The Bananafication of the Republic

by Eric Martin

Building on Publius' prior post on the reasonableness of the proposed surtax to pay for health care given the astronomical gains over the prior decade by the top 1% of American earners, Kevin Drum is as shrill as he is quotable.  Drum is riffing off a Wall Street Journal article which shows that executive pay is continuing on its out-of-balance rampage ever upward:

You probably thought that the big problem with skyrocketing executive pay was the fact that it left nothing for the rest of us.  And you're right: that 24% increase for "American workers" includes the 48% increase for the top earners.  In other words, the executives got a 48% increase, the rest of us got approximately nothing, and it all averaged out to 24%. [...]

And now the Journal is pointing out yet another problem with running our economy solely for the benefit of the wealthy: you only owe payroll taxes on income up to $106,000.  This number rises every year, but it doesn't rise nearly as fast as the earnings of the rich.  Which means that more and more income every year is above the cutoff and doesn't get taxed.  And that in turn means that Social Security is in considerably worse shape than it would be if increases in national income weren't being hoovered up almost exclusively by the executive class.

So there you have it.  If we don't pass healthcare reform it will be because the rich don't want to help pay for it.  Average wages are stagnant because that leaves a bigger pool of money for the rich to slosh around in.  We're letting the planet fry because policies to stop it would inconvenience the rich.  Regulatory reform of the financial system increasingly appears to be a dead letter because Congress is owned by the rich and they don't want it.  Against all that, I suppose that crippling Social Security hardly even shows up in the ledger.  But we might as well tot it up anyway.

Meanwhile, California is plunging over the precipice due to Arnold's GOP lawmakers' refusal to even countenance a tax increase to help close a gaping budget gap, and the mere prospect of trying to reinvigorate the middle class by passing needed programs designed to ameliorate the effects of stagnant wages and rising health care costs - and in the process bringing tax rates back to levels during the late 1980s/1990s (let alone 1970s, 1960s, 1950s, etc) - has people threatening to Go Galt, threatening to cut back on earning money by intentionally not servicing clients, holding teabagging rallies, whining about giving back enormous bonuses at bailed out firms (or the fact that their receiving any form of scrutiny for same), warning about dread socialism using the same loony language that Reagan used to rail against Medicare at its inception, etc.

And in the spotlight are a group of soi disant centrist, moderate Democrats and Republicans who alternate between self-satisfied preening, self-indulgent eccentricities and self-interested targeting of insurance company campaign dollars (as if winning was itself the only goal, and governing a distant and nettlesome concern) while holding the fate of key programs in their hands like petulant children fingering baubles. 

Unabated, these trends spell serious, longterm decline for America.  Yet the confluence of power and money are clamoring for more and faster, please.  The corporate media, naturally, plays along. 

Comments

[Ugh]

Yet the confluence of power and money are clamoring for more and faster, please.

Just wait until SCOTUS holds McCain-Feingold unconstitutional.

[Sebastian]

Do you really think McCain-Feingold has been a serious check on the political influence of money? Hasn't it pretty much shifted to 527 organizations? And are we really going to ban general advocacy expenditures? Goodbye ACLU political advocacy? Really?

I actually have a question about the CA budget crisis. I'm pretty knowledgeable about it, but it just struck me: if you can get past the 2/3 bar to raise taxes, what do you care if the governor vetos it? You already have the 2/3 needed to override.

Is it some sort of interaction with the line item veto?

[Catsy]

I don't know why the GOP pols in CA are freaking out. This is the culmination of their dream: a hard refusal to levy taxes exacerbating a government starved of funding, resulting in massive cuts in state services... isn't this what "starve the beast" was all about?

From the way they're acting, you'd think this was a crisis or something, instead of the endgame that the Norquistian anti-tax jihadists have been aiming for.

