Will the world’s middle classes rise up, in a “Helvetian War”?

 My 1989 novel Earth is credited with a fairly high predictive score.  In fact, fans maintain a wiki to track its successful "hits" - including little things like the World Wide Web and wearable augmented reality "google goggles." See: Earth-related predictions.

(They also track some embarrassing "misses"... ah well.)

Set in the year 2038, Earth portrays citizens in that near-future era looking back upon a brutal struggle that took place in the 2020s.  The Helvetian War was unlike anything we've seen since the French or Russian Revolutions. A radical rising by a fed-up world middle class, pushed against the wall by cynics and the corrupt connivers.

What they seek - and attain - is not socialism, a discredited foolishness that arose out of silly abstractions that bore no relationship at all to real human nature. Market economies have out-performed socialist or communist or oligarchic ones so overwhelmingly that only delusional fools - or would-be oligarchs - should prefer top-down, bureaucratic control instead of the fluid productivity that we get out of creative competition. (Does that make me sound like a right-winger? Silly.  Broaden your memes.)

No, the new radicalism that may be demanded in the 2020s -- especially by emerging middle classes in the developing world -- is to give all people a chance to compete fairly, free from parasitism by their homegrown kleptocrats and from the rising global variety. Free from the secret, conspiring control of a caste that Adam Smith himself called the oppressors of freedom and market economics across 6000 years.

"All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind." --Adam Smith, in The Wealth of Nations

Now, in that context, consider this headline. $21 Trillion hoard hidden offshore by global elite.

Yes that is a "T" and not a "B." Just sit there and consider that number.  Then think about my prediction that the world's middle classes will become radicalized, perhaps in the 2020s, or even sooner.

The study in question estimates the staggering size of the offshore economy and how private banks help the wealthiest to move cash into overseas havens. Russian, Saudi and Nigerian oil barons top the list, followed by US and British bankers and then drug lords and other criminal enterprises.  The totals amount to as much as the American and Japanese GDPs put together.

With US tax rates at their lowest levels in 60 years, and taxes on the rich at their lowest levels since 1920, it would seem that they still aren't low enough for today's super wealthy.  Consider the GOP's potemkin rally in Tampa, in this context.

See also this angle: This hidden wealth costs western democracy governments $280 billion a  year in lost tax revenue. That's annual.  An amount so huge that infrastructure repair and boosted science could coincide with cuts in the actual tax rates for law-abiders who aren't part of the secret Lords Economy.

Want to see where this might lead?  Try reading Earth.

== Is a World Middle Class Even Possible?

In fact, it is more than possible. If by "middle class" you mean having a clean home with electricity and sanitation, a washing machine and access to transporation, plus kids who are in school with adequate food, clothing and books, then that already includes two thirds of the Earth's human population, a fact that is seldom mentioned by either left or right.

Why is this good news ignored? Because of the Paradox of Progress.  It's all a matter of deep personality. The reflex of folks on the right is to avert the gaze from problems to be solved and to resent nagging to solve them. The reflex of the far-left is hypersensitivity to perceived problems. To rail for solutions - but to deny that any past attempts at improvement ever worked! The right is suspicious toward the whole notion of "improvability" of either humans or society. The left wants improvability, passionately, but insists it has never happened yet.

Both extremes are - in effect, completely crazy.

See The Progress Paradox: How Life Gets Better While People Feel Worse, by Gregg Easterbrook. 

Amid ongoing debates over progress, there is a third group. Those who seek to improve the human condition and who admit that steady improvements have already taken place.  These are called "liberals" - a very different breed than leftists - and to them the question of whether development has taken place inevitably gives way to practical discussions.  How to foster a speedup of already ongoing progress.   Pragmatic progressivism eschews dogma in favor of asking: what has worked and what hasn't?

What's becoming clear is that some parts of the world are doing better than others.  In 1970, South Korea had a lower per capita GDP than Ghana.  Today, all the nations of East Asia have left all African nations in a cloud of dust, and that includes China, which had a thirty year hiatus under Maoism.  Today, Latin America has large areas that are burgeoning -- e.g. Brazil -- and sub-Saharan Africa is experiencing its most rapid rate of growth (outside of certain hell-holes) since colonial kleptocrats gave way to local kleptocracies in the 1960s.

