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Cross posted from Real Economics.

According to an analysis by Pulitzer-Prize winning reporter David Cay Johnston, the Bush tax cuts, rather than resulting in great general prosperity – as argued by Bush and the Republican Party – cost working Americans a total of 6.6 trillion dollars in lost income over 12 years. For each American taxpayer that is $48,000 in pre-tax personal income.

Johnston is author of the 2008 book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill), and was formerly a correspondent for the New York Times. He has been a pioneer in tracking down, calculating, and revealing to the public the trillions of dollars the very rich and various corporations have hidden in hot money centers around the world to avoid and evade taxes. In January 2009, he presented in Mother Jones magazine a point-by-point plan for dramatically shifting government policies away from favoring the rich and corporations, to working for the general welfare of all Americans. Among his points was a ruthless crackdown on tax havens such as Bermuda and the Cayman Islands, including the use of military force if that was required to overcome the refusal of the authorities of those locales to cooperate.

The discussion on Daily Kos of Johnston’s determination that the Bush tax cuts had essentially robbed each working American of $48,000 in pre-tax personal income reflected the confusion and ignorance that still characterizes thinking about political economy among Democrats and the left generally. A number of tenets and assumptions fostered by movement conservatism were much in evidence. For example, one commenter wrote:

But how do you make that the fault of the Bush tax cuts? For at least the first few years doesn't it make more sense to blame 9/11? In actual fact, I think a big part of the issue is globalization and the knowledge economy…. Globally, incomes are converging…. Secondly, the Internet and the knowledge economy are transforming us into a winner takes all economy.

Leaving aside the glaring contradiction of how incomes could possibly be converging in a “winner takes all economy,” the commenter is asking an important question> What is the causal mechanism by which Bush’s $1.6 trillion in tax cuts resulted in a drop in personal income of $6.6 trillion? This is slightly different than asking why Republican / conservative tax cuts don’t actually pay for themselves, but is closely related. In December 2010, when President Obama was pushing through an extension of the Bush tax cuts, I wrote The Obama tax deal with Republicans is insane, in which I noted, “there have been three grand multi-year national experiments with Republican / Conservative tax cutting over the past century.” These were: the Harding / Coolidge tax cuts of 1921 through 1926; the Reagan tax cuts of 1981; and the Bush tax cuts of 2002. The results of each one of these tax cuts was exactly the same: “all three experiments resulted in the average American becoming poorer, the real (industrial) economy in tatters, and spectacular financial crashes.”

Which should lead to the obvious question:

Why do tax cuts lead, counter-intuitively, to industrial decline, stagnant wages, and finally financial collapse?

Continued below the fluer de Kos....

And I explained:

If you look under the hood of the industrial economy, you easily see why there is this counter-intuitive relationship between tax rates and economic growth . With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business -- in plants, equipment, staff, research and development, new products and all the rest. But if tax rates are low, then there is more incentive to pull the wealth out, by declaring it as profits that are taxed at what turns out to be too low a rate. In other words, low taxes create an incentive for profit taking.

This in turn creates an incentive for short-term horizons in business planning. If you’re going to be taking all the profits out of a company, and take home a few million a year, why bother to reinvest anything in the business? You’re going to be rich, and never have to work again, even if the business goes bust. Or gets packed on a boat and shipped to China. Or goes "virtual" and lets all the hard work, like, you know, actually making something, be done by the lowest bidder. Employees? Don’t need them.

But employees are also customers. If enough businesses "take profits", after some length of time, the former employees also become former customers. Meaning, they stop buying. The economy's aggregate demand generation is crippled. From the three Republican tax cut experiments this past century, it appears the length of time for this to happen is five to seven years.

If tax rates are high enough to discourage profit taking - forcing wealth created by a business to be recycled back into the business – then businesses are pushed toward longer-term planning, as they invest in new plant and equipment that will be used for many years. And you do not get the absurd situation you have now, where companies are posting record breaking profits, but are not buying new equipment, nor hiring new employees.

Low tax rates encourage taking wealth out of industrial companies; the wealth taken out must then be "put to work." That means more money chasing "investment" opportunities, leading to price increases in financial capital or real estate or some other asset. In other words, an asset bubble. The rise in prices of an asset bubble has nothing to do with the creation of real wealth. It all looks like prosperity – until the asset bubble bursts. That’s where we are now.

In the DailyKos discussion of Johnston’s finding that each American taxpayer lost  $48,000 in pre-tax personal income because of the Bush tax cuts, I argued that the tax cuts are a symptom, not a causal factor, of an entire philosophy of political economy which is really to blame. The "cost" of $48,000 is a statistical artifact that is revealed by projecting what average incomes would have been if they had continued to grow at the same rate they were growing before the tax cuts. (In fact, I used the same type of analysis -- projecting that average weekly earnings of the typical household would have been nearly double what they are now, had earnings continued to grow at the same rate after Reagan as they had grown from 1964 to 1980 – to predict, in December 2007, the financial crashes of 2008.)

Globalization, financialization, technological displacement of workers, and other apparent causal factors that might be mentioned are really also symptoms. But symptoms of what?

The real underlying problem is the ideology of political economy espoused by conservatives and Republicans – and a disturbingly large number of Democrats and liberals. It is the belief that markets and private investors are better than government at deciding where and how to allocate society's financial and economic resources -- AND the accompanying belief that government can never be a positive factor in the economy, but only a burden sucking up resources that, if they had been placed under the direction of private investors in the markets, would have been used instead in ways that meet market demand and therefore "grow the economy."

