Saturday, October 17, 2009

The enduring Republican victory

[People are still arriving here because they have received an email attributed to myself comparing President Obama to Adolf Hitler. They are also still calling my home, contacting the public affairs office of the Naval War College, and deluging another David Kaiser with emails. I did not write, and do not agree with, that fraudulent email. You may however be interested to read the following post. Meanwhile, here is the best explanation I've found of why that email is so incredibly popular.]

The Obama Administration's difficulties on the domestic front, I think, reflect a long-term shift in American opinion. In 1968, after 35 years of largely Democratic ascendancy which had created a relatively egalitarian economy and established a strong role for the government, the Republican Party, increasingly led after 1976 by its conservative wing, began its successful campaign to establish a national majority. Their strategy had two major aspects. The first--which was largely handed to them, as Lyndon Johnson himself realized, by the great civil rights act--involved picking up the southern white vote, which became nearly as reliably Republican as it had previously been reliably Democratic. The second involved a long campaign to change Americans' minds about the proper role of government. The Republican Party has temporarily at least lost its majority--but the enormous influence of that campaign remains.

We can see that influence reflected in three major, related issues: the economy, the federal budget, and health care. Taking the first two first, our economy has been (and is still being) enormously distorted by the enormous profits available to the financial industry. Because taxes on capital gains have become so low (and because some of the biggest players in the financial game, hedge fund managers, can evidently claim nearly all their income in that form), traders and private equity firms can make, and keep,enormous profits. Meanwhile, the federal budget defect--already swelled to gigantic size by eight years of George W. Bush--has doubled again because of the recession. (I strongly suspect, and hope to show, that one reason that federal revenues have become so recession-sensitive is that they are so largely composed of payroll taxes.)

Now the solution to both of these problems, is, actually, rather obvious: a return to high marginal tax rates--something between 50%, which is common in Europe,and 90%, which the US levied from the time of the Second World War until 1965--on high incomes--say, incomes of over $2 million a year--from whatever source derived. If quick profits will go the federal government, managers will no longer seek them. There will be far more incentive, as there was half a century ago, to re-invest profits in expanded firms, actually producing more, rather than fewer jobs. And we will have a prospect of a long-term reduction in the deficit.

Yes, by historical standards, this is obvious--but thirty years of Republican propaganda and lobbyists' contributions have made this solution not just impossible, but unmentionable. This morning's Washington Post informed me, to my amazement, that the Obama Administration does not even intend to allow various Bush tax cuts to lapse! We have found that enormous, largely untaxed incomes do not stimulate the economy: higher wages for average Americans do. But we can't even talk about this solution--it's comparable to suggestions that we stage a Leninist revolution, undo women's liberation, or bring back slavery.

Something even more striking is happening with regard to health care. Everyone seems to understand that we spend too much on it and can't afford to go on at this rate. But Republicans and lobbyists seem very close to having killed the public option because it would be a cheaper form of health care.. What we need, we cannot have. The broader problem is obvious. Cheaper health car4e means that many people will make less money out of health care--especially insurance companies and drug manufacturers. I have not heard even one participant in this debate suggest that there is something immoral about profiteering on medical care. Instead, the papers are filled with stories of the ways in which lobbyists are trying to make sure that a new bill will mean no less, and perhaps more, money for health care interests.

I am concerned by all this because I think that both the political future and that of the Obama Administration depend on facing these issues squarely. A health insurance "reform" that costs even more money will eventually have huge political costs for Democrats. Endless deficits with no end in sight will pose the same problem, and the collapse of yet another Wall Street bubble could easily return the Republicans to power. We cannot solve these problems without removing some of these taboos. The press, which consistently gives the most space to the shrillest voices on the right, has been no help either. The Administration has shown the courage to defy the conventional wisdom on several foreign policy issues, including missile defense and Iran, without apparently incurring political costs. Let us hope that it finds the courage to do the same on the far more critical domestic front.

15 comments:

Jamie Litchfield said...

Thanks David! You are like a voice crying in the wilderness. Keep crying aloud. Maybe, someday, someone will hear!

Anonymous said...

The high marginal tax rates of the 50s really put a dent into the debt racked up in WWII.

Packrat said...

On health care:
The biggest stumbling block is abortion. By eliminating public funding for abortion, approximately fifty per cent of republican party opposition would wither away. I really don't understand why murder is a secular issue but life is a religious one. As I see it, democrats are bought and paid for by the abortionists who seem to have limitless money for lobbying. Why don't you democrats tell them to spend that money on their own special interest by providing support to abortion clinics and on advertising the blessings of abortion.

