God, where to begin today. Maybe with the fact that while your mortgage payment was tripling, Goldman Sachs's earnings fell a whole entire 11% ?? Or like, while the Justice Department was systematically sacking any and all prosecutors whose decisions on things like habeas corpus and torture and crap fell anywhere to the rational side of "automated Bush surrogate," the Pentagon was firing an official for the grave offense of noticing a billion dollar overage on a KBR invoice? Or how even as the net income necessary to join the Top 400 plutocrats, adjusted for inflation, has tripled since the beginning of the Clinton Administration, the McCain campaign is dissing on Obama's economic policy proposals for their inadequate FAITH IN THE MARKETS??? (Wait, was that a question? I don't even know anymore.) Megan and I babble about who should get taxed more and how — and she nominates Hitchens — after the jump.
MOE: Ummmmm is it just me or is today, like, all about POLICY??
MEGAN: It does seem like my jack-of-all-trades-master-of-none brain when it comes to policy issues might come in handy this morning! Where do you want to start?
MOE: Maybe with the incredibly astute words of McCain economic adviser Douglas Holtz-Eakin:
Douglas Holtz-Eakin, chief economic aide to Republican candidate Sen. John McCain, dismissed the Obama strategy as "classic industrial policy which shows a lack of faith in private markets."
MEGAN: Obama's got this part right though: "How much you pay in taxes as a corporation a lot of times is going to depend on how good your lobbyist is."
MOE: I mean, what have the private markets done to instill faith in you lately? Are we supposed to be like Job with these things?
MOE: This isn't something I would mind seeing: "Americans with incomes above $2.8 million would see their after-tax income decrease by 11.5%."
MEGAN: Hardly anyone pays the actual income tax rate because of loopholes. If I heard my now former boss say it once, I heard it 15 times, if you eliminate deductions and credits, you could reduce the corporate rate to, like, 25% without losing revenue. You could lower personal rates even further and eliminate taxes for a percentage of the population. It's an incredibly inefficient system.
MEGAN: I did an analysis of the candidates' tax plans on young single women. Obama's is better.
MOE: Did you see this handy graf on the rebirth of the plutocracy? Just before the Great Depression the top .01% of households averaged 892 times the household income of the households in the bottom 90%, and that number of course plummeted and only really began steadily rising in 1980 to the point that it's now 976. These are imperfect numbers, of course — how big is the top .01%? How about the top .1%? Etc. etc. But it's a nice visual aid!
MOE: The income required to make the Top 400 list of earners has tripled since 1992, AFTER ADJUSTING FOR INFLATION.
MEGAN: I mean, the question is, from a policy perspective, is whether that's truly undesirable and what can be honestly done about it. Given the nature of the international financial sector and personal and currency mobility, would heavy taxation be effective? Can we limit income? Can you create or force businesses to create better oversight and board systems to protect shareholder interests, say, with a mandate that multimillion dollar compensation packages that aren't effectively tied to long-term performance are considered not in shareholders' best interests? I don't think either of the candidates has really talked about serious policies aimed at resolving income inequality because it's such a squishy issue to get your arms around let alone resolve from a policy perspective.
MOE: A few things: 1. Well yeah I think income inequality is truly undesirable from a policy perspective. 2. And the only way to deal is tax the everliving shit out of capital gains and use that money to beef up the SEC and education. Because the people who set executive compensation, the people who "look out for the interests of shareholders," the people who monitor the people allegedly looking out for those interests, the people who kick out executives for underperformance and are charged with luring in a new guy to "clean house" — all those people are part of this racket. And one, their version of "long term" is at most five years. And two, they set the yardsticks, the standards. They're all friends and acquaintances and they all know exactly how much everyone gets paid and they've pushed the baseline up up up.
MEGAN: What is "taxing the shit" out of capital gains? Back up to 25%? Higher? Won't they just try to pull some work around if that happens, the way private equity funds are just an elaborate way around taxation?
MOE: Well every policy creates loopholes, and certainly you'd probably see some money shift to less taxable assets, not that we didn't see that already with the real estate bubble, but none of the hundreds of executives indicted on backdating their stock options worked for a private company, you know? I mean, eventually the big payoff in private equity tends to come from the public markets, right? Or an acquisition? The thing that people need to get through their thick fucking heads is that yeah, there's always a greater and greatest fool losing out here, and we've missed out on a lot of the fundamental zero-sumness of corporate earnings growth because our standards of living are being propped up by artificially low standards in China, which China maintains as part of its INDUSTRIAL POLICY.
MEGAN: Hypothetically speaking, then, not that this is in my personal best interest as a homeowner, one of the ways to keep people from transferring assets into real estate to reap tax benefits would be to reduce the tax preference for home ownership and for real estate more generally.
MOE: Right. Although I don't know if you'd do that in the middle of a housing crisis?
MEGAN: Which, by the way, would probably have helped slow the bubble, and would slow the growth in home prices because creating a tax preference creates a market for people seeking to exploit it and it pretty quickly gets built into the price
MOE: Well yes.
MEGAN: Well, why wouldn't you? I don't know that it could hurt anymore now. If you wanted to be fair you could grandfather it or give some sort of one-time rebate payment or something and call it a fucking day.
MEGAN: The mortgage interest deduction and state and local tax deduction (which includes property taxes) are two of the largest deductions in the tax system, that are taken advantage of almost exclusively by people earning above the median income. They're also, along with having kids, the main reason people in the so-called "middle class" end up paying the Alternative Minimum Tax, though "middle class" is kind of a stretch for someone making $100, $120K/year when median income is $45K, but I'll accept that definition. Obama's willing to go up to $250K.