Still, the African acceleration is only impressive compared to previous stagnation. And some regions that have tried -- under pressure or tutelage from international development agencies -- to reform their laws and civil society, have failed to make them sufficiently competition-friendly to invite much new investment, or to give vibrant locals a level playing field against conniving local elites.

== What do the professionals say? ==

Two interesting perspectives offer a glimpse at just how difficult the problem can be.

In a fascinating and vivid audio-visual presentation, Owen Barder explores the implications of complexity theory for development policy. He explains how traditional economic models have tried and failed to understand why some countries have managed to improve living standards while other countries have not. Using complexity theory, he shows that development is a property of a system, not the sum of what happens to the people within it.

While Barder is both interesting and informative and is on-target in his range of criticisms - (do watch the video!) - in the end he winds up sounding like a lot of "complexity" fans.  Okay, so the problem is complex.  Thanks for telling us that.

For balance, have a glimpse at an interesting, if a bit depressing, appraisal of the likelihood that creative-competitive capitalism can ever take root in MENA -- the Middle East and North Africa -- despite formal legal reforms.  The problem is an ancient one... oligarchies of a few at the top, engaging in what Adam Smith called "rent-seeking," using informal connections and conniving to bypass the new "civil society reforms" and still maintain their advantages, thus repelling or driving out investment in new competitive enterprises.

It is a standard pattern that this World Bank report deems fairly hopeless to overcome in this region, though others are doing better... while the United States slips ever deeper into the classic oligarchic pattern that Adam Smith loathed.

So, shall we commit seppuku and give up?  Of course not.  There is enough light erupting all over the Earth to encourage belief in progress, not only that it can happen, but that it has.  And that tech-driven transparency will help, when citizens can record and expose local corruption with the touch of a cell phone.  And that -- far better than chiding -- is good enough reason to persevere.

== So, will the world's new middle classes rise up? ==

As I portrayed in EARTH... and explore a bit in EXISTENCE... there are two types of uber-rich.  Those who are loyal to the Enlightenment Experiment that empowered their rise and (in effect) gave them everything they have... a diamond shaped social structure in which even with their billions, they - and their children - will keep facing fresh competition from a lively, vibrant population of educated and confident citizens...

...versus a portion of the new-aristocracy that simply does not get it.  Who think - as oligarchs did in 99% of past human cultures - that they are superior NOT because of this year's latest goods and services, but because wealth inherently means lordly merit.  Such folks aren't at fault for having this reflex.  We are all descended from the harems of guys who pursued power tenaciously and darwinistically.  The reflex is in our genes.

But it's a poison. Our Enlightenment Experiment achieved more human progress in just four generations than all the preceding feudal societies combined.  Its founders, like Adam Smith, recognized the oligarchic tendency and denounced it.  They knew that the foolish "uber" types would keep trying to pound our diamond shaped society back into a pyramid, promoting "rent-seeking" income (like dividends and capital gains) ahead of the wages earned by creative and hardworking people with their hands.

Inevitably (and history bears me out) all this conniving will have just three possible outcomes.

1- They succeed.  The Enlightenment Experiment comes to an end. (In Existence I explore the rationalizations they might give, to excuse such a backward shift, some of them very clever!)

2- The middle classes - uniting in common cause with knowledge professions like science - could enact yet another mild, moderate, incremental, American-style revolution, of which 1776 was only one example. So was the first U.S. Civil War and Teddy Roosevelt's progressive era, and FDR's New Deal, in which oligarchy gets stymied just enough to keep freedom and creative competition and entrepreneurial markets and  transparency and divided power and opportunity and social mobility going, while maintaining the allure of competitively-earned wealth as a reward for delivering cool things into the world.

3- Paris... 1789.

Here is the chief difference between the good/smart/tech billionaires and the fools who now use Fox News to push an idolatry of property that has always, always, always been the enemy of competition.  The smart guys -- the billionaires in Silicon Valley for example, or Warren Buffett and Bill Gates -- want option number two. If need be, they will join the world's middle classes and help keep our looming "helvetian wars" mild.

In sharp contrast, the ones who are pushing the United States into Culture War... indeed, the lastest phase of the American civil war ... actually think they are very smart.  But their efforts, if successful, will only lead to outcome#3.

They aren't as smart as they think they are.

