefficient is positive, indicating that income has gone up slightly (though negligibly) more in years with higher taxes. Two strikes. How about hourly wages?

3. Cutting the top tax rate does not lead to wage growth.

Not surprisingly, we have mixed results yet again! Growth in average hourly wages did increase during the 1980s following the first Reagan tax cuts, albeit two years after the cuts took effect. But, just like GDP growth and median income growth, hourly wages decreased following the late 1980s tax cuts, and spiked upwards after the 1993 tax increase.
Furthermore, wages grew at a level of at least 1%, and usually much more, all throughout the period when the top income tax rate was 91%. In fact, it isn’t until 1972 that we see a wage growth rate of less than 1%. However, if we look at the 19 years of the study period when the top tax rate was 50% or less, we see that 8 of the years saw an increase in wages of less than 1%. Thus, it seems that hourly wages grew more when taxes were higher – indeed, the correlation coefficient is 0.34, indicating a mild positive relationship between higher taxes for the rich and higher hourly wages. This finding flies in the face of the conservative theory. As if that's not enough, now let’s see about what President Bush claimed would be the biggest result of tax cuts – job creation.

4. Cutting the top tax rate does not lead to job creation.



Here, we see the change in the unemployment rate laid against the top tax rate from 1954 to 2002. Thus, negative values signify a decrease in unemployment -- in essence, job creation. Once again, while the top tax rate trends downward over the period, the annual change in unemployment doesn't seem to trend at all! Although the largest increase (2.9%) did occur in 1975, when the top marginal tax rate was 70%, three of the four largest decreases in unemployment occurred in years when the top rate was 91%. The mixed results do not bode well for those who see tax cuts for the richest as a sparkplug to incite job growth. The correlation coefficient between the variables here is 0.11 -- meaning that there have been slightly more jobs created in years with lower top tax rates, but this pattern is negligible -- nowhere near strong enough to signify a relationship.

So, can you tell what our conclusion is yet?

Overall, data from the past 50 years strongly refutes any arguments that cutting taxes for the richest Americans will improve the economic standing of the lower and middle classes or the nation as a whole. To be sure, the economic indicators examined in this report are dependent on a variety of factors, not just tax policy. However, what this study does show is that any attempt to stimulate economic growth by cutting taxes for the rich will do nothing -- it hasn't worked over the past 50 years, so why would it work in the future?

To put it simply and bluntly, Bush's top-bracket tax cut is an ineffective attempt at stimulus that will not cause any growth.

(Source)




11 Comments:

Anonymous Anonymous said...

Here’s where the Mehrun Etebari is DEAD WRONG, he fails to see government as the force for evil that it always is...and must be.

There can never be a “good government,” so long as human nature reigns supreme...and hopefully that will be as long as humans exist.

Nefarious, corrupt and abusive government is not a “sickness” or disease that we must cure, but a basic reality that we all must all accept and that’s why ALL of us, those outside government, as well as those within, must recognize that government MUST be limited and starved of resources at every turn.

America’s Founders knew that. They despised government as much as today’s Militia members do.

But somehow we’ve fallen away from their great and time-honored anti-government tradition.

The American tradition demands that ALL tax rates must be kept low...ideally below 10% so that government cannot take on ambitious projects.

Even Hamilton, the most federalist (pro-government) of America’s Founders considered anything that resulted in taking money from some Americans to benefit other Americans as innately immoral. On that score, at least, Hamilton was right.

There is nothing I can think of more immoral than compulsory charity, the taking from those who produce to give/benefit those who are poor in the name of all Americans.

So anyone who supports any form of real redistribution of wealth is fundamentally immoral. Moreover, anyone who maintains that the income tax is a means by which to redistribute the wealth is a moron to boot.

Why?

Because the income tax DOESN’T TAX WEALTH!!!

How so?

Because income is NOT wealth.

Almost none among the top 10% of all income earners are among the top 10% of “wealthiest Americans.”

How’s that?

Because the truly wealthy don’t rely on income, the least effective means of garnering wealth, to generate their wealth. The truly “rich” rely primarily on investment vehicles, Trust Accounts, etc, all taxed at lower, fixed rates.

