Don’t feel sore; you’ll keep getting richer

In any vigorous (dirty) US election, there’ll always be a signature red herring. In logic, the term for this gambit is “poisoning the well.” During the Cold War, implying that the other guy was an intellectual was negative political dynamite. Up until recently, passing along the suspicion that he was a little queer and, therefore, unreliable on law and order also worked well. And today, the old standby that he is too easily tempted by “foreign” ideas still has some force.

The big one for this presidential election, however, has to be: “The Obama administration is jealous of the rich. It’s disgusting.”

The accusation that Obama is being hard on the rich has specific practical and psychological value: it is raising $millions for Mitt Romney from people who can most easily spend the money and it seems to provide many incredibly fortunate Americans an explanation for why they’re unhappy and don’t think they get proper respect.

On a general basis, however, it’s just another intoxicant. It clouds the issue of fair taxation and distracts people from real problems in the social and economic fabric of the country.

It would deserve a hearing, anyway, if it were true. But, it isn’t.

Larry Summers—the economic Rasputin of Obama’s first term—alluded to the truth of the matter in a column calling for greater focus on inequality in opportunity:

“While I support moves to make the tax system more progressive, the reality is that inequality is likely to continue to rise, even with all that can responsibly be done to increase tax burdens on those with high incomes and redistribute the proceeds. Measures such as allowing unions to organize without undue reprisals and enhancing shareholders’ role in setting executive pay are desirable. But they are unlikely to even hold at bay the trend toward increasing inequality.”

Click on: www.washingtonpost.com/opinions/lawrence-summers-changing-focus-to-inequalities-in-opportunity/2012/07/15/gJQATol4mW_story.html

Mitt Romney faithfully parrots that audaciously pedestrian question: “Are you better off today than you were four years ago?” Why not, Mr. Romney, first ask your friends?

Imagine the blushing outrage if Barack Obama took the rich aside and asked: “Aren’t you feeling better off—and safer—today than you were feeling when I took the oath of office in January 2009?”

That question would be rude. The poor shouldn’t complain and the rich shouldn’t have to acknowledge their good fortune.

The truest, if not the most politick, response to the hostility of the most affluent Americans to Obama’s policies and his record is this prediction: if he remains as radical in his second term as you think he’s been in his first term, you should expect that the rich—the job creators, if not every speculator—will keep getting richer, probably faster than everyone else.

Seriously, Obama’s pitch to the affluent should be less arduous than his pitch to the poor. His more collegial foreign policy and middling Keynesian policies have been far more effective, so far, in restoring the fortunes of the rich than in creating wage improvements for the rest.

Of course, the most affluent may decide to go for broke, to try to get more out of the economy with more tax cuts with Romney. Many, however, may wonder whether it might be prudent to invest just a little more in the fate of the population at large. Every four years, after all, they’re shareholders, too.

Brain candy—ouch!

Take this, David Brooks:

“You ain't fooling anyone with another one of your traveling dead dog & donkey cerebral extravaganzas.”

—Joseph of San Francisco’s comment on David brooks column “The Opportunity Gap” New York Times, July 9, 2012

Click on: www.mercurynews.com/opinion/ci_21045467/david-brooks-why-americas-growing-opportunity-gap-is

Here’s Brook’s inflammatory, milk toast closing to his column on recent literature about the troubling disparities amongst young Americans:

“Political candidates will have to spend less time trying to exploit class divisions and more time trying to remedy them — less time calling their opponents out of touch elitists, and more time coming up with agendas that comprehensively address the problem. It’s politically tough to do that, but the alternative is national suicide.”

Can’t imagine that’ll get him into fights in the Hamptons this summer.

Mitt Romney’s rich dare to Americans

Four years ago, Barack Obama stood before hundreds of black and liberal audiences and gambled that they would see that he could sell himself to white America. For months, Mitt Romney has been daring Republicans to try to elect a very rich investment banker as president of the United States.

They’ve decided to take up the challenge, and Romney now offers the same righteous choice to all Americans:

"If people think there's something wrong with being successful in America, then they'd better vote for the other guy, because I've been extraordinarily successful, and I want to use that success and that know-how to help the American people."

