The Truth about Taxes and Growth

It's Thanksgiving weekend, and some Americans have much more to be thankful for than others. This trend has been accelerating for the last thirty years, and last September, in a little-noticed study, an economist named Thomas Hungerford documented it carefully in a study for his employer, the non-partisan Congressional Research Service. You can read the study here,, and it is relatively jargon-free and scrupulously honest in its findings. The real point of the study was to test the fundamental assumption of Republican public policy: that lower taxes on high incomes will increase savings and economic growth. The study drew upon data since the end of the Second World War, and its conclusions were unequivocal.

Hugerford provided some data that I had never seen. As I have mentioned many times, the top marginal tax rate on incomes fell from 95% at the end of the Second World War to 91% shortly thereafter, where it remained until 1964. The Kennedy-Johnson tax cut, timed to favor the GI generation as it entered its peak earning years, cut it to 65%, where it remained until Ronald Reagan, who cut it to the mid-40s in 1981 and below 30% in 1986. It rose again under Bush I and Clinton, to 40%, and then fell to 35%. Capital gains taxes have fallen a similar downward path, except in the 1970s, when they reached historic highs. They held steady at 25% all through the High (1945-65), went up apparently to about 35% in the 1970s, and have fallen in stages ever since until now they are at about 18%. But Hungerford went beyond the simple top marginal rate and provided data on the effective rate paid respectively by the top .1 % (one tenth of one percent) and the top .01% of households. These figures are equally striking. The top .1%'s effective federal income taxes fell steadily from about 55% to 35% between 1945 and 1965, while the top .01% fell from 60% to 40%. Both then rose during the 1970s, to 45% for the top .01% and about 41% fort he top .1%. Then came a pretty steady fall to 25% in 1990,a figure which applied to both groups, followed by a rise under Bush II and Clinton to 31% in 1995. Then, however, two things began to happen. Even under Clinton, the effective rate paid by both groups began to fall sharply. I don't know why this was--perhaps it was at that time that investment bankers developed the "carried interest" dodge that effectively exempts them from federal income tax rates. The second thing that happened was that the top .01% began paying an even lower percentage of effective income taxes than the top .1%. For reasons which, once again, I cannot explain, their effective taxes bottomed out in 2005 and have risen slightly since. The top 1% now pay an effective rate of 26% and the top .01% pay 24%.

It's unfortunate that Hungerford did not expand his tables to include the rest of the population, and that he did not provide additional tables that would have shown the impact of payroll taxes as well. We all know thanks to Mitt Romney that 47% of households pay no federal income taxes (although they do pay payroll taxes.) We don't know what the total tax burden is, both of those 47%, and of the additional 42% who comprise most of the upper half of our society. They may have the most reason to be angry of anyone.

Hugerford then presents tables correlating the change in top rate tax brackets with changes in private savings, private investments, productivity growth, and real per capita GDP growth. I shall begin by saying that Hungerford's regression analyses--the equations that determine correlations between factors--did not find his results to be statistically significant. However, the insignificant correlations that emerged from his data were, almost without exception, opposite to what Republican ideology holds to be true. Savings and investment tend to be higher when top marginal income tax rates and capital gains rates are higher, and vice versa. Productivity growth is also positively correlated (albeit insignificantly) with higher marginal income tax rates, although negatively correlated with higher capital gains rates. Increases in real per capita income are almost totally uncorrelated with changes in tax rates.

It's hard to know exactly what to make of these figures, because I'm not sure they represent the true picture. What is indisputable, as Hungerford acknowledges, is that economic growth, productivity growth, and per capita income rose much more quickly during the High (again, 1945-65), the era of the highest effective income tax rates on the very rich, than they have since, as the Silent and Boom generations took over the world. But since 1964 top tax rates and capital gains taxes have bounced up and down a good deal, while maintaining a secular downward trend. It is those frequent changes, I suspect, that resulted in such weak correlations.

Hungerford concludes with tables correlating income inequality with changes in top tax rates and capital gains rates, and those results, of course, are striking. The top .1% (again, the top one in a thousand) of households earned about 4% of national income in 1945 and that figure dropped to about 3% in the 1970s. Then their share began to rise, reaching 12% in 2006, falling to about 8% at the depths of the recession, but now on the way back up at 9%. The question we now face in connection with the expiration of the Bush tax cuts is whether we will allow the resumption of that trend to continue. (Incidentally, for the whole of the period under consideration, the top .01% has earned about half the total income of the top .1%.)