On taxes:
FICA is a very regressive tax, but it wouldn't take much to turn it into a progressive one. Unfortunately, too many politicians, and I include practically all democrats, benefit from the status quo. Don't see any change as long as our current political conditions exist. In fact, our current political system make a joke of the phrase "government of, by and for the people".

Anonymous said...

The solution is simple.

1. kick out all incumbents. Replace with fresh faces.

2. Replace Social Security with Social Credit with money created by congress, like JFK did in 1963. Apply FICA tax to debt reduction.

3. Remove all welfare programs from Federal government. Replace with Social Credit to every Citizen without means testing.

4. Remove Medicare and replace with Social Credit large enough to purchase health care insurance. Pass legislation that opens up the insurance market across state borders and increases competition.

5. Slash all remaining government programs by 50%. Remove the personal income tax.

wmmbb said...

Contra Anonymous:

The solution is hard: change the electoral system and political process.

Brandon Edsall said...

Mr. Kaiser, I'd like to know your thoughts about JFK. You claimed to like the higher tax rates:

"Now the solution to both of these problems, is, actually, rather obvious: a return to high marginal tax rates"

JFK had a different view of taxes:

"Our true choice is not between tax reduction, on the one hand, and the avoidance of large federal deficits on the other. It is between 2 kinds of deficits-a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy-or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, produce revenues, and acheive a future budget surplus. The first type of deficit is a sign of waste and weakness-the second reflects an investment in the future."

David Kaiser said...

Brandon Edsall did some research and deserves a comment.

When LBJ managed to pass the tax cut in 1964, John Kenneth Galbraith denounced it as a mistake. He was right!

Brandon Edsall said...

Mr. Kaiser,

Thanks for replying to my comment. I can't help but wonder though. I'm a conservative but I'm a fair minded conservative who wants perspective from both sides.

I think it's fair to say that both the left and right seem to just play games with not only history but just about everything.

It's as though both sides have been pulling all of us in opposing directions and the average person who just wants honesty and real solutions to today's problems remains frozen in the middle due to the fact that we can't trust either side at the moment. Isn't that a fair statement?

"The war on poverty of which so much has been made since then has been able to make excellent careers and many thousands of civil servants of academic people who have been able to do study after study on poverty." - John Kenneth Galbraith

Is that much different from Ronald Reagan's "The government declared war on poverty and poverty won"?

I feel government is inefficient in just about everything it touches. Given the last few years I think both the Republicans and Democrats have become more about themselves and less about the country. Both parties were behind reckless spending in recent years.

In my view most Americans have accepted that while we can't trust many businessmen, Bernie Madoff for example, we can't seem to trust politicians either.

Who do we then trust? I'd argue we have to trust ourselves and our families. We should be holding both sides accountable, for the record I didn't vote for McCain or Obama because I didn't trust either of them.

Isn't the current mistrust of government more of a general feeling the public has built up due to the harm caused by partisanship and special interest from both sides rather than some fringe group of "extremists"?

I may be a conservative but I don't think I'm an extremist. I think lobbyist extremist and special interest extremist have hijacked our government as a whole and it is for that reason that I think it's logical to be critical of both parties and both president's, (Bush and Obama).

I apologize for the length of this comment but I just wanted to show a point of view that is seldom heard in today's political circles.

I worry about trusting the government with more and more of our lives whether it's economics, war, healthcare, or taxes given the government's dismal track record. How can so much trust be placed in politicians, (both sides), when they have proven to be so untrustworthy?

George Washington warned about forming political parties, he was right.

Can anyone read this comment and honestly say they think I'm an extremist?

Anonymous said...

(1) It would be nice if the president would at least read the health bill before thinking of signing it. According to his spokesman, he hasn't done so.

http://www.cnsnews.com/news/article/55038

(2) The public option is othing, but a stepstone towards the single payer system. The single payer system has provem many times over that it doesn't work.

(3) The biggest stumbling blokc is not abortion. It's a very simple fact that there are, believe it or not, quite a few people who have healthcare and like it. And would like the government to stay out of it.

(4) I apologize for changing the theme. You didn't like when HMC was making money for Harvard and supporting its functions and have been quoted as the reason for leaving of the management team that had increased value of endowment 6 times. Apparently, being paid for expertise is not something you value. The impotence and incompetence of new HMC fund managers, that brought the value of endowment to 2005 levels, can be,at least in part be attributed to your eforts. I wonder, what would you like to propose next for HMC managers - to volunteer?

Anonymous said...