     =====     =====     =====

== See also: Class War and the Lessons of History

and Libertarians and Conservatives must choose: Competitive Enterprise or Idolatry of Property

Tax Inequity and the Middle Class -- Top Issue for 2012

In an earlier political posting I pointed out that the top federal income tax rate - for earned income - has seldom been lower than it is right now.. and the rate that Mitt Romney pays on dividends is half of that.  Federal taxes, in general, are at one of the lowest points since 1912... suggesting that our current national argument about taxes ought to at least feature commensurately lower rates of anger.  Sure, let's negotiate how to simplify the system and make it more fair. But can we tone down the rage a little?

(Oh, but indignant fury is the whole point.  If it isn’t taxes, it will be something else.)

Above all, effective tax rates on the very wealthy are at their lowest since Teddy Roosevelt was president.

One response was sent in “That’s federal taxes! But state rates have gone up.”  Well, it’s a point that merits answering. So consider: (1) states vary a great deal, hence you are free to move to a low-tax state and I know many folks who have.  (2) Have a look at the Wiki site for “Tax Freedom Day.”

Tax Freedom Day 1971 to 2011 Source: Tax Foundation

Tax Freedom Day is the first day of the year in which a nation as a whole has theoretically earned enough income to fund its annual tax burden. It is annually calculated in the United States by the Tax Foundation—a Washington, D.C.-based tax research organization that is far, far from lefty, let's say. Every dollar that is officially considered income by the government is counted, and every payment to the government that is officially considered a tax is counted.

Taxes at all levels of government—local, state and federal—are included.  Have a look at the site.  Even taking all state and local taxes into account and averaged, the US falls way toward the bottom of tax rates for industrialized nations.  And at rather low rates compared to American history.

Only now have a look at the deadline for a fix that looms ahead of us in January 2013.  The Bush era tax cuts, that were supposed to result in vanished deficits (via Supply Side magic) have instead simply vanished revenue while inflating asset bubbles and rewarding passive types of parasitic income,  Do, by all means, actually read this article in the New York Times.

“We are at a revenue level that is almost the lowest in 60 years as a share of national income, too low to fund the things that are required,” Mr. Conrad said.

In 2011, federal tax revenue as a percentage of the gross domestic product stood at 15.4 percent, the Congressional Budget Office said in January. That is up slightly from the previous two years, but otherwise is the lowest percentage since 1950. Federal spending last year, at 24.1 percent of gross domestic product, was on a par with 2009, but to see such levels before the recent recession, you have to go back to 1946 and the winding-down of World War II.

...and this, from later in the article:

"The Bush tax cuts, which totaled nearly $2 trillion over their first decade, remain highly controversial. Tax cuts in 2001 lowered income tax rates at all levels, to 35 percent from 39.6 percent for the highest income earners, and to 10 percent from 15 percent for the lowest bracket. They also doubled the size of the child tax credit and made it refundable for the working poor, while phasing out the tax on inherited estates and allowing affluent taxpayers to take more deductions and credits. Even Mr. Hubbard acknowledges that in some ways the cuts made the tax code more complex.
Another round of tax cuts in 2003 reduced most capital gains tax rates to 15 percent from 20 percent, while also taxing dividends at 15 percent. Before, dividends were taxed as ordinary income, meaning a 39.6 percent rate for affluent investors.

Mr. Conrad calls the tax cuts “a profound mistake for the country on almost every level.” Still, 2001 started as a heady year, with the Congressional Budget Office projecting a federal budget surplus for the coming decade totaling $5.6 trillion. Alan Greenspan, then the chairman of the Federal Reserve, worried that the federal debt would be eliminated too quickly, leaving the world with nothing to benchmark interest rates against because Treasury bonds would cease to exist."

Really?  How charmingly naive and quaint.  And dismally stupid and an utter repudiation that such people should ever again be listened-to or allowed anywhere near power.

Read the article... and the suggested "reforms" that are being discussed. I am seriously unimpressed with most of them.  See my own suggestion on how the tax code can inarguably be simplified while avoiding the usual political wrangling. My "no losers" approach separates simplification from tax "policy" or who should pay more!  If we did this first, we'd have a sleek, sensible system in no time, and could then make policy adjustments that made sense.

Oh... but it gets worse, way worse.  See these charts revealing the "knee-capping of the U.S. middle class."  And yes, this will be the issue, for the rest of 2012.  Above all, as I suggested last time, use all this as a basis for making real-money wagers with your tea party uncles.  But get them to write it down, first.

