"Before you break out the tiny violins for my hypothetical doctor, allow yourself to imagine that he's got a mountain of college loans, his mortgage is underwater, and he's supporting three grandparents (one on his wife's side) who all need some form of senior care, and the doctor's parents, and his wife's parents, have no spare cash. The doctor's parents might also need help in a few years. Oh, and the doctor has two kids of his own, one of whom needs some sort of special care. That's what the real world looks like for the so-called Sandwich Generation. For this imaginary doctor, any extra tax burden takes money from four generations of his family who needs it and distributes the cash to strangers."
Imagine that instead of a doctor, we are talking about a hard working carpenter who makes about $40,000 a year, and of whom we could say "his mortgage is underwater, and he's supporting three grandparents (one on his wife's side) who all need some form of senior care, and the carpenter's parents, and his wife's parents, have no spare cash. The carpenter's parents might also need help in a few years. Oh, and the carpenter has two kids of his own, one of whom needs some sort of special care."
Why do the woes of the hard-working doctor demand more sympathy than the woes of the hard working carpenter?
"Why do the woes of the hard-working doctor demand more sympathy than the woes of the hard working carpenter?"
If that's what you drew from the article; you've missed the point entirely. The point Adams is making is that a doctor making $250,000 per year has a lot more in common with the $40,000 per year carpenter than he does with the truly rich.
This isn't about having sympathy for the doctor OR the carpenter; it's about understanding that both of them will be significantly hurt by higher taxes. Since no one is talking about increasing taxes on the carpenter, it's fair to question whether we've set the bar of "rich" far too low--or if two categories even make sense.
No I think you've missed the point. The doctor is making far more over the basic rate required to get by than the carpenter. The doctor's cries at night because he can't afford another Mont-Blanc pen and the carpenter can't send his kids to school. You have to understand that the doctor's needs are satisfied, not his wants.
Disregarding, for a moment, that you're completely overestimating the value of this hypothetical $250k per year income...
The answer is to punish the doctor? This is precisely my problem with the general tact of liberalism: the answer is always to bring the upper-middle class down to the level of the lower-middle class while predominantly leaving the true wealthy untouched. Why shouldn't people be able to get somewhat ahead? Why is the mentality that we all have to be exactly equal so long as we can lump your income with this mythical middle class?
bcrescimanno, I'm not sure what you are referring to. There was recently an effort made in the USA to allow Bush-era tax cuts expire for those making over $250,000 a year (gross adjusted). Had that gone forward, the doctor making $250,000 and the carpenter making $40,000 would both continue forward without facing an increase in their income tax. Only those people with gross adjusted income in excess of $250,000 who would see an increase in the tax paid on their income in excess of $250,000, although these affluent people would continue to enjoy the Bush era tax cuts on the first $250,000 of income they earn.
As it was, pretty much all of the Bush era tax cuts were extended.
As to this:
"This is precisely my problem with the general tact of liberalism: the answer is always to bring the upper-middle class down to the level of the lower-middle class while predominantly leaving the true wealthy untouched."
According to Wikipedia, only the wealthiest 1.5% make in excess of $250,000:
The poorest 98.5% of the USA makes less than $250,000 a year. Are you trying to define a portion of that wealthiest 1.5% as part of the upper middle class? If so, which part? Would you go into the top 1% and define that, too, as part of the upper middle class? Definitions matter, and it would be good if you could be precise.
I would add, my politically active friends are pushing for much higher taxes on the rich. Their focus is not on the poorest 99% of Americans, but the wealthiest 1%. And so, they focus on those making in excess of $350,000. I am curious if you regard that as within the range of the middle class?
If the class he's calling "Suckers", in between the Rich and the Majority, includes Scott Adams -- as he says it does -- then I can't help thinking that this is just the old, familiar gambit where rich people try to redefine a term like "middle class" to include themselves, so that they can portray self-interest as looking out for the poor beleaguered middle classes.
The interesting question isn't whether it's a "gambit", the question is whether it is true. Calling people with large incomes and large unavoidable outflows "rich" isn't necessarily right, and while the stuff Adams said about that guy may mostly not look like unavoidable outflows, we do saddle all our doctors with debt and a lot of small business owners do have a lot of unavoidable outflows like, say, other people's salaries. Just taxing everybody with a high income is not necessarily a good idea for anybody, however good it may feel. He is certainly right that not all rich is created equal and the language here is very impoverished.
It's also worth pointing out that a lot of those outflows are avoidable only to the extent that they are picked up by taxpayers, like taking care of his parents or college grants. We don't win if we grab $10,000 more from that guy, he goes bankrupt, and we incur $30,000 more in liabilities picking up what he now can't carry. (And yeah, I think those numbers do work, as the government frequently picks things up inefficiently.)
> and a lot of small business owners do have a lot of unavoidable outflows like, say, other people's salaries
As if that matters. It's not like they are taxed before they pay salaries. Small business people pay taxes on the amount of money they have left over after all business expenses are deducted, i.e. profit, not revenue, so what point exactly are you trying to make here?