I am one of the people who got the e-mail. Before forwarding it on, I decided to check it out. I'm glad I did. But where do you get the idea that public health care is cheaper? At 980 (Or is it 945?) billion dollars a decade for the 45 million people who don't have insurance? And that estimate is by the Obama gang. Of course there will be cost over runs.
In the end, our problem is our own tendency for the extremes. The left and right pendulum keeps swinging ever wider with each side reacting to the worst of the opposite side. Limbaugh? Give me a break. He is only a radio guy with a diminishing audience. But he isn't in the White House, like some of the ultra far left of the Obama administration.
The e-mail was correct in that there is a profound change in this country. Not a change from ten or thirty-five or sixty-five years ago, but from the foundations of this country. Do some calculations and discover what percent of the economy the government now owns. Government-owned health care will add another 18 percent. Those that signed the Declaration of Independence are spinning in their graves.
I'm a lot like Brandon. I am heartily sick of the extremists and the media that gives them so much attention. There are reasonable solutions for reasonable people that involve compromise, negotiation, and the utterly lost art of true politics. Pity we can't find them.
By the way, I'm a history teacher too. Not as well-known as you, but a history teacher none-the-less. I can no longer give my students a good recommend on any of the people in politics today.

liberty minded politics said...

You attribute a huge amount of deficit swelling to George Bush, but fail to attribute further deficit expansion to Obama, rather blaming it on the recession? I find that quite amusing.

Anonymous said...

One can see how well Massachusetts care for all works based on the situation of the hospitals that are suing the state to stay in business.

http://bostonherald.com/business/healthcare/view.bg?articleid=1206197#

Since obamacare is to be based on the Massachusetts highly "successfull" model one can see how well that will fare.

Anonymous said...

If you are smart, or work hard, or possess specific knowledge that is in demand, you can trade those qualities for money in the marketplace.

If you combine two of those attributes you can make good money. If you have all three, you can make a lot of money.

Why does anyone think that smart, hard working individuals with specific knowledge that is in demand, would EVER owe 90% of what they make to any government?

Do they receive more of what the Government provides? Do they receive a higher quality version of what the Government provides? Of course not. They get absolutely nothing additional for their vastly larger individual additional contributions.

I can see where Mr. Kaiser's politics lie based on a quick read of his blog. He is just another academician insulated by tenure who has lived his life completely outside of the real world.

For all your knowledge and credentials, you would fail in months if ever placed in a situation where you are responsible for making a payroll.

It is with glee that I imagine the horror you felt when you saw this email as attibuted to you. It is with some sympathy that I imagine my horror at seeing a series of liberal thoughts attributed to me.

I also notice that your response to it makes no effort to disprove the facts contained therein.

The truth can be tough to refute.

Gregg Gruselle

Packrat said...

To Mr. Anonymous:

Yes, there are quite a few people who like their current health care. How many? 10%. 25%. A majority. Please back up your statements with some evidence. Until then it is only a matter of your belief. The other side of your argument can be stated, "Since there are some people in our country who like their current health care, reform is not needed." I leave this dubious reasoning for the reader to evaluate.

Abortion is a major stumbling block because it is preventing the Parties from enacting a truly bipartisan reform bill. Personally, I hope the bill in its current form does not become law as there are many other things in it which seem to be incompatible with the general beliefs of the population and our own countries foundations.

As for the question posed in your last post, it is meaningless in any practical sense. From time immemorial, governments have always taken money from people and especially from the rich unless they were the favored ones. Our government has not been an exception since Kennedy(the primary reason for his assassination and his brother's).

I would love to comment on the first part of your post but I have said too much for this one post.

Anonymous said...

To Mr. Packrat:

Let me back up my statement.
You can read the entire article at:

http://blog.newsweek.com/blogs/thegaggle/archive/2009/09/01/poll-finds-large-majority-of-americans-happy-with-their-health-insurance.aspx

But..for the numbers sake, et me give you the pertinent numbers from the Gallup survey.

"Gallup has today released some analysis on public perceptions of health insurers based on polls conducted from 2006-08. The data cuts to the heart of why the the President is having such difficulty in selling plans to reform health insurance: public or private, people like their health insurance. According to Gallup's data, 87% of people with private insurance and 82% of people on Medicare or Medicaid say that the quality of their health care is excellent or good. "

Anotherwords it is quite clear and obvious why people are against the obamacare. No one wants their plan, that they consider to be EXCELLENT or GOOD messed with, and in the process creating even larger deficit.

Furthermore, people would much more prefer to be duly employed and thus be able to organize their own healthcare the way they see fit then to depend on obamacare.

The advantages of future obamacare are clearly demonstrated by the situation with H1N1 vaccinations. No clearer proof is necessary to illustrate what obamacare would bring.

I would love to hear any comments you might have.