Curmudgeonocracy 8—Inequality and Redistribution

“I don’t read much progressive literature, Curmudge, but I suspect that progressives believe that inequality is the problem and redistribution is the solution.”

“It makes a good political cant, Julie.  The progressives want the middle class to feel as if they deserve a bigger share of the good life and the share should come from somebody else.  It’s called resentment or coveting, as in the Ten Commandments where one is admonished about coveting his neighbor’s wife or his neighbor’s anything else.  Of course, if the progressive is also a post-modernist, he’s not bothered by the Ten Commandments.”

“Fortunately my couch-potato husband is too lazy to look at the gal next door or to read what a post-modernist can ignore.  So how do the progressives convince middle-class Americans that they have been ripped off?”

“They use misleading data, Julie.  They ask, ‘are you worse off now than in (some earlier date)?’ and then answer their own question, ‘of course you are.’  But often they aren’t.”

“So what’s the straight scoop, Professor?”

“The progressives focus on pretax income inequality and ignore transfer payments such as unemployment insurance, food stamps, Medicaid, and other safety-net programs.  According to Hassett and Mathur in The Wall Street Journal (1), ‘Consumption is a more relevant metric of overall welfare than pre-tax cash income.’  Data in a 2011 Congressional Budget Office report ‘reveal that average disposable household income increased across all groups since 1979.  The average household income grew by 40% for the middle quintile and by 49% for the bottom quintile.’ (2)  And regarding ‘the good life,’ the Department of Energy reported these increases between 2001 and 2009 for low-income Americans—those earning less than $20,000 in 2009 dollars: ownership of a computer, from 19.8% to 47.7%; air-conditioning, 65.8% to 83.5%; a dishwasher, 17.6% to 30.8%; and a washing machine, 57.2% to 62.4%. (1)”

“Gosh, Curmudge, neither of us had a computer in 2001.  But we are certainly better off than many people in Europe.  ‘The average U.S. family has 38% more disposable income than a family in Italy, 25%more than a family in France, and 20% more than a household in Germany, when adjusted for purchasing power.’ (2)  So what do the progressives say about that?”

“They persist in wanting to raise taxes in order to achieve the degree of socialism that countries in Europe have found they can’t afford.  And increasing taxes on ‘the rich’ who already provide most of the government’s revenue won’t be sufficient.  Ultimately the middle class would have to pay more.  Additionally, the fact that high taxes haven’t helped in the U.S. in the past is pretty good evidence that they won’t help in the future.”

“Okay, Professor, in case I encounter a progressive at a picnic, please provide some data.”

“ ‘The Congressional Budget Office looked at 2007 through 2009 and found the bottom 20% of American earners paid just 0.3% of the total tax burden, while the richest 20% paid 67.9% of taxes.’ “

“Wow!  And some say the rich aren’t paying their fair share.  And you have more?”

“Apparently some progressives are unacquainted with the ‘Laffer curve.’  Laffer has observed that while revenues increase as tax rates go up, at some high tax rate the curve bends downward and revenues decrease.  The economy also turns down as people decide that because of their high marginal tax rate, the higher income from their extra efforts isn’t worth the trouble.  Here are some numbers: During the tax rate increases of Presidents Johnson, Nixon, Ford and Carter, between 1968 and 1981, the top 1% of income earners reduced their total income tax payments from 1.9% of GDP to 1.5% lf GDP.’ (3)”

“What about the economy during periods of high taxation?”

“President Hoover precipitated the Great Depression with the Smoot-Hawley Tariff in 1930, and raised the personal income tax rate from 24% to 63% in 1932.  President Roosevelt raised it to 79% in 1936, and the Depression roared onward with unemployment at 20% in 1938.  According to Arthur Laffer of Laffer Curve fame: ‘Whoever heard of a country taxing itself into prosperity?’  ‘Higher tax rates on the rich create the very poverty and unemployment that is used to justify their presence.’ (3)”

“It’s pretty evident to me, Curmudge, that the progressives did the wrong thing in the distant past, and that’s what they seem to want to do now.  However, there are some who were undoubtedly progressives a few years ago who said things that are clearly at odds with the policies of our current administrative state.  For example, here’s a quote from John F. Kennedy in January 1963: ‘Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle—workers without jobs and farm and factory capacity without markets.  Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction…’ “

“Equally interesting, Julie, is this quote from Al Gore: (4) ‘Capitalism has become the world’s economic ideology of choice primarily because it demonstrably unlocks a higher fraction of the human potential with ubiquitous organic incentives that reward hard work, ingenuity and innovation.’ “

“Wow!  From Al Gore?  That’s not only surprising; it’s hopeful.”