> Just taxing everybody with a high income is not necessarily a good idea
Small business people, if near broke after paying all outflows, wouldn't qualify as people with high incomes even if their business was pulling a billion dollars a year in revenue, and wouldn't be paying any additional taxes on the rich because they wouldn't qualify as rich.
The whole small businesses would be hurt by taxes on the rich is a red herring, it's simply not true, and is just rhetoric from the right meant to distract from the real issues. It takes advantage of the fact that most people don't know how taxes work and don't separate gross income from net income. Businesses don't pay taxes on all they money they make, they for the most part, pay taxes on profit, which is by definition, extra money above and beyond operating expenses.
There is one coherent argument about large capital expenses for pass-through entities (LLC's, S-Corp, Sole Proprietorships).
Bob the business owner needs a new gizmo for his lawn care operation. It costs $500k. Normally he would need to depreciate this gizmo over some period of time (it depends on what you are buying) spreading the expense out over those years. If he has a net-profit over $250k then whatever he makes over that rate will be taxed at that higher rate reducing his ability to afford the gizmo.
Essentially the issue is that under normal accounting rules he would pay the higher tax rate today, but it would take 5 years for him to fully realize that expense from a tax perspective. That could, at least in theory, make small business owners a bit gun-shy about making large capital purchases as their take-home pay would take a hit even though they bought something for the business instead.
Thankfully the legislation, as crafted by Obama, contains provisions allowing the cap on capital purchase deductions to be raised significantly (I think it would have put it over $1M). Thus you could take the entire expense in the year you bought the thing and avoid this particular tax issue.
I agree, as I did say for the most part; however, in many if not most cases, this could be easily dealt with by borrowing the money for those items instead of laying out the capitol and incurring the tax burden of paying taxes on money you don't actually have. Regardless, this is an exception, but for the most part, businesses do only pay taxes on profit.
I don't think that's a fair assessment; it's completely absurd to categorize people simply into two categories (and I'd even argue that 3 is probably not enough but that's far too long-winded for a HN comment).
A family with an income of $200,000 per year is certainly more well-off than a family with an income of $50,000 per year; but there's absolutely no parallel to a family with income of $5,000,000 per year. I'd contend that the family with the $200k income has far more in common with the $50k income than the $5m family.
And then we look at the $5m per year family and the $500m per year family. There's still no comparison.
I don't think this is a case of Adams trying to push himself into the "middle class," I think what he's getting at is that the "middle class" is really a myth.
1. No, my point wasn't that there's something wrong with using the word "suckers" to describe people on $200k/year, but that I strongly suspect that he's substantially better off than a lot of the people he's labelling as "suckers".
2. Oh ho ho ho. Yes, indeed he said that. But the fact that someone says "I'm doing X to demonstrate the power of language" doesn't mean that's really why he's doing X. It may merely mean that he's hoping to deflect criticism of the sleazy rhetorical move he's pulling. Which, by an astonishing coincidence, moves in the same direction as the sleazy rhetorical move of saying "allow yourself to imagine" followed by this huge pile of problems our hypothetical doctor might have, each of them plausible enough but distinctly unlikely in the aggregate, and then "That's what the real world looks like for the so-called Sandwich Generation". No, it's what the real world looks like for a small fraction of the apparently-affluent, of any generation.
Oh. And "gang-raped by the Rich and the Majority while they high-five each other and call it fairness"? I suppose that would be another example of a loaded word to demonstrate the power of language. The most that anyone's proposed is that his taxes should be returned to the level they were at before the so-called Bush tax cuts, which would put them at about the same level as they were under that egalitarian communitarian socialist, Ronald Reagan. And even that has just been put on hold for two years.
There is a huge difference between the "wealthy"/"rich" and high income earners. Many high income earners, like young doctors or entrepreneurs, have negative net worth and are not wealthy at all. The progressive tax system is a scam rigged by the true rich-- who control assets and take income mostly as capital gains-- against the next generation of strivers who have earning power but few assets.
The most interesting part there, to me, was the currently first comment by poke111. I'll reproduce it here:
Imagine the government found some way to fund itself without any tax revenue at all. Say, a giant reserve of natural resources were found on federal land, and now tax revenue isn't needed to fund the government. As a libertarian-leaning conservative I personally would be delighted to see all federal income tax go to zero. After all, we've always been told that taxes are needed to fund the government. But somehow I think some people would not be happy that even "rich" people wouldn't have to pay taxes anymore.
And here I think is where the real difference lies: libertarian and conservative type people see taxes as a necessary evil. If the government wouldn't need the money, the ideal situation would be zero taxation. But I think liberals tend to see things in the opposite way: Taxes are a way to acheive fairness, and funding the government is a convenient means to that end, in the absense of which they would find a different means.
Conservatives want to set the level of taxation to match their preferred level of spending (at least in theory), and liberals want to set the level of spending to match their preferred level of taxation. The difference is whether taxation is the means or the end.
