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"It is better to be drunk with loss and to beat the ground, than to let the deeper things gradually escape."

- I. Compton-Burnett, letter to Francis King (1969)

"Cynical realism – it is the intelligent man’s best excuse for doing nothing in an intolerable situation."

- Aldous Huxley, "Time Must Have a Stop"

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Tuesday, 13 January 2004

Topic: The Economy

More on class warfare:
Work is for losers. Portfolios are for winners - real men.
FDR was the worst, and most insidiously evil president in history.
No, I'm not making up this stuff.

In my recent posts here on the issue of the economy and job loss I was edging toward some sort of unified theory about capitalism and work. Sort of.

Friday, 9 January 2004, at the end of The Brave New World, I said, with some bitterness, "Best to own a business - be a capitalist - and not to work for one."

Well, here is someone as bitter, who draws the same conclusions.

See Good for Investors, Bad for the Rest

Harold Meyerson, The Washington Post, Wednesday, January 14, 2004; Page A19

Meyerson opens with this:
If you work for a living in George W. Bush's America, you're a sap.

Take a quick look, or a long one, at the tax code as Bush has altered it during his three years as president, and you're compelled to conclude that work has become a distinctly inferior kind of income acquisition in the eyes of the law. Bush tax policy rewards investment and inheritance. Relying on work for your income, by contrast, turns you into a second-class citizen.

In his first round of tax cuts in 2001, Bush got Congress to phase out the estate tax by 2010. Last year, with Republicans in control on Capitol Hill, he reduced the top tax rate on dividends from 39.6 percent to 15 percent, and brought the capital gains tax rate down from 20 percent to 15 percent as well.

This year, his new budget proposes that families be allowed to shield as much as $30,000 yearly on their investment income, which will abolish all remaining taxes on such income. Meanwhile, the income tax cuts to most middle-class families don't exceed a couple of hundred dollars, and payroll taxes for employees remain untouched. In part, this devaluing of work is simply an expression of Bush family values. As Kevin Phillips points out in his new biography of the Bush dynasty, the Bushes don't do anything so vulgar as going into professions. Rather, the clan lives by its connections. For George W. and his brothers, work has meant riffling through Pappy's Rolodex. Theirs is the cronyest form of capitalism.

But a broader theory is at work here, too. It says that investment, rather than labor, powers economic growth, so rewarding investment is merely the most direct way to help the economy.
I'm so glad it's just not me.

It seems the current theory, or the theory of the current administration, is that Clark and the Democrats have it all wrong. Tax breaks for ordinary working folks who might actually spend the money and fire up the economy won't do the economy any good.

You have to get business, particularly large corporations, and the wealthy, feeling good and optimistic. That's where the growth begins.

Meyerson's take on that?
A lovely theory, but if anyone thinks the Bush tax cuts have spurred economic growth, I have a low-tax investment in a bridge to Brooklyn. To be sure, investment income and corporate profits are high. But just 278,000 new jobs have been generated since June, which means the recovery is about 7.5 million jobs shy of the norm for post-World War II recoveries. Bush's Council of Economic Advisers had predicted job growth of 510,000 from the 2003 tax cuts, plus another 1,335,000 new jobs, during the second half of last year.
This seems to be the worst unemployment situation since 1944-45, when WWII was running down. The very worst by far.

Yeah, well, but corporate profits are way up. What about that? Doesn't that matter?

Well, what about that? One doesn't get warm optimistic fuzzies about that when you cannot find work. And a lot of people cannot.

But corporations are making tons of money.

Ah yes, but I was writing specifically about outsourcing and jobs disappearing because of that. How does outsourcing and tax policy fit in here?

Here's how Meyerson sees that:
Outsourcing has turned the phrase "investment-led growth" into the grimmest of oxymorons. It means that Bush's tax policy subsidizes job growth in India and China rather than the United States. And in failing to create more employment here at home, the tax cuts have also helped depress wages. Real wages in the United States actually fell 0.7 percent in the fourth quarter of last year.
And he says this of the response of those who would run against Bush:
To all this, the Democratic presidential candidates have proposed a reversal of the Bush tax priorities. John Edwards is the most explicit, calling for an increase in taxes on most forms of investment income while lowering the taxes on employment. Wesley Clark has proposed eliminating income taxes for more than half the households in the United States, and Howard Dean is reportedly mulling over a plan to cut payroll taxes.

All that is good in itself, but doesn't really grapple with the conundrum of job creation in a globalized economy.
So what does?

Meyerson argues for something like FDR-style public works projects. Public investment. Remember the WPA and NRA (not the National rifle Association - think the 1930s and dams and roads and things).

Ah yes, but I have been on the receiving end of many a lecture from my conservative friend on how FDR was by far the worst president in American history, responsible for destroying the American character. How? He made people lose their self-reliance and sense of personal responsibility, turning them into infantile whiners, people who saw themselves as victims, who felt is was their right to have some "mommy government" intervene and make things all better, when they should have changed their attitudes and taken responsibility for themselves - and acted like adults, not self-righteous children. FDR created a nation of dependent whiners.

And it's not just my conservative friend. Perhaps later I'll review the three or four books published in the last eighteen months that make that argument.

Is all this class warfare? You bet.

Posted by Alan at 22:35 PST | Post Comment | Permalink

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