[Sebastian]

"Meanwhile, California is plunging over the precipice due to Arnold's refusal to even countenance a tax increase to help close a gaping budget gap, and the mere prospect of trying to reinvigorate the middle class by passing needed programs designed to ameliorate the effects of stagnant wages and rising health care costs - and in the process bringing tax rates back to levels during the late 1980s/1990s"

Are you going past CA here? So far as I can tell, the combined State/Local burden in CA has been right around 10% since the early 1980s. The tax burden in CA has been remarkably steady, which is why the enormous spending increases are so striking.

[Ugh]

Do you really think McCain-Feingold has been a serious check on the political influence of money? Hasn't it pretty much shifted to 527 organizations? And are we really going to ban general advocacy expenditures? Goodbye ACLU political advocacy? Really?

I guess not really and what I was really thinking of was that they would strike down the ban upheld in 1970s for caps on individual donations.

[von]

Do I take that fact that you're continuing to focus on the surtax to mean that you don't have a good defense for the rest of the revenue provisions in HR 3200?

[Eric Martin]

Seb: I'd have to see your math. Also: spending increases are due, in part, to increased costs of health care and education - structural stuff, not new spending programs.

[Eric Martin]

Do I take that fact that you're continuing to focus on the surtax to mean that you don't have a good defense for the rest of the revenue provisions in HR 3200?

No. I have not read the entire bill yet, nor the various arguments about the various funding mechanisms.

[von]

No. I have not read the entire bill yet, nor the various arguments about the various funding mechanisms.

Start with the New York Times summary, which is linked at my post. The surtax is only one of eleven provisions.

[Eric Martin]

Von: will do. My response is based on the amount of heat that the surtax provision is generating - which is related to the heat that other tax provisions received early in Obama's tenure (raising top marginal rates a small amount ie).

[Ugh]

Start with the New York Times summary, which is linked at my post. The surtax is only one of eleven provisions.

Tax nerd nitpick: it's the Joint Committe on Taxation's summary, not the NYTimes's.

[Steve Peterson]

Actually it hasn't been the Governor's refusal to raise taxes; it's been Republican legislators who have refused. The Governor tried to raise some taxes, but those ballot measures got voted down. Hence the current crisis.

Unfortunately the closed primary system and gerrymandering, combined with term limits, have left the Legislature in the grip of ideologues (from the left and the right) unwilling to compromise on spending and taxes. Throw in voter-approved constitutional changes that guarantee large parts of the budget (Prop 98 locks in the 40% of the budget for K-12 education), and you have disaster. Moderates can't get elected, so compromises can't be created... and the constitution prevents substantive changes. Gridlock.

We need fundamental reform to fix this; I agree with calls for a constitutional convention, but I don't know how you'd keep the various interest groups from using such a thing to make the situation worse instead of better.

[von]

Sorry, Ugh, you're absolutely right. Complete brain freeze on this end -- it was uploaded by the Times, but it's not the Times' summary. My bad.

[Sebastian]

"Seb: I'd have to see your math."

Sorry I thought I provided the cite but I didn't.

The general tax burden in CA has been right around 10% for about 30 years.

Cite

"Also: spending increases are due, in part, to increased costs of health care and education - structural stuff, not new spending programs."

Really much of the increase was in education spending and prison spending. Those are only pseduo-structural, in that they involve voter mandated pushes throwing money at things without bothering to look at how to do so effectively (and both are also massively pushed around by two of the most powerful unions in the state--the teacher's union and the corrections officer's union [a left wing one and a right wing one]).

It is mandated spending, but mandated by the voters in exactly the way I described--wanting to have the government spend more without being willing to pay for it (see the 64%+ No votes on the budget initiatives).

[Eric Martin]

Seb: I don't doubt the structural idiocy of the current spending/tax legislative regime - just for the record.

[publius]

very quotable indeed -- i might have do some more quoting on this one later

[Angellight]

When one is on the Battlefield for positive change, one cannot pause to worry and fret about "allegdely" sinking poll numbers.... that is a "trojan horse", For One cannot worry about the Separated Self, when they have the People's business to do!