Any truth to this technically? It feels right to me but I'm neither an economist or much of a politician.
This argument completely ignore economic factors of taxation and instead looks at motivation, which is going to be different on a case by case basis and virtually impossible to "prove". Personally, as a liberal (who, combined with my wife, is in the "rich" tax bracket), I too see taxes as a necessary evil as well but I also see it as a way provide additional support to those in need with respect to social programs. I don't see it as a way to "level the playing field" as claimed, but thats just my motivation as a counterpoint . A Keynesian liberal (and I probably fall in this camp) sees higher taxes as both a way to fund social programs and fuel the economy so good for the community and good for the pocketbook.
There's a whole other world of hurt when you look at that "at least in theory" part. Recent history has shown conservatives being very good at lowering taxes but totally inept at the corresponding reduction in spending. Liberals tend to be better at staying true to their higher taxes, higher spending line.
I'm a liberal but I can understand the basic conservative, libertarian economic argument (I have issues with libertarian theory but thats another flamewar) and can even see it as, perhaps, a viable model. But if they can't decrease spending while cutting taxes then their model fails completely.
I think this line of dialogue is a way to demonize liberals (which is such a loaded/confused term to begin with), or to align traditionally socialist/communist ideas of equality of outcome with them.
The gist is that President Obama really cut a fantastic deal for liberals yet many were still livid because it also contained an extension of the tax cuts. Hence they want to punish the rich above or equal to achieving their own goals.
Personally I think the left is a sliding scale that goes from Moderate to Marx. Marx's famous quote "From each according to his ability, to each according to his need" is in line with the comment you quoted and I think people on the far left believe just that. I think the further you get away from the far left on the sliding scale the less that becomes true.
Tax cuts are not a great stimulus. The multiplier effect is low. A great deal from a liberal perspective would be a system in which higher education for qualified people has minimal cost, a system in which everyone has access to decent medical care, a system which invests in the future with infrastructure, scientific research, etc. These things cost money and lowering government revenue without corresponding cuts adds to the deficit in a way that has a low multiplier effect. Tax rates are quite low right now. Deficit spending is a tax, it's just a delayed tax. The moral thing to do with our present deficit spending is to spend in programs that will enhance the country. The tax cuts don't do this.
I'm sorry but you're arguing a political opinion as if it were fact and not offering anything to justify your argument. A good half the country believes that tax cuts ARE a great stimulus and you could get conservative economists to give you Ronald Reagan based examples until you're blue in the face.
(Please note I'm not even on the conservative side here. I think the tax cuts should have expired. But I can see both sides of the argument)
A quarter of the country also believes Obama is not a US citizen. Whether the general public believes something or not has does not make it true or untrue.
One can get a higher multiplier effect from other types of programs than from tax cuts. You can look this up. The rest of what I said was an opinion because it was in response to the Krauthammer article that said that liberals should be happy with what Obama has done. I'm a liberal and I'm not happy and I stated why.
And when you do, you'll discover various activists with an agenda pushing speculation and prediction backed by gigantic statistical formulae. And this is even taking the neo-Keynesian picture of the economy as a proven truth (as opposed to a wildly oversimplified model based on assumptions known to be false).
(Note: not trying to imply that any other macroeconomic prediction models are much better.)
Reagan economics began the massive inflation of the US public debt and the decline of real wages for the middle class. The opionions of the public are extremely misinformed.
That's not the question though. The question wasn't "why don't liberals agree with a tax cut for the Rich" (the answer to that question is exactly your point). The question is "why would they be so angry that they'd turn on the most liberal President elected since Carter and perhaps FDR". Or "Why would this deal make people talk about challenging him in the Primary"
That anger isn't about reducing the already ballooning deficit. There's something more there (whether that "more" is to punish the rich is debatable)
I'd say the anger comes from the following line of thought:
"The extremely wealthy are receiving tax cuts which will barely affect their personal quality of life, yet cost 'the rest of us' billions of dollars. That money would have a far higher quality of life impact if spent on welfare or tax cuts for middle/lower income Americans. Our quality of life is being held down for the sake of theirs, when theirs is already far higher."
Conservatives want to reduce government spending - except to defense companies owned by contributors, liberals want to reduce spending except to government employees that vote for them.
Both want to cut government waste and will employ as many civil servants as it takes to do this
Not necessarily; let's not use the term "Conservative" as a synonym for "The Republican Party" and "Liberal" to mean "The Democratic Party."
If we look at conservative libertarianism vs liberalism, the comment is pretty spot on; especially in its conclusion as to how both sides view the purpose of taxation.
Perhaps I have an unusual viewpoint on here but I'm in the UK and there are certainly people who think that way. The disgust for the rich (or even the "well off") held by what are often called "the working classes" is frequently palpable. I've not encountered this disgust of wealthy people to such a level in the US.
This is historically based: caused by the way the upper class and bourgeoisie have treated and regarded the working class in the UK. Read Orwell's accounts of life in the workhouses during the Depression for more insight.