Taxing dividends and Capital Gains more is NOT the answer either. In fact, there is only one way to tax everyone and make everyone pay at least something and that is with a flat rate consumption based tax – the Fair Tax or NRST (http://www.fairtax.org).

Anyone arguing for higher income tax rates is arguing for more government spending, which is, in effect, arguing for MORE government evil.

I wonder why Mr. Etebari would do that, unless he simply fails to understand the above.

9:37 AM  
Anonymous Anonymous said...

I have to say "he fails to understand the above"

So do most people.

I've spent a lot of time reading Ayn Rand and I'll bet that Atlas Shrugged is on your reading list?

The forth ideal of Objectivism:
"The ideal political-economic system is laissez-faire capitalism. It is a system where men deal with one another, not as victims and executioners, nor as masters and slaves, but as traders, by free, voluntary exchange to mutual benefit. It is a system where no man may obtain any values from others by resorting to physical force, and no man may initiate the use of physical force against others. The government acts only as a policeman that protects man's rights; it uses physical force only in retaliation and only against those who initiate its use, such as criminals or foreign invaders. In a system of full capitalism, there should be (but, historically, has not yet been) a complete separation of state and economics, in the same way and for the same reasons as the separation of state and church"

That's a great theory, I'll bet it works in a test tube. Now welcome to the real world where greedy people have all of the power and are not willing to share their resouces.

Our "evil government" is what stands between us and the Rober Barons of yesteryear.

Captialism is what's sick. Anyone with a conscience can see that. Without Democracy capitalism will swallow everthing in its path - so watch out! It feeds on greed and lust for power.
At least a Democratic from of government holds elections and attempts to do the will of the people.

10:02 AM  
Blogger Van said...

JMK- I think that it is important here to define terms, when I think of evil, I think of a perverted approach to goodness. Like the way a criminal steals, he or she is attempting to do good, i.e. eat or purchase illegal drugs, good in his preverted way of thinking, but his attempt or approach will hurt others in some way.

Is that what you mean by evil? A perverted approach to goodness?

Anyway, politics would be much more efficient if when politicians stated that “government is bad”, they only mentioned what they mean by bad or evil. This way we could agree or disagree from the start,not wait until something like Social Security is privatized, and then say...oh, that's what he meant by big government.
Most of the time when a politician suggests that an evil government program must be eliminated he or she is mentioning a program that protects the people, and the people may be thinking of a wasteful government (pork) program. So defining terms is important here too.

Obviously you and I disagree, I don’t think that government is evil. It can do evil things, but we may also disagree on what those things are so there’s no need to broach that topic right now either.

Since I know that we disagree on what government should do, what services it should perform, let me start by stating why I believe that government is mostly good.

Government provides protections from over powering market forces – it protects the little guy from being eaten by the big guy.

Government provides disaster recover and helps people through major storms and tragedies, it provides economic stability for investing, it provides education to the poor, it provides our courts, criminal justice, firemen, policemen, law and order.

The government provides us with a military and public defense, medical care for the poor, Social Security for the elderly, child labor laws and Welfare.
I know that you are probably against many these programs, but consider where we would be without them. Consider for a moment how many in our country would be starving if it weren’t for Social Security and Welfare.
Now take a look at Somalia where there is not government or Peru where there is very little regulation of industry, is that what you want for us? Not me, no thanks.

Besides, we’ve tried Laissez-faire in 19th century America? It was a disaster. Filth in our meat, shanty towns, racism, 'No Irish need apply', company towns, union-busting goons, monopolies, corruption scandals, a punishing business cycle, old folks living in poverty, failing banks.

The solution to most of those problems was government: food and drug regulation; anti-trust laws; banking regulations; labor laws; the Fed and Social Security.
Government works for the people, it serves the collective will. How can that be evil?

11:01 AM  
Anonymous Anonymous said...

The view of government as champion, or even "potential champion" of the people, can only be accepted by ahistoric (historically unaware) people.

Virtually all human degradation and misery and ALL of the recent (20th Century) genocide has been accomplished by government.

Greed has never been overcome by any in government, in fact, nowhere is greed more corrosive and malice for the populace more direct than in the halls of government (ANY government).

