Remembering Irene

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One year ago, Tropical Storm Irene devastated large parts of the “brave little state of Vermont.” Here are three paintings by Chester artist James Jahrsdoerfer.

Revolt of the rich?

Mainstream economists and politicians don’t like to talk about it. But Mike Lofgren is willing to admit, in the pages of the American Conservative, that what we’re witnessing is a revolt of the rich.

Stephen Schwarzman, the hedge fund billionaire CEO of the Blackstone Group who hired Rod Stewart for his $5-million birthday party, believes it is the rabble who are socially irresponsible. Speaking about low-income citizens who pay no income tax, he says: “You have to have skin in the game. I’m not saying how much people should do. But we should all be part of the system.”

But millions of Americans who do not pay federal income taxes do pay federal payroll taxes. These taxes are regressive, and the dirty little secret is that over the last several decades they have made up a greater and greater share of federal revenues. In 1950, payroll and other federal retirement contributions constituted 10.9 percent of all federal revenues. By 2007, the last “normal” economic year before federal revenues began falling, they made up 33.9 percent. By contrast, corporate income taxes were 26.4 percent of federal revenues in 1950. By 2007 they had fallen to 14.4 percent. So who has skin in the game?

I’d put it a bit differently: what we have before us is a revolt of the corporations. And it’s been going on for most of the postwar period:

source

At the same time that corporate income taxes have been falling, the taxes paid by workers have been rising:

source

In other words, throughout the postwar period (with notable jumps, such as during the Reagan income tax cuts and social insurance tax hikes), corporations have managed to shift the federal tax burden from their surpluses to workers’ incomes. For example, corporate income taxes, which were 42 percent of total federal revenues in 1952, had fallen to 10 percent in 2012. Meanwhile, payroll taxes rose from 10 percent in 1952 to 34 percent in 2012 (individual income taxes have, during the same period, risen slightly, from 42 percent to 47 percent).

This revolt of the corporations has, since the mid-1970s, also involved an attack on workers’ wages, thus putting a further squeeze on workers, who are both yielding up more surplus and feeling the after-tax pinch on the wages they take home.

Now, corporations are demanding further tax decreases, in order to play their role as “job creators,” while their right-wing political representatives propose to cut back exactly the social security and Medicare benefits workers have been hoping they’d been granted access to through payroll deductions (which only recently have been lowered, and only temporarily).

The revolt of the corporations has created the fiscal and economic mess we’re in right now. And, as long as people target their wrath at the politicians in Washington and not at the corporations themselves, that mess will continue.

Plus ça change. . .

What’s the difference between the jobs plan announced by Mitt Romney and the plans for creating lots of new jobs that were part of the campaigns of previous Republican presidential candidates?

Rien.

Mike Konczal does a good job comparing the main points of the Republican jobs plans from 2012 (Romney), 2008 (McCain), 2006 (Bush, State of the Union), and 2004 (campaign). And they’re basically all the same:

Domestic oil production, school choice, trade agreements, cut spending and reduce taxes and regulations – it’s been the conservative answer to times of deep economic stress, times of economic recovery, times of economic worries and times of economic panic. Which is another way of saying that the Republicans have no plan for how to actually deal with this specific crisis we face.

Cartoon of the day

Special mention

Planning vs. markets

They just don’t get it.

Daron Acemoglu and James Robinson continue to insist that:

1. The Mycenaean palaces of the Aegean Late Bronze Age were based on central planning, notwithstanding new information stemming from the study of ancient economies that reveal “characteristics of decentralized economies and even vibrant markets.”

2. Central planning “involves the suppression of markets and price systems for the governing institutions and elites to better extract resources and politically and economically control society.”

3. Markets do not involve “the recruitment of goods and services for the benefit of a group not coterminous with the contributing members.”

After all this time, the simple planning-market dichotomy continues to structure neoclassical theories of historical and comparative development.

Development?

Only in the world of Thomas Friedman—and Reuters—is the arrival of McDonald’s a sign that development in Huancayo and the rest of Peru is taking place.

I have no doubt that, in Peru and elsewhere, the aspiring middle-class equates development with access to fast food and shopping malls. But that is very different from arguing that economic and social development—for the poor and working classes—is actually occurring.

Disclosure: I spent a year studying in Huancayo, from 1975 to 1976, at the Universidad Nacional del Centro del Perú.

Chart of the day

Yes, Virginia: in the midst of the Second Great Depression, U.S. companies are making money at home. Lots of it.

Domestically earned profits of nonfinancial firms rose to $1.1 trillion in the second quarter, the fifth straight quarterly increase. Profits from Europe, China and the rest of the world have been uneven, dropping in the first quarter before edging higher in the second.

Protest of the day

Occupy Wall Street will mark its first anniversary by trying to block traffic in the financial district and encircle the New York Stock Exchange on 17 September.

Cartoon of the day

Special mention

Chart of the day

Democrats are good for Wall Street.

I always enjoy this kind of analysis of the contradictions of politics, like the fact that anti-abortion activists tend to vote for Republicans even though abortions are lower during Democratic administrations. In this case, CMC Markets demonstrates that, on average, Democratic presidents are better for Wall Street than Republican presidents.*

Returns were highest under Calvin Coolidge, a Republican president during the Roaring 20s, when the stock market boomed ahead of the Wall Street Crash. But the next two presidents in the league table are Democrats–Bill Clinton and Franklin Roosevelt. Barack Obama’s performance has been above average–only slightly below that of Dwight Eisenhower in the 1950s and Ronald Reagan in the 1980s.

You can see the full YouTube presentation of the report here.

*Yes, I know: technically a table not a chart.