"I stand ready to lead us down a different path, where we are lifted up by our desire to succeed, not dragged down by a resentment of success."

Click on: www.latimes.com/news/opinion/commentary/la-oe-kinsley-column-romney-secrets-of-success-20120420,0,3509588.story

In interviews with journalists he often volunteers that he's made a lot of money. He’d like to talk about his money and his handles definitely would like Obama to whine about his wealth.

Sorry, but this is two-bit drama compared to electing the first black president.

For one thing, it’s as likely that Romney scrambled to make his millions to succeed in Republican politics as was drafted into politics to restore the luster of money.

Second, Romney’s wasting his breath trying to tease Barack Obama into “resenting” success. Manhattan and the One Percenters are gorging under his grip and, anyway, it’s impossible to slap a pout on Obama’s face until Romney beats him at something.

Let’s grant, however, that there's something genuine about Romney’s invitation to Americans and liberal intellectuals—in particular, to say nice things about his money.

His problems are not as easy to appreciate as the problems of black men documented in Ralph Ellison’s novel, The Invisible Man, about living as a black man in American's northern cities. However, very rich men can have problems connecting with people.

Everyone thinks they can find something to say to a social worker, but Romney the rich man is difficult. He’s not just a “millionaire” and he’s not a “billionaire,” and his business activities are in blind trusts. In the 90s, Bain Capital investments earned approximately a 400% rate of return on his watch. Yet it’s just not socially acceptable to ask Romney how he did it or to leave the impression that any of it was dumb luck.

Nevertheless, Romney’s challenge to Americans needs to be answered: he wants respect and Republicans will be hectoring America to demonstrate that they don’t resent his wealth. There is no reason to make envy the ballot issue. There are ways to help affluent Republicans feel comfortable in America without a Romney presidency.

Here’s a small one: Lanky joggers could wear T-shirts proclaiming: “I’m impressed with Romney’s wealth!” Others could go further and add on the back side: “And I’m voting for Obama.”

George Will on the Glory of Messy Change

Bow ties are worn by men who take extra care to avoid common sentiment, and George Will has been wearing one as long as he’s been writing a national column. He’s tireless in exposing soft thinking and back-sliding in others:

“Creative destruction continues in the digital age. After 244 years - it began publication five years before the 1773 Boston Tea Party - the Encyclopedia Britannica will henceforth be available only in digital form as it tries to catch up to reference websites such as Google and Wikipedia. Another digital casualty forgot it was selling the preservation of memories, a.k.a. "Kodak moments," not film.

“America now is divided between those who find this social churning unnerving and those who find it exhilarating. What Virginia Postrel postulated in 1998 in "The Future and Its Enemies: The Growing Conflict Over Creativity, Enterprise and Progress" - the best book for rescuing the country from a ruinous itch for tidiness - is even more true now. Today's primary political and cultural conflict is, Postrel says, between people, mislabeled "progressives," who crave social stasis, and those, paradoxically called conservatives, who welcome the perpetual churning of society by dynamism.

“Stasis’s see Borders succumb to e-books (and Amazon) and lament the passing of familiar things. Dynamists say: Relax, reading is thriving. In 2001, the iPod appeared, and soon stores such as Tower Records disappeared. Who misses them?”

Click on: www.jsonline.com/news/opinion/the-glory-of-messy-chaos-d24lm1g-143698876.html

Some of this is merely too simplistic and some is bad because it is simply partisan nonsense.

First, individuals everywhere are of two minds about change and their own futures; they’re not divided on these questions according to whether they’re on one side of town or the other, or live in one class or race or another, read romance novels or went to Rocky films—or whether they live in public housing or Tribeca, Manhattan.

Does Will honestly think that his faithful reader living in his gated community in Naples, Florida, is “exhilarated” by perpetual change? Does he really think the phrases “globalization and “free trade” are doing poorly in Newark, New Jersey, because young men there have a “ruinous itch for tidiness"?