We recognize this philosophy of political economy as conservatism, but it is called by economists "neo-liberalism," which during the Clinton administration became known as "the Washington Consensus " (through there were some critics who engaged in splitting hairs by arguing that the two were not exactly the same). Among the tenets of this school, which has dominated, and continues to dominate, USA policy making:

Fiscal policy discipline, with avoidance of large fiscal deficits relative to GDP; Tax reform, broadening the tax base and adopting moderate marginal tax rates; Interest rates that are market determined…; Trade liberalization…; Privatization of state enterprises; [and] Deregulation: abolition of regulations that impede market entry or restrict competition….

Now, stop and look at that. What’s missing? No mention is made of the general welfare. It is simply assumed that these neo-liberal measures of removing the government (or, the “state”, the preferred term of many conservative extremists who are forever denouncing all government programs, especially social programs, as “statism”), will result in widespread general prosperity, and such “prosperity” is the same as “the general welfare.”

This is the key defect in conservatism / neo-liberalism: the idea of the general welfare is ignored. Consider, for example, the following example. What would be the effect of the Koch brothers deciding to spend their huge fortune to triple the number the coal-fired and natural gas-fired electricity generating plants in the USA? Never mind why they would – this is just a hypothetical example I want to use to illustrate a point. Certainly, there would be a sizable increase in economic activity. A lot more steel, concrete, wiring, switches, boilers, turbines, generators, and transformers would have to be produced or imported, transported and distributed, and put into use. Hundreds of thousands, probably a few million, people would have to be hired to design, build, and operate all the new power plants. There would be, in fact, what many could hail as “an economic boom.” But would all this really be advancing the general welfare? Would significantly increasing our reliance on burning coal and natural gas to produce electricity really be “progress”?

And if you think this hypothetical example is far-fetched, consider that it is pretty much what we are doing with fracking, and the crash program to exploit the Bakken oil field in North Dakota. There certainly is an “economic boom” associated with these activities: hundreds of thousands of people have been hired to help frack; there has been a nearly five-fold increase in the number of new rail tank cars being constructed each year, and no other state comes close to North Dakota’s official unemployment rate of 2.6% (the next lowest is Vermont’s 3.3%, and the national average is supposedly 6.3%). The fracking and Bakken booms demonstrate vividly, as we face a rapidly closing window in which to solve the problems of climate change and peak oil, that what the markets determine as the best investments do not necessarily advance the general welfare. And consider the political activities of the Kochs in trying to prevent states from adopting renewable energy mandates, and prevent the construction of new urban mass transit systems.

In fact, political conservatives and libertarians explicitly denounce idea of the general welfare as the "slippery slope" to tyranny. The key here is the conservatives’, libertarians’ and neo-liberals’ rhetorical trick of labeling any government planning, “central planning,” which of course evokes the famines and gulags associated with the Soviet Union’s “central planning.”

The seminal book for this denigration of the general welfare was Austrian imperial economist Friedrich Hayek's book The Road to Serfdom, which is summarized on Wikipedia thus:

"warned of the danger of tyranny that inevitably results from government control of economic decision-making through central planning." He further argues that the abandonment of individualism and classical liberalism inevitably leads to a loss of freedom, the creation of an oppressive society, the tyranny of a dictator, and the serfdom of the individual. Significantly, Hayek challenged the general view among British academics that fascism was a capitalist reaction against socialism. He argued that fascism and socialism had common roots in central economic planning and empowering the state over the individual.

In Hayek's view, any governmental promotion of the general welfare is merely "central planning" and therefore a dangerous path that leads to the creation of an oppressive "big" government. That's why the mantra of Republicans is always "cut taxes," because their belief system simply cannot accept that giving money to government can ever result in any good, but will only be used to build up and grow a government of central planning that will eventually smother individual liberty and freedom.

The rub is simply that markets and private investors, as suggested by the examples of fracking and the Bakken field projects above, do NOT invest society's financial and economic resources in the best possible ways. It may appear to be the "most profitable" ways, but the statistical exercise performed to show that $48,000 of income was lost show that this profitability is illusory: the profits depended on deliberately failing to account for the externalities imposed on society, as well as the lost opportunity costs of not doing something that actually addresses the problems of climate change and peak oil.  What markets and private investors actually do is invest in ways to make more money the easiest way. This means that, if allowed by the lack of government surveillance and regulations, markets and private investors prefer to invest in credit default swaps, or futures on the dollar-yen valuation, or some other speculative instrument, instead of actual industry and infrastructure that increases the economic potential of society. As I showed in May 2009, and in June 2012, the flow of funds from the financial markets to industrial companies has actually been negative for over a decade (meaning industrial companies have been looted), and the U.S. economy consequently has been de-capitalized while it was also being deindustrialized. It is very misleading to call this state of affairs “capitalism.” It is much more precise to call it a bankers’ dictatorship, or as Sterling Newberry wrote in summer 2009, a “dictatorship of the propertariat.”

As the philosophy of conservatism / neo-liberalism spread and took hold, and government was shoved "out of the way" by defunding it, shutting agencies, and cutting regulations, the entire economy began to shift from actual productive functions of wealth creation, to functions of speculation, usury, and arbitrage.