There are governments that get most of their revenue from taxing the extraction of natural resources, eg Venezuela or Alberta. But like Venezuela vs Alberta, the outcome is not guaranteed to be good.
IMO the danger of a government that doesn't get its funds from the people is that it doesn't really need the people. The leadership only need to maintain their lock on the golden goose, and that can often be done more cheaply with guns than butter. They people become at best a nuisance to be placated, and at worst a rabble to control with fear.
Wow, he really had to pile a lot on that doctor to make people feel sorry for him. College loans, mortgage, and 3 grandparents' nursing homes. Plus, his parents and his wife's parents also need support.
It's a good thing normal people never end up in that situation! If he wasn't rich, he couldn't afford it. Wait... I think they do!
He has a good point, but his analogy completely obliterates it. Unfortunately, he acts like we've never heard of the middle class and that he's delivering us news that they exist. They have been part of every tax discussion I've heard in the last few years. It's not news.
In the example scenario, wouldn't the doctor be able to get tax deductions for college loan payments as well as dependent care of seniors? The mortgage underwater scenario sucks, but is he losing his home because it's not worth what he paid? I no tax expert, but wouldn't the increased taxes only apply to income that isn't covered by the deductions? If he's still making $250K+ per year beyond the deductions for those expenses, then I don't see that the sob story of the poor doctor just trying to get by with all the uncontrollable expenses is really valid.
> If he's still making $250K+ per year beyond the deductions for those expenses, then I don't see that the sob story of the poor doctor just trying to get by with all the uncontrollable expenses is really valid.
In my opinion an income (or wealth-based) tax systems is not really that optimal in a globalized world. Instead I propose a kind of resource-based tax systems: Instead of taxing income tax the amount of scarce resources used. For example, the amount of land owned, the amount of oil used, or even the amount of CO2 emitted.
I think that such a system would have several nice implications:
* Businesses would automatically look for ways to save taxes, and thereby help the environment.
* It better reflects the true cost of a business or person to the society: If someone earns a lot of money this does not reduce my standard of living. However, if someone destroys the environment it does.
* As a country you can avoid loosing many of the Internet businesses to tax havens, as there is a lesser advantage of moving away.
Unfortunately, in many countries it's exactly the other way around. For example, many South American countries endorse usage of scarce resources by subsidize oil. While this works in the short-term, the consequences in the long-term will be fatal.
Caring for parents and grandparents, paying off college loans and servicing a mortgage are all tax-deductible activities. I'm not saying it isn't hard to make ends meet with all those obligations, but a tax hike would disproportionately affect his _discretionary_ income, not income that ends up being spent on caring for others or paying off student debt.
Am I the only one who thinks "gang rape" is a little extreme here? Granted, I'm on the low end of the "majority" but I find the perspective all sorts of wrong.
My family was left penniless just paying the healthcare bill for our first daughter, and even then I would never compare a broken system to gang rape. I'm not saying we should discount the woes of middle-class America, but I think it's irresponsible to act as though the poor don't have it worse — and even more irresponsible to imply that the poor and the rich are somehow in collusion to "rape" the middle class.
His initial point is a good one, but it strays really far.
The solution to the problem he puts forth is actually a simple one: Go entirely to a consumption tax. Then the doctor with all the family to support gets taxed very little despite his income and the rich guy going out to buy a Yacht gets taxed a huge amount. It's as fair as fair could be.
The problem with a consumption tax is getting the Government to agree to a system that doesn't guarantee them a certain income and getting the people to accept huge price spikes (which are emotionally jarring even if your income tax has been eliminated).
The poorer you are, the larger the proportion of your income that gets used for consumption.
Folks making minimum wage currently pay little or no taxes, so they'd see a significant tax increase with consumption-based taxation - an increase they can't afford.
"Folks making minimum wage currently pay little or no taxes, so they'd see a significant tax increase with consumption-based taxation - an increase they can't afford."
Maybe they would see what it's like to be taxed..and not vote to get everyone else gouged while their income isn't affected.
> Maybe they would see what it's like to be taxed..and not vote to get everyone else gouged while their income isn't affected.
Should people from well-off families be made to see what it's like to live off a minimum wage income so they can not vote to make life harder for the poor?
"Should people from well-off families be made to see what it's like to live off a minimum wage income so they can not vote to make life harder for the poor?"
seeing as how the the poor vastly out-number the rich, no. I also don't see how the rich are making it difficult for the poor.
They pay more than their fair share of taxes (which in turn pays for many social programs that they don't even use). They also aren't lobbying to take anything away from the poor, except less of their own money.
The proposals that I have seen (including http://en.wikipedia.org/wiki/FairTax) call for a standard deduction of sorts, so the tax burden on those with low income and hence low spending would still be minimal.
Then yacht guy buys and registers said yacht in the barbados, avoiding the tax entirely...
Similarly, very few people pay attention to the "use tax" where that's in effect, and buy small, high price items like computers online where tax < shipping.
