Rand Paul appears to have stepped up to the plate on  a Levin and McCain effort at vilification of big corporate interests using their tax code within the law but in a way they don’t like. See the post at Powerline Blog. It’s the left going after the feed corn – again.

It’s the story of The Self-Stirring Pot and Our Rising Quality of Life at Via Media. The invention of a Japanese dentist is the stimulus for noting tha many small steps can make a big difference that often goes un-remarked.

“Besides the big innovations that change the world dramatically, a steady tide of new gadgets continues to reshape daily life in small ways.

Over time these little changes add up—30 years ago Americans had no Internet, ATMs, laptops, or DVDs. The conventional income comparisons between generations miss this. The richest man in the world couldn’t have bought a smartphone in 1983; today even people of very modest incomes can afford one. Our quality of life has improved much more than income levels suggest.”

Waxing nostalgic about the waning of modern whatever is a favorite hobby for many but not necessarily well in touch with reality.

In the movie Casablanca highly qualified people are in a surplus and anyone gets any job they can. A recent New York Times article noted how the Bachelor’s degree is taking the place of the high school diploma in the current job market. It seems many pundits miss the connection.

It isn’t that a BA is needed, it is that employers can find college degreed candidates for their positions.

Megan McArdle says Sorry, Kids, No High School Diplomas Need Apply

“More worrying is the way in which a BA is now becoming a minimum requirement for jobs that simply don’t require any of the skills you learn in college: receptionist, file clerk, secretary. ”
…
“Caplan argues that to a large extent, the BA is becoming what a high school diploma became before it: a signal to employers that you are not stupid, lazy, or poor enough to drop out before you’ve finished your education. That’s valuable for the employers, but it’s increasingly expensive for the students, without necessarily preparing them to better do their work. And it’s far from clear that it’s worth removing people from the workforce for four years in order to prepare them to do sales, or manage an office. “

The issue here is in the ‘minimum wage’ class. There is a cost to employees in getting that degree and to society in productive years. Nice if you can afford it?

“By any historical marker, the future of Americans has never been brighter. The United States has it all: undreamed new finds of natural gas and oil, the world’s pre-eminent food production, continual technological wizardry, strong demographic growth, a superb military and constitutional stability.

Yet we don’t talk confidently about capitalizing and expanding on our natural and inherited wealth. Instead, Americans bicker over entitlement spoils as the nation continues to pile up trillion-dollar-plus deficits. Enforced equality rather than liberty is the new national creed. The medicine of cutting back on government goodies seems far worse than the disease of borrowing trillions from the unborn to pay for them.

In August 1945, Hiroshima was in shambles, while Detroit was among the most innovative and wealthiest cities in the world. Contemporary Hiroshima now resembles a prosperous Detroit of 1945; parts of Detroit look like they were bombed decades ago.

History has shown that a government’s redistribution of shrinking wealth, in preference to a private-sector’s creation of new sources of it, can prove more destructive than even the most deadly enemy.”

HANSON: Why do societies give up?,

The Washington Times

. It is fuel for the thinking man.

“Once upon a time, the mortgage market was a safe and staid place where widows and orphans could lend to responsible borrowers paying reasonable prices for sensible housing. But a combination of lax regulation, political opportunism, Wall Street (and Fannie Mae) greed, credulous investors and speculative borrowers turned the mortgage market into a horrible mess that cost this country as much money as a foreign war. Let’s try not to do the same thing with our municipal finance system, shall we?”

WR Mead worries about California: Already Stoking the Next Big Financial Crash?. The state has authorized municipal bonds that run interest only for decades.

“It is starting out innocently enough. Looking to expand a number of aging school facilities but loath to raise the taxes necessary to pay for it, California cities have opted to fund school construction projects with capital appreciation bonds, which allow school districts to borrow money now while putting off payments for decades. It sounds like a great deal, but it has one major drawback: The interest rates involved push the eventual price tag to many times the original amount—sometimes as much as ten times more.”

This is basically what happened in the real estate market. Inflation in housing values became considered a given and money was loaned on that basis. The Government pushed loans that were otherwise unsound and impractical. That bubble burst to horrific effect but the desire for ‘free money’ continues. There is concern about student loans and the fact that they don’t provide a real return on investment when it comes to money loaned to a student compared to occupational advantage. Now we see local governments hurting for funding for all the frills and fancies that so many have come to see as a necessary part of government services. The funding for those desires is being pushed off to the children. That has been ongoing as the pension funding problem is already bankrupting cities.