The process of shoving government "out of the way" also affords the owners of financial capital greater opportunities to employ and exploit cheaper labor. This last particularly irks me, because if Americans knew their own history, they would know that this war of capital on labor was a central issue of USA politics through all the nineteenth century. Here is Henry Carey, the foremost American economist of the mid-nineteenth century, promoting what was then known as "the American System" of political economy:

The British system is built upon cheap labour, by which is meant low priced and worthless labor. Its effect is to cause it to become from day to day more low priced and worthless, and thus to destroy production upon which commerce must be based. The object of protection is to produce dear labour, that is, high-priced and valuable labour, and its effect is to cause it to increase in value from day to day, and to increase the equivalents to be exchanged, to the great increase of commerce.

-- Henry Carey - Excerpts from The Harmony of Interests: Agricultural, Manufacturing & Commercial(1851)

I have come to believe that the ideas of modern conservatism / neo-liberalism are actually the ideas of the old European oligarchs, and their American allies, the newly-minted financial oligarchs, who want to destroy "the American System" exactly because the role of government under that System prevents them from doing what they want to do with their money – indulge in the lazy way of Wall Street casino games, instead of the hard work of planning, building, and operating technologically advanced industrial facilities and infrastructure.

This leads me to the phrase "neo-liberalism" itself. Originally, liberalism was a revolt against the ruling monarch and oligarchs of Europe in the 15th through 17th centuries, who used the powers of the state to enrich themselves and their retainers through mercantilism and the granting of monopolies. Liberalism wanted these mercantilist monopolies dismantled so that entrepreneurs who did not enjoy the favor of the royal court could also compete; the efforts of these entrepreneurs, once released from the burden of state control, would then flourish and drive forward economic growth and prosperity.

Consider this passage by James Madison in The Federalist Number 39, keeping in mind the liberal revolt against the economic rule of the monarchs and oligarchs:

If we resort for a criterion to the different principles on which different forms of government are established, we may define a Republic to be, or at least may bestow that name on, a government which derives all its powers directly or indirectly from the great body of the people, and is administered by persons holding their offices during pleasure, for a limited period, or during good behavior. It is essential to such a government t/tat it be derived from the great body of the society, not from an inconsiderable proportion, OR A FAVORED CLASS OF IT : otherwise a handful of tyrannical nobles, exercising their oppressions by a delegation of their powers, might aspire to the rank of republicans, and claim for their government the honorable title of Republic.

Another author of the Federalist Papers, Alexander Hamilton, as the first Secretary of the Treasury, had to confront the question of capital, in order to secure funding for the general government, as well as create a framework to encourage the establishment of manufacturing, and advancing agricultural development. The antipode of the American System can be termed – and was in the mid nineteenth century, the British System, and it gave free reign to the classes in society which had amassed capital — whether by inheritance, thievery, or otherwise —  to use that capital for private gain, without regard to the general welfare. Hamilton rejected the British System, and strove to create structures and policies of government that channeled the use of capital into the higher purpose of promoting the happiness, security and prosperity of the entire population, not just the private gain of the few who happened to control most of the financial resources of the economy. In his December 1791 Report on Manufactures, Hamilton discussed the powers of the Federal government to encourage necessary industries and infrastructure, and near the end explained his concept of the general welfare:

The terms 'general welfare' were doubtless intended to signify more than as expressed or imported in those which Preceded; otherwise numerous exigencies incident to the affairs of a nation would have been left without a provision. The phrase is as comprehensive as any that could have been used; because it was not fit that the constitutional authority of the Union, to appropriate its revenues shou'd have been restricted within narrower limits than the 'General Welfare' and because this necessarily embraces a vast variety of particulars, which are susceptible neither of specification nor of definition.

It is therefore of necessity left to the discretion of the National Legislature, to pronounce, upon the objects, which concern the general Welfare, and for which under that description, an appropriation of money is requisite and proper. And there seems to be no room for a doubt that whatever concerns the general interests of learning of Agriculture or Manufactures and of Commerce are within the sphere of the national Council as far as regards an application of Money."

What the Constitution of the United States did was impose the consideration of the general welfare on the chaotic eruption of entrepreneurship. Corporate charters were granted only for specific purposes, and with due reference to the need to promote the general welfare somewhere in the charter. John F. Kasson, in his Civilizing the Machine: Technology and Republican Values in America, 1776-1900, (Grossman Publishers, 1976), notes that at the beginning of the republic,

The questions of the introduction of domestic manufactures and the role that labor-saving machines might play in American life were considered not as isolated economic issues but as matters affecting the entire character of society. No doubt profit motives existed, but would-be manufacturers had to make cogent arguments which addressed broader ideological concerns. “In addition to asking “How much will it pay?” they had to consider as well, ”How will it advance the cause of republicanism?” The question was not rhetorical – not at this time at least.

