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January 01, 2010

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Lisa Simeone

Loved the Brooks piece.

Prup (aka Jim Benton)

Before this piece went up, I'd started an e-mail to you, Sir Charles -- interrupted by a holiday visit -- making a suggestion I'll now make to all of you, that you make a New Year's Resolution to become more familiar with the writings of Neil H. Buchanan.

I have mentioned Buchanan a few times in the discussions on HCR, and still find his Findlaw columns on that subject among the best I've read. But I've been tracing down more of his work, on Findlaw and on "Dorf on Law" as well as his more formal academic work, and I believe I've found the current day equivalent of John Kenneth Galbraith. The difference being that Galbraith was a 'pure economist' while Buchanan has doctorates in both Economics and Law and serves as a Law Professor at Georgetown and, this year, a visiting scholar at Cornell Law School.

The two are similar in many ways, in their fiercely logical progressivism, the clarity of their writing, and in the way the heat of their intellects melts the ice surrounding the frozen ideas of the neoclassicists so their imperfections can be better shown.

I'd like to suggest that you all look at his columns in Findlaw -- available here -- and if the titles and summaries drive you further, as they will, go on to the "Dorf on Law" pieces and the longer pieces available elsewhere.

Prup (aka Jim Benton)

Oh, I can't resist one example of Buchanan's writing, three paragraphs from his attack on the idea that we must reform the tax code to increase savings, and on Reaganomics in general, his article in the Journal of Economic Issues entitled "Taxes, Savings, and Macroeconomics." (As I've said, questia.com is a wonderful thing to have.)

Any plan to increase saving, if it is to continue to collect the same amount of revenue as the current system (and thus not increase the fiscal deficit), must raise tax revenues from some people to pay for reduced tax revenues from others. If everyone changed their behavior toward more saving, it would not be possible to make up the lost tax revenue (if we continue to assume that income is constant). This implies that there must be a group of people whose consumption is non-responsive to tax changes, while there is another group that does respond to tax incentives. The tax burden is then shifted onto the former group. It should not be surprising that the latter group, which will see its taxes decreased, is also known as "high-income households," who will be rewarded for the saving that they would do even in the absence of tax incentives.
The distributional consequences of taxing consumption are likely to have a further perverse effect on saving. There is extremely strong evidence that people - when faced with difficult economic circumstances - will devote extraordinary amounts of creativity to maintaining their current level of consumption. The recent work on "loss aversion" [see, for example, Thaler 1992] is particularly revealing in this regard. Loss aversion denies the standard notion that taking $1 away from a person will decrease their happiness by (roughly) the same magnitude as giving $1 to the person would increase it. Employing experimental and survey techniques, Richard Thaler has concluded that losses are, in fact, perceived to be twice as bad as gains (of the same size) are good.
Loss aversion is in rough accordance with the "relative income hypothesis" [Duesenberry 1949], which states that the marginal propensity to consume is substantially lower in response to declines in income than it is to increases in income. Under either theory, raising tax rates on consumption will not have a sizable impact on consumption because people will fight to continue to consume what they have grown accustomed to consuming.

And thus we bury the Laffer Curve and the flat tax and other poisonous nostrums.

oddjob

Here's some must read, with data ammo. for future reference (in WaPo no less!)

"For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different.

The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity that is leading economists and policymakers to fundamentally rethink the underpinnings of the nation's growth.

It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.

There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent...."


Read the rest. Hat tip, Sully.

Krubozumo Nyankoye

Oddjob and Prup,

I stumbled on this the other day (mind the wrap I don't know how to make URLS small).

http://www.dailykos.com/storyonly/2009/12/27/819543/-Historical-Income-Tax-Rates-for-the-Top-Tax-Bracketwith-Charts

The last time I had a good consulting gig in the US was in the 1980s. The last time I worked for a corporation with more than 500 employees was in the 1980s. The last time I was in the top tax bracket at year end was in the late 1990s. And I don't fit the profile of an ordinary worker in any sense of the word. The last time I checked, about two years ago, if I went back to the kind of work I was doing in the 80's I would have to take a 40% cut in the pay level I had then to get a job. But of course I would not have been able to get a job because two years ago I was already too old to hire.

I am just relating some benchmarks, I can't complain. It is hard to get paid sometimes working for foreign concerns but if that was my biggest problem I would be a happy man. I simply can't imagine what it is like for the "average worker" who finds him/her self out of a job but also out of any prospect of a job at the same level. It is demoralizing.

So too is it demoralizing to realize that the selection of the national government is vested in the voting of an elite body of 9 people 5 of whom at the least are partisan and biased. That is what happened to the US at the beginning of this decade. It just got worse after that. Among the first things the frat boy administration did was unilaterally abrogate both the Kyoto accords and the ABM treaty with Russia. Then they focused their attention on giving the richest 1% a windfall and send a signal that wholesale thievery was OKAY so long as it was big enough to affect millions of peons. Enron anyone? (my chronology may be out of whack here). But then came the golden opportunity... 911. Out of the black pall of smoke and toxic particulates that engulfed lower Manhattan the neocons saw the opportunity to drive ahead with their agenda with impunity. And they did. They exploited 911 to the maximum degree possible.

Two wars in two years. The first fought with both hands tied behind our backs and a large log chained to one foot, and the second - well I am at a loss for any comparative analogy. Suffice it to say, however, that on the day the Iraq war began I knew that my country had comitted an egregious crime. There is no greater crime than aggressive war.

Since then, things went more or less consistently down hill. The litany of crimes and transgressions is apalling. Yet now we find ourselves, still treading water in this cess pool of idiocy, and apparently unable to find any purchase that will allow us to take breath and consider what to do next.

I am not surprised. But I think the measurable declines in the status of the vast majority are as nothing compared to the more intangible outrages that have been perpetrated to consolidate and assure the future dominion of the select few.

There is a certain irony to all of this, and that is that the oligarchs believe they are immune from the future they are shaping. They believe that their money can protect them from nature. That is reason enough to reject them, but unfortunately, most people are early on indoctrinated to believe that they cannot make decisions themselves and should listen to the advice of those whose real interest is to exploit anyone who will listen to them.

We live in interesting times. Luckily, some of us are getting old enough to realise that it is a good thing not to look forward too far. I don't hold much hope for the future of civilization as we know it. But at the same time, I realize it really does not matter. It would matter to us if we were wise enough to see it, but because we don't, when our little technological spark in the vast universe withers and dies, it will go unnoticed.

Just as we have probably already passed the point where any reasonable action could reverse the manner in which we are impacting the planetary ecosystem, we have long since passed the point where realizing our folly would make any real difference.

Mandos

So, are we doomed? Should I start shorting the future now?

big bad wolf

doomed, mandos? don't you know?

Mandos

Yes, but I'm not supposed to invest in it. Insider trading, don't you know. It annoys Manwë.

oddjob

It annoys Manwë.

LOL!

Parenting Magazine

This seems to be a good reading materials. Thanks for sharing it.

Prup (aka Jim Benton)

SPAM ALERT!^

oddjob

conservatism is a political philosophy; the farce currently performing under that marquee is an inferiority complex in political philosophy drag

That's very well put. Sully has been making this point in so many words for a couple of years now.

The frightening thing is that the tea party crowd, if grabbed by the wrong charismatic leader, would immediately become a crowd passionately devoted to a fascist American future.

oddjob

How did I end up here??

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