As I recall he has to spend at least half his time outside the US in that instance (or is taxed as if he were natively resident). I am not a tax lawyer, YMMV
No it doesn't. It's called a progressive consumption tax. The first $10,000 you consume is tax free, the next $10,000 is taxed at 10%, and the next $10,000 at 15%, and so on.
Hmm. I wanted to post a link to one of the comments (currently the second-newest), but apparently his comment system doesn't have permalinks. So here's a copy-and-paste:
Suppose that every evening, 10 men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The 10 men drank in the bar every evening and were quite happy with the arrangement, until one day, the owner said "Since you are all such good customers, I'm going to reduce the cost of your daily beer by $20". Drinks for the 10 men would now cost just $80.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share? They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
Therefore, the fifth man, like the first four, now paid nothing.
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).
Each of the six was better off than before. And the first four continued to drink for free.
But, once outside the bar, the men began to compare their savings. "I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man, "But he got $10!" "Yeah, that's right," exclaimed the fifth man. "I only saved a buck too. It's unfair -he got 10 times more benefit than me!" "That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy always win!" "Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!" The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, is how the tax system works. The people who pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.
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The comment id is 75340, if anyone knows how to hack the URLs.
I don't buy this argument. The most prosperous nations have what might be considered "outrageously" high taxation rates on the rich, which the US used to have as well not that long ago. The countries which tax the rich to their favor are mostly tax havens and third-world economies that are plundered for their natural resources and the populance gets nothing in return.
Seriously, there are forms of wealth which don't add value to societies, and if those people aren't willing to get into markets because it hurts their bottom line too much, so be it. "The Rich" are not a universally good group that adds value to all the economies where they do business; they too have their part in fucking up a huge number of locations around the world.
Just as an example, Germany is one of the most prosperous nations in the world, and their economy is as socialist as it gets (in the European, modern use of the world, not the classical Marxist usage). Their labor force is highly skilled and sheltered, and its manufacturing base is strong. I don't see the same thing happening in the dirt-poor Caribbean tax havens.
She's done almost nothing but move the country further away from socialism and unemployment now stands at 6.7%. So I don't see your example as being very accurate.
Germany is still significantly more socialist than the US currently, and US unemployment is higher than 6.7%.
Also, apparently the lower German employment is due to a socialist program in which the government gets companies to lower your working hours and makes up the salary difference.
> Part of the answer is that, in Germany, Trumpf could take advantage of government incentives to reduce worker hours rather than lay off people, a system known as short work. In the program, the government gives workers partial compensation for the lost wages.
You're still ignoring the fact that Germany is significantly more socialist than the US with a lower current unemployment rate. Using them as an example of how moving away from socialism is beneficial seems odd in that context.
First of all, Germany is social democracy, not "socialist". On the other hand US is liberal capitalist country - even slightest hints at turning it more towards European-style social democracy are instantly attacked as "communism" there.
Secondly, even if Germany is more of a social democracy than US, it's "a little more", not "significantly more".
"Kurzarbeit" is part of the reason, where the government pays 60% of the difference. But a lot of the low rate of unemployment is due to considerably less socialist reforms i.e. more lenient labor laws (compared to the previous German norm, of course). Temp jobs especially have seen a significant rise, with the usual lower wages, short-term contracts and avoidance of union restrictions.
And a lot of that has been initiated during the time when Schröder was in power – then head of the Socialist Democratic Party.
So it's really not that easy to ascribe it to certain political leaders or certain political ideologies. Unless you count pragmatism…
Germany has undergone a heroic transformation, absorbing East Germany and trying to modernize it. Considering that a quarter of the country was a complete basket case due to 60 years of Communist misrule, the miracle is how far Germany has managed to come in the last 18 years.
Right but the fact that it cut it's unemployment in half in 5 years time while the rest of the world sank into a depression leads you to ask what they were doing that caused that. The fact that "what Merkel was doing" was moving the country away from Socialism contradicts the initial assertion that "Germany is a socialist as a nation comes and they're one of the most prosperous countries in the world"
I'll agree that many of Merkel's measures are not "socialist", but let's also keep perspective and realize that her measures do not shift the underlying social dynamics away from modern socialism's tenets, and that the changes appear as a general global trend of globalization and an aging population that makes maintaining the benefits more difficult than before.
Considering the fact that many countries have paid a much, much heftier price on their social welfare than Germany and have not improved substantially means that the balance need not shift as much as many people claim.
Without a very precise definition of "Socialism" it is hard to engage in this conversation at a serious level. Germany has a number of features that people from English speaking, Common Law countries might find surprising. Germany still has the "co-determination" laws that gives every union an automatic seat on the Board Of Directors of large firms, and it has laws that make it mandatory that any company with more than 300 workers have one union member work full time on matters relation to those decisions that come under the review of the co-determination laws, including all hiring and firing. Germany still has laws that would seem extremely pro-union from the perspective of, say for instance, the USA. In Germany it is still assumed that the state should play a leading role in managing the interface between industries, schools and the apprenticeship programs. In Germany, the social safety net is extremely rich compared to English speaking nations such as England, Canada, the USA, New Zealand or Australia. To go 20 years without working a job, living on welfare, is common in some areas, especially in the still-recovering East. Education remains heavily subsidized. It is extremely difficult for a firm to fire anyone.
