Wednesday, November 3, 2010


One of the headlines in today's Bulletin was "Change is Here to Stay."

I thought of leading off this blog with "Guerrilla Warfare from the Inside."

We voters seem to want Change -- no Gridlock -- no Change -- no Gridlock.

Meanwhile, I think we just re-installed the guys who drove us into the ditch, and fired the tow truck driver.

That's all I have to say, since this is not normally a political blog.


Leitmotiv said...

"Change is Here to Stay." Isn't that kind of an oxymoron from the point of view of the Bulletin? I mean... change can't stay forever right? Because then it wouldn't change anymore.

Unless the Bulletin is in total favor of party changeovers every couple of years. Ha!

RDC said...

I think a better way to put it that voters prefer gridlock to the kind of change we have gotten the past two years.

As far as the driving in the ditch analogy, congress controls the purse strings and as a result has more impact upon the economy then does the President. So the driver of the economic truck when it got driven into the ditch happened to be the Democrats that had control of both houses since 2002.

Presidents set policy, Congress has the power of the purse.

Duncan McGeary said...

Errr....I think the GOP had control of both houses until 2008. I don't think 2 years was long enough for the Democrats...

RDC said...

My Error. Though it was 2006, not 2008

Congress was fully in the hands of the Democrats in 2006 231 - 202, Senate 51-49.

In 2004 Senate 55-45 Republican, Congress 232,202

In 2002 The Senate was Republican 51-49, Congress Republican 229, 205

In 2000 The Senate was 55, 45 Republican, Congress 221, 212Republican

As far as the ditch. I think there is quite enough blame to go around on all parts. You have the Democrates pushing for loans to everyone and expanding government, The Republicans who were just as happy to allow loans to go to every one and increase government spending, you have the general public taking on debt and being perfectly willing to demonstrate their own greed by buying far more house then they could afford during a bubble, you have the FED inflating one bubble after another ...

The key point is that was not just one driver of the truck, it was more a matter that as long as the bubble was expanding everyone was quite happy to keep pressing on the accelerator.

What has gotten this country in to this mess has come to a head in the last few years, but it has been building for the last 40. Right along with the trade deficit, increased government debt, increasing personal debt, and reduced savings rates.

Anonymous said...

Could respond to RDC but won't. Have other things to do.

blackdog said...

"Meanwhile, I think we just re-installed the guys who drove us into the ditch, and fired the tow truck driver."

Yep. Good metaphor.

The Republicans in recent times have been much better at winning elections than at actually governing. It will be amusing to watch them try to govern. I think they will find that "Whatever It Is, We're Against It" is not a practical approach.

RDC: "the driver of the economic truck when it got driven into the ditch happened to be the Democrats that had control of both houses since 2002."

Well, actually the Democrats didn't have control of both houses until 2007, from then until 2009 they had a Republican president who freely wielded the veto pen, and they never had a filibuster-proof majority in the Senate.

But two can play at this game. If you're going to claim the Democratic Congress wrecked the economy in less than two years, I'm going to expect the Republican Congress to fix it in less than two years. And if they don't I'm going to give them holy hell.

"What has gotten this country in to this mess has come to a head in the last few years, but it has been building for the last 40."

Absolutely spot on. And I would remind you that we have been following conservative policies (trickle-down, union-busting, deregulation, globalization) for almost all of those years. (Bill Clinton was NOT a liberal, though Republicans like to claim he was.) We can't expect to have a sound economy if we adopt policies that pauperize the middle class.

RDC said...

Unions have fallen out of favor almost everywhere, except Government. They have dramatically increased. There is a reason why unions memberships have decreased and it is not due to government union busting. If it was government union busting then kindly explain how the one area where they have increased has been government employees?

The reason is because many of the blue collar manufacturing jobs have left the country. A lot of the jobs that have been created are either white collar (traditionally not union) or small business and also tend not to be unionized.

Also some of the reasons that Unions existed in the first place. Work hours, safety, etc. have tended to be replaced with state or Federal laws which cover those issues as a matter of law.

So please provide detail on exactly what union busting has been under taken by the government during that time other then the air traffic controllers getting fired by Reagan when they went out on an illegal strike.

I think you will find that therre has been some deregulation, but it has been overwhelmed by the amount of new regulation and paperwork that exists. The size of the CFR is easily 4-5 times the size of what it was 40 years ago. Do you want me to start listing major government regulatory act that exist today that were put in place over the last 40 years?

The little deregulation which has occured has been in a few high profile items such as Glass Stegal and things such as deregulation of the airline industry, telephone industry, etc. So please demonstrate exactly how much deregulation has really occured.

No please provide in detail what exactly the government has done to, as you put it pauperize the middle class? It is clearly not income taxes. The top five percenta pay a much higher precentage then ever in history. In the time past which they have paid a higher tax rate, the base has also been much broader.

THe issues with the middle class and really standard of living is a direct consequence of balance of trade and the fact that we are now competing directly with the thrid world countries and we are consuming a lot and not generating wealth like we did 40 years ago.