Perhaps this is a way to distribute income? It is the rich after all who are the only ones that can invest money. So when the investments go belly-up, it is essentially just re-distributing their money to the poor and needy depending upon government services. The fact that this sort of thing tends to bankrupt countries doesn’t seem to register with many.

” In sum, e-filing helps the IRS with audit selection, costs the Treasury billions through fraud, and transfers many costs of tax administration to you.”

Starkman: E-Filing and the Explosion in Tax-Return Fraud

What this means is that the input is automated, the processing for IRS needs is simplified, but the verification process is insufficient. Things like verifying that the taxpayer ID on the return is the same as the one on the bank account before doing a direct deposit don’t seem to be in the list. With the data the IRS and the government maintains, data mining techniques could be used to help detect and prevent fraud. The private sector, credit card companies for instance, do this.

Bill McBride has hit this several times: Bernanke to Congress: Do your job, Pay the Bills. In doing so, he reveals a political bias.

The debt limit is a financial control. As with any complex system, government expenditures need many controls at many levels. In personal finance, the debt limit is your credit limit. It is a last ditch control.

A more basic financial control is a budget. That is where you plan your spending to meet goals against expected income. The problem the U.S. government has right now is that it doesn’t have a budget thanks to obstructionism of the Senate majority leader. For the last three or four years, the government has been going on a continuing resolution basis using the first budget approved by the President and Congress in 2009.

The President’s assertion about raising the debt limit in order to pay for things Congress has budgeted for sounds very nice. The problem is that the last time Congress passed a budget was two sessions ago. The tactics of the Democrats then are to bypass the upheaval in Congress due to the 2010 election and since.

What has happened in recent history when debt limits have been reached is the threats about teachers, firemen, and police. In other words, when government is faced with having to cut back on expenditures, they try extortion on their constituents. The programs that get put up for suffering are the high value or high emotion ones. The lack of seriousness in such behavior is starting to grind on those constituents but it appears that the President and others haven’t got the message, yet.

This is why the ‘just to pay the bills’ idea is insidious as well as just false. For McBride to fall for it demeans an otherwise excellent finance and economics blog.

“we have run the government for 1350 days by continuing resolutions and omnibus catch-alls, perhaps the least efficient ways of legislating and of working out compromises. Why? Reid doesn’t want conference committees and compromises — he wants capitulations. That’s why we keep careening from crisis to crisis, from cliff to cliff.”

Ed Morrissey asks: Will the GOP force normal order on budgets to resolve debt limit?. What brings that question up is the Senate Majority Leader’s obstruction to budgetary processes mandated by law. The answer to the Senate’s intransigence on the budget was a subject of Byron York’s thoughts that Morrissey notes.

The question is whether the Senate Majority Party will be held accountable for its behavior both in terms of the budgetary process and in terms of spending.

The Senate has not worked on a budget in nearly four years despite a seventies law that says it must. The president doesn’t see any problem with government spending. Republicans see things differently:

“The driving passion for Mr. Boehner in these fiscal debates is his conviction that trillion-dollar deficits are sapping the country of its energy and prosperity. When I ask him when the impact of this debt will start to be felt, he says: “It’s already here today. It’s killing our economy. It’s causing investors to sit on their cash. They’re afraid to invest. It’s a wet blanket on top of our economy.”"

Stephen Moore explains the problem at the WSJ: The Education of John Boehner. Leverage for the next clash: GOP willingness to let the spending sequester take effect.

“With the two sides so far from agreeing even on the nature of the country’s fiscal challenge, making progress on how to address it was difficult.”

Figuring out what problem to solve is a problem in itself.

US News is a good source for the sort of ignorance that seems to be driving politics. Susan Milligan provides an example in It’s Business Execs—Not Obama—Who Don’t Get the Rules of Capitalism.

“We saw this with the arrogant Wall Street financiers who brought the national economy to the brink of collapse because they played a little too carelessly with their investments. What made it worse is that the cash in question was other people’s money—not just big investors, but people with 401Ks and smaller investments. Letting the banking industry and the financial sector fall apart would have been hard on those industries, but devastating for people who had nothing to do with the bad decisions that got the sectors in such trouble to begin with.”