Change, as Robert Kennedy warned, always has enemies. Unlike Will, however, he was not referring merely to sentiment and nostalgia.

The change in North America for 200 years has been relatively unrelenting, not because North Americans lost the reflex to look back, romanticize, and fight for what they have, but because change in North America kept producing great material dividends, across the board.

The real challenge serious conservatives are engaging with progressives today is how to ensure that capitalism, in a global context, can again produce a dividend for society at large. If 97% of the dividend is going to go to the top 1% on a regular basis, then “creative destruction” will become an untenable sick aesthetic.

Brain Candy (not) for Liberal renewal:

“Mr. Graves points out that the middle class is not a natural phenomenon; it's a product of state policy – of progressive taxation, redistribution of wealth, laws that allow for union organization, substantial support of education, health care and housing.

“As state supports diminish and taxation advantages are increasingly skewed to the wealthy, the middle class shrinks and inequality increases.”

Click on: www.theglobeandmail.com/news/politics/is-a-liberal-comeback-mission-impossible/article2250088/page3/

– Frank Graves, president of Ottawa based pollster Ekos Research Associates, in The Globe and Mail, November 25, 2011.

Obviously, the Liberal Party better go after the middle classes if it’s going to survive. However, Graves’s message is historically inaccurate and over-wrought—beguiling, but wrong. Primarily, economic circumstances not big government have turned away from the lucky middle class of our memories.  

The breadth and affluence of Canada’s and America’s middle classes were not created by Henry Ford’s beneficence or by government spending — and, unfortunately, will not simply be restored by penitent One-Percenters and longer lists of public projects.

In fighting the last World War and mass unemployment, the public sector’s appetite for goods and human resources exploded and, for a while, government ran the economy. However, after building the atomic bomb, governments didn’t then decide to invent the most prosperous middle class in economic history.

That middle class—with its wonderful deep pockets—was already taking shape. Certainly, it was receptive to liberal and European ideas about how to use government to expand social benefits and secure its future. It was optimistic—after all, democratic governments had successfully performed extraordinary tasks for nearly a decade.

North American politics in the 50s and the 60s did generate new domestic policy ideas and promises. But above all, increasing middle-class wages and salaries enriched government revenues and made it easy for governments to spend. Indeed, in the 70s, governments were so sure that the money would keep coming in that they started capping income tax increases caused by inflating wages and salaries, and also enriched social entitlements like unemployment insurance, universal healthcare, and access to post-secondary education.

Republicans in the United States are being overheard telling each other that the next time they’re in charge they’ll dismantle much of the social safety net financed by Washington. (And Obama is effectively calling them for it.) However, the squeeze on the middle class today was not engineered by conservative governments or fainthearted liberals in the 1990s.

Governments in Western Europe and North America are struggling to keep up with rising inequality. The OECD reports that the redistributive impact of Canadian government tax policy on Canada’s wage gap offsets less that 40 per cent of the rise in inequality since the mid-1990s.

Click on: www.theglobeandmail.com/report-on-business/economy/canadas-wage-gap-at-record-high-oecd/article2259657/

Of course, that 40 per cent can be raised somewhat by adjusting how government taxes and spends. Being frank about more fairly taxing individuals and more effectively targeting benefits to people would give Liberals fresh attention. That approach, however, might credibly address the increasing inequality—but not the underlying problem.

Democratic governments never before have succeeded in significantly redistributing incomes in a flat economy. Liberals, as well as conservatives, need to start considering new ways for government to facilitate, not frustrate, private sector economic growth.

The changes going on in society and in the economy today are far more profound than the squirming that is going on in the state.

Is democracy too hard on the rich?

The authors of the American constitution had good reason to fear what popular governments and voters could do to unpopular individuals, ideas, and minorities. Accordingly, they created constitutional safeguards to tie the hands of democratic government.

When the ballot was extended to include women and labor, should nation-builders also have introduced fiscal safeguards for the rich?

Underlying the vehement opposition of American conservatives today toward any measure to enhance federal tax revenues — and their support for a constitutional amendment to make new taxes and federal deficits next to impossible — surely beats a profound fear that democracy is rigged against the affluent. The reckless demos will depreciate the value of their savings, tax away what they have protected for their children, and tax their “excessive” incomes along the way.