40 years ago the thrid world did not have the infrastructure or the education for plants to be easily built and operated. Now they do. That means that a worker in the use that wants to make $20 per hour has to compete with a person in the third world that works for 25 cents an hour. That labor cost advantage has to be made up somehow if the job is to stay with the $20 per hour person. You can not legislate it to remain, the position must be that much more productive.

Today the third world countries have decent and improving infrastructure, reasonable and improving educational systems, and are willing to work harder and for less money and by the way the environmental in those area tend to suck, so while we are shutting down companies that might product X CO2 per dollar of product produced those items are now being produced where they might generate 2-3X CO2 per dollar of product produced.

RDC said...

Globalization is pretty much outside of the control of the Government as much as you might want to legislate that it does not exist.

We happen to export good and import goods. The change over the last 40 years is there was basically no competition outside of Europe and Japan. The hurdle to manufacturing in the third world was too high. No infrastructure (roads, electricity, water, construction). No education. No Communications. Unstable governments. High levels of corruption. ...

Well now there is competition. You can network to a plant just about anywhwere. You can find an educated work force just about anywhere. Roads are good enough. Services are pretty reliable. As such workers in the US are DIRECTLY COMPETING with those in the third world. It is rapidly moving to not just competing for manufacturing jobs, but for white collar jobs as well (India graduates far more engineers and software developers then the US does). Go to any of the top schools these days and look at the names of the top graduate students is science, engineering, etc. Most of them are foreign.

You don't fix those problems by hand outs. You fix those problems by encouraging and improving our competiveness, not eliminating it.

We are seeing the results of our everybody gets a trophy education system where you certainly cannot make someone feel bad by actually flunking them.

We have become a nation where people think they are owed something and are running into an entire world where most have had to struggle to get anything.

RDC said...

Oh lets take a look at just some of the major Regulatory Acts passed since 1970

1970 Clean Air Act
1972 Clean Water Act
1980 Comprehensive Response Compensation and Liability Act
1986 Emergency Planning and Community Right to Know
1973 Endangered Species Act
2007 Energency Independance and Security Act
2005 Energy Policy Act
1994 Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations
1997 Protection of Children From Environmental Health Risks and Safety Risks
2001 Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use
2002 Federal Food, Drug, and Cosmetic Act
1996 Federal Insecticide, Fungicide, and Rodenticide Act
1988 Marine Protection, Research, and Sanctuaries Act
1996 National Technology Transfer and Advancement Act
1972 Noise Control Act
1982 Nuclear Waste Policy Act
1970 Occupational Safety and Health Act
1990 Oil Pollution Act
1990 Pollution Prevention Act
1976 Resource Conservation and Recovery Act
1974 Safe Drinking Water Act
1988 Shore Protection Act
1976 Toxic Substances Control Act

These are just the main ones that the EPA enforces. Some have created entirely new regulatory departments. All have results is thousands of pages of new regulations.

I can do the same for the other Agencies. So give me your list of all of the regulations that have been removed or exactly what has been deregulated during this period of such extreme deregulation.

blackdog said...

"So please provide detail on exactly what union busting has been under taken by the government during that time"

Perhaps "union-busting" is not exactly the right term. Government anti-union efforts now mainly take the form of refusing to enforce the laws that exist to protect employees' right to organize and bargain with employers. If your employer fires you for trying to organize a union, lotsa luck getting the NLRB to do anything about it.

"The little deregulation which has occured has been in a few high profile items such as Glass Stegal"

Repeal of Glass-Steagall by the Gramm-Leach-Bliley Act (1999) was HUGE. We largely have that incredibly misguided piece of legislation to blame for the proliferation of mortgage-backed securities and the economic collapse that ensued when those securities turned out to be smoke and mirrors. (Thank you very much, President Clinton and Republican Congress.) It was followed by the Commodity Futures Modernization Act (2000), which prevented the Commodity Futures Trading Commission from regulating credit default swaps. In 2004 the SEC moved to allow banks to reduce their amount of reserve capital and increase leverage. All of these actions set us up for the disastrous bubble and bust.

"The top five percenta pay a much higher precentage then ever in history."

The top 5 percent have a much greater share of the nation's income and wealth than ever in history. But tax rates at the top end are much, much lower than they were 40 or 50 years ago. Don't try to pretend you don't know this.

RDC said...

Tax rates are lower, but a lot of deductions nolonger exist. Also you now have AMT. When you really look at that data I don't think your comment will hold up.

The IRS produces income information by quintiles that is very informative. You might want to look at that data.

Also when looking at that you need to adjust for the earned income credit changes in the 90's. Basically that skewed the data because people that did not file income tax statements prior to earned income credits because they did not need to and consequently were not represented in the data, then started filing to get the credit and as such dramatically increased the lower income level, pushing the decile income level cutoffs down.

Also one needs to adjust for age demographics. Retirees, even those well off, report lower income because a portion of the dollars they spend are after tax from previous years (savings/investments).

As far as Glass-Steagal I actually mentioned that as a red herring. While my view is that is should not have been repealed. Its repeal did not reduce the over all amount of regulation. It merely replaced a fairly simple set of rules that did not require much in the way of regulation or enforcement, which a much more complex, more vague, and more dependant upon interpretation by the regulators, huge volume of regulations. The end result are repeal was more regulation not less.