This is good a time as any to mention a very recent story in the New York Times floating a possible "compromise" that would allow Republicans to vote for higher taxes on the wealthy without offending their enforcer, Grover Norquist. This compromise would keep the top rate where it is, at 35%, but would apply that rate to the total income of households making approximately $300,000 or more. To some one making $300,000, that would mean a substantial tax increase. To some one making $3 million, $30 million, or $300 million, it would be completely trivial, even if they were counting most of their income as wages and salary instead of carried interest. The only way we will get a genuine increase in taxes on higher brackets will be to let the Bush tax cuts expire in toto and force the Republicans to accept a compromise involving higher rates for the wealthy.

John Kenneth Galbraith frequently remarked that the world became much easier to understand if one simply kept in mind that rich people believe they should be even richer. The story of our politics over the last 30 years is terrifyingly simple. Lower taxes on the wealthy have created gigantic and growing fortunes, which enable the wealthiest to buy more and more political power, which they use to make their fortunes even larger. The is the process that the entire Republican party is now dedicated to promote. It's sad but true to note that the last time that the nation had to confront this problem, in the Progressive era, both parties included office-holders who wanted to do something about it. The situation today is very different. Hugerford's report, which received surprisingly little media attention, genuinely threatened Mitt Romney's campaign. Congressional Republicans therefore somehow forced the Congressional Research Service to withdraw it. They didn't save Romney, but we still don't know whether they will save most of the tax policy of the last thirty years and its consequences.

Barackus Cunctator?

In 218 B.C., during the Second Punic War between Carthage and Rome, the Carthaginian Hannibal, having crossed the Alps, won the first of a series of victories against the Romans. As was their custom, the Romans appointed a dictator, Fabius Maximus, to deal with the emergency, and he decided to avoid battle and let Hannibal wear himself out in the Italian countryside. Rome grew weary of this strategy and removed him in time for the 216 campaign, and the Romans promptly suffered the most disastrous defeat yet, a double envelopment at Cannae. In desperation they recalled Fabius, and he resumed his strategy of keeping close to Hannibal while avoiding battle. Having learned their lesson, the Romans recalled Fabius and successfully pursued his strategy for over a decade. The Fabian strategy has become a military byword, a weapon of the weaker party based on the avoidance of battle until the balance of forces has changed or the enemy offers an unexpected opportunity. Its practitioners, at different times, have included Frederick the Great of Prussia, the Russian General Kutuzov in 1812, George Washington, and, at times, Mao Zedong. Fabius was known as Fabius Cunctator, or Fabius the delayer--originally a term of insult, but later a term of honor recognizing the success of his strategy.

Barack Obama, one might argue, has been pursuing a Fabian strategy for the last two years, and it has now been crowned with some success. He began his term confidently but failed to cope adequately with his own Carthaginian invasion, the Great Recession. Thus, despite an eventual victory on the health care front, he suffered his own Cannae in the elections of 2010. Those elections and the Republican-dominated redistricting that followed locked in a Republican majority in the House of Representatives for the foreseeable future. But like Hannibal, the Republicans became overconfident. They believed that the tide would continue to run in their favor, and that they could impose budget cuts on the President and sweep him out of office after one term. Obama, like Fabius, was remarkably non-confrontational and fruitlessly sought a deal. But after that failed, he sat back, essentially, while the Republicans flailed away at him and each other during the first half of 2012, alienating larger and larger fractions of the American public as they did so. By the time the general election campaign kicked off they had fatally weakened themselves. The popular vote remained fairly close, but Obama won the electoral college very handily and added seats in the Senate. Like an invading army, the Republicans now have to face an unpleasant fact: their strength, for demographic reasons, is bound to decline over time. Like Hannibal, they are still fighting wherever they can, but their prospect of decisive victory is gone forever.

It has been easy to criticize Barackus Cunctator for his caution, his concession to the deficit--essentially a phoney issue and a mainly Republican concern--and the excessively moderate policies he has pursued on the economy. Politically, however, his strategy had an extraordinary success, and he has for the moment regained the initiative. Yet he faces a problem. The Fabian strategy is a defensive one, and one cannot win a war with defense alone. Shortly before his death, Fabius lost a debate with another general, Scipio, who convinced the Romans to send him with an army to Carthage to force Hannibal to withdraw from Rome and, quite possibly, win the war. Scipio Africanus destroyed the Carthaginian Army at the Battle of Zama, and that was that.