Does government serve "the collective will?"

Only in the most obtuse way...and even then, mostly accidentally.

Sure, there are some good people in government, but people (ALL people) are motivated by the same things (avarice and ambition most of all).

America's Founders had it about right - "Government is, at best, a necessary evil." That's why they enshrined INDIVIDUALISM, with not even a nod to any "collective good."

As far as governments go, we'll always have to put up with some degree of corruption and on occasion (Stalin, Hitler & Mao for instance) much worse, for that is indeed the price of that "necessary evil."

But to think that government is a "tool of the people," is beyond naive. It never was and never will be that...nor should it be.

It is what IT is....just as business, as amoral and ruthless as business can occasionally be, is what IT is.

The fact is, there simply is no economic alternative to markets now-a-days. Socialsim has failed in every conceivable way. The 20th Century proved that!

The last best chance for Socialism was in the form of some kind of Command Economy managed by an efficient Dictator unafraid to force those who would not relinquish their possessions to the State to do so - but that failed in Russia, in China, in Albania and again in Bulgaria and a hundred other pissant Third World nations to boot.

Democratic Socialism fared even worse because in a democracy, it is even harder to force those who HAVE to willingly give what they have up. The result, in places like France, Sweden and other Western Eurpoean nations, was a wholesale reversion to Corporatism, where the government resorted to regulating buisness and industry, protecting existing, established enterprises, while stifling new ideas and innovations in the process.

Those places ran their mammoth welfare bureaucracies on the backs of those few with real jobs within those double digit unemployment economies.

France, Germany and Sweden are all running even further away from their huge social bureaucracies today. Germany's Angela Merkel has even stated that she wants to make the German economy "more like America's."

Unfortunately for her, America's economy is also far more Corporatist, at this point, than anything else.

The sad reality for those who still wistfully believe in the Socialist cause is that it is utterly and finally defunct...and rightly so.

Socialism was directly responsible for the between 250 and 400 million people exterminated during the 20th Century in its name, from the 50 million murdered in the USSR, to the nearly 100 million murdered in China, to those in Hitler's (National Socialist) Germany, to Pol Pot's Cambodia...those were all the last gasps of the "alternative to the market-based economy."

ALL of America's prosperity is owed to its business community, and yet there is never a shortage of misguided souls who'll see the evils of government action (for instance, evem the monopolies of the late 19th Century were solely a result of government action, because without government barring competition, there is no way a monopoly can possibly exist) and blame business and industry for those things.

In the wake of the death of Socialism, some might say, "Well, we're stuck with a market-based economy, we may as well deal with it."

That is not really true, as we're not so much "stuck with" the market-based economy, as there actually is no other kind of economy possible!

Market forces (such as Supply & demand) are as ineluctible as gravity and there is no god nor government known to man capable of eradicating them, any more than can gravity be eradicated.

4:59 PM  
Blogger Van said...

Hello JMK – Thanks for stopping by again. I always look forward to your comments.

As usual, you make some good arguments.
The view of government as a “champion” of the people has historical relevance. There have been many times when government has risen to the occasion and actually helped the people of the United States and not simply helped to advance the interests of the corporatists.
I can think of our efforts to put people back to work to during the Great Depression, The Civil War, and The War on Poverty, The Civil Rights Movement. Yet these things did not happen simply because we have a benevolent ruling class which acts as a nurturing parent. No, they happened because the people spoke, and the government listened.
Anytime that the government has made sweeping changes to laws which have effected our national psyche, such as the civil rights laws of the late 50’s and early 60’s, it was done to fulfill the will of the people.
So yes, with motivation from the people, our government can champion certain issues. But a government will nearly always look to fulfill its own self interests; that’s no secret. It always takes the collective will of the people to make our government respond to our needs, it always will.
And that’s no accident.
But I think that you have me confused with someone else when you suggest that I am advocating socialism, I am not and never will. I would not advocate a pure form of capitalism, objectivism, or any other “ism”.
What am I advocating? Well, let’s start with Clean Elections, then a national healthcare system, then low interest loans for college students and more Pell Grants for under privileged college students, and possibly unemployment gap insurance.
I want people to pull them selves up from their own boot straps, but I want our nation, our people, to pitch in.
I didn’t sign up for Globalization, so when my job goes overseas why should I lose my healthcare, my ability to pay my mortgage and be expected to retrain for another job category? Or better yet, how can I be expected to meet all of those obligations?
No one can do that alone.
Hell, even Republicans are talking about unemployment gap insurance.
Second, I don’t want our young college students saddled with debt before they even graduate.
Third, I don’t want someone to have to file bankruptcy or sell their family home due to major illness.
This doesn’t make me socialists, it makes me practical.
You wrote:
“Democratic Socialism fared even worse because in a democracy, it is even harder to force those who HAVE to willingly give what they have up. The result, in places like France, Sweden and other Western European nations, was a wholesale reversion to Corporatism, where the government resorted to regulating business and industry, protecting existing, established enterprises, while stifling new ideas and innovations in the process.”