I would prefer it if people in this thread could avoid lazy labels like "capitalist" or "socialist" and instead speak specifically about what policies you think help or hinder German competitiveness.
I have trouble imagining that anyone would look at Germany and see it as a model of what an economy can do when the government does nothing - rather, in Germany, the government is everywhere. The state plays a leading role in all aspects of civil society. This does not mean that private sector players have no influence, however, the role of the state is large.
I'm uncertain what the original author may have meant by this:
"Germany is a socialist as a nation comes and they're one of the most prosperous countries in the world"
However, if you recall the debates that happened in Britain and the USA during the 1970s, Germany raises many interesting questions. Both Thatcher and Reagan came to power in a political environment where the labor unions were blamed for the competitive decline of Britain and the USA, respectively. Given the very strong unions in Germany, and Germany's competitiveness, some revision of the 1970s debate in the English speaking countries seems warranted. Apparently it is possible to have very strong labor unions and yet remain competitive.
I have difficulty understanding why any discussion of taxes in the US becomes a conversation about the income tax. There are many, many taxes in the US. A rational discussion of taxes would include all of the taxes together. Most states have a sales tax, and the tax is regressive. Several states (North Carolina, Alabama and many others) make the sales tax much more regressive by putting a cap on it. I recall, when I lived in North Carolina during the 90s, the sales tax had a cap at $100. So the kind of everyday items that poor people have to buy would face the full tax, but plenty of consumer goods that the middle class bought (lots of consumer electronics, for instance) did not face the full tax since the items cost over $100. In essence, the poor were the only ones who had to the full sales tax on nearly everything they bought.
In almost all 50 states, the overall tax code is regressive - the middle classes are taxed more heavily than the rich. The regressive nature of the state taxes is offset by the progressive nature of the Federal taxes.
Imagine re-doing the above scenario of 10 men in a bar, but doing it in an accurate way, where there is sales tax on those beers - then the story comes out rather differently.
This is why I prefer the New Hampshire model of no sales tax and no income tax. Instead, a large property tax and a (small) capital gains tax are in place.
This is far from the whole story, and NH isn't perfect, but the model of these four taxes seems to hurt the poor much less.
A 2006 NBER paper claimed that when taking into account a wider set of taxes (state income/sales taxes, federal/state corporate taxes, payroll taxes, etc), the US has roughly a flat 40% tax rate across all income brackets.
Here's the thing: just re-write the end of the story, and it makes the exact opposite point.
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But, once outside the bar, the men began to compare their savings. "I only saved 16% out of the 20% reduction," declared the tenth man. He pointed to the sixth man, "But he saved 100%" "Yeah, that's right," exclaimed the ninth man. "I only saved 22%. It's unfair -he got much more benefit than me!" "That's true!" shouted the eighth man. "Why should he get 100% back, when I got only 25%? The poor always win!" The eighth, ninth, and tenth men got together and talked to the bartender, who (because their money was keeping him in business) agreed to no longer serve the group unless they adopted a less progressive schedule.
And that, boys and girls, is how the tax system works. The people who pay the highest tax rate will naturally get the least benefit from a tax reduction, but they have the most power to explicitly direct a reduction to themselves.
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Note that however it may seem, I don't mean to argue a particular position by this. I'm only pointing out how changing a little piece at the end completely changes the message of the parable. It's a complete hypothetical either way. I've been calling this the "Fallacy of the Parable": using a parable in place of a reasoned argument.
You can re-write the parable if you wish, but it no longer mirrors reality. Any reduction in tax rates is commonly decried as "Tax cuts for the Rich." No one says anything like , "the poor always win!"
Obviously, a parable is only as good and the truth it illustrates. If the parable is implausible (like your revised version), it obviously carries no weight.
It doesn't matter how "plausible" it is, only whether or not it's actually happened. If it has not actually happened, then it carries no weight in an argument.
Parables are good for teaching children lessons, but not as evidence for a particular viewpoint.
(Also, you may not hear people say things like "The poor always win." That's because that side prefers to a different sort of emotional appeal; I hear things that express the same sentiment all the time. Nobody discusses economics in good faith, which is part of the problem.)
Suppose the tenth man controlled 99% of the wealth. Would his/her reaction be justified in going to another bar? Would the reaction be justified if at least part of the wealth of the tenth person came from the work of the other nine? If it came from being in a country with roads, education, national defense, and smart worker then is it proper for the tenth person to view all of their wealth as theirs alone with no obligation to other?
If it came from being in a country with roads, education, national defense, and smart worker then is it proper for the tenth person to view all of their wealth as theirs alone with no obligation to other?