Can Obama shift from being Fabius to being Scipio? It does not seem terribly likely, and he faces heavy odds in any event because of the House, but there are signs that he might. He is talking much more sharply to the Republicans than he ever has in the past. A signal of a new temper would be a serious Democratic attempt to change the filibuster rule, something that a couple of freshmen are talking about but which the leadership, to my knowledge, has not endorsed. Obama seems willing to risk a fight over the budget involving the lapse of all the Bush tax cuts, and that would be a game changer. The Republican threat to modern America is receding, but it is not yet clear how much of the New Deal can be restored. Perhaps, a regular reader suggests, if the Republicans continue to self-destruct, we can elect Scipio--or Scipia--in 2016. But upsetting our new balance of economic power will be much more difficult than simply defeating the GOP once more.

Pershing, Eisenhower and Petraeus

John J. Pershing, born in 1860, rose through the ranks of the tiny American Army around the turn of the century. In 1909, when he was almost 40, he married Frances Warren, the daughter of a powerful Senator, and they had several children. In 1915 she and three of the children died in a fire. In 1916 he led an expedition into Mexico chasing Pancho Villa. In 1917 President Wilson made him the commander of the American Expeditionary Force in France. Pershing built a large American Army at an extraordinary speed and helped the allies defeat Germany in the fall of 1918. Meanwhile, while in France, he carried on an affair with a wealthy married socialite named Louise Cromwell Brooks. According to at least one account, she wanted both to get a divorce and marry him, but he declined. "Marrying you," he reportedly said, "would be like buying a book for some one else to read." Brooks, who evidently liked men in uniform, got her divorce and retaliated a few years later by wedding the Army's youngest general, Douglas MacArthur. They separated after five years and eventually divorced. Pershing became the only six-star general in the history of the U.S. Military, a rank he was given to put him on the same level as European field marshals. He lived into the 1940s and his personal life was never allowed to stain his public reputation.

Dwight Eisenhower, born in 1890, appeared destined for an undistinguished military career after he graduated from West Point in 1915 and completely missed the First World War in France. He married Mamie Dowd, whom he met stationed in Texas, and whose family was in no position to help his career. He might well have remained obscure had not General George Marshall, the Chief of Staff from 1939 until the end of the Second World War, marked him down as a bright young officer suited to high command. Shortly after Pearl Harbor Eisenhower became chief of the War Plans Division, the nerve center of the Army, and within months he had been appointed commander of the planned landing in North Africa. During the war, by many accounts, he fell in love with his driver, an Australian woman named Kay Summersby. Some have claimed that Ike wanted to get a divorce and marry her when the war was over, but that in any event did not take place. The press never breathed a word of the matter, and Eisenhower became President of Columbia, the first commander of NATO, and a very effective President of the United States. After his death Summersby described their relationship in a memoir but discreetly claimed that it had remained chaste.

David Petraeus was born in 1952 in upstate New York and entered West Point in the same year that I enlisted in the U.S. Army Reserves, 1970. At no time in American history has a military career been held in lower repute than at that moment, and Petraeus graduated in 1974 and entered a force plagued by indiscipline and drug use. He was both a star athlete and an academic standout at West Point and in his thirties the Army sent him to Princeton to earn a Ph.D. His thesis, which I have read, examined the Army's response to the Vietnam War, which consisted, he concluded, in a determination to avoid any similar counterinsurgency effort at all costs. He ended the thesis prophetically, however, arguing that sooner or later the Army would be drawn into a counterinsurgency--and he intended to be ready for that moment. Meanwhile, he, like Pershing, had married adantageously, to the daughter of the Superintendent of West Point while he was a cadet. They have been married ever since.

Petraeus, of course, became the commander in Iraq three years into the war there, when things were going very badly, and managed with a mix of political and military moves to quiet things down and establish the Maliki government securely. To be quite frank, while Petraeus was a very fine general who inspired those who worked with him, I never felt that he would rank with Grant, Marshall, Eisenhower or Ridgway, because he never came to grips with the fundamental long-term problem of counterinsurgency efforts. He proved that US forces could quiet things down in Iraq, but I don't believe that he ever faced up to the difficulty of leaving a stable political order behind--something which in fact we have not been able to do. He was confident that the Iraqis would want to keep American forces around because they needed us, but he turned out to be mistaken The same problem of achieving long-term stability is probably going to doom, in the medium and long term, the further efforts that he undertook in Afghanistan. After serving as CENTCOM commander, he accepted a demotion to take over Afghanistan again after General Stanley McChrystal was relieved of command. Then he became director of the CIA.

