[A] statesman in contact with the moving current of events and anxious to keep the ship of state on an even keel and steer a steady course may lean all his weight now on one side and now on the other. His arguments in each case when contrasted can be shown to be not only very different in character, but contradictory in spirit and opposite in direction: yet his object will throughout have remained the same. His resolves, his wishes, his outlook may have been unchanged; his methods may be verbally irreconcilable. We cannot call this inconsistency. In fact it may be claimed to be the truest consistency. The only way a man can remain consistent amid changing circumstances is to change with them while preserving the same dominating purpose.
I had missed Tim Pawlenty's speech on the economy at the University of Chicago this past Tuesday (see Missoula post below for details). However, the address isn't to be missed. Pawlenty is positioning himself as the conservative frontrunner, and his views on the most important issue of the election are bold and courageous. If he can also project sufficient character, optimism and leadership to persuade nervous but determined moderates to his plan, he'll have a solid shot at the presidency in 2012.
Here's his first salvo:
UPDATE: Pawlenty apparently thinks he did a good job with the Chicago speech, as well. His campaign video summary / advertisement is here:
Liberals have begun to howl in protest. Ruth Marcus in the WaPo calls his plan "delusional" (for assuming economic growth at 5% is possible) and "reckless" (for promising tax cuts). I don't think most Americans will prefer Marcus' sky-is-falling objections to tax cuts and optimism about the economy. It's interesting to see liberals pushing the pessimistic side of the argument and attacking a message of hope and change.
Literature, Poetry, and Books
I don't know if Walter Russell Mead's account of the housing bubble and financial collapse contains enough of the truth to form the basis for a populist Republican campaign in November of 2012. I do know that this is brilliantly inflammatory writing:
The Democratic Party today is a fragile coalition of elite liberals, traditionally Democratic ethnic blue collar whites, African Americans and Hispanics. The Fannie Mae story is essentially a story of how liberal Wall Streeters raped every one else -- and how the organized leadership of the other groups colluded in the attack.
Something about this narrative feels off, but I wonder if this perspective on the housing bubble and the financial crisis might be combined with some of the suggestions of regular NLT commenter Art Deco:
Revisions to financial regulation which might include the following: requiring exchange trading of swaps and derivative or banning credit default swaps or both; separation of deposits-and-loans banking from securities underwriting, proprietary trading, prime brokerage, and private equity; separation of securities underwriting from proprietary trading, vending of mutual funds and such, and any sort of business that involves investment counseling; separation of the vending of mutual funds and such from the provision of investment counseling; separation of proprietary trading from any other sort of business; abolition of insurance on financial products; excision of regulations which promote the disaggregation of mortgage lending; eventual liquidation of Fannie Mae, Freddie Mac, and Ginnie Mae; requirements that hedge funds and investment accounts be levered no more than 1:3; institutional provision for an authority which can (if possible) rapid roll up insolvent securities firms; provision for re-capitalizing banks and securities firms via debt-for-equity swaps; and provision for dismantling of the megabanks.
Maybe this would lead to good politics and (more importantly) good policy. Heck, I dunno.
Anyway, this book is going on my summer reading list.
I previously wrote at AOL's Political Machine - I was actually a founding member. When that site transformed into Politics Daily, my profile and blogs were transferred to the new site. As I mentioned previously, AOL purchased the Huffington Post in February for $315 million. I feared what the tea leaves portended:
[Political Machine's] producers, Coates Bateman and Michael Kraskin, as well as lead editors such as David Knowles, strove to keep the site above mere partisan ranting and struggled to retain ideological balance. All of the fine bloggers with whom I wrote (with the exception of the odious Cenk Uyger) delightfully played their parts in the agreed upon larger drama. But reports indicate that the blog may soon be folded into HuffPost - and with it, I fear, any semblance of ideological balance or journalistic integrity.
Politics Daily has now been subsumed into the Huffington Post. Hence, my former blog-home is now the Huffington Post.
I feel dirty.
Another "evolution" in journalism - a moderate site and a hard-left site merge into a hard-left site. And another predictable result - after only a few months, the merger is a disaster.
I've been a long-time fan of the conservative-libertarian site, Intellectual Conservative, and the good folks over there have invited me to come onboard as a columnist. So, when I wax too long for Peter's patience here on NLT, I'll occasionally redirect an article to IC.
My latest article with IC attempts to "decipher the incoherency of renewable energy." The intro:
Windmills are not the future of the global economy. They were dandy for grain-grinding in the 19th century (and much appreciated for their contribution to bread-baking and beer-brewing), but they've taken their place alongside wooden teeth and horse-drawn carriages. And yet windmills are the latest craze in Congress - the leading-lady in a full ensemble touring Washington under the title, "Renewable Energy." The troupe premiered on the D.C. circuit in the 1960's, with Al Gore soon emerging as the leading-man, and their quixotic environmentalist spectacle recently received an all-expense-paid encore from the Democrats lame-duck Congress.