“Don’t get your hopes up, Julie.  Since exiting from pure politics, he has combined environmentalism with capitalism.  That’s not unusual among environmental zealots.  In any case, we’ll explore some potential paths forward for curmudgeonocracy in future postings.”

Kaizen Curmudgeon

(1)  Hassett, K.A., and Mathur, A.  Consumption and the Myths of Inequality The Wall Street Journal 10/25/12.

(2)  Gilbert, Neil  The Denial of Middle-Class Prosperity  The Wall Street Journal 5/17/14, p. A11.

(3)  Laffer, Arthur  The Soak-the-Rich Catch-22  The Wall Street Journal 8/02/10.

(4)  Gore, Al, and Blood, David  Toward Sustainable Capitalism  The Wall Street Journal 6/24/10.

Link to posting from blog archives: The Robot –11/03/10 http://kaizencurmudgeon.blogspot.com/2010/11/robot.html

Curmudgeonocracy 7—More That’s Wrong

Progressivism and Equality

“You know, Julie, it appears that progressives’ knowledge of biology is comparable to their knowledge of economics.  They seem to think that money grows on trees and that all people must be compensated equally irrespective of abilities and accomplishments.”

“I’m convinced that progressives tend to be spendthrifts, Curmudge, but what about their views on biology?”

“Progressives are clearly wrong.  I’m living proof of inequality.  I’m not big enough to play in the NFL or tall enough for the NBA.  Let’s face it; inequality is endemic in the human race.  However, progressives and conservatives are pretty close on equal opportunity.  They both feel that people should be equal in their opportunity to get a basic education and live in an enriching and productive environment.  But in addition, progressives believe that everyone should have an equal outcome in life, as if they were stamped out of a machine as little widgets.  That is, equal despite their inherent differences in initiative, intellect, and a host of other conditions.”

“Gosh, Old Guy, do progressives truly believe that that is possible?”

“Probably not, Julie.  I’m exaggerating, but they seem determined to make the nation do everything feasible to meet their vision.  And they seem willing to impoverish the country in the process.”

“So, Professor, how does that translate into the ‘here’ and ‘now’ in America?”

“Progressivism and politics are symbiotic, because the administrative state is essential in applying progressive concepts.  To a politician, the greatest good that he or she can do for the country is get re-elected.  Thus to make that happen, he/she will support progressive measures—often despite their cost—if they seem popular.  Consider federal government food stamps.  If a politician supports expansion of that program, the recipient will support the politician; he will not bite the hand that literally feeds him.  This has been proven by the riots in Europe that have erupted when governments considered reducing social programs that people feel are their ‘entitlements.’ “

“I get it, Curmudge.  That’s why Social Security is considered the ‘third rail’ of politics.  And from my reading (1), the U.S. deficit will increase by $40 trillion over the next 20 years, mostly due to Social Security, health entitlements, and interest costs.  The progressives don’t seem to show much concern over tackling this problem.  Perhaps we should remind our readers—once again—just how big a number a trillion is.  If one counts backward in time for one trillion seconds, the date would be 30,000 B.C.”

“Forty trillion is indeed a mind-boggling price to pay for 20 years worth of mostly social programs, Julie, but the progressives’ goal of equal outcomes would also be a big hit to our culture and wellbeing.  Suppose the government decided to create universal equality by confiscatory taxation of all high earners and achievers.  The driving force for generating new knowledge and developing new products would disappear.  And with everyone equally poor, there would be no support for symphony orchestras in small cities, college scholarships, or charities.  Life would be harsh and drab—almost like the Middle Ages.”

“If that had been implemented when you were born in 1934, Senior Citizen, we wouldn’t have had jet planes, transistors, computers, and all the benefits of modern medicine.  And without college scholarships, you wouldn’t have met the future Mrs. Curmudgeon.  Here’s a quotation from Winston Churchill about being equally poor. ‘The inherent vice of capitalism is the unequal sharing of blessings.  The inherent virtue of socialism is the equal sharing of miseries.’ “

“The draconian costs of equality are also portrayed in an amusing but frightening way in a short story by Kurt Vonnegut (2) recalled by Al, one of our editors.  ‘The year was 2081, and everybody was finally equal.’  ‘Nobody was smarter, better looking, stronger, or quicker than anybody else.’  The new constitutional amendments were enforced by The U.S. Handicapper General.  Because there was no way to bring people up to a higher performance level, those with physical talents had to wear bags of lead shot to hold them down.  Those with the ability to think had noisemakers installed in their ears to disturb any creative thoughts.  The story described ballerinas with masks to cover pretty faces and sash weights to make them clumsy.”