This week General Petraeus had to tell President Obama that he had been having an extramarital affair with a married woman with two children, Paula Broadwell, who has recently published a biography of him. She spent time in Kabul while doing so, suggesting that their affair, like Pershing's with Cromwell and Eisenhower's with Summersby, might well have begun in a combat zone. It is easy to see what drew them together: she is also a West Point graduate who has an Ivy League degree, and they are both fitness nuts. They are also human. These things happen.

I once wrote a long post here about the German Chancellor Bernhard von Bulow, who did so much to delay the First World War as chancellor from 1899 to 1909. He commented repeatedly that he thought he could see the world more clearly than most of his German contemporaries because he was a diplomat who had spent so much time overseas. I seem to see many things differently from my contemporaries because I've been reading history since I was seven years old, and comparing the present to the past. There is no difference--none--between Petraeus's indiscretion and that of Eisenhower and many other military and civilian leaders that I could name. There is no reason, in a sane world, why his behavior should have any more impact on his life, family and career than theirs did. But Petraeus is now ending his career in disgrace and his name will be forever tarnished--not because of what he did, but because in the last thirty years the media has arrogated itself the right to investigate the lives of public figures and ruin them for extramarital affairs. We have even had a President impeached for a sexual indiscretion (and please don't waste my time with comments that it was about lying, not sex-we all know better.) This is not a sign of increasing maturity, but of decreasing maturity. We will never again have effective leadership in this country if we can't accept that leaders are human beings, that they do jobs most of us would never have the courage even to attempt, and that their personal lives are their own business.

Official Washington, it seems, has now internalized the values propagated by the media. Some press reports suggest that the scandal broke after it accidentally came to the attention of the FBI. I know how this would have been handled fifty years ago, in the days of J. Edgar Hoover. The information would have gone right to him, and he would have passed it discreetly to Petraeus and the President. The General would have modified his behavior accordingly so as to avoid further embarrassment, the President might (or might not) have had a brief talk with him about it, and Hoover would put them both on his list of people he would be able to rely on for help and support in the future. I preferred living in that America to this one.

Let me conclude with a few words addressed to President Obama and then to General Petraeus himself, neither of whom I have ever met.

President Obama, may I say that I am sorry that you once again took the path of least resistance and decided, after a night's reflection, to accept the general's resignation. The American people--myself among them--had just voted to give you another chance. You did not see fit to do the same for a subordinate, one of the few inherited from the Bush Administration who had chosen to work for you as well. That, like your decisions not to break up the big banks, not to let the Bush tax cuts expire two years ago, and to keep Guantanamo open, was an example of your predilection for the obvious course of action.

General Petraeus, please accept my apology as a citizen of the United States for the penalty you have paid for serving our country at a high level in these troubled times. I am not self-righteous enough to hold your personal life against you. As far as I'm concerned, you were a fine man, general, and public servant yesterday, you still are today, and you still will be, or could be tomorrow. I didn't always agree with your decisions, but they were your responsibility, not mine, and you undoubtedly accomplished far more good than harm. You are now suffering from a national fit of self-righteousness that is unbecoming to our nation. I hope that it will pass and that in the long run you will retain the esteem you have earned from your fellow citizens. And for what it's worth, I would have been honored to advise your excellent thesis.

[The author served in the Army reserves from 1970 to 1976 and taught as a professor at the Naval War College from 1990 until 2012. He is currently a visiting professor at Williams College.]

What Tuesday means to me

I am very relieved that Barack Obama was re-elected on Tuesday, that demographic trends clearly are pointing away from the Republicans, and that I will not in the next four years have to watch the unraveling of all the national political achievements of the last 100 years. I am encouraged by the demographic trends that certainly favor the party I have supported all my life. On the morrow of this election it would be easy for any Democrat not only to gloat, but to look forward confidently to the future. But alas, that is how I am feeling and that is not what I am going to do today.