Ok - the tenth worker has an obligation to pay for this stuff. But about 60% of the government budget is just wealth transfers, and has nothing to do with the public goods you mentioned. Why does the tenth worker have an obligation to pay for that?
(I'll ignore the fact that education is a private good. I'll also ignore the many wealth transfers hidden inside the public goods you describe, e.g. inflated teacher comp packages, unnecessary military spending which funnels money to various congressional districts.).
http://www.usgovernmentspending.com/year2008_US.html (All #s taken from official sources. I use this link because it is t he only source I've found which combines both state and federal numbers into one chart.)
One shouldn't include Social Security in government expenditures because it's a pension system that is funded largely by the recipients. It's also not in trouble. Medicare and Medicaid have problems but not Social Security. Social Security is a government run pension system so it is included in budget numbers.
It is for the reasons I've stated that Social Security is not part of the discretionary budget. The discretionary budget is dwarfed by defense related spending. And this is just the 'on the books' spending in defense related activities. When one factors in the supplemental spending on defense activities then the share of defense spending is even greater.
Highways, national defense, and education are a large majority of the discretionary budget.
Edit: I'm only talking about federal spending as that is what the topic of discussion appears to be.
SS is a redistribution scheme which funnels money from the young to the old. It's also not funded by the recipients - the recipients voted to borrow money from it, spend that money, and now expect other people to pay back their debts. It's a transfer no matter how you slice it. All pyramid schemes are about redistribution - they have no other purpose.
Same thing for medicare, medicaid, welfare, and even big portions of defense and education. See the numbers I linked to - most government spending is redistribution, not public goods.
Social Security is a pension system very much like any other pension system. It is currently actuarially sound. Like all pension system it assumes a certain percentage growth per year and part of the pension payout a person receives will come from such growth. It is not a redistribution scheme. It's a pension system. It is well funded in an actuary sense. It is not properly a government expenditure and therefore is not counted in the discretionary fund.
You may count it as a government expenditure and count payouts from this pension system as a government expenditure but this is contrary to how this is normally considered.
Virtually every private pension system in the United States has been stopped for the reason that they are not actuarially sound. The reason for this is that population is not growing steadily as the model predicts. The baby boom was an anomaly that will wreck the system.
The major reason that US car companies struggled so much over the last decade is that they are saddled with pensions that foreign car manufacturers are not (e.g. Toyota). They sold as many cars, but their profit per car was less because of pension obligations to workers no longer producing for the company.
Even if the wealth came from a weekly poker game where purely chance determined who was wealthy, and it was zero sum. Wouldn't it still be reprehensible to expect the winner to pay the tab just because he won?
Just about everyone who makes a great deal of money does so because of the type of society we live in. Does so because of the type of workforce we have. Is protected by the police and our military. The analogy you've given is a bad one because of these facts. Living in a society is not analogous to a poker game.
You put the cart before the horse. Society doesn't create wealth, wealth creates society. Consider the ghost towns of the southwest. Strike gold and an entire town springs up overnight with theatres, shops, bars, schools, etc... When the mine runs out it all dissappears as quickly as it came; regardless of how large the workforce of the miners, or effective the law enforcement.
I do agree that it's not analogus, because it's not zero-sum, and it's not decided by chance to the same degree. If anything making the scenario more unfair.
You're talking about society at the micro-level though, not the national level. Some of them were immigrants from outside but a large proportion were moving from other communities in the nation and their ability to do that while retaining their previous prosperity was insured by the society they were investing in through their tax code.
I actually think insurance can be quite a good model of the tax system. I'm insuring my assets against a total societal breakdown and confistcation, a la the Bolshevik revolution. I pay more than some because I have a higher asset base to lose but less than others who have more than I.
Whenever humans congregate in sufficient numbers a society is formed. This has been going on for at least the last 10,000 years. This has nothing to do with wealth as far as I know. At least, not in the sense that the term is colloquially used.
"Why can't they use real people and real numbers?"
I would suggest that simple models can help clarify things, in a way real situations do not. People use simple models in math, physics, medicine, sociology, statistics, economics, finance, chemistry, ecology, climatology, astronomy, etc. In almost every field of inquiry, people attempt to build simple models to try to get at the underlying truth of some situation. Real events are full of complex interactions, which often involve more variables than can be easily understood. The human brain is not set up to understand real events in which 200 variables all have some influence.
Issac Newton was offering a simple model when he said all matter attracts matter, proportional to its mass and inversely proportional the square of the distance - his model does not explain everything in the Solar system, it especially failed to describe the orbit of Mercury, but it did offer wonderful insight all the same.
Lister and Pasteur were both offering a simplified model when they advanced the germ theory of illness, and yet their model offers wonderful insights into disease.
Gauss offered simple models for more things than I could possibly list here - some have argued that he was the most important mathematician of all time. He contributed something to group theory, geometry, analysis and he largely invented statistics. And what is statistics, but a set of methods for quantifying simple models or sorting relevant data from the irrelevant?
With only slight exaggeration, I could make the argument that the progress of science is the progress of simplifying models.