== Ultrafast Stock Trading ==

Following up another past-posting, where I touted a Transaction Fee as a way to let humans regain some footing in stock market trading... here’s a relevant recent study. “

Ultrafast Trades Trigger Black Swan Events Every Day, say Econophysicists. The US financial markets have suffered over 18,000 extreme price changes caused by ultrafast trading, according to a new study of market data between 2006 and 2011“

But nothing will convince the mutants of the City and Wall Street. Listen to these religious fanatics spouting fervent and totally un-based incantations about "market efficiency" and "hyper-liquidity" and denouncing "friction"...  then look at the bitter fruit of their tenure at the helm of our economy.  They are mad.  Eloquent!  But loony priesthoods often are. In fact, they are out of their cotton pickin' minds... and sucking at our necks like lampreys. They are the worst enemies of true capitalism.

==  Political Miscellany ==

An interesting... pessimistic... interpretation of why Americans are using a whole lot less gasoline than they used to.


But let's finish with some optimism! My friend Peter Diamandis has an essay in Forbes, foretelling that science, entrepreneurial markets, innovation, startups, amateur enterprise and stunning breakthroughs in technology may soon unleash a tsunami of Abundance on the world, erasing poverty and helping to heal the planet, too!  Peter discusses why we are biologically programmed to view the world through a filter of anxiety, when, in fact:

"What does the world really look like? Turns out it’s not the nightmare most suspect. Violence is at an alltime low, personal freedom at a historic high. During the past century child mortality decreased by 90%, while average human life span increased by 100%. Food is cheaper and more plentiful than ever (groceries cost 13 times less today than in 1870). Poverty has declined more in the past 50 years than the previous 500. In fact, adjusted for inflation, incomes have tripled in the past 50 years. Even Americans living under the poverty line today have access to a telephone, toilet, television, running water, air-conditioning and a car. Go back 150 years and the richest robber barons could have never dreamed of such wealth."

Peter goes on to describe tech wonders looming on the horizon.  I make many of them vivid in Existence (coming in June.) But I think he leaves out one reason for our frenzied waves of anger and fear, nowadays... because rage feels great!  Sanctimony and Self-righteousness are drug highs. They can have their uses.  But when they prevent our fellow citizens from even detecting good news? Or worse, when they turn our neighbors into active obstacles to progress?  Then these sick habits are worse than heroin.

Are Taxes Historically High or Low? Chilling Secrecy, Clint Eastwood and the Rise of Common Sense

Okay, so it's 2012 and you can expect a regular rhythm of postings that are... well... political.

= THE GREAT FURY OVER TAXES =

To listen to Republicans, you would think we have the most oppressive tax rates ever, with the federal government hogging ever larger portions of the national economy.  Ever hear of Orwellian anti-truth?  That is where you repeat the exact opposite of the truth and people start believing it.

Top Federal Marginal Income Tax Rate from 1913 to 2011

But drop by and look at the actual facts. See this compilation of income tax rates.. Tax rates are at historic lows. And  this is for earned income. Rates for dividends and capital gains are even lower - by half - than what you see in the figure!

In the 99 years that we have had the income tax, rates for top earners were lower than they are today only twice: 

1)  during the 5 years before the US entry into the First World War in 1917, and

2) during the brief stretch from 1925 through 1930... when a massive asset value bubble pumped the economy into the Great Depression.

Also note this. They are LOWER for the middle class, under Obama, than they were under Bush. The "Obama tax hikes" are purely mythical.

That’s it. Today’s top rates are currently lower than at any time since 1930... and ironically that includes half of the HOOVER Administration preceding FDR. In other words, the hiking upward was first done by the same 1930 Republican Congress that brought us the Smoot-Hawley Tariffs!

Just to make this clear, so you rub it in your crazy-as-Fox uncle, income tax rates are lower than at any time in 80 years.

The other big fact is the fraction of U.S. national GDP taken by the federal government.  Fox’s uncles swear that this is at an all-time high. In fact, the federal share of GDP is at its lowest since 1950.

Be entrepreneurial.  Make Adam Smith proud and use all this to make money. Seriously. Lure your nearest Tea Partier to make grand declarations about the oppressiveness of recent tax rates and the growing federal share of the economy and then demand a wager!  Only... get it in writing.