In his important study of the economic thinking behind the creation of the United States, E.A. J. Johnson writes in The Foundations of American Economic Freedom: Government and Enterprise in the Age of Washington, (University of Minnesota Press, 1973):

American economic liberalism in the 1790s represented an opposition to certain interests which not only were allegedly predatory and therefore unjust, but which also operated as restraining influences on the economic efficiency of the enterprise system. The blameworthy interests were both historical and emergent. Thus the British “landed interest” represented a historical exploitative agency as did the British factorage system. The “monied interest,” the “paper interest” or the “banking interest,” in contrast, represented new “factitious” interests; they were conceived to be recent perversions of an otherwise wholesome economic society. Democratic thought waged war, therefore, on two fronts: against the older propertied interests (which defended their privileges by a “political formula” which asserted that social stability required social stratification), and against the newer, “unnatural,” “factitious,” financial interests which threatened to create different forms of exploitation and to generate new forms of inefficiency within the enterprise system.” (pages 58-59)

….The general view, discernible in contemporaneous literature, was that the responsibility of government should involve enough surveillance over the enterprise system to ensure the social usefulness of all economic activity. It is quite proper, said [leading Maryland jurist and promoter of scientific agriculture John Beale] Bordley, for individuals to “choose for themselves” how they will apply their labor and their intelligence in production. But it does not follow from this that “legislators and men of influence” are freed from all responsibility for giving direction to the course of national economic development. The must, for instance, discountenance the production of unnecessary commodities of luxury when common sense indicates the need for food and other essentials.  Lawmakers can fulfill their functions properly only when they “become benefactors to the publick”; in new countries they must safeguard agriculture and commerce, encourage immigration, and promote manufactures. Admittedly, liberty “is one of the most important blessings which men possess,” but the idea that liberty is synonymous with complete freedom from restraint “is a most unwise, mistaken apprehension.” True liberty demands a system of legislation that will lead all members of society “to unite their exertions” for the public welfare. It should therefore be the policy of government to aid and foster certain activities or kinds of business that strengthen a nation, even as it should be the duty of government to repress “those fashions, habits, and practices, which tend to weaken, impoverish, and corrupt the people. (pages 194-195)

Where liberalism is a revolt by the people against the government of oligarchs who use the state to steer economic activity to their own selfish gain, neo-liberalism is a revolt by oligarchs against the government of the people who use the state to steer economic activity to promote the general welfare. It is not coincidence that the rise of neo-liberalism was funded and largely conceived by people who were, or were linked to, old European oligarchs. Unfortunately, Philip Mirowski and Dieter Plehwe were not very explicit about this point in their important book, The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective, but there are enough snippets of information there to lead me to the conclusions outlined above. One example is the role of Count Richard Nikolaus von Coudenhove-Kalergi, founder of the Pan-European Union.

It is the cumulative effects of the philosophy of conservatism / neo-liberalism, in smothering all consideration of the general welfare and replacing it with the idea that any private gain, no matter how speculative or how usurious, is a net benefit to society, that is the causal factor in the decline in average incomes seen in the 12 years since the Bush tax cuts.

Originally posted to NBBooks on Sun Jul 13, 2014 at 01:09 PM PDT.

Also republished by Money and Public Purpose.

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Comment Preferences

  •  Tip Jar (340+ / 0-)
    Recommended by:
    skybluewater, Alumbrados, Mimikatz, chuck utzman, Paleo, Val, Odysseus, Trendar, glitterscale, Gooserock, barry s, bosdcla14, surfbird007, Emerson, Shockwave, wu ming, TX Unmuzzled, LeftHandedMan, freelunch, RFK Lives, dpc, opinionated, BlackGriffen, fugwb, susakinovember, macleme, mollyd, dksbook, jdmorg, tidalwave1, psnyder, Bring the Lions, Dallasdoc, pat bunny, White Buffalo, potatohead, HeyMikey, mnguitar, NYFM, Bluehawk, lcrp, stringer bell, zerelda, side pocket, Hillbilly Dem, Deward Hastings, sawgrass727, Gowrie Gal, rapala, nailbender, radarlady, 3goldens, NoMoreLies, newfie, disrael, mjd in florida, corvo, kamarvt, Simplify, basquebob, ChemBob, YucatanMan, cassidy3, most peculiar mama, Ozymandius, middleagedhousewife, No Exit, Captain Chaos, elwior, blue jersey mom, congenitalefty, Youffraita, jrooth, CWinebrinner, shaharazade, Ckntfld, No one gets out alive, Dartagnan, Sinan, papercut, techno, Sun Tzu, SouthernLiberalinMD, MKinTN, MJ via Chicago, kenwards, ltsply2, p gorden lippy, jiffykeen, Pescadero Bill, ozsea1, science nerd, Noodles, chriscol, LibrErica, fiercefilms, annan, Lefty Coaster, catlady, brianmkennedy, Front Toward Enemy, jnhobbs, qofdisks, flavor411, kkjohnson, SoCalSal, Brooke In Seattle, deltadoc, vacantlook, bryduck, The Hindsight Times, ribeye, ER Doc, decisivemoment, Capt Crunch, cybrestrike, TAH from SLC, livingthedream, eyo, Timaeus, Prognosticator, wigwam, DSC on the Plateau, JosephK74, Constantly Amazed, chimpy, majcmb1, amyzex, docmidwest, GreatLakeSailor, Chaddiwicker, wordene, boatjones, cocinero, Angie in WA State, torquenator, Shakludanto, splintersawry, splashy, brakejob, Yellow Canary, gsbadj, Bluesee, WolfmanSpike, WheninRome, monkeybrainpolitics, Josiah Bartlett, Dolphin99, kaliope, costello7, PapaChach, waiting for lefty, quagmiremonkey, bartcopfan, blackjackal, Sunspots, USHomeopath, Magick Maven, geebeebee, run around, slakn1, AaronInSanDiego, claude, agnostic, offgrid, kharma, Heimyankel, Jollie Ollie Orange, aughtomatic, IreGyre, blue muon, vahana, eagleray, cyncynical, SparkyGump, chuco35, The Wizard, hubcap, Steven D, bluezen, kmkirb, FinchJ, Uncle Bob, Amor Y Risa, wolf advocate, CA ridebalanced, northsylvania, cici414, cassandraX, figbash, oortdust, IdaMena2, multilee, Anna in PDX, BYw, ginimck, Dissentinator, mkor7, NoBlueSkies, alliwant, amparo fan, roosterbear