These conservatives, of course, do not believe that government can’t do anything right; most say American government will never accidently hang an innocent man, spill nuclear fuel, or conduct an incompetent war. They fear, however, that as soon as the people start thinking again that activist government can help solve their problems, they will start using government to hurt those with means. (On the left, they are increasingly called “billionaires and millionaires.” Conservatives rally to the defense of anyone with a taxable income of over $200,000 as a “job creator.”)  

This vision of the masses lined up on Election Day to cut their betters’ throats was starkly outlined in a piece by George Bragues, assistant vice-provost and program head of business at the University of Guelph-Humber in Toronto. He asserts:

“Consequently, the state’s fiscal operations necessarily divide society into two classes — that is, between those who, on balance, receive more from the government than they are required to give it, as opposed to those who must pay more to it than they are entitled to receive from it. Following John ­Calhoun, the 19th-century American politician and writer who developed this analysis, we can refer to the first class as tax consumers and the second as tax payers.

“Amid the struggle that occurs between these two, democracy favours the tax consumers. In every society that has developed beyond the hunter-gatherer stage, wealth has been distributed unequally, that is, concentrated in a group making up less than 50% of the population, indeed often a good deal less than that. At the same time, democracy in principle empowers whoever can garner 50% plus one of the votes. To an ambitious democratic politician, the optimal strategy to win elections is obvious: Promise the not-so-wealthy majority a wide assortment of government-supplied benefits in the hopes of passing on the costs to the wealthier minority. In other words, forge a coalition of tax consumers that outnumbers the tax payers.”

Click on: http://opinion.financialpost.com/2011/08/31/voters-and-debt/

Where have these ambitious politicians been for the last hundred years?

Certainly, wealthy tyrannies like Saudi Arabia bribe their subjects with ridiculously cheap public services in order to keep them servile politically. Certainly, some anti-democratic capitalist regimes like China’s have been able to create an impressive number of billionaires — for at least a generation. Certainly, democratic governments can be corrupt, bribing groups of voters as well as rich patrons. Nevertheless, the masses have hardly forced governments to systematically exploit the wealthy.

It’s a pure pandering by an academic, and paranoia by the well off, to imagine that a majority of voters turn out in elections to soak the rich. America has the most competitive mass democracy in the world — regularly shunning tax measures that would clip the wings of the rich. America’s business class is the most affluent in the world — and the safest. Also, America’s most affluent families are the biggest beneficiaries of public spending on the arts, health research, and advanced education.

Clearly, a shared idea of fair treatment and mutual gain — of a just society — disciplines our politics and permits our economies to grow. That idea, not a predatory game theory, has allowed for fantastically different economic outcomes for individuals and a decent level of social solidarity.

The challenge now is not to shrink our democratic rights, but to design tax policies that will strike people as fair.

US Tax reform is coming

Except in a handful of wicked American cities, you could not get elected a hundred years ago without being able to talk intelligently about the family farm and commodity markets. Economic dangers and opportunities were immediate and hotly discussed; the stakes were high and, consequently, the voters were economically literate. Is it possible that those times are returning?  

This summer, twenty-four hour coverage of the economy and Washington’s finances—and extreme political talk on both—may be doing the economy measurable harm, as well as educating the public. Talk of national bankruptcy has surely had something to do with the decline in consumer confidence, an ever rising savings rate, and now stalling industrial production.

Consumers, investors and employers have been told that the glass in Washington is not just half empty, but half full of poison.   

Being unready to accept failure or live for long in pain, the next response by Americans is likely to be higher political participation and, just possibly, less tolerance for Democrat and Republican clichés. Over the next fifteen months, it could get harder and harder to sound stupid and irresponsible.

Already, two fire lines against fresh thinking are in trouble. “No new taxes” and higher taxes on “millionaires and billionaires” are perceptively giving away to calls for tax reform and, yes, some new revenues. The prospect of a more robust tax base would make short-term stimulus more credible and, therefore, more effective.