== Chilling Effects ==

What exactly are your online rights? What protections are offered under the First Amendment and intellectual property laws? Here are details expanding on last time:  Chilling Effects offers an extensive database of info about copyright and trademark infringement, fan fiction, cease and desist notices, issues of anonymity and freedom of expression. A joint project of the Electronic Frontier Foundation and Law Schools at Harvard, Stanford, ...Berkeley and the George Washington School of Law, Chilling Effects is a first stop to determine your legal rights in the on hot issues in the ever-evolving online world. 

I’ve been known to differ over matters of emphasis with my friends at EFF. I am far less worried about what governments and the mighty “see” about me -- and history shows little hope of stopping them -- while I am more vexed and angry over government and the mighty hiding from citizen supervision. Still this is a good and important move and I am glad these folks are doing things like this!

Most civil servants... and even a lot of politicians... are sincere. They believe they are protecting us and/or defending freedom. The problem (for now) is that they can be counted on - via human nature - to have the inherent reflex of rationalizing how they must wield power for the greater good and must evade (some) accountability of the kind that might hamper them in doing their jobs.

1) They (and we) must be convinced that what's important is to defend and promote... the secular trend toward a more open world. The reason is clear and it goes beyond mere "goodness" of openness. It is the simple fact that our type of society is invigorated by the effects of transparency (though individual leaders are often severely inconvenienced) while all the cultures that oppose our way suffer from severe-to-lethal damage when washed in light. That is too great an advantage to ignore, even if you are a realpolitik-cynic.

2) Given that this secular trend is essential... and that human nature works against it... are there forms of sousveillance - or shining light upward - that can be applied to our own elites that will still leave them unimpeded in the practical fulfilling of their duties? Short term tactical secrecy is still vital for the effectiveness of military, police and Homeland Security functions, among others.

In EARTH I portray the legal sequestration of information being limited to short, 5 year terms unless a longer term is purchased at considerable dollar cost. In other words, there is a built-in bite and disincentive to claiming longer periods of secrecy, and with most secrets kept at the shorter, 5 year term, you have a reflex to say "I'd better behave generally well... or at least well enough to be forgiven... since this will all come out."

3) As it happens, there are some lovely potential innovations that could increase our confidence in supervision while ensuring minimal interference in day-to-day operations. I talk about some of them elsewhere. 

== Clint Eastwood... Democrat? Or American? ==

Has there begun a jobs renaissance in America, especially in manufacturing?  There are definite signs of “in-sourcing” taking place.

Oh but that segues into Clint Eastwood's Superbowl Chrysler commercial... and the subsequent Republican fire storm against him, by Karl Rove and others, for daring to suggest that the "bailout" of Detroit was actually a resounding success. 

Rove sniped "... Chicago-style politics, and the President of the United States and his political minions are, in essence, using our tax dollars to buy corporate advertising and the best-wishes of the management which is benefited by getting a bunch of our money that they'll never pay back."

Say what? Except that we're getting every single penny back. Plus many millions more in taxes on now-profitable American companies that Rove and his ilk wanted to let go belly up? (After they did urge much bigger bailouts for their Wall Street friends.) Refusal to admit that the automaker loans were anything other than a towering, spectacular, 200% success is the act of a deranged mind.

Oh... BTW. Clint has said "I don't recall ever voting for a democrat." If a man like that has switched sides, it is because he has sanely realized that the GOP has "left him."

== Some Fascinating Political Miscellany ==

Here's a fascinating one: "The lesson of the Great Crash was that unequal enrichment provokes asset bubbles, excessive demand for debt and, finally, economic failure. Now we are painfully learning that again."  Read the whole article by Stewart Lansley.  But a key point.  The massive wealth that has been redistributed upward to a thousand or so billionaires and top corporations is not generating jobs or economic activity at anywhere near the same pace as the same wealth would have, if it remained with the middle class. Those “job creators are mostly sitting on mountains of cash.  Banks, flush with reserves, are lending very little. Cash-rich companies are neither building productive capital (supply-side’s justification) nor doing much hiring.

Sign the petition offered by Senator Bernie Sanders, for a Constitutional Amendment that declares that Corporations are not the same as people and can be regulated by Congress and the States.  I also recommend Kent Pitman’s blog on this topic.  