“I think I’m going to be sick again, Curmudge.  If that were not fiction, the Handicapper General and staff would be exceptionally dedicated progressives.”

“Any system of government that suppresses or subjugates the people has to have enforcers like the Handicapper General.  If the people are required to be equal in terms of outcome, the enforcers must be a higher political class.  That proves the impossibility of universal equality.  Which brings us to another more familiar lesson from fiction.  It’s George Orwell’s Animal Farm.  ‘All animals are equal.  But some are more equal than others.’  I think that’s what we have in the Administrative State.”

“Just because the progressives view themselves as a higher political class, it doesn’t mean that they are higher achievers.  Consider, for example, the Affordable Care Act as observed by Phil Gramm in The Wall Street Journal (3):  ‘Judged by the deeply flawed roll out and the necessity for endless illegal waivers, merely implementing the law as written seems to be far beyond the capacity of the U.S. government.’ ”

“And in addition, Julie, the bureaucratic minions are led by political hacks with inadequate management experience.”

“Here’s my arm again, Curmudge.  Put your thumb on the anti-nausea acupressure point on my wrist.”      

Kaizen Curmudgeon      

(1)  Portman, Rob  Heading Off the Entitlement Meltdown The Wall Street Journal, 7/22/14, p. A9.

(2)  Vonnegut, Kurt  Harrison Bergeron in The Magazine of Fantasy and Science Fiction (October, 1961).

(3)  Gramm, Phil  A 2014 ealth-Care Stfrategy: FreedomHhHealth-Care Strategy: Freedom The Wall Street Journal 7/25/14, p. A13.

Link to posting from blog archives: Evidence-Based Medicine 5—10/21/10

http://kaizencurmudgeon.blogspot.com/2010/10/evidence-based-medicine-patients_21.html

Curmudgeonocracy 6—What’s wrong?

“I don’t get it, Curmudge.  The New Deal didn’t end the Great Depression, the Great Society didn’t make society great, the 2009 American Recovery and Reinvestment Act ($862 billion ‘stimulus’) didn’t stimulate the economy, and the countries of Western Europe are trying to undo their unaffordable cradle-to-grave social welfare programs.  In the U.S. we are recovering from the Great Recession at a snail’s pace.  It looks as if the people in charge have not studied history.  They persist in attempting things that have been proven not to work, and they refuse to accept that the U.S. is a complex system that can’t be micromanaged from Washington.”

“Actually, Julie, you do get most of it.  We both understand what has happened, but neither of us fully understands the underlying ‘why?’.  We may need to speculate.  Perhaps the ultra-progressives have a sort of messianic vision that ‘this time it’s different.’  Maybe we can better understand the progressive mind if we look at some of the actions of the administrative state.  Laws and regulations often have unintended consequences or reflect the political or economic goals of favored groups.  The latter are termed ‘crony capitalism.’  Let’s look a some examples.”

Unintended Consequences

“I know some consequences of the Endangered Species Act (ESA), Old Guy. The red-cockaded woodpecker is a protected bird that nests in old-growth pine trees in eastern North Carolina.  ‘When a landowner felt that his property was turning into the sort of habitat that might attract a nesting pair of woodpeckers, he rushed in to cut down the trees. It didn’t matter if timber prices were low.’  And here’s another ‘bird’ example, the northern spotted owl in the Pacific Northwest.  Although saving owl habitat was a noble goal, designers of the ESA probably didn’t envision that it would decimate the northwest timber industry and the communities that it supported.  And as it turned out, the barred owl drove the spotted owl out of its habitat.”

“I lived in the Northwest when this was a big issue, Julie.  When one detected a spotted owl on his property, conventional wisdom was to ‘spot, shoot, and shovel.’  And here’s a present-day example of regulators’ overriding the needs of people in favor of wildlife.  Despite the parched condition of farmers’ fields in California, water desperately needed for irrigation is being flushed into rivers running into the ocean to keep baby salmon comfortably cool on their migration to the sea.”