I have encountered many moving moments researching my new book on American entry into the Second World War, but none touched me more deeply than an exchange between a Republican Senator and Secretary of the Navy Frank Knox in hearings on the Lend-Lease bill in January 1941. Knox, a Republican newspaper publisher from New Hampshire who had acquired the Chicago Sun-Times, had been the Republican Vice-Presidential candidate in 1936. Then and in subsequent editorials published as a book, he had attacked Franklin Roosevelt as a socialist, a Communist, a totalitarian, and a meddler in the economy whose policies were making it impossible for free enterprise to work. But somehow--I am not sure how--he and FDR had maintained a cordial relationship into the late 1930s, and in June 1940, after the fall of France, Roosevelt appointed him to the Navy Department and Henry M. Stimson, another Republican, to the War Department. During the hearings a Republican began quoting Knox's attacks on Roosevelt back to him. "Oh, you could find much worse than that," said Knox. But then he became serious. "Senator," he said, "I am not ashamed of having been a Republican all my life. I am not ashamed of being a Republican now. But I am not functioning as a Republican now."

I feel it incumbent upon me as a Democrat to face that while Obama's re-election was by far the superior outcome of the election, the country is left with gigantic problems that we show no signs of addressing. My own view of what those problems are is quite different from the mainstream one. The deficit and the national debt are far from the top of my list. The deficit is already falling and it is nowhere near the deficits incurred by Lincoln during the Civil War or FDR in the Second World War. The national debt, as I have pointed out here before, is effectively about half of its official figure, since the rest is held either by the Federal Reserve or by the Social Security Trust Fund. The latter portion need never be paid, as long as payments into Social Security are adequate to pay benefits, and when the foolish payroll tax reduction expires at the end of this year, they will be once again.

Our problems, instead, are unemployment and economic inequality--which in fact are closely related. We are learning the hard way what our grandparents learned 80 years ago. An economy in which a small number of people reap all the profit cannot prosper, because most of the purchasing power generated will go to waste. We have not only too few jobs, but too few well-paying jobs. (That problem went almost unmentioned during the campaign.) The whole upper half of the economy needs to pay more taxes and the government needs to use the money to put people back to work. The minimum wage needs to be substantially increased. Millions of people still need mortgage relief And evidently, we need more effective labor laws One or two Sundays ago, the New York Times. printed an extraordinary story about the effects of the computer age on the labor market. Computer programs tell grocery stores, department stores and restaurants exactly how many workers they need and when they need them. This is what an economist calls "rationalizing" the labor market--but the result is that increasing numbers of workers do not work enough hours every week to earn benefits or a living wage. This cannot go on--but no one is doing anything about it. Nor in the long run can the political system remain healthy if we allow people like the Koch brothers to accumulate fortunes in the billions. Their money was in fact wasted, from their point of view, in this year's election, but there is no guarantee that it will always be thus.

Nor is this all. The exit polls this year tell a frightening story of a divided nation. "It would mean the end of everything I worked for," the late Jackie Robinson once remarked, "if baseball were integrated and the political parties were segregated." But so they are, with huge majorities of black, Hispanic and Asian Americans voting Democratic while 59% of whites vote Republican. Incredibly, fifty years after Marin Luther King, race is a better predictor of voting than either education level or economic status. You don't have to be the son of a first-generation American Jewish father and a near-Mayflower descendant wasp mother like me to feel that this situation is a repudiation of everything the United States is supposed to stand for. The nation today is as divided regionally and ethnically as it was in the wake of the Civil War, and that situation did not create a healthy political environment.

Barack Obama should now regret, I think, that his campaign evidently wrote off the House of Representatives as a lost cause and didn't realize what was possible in the Senate. To the amazement of all--including Nate Silver, who called the presidential race exactly--Democrats won Senate races in North Dakota and Montana. They could easily have picked up a Nevada seat as well, it seems, had they known that they had a chance. The decision to write off the Congress was, like so many of this Administration's decisions, reminiscent of the Clinton Administration, which did the same thing in 1996. According to Paul Krugman, preliminary counts suggest that more voters chose Democrats than Republicans for Congress this year, but thanks to gerrymandering the Republicans maintained most of their majority. Despite media claims to the contrary, John Boehner showed no inclination to compromise on taxes. I don't think that he can, at least until January, because if he did, his career as speaker would almost surely come to an end and he would give way to Eric Cantor or Paul Ryan. He has a majority of rigid ideologues who hate government and don't care if they get re-elected or not.