Thre problem is the Government never deregulates, they replace one set of regulations with another. Even before the last round of administrative boondoggles, far more pages of financial regulation existed then in 1999 prior to its repeal.

Adding regulations is not the answer. One must first enforce what exists and they must be well designed.

AS far as Unions. Would you like me to put together a list of successful cases supporting unions by the government during this time period of anti- union behavior.

One persons view of anti union behavior is another person view of abusive behavior by unions.

Unions today are in most cases more interested in the power of the union then they are in the well being of the employees

RDC said...

THe following is an extraction from a paper written by the St. Louis Fed on how one really needs to look at the Census data which is the source of the claims about an increasing income gap.

The Census Bureau essentially ranks all households by household income and then divides this distribution of households into quintiles of equal size.1 Finding the highest ranked household in each quintile then provides the upper income limit for each quintile.2 Comparing changes in these income limits over time for different quintiles reveals that income for the wealthier households has been growing faster than the income for poorer households, thus giving the impression of an “increasing income gap” or “shrinking middle class.”

One big problem with using the census income statistics to infer income inequality is that these statistics only provide a snapshot of the income distribution at a single point in time. The statistics do not consider the reality that the income for many households changes over time, i.e., incomes are mobile. The income of most people increases over time as they move from their first low-paying job in high school to a better paying job later in their lives. It is also true that some people lose income over time due to business cycle contractions, demotions, career changes, retirement, etc. The point is that individuals’ incomes are not constant over time, which implies that the same households are not in the same income quintiles over time. Thus, comparing different income quintiles over time is the proverbial “comparing apples to oranges” because incomes of different people are being compared at different stages in their earnings profile.

The U.S. Treasury released a study in November 2007 that examined income mobility in the U.S. from 1996 to 2005.3 Using data from individual tax returns, the study documented a household’s movement along the distribution of real income over the 10-year period. As shown in Figure 1A, the study found that nearly 58 percent of the households that were in the lowest income quintile (lowest 20 percent) in 1996 moved to a higher income quintile by 2005. Similarly, nearly 50 percent of the households in the second lowest quintile (20 percent to 40 percent) in 1996 moved to a higher income quintile by 2005. Even a significant number of households in the third and fourth income quintiles in 1996 moved to a higher quintile in 2005.

The Treasury study also documented falls in household income between 1996 and 2005. This is most interesting when considering the richest households. As shown in Figure 1B, more than 57 percent of the richest 1 percent of households in 1996 fell out of that category by 2005. Similarly, more than 45 percent of the households having the top 5 percent of income in 1996 fell out of that category by 2005.

The main point is that, over time, a significant number of households move to higher positions along the income distribution and a significant number move to lower positions along the income distribution. Common reference to “classes” of people (e.g., the lowest 20 percent, the richest 10 percent) is very misleading because income classes do not contain the same households and people over time.

RDC said...

Fed Article Continued

Another problem with the inequality statistics is that they do not consider the noncash resources received by lower income households and the tax payments made by wealthier households to fund these transfers. Lower income households annually receive tens of billions of dollars in subsidies for housing, food and medical care. None of these is considered income by the Census Bureau.4 Thus, the resources available to lower-income households are actually much greater than is suggested by their income. On the other hand, these noncash payments to lower income households are funded through taxpayer dollars, mostly from wealthier households since they pay a majority of overall taxes. One research report estimates that the share of total income earned by the lowest income quintile increases roughly 50 percent, whereas the share of total income earned by the highest income quintile drops roughly 7 percent when transfer payments and taxes are considered.5

The census statistics also do not consider the fact that the households in each quintile contain different numbers of people, and it is differences in income across people that provide a clearer measure of inequality. Lower income households tend to consist of single people with low earnings, while higher income households tend to be married couples with multiple earners.6 Thus, lower income households have fewer people than higher income households, thereby skewing the income distribution. When considering household size along with transfers received and taxes paid, the income share of the lowest quintile nearly triples and the income share of the highest quintile falls by 25 percent.

RDC said...

Now lets look at tax vs income.

For Deciles 1-4 their percentage of taxes paid is significantly less than their percentage on income earned.

The highest quintile pays a substantially higher percentage of total taxes paid then their income represents.

Quintile % Total Taxes % Income
1 .8% 3.9%
2 4.1% 8.4%
3. 9.1% 13.2%
4 16.5% 19.5%
5 69.3% 55.7%

Now lets see how the rates have changed since 1979. THe earliest data that I can get my hands on easily.

Quintile 1979 2006
Total Effective Federal Tax Rate (including both income and payroll taxes such as FICA)
1 8.0% 4.3%
2 14.3% 10.2%
3 18.6% 14.2%
4 21.7% 17.6%
5 27.5% 25.8%
Top 10% 29.6% 27.5%
Top 5% 31.8% 29%

RDC said...


When I stated that the top 5% pays a higher percentage it is a higher percentage of the total of taxes paid to the government. Just as the 69.3% paid by the top Quintile leaving only 30.7% by the remaining 4 quintiles is also a high water mark for that group.