    A conservative is a scab for the oligarchy.

    by NBBooks on Sun Jul 13, 2014 at 01:09:30 PM PDT

  •  Yep, I've Made a Number of These Points Myself (103+ / 0-)

    often here.

    I'm self employed, I live that tax reality that when I face a big tax bill (in my case it would come from an unexpected surge in income that didn't have its estimated tax sent in), I have the incentive to reinvest, and yes if the tax rates are low why shouldn't I withdraw it as my personal income?

    Same applies to both corporate and individual taxation.

    Right now the highest income owners and management can take home most of what they can arrange for compensation, so obviously it's in their personal and family interest to arrange for hyper profitability for hyper compensation.

    They're humans; they only need a few years' income at the top end to make themselves and family safely rich for life, so the incentives favor short term horizon management just as you say, and to hell with the company after a few years when we no longer depend on it or for that matter on the welfare of society, having made our killing.

    Globalization and financialization are tools. Since the ultimate incentives are for hyper profitability, earning ordinary good returns and a good living are no longer good enough. Finance and outsourced manufacture are two activities with hyper markup potential that can generate extreme returns.

    Once we allow individuals to take home extreme compensation, the economy shifts toward sectors like finance that can easily generate extreme rewards.

    THen other sectors begin eating their own muscle to generate competitive profits for investors, for the short and medium term as long as they can.

    Other sectors that merely pay a good living, that merely earn a good return on investment, are no longer competitive and like newspapers, family retail, family farming, clothing manufacture, so much factory work, they either offshore or go out of business.

    The Neoliberals whose policies we began to adopt as early as Jimmy Carter, if not before, were literal old time oligarchs and royalists, aristocratic minded. There was information with more specifics in circulation in the past, maybe there are readers who know more of the names behind the early RW revolution and neoliberal economics and their background in connection with economic aristocracy and values.

    Regardless, from the first neoliberal moves, it's been obvious that the only consistent effect of those economics has been for the benefit not of the top 10% or so, not for the 1%, not for the 0.1% but up into the .o1% or so.

    Almost all the 1% are enablers who some studies have shown have not seen any important growth over numerous periods of the past 45 years when the 99% were unarguably stalled to backsliding.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sun Jul 13, 2014 at 01:45:05 PM PDT

  •  Leaving out thew 86 TRA? (32+ / 0-)

    Eliminating nearly all tax incentives for long term domestic investment.......

    ...........that was depressing the clutch and shifting into gear and dumping the clutch while mashing the gas pedal down when it comes to capital leaving the US for Asia. NAFTA was the supercharger that accelerated capital & jobs leaving the US.

    Without the 86 TRA & NAfTA the Bush tax cuts would have been relatively survivable, because the large scale loss of jobs and capital to Asia would of had far less incentive to occur during the intervening 15 years.

    The 1981 TRA was a tuff one, sure, but the 86 TRA was directly responsible for the large scale outsourcing, hitting domestic manufacturing the hardest.

    .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Sun Jul 13, 2014 at 02:16:55 PM PDT

  •  High marginal tax rates raise business investment (101+ / 0-)

    This is such a plainly evident truth that it has required decades of Big Lie propaganda to convince Americans otherwise.  Business owners have two choices regarding what to do with excess capital:  invest it to grow the business, or take it out as income for personal use.  High income and corporate tax rates promote investment, low ones promote personal consumption and diversion to other uses.  It's really a very remarkably simple concept, but aside from Thom Hartmann I've never heard anyone in the media elucidate it.

    Corporate offshoring of profits is another gigantic economic anvil.  What would our economy look like if the trillions of dollars sitting in tax havens were put to productive use?  What would our country look like if some fraction of those trillions were invested in educating our populace and rebuilding our infrastructure?

    Government has been roundly trashed by conservatives (and neo-liberals) because it is the one engine for improving the general welfare and building the country.  This will be partially at the expense of the oligarchic class, and they are unwilling to pitch in to any discernible degree.  I long for the good old days, when greed was recognized as a mortal sin.

    I stand with triv33. Shame on her attackers.

    by Dallasdoc on Sun Jul 13, 2014 at 02:29:44 PM PDT

  •  What a great diary! (91+ / 0-)

    It's length may turn some folks off, but this diary should be required reading for everyone here.  It clearly explains why so many of us are against the neo-liberal economic policies promoted by Third Way and the majority of the Democratic party

    There are so many great tidbits in this diary, but I think that the problem with our current system can be boiled down to this one simple sentence.