On the lighter side.... In New Hampshire there was an event carried on C-Span... the "lesser candidates' forum" featuring 13 Democrats running against President Obama (all it takes is $1000 in NH) and 25 or so lesser known Republicans. See an article... but it pales next to the videos, including one of the "very silly party" candidate wearing a boot on his head, named "Vermin" who promises every American a pony.

Look at how a transparency (and tech-empowered) citizen hero caught villains with his flying drone. Snapping aerial photos of an illegal river of blood pouring from a slaughterhouse into a river.   Exactly what I spoke of in The Transparent Society  and especially the citizen action smart mobs I portray in my next novel!  

Recall my earlier blog urging the establishment -- or rather RE-establishment -- of the 90 year old transaction fee for financial trades?  At 0.1% per trade, this would scarcely be noticed by you or I, but would lessen the huge advantage grabbed by giant Wall Street houses through massive computerized trading systems.  Well, things are moving fast.  The French are now siding with the Germans in enacting such a fee.  The British conservative government, protecting the “City” bankers who got western civilization into this fine mess, are balking hard.

Okay, I admit this is beneath me.  But does anyone remember the 1971 creepy rat movie “Willard”... or the even-creepier 2003 remake with Crispin Glover? Okay, so, now we’re supposed to elect a guy named Willard to be President?  Okay, I admit “Obama” was creepy too, in the context of 9/11.  So what does it all mean?  That “fate” is giggling and poking at us from behind the curtain? It gets weirder. But enough about that.

An interesting - if biased in-favor - article about President Obama does clarify matters as to whether he has either been a “socialist” or “betrayed liberals.” 

And again.... Nehemia Scudder supporters! Order your bumper sticker!  Seriously, get people talking. It is a meme worth spreading. 

== Finally... housekeeping ==

A quick check.  Folks have lately reported problems receiving RSS feed from this web-log. If you feel that’s been the case, go ahead and leaf through the last few entries to see what you’ve missed.  If you fall into that category... but the problem has been fixed, feel free to let me know (or that there’s still a problem) by making a comment, below.

==For more on the Economy: Past, Present and Future

Disparities of taxation and wealth? Time to choose between ideology and civilization

The never-ending tide of troglodytic microcephaly from Republican candidates has the older, mainstream conservative intelligencia wringing its hands in near-despair. What kind of Twilight Zone do we live in, when GOP icon Alan Greenspan gives his highest presidential rating to Bill Clinton and by-far lowest rating ever to George W. Bush?

A veritable flood of former Republican standard bearers, like Paul Craig Roberts (the “father of Reaganomics”) have deserted, along with large swathes of the professional caste, from intelligence and military officers to scientists. Heck, rumors have it that the state of Arizona draws half its power from coils placed around the spinning in Barry Goldwater's grave.

Now, Bush family friend and renowned economic forecaster John Mauldin has weighed in.

"Far too many in both parties tell a frustrated America what it wants to hear, rather than the economic reality. The Republicans have some of the worst offenders."

John goes on with a riff about Mike Huckabee's "Fair Tax". Here's an excerpt:

"Fair Tax proponents want a 23% sales tax to replace every type of government tax. No more income, corporate, social security, or Medicare taxes. And everyone gets a $5,000 or so "prebate" which covers the taxes up to the poverty level. What could be simpler or more fair?

"First of all, the 23% they talk about is really 30%. Under the proposal, if an item sells for $100, then $23 of that would go to the government (said to be tax-inclusive). That means the item really costs $77 and the tax is an additional $23 or about 30% (said to be the tax-exclusive rate). Add an average 7% for state sales tax and we are now up to 37%. But wait, it gets worse.”

Bruce Bartlett writes this week in the Wall Street Journal: "A 2000 estimate by Congress's Joint Committee on Taxation found the tax inclusive rate would have to be 36% and the tax-exclusive rate would be 57%. In 2005, the U.S. Treasury Department calculated that a tax exclusive rate of 34% would be needed just to replace the income tax, leaving the payroll tax in place. But if evasion were high then the rate might have to rise to 49%. If the Fair Tax were only able to cover the limited sales tax base of a typical state, then a rate of 64% would be required (89% with high evasion)."

Mauldin: "Further, this is a tax hike on the middle class. If you make less than $15,000 you win. If you make more than $200,000 you win, because you actually save more and spend less of your income. This is a nice populist proposal which sounds good but is economically challenged. It only works on someone who has not read about the problems. Let me give you two links if you want to read more. One is to Bartlett's article and the other is to the people at Fact Check.org.