Note the use of words such as “arrogant” which are judgements rather than descriptions.

The fact is that those executives and financiers and many others are entrusted with handling other people’s money. As with any leader, they make convenient targets. For the Milligan crowd, they also serve as a source of envy due to their income. What Milligan doesn’t get, which the Teamsters appears to understand in the Hostess controversy, is that the amounts involved in executive compensation are small peanuts in the overall scheme of things.

“Obama isn’t socializing any part of the economy. But it appears a lot of executives actually want it that way.”

The socialism aspect is that of taking control of an enterprise away from the entrepreneurs and trying to take what they have earned to give it to some other class. Government is given the role of deciding who shall have control over money rather than an individual investor. The individual investor is allowed to bypass his responsibilities and risks in deciding what to do with his money. Socialism is second guessing the system to determine whose income is ‘fair’ and whose isn’t.

The sad part of such ignorance is that the outcomes have been rather clear whenever it is tried in governmental systems. Some people do not seem able to learn from history.

“Republicans won’t begin to turn the tax debate around until they begin to develop the argument that it isn’t fair to place the burden of paying for the government on just a portion of the population. What exactly is fair about taking half of someone’s income to pay for out of control government? In other words, at some point Republicans need to develop an argument that challenges the idea of tax progressivity itself. That will be the ground of moving to a flat tax through fundamental tax reform.”

Steven Hayward offers his take on Why Are Republicans Losing the Tax Debate?. It’s the old feelin’ vs reason thing that Limbaugh keeps noting.

“When you see the data, several things become clear. First, the liberal “tax the rich even more” theme represents a purely punitive expression of envy”

See the charts Hayes provides from IRS data. The issue is about all of those who won’t look, won’t see, or even actively deny and certainly won’t discuss. It is very difficult to get past a buried envy.

“the debate heats up once again as part of the “fiscal cliff” negotiations, it’s worth taking the time to highlight some of the things most people never knew about the Bush-era tax cuts.”

John Merline exposes 5 Dirty Little Secrets About the Bush Tax Cuts, one of those ‘Bush’ things that have played a large part of the ‘blame Bush for everything’ demagoguery that has been popular over the last few years.

With the 2001 and 2003 tax cuts, the rich did end up paying more, federal revenue increased, and the income gap decreased. Getting a handle on such a reality, though, takes work both in collecting data and in intellectual understanding of nuance. It is much easier to see tax as a zero sum game and drink the kool-aid of excess simplification and statistical obfuscation.

about those Bush tax cuts for the rich …

“To be fair, these two decade-apart positions are not entirely incompatible. Bush cut the tax bills of the rich by much bigger dollar amounts than the tax bills of everyone else. Still, more middle-class people got a tax cut than rich people, and many of them got a bigger reduction in percentage terms, too: The top tax rate fell 4.6 percentage points; the lowest rate fell 5, and the second-lowest rate fell 13.

As a result, The Joint Committee on Taxation says extending the middle- class tax cuts will shave $2.7 trillion in revenue over 10 years. The White House says ending the tax cuts for the richest 2 percent would raise $849 billion over a decade. In short, less than one-fourth of the Bush tax cuts benefit “the rich.”

But you’d never have known that latter point from the way Bush’s critics talked at the time.”

A. Barton Hinkle takes a look at reality in George W. Bush, Middle Class Champion, Less than one-fourth of the Bush tax cuts benefit “the rich”.

The tax cuts that helped spur recovery from the Tech Bubble recession ten years ago have been a class envy lightning rod for years. As with many such issues, they were misrepresented for the convenience of bashing an opponent and promoting an idea. Now that the tax cuts are set to expire, reality is back on the table. If they are allowed to expire, the incessant assertions that the tax cuts were only for the rich will hit many non-rich in the wallet, which makes the reality much harder to hide and deny.

That there is still a problem with bias and point of view is evident in how many calls there are for Republicans to bend and allow higher taxes and how few (if any) there are for Democrats to bend and tackle entitlements and spending.

“What I’m suggesting might seem like a subtle or even trivial shift in how we look at the world. But that sort of shift can be huge in terms of how it changes behavior. Class warfare strikes me as a dangerous worldview. It encourages a win-lose approach to government policy in order to pursue the elusive unicorn of “fairness.” A more productive way to view the world is in terms of net creators and net consumers of wealth, at least so long as society makes it possible for any net consumer to become a net creator by going to school, training for a job, or investing in start-ups. For the middle class, it might simply mean spending less than they earn. I think this approach gets you to a healthy economy faster than a class war.”