    What markets and private investors actually do is invest in ways to make more money the easiest way.
    And that is why they need to be taxed and regulated so that the above option is not so attractive.  I will also add that higher marginal rates and closing of tax shelter loopholes means more money in the Treasury so that the government can make its most important investment of all, in our own people.  

    Tipped, recommended and hot listed.

    "I don't want to run the empire, I want to bring it down!" ~ Dr. Cornel West "...isn't the problem here that the government takes on, arbitrarily and without justification, an adversarial attitude towards its citizenry?" ~ SouthernLiberalinMD

    by gulfgal98 on Sun Jul 13, 2014 at 03:10:15 PM PDT

    •  Yes, hit me the same way (2+ / 0-)
      Recommended by:
      DSC on the Plateau, gulfgal98

      What a great diary!!

      Still trying to figure it all out

      by CindyV on Mon Jul 14, 2014 at 10:11:11 AM PDT

      [ Parent ]

    •  You have to remember... (0+ / 0-)
      It clearly explains why so many of us are against the neo-liberal economic policies promoted by Third Way and the majority of the Democratic party
      You have to remember that a very large minority of Democratic voters, and a significant majority of Democratic politicians, are in the Democratic party because the Republican party went completely off the rails 30 years ago and has continued off into the weeds ever since.

      The people who realized that the other party was no longer interested in actually running the country at all went over to the party that was, and have mostly succeeded not only in taking it over, but in the very difficult task of convincing themselves that they are the real liberals who belong in the Democratic party.

      This of course involves convincing themselves that the original occupants are 'clearly lunatics' and 'just as insane as the Republican party'... because if it were sensible to be any further to the left, then the current owners of the Democratic party would have to own up to the fact that they aren't really liberals.

      Some of the more honest ones do, of course. Obama has said several times that if it were 30 years ago, he'd be a Republican. But so much of the Democratic party is firmly convinced that he and they are 'real liberals' that they have to demonize and reject anyone further to the left.

      It's a funny process to watch, really. You have to laugh. Because crying and throwing up are both bad for you.

  •  It is actually 48,000 per family not per person. (3+ / 0-)
    Recommended by:
    psnyder, Slightly Wobbly, elwior

    We are not powerless!! "Activism is the rent I pay for living on this planet."– Alice Walker

    by nocynicism on Sun Jul 13, 2014 at 03:33:00 PM PDT

  •  General welfare missing in the "conservative".. (28+ / 0-)

    ..or "neoliberal" as noted in this post may not necessarily be an oversight. And when it is mentioned by "conservatives" the story is almost always a purposeful disparaging of what general welfare actually is. 'Cadillac queens'  for instance - social programs as only for the unwashed masses when the $trillons spent on protecting corporate  "interest" here and abroad is a huge part of the "general welfare"

    We Dems have the heart of it and understand it is about people and the society that we are.

      "conservatives" / capital / supply side (those that don't survive on earned income, but live off of accrued wealth exploit the "general welfare") understand the value as would a parasite to a host

    The difference is almost completely opposite

    Most Oligarchs like the Pete Petersons of the world say they believe that their wealth is real. A tangible thing that protects them, sustains them and has some solid foundation all of itself.

    The smarter oligarchs know this is fiction. Hence 'bread an circuses' and so on.

    Money is an agreement. We agree that is has value. That is the general welfare that supports the Oligarchy - that "agreement"

     Without our labor and all of society; every single person  (including immigrants) and the infrastructure, that includes the Justice Dept. and the police forces, military, etc. that protects that "agreement") that was built, paid for and maintained by the physical world (labor sector) that enables and allows the very existence of legal fictions; the incorporated entities - the fictional on paper world.

    Just one of the many trick that David Cay Johnston brings up and is good to mention  - imo - to push back on the right-wing myth we always hear.  That the 1%ers pay most of the taxes. On paper (or in zeros & ones), but in reality, not so much.

    Tax deferrals are one of the major tools for redistributing wealth upward. While most of us must pay each time we get a paycheck, executives and corporations can defer their taxes for years, even decades. When the treasury finally gets the money, inflation has eroded its value; in the meantime, government must borrow more, pay more interest, and collect more from everyone else.
    ~~~~~~~~~~~~~~~~~~~~~~

    One thing though. the title of this post stomps on the work itself and directs the focus away from some excellent points made

    This kind of a title would avoid that:

    Understanding how Bush Tax Cuts wiped out $6.6 trillion in personal income is a BFD

    The focus is on the good work posted here, the culprit(s) are explained and the title remains in service to the points made.

    Unless a reprimand of sorts aimed Dems was intended - that is. If so, again, it lessens the impact - imo

  •  Terrific explanation (13+ / 0-)

    Thanks!

    Reality has a well-known liberal bias -- Stephen Colbert

    by ItsaMathJoke on Sun Jul 13, 2014 at 03:42:16 PM PDT

  •  And now they want even more (13+ / 0-)

    237 billion more is what they are proposing.  What thievery  

  •  It's not "ignored", it's "assumed" (27+ / 0-)
    No mention is made of the general welfare. It is simply assumed that these neo-liberal measures of removing the government (or, the “state”, the preferred term of many conservative extremists who are forever denouncing all government programs, especially social programs, as “statism”), will result in widespread general prosperity, and such “prosperity” is the same as “the general welfare.”

    This is the key defect in conservatism / neo-liberalism: the idea of the general welfare is ignored.