That is the argument for not using "real people and real numbers".
That would be economics. Nobody in American politics listens to experts like economists - they only listen to "real people", who are above all that elite liberal claptrap they teach in schools.
"guys drinking beer" is highest amount of complexity that american politicians are willing to use. It's so simple, they're all the same people with the same opportunities, some are just poorer than others... right? There's not barrier to entry, plumbers just don't apply for the CEO positions.
Most political arguments involve hypotheticals - arguments against progressive taxation are nothing special. See, for example, Krugman's continual use of the baby sitting coop example.
The real data is usually not as convincing as toy examples, analogies, or assertions that your political opponents are pure evil.
But using it as Krugman does, namely as a predictive model of the real economy, is little but analogy.
So technically that's an analogy, rather than a hypothetical. My bad. It's still a far cry from using real people and real numbers to argue for inflationary monetary policy.
(Incidentally, one very common liberal hypothetical is that "tax cuts for the poor have a higher velocity than those for the rich, since the poor live hand to mouth and must spend everything they get." It turns out this is false - the poor pay down their debts with tax cuts, while the upper middle class spend it. http://www-personal.umich.edu/~shapiro/TaxRebates.pdfhttp://papers.nber.org/papers/w16246 )
I suppose the alternative would be a stable monetary policy.
The difference would be that under a stable policy you would only print money to keep the currency stable as inflation occurs, rather than printing money to fund government initiatives.
And how exactly would you differentiate between printing money "to fund government initiatives" and printing money to fuel the economy?
The fact is, even if all the money printed would be given away to non-governmental entities (that is, central bank would not be engaging in Quantitative Easing), it will still be funding the government (e.g. some of it will be collected back as taxes).
Let's add to this hypothetical... assuming a similar distribution of wealth as in the US and these 10 men had a total wealth of $1000. The top 2 would hold $425/each, the next 2 $50, the following 4 around $10, and the remaining 4 $2.25.
"Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier."
Laws could be passed to keep wealth from moving overseas without being taxed first.
What word would you use to describe the government taking money from people who decide it's no longer in their best interest to participate in that government?
Wow, finally a voice of reason in this argument. Just because you're in the highest tax bracket does not mean you have disposable income like Warren Buffet, Bill Gates, etc do. I'd think that most of the assets of people at the lower end of the highest tax bracket are illiquid.
Is there some income level where everyone can agree that nobody is a "sucker", and you're just rich at that point?
I would imagine all but a handful of doctors make less than 2 million dollars (40 times the median household's income), and those that do I'd be fine calling rich. If you create a new tax bracket for the rich at that point, you're losing only 2% of the increased tax income on the 100 millionaires, but not harming the struggling, debt-ridden doctors of the world.
> The number of jobs with pay below the poverty threshold increased to 29.4 million, or 22 percent of all jobs, in 2006 from 24.7 million, or 19 percent of all jobs, in 2002.
This is simply false. In 2008, 78% of the poor chose not to work (or even seek work) more than 26 weeks/year. See the link I provided in my edit.
If you bothered to read your link as far as the third paragraph, you would realize they redefine poverty to be $41k/year. By that definition, more than half of France lives in poverty, oh noes!
> If you bothered to read your link as far as the third paragraph, you would realize they redefine poverty to be $41k/year.
Considering I quoted the fourth paragraph...
$41k is a pretty small sum for a family of four. My family of four's health insurance premiums would eat up 1/4 of that. Our copays would eat up another 1/4. Not much money left for rent, insurance, food, transport to work, education, etc., let alone longer term stuff like college and retirement savings.
I was being charitable and assuming you didn't actually realize that "poverty threshold" was really code for "2x poverty threshold". It turns out you knew this but were attempting to mislead people.
Interesting how state-funded health care would prevent his doctor example completely. True, we might need more taxes, but the cost would be evenly divided among the 'suckers' who have ill family members and the 'suckers' who don't.
"Before you break out the tiny violins for my hypothetical doctor, allow yourself to imagine that he's got a mountain of college loans, his mortgage is underwater, and he's supporting three grandparents (one on his wife's side) who all need some form of senior care, and the doctor's parents, and his wife's parents, have no spare cash. The doctor's parents might also need help in a few years. Oh, and the doctor has two kids of his own, one of whom needs some sort of special care. That's what the real world looks like for the so-called Sandwich Generation. For this imaginary doctor, any extra tax burden takes money from four generations of his family who needs it and distributes the cash to strangers."
Imagine that instead of a doctor, we are talking about a hard working carpenter who makes about $40,000 a year, and of whom we could say "his mortgage is underwater, and he's supporting three grandparents (one on his wife's side) who all need some form of senior care, and the carpenter's parents, and his wife's parents, have no spare cash. The carpenter's parents might also need help in a few years. Oh, and the carpenter has two kids of his own, one of whom needs some sort of special care."
Why do the woes of the hard-working doctor demand more sympathy than the woes of the hard working carpenter?