"The call by Huckabee and others to deport 12,000,000 illegal immigrants is simply economic suicide. It would create a depression (not just a minor recession) in short order. Let's reduce productivity by 10 15%. Let's reduce consumer spending by 7-8%. Shut down hundreds of thousands of businesses who could not get workers they need. Who will pick the crops? Or do any of a hundred jobs that Americans don't want to do? It would drive up labor costs and create inflation. It would be a disaster of Biblical proportions. Now, I am all for controlling the border. I want to know who is coming in. But we have to deal with reality, and the reality is that we need those workers who are here. The economy simply will not function without them."


HOW IS ALL THIS RELEVANT?

Why am I quoting all this from John Mauldin? Because it is vital for us to remember that not all of our conservative neighbors have gone stark, jibbering mad. Some are merely in a deep state of denial. Able to criticize bits and pieces of what has happened to their movement - as John does, above - though without (alas) allowing themselves to see the big picture. How the neocons, who hijacked conservatism, have relentlessly and deliberately reversed nearly every prudent principle that it used to stand for.

(In fact, I agree with John that IRS rules should be slashed and simplified. The problem is that every interest group lays down a ferocious veto, whenever their favorite offsets are under threat. There IS a solution! It is called "No Losers"... in which the tax code is slimmed by computer algorithm, seeking the minimum number of rules, under special, pre-set boundary conditions that follow a simple rule. For the 100 most common or representative tax profiles, the simplification algorithm makes no change in NET tax paid.

(Thus, everybody winds up paying the same, even if their favorite deduction goes away. It sounds magical, but, believe it or not, this really can be done! At very low expense, this experiment could at least present a proposed reform under which nobody’s ox is gored and the number of rules shrinks. Well, tax accountants would hate it. But that's for another time.)

In fairness, let's hear John out when he criticizes one of the catechisms of the left... that the rich aren't paying their fair share, since the Bush tax cuts. "They want to "tax the rich" and make more for middle class tax cuts. Sounds nice, but let's look at the facts. The bottom half of taxpayers only pay 3% of the total income taxes collected, which is 1% less than before the Bush tax cuts. 44% of the US population, or 122 million people, pays no income tax at all.

"The richest 1% of the country pay 39% of all taxes ($365,000 income and up), which is 3% more than before the Bush tax cuts, under the Clinton tax policy. The top 5% ($145,000) pay 60% of all taxes (up 5% from 1999); and the top 25%, with income over $62,000, pays paid 86% of all taxes. It seems to me that the rich are paying their fair share. Every category is paying more now than under Clinton, except the bottom 75%."

This notion that the rich are paying more nowadays - even after receiving fantastic tax cutes (during time of war) - sounds odd...

...and it turns out that it is. I hate to say it, but John is being just a bit disingenuous here. The middle class is paying less tax and the rich are paying more... because of a vast swing in actual wealth -- including income-generating property -- from the middle to the top.

This flow has accelerated so fast that the super-rich are, indeed, paying more net taxes, despite their low tax rates.


TIME TO CHOOSE... BETWEEN IDEOLOGY AND CIVILIZATION

Another way to put this would be to ask “How much tax is paid on the top 1% (by accumulated dollar value) of wealth, rather than the top 1% (by population) of wealth owners. That tax has inarguably gone down. Way down. Resulting in yet further wealth transfer in that same direction, so that more percentage points of overall wealth are owned by that top 1% of owners.

Thus, John manages to make a truly terrifying vicious spiral -- threatening a new age of feudal style aristocratism -- sound benign. He should know better.

In other words, the very same facts that he uses to deflect criticism of the Bush Tax Cuts actually show just how far those cuts have skewed the system in favor of those who are raking it in. Without comparing these stats of gross tax payments to the growing disparity in actual wealth, they are deeply misleading. In fact, if you seek the one common thread, among every Republican candidate’s tax proposals, it is this. All of them seek ways to accelerate further transfer of wealth percentage shares into the hands of the top 1% of individual owners.

Yes, some of the dems’ suggested means of reversing this trend are questionable, in their own right. I am far less interested in solutions that are confiscatory than those aimed at regulating and counterbalancing activities that are - in themselves - criminally stupid, market-warping acts of collusion by a narrow clade of golf buddies. Simply prevent outrageous thievery and re-introduce market forces at the top! That ought to solve the problem. Certainly defenders of idealised markets tell us so!