In regards to the current debate, Healthcare costs are one of the culprits Directly related to our collapsing economic condition. We are drowning in this quicksand which calls for urgent and immediate address and attention. This time is Urgent, the time is Now!

It is hard to Change old habits of greed and selfish power to one of cooperation and a public good for all. Pres. Obama is going up against a Monster of Greed and Corruption that does not want to give up its power. This monster will Lie, Steal and Deceive. We the people must not allow this Monster of Corruption to continue to have its way, which will only continue to bankrupt the United States. We must stand firm with Pres. Obama who truly represents the Change the people need and have voted for.

If we in our own lives can do more than One thing at a time, so can Congress, and it is their duty and business to do so. If those in Congress want to continue to be a Do Nothing Congress, than we must elect leaders who can do Something for the whole of humanity and not just the separated self or special interest party.

Members of Congress have great insurance coverage, and a cushy salary. They do not live under the fear of unemployment and no insurance coverage. They are there to work on Behalf of the People, so they too, do not have to live in that fear... Yet, while in the care and leadership of the GOP, Congress has done a miserable job on taking care of the people and now the GOP want to obstruct the Democrats from putting into laws that which will benefit the people and grow the economy, not bankrupt it. But people are turning a deaf ear to the deceitful “Wizards of Oz” for they want us to continue to travel their yellow brick road of deception. We must become immune to their lies and vigilant to their deception if we are to make progress towards sanity again.

I call on those of goodwill to work, speak-up and Stand firm for Change and for transformation -- towards a more just and equitable government for all.

[Michael Cain]

I don't know why the GOP pols in CA are freaking out. This is the culmination of their dream: a hard refusal to levy taxes exacerbating a government starved of funding, resulting in massive cuts in state services... isn't this what "starve the beast" was all about?

Not really. My own perception is that the target was Medicaid and other programs for the poor and/or disabled. I think most of them are fine with state parks, public schools (minus most of special ed and the like), and even a lot of regulation of businesses (health inspections of eating establishments, building codes, etc). But don't spend their tax dollars on the poor!

Note that states are starting to pick up on just what the federal recovery dollars are going to cost them in the not-too-distant future. Today the Governor of Colorado indicated he will be http://www.denverpost.com/search/ci_12879578>asking the feds for a waiver to allow them to cut state higher ed funding below the levels they promised to maintain in exchange for the big lump of education dollars Congress provided...

[Model 62]

Some (a plurality?) of those initiative No votes were votes of no confidence in the legislature, the governor, and the system itself. Had they included a recall and an offer of a constitutional convention among those failed measures, we would have seen two certain winners.

@Steve Peterson: I think it's a little facile to describe Cali politics as polarized between left and right, with no compromise in between. The Dems have compromised mightily throughout this process. In addition to agreeing to a cuts-and-gimmicks-only bill with no new taxes, they've also agreed to sell a fresh oil lease, with minimal royalties (none?) and no oil severance tax. GOP legislators, with their rock solid 1/3 minority, recently bolstered by the Governor, have refused to budge -- they didn't in February and they didn't last night.

That said, I agree that term limits, the 2/3rds rule, gerrymandering and the initiative process need to be scrapped (I'd settle for a curtailment of initiatives). A Constitutional Convention is the only way to get there. The way to keep it out of the hands of entrenched interests is to open it up as much as possible -- invite scores of Californians from each legislative district, politicians as well as community leaders, businesspeople, educators, government employees, homemakers, and so on. Hold a special election to choose those delegates and set them up in Sacramento for a summer and see what they come up with. The rest of us can vote Yea or Nay in the fall.

As to Bananarepublicification of the Republic, I recall some commenter somewhere at the time of the collapse of the Soviet Union -- Doug Henwood's LBO listerv, maybe? Pacifica Radio? The Nation? -- advising the working class to keep their heads up. Now that Communism no longer posed a threat to Capital, the gloves were coming off.

Maybe that commenter was right.

[Hogan]

The general tax burden in CA has been right around 10% for about 30 years.