Well, I can point to many Western European countries that are doing very well, perhaps their GDP is not as high as ours, but their companies are making money and their people are happy and well adjusted.
The truth is that any political or economic system without a counter balance will fall under its own weight.
So yes, Germany want’s to become more American. If that means being more productive and more efficient with business processes, more power to them. The simple truth is that every country or economy requires reform once in a while.
If countries do not reform then you will end up with an economy like Italy was GDP has been below 1% since the year 2000. Italy has not modernized their manufacturing facilities and that has caused their economy to spiral downward.

But do you thing that the German people want to be more like Americans? Do you think that they want to lose access to healthcare and education and live each day with the insecurity that a layoff from work is an economic death sentence? I seriously doubt it.

In fact, to me it seems that what is happening in Germany is emblematic of the cycles of social democracy –- and a by the way Germany is still the third largest economy in the world and one of the largest exporters.
When an economy moves too far to one direction, right or left, it will naturally have to move in the opposite direction for a time.

I predict that the Untied States will start moving toward the left again once the disparity rate between the rich and poor reaches a certain point. Once people realize that trade unions are not the enemy of the worker, once we realize that laissez-faire capitalism, unrestrained capitalism, is as dangerous as ideological socialism.
It’s just a matter of time for us to move left as it is for the French to move right. And as in the past, the people will start the movement and the government will be the vehicle for change, until another tipping point is reached and we move back towards right wing, pro-business policies.
This is what makes social democracies so successful, so appealing to so many; social democracy is flexible.

5:27 AM  
Blogger Van said...

MD - you wrote:
"Personally I would take the church over a union any day."

I wish that you would reconsider that point.
A labor union, for all of its faults, provides a worker the a voice in the workplace, a voice and a direction over his or her destiny.

A labor union brings democracy to the work place. A church will never be able to provide democracy in this regard.

A church will provide spirtual guidence and social cohesiveness, but a church will not be able to negotiate a wage settlement or a labor dispute.

We've lived in a period where there were no labor unions. It was called the Guilded Age.

Here are some of the symptoms of a country with no labor unions.

There was filth in our meat, shanty towns, racism, 'No Irish need apply', company towns, a punishing business cycle, children slaving in factories, a very high child and infant mortality rate and a high adult mortality rate, starvation and tremendous wealth inequality, not to mention worker insecurity and intimidation.

You may not like Unions, but they are a necessity for our middle-class to thrive.
Unions, just like any other organization, must reform from time to time.

This is a time of reform for Unions. unions have grown too fat, too disconnected from the workers.

In time unions will make a strong comeback and serve an important purpose.

In fact the SEIU picked up over 200,000 new members in 05.

As I said, unions bring democracy to an otherwise fuedal work place, this is a very appealing attribute.

5:23 AM  
Anonymous Anonymous said...

Here's the crux of my disagreement Van, I'm not arguing what SHOULD BE, certainly it would be great if governments were not as afflicted with greed and self-interest as all other organizations, I am arguing about the unfortunate reality that government is NOT devoid of greed, avarice and puny self-interest.

When people here in the U.S. talk about corruption as though it were an aberration, they do themselves a great dishonor (appearing unaware of the facts) and government a disservice (by underestimating just how fallible and prone to human nature those in government ARE and have been).