There's a strong possibility that the country won't get back on the right track with respect to economic and financial policy in my lifetime (and I expect that to last another 25 years at least.) But if it is ever going to, the best hope by far would be for the President to refuse to make a deal and let the Bush tax cuts expire in toto, for everyone. The sequestration will take care of itself, I think, because every major institution in the country, public and private, is against it, for very good reasons, and a sufficient number of Republicans will have to agree to the change. But the President must show the country that "compromises" with the House Republicans will not determine the country's future if he is going to leave a substantial legacy behind. If a new series of cuts drives the economy back into recession, as it did in 1937 and as it has done in Britain today, the Republicans will gain seats again next time. Meanwhile, in the Senate, Harry Reed has been quoted to the effect that he wants to do something about the filibuster. That would involve a confrontational move as well--a ruling from the chair, Vice President Biden, that the Senate rules have expired and that they can be amended by majority vote. But it is desperately needed as well.

We have pulled back from a political cliff. We have not yet started in the right direction, and I'm afraid the odds that we will are less than 50-50.

The Nightmare Scenario

Since most readers probably rely on some kind of notification from google or feedblitz to learn that there is a new post here, most of you probably won't read this one until tomorrow morning, when the presidential election may well be clearly decided. But because it may not, I want to use history, once again, to share a possible scenario that could threaten the integrity of the republic as we know it, based on some of the events of the fall of 2000.

Nearly everyone remembers, of course, that controversies over the recounting of votes in Florida went on for over a month in that year, until the Supreme Court summarily halted the recounts in progress and handed the election to George W. Bush. (The most thorough post-election study suggested that a full recount of the state--which Gore had not demanded--would have shown Gore to be the winner and thus the new President.)But relatively few of you probably remember one episode in that controversy. As the issue of the state Supreme Court-ordered recount made its way towards the Supreme Court, the Republican-dominated Florida legislature called itself into special session to settle the matter themselves. A bill summarily to certify the Republican electors was halfway through that legislature when the Supreme Court ruled.

Florida, Virginia, and Ohio are three states where the vote is expected to be close, and which have solidly Republican legislatures. If the Republican Party can create enough controversy in the courts over the results so as to last until the deadline for certifying the vote on December 11, their legislatures could try to pull the same trick as the Florida legislature did, and certify Republican electors whether a fair count seems to show a Ryan-Romney victory or not. All three of those states also have Republican governors, and if he certifies the choices, there will be no prima facie basis for questioning these votes when the House and Senate meet to count them in early January. Debates may occur if both Senators and Representatives dispute some of the electors, but it's not at all clear that they could be resolved, and if no President or Vice-President had been chosen by January 20 then John Boehner (or another new Republican speaker, such as Paul Ryan) would become President.

I hope, obviously, that this does not happen, but I do not think at least some of this scenario can be ruled out. That, we learned in 2000, is the world we are living in.

Pundits and Polls

(This is my second post of tht weekend and I hope new visitors will check the one below as well.)

I was in Washington this weekend and I saw some interesting columns in and stories in the Washington Post. As my regular readers know, I rely mainly--indeed, almost totally--for electoral intelligence on Nate Silver at the New York Times's fivethirtyeight.com. Silver started his career writing on baseball at baseball-prospectus.com, and his reception among political pundits, most of whom must make at least ten times the money that he does, is similar to the great sabermetrician Bill James's reception among sportswriters, none of whom made nearly as much money as James did from his Baseball Abstracts in the 1980s. Both pundits and sportswriters cultivate their readers by claiming unique insights and inside knowledge. They instinctively seem to resent the idea that a patient, scientific observer could, simply by crunching numbers, reach sounder conclusions than they could. This remains the attitude of the Boston press towards James, even though he has clearly been a key figure in the Red Sox Renaissance over the last 10 years--a period which, sadly, seems to have come to an end despite his best efforts. They were livid a few years ago, for instance, when James once again demonstrated pretty clearly that Jim Rice didn't belong in the Hall of Fame. He was right, but the sportswriters elected him anyway on the grounds that he was "the most feared hitter" of his generation, the kind of quality they love precisely because it doesn't translate into superior statistics.