Scott Adams provides some thoughts about Wealth Creators versus Wealth Consumers 11/26/2012. Hidden in his idea is that many wealth creators are not necessarily in the dollars game. He mentions philanthropists but misses the classes of others who generate wealth but not for their personal monetary gain. These classes include many volunteers and religious leaders, for example. That would get into some thought about why it is that the most capitalist societies tend to not only have very many money producers but also the most vibrant nonprofit social welfare efforts.

This also gets into the problem that those who set themselves apart by their efforts also tend to be impugned. The sneering at the nerds in schools is just one example. The rich, the over-achievers, the people who work hard to climb the ladder of success in their chosen field are often seen as ‘showing up’ those who don’t want to put in that effort.

The change in point of view would be back towards where the hard working, self made, successful were considered role models. These people were on parade at the Republican convention this year. The modern view, however, seems to use some other criteria for their models.

“On one side, we have the Republicans, whose primary concern is economic growth and debt/deficit reduction, and on the other, the Democrats, who seemingly lie awake at night worrying about income inequality. The big lie of the campaign was that the Republicans were opposed to increases in “revenues” (code word for soaking the rich), when the reality is that the Democrats don’t care as much about revenue as they do about “social justice,” as exemplified by the president’s Marxist remark during one of his primary debates in 2008 that he would increase the capital gains rate even if it reduced revenue, out of “fairness.” And so concerned is he about the debt, that he doesn’t even know how much it is.”

Rand Simberg describes The Ideological Underpinnings of the Tax Rate Debate as a matter of a dynamic situation rather than a static one. At its simplest level, the example is the zero sum game often used by one side to calculate budgets compared to the growth of wealth concept used on the other. The ‘equitable distribution’ of what exists now as if that is all there is to it, an arithmetic approach, gets into concepts of having to punish some in order to achieve social justice or to be ‘fair.’ The growth of wealth concept, on the other hand, is a dynamic vision needing calculus concepts of rate of change and relationships between variables rather than simple arithmetic. Fairness and social justice in the growth of wealth approach are matters of freedom rather of punishment.

What is particularly troublesome is that the zero sum economic ideology has a history of failure that seems to make no impression on its adherents.

“The relevant question is where we are on the Laffer Curve. Are we on the part of the curve–the “prohibitive region”–where an increase in marginal tax rates will reduce revenues and a decrease in marginal tax rates will increase revenues? For the United States, I think the answer is pretty clearly no.

But what about for California? We are about to have an empirical test. Proposition 30 garnered about 54 percent of the vote earlier this month. One provision is a one-quarter percentage point increase in the sales tax rate.”

David Henderson says It’s not Go Galt: It’s Go to Texas. That is the federalism option that is not available when it comes to national taxes. One of the key features of federalism – keeping governance as local as possible – is that a citizen can remove himself from governance he does not like and find something closer to what he can tolerate. This has been happening in states such as California where people have left the state to find less oppressive governance.

The issue is not about something that has binary features. O’Reilly had trouble with this trying to understand Stossel’s argument that price ‘gouging’ in disasters like Sandy could be a good thing. Rather than seeing high gas prices moderate behavior over a continuum, O’Reilly could only see a grandma who could no longer afford any trip for necessary purposes. The reality, shown time and again, is that people respond to high gas prices by cutting back on trips, sharing rides, and doing other things. The same happens with taxes. There are all sorts of ways to reduce tax burdens and the more tax there is, the more effort is put into finding them.

The experiment in California is just how much you can raise taxes and obtain the expected revenue increase. There is a penchant to dismiss Laffer Curve ideas and envision a simple more tax means more revenue theory. Those hated Bush tax cuts illustrate something different from this. They were installed to combat the Tech Bubble recession and federal revenue rose after they were implemented. That debate is on the table right now because the cuts are set to expire very soon.

California and a few other states are leading the tax increase effort. Economists watch and wait in order to get some idea of just how high the taxes can go before adverse effects start to decrease government revenue.