The William Jefferson corruption scandal is no aberration, it's par for the course. If he's more guilty of anything, more than the average American politician, it's being a little more obvious and a little less cunning in his methodolgies.

Recently the UN acknowledged that in sub-Saharan Africa, African pols stole more than $140 BILLION earmarked for Aids treatment and prevention.

Some folks are shocked, I laugh.

I laugh because THAT'S human nature in a nutshell. The only thing those African pols do differently than their European, Asian and American colleagues is that they again, were too obvious, too "in your face" with the theft.

Yes, elsewhere perhaps 25% or even 30% of the actual monies would've went to the actual cause earmarked, if only to create a plausible "good faith effort" in the face of overwhelming odds, of course, while the other 60 to 70 percent would be siphoned off, but in every case, the pols think "ME first," everything else, a very distant second.

OUR government, here in America, HAS been better than most governments the world over, only because of one vital difference - ours has intruded the least and attempted to "manage the economy" the least.

That has changed drastically over the last half or three quarters of the 20th Century (beginning in earnest around 1930, though the underpinnings, the 16th Amendment and the Federal Reserve Act took hold much earlier) and to our detriment.

What America's Founders knew is that no government can be trusted, at least not for very long. What they may have known, but never much expounded upon, is that people, as a part of nature, are every bit as resilient as nature is.

For instance, one of the worst things you can do to a wild animal is to feed it. Sounds contrarian, but it's true.

For when animals get used to being fed and not having to compete, forage and "earn" their food, they lose the ability to do so and when that person either tires of feeding them, or moves to another place, many of those animals inevitably starve.

The same is true for people.

Humans as individuals are extremely resourceful and resilient, but like any animal, they generally choose the path of least resistance - "the easier way out." When faced with opportunities, they compete, but when given things based on "need," via social programs - they lose both the will and the ability to compete for opportunities.

The workplace is changing...or more aptly HAS changed. The days of protected workers, working in Union shops for one employer are pretty much gone. Today, an increasing number of workers are considered "independent contractors," responsible for their own benefits (Health Insurance, 401Ks, etc).

Is that good or bad?

Actually, it's neither, it's merely a more efficient model of business. One that forces the worker to recognize and acknowledge that he/she is an entrepreneur, a seller of his/her skill-set/labors and it is up to that worker/labor-seller to be able to offer the most value, in terms of a useful and varied skill-set to the customer/employer as is possible.

It's actually a model that treats the worker as an indpendent and responsible ADULT and not a child to be taken care of.

We can argue about wage rates and skill-set value, but the reality is that wage rates are largely uneffected by such things as tax policy, expanding or contracting GDP, the Trade Deficit and the National Debt. They ARE directly effected by things that impact the Supply & Demand of labor, such as "Free Trade" policies that have allowed so much "outsourcing" of American jobs and our encouraging (by merely winking at) illegal immigration, which has flooded this country with a massive influx of people willing and able to provide cheap labor.

While BOTH major Parties have been terrible on both those issues, it should be noted that the Democrats, the Party that should be opposed to cheap labor and in favor of what's best for workers, has presided over the expansion of GATT in 1991 and the passing of NAFTA in January of 1994.

Van, that's a terrible record!

The "flexibility" you speak of has been a curse.

We've NEVER reached a balanced economy, one that neither punishes business, nor workers, by flooding the worker's marketplace with cheap labor.

By the 1960s the U.S. Labor movement had already put thousands of small and medium sized businesses out of business by imposing "pattern bargaining" on those smaller firms, burdening those companies with labor costs they couldn't bear...and killing off tens of thousands of jobs in the process.

The reality is that Unions weren't forced out of the picture, they've suffered as the economy has changed from an industrial base to an information base...and we're not very likely to go back to that industrial base.

In fact, we're probably going to see an accelerated switch to an information based economy with its emphasis on worker as "free agent," or "labor entrepreneur." That will ultimately ahppen in many places around the world.

Since too few people understand the realities of the market and how market-based health care would provide cheaper, more efficient healthcare, if forced on the healthcare professions, we probably will embark on some sort of Universal Healthcare system, replete with healthcare rationing and all the other probelms that beset all such rpograms, though I'm also confident that we'll still acknowledge the marketplace by giving those who can pay, the ability to buy extra care, or go "outside the system" to get "better than standard care."