Silver has a data base consisting essentially of every state and national poll taken for at least the last 35 years, and perhaps more. This allows him to find out how many times the average of all available polls has been correct. It also allows him to adjust for systematic bias in particular polling outfits, and to estimate very accurately the chances that today's polls will in fact predict the winner, even if the election is very close. Karl Rove, who is a political professional but too obviously partisan, it seems to me, to be counted as a pundit, employed the opposite technique in his Wall Street Journal op-ed a few days ago to predict a Romney victory. He simply grabbed ever hopeful piece of data he could find, vastly exaggerated its significance, and concluded that Romney was going to win. This technique is common among political junkies. My late father, for instance, having noticed in one election that a Democratic candidate had overcome a three-point polling deficit to win his race, assumed for the rest of his life that any Democrat trailing by three points or less was going to win. Rush Limbaugh did this kind of statistical cherry-picking on Friday as well: "The only thing that you can say about these polls is that in none of them is Obama at 50. And that matters. When the incumbent is not at 50, I mean, that's a rule of thumb. So is the rule of thumb about he who wins independents wins the election. I don't care what the overall result is, in all the polls it's Romney up, for the most part, double digits. Not in all, but in many of them double digits in independents." Nice try, Rush.

This morning Dana Millbank, in my opinion, embarrassed himself pretty badly by reviewing Silver's projection, which currently gives Obama an 85.1% chance of winning the election and expects him to win with about 307 electoral votes. Millbank started his column well by showing that we could discount Rove based upon his track record--he has consistently exaggerated the Repubicans' chances in every election since 2000 except 2010, it seems--but he then turned Silver and declared that he, Millbank, gave Silver "a 50-50 likelihood of being correct. The truth is anybody who claims to know what is going to happen on Election Day is making it up and counting on being lucky." That statement is ludicrous. Silver is the first to admit that Romney could win the election, but the chances of him doing so are, according to the best model we have--Silver's--15%, not 50%. (In fact, Silver's probability of Obama's victory has gone up 10 points since Millbank wrote his column). I've never met Millbank and I don't know why he can't see this. It's not as if Silver doesn't have a track record: he called the last Congressional elections almost perfectly, a much more difficult feat, it seems to me, with 435 separate elections to deal with instead of 51. (I'm very disappointed that the Times editors allowed him to ignore the House completely this year.) But Millbank didn't embarrass himself nearly as badly as George Will, for whom the results are likely to be a huge disappointment. Will lists a series of possible events Tuesday and assigns them certain significance. If Romney wins Wisconsin, he says, that will prove how popular Governor Walker's union-busting strategy was. It might, indeed, prove that, but Silver's analysis of the polls shows that Obama has a 94.6% chance of carrying Wisconsin. Will adds that if Romney wins Pennsylvania, "or even comes close," it will show Republicans to be more popular than expected among the elderly, since Pennsylvania has one of the oldest populations in the nation. In fact Will must know that Republicans are already more popular than Democrats among the elderly and will almost surely carry the over-50 vote and the over-70 vote by an even greater margin--and he should know that according to Silver, Obama's chances in Pennsylvania are 97.3%.

There is another far more important political lesson to learn from James and Silver: the truth is out there, on a lot of subjects, if you're willing to gather data and analyze it dispassionately. We could do for health care and taxes and yes, maybe even for global warming, what they have done for baseball and elections if we wanted to--but those are areas where there's too much money at stake for reasoned analysis to prevail, certainly at times like these. Rove, Will and Millbank are all part of the power elite. Nowadays, it isn't very interested in the facts.

What is at stake on Tuesday

Last night I attended a panel discussion of the election featuring three political scientists. Two of them argued that this was a very important election, a point with which I thoroughly agree. What was at stake, they said, was the preservation of the New Deal. I was reminded of another discussion 32 years ago, immediately after the election of Ronald Reagan and a Republican Senate, when a colleague remarked that he hoped we could save the New Deal, even if we lost the Great Society. In recent months I have realized how wrong he was, and I spoke up at question time last night because I could not agree.

To say that we are still fighting for the New Deal completely misunderstands what the New Deal was and what it accomplished. The metaphor itself had a meaning now lost: it treated the national economy as a card game in which a tiny number of players held all the high cards, and promised to redistribute them. And this was not just a moral issue, even though Roosevelt struck moral chords in his first inaugural address. The New Deal economists saw inequality and rampant market freedom as the source of economic misery and they were determined to do something about it. They did so, almost at once.