    I agree and heartily rec this diary, but I'd fall all over myself to flesh out the point out that "prosperity" is not the same thing as "the general welfare". that is a point that any populist worth their salt needs to start clubbing these neo-con-artists and neo-fake-liberals over the head with. And they need to use that same club on the heads of every person in this country that is still being sucked in by propaganda that lays waste to this basic tenet of business evolution:

     

    With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business -- in plants, equipment, staff, research and development, new products and all the rest.But if tax rates are low, then there is more incentive to pull the wealth out, by declaring it as profits that are taxed at what turns out to be too low a rate. In other words, low taxes create an incentive for profit taking.
     

    "Inevitability" diminishes free will and replaces it with self-fulfilling prophecies."--Geenius At Wrok

    by lunachickie on Sun Jul 13, 2014 at 03:53:57 PM PDT

  •  Isn't there a way for the people to use the (8+ / 0-)

    Rich people's principle of "Clawback" to repatriate this 6.6 Trillion to its rightful owners.

    Isn't it a delightful thought just to contemplate

    •  Yeah, its called legislative action. Simply advoca (3+ / 0-)
      Recommended by:
      pat bunny, OHeyeO, opinionated

      for Congress suspending the punishing and regressive FICA tax so that we middle and working class folks can get a minimum raise of at least 7.5% each year.

      "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

      by Auburn Parks on Sun Jul 13, 2014 at 04:45:50 PM PDT

      [ Parent ]

      •  I love your sig line. Great idea by the way. (6+ / 0-)
        •  Thanks (1+ / 0-)
          Recommended by:
          bartcopfan

          "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

          by Auburn Parks on Sun Jul 13, 2014 at 05:09:00 PM PDT

          [ Parent ]

      •  Now that's eating your seed corn (9+ / 0-)

        Because it would be great to bankrupt the government and Social Security and Medicare so you can starve during your retirement years.

        Money is property, not speech. Overturn Citizens United.

        by Betty Pinson on Sun Jul 13, 2014 at 04:56:00 PM PDT

        [ Parent ]

        •  HAHAHAHAHAHAHAHAHAHAHHAHAHAHAH (1+ / 0-)
          Recommended by:
          No one gets out alive

          bankrupt the Govt eh? You do realize that the Govt is the monopoly supplier of the US Dollar dont you? If anyone else make US Dollars they get arrested for counterfeiting. So how can the issuer of the dollar runn out of dollar again?

          "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

          by Auburn Parks on Sun Jul 13, 2014 at 05:01:40 PM PDT

          [ Parent ]

          •  Um, read my comment again (6+ / 0-)

            If need be, I can type it in ALL CAPS.

            I mention bankrupting Social Security, some thing neolibs and their low brow conservative pals have been trying to do since Raygun was POTUS.

            Those peabrained jackals have been trying to privatize SS and Medicare for decades.

            I'm surprised such a smart guy like yourself is unaware of that fact.

            Money is property, not speech. Overturn Citizens United.

            by Betty Pinson on Sun Jul 13, 2014 at 05:17:39 PM PDT

            [ Parent ]

            •  Hey Betty, no need for you to type in caps, (2+ / 0-)
              Recommended by:
              ozsea1, No one gets out alive

              the quote is right here:

              "Because it would be great to bankrupt the government..."

              The SS Trust fund and FICA have nothing to do with funding SS payments.  The Govt's budget is not like your personal budget.

              Whether taxes are $1 or $100 trillion per year, the ability of the Govt to spend money by crediting bank accounts at the Fed with digital entries is always infinite.

              That's what being the currency issuer means.

              "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

              by Auburn Parks on Sun Jul 13, 2014 at 05:22:52 PM PDT

              [ Parent ]

              •  DBAA (1+ / 0-)
                Recommended by:
                Words In Action

                All caps.

                Money is property, not speech. Overturn Citizens United.

                by Betty Pinson on Sun Jul 13, 2014 at 06:03:21 PM PDT

                [ Parent ]

              •  Auburn, the government does not admit (4+ / 0-)
                Recommended by:
                milkbone, costello7, NoMoreLies, Val

                that reality and you know it. Therefore, the political reality, as in, what would actually happen if anybody followed your advice, is that FICA tax would be cut, Social Security would show a greater inability to cover its expenses 30 years down the road, and we'd be treated to a 24/7 Pete Petersen propaganda-fest about how Social Security benefits need to be cut.

                If you can first get the government to admit the reality that they have the power to issue as much fucking currency as they want, which they basically just proved during the financial crisis (16 trillion dollars distributed to banks and "wealthy individuals"--ever wonder who they are? I do...), then you can start talking about cutting taxes. I have no, repeat, no hope that you can convince them of any such thing, as I have been unable to convince them even of Keynesianism, which used to be the bread and butter economic philosophy of people from FDR to Richard Nixon, and which has been historically proven, within certain parameters, to work, albeit with down sides that your economic philosophy would not incur.

                You're talking about people who don't even understand that it's good for the government to spend in a recession--or won't admit it.

                There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

                by SouthernLiberalinMD on Mon Jul 14, 2014 at 08:20:17 AM PDT

                [ Parent ]

                •  Actually there have been many examples of (0+ / 0-)

                  extremely high level Govt officials saying exactly the same thing I am:

                  http://www.dailykos.com/...

                  Fed Chairmen, Industrial luminaries, TSY officials etc. The reality is out there for anyone to see, people just have to want to look.