I hope you'll RTWT.
Quote of the Day
So Tim Pawlenty gave a big speech on taxes and the economy today. He wants to institute a two-tier income tax with rates of 10% and 25%, cut the corporate income tax to 15% and eliminate the capital gains, interest income, dividend and inheritance taxes. It was a pretty partisan speech, but that doesn't mean it was ineffective. Pawlenty (when he isn't pretending to be furious and acting out his cartoonish idea of what a "populist" sounds like) has room to be more ideological and partisan partly because of his calm affect. There is a lot to chew over, but two questions predominated.
1. What will be there distributional impact of his tax policy if there are changes to income tax deductions in order to prevent tax revenues from collapsing?
2. What will be the impact of Pawlenty's policies on federal revenues? If his plan would cause revenues to decline, that means that we would have to make even deeper cuts than those outlined in Ryan's PTP (whose tax plan budgets for revenue neutrality) or an even larger deficit. The cuts in Ryan's PTP are already politically problematic to say the least (and he might not have budgeted enough money for Medicare) so advocating even sharper cuts will be even tougher. Or we could have a sovereign default.
IF Pawlenty's plan is shown as likely to cause a sharp drop in federal revenues it would probably have some political ramifications. Obama's budget promises of 2008 were nonsense of course (remember "net budget cut") but the deficit and the public debt were a much smaller issue in 2008 and the Republicans were burdened with a President with approval ratings in the 30s. Obama's approval ratings have been solid at about the 44% range. The asymmetry of media power between the left and right will make sure that all persuadable voters will have heard that Pawlenty a) said he believed that we were in a debt crisis that required wide sacrifice and b) Pawlenty came out for a tax plan that made the deficit worse in order to cut taxes on high earners. I think Pawlenty will have two answers to this:
1. You should trust me rather than the naysayers. I'm the guy who told Iowa we can't afford ethanol subsidies. I'm the guy who went to Wall Street and told them no more bailouts. I'm the guy who went to Florida and said that the younger generation will have to work a little longer before collecting Social Security benefits and lifetime high earners will get smaller Social Security COLAS. So when I say it adds up, that means it add up.
2. Cutting taxes will boost the economy so much that it will make up for the lost revenue.
There are circumstances under which this approach could work politically. Circumstances in 2012 could be such that a majority of voters might be willing to go along with such explanations if the Republican candidate doesn't come across as fanatical, insane, or grotesquely ignorant. There are several problems with this:
1. It assumes a situation where Republicans mostly win by default.
2. Our public debt problems are real and serious.
Refine & Enlarge
The descendants of the litigants in the great civil rights case of 1896 form a foundation. Sweet idea, and I'm wondering whether serious tea party-style activists might follow suit by forming similar foundations devoted to ending irrational discrimination. They might find inspiration in Jennifer Roback Morse's libertarian scholarship, which notes the City of New Orleans overriding the railway's preference for integrated seating. (Clint Bolick has also performed great service along these lines.) Here is another way to put natural rights-thinking to practical use. Reading Charles Lofgren's classic work on Plessy is essential background. The Claremont historian shows the direct ties between Plessy's arguments and the Declaration of Independence.
The Tea Party's most appealing argument is for the restoration of the principles of the Declaration of Independence in everyday life. The fight for color-blind justice is an essential part of that argument. Thanks to Mike in the comments.
Treppenwitz: Here is one version of Edward Erler's argument on Plessy's persistence in our jurisprudence.
Harold Meyerson recently set out to sneer, in the pages and pixels of the Washington Post, but succeeded more decisively in refuting himself. It's always a bad sign when a writer introduces statistical evidence that weakens the argument he's trying to make.
Meyerson wanted to show that the Republican approach to cutting the deficitspending cuts only, no tax increasesis absurd. His point on taxes is that in 1955, according to the Campaign for America's Future, the country's 400 wealthiest taxpayers had an average income of $13.3 million (in 2008 dollars) and paid 51.2% of that in federal income taxes. In 2008 the richest 400 had an average income of $270.5 million and paid 18% of that in federal income taxes. In 1955, he notes, "we could afford to pave roads."
But wait. 51.2% of $13.3 million is $6,809,600, the average federal income tax bill for the most fortunate 400 in 1955, using 2008 dollars. Thus, the federal government gathered in the inflation-adjusted equivalent of $2.724 billion from the whole lot of them. 18% of $270.5 million is $48.69 million, meaning that average tax bill for the top 400 was, adjusted for inflation, more than seven times as high in 2008 as in 1955. Those 400 households collectively accounted for $19.476 billion in federal revenues.