In practical terms, the New Deal meant a drastic reorganization of the financial industry separating commercial banking from investment banking, as codified in the Glass-Steagall Act. It meant creating the SEC to regulate the stock market. It meant recognizing the right of unions to organize and bargain collectively, a new right of which literally millions of workers took advantage from the mid-1930s onward. It meant effective limitations on hours and a minimum wage. Eventually it meant vigorous enforcement of the anti-trust laws. The New Deal gave the government a role in providing energy--public power was its watchword. And it made the government an employer of last resort in hard times, using manpower to build a new infrastructure for the country. Last but hardly least, it eventually pushed top marginal tax rates--already at around 60% thanks to the Hoover Administration--up to 91%, where they remained until 1964. That made it impossible for people like the Koch brothers to accumulate fortunes big enough to buy the American political system. The New Deal did these things, to repeat, because New Dealers from FDR on down saw them as essential to a healthy economy and society--and they were right.

Today, all of those reforms and policies are either dead, or moribund, and Barack Obama has done very little to reverse that trend. He could have nationalized the big banks in 2009, sold them off as separate units, and called for a new Glass-Stegall Act, but he didn't. He has done nothing for labor. The minimum wage remains well below what it was half a century ago in real terms, and hours, as a brilliant New York Times piece showed last weekend, are now much too short, not too long--too short to allow jobholders to live. Obama could not even summon the courage to let all the Bush tax cuts expire and let the top bracket go back up to 39%. He has not even proposed doing away with the "carried interest" scam that allows Romney to pay 14% on his millions. Labor has been retreating steadily for decades. And with the Republican majority dug in in the House, none of this would change in a second Obama term even if he wanted it to.

What we are fighting for now are the most important legacies of the Great Society and its aftermath under Richard Nixon. These include Social Security payments that retirees can actually live on (a Nixon legacy); Medicare, Johnson's signature achievement after civil rights; and Medicaid, which passed along with it. Roosevelt did start Social Security, but it remained too modest to keep recipients out of poverty for its first three decades. Two other threatened legacies from LBJ are the Voting Rights Act, which now seems more needed than it has been for thirty years, and spending on education. That is the legacy that Obama is trying not only to preserve, but to build on with Obamacare. But because of that, we face an ironic prospect. While we may still take care of people when they are old or sick, working adults and their families get worse off every year.

The difference between the Roosevelt and Obama Administrations is reflected in the political trends of the last four years. FDR, to be sure, was luckier in certain respects. Not only did he come into office at a moment of much worse misery, but he also came in when the Depression was finally bottoming out. But his vigorous measures, as well as his crusading spirit, made an enormous difference in the lives of millions of Americans during his first four years in office. That is why the Democrats gained seats in both houses in the Congressional elections of 1934, and why Roosevelt won the biggest electoral majority in modern history in 1936. Curiously enough, Barack Obama's auto bailout has made a difference--a huge difference--in the lives of hundreds of thousands, if not millions, of families in Michigan and Ohio, and that may ensure his re-election. But those are the only families who feel that way, and that is why the Democrats lost more than 60 seats two years ago and why Obama is now poised to be re-elected by a razor-thin margin along with a largely hostile Congress.

Mitt Romney's victory remains possible, if less likely, and we are all wondering which Romney would be sworn in on January 20 if he won. Looking realistically at his life, he has gone with the flow at every turn. As a young man he jumped on the private equity bandwagon without caring in the slightest what the impact of leveraged buyouts would be. When he went into electoral politics in Massachusetts he took the positions necessary to appeal to the electorate, and as Governor he worked with a Democratic legislature to pass impressive liberal reforms because that was the only way he could make a record. He obviously has no interest in making the country more like Massachusetts (which, by the way, has one of the lower unemployment rates in the nation even now.) I am not hopeful that he would arrest the Republican tide, and I doubt very much that even a small Democratic Senate majority would do much to stand in its way.

For the sake of the next decades it is important that we at least preserve the government that we have now. We may not, partly because the Republicans and the media have persuaded many voters--including well-educated younger voters, as I have found--that there really isn't much difference between the two parties and that they are equally partisan. But if we do, future generations will have more to build on when our intellectual and moral tide turns, and we begin once again to realize the promise of prosperity and equality which the Founders bequeathed to us.