Unpopular and Unwise Regulatory Goals

“You know, Curmudge, sometimes the citizens of a community are unhappy with things that the federal government bureaucrats are trying to do ‘for’ them.  One example is in implementation of the Fair Housing Act by the Department of Housing and Urban Development (HUD).  Apparently HUD is regarded as attempting to rewrite local zoning laws by federal fiat in Westchester County, NY.  This pertains to construction of low-income housing units.  HUD says the county is not being sufficiently ‘diverse’ and will withhold $5.2 million this year.  ‘This deprives Westchester’s poorer neighborhoods of the very funds that are needed to build affordable housing.’ (1)”

“Another issue, related in that it pertains to the Fair Housing Act, is

disparate impact.  ‘The theory of disparate impact allows regulators and plaintiffs to sue under the Fair Housing Act and other ‘discrimination-focused’ laws using the legal theory that a particular lending scheme – although unintentional – had a disparate impact on a minority group.’  The issue is that concern over unintentional ‘disparate impact’ might overrule a banker’s judgment in mortgage lending.”

“It doesn’t take much reading to conclude that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is unpopular with a lot of people.  I suspect that you, Old Guy, will agree with these quotes from a recent article in The Wall Street Journal. (2)  It was inspired by the progressives’ belief that the ‘housing bubble’ and Great Recession were caused by Wall Street greed and insufficient regulation.  ‘However it is now clear that government housing policies forced a reduction in mortgage underwriting standards and were the real cause of the crisis.  The goal was to foster affordable housing for low-income borrowers and minorities, but these loosened standards inevitably spread to the wider market, building an enormous housing bubble between 1997 and 2007.’ “

“The same article described some impacts of Dodd-Frank, Julie. The act is 848 pages long, and only 208 out of 398 regulations required by the act have been finalized.  ‘The gross domestic product (GDP) from the recession that ended in 2009 has been the slowest on record.’ ‘J.P. Morgan Chase plans to hire 3,000 more compliance officers this year, to supplement the 7,000 brought on last year.  At the same time, the bank will reduce its overall head count by 5,000.  Substituting employees who produce no revenue for those who do is the legacy of Dodd-Frank.’ “

“Other big-government actions and regulations could be categorized as crony capitalism.  That is sort of a generic name, which we introduced in our 4/20/14 posting, because there are also crony liberalism, crony progressivism, and crony unionism.  In an administrative state where all ‘good’ things come from the government, an organization or its cause must be favored by the Administration or its progressive bureaucrats to get in on the ‘goodies.’  I’ll bet that you know some examples, Old Man.”

“Limited only by the space we want to devote, Julie.  The classic example is Solyndra, that had a $535 million government-guaranteed loan when it went bankrupt.  Bureaucrats felt they could make better decisions with taxpayers’ money than private investors would with their own.  And then there’s the corn lobby that forces us to have 10% ethanol in our gasoline.  The failure of General Motors is an example of crony unionism.  The Administration gave a big chunk of GM to the United Auto Workers and ‘stiffed’ the GM bondholders holding senior debt.  A sure sign of government decay is when they don’t follow the rule of law.”         

“I’m certain that you couldn’t end a discussion of unwise regulations without mentioning industry’s bête noire (black beast or nemesis), the Environmental Protection Agency (EPA).”

“Their worst is their latest, Julie.  They consider carbon dioxide, which we exhale and plants require, to be a pollutant under the Clean Air Act.  Under the guise of global warming, they will destroy the coal industry with the hope of reducing the global temperature by a fraction of a degree.  But we dealt with that topic a year ago in our five-posting series on Climate Science beginning on July 23, 2013.”

“To me, Curmudge, the progressives’ ultimate insult to the public is the Administration’s weaponizing federal agencies to investigate and harass conservative citizens’ groups.  And the worst offender is the Internal Revenue Service, whom we always felt to be insulated from politics.  Corruption in government makes me sick.”

“Our discussion of obstacles to curmudgeonocracy will continue in the next posting, Julie.  Meanwhile, give me your hand and I’ll put my thumb on the acupressure point on your wrist to control your nausea.”

Kaizen Curmudgeon    

(1)   Westchester USA  Editorial in The Wall Street Journal 7/08/14, p. A12

(2)  Wallison, Peter J.  Four Years of Dodd-Frank Damage, WSJ 7/21/14, p. A13.

    

 Link to posting from blog archives: Evidence-Based Medicine 4—10/14/10

 http://kaizencurmudgeon.blogspot.com/2010/10/evidence-based-medicine-patients_14.html