It speaks well of American governance during the Eisenhower administration that we managed to pave our roads while receiving $2.724 billion in federal taxes from our richest citizens. It speaks poorly of the quality of our governance today if, despite the additional $16.75 billion the families in the capstone of the income pyramid paid to the IRS in 2008, we can't pave the roads as often or as well, which Meyerson suggests is the case.
Assuming Mr. Meyerson owns and operates a calculator, it makes sense to ascribe his mistakespeaking as if the tax revenues generated by the richest 400 have gotten much smaller when they have clearly gotten much biggerto a philosophical disposition rather than a mathematical error. Most people, and certainly most NLT readers, assume the purpose of a tax system is to raise revenues to finance the government's activities. A seven-fold increase in tax revenue from one segment of the population would, accordingly, mean that the government could undertake more activities, or that other segments of the population could pay lower taxes, which is a rough description of what actually happened in America between 1955 and 2008.
If, however, the primary purpose of the tax system is to punish or reproach the rich, to express our envy and resentment of people who are rich and getting richer, then it makes sense to treat the much larger revenues from that cohort as a minor detail and concentrate, angrily, on the fact that their incomes have gone up while their tax rates have gone down. Six years ago the columnist Jonathan Chait insisted that such malign intentions toward the wealthy played no part in liberals' preference for progressive taxes: "Liberals want to make the rich pay higher tax rates not because they hate them. It's because somebody has to pay for the government, and the rich can more easily bear higher rates."
Well, yes, one advantage to being rich is that you can afford things easily that would be difficult or impossible for other people, including the 91% federal income tax bracket that was on the books in 1955. The problem with Chait's argument is there's no way to say where it stops. If the principle is that the rich should pay higher taxes because they can more easily bear the rates, then we should keep raising tax rates until the rich can no longer bear themuntil, that is, they're no longer rich. One need not be rich to find this prospect disquieting. A government that can take whatever it wants strikes a lot of people as unfair, and unfree.
Assurances that only the rich will suffer as a consequence haven't convinced most people that this policy is fair, or that it really will be confined to the wealthy. In November 2010 voters in Washington, a state blue enough to have given Barack Obama 57% of its vote in 2008, rejected a state income tax applicable only to individuals making more than $200,000 per year and families making over $400,000. That most prosperous 1.2% of the state's population evidently had a lot of less-affluent friends, since 65 percent of the voters opposed the tax. One factor was that the promise to limit the income tax to the $200,000 and $400,000 thresholds was good for all of two years, after which the legislature could have applied it more broadly.
Meyerson makes a second point. Not only are the rich getting off too lightly, but the main beneficiaries of the federal government's activities tend to be red states. He cites a Tax Foundation study showing that in 2005 the federal government spent between $1.76 and $2.03 in New Mexico, Mississippi, Alaska, Louisiana, and West Virginia for every dollar it received from those states in taxes. By contrast, the blue states subsidize the federal government's operations: New Jersey, Nevada, Connecticut, New Hampshire, and Minnesota received between 61 and 72 cents for every dollar paid in federal taxes. The states that "drain the government also constitute the Republicans' electoral base," writes Meyerson, "while those that produce the wealth constitute the Democrats'."
But, again, there's more to the story. The Tax Foundation study includes money transferred between citizens and the federal government as well as between the federal government and state and local ones. As the organization explains in the introduction to its study, "The most important factor determining whether a state is a net beneficiary is per capita income. States with wealthier residents pay higher federal taxes per capita thanks to the progressive structure of the income tax." New Jersey and Connecticut are net exporters of dollars, vis-à-vis the federal government, precisely because progressive federal taxes, which Meyerson imagines to have been relegated to the dustbin of history, draw in so much money from those states' disproportionately affluent residents. Mississippi and West Virginia have disproportionately few residents in the top tax brackets, but more than their share of poor residents receiving assistance from Medicaid, food stamps, Supplemental Security Income, school lunches, and a long list of other government programs.
If the disparities between importer and exporter states are intolerable, then perfect fairness will be attained when no such disparities exist, and every one of the fifty states receives precisely as much from Washington as it sends to Washington. At that point, however, the involvement of the federal government becomes completely pointless. The big steps needed to reduce the disparities between states that are net importers of federal dollars and net exporters would be to abolish the progressive federal income tax in favor of a flat tax or Value Added Tax, and do away with federal programs that direct assistance to households with low incomes.
I'm not as mean-spirited as Harold Meyerson, so I'll suggest consideration of a less drastic remedy, proposed 38 years ago by William Buckley in his book Four Reforms. Buckley would confine eligibility for welfare state programs to Americans living in states whose median income was below the national average. Because Buckley thought it was economically and politically debilitating to "turn the skies black with criss-crossing dollars," his reform would ground a lot of those dollars. Federal welfare expenditures would shrink, as the number of people eligible for them was limited, and prosperous states would pay for their own welfare programs without the transit and administrative fees of sending them on to Washington and then back to the states. Mr. Meyerson, do you wish to second the motion?