That would seem the most likely American compromise. One that ultimately would become the equivalent of the private vs public school system dynamic, with the vast majority of folks having to send their kids to sub-par public schools, while those who CAN, do send their kids to better, more efficient and effective private schools. That's not an endorsement of that system (I'd endorse free market medicine), but it seems the most likely American compromise, given our history on such things.

There's no doubt that government SHOULD be the impartial referee many see it as, but it's also true that the viscisitudes of human nature dictate that THAT'S nearly unattainable. The "best and brightest" go into business and research, leaving the most flawed among us to go into government. More often than not, the results are catastrophic, as in the sub-Saharan African Aids money scandal.

8:20 AM  
Blogger Van said...

Hello JMK - you've make some excellent comments - thank you.

Please don't be offended if I do not respond right away, I have a heavy workload today and a very busy weekend.

I'm tenting my home for termites on Tuesday, so I have a ton of work to do in preparation.

I'll respond and resume blogging again by next Wednesday. In the mean time I hope that you have a great weekend.

8:58 AM  
Blogger Van said...

JMK - Finally I have a moment to respond.

You raise some interesting points, but I've never argued that government is devoid of greed of self interest.
I argue that the democratic process allows all of us, all citizens, to participate. As opposed to corporate board rooms where only a few make the decision for many.

Government can, and does make back room deals to serve its interest, but we can throw the bums out in the next election -- I suspect that this will happen in November -- God willing.

You wrote:
"The workplace is changing...or more aptly HAS changed. The days of protected workers, working in Union shops for one employer are pretty much gone. Today, an increasing number of workers are considered "independent contractors," responsible for their own benefits (Health Insurance, 401Ks, etc)."

Then

"Actually, it's neither; it's merely a more efficient model of business."

My point is that the burden for "personal responsibility" is too high.
In the real world where a 40 year old professional is laid off and does not find gainful employment for a year or so, he/she should not be expected to cover healthcare for the family and retrain for a new career, it's too much of a burden.

How can we expect a person with a family, a mortgage and additional obligations to cover all of these expenses without having to file bankruptcy?

Besides, retraining is not a silver bullet.

According to Lou Uchitelle's new book, "The Disposable American” there are not enough professional category jobs for all of those who need to be retrained.

If we are not careful we will end up like Pakistan where the majority of PhD’s are under employed and the average cab driver has a 4 year college degree.

What good is a degree without a job?


You wrote:
"In fact, we're probably going to see an accelerated switch to an information based economy with its emphasis on worker as "free agent," or "labor entrepreneur." That will ultimately happen in many places around the world."

This may be true, but our middle-class will not absorb the sort of pitfalls of a purely market based economy.

Free Agent? Well that just means that business is off the hook and the burden of healthcare, pension and social safety nets will on the individual. That would be ok with me if the price for those necessities were reasonable, but they are not.

As a person who has been laid off several times due to outsourcing, I see first hand how difficult it is for individual recovery from job loss.

While laid off, my payments for healthcare were nearly $1000.00 per month; I had to pay that for 3 months to avoid a lapse in coverage. I was able to pay this out of my slush fund, but I've haven't been able to recover that fund since 2004. And I'm not alone. The majority of Americans do not or cannot save money due to higher living expenses.

I see our country, by necessity, moving towards a more European style of democracy where the individual has a safety net in the event of economic pitfall-- layoff. By this I mean unemployment gap insurance, healthcare coverage and possibly assistance with re-education.



Let's face it, in the market based economy that you describe the layoff will be ubiquitous.

We'll see what happens, we're both right here -- front row seats.

5:43 AM  
Anonymous Anonymous said...

Business is not "on-the hook" for health care as it is, Van....nor should it be.

That burden only resulted in a hidden "consumer tax," as every EXPENSE that business incurs, from the price of materials, labor, taxes and worker benefits are all added to the final COST. In reality, business pays none of those costs, as they are ultimately passed along to all consumers...and rightly so.

Business doesn't survive incurring costs it can't "disperse" or pass on.