Singling out too few taxpayers for an income tax increase sounds too convenient. It doesn’t sound statesmanlike, it sounds envious. Alternatively, calling any new tax “socialistic” or a “job killer” is wearing thin. American governments spend like Canadians. Ultimately, they’ll have to pay equivalent taxes too. Most important, there is no credible way to raise serious money without asking more from the rich.

(Okay. Let’s set aside the extraordinary growth in wealth of the top 0.1% of Americans over the last thirty years. It is not demagogic, however, to note that the top 10% of Americans control two-thirds of America’s wealth. The Democrat’s proposed tax increase on those earning over $200,000 is stale, doesn’t raise enough, and doesn’t encourage economic growth. Nevertheless, it is not radically left or substantially different from most conservative and mainstream alternative ideas to modernize the tax code. They all hit those with high incomes and indulgent tax breaks—because that’s where the money is. This isn’t a class-war issue. It’s about ability to pay.)

Click on: http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph  

Clearly, the business community has discovered, albeit, ridiculously late, that brinksmanship, polarization and paralysis in Washington are very bad for business. Also, on his Midwest tour this week, Obama must have noted that his audiences want him to test Congress with new measures immediately, not simply sound reasonable. 

They may respond well to another “give ’m Hell Harry” next fall. But, for this fall, they want an LBJ problem-maker.

Inequality’s challenge to the capitalist consensus

There’s no question that the “Washington Consensus”—with its 20 years of globalization, private innovation and state restraint—survived the great recession. Mainstream politics in the west is dominated by arguments about how much faith to put in markets and how to make big government affordable.  The breadth of support for capitalist global economic development is unprecedented and may have contributed significantly to the swiftness of the global recovery.

Nevertheless, that broad support will only be sustained if the benefits are broadly shared.

We live in mass democracies; the unenlightened, the less adventurous, and those less able to enjoy vicariously the good fortune and exceptional talent of the few—have the vote. We know that anxiety about food and shelter and the future trump flag waving and slick advertising. Consequently, the cascading evidence that globalism, on its own, isn’t sharing the benefits as broadly as the nation-based industrial capitalism of the mid 20th century must soon receive more public attention by mainstream conservatives as well as liberals.

In America, the fact that nearly 70% of the people don’t believe their country is heading in the right direction is narrowly and naively seen as a good omen by Republican tacticians. However, this lack of confidence in the workings of the most powerful market economy in the world is based in real disappointment not just in exploitable shortcomings by and misconceptions about big government.

Recently, OECD reported that over the last two decades the gap in incomes between the most affluent and the rest has widened across the developed world. In the US, this trend has included chronic unemployment and wage stagnation along with gaudy displays of wealth in a handful of coastal cities. Most important, the evidence is accumulating that this isn’t simply the result of one wrong-headed tax cutting Republican president. Good old free enterprise—at its most Harvard MBA best—isn’t sharing the riches the way it used to.

Nobel Laureate Michael Spence and Sandile Hlatshwayo of New York University carefully document how America’s most dynamic global corporations are successfully restoring America’s global economic credibility by creating high paying jobs for the most highly skilled while offing little domestic employment for others. In their article, “Jobs and Structure in the Global Economy” they conclude:

“If a relatively open global system is to survive in a world where nation states are the principle decision makers, it will have to be managed and guided not just to achieve efficiency and stability (important as these goals are), but also to ensure that its benefits are distributed equitably between and within countries.”

Click on: http://www.project-syndicate.org/commentary/spence21/English

It may not be politically possible to use significantly more government intervention to directly encourage business and “strategic” sectors, in particular, to hire more people and invest differently. It might be wiser to take a more hands off approach and explicitly share more broadly the benefits of free markets and global trade through tax reform and universal programs that most benefit middle and low income Americans.

Liberals and conservatives pragmatists can argue about means. Market conservatives, however, can’t for long maintain there is no problem. Conservatism’s most banal virtue ought to discipline conservatives first: when the glass is half empty, you can only insist that it’s half full—and accept that much is missing.