MOE: I wonder if there is like, a rich folks CPI that tracks the rising costs of… luxury real estate, private education, corian countertops, that sort of thing.
MEGAN: Not, by the way, that this bears any relationship to the conversation at hand, but coffee may be helping us live longer. I'm hoping alcohol consumption offsets that.
MOE: Okay so I'm creeping through his interview and, you know, the Journal basically says "well Clinton said a lot of this stuff but then he became obsessed with the deficit and it's not like THAT'S not a problem right now" and Obama says like "well now we have energy problems too so there's that." Like there's this meme out there that alternative energy is going to become this huge new sector of the economy but like who is going to lead that?
MOE: Ha I like how it ends
WSJ: A lot of folks would say cutting corporate tax rates are equivalent growth.
Sen. Obama: I don't want a distorting effect of our tax code on corporate decision making. But that's different from just saying you know, let's run up the deficit another couple of trillion dollars …</blockquote
MEGAN: Well, I think it's a meme because there's this idea that it can't be outsourced (next wave of globalization fears, already started: insourcing) and it's all rainbows and starshine and green industrial policy. I'm on record as thinking that green collar jobs is a load of crap.
MEGAN: Well, and as I touched on before, everyone knows that lowering the rate and reducing deductions — i.e., simplifying the system — is good for the business community writ large (except for lawyers and accounting firms). It would also make tax audits insanely easier. And yet even corporations that recognize that are caught between the rational "lowering rates by giving up deductions will save us money" and the long-held assumption that through lobbying you can best your corporate competitors by changing your tax rate or deductions and so they won't allow the government to pry their credits and deductions from their cold dead hands.
MOE: OH dude I forgot to mention that Goldman's earnings fell a whole 11%…
MEGAN: And after all those bonuses, too!
MOE: Yeah they're only on track to get $19 billion this Xmas sad sad world. But I don't know, can we really make the argument that it would be societally optimal for that money to …maybe find other uses for itself?
MEGAN: Ooch, Obama is co-opting the Republican small government ethos, but with a delish Democratic twist — making it, you know, actually effective.
I think the danger is always to equate size of government with effectiveness, and I don't. It's not clear to me that we want a larger government, but we certainly want a government that is setting more intelligent priorities and using taxpayer dollars more wisely and structuring tax policies that are conducive to long-term economic growth. As I mentioned during the speech, there may be programs that no longer work. There's certainly all kinds of previsions in our tax code that are antiquated and are not spurring economic growth. We've got offices like the patent office that are outdated to take advantage of new discoveries here in the United States.
Republicans have gotten so focused at starving the beast or cutting off the snake's head that they've forgotten they can actually do proactive things to reduce gov't. Or, in the case of this administration, they haven't wanted to reduce its size.
MOE: Thomas Frank doesn't have a new column out yet I guess that happens tomorrow but he changed the name to "The Tilting Yard." Weird.
MEGAN: Is it, like, a Cervantes reference? Is he Don Quixote?
MOE: Well he had the same column name, "Fighting Words" as Hitchens, whose last column on Hillary and sexism is the most Hitchens thing Hitchens has ever written, right down to the Juanita Broaddrick ref:
Posterity may well remember the Hillary Clinton campaign as the nearest that a member of the female gender had thus far gotten to the nomination of a major political party. But the episode will be recalled for many other salient features as well. The first time that the wife of an ex-president had leveraged her first-lady status into a senatorial seat and then a bid for the presidency. The first time that the candidate's spouse (and campaigner in chief) was a person who had been disbarred for perjury and impeached for-among other things-obstruction of justice.
MOE: The first time since the 1960s that a Democrat seeking the nomination had implicitly relied on a "Southern strategy" of appealing to the rancor of the "white working class." The first time since the lachrymose Ed Muskie that a candidate's eyes had welled up with tears in New Hampshire. The first time that a woman candidate was married to a man who had been believably accused of rape and sexual harassment (see my book No One Left To Lie To). The first time that a candidate had said of her half-African-American rival that he was not a member of the Muslim faith "as far as I know." The first time that the loser in the delegate count had failed to congratulate or even acknowledge the winner on the night of his historic victory.
MEGAN: I tried to write something about it, but it's so hard to respond to stupid sometimes.
MEGAN: This is, after all, the same dude that ejaculates at the thought of Bill Clinton. Granted, it's at his humiliation, but I don't think that makes him any less of a gay, S&M fetishist with a hair trigger. I feel sorry for his wife.
MOE: So maybe Tilting Yard was a dig at Hitchens who I bet 1. gets it and 2. has had on more than one occasion, like, epically tilted into something mid-rant at a party or something, but that is just my guess.
MEGAN: Well, if by "tilted" you mean "stuck his small British peen into the vagina of a 19 year old with hero worship in her eyes," then, yes, he's done that at parties.
MOE: So guess what, I totally missed talking about torture again, or the Army official who claims he was fired for refusing to approve a billion dollars in shady fees to KBR, or like, drilling in the wildlife refuge or whatev. Do you have anything to say about this shit?
MEGAN: Oh, McCain doesn't want to drill in ANWR, he wants to drill along the CA/FL coasts, something that Bush and Jeb Bush and Charlie Crist and Arnie and the Republicans from all those states have opposed because it will ruin the views of Republican voters who hate high gas prices and environmentalism but love them their views.
MEGAN: Also, the KBR thing is just confirming what everyone already knew, which is that pressure was applied at some point. I am amazed that no one caught the part where the Administration recently signed a 10-year contract with KBR to provide services to our troops in Iraq. That's, you know, until 2018.
MEGAN: We also didn't talk about the floods will raise food prices or the Chinese expat newspaper article about Obama's skin color, but shit happens.