"My point is that the burden for "personal responsibility" is too high.

In the real world where a 40 year old professional is laid off and does not find gainful employment for a year or so, he/she should not be expected to cover healthcare for the family and retrain for a new career, it's too much of a burden.

How can we expect a person with a family, a mortgage and additional obligations to cover all of these expenses without having to file bankruptcy?

Besides, retraining is not a silver bullet.

According to Lou Uchitelle's new book, "The Disposable American” there are not enough professional category jobs for all of those who need to be retrained."


Again, we are all individually responsible for what happens to us.

Yes, many times, bad things, out of our control, happen to us. That does not make that "an injustice," or a "collective responsibility."

The busines climate changes and jobs that were hot ten years ago are over-filled today. That's not a collective tragedy, it's an individual one and it's not something government should be in the busines of, or even have the right to redress.

Hell, tens of thousnads of people come down with cancer every year too and most of them see that as a "bad thing" theat happened to them over which they had no control and did nothing to deserve.

Again, THAT is an individual tragedy and not a collective grievance...we have no right to turn to government over cancer rates and say, in effect, "Fix THIS."

It's (1) outside of the purview of government's limited abilities (though they'll still lie and say they'll help) and (2) it's simply not a governmental or collective issue.

The only way that some form of national healthcare will be passed is as a government program. That would leave businesses completely OFF-the hook for healthcare costs and foist all the costs and the concommitant healthcare rationing on the hapless taxpayers. Every form of national healthcare or socialized medicine comes with rationing, limits on visits, etc.

And of course there'll always have to be a market-based alternative, where those who have the means will be able to get all the healthcare and special treatments and surgeries they can afford, otherwise those who make the rules won't go along.

It's why Congress has exempted itself from Social Security and set up a super-retirement package for themselves.

9:30 AM  
Anonymous Anonymous said...

"To put it simply and bluntly, Bush's top-bracket tax cut is an ineffective attempt at stimulus that will not cause any growth." (Van)
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Actually, the facts, even the current economic realities don't support that statement.

Income Tax rate cuts down to around 22% DO result in INCREASED REVENUES, as fewer people defer income when tax rates are relatively low.

This from NRO (6/19/2006)
http://article.nationalreview.com/?q=ZTVmMDgzOGU5NWViZjdjNTIwMmNhMDhlYjM4MzEwNDk=


“...Driven by a surging national economy, tax revenues are increasing and the deficit is rapidly shrinking. The president’s deficit-reduction plan looks like it will not only succeed, but will do so years ahead of schedule.

The country was facing the largest projected deficit in history when Bush promised to halve it as a percentage of GDP by 2009. Due to high wartime spending and the residual effects of the 2000–01 recession, the White House expected the 2004 deficit to reach $521 billion, or 4.5 percent of GDP. Bush’s goal was to reduce this to 2.25 percent by 2009.

After all the beans were finally counted, the 2004 deficit came in at $413 billion—roughly 3.5 percent of GDP. The economy had begun expanding, partly in response to Bush’s tax cuts, creating jobs and boosting revenue. This trend continued into the next year, pushing the deficit down to $319 billion in 2005.

This year, the projections look even better. Through the first eight months of this budget year, the deficit is $227 billion—16.7 percent lower than this time last year. That’s largely because government revenues in these eight months have reached $1.545 trillion, up 12.9 percent from last year.

This huge revenue boost means that the deficit is going down even as an out-of-control Congress continues its spending profligacy. Federal spending has already swelled by $130 billion so far this fiscal year—a 7.9 percent increase compared with the same period last year. Such increases can’t be blamed entirely on the demands of the War on Terror, either, as Defense and Homeland Security together account for only 30 percent of Congress’s total spending increases since 2001.

Despite the strong updraft of federal spending, the deficit is on track in the next few years to continue falling until it approaches 2 percent of GDP. This is below the 2.5 percent that has been the national average since 1970, demonstrating that the president’s critics were simply wrong when they claimed that the Bush tax cuts would lead the country into economic ruin.”

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Where I disagree with the NRO writers is that I support tax cuts to a level below which revenues increase, in order to starve off the beast and force the government to LESS with LESS.

12:35 PM  

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