“Jerry Brown, who pushed hard for this tax increase, and the California voters who voted for this, are playing with fire.”

some deny there is any fire potential — that gets into class warfare and envy …

“Union idiots are free to choose this course of action but they are also going to have to live with the consequences of that choice. The important thing is that these people get no public assistance benefits whatsoever. In this economy there is no reason that people struggling to get by should subsidize people who throw away jobs.

People voted for irresponsibility, now they must get it. No soft landings, no pity. It’s time for harsh lessons to be learned.”

Ace of Spades HQ describes the result from a Union that decided striking a company in bankruptcy was the way to go. Perhaps they were a bit too comfortable and well off to consider the implications?

This episode has another highlight as it appears it is being blamed on Romney via Bain Capital (even though neither had anything to do with this situation). That may indicate that the Blame Bush thing is getting a bit old in the tooth and a new villian is needed.

“The evidence is that money is not as important in determining outcomes of election as people think. Apparently, we aren’t puppets of the rich and powerful who mindlessly follow the plutocrat with the deepest pockets.”

Via Meadia notes Citizens United Not End of the World citing election research.

Of course, it is a convenient straw man. These days, those who have money are evil so it is obvious that election outcomes that one doesn’t like must be because the election was bought. Reality speaks a different tune, though.

“Apparently voters follow their own perception of their own interests and values when they vote and are not so easily bamboozled as campaign consultants would have politicians believe.”

This might be a bit over-simplified as well. People are not often closely in touch with their own interests and needs. The last election has ripe material for examining that.

“All of has made me wonder if California is a harbinger of our future. Its economy is in a pitiful condition. It just voted to raise taxes substantially on its most productive citizens. Its Hispanic population (legal and illegal) is large and growing. And it has become a one-party state.”

Scott Johnson wonders: California, here we come? California is often considered to be a political indicator. The recent election certainly took the ‘Animal House Nation’ ideas of ignorant dependency, envy, and ‘feel-good’ to a new level. This despite the state pension system being threatened enough to be a factor in the bankruptcy of several cities. But that just illustrates another problem that was clearly present in the last election.

“the electorate did not on average hold Obama’s pitiful record against him. Voters split about equally on the question of which candidate would better handle the economy — here I am drawing directly from the AP report — and about half said former President George W. Bush is more to blame for the current economic problems, while 4 in 10 laid the blame with the current president.”

The ‘blame Bush’ thing is something worthy of study because it represents a propaganda success that Radio Moscow in the early 70′s would have envied. It seems to be well correlated with a psychological fixation that denies any threat to its world view. The election results cannot be understood until this phenomena is also understood.

California is a bit ahead of the rest of the country in its fixation on the ideas that the only way to raise government revenue is via higher taxes, especially on those who produce more wealth. It demonizes those that do not think government is the solution and projects the sources of its problems on its opponents. The voting public either swallows this propaganda or loses interest in participating. The results are likely to be tragic. California, being one of the wealthiest regions on the planet, will tell us what it takes to survive and just how much damage can be sustained.

Ed puts up the charts as the base for a New Obama ad: Dude, I found my second-term agenda!.

“The one thing they [Obama administration] didn’t have is a reason for anyone to vote for Barack Obama — a second-term agenda.  Mark Halperin became the loudest voice in the media to point this out after the second debate came and went without it, and even some Democrats began to wonder whether Obama himself knew what he wanted to do with a second term.  Hours after the third debate passed without an agenda, guess what Team Obama discovered?

You will see ads that claim that all is well and things are improving and the administration’s efforts in the first term have been successful. Rick Klein says “President Obama came into the debate with a record to boast of” [Mitt Romney Keeps Command Amid Attacks – and Looks to Future]. Yet on foreign policy, there is the Benghazi situation, Obama: The Dictator’s Choice For U.S. President or the apology tour idea – that last gets the fact checkers in a tizzy but Drudge had a collection of pictures of the bowing to other country leaders and another group has put together a set of clips of the apologies.

The charts that Ed uses to answer the question about whether or not real progress has been made include change in US Employment during recessions that show the current situation is way behind other such events, the declining labor force participation, and the budget deficit by year since 2000. These charts show a laggard economy where a smaller portion of the population is engaged in productive labor and a government accumulating debt at an unprecedented rate. What is odd is that those phenomena don’t seem to worry a whole lot of folks, some of whome go so far as to deny their existence.