For example, try breaking up interlocking directorates (Republican Teddy Roosevelt could have told you that!) Or adjusting the rules of compensation for CEOs, directors, etc, so that their rewards come largely from ten-year company stock options! That would reshape the playing field so that managers’ best interests coincided with society’s. Oh, and those who run a company into the ground would not flutter away with 8-figure buyouts. The market for managerial talent would remain flat and fair. It would just remove the incentive for 10,000 golf buddies to conspire together to rob us all.

(Does nobody ever examine the fundamental premise-assumption underlying these godawful CEO compensation deals? The capitalist premise is that such vast payouts should attract brilliant people from other fields, until competition drives the pay levels back down!

(In effect, the golf buddies are telling us that they are mutant-level talents, like top basketball stars, worth any price, so the rules of supply/demand will never apply to them! Funny thing though. Their system to decide all this is a classic circle-jerk.)

We need to ponder whether it actually "defends market capitalism" when these wealth flows so severely alter our social structure that they threaten to entrench a quasi-feudal aristocracy. Don't forget who Adam Smith called the true and worst enemies of markets! In his day, socialism and bureaucratic regulation were FAR from the top enemies of market enterprise! Indeed, throughout human history, market enterprise had one major enemy. Conspiratorial oligarchy.

Those who style themselves as defenders of liberty and markets need to step back. They need to remember that the masters of Guided Allocation of Resources (GAR) are enemies of freedom, of every kind. We don’t need their clique to guide us. Or any clique. What we need is our Enlightenment back.


=== More political misc ====

See a bitter, but illuminating, ex-insider’s view of what’s become of TV news by veteran reporter/producer John Hockenberry, in MIT Technology Review. Especially depressing is the part where he tells of tryig to interview members of the bin Laden family, only to be thwarted from above.

Have I been crazy to suggest that there’s a lot more going on in the R’oil Desert Kingdom than the Bush Administration wants us to learn? You really, really need to read “Confessions Of A Terrorist,” which exposes one of the biggest smoking guns ever. Or at least, since scores of potential material witnesses, from the home country of most of the 9/11 hijackers, were whisked out of the US on luxury charters, without ever being questioned, on the same day that Americans were forbidden to fly.

Following up this article, I’d be interested if anybody has read Gerald Posner’s Why America Slept (Random House), is a lean, lucid retelling of how the CIA, FBI and U.S. leaders missed a decade's worth of clues and opportunities that if heeded, Posner argues, might have forestalled the 9/11 terrorist attacks. My interest is very narrow and specific, whether Posner mentions anything about FBI agents or others being re-assigned away from counter-terror duties, during the first eight months of the Bush Administration, in order to go skeleton hunting for dirt about the Clintons. So far, my sources on this are anecdotal, not statistical. If the numbers were as high as I suspect, it could be the biggest scandal of this entire, sordid period.

Finally, here are a few more points to add at the addendum following my main article: Ostrich Papers: How It Will Take All Decent Americans to Restore Decency to America...

* What if, in the middle of a declared state of dire emergency and an ongoing war -- one that was using up all American ground forces and devastating the budget -- a Democratic President (say, FDR) were to regularly walk away from his job and take more days off than any other in history? Even exceeding the earlier record set by Ronald Reagan? And setting this milestone with a whole year left before his term ran out? Would you Have let Bill Clinton get away with hurling our forces into harm’s way, then turning away to kick back with cronies for weeks at a stretch, on their new, mega-ranches?

Over the past few months, two of the most high-profile inspectors general in government have faced public firing squads. As the Washington Post on its front page on Friday, Stuart Bowen, the inspector general tasked with investigating Iraq reconstruction, now faces an investigation himself. Several government agencies are examining charges that his office was involved in massive mismanagement and waste, the very sins he had been tasked with uncovering in Iraq. Most puzzlingly, over twenty-five of his employees earned more than General David Petraeus did last year. This article in the New Republic is naturally tilted-against the Bush Administration. But then, so are the facts.

Who was speaking about inspectors general two years ago? See my article: Free the Inspectors General. Amazing that such a simple and blatantly sensible suggestion gets no notice, alas.

--See more on the Economy: Past, Present and Future

David Brin
http://www.davidbrin.com