10% of what? I don't see an explanation of that at your link (sorry if I'm being dense).

[Gary Farber]

"I call on those of goodwill to work, speak-up and Stand firm for Change and for transformation -- towards a more just and equitable government for all."

I call on everyone to engage in more Random capitalization: it's so Very eighteenth Century.

[bob h]

What makes the refusal to countenance higher taxes on the overcompensated well-to-do is that many, if not most, of these people are in finance, and industry that was rescued at great cost by the rest of us.

[CaseyL]

What makes the refusal to countenance higher taxes on the overcompensated well-to-do is that many, if not most, of these people are in finance, and industry that was rescued at great cost by the rest of us.

That's the essence of oligarchy, right there. The proles are supposed to be drained in order to fatten the nobility. Proles don't count, don't matter, and breed quickly enough that no one notices or cares how long or how well they live.

[Doctor Science]

Way back in my high school European History course, I recall learning that in pre-Revolutionary France the aristocrats were *incensed* at the suggestion that they pay taxes. The purpose of taxes was to pay *them*! That's what it means to be "the ruling class".

[Sebastian]

"10% of what? I don't see an explanation of that at your link (sorry if I'm being dense)."

10% of income.

"Way back in my high school European History course, I recall learning that in pre-Revolutionary France the aristocrats were *incensed* at the suggestion that they pay taxes. The purpose of taxes was to pay *them*! That's what it means to be "the ruling class"."

But we aren't talking about that, right? We aren't even talking about paying equal taxes. We're talking about how much higher in taxes the rich should pay. Right?

[Eric Martin]

But we aren't talking about that, right? We aren't even talking about paying equal taxes. We're talking about how much higher in taxes the rich should pay. Right?

In theory if not practice.

[Eric Martin]

Also worth pointing out: the actual top top earners pay a smaller percentage of their income than the upper middle class. There's a weird shape to the graph whereby it goes up along the x axis until you hit the end with the highest earners and then it dips.

I think the group that pays the most is the 250,000-350,000 range. I'll look for a link.

[Sebastian]

Right, which is a great argument for tax simplification--a whole 'nother topic. lol

[Sebastian]

But back to your original post. Does the fact that the tax burden has NOT decreased in California change your argument?

[Eric Martin]

Dunno seb - depends on what my original argument was ;) Isn't part of the problem the decreasing amount of money from the fed government, and also the usual increases in costs due to aging populations/health care costs/fuel costs, etc.? If so, more revenue is needed.

But I do think that some of the spending programs could and should go or be fixed. I agree with much of this list that Connor Friedersdorf puts together.

http://andrewsullivan.theatlantic.com/the_daily_dish/2009/07/my-gloss-on-the-golden-state.html

[Eric Martin]

Friedersdorf: "What vexes me as a Californian are all the better ways the state could reduce its expenditures were the legislature only willing to rein in the most egregious giveaways to its most reliable cash cow lobbies. Pension obligations could be radically reduced by changing the formula that allows all public safety employees, broadly construed, to receive 90 percent of their salary for life upon retirement. State prison costs would decrease if the state decriminalized drug possession and stopped prostrating itself before the prison guard union. School reform could cut administrative costs higher than in most states without affecting money being spent in the classroom -- for example, by reversing a state of affairs where school districts pay problem teachers millions of dollars to stay out of the classroom, for starters. Repeat offenders would decrease if the state identified illegal immigrants in its jails and ensured their deportation at the conclusion of their sentence, rather than releasing them back into the populace. A state in need of revenue might reconsider workers' compensation laws that are among the costliest in the nation for taxpayers and businesses..."

[Gary Farber]

"Repeat offenders would decrease if the state identified illegal immigrants in its jails and ensured their deportation at the conclusion of their sentence, rather than releasing them back into the populace."

I'd be curious -- but not curious enough to feel like searching for myself just now -- as to what percentage of recidivists in California state prisons are illegal immigrants.