                  "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                  by Auburn Parks on Mon Jul 14, 2014 at 11:10:35 AM PDT

                  [ Parent ]

                  •  I'm not talking about proving whether your (2+ / 0-)
                    Recommended by:
                    claude, Val

                    point is philosophically sound.  For what it's worth (nothing), I agree with your philosophy. I agree that banks just invent money out of thin air. I agree that it's idiotic for governments to let banks do that and then borrow money from them rather than issuing currency themselves. I have read Web of Debt and I agree with it fully, all right?

                     I just think that if you follow your philosophy (because it's right) without looking at the fucking political minefield you're walking into, dominated by people who would never give your theories or the reality they describe the time of day, you're going to do damage. They don't care what's real. They are faith-based remember? They invent political reality.

                     The political reality I'm talking about (the one they've invented) comprises the political and economic philosophies that go into making the federal budget and determining fiscal policy for this country. I don't care about Bernanke and Greenspan quotations when those quotations were not brought to bear directly on the budgetary and fiscal process of our polity during the eras when those gentlemen held sway. In other words, who fucking cares what Bernanke and Greenspan said, when the way they did their jobs exemplified precisely the opposite?

                    "Reality there for anybody to see, people just have to want to look?" Let's talk about the people who don't want to look: Chris Van Hollen, Paul Ryan, John Boehner, Barack Obama, Tim Geithner, Larry Summers, Bill Daley, and whoever that most recent jerk is, oh yeah, Gene Sperling. To say nothing of Max Baucus and whatever dickwad is going to replace him on the Senate side. (I have to insert here that I don't think Van Hollen is a jerk or a dickwad. It's just that the chances of him breaking with the PTB on this issue are, uh, nil.)

                    If you go in there demanding a FICA cut based on your philosophies, they will give you the FICA cut with a smile and ignore your philosophies. Then they will use the FICA cut as more justification for cutting Social Security benefits.

                    There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

                    by SouthernLiberalinMD on Mon Jul 14, 2014 at 12:32:34 PM PDT

                    [ Parent ]

                •  WRT the political realities. I certainly agree wit (2+ / 0-)
                  Recommended by:
                  SouthernLiberalinMD, offgrid

                  alot of your logic and reasoning. I just take the counter POV, I believe its the populace that the Pols take their cues from. Just look at gay marriage and marijuana legalization. Politicians haven't led the public in changing cultural norms, it was the other way around.

                  I agree that we probably won't get a politician to admit the truth our Monetary Sovereignty, just like we don't have any publicly acknowledged atheists in Congress. But if the people demand something enough, the Pols will come around. So thats all I'm trying to do, trying to get our community (progressives) to understand accounting and basic economics, so that we have the intellectual framework  from which we can make coherent arguments. After all, we can't win progressive policy if we accept the Right wing framing and lie that the Govts budget works the same way as a household budget.

                  "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                  by Auburn Parks on Mon Jul 14, 2014 at 11:16:08 AM PDT

                  [ Parent ]

                  •  Social policy bones to fight over. (3+ / 0-)

                    Distracting the people away from the Neoliberal economic policies.

                    •  Both Cons and Dems think that shrinking (1+ / 0-)
                      Recommended by:
                      offgrid

                      the private sector's surplus (Govt deficit) is a good thing to do.

                      Dems want to raise taxes to remove the private sector's surplus
                      Cons want to cut spending to remove the private sector's surplus.

                      Both policies are tragic and ridiculous

                      "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                      by Auburn Parks on Mon Jul 14, 2014 at 12:19:22 PM PDT

                      [ Parent ]

                      •  I'd like to discuss that part further with you. (1+ / 0-)
                        Recommended by:
                        offgrid

                        Because I'm not certain, under these conditions, that removing the private sector's surplus is a bad thing. They are currently hoarding their surplus, when they're not using it to gamble and increase the volatility of the whole system. Maybe it would be better if we did decrease their surplus.

                        As far as the conservatives go, they don't really practice what they preach anyway. MIC spending doesn't count as spending to them. They're willing to pour billions of government spending into wars, machines of war, black ops, surveillance, departments of homeland security, militarized police, what have you...

                        There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

                        by SouthernLiberalinMD on Mon Jul 14, 2014 at 12:39:05 PM PDT

                        [ Parent ]

                        •  a (0+ / 0-)

                          "Because I'm not certain, under these conditions, that removing the private sector's surplus is a bad thing."

                          How can you say this?

                          The real unemployment rate is still over 10% (U-6)
                          Real wages are at the same level as 1990

                          Rich people may have too much surplus, but they are not the entire private sector.

                          Just ask yourself what good letting the bush tax cuts expire on people making more than $400K per year did.

                          We don't need the revenue and people making $500K a year are not the enemy. People making $500 million per year are the enemy, and they don't earn salaries that get taxed by the Federal Income Tax.

                          "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                          by Auburn Parks on Tue Jul 15, 2014 at 08:47:50 AM PDT

                          [ Parent ]

                          •  Rich people are not the entire private sector (0+ / 0-)

                            But they are pretty much where the surplus is. As far as the upper middle class goes, I'm not the one that endangers them. It's the people above them.

                            And yeah, I'm fine with targeting primarily the top 1%, or perhaps even the top .01%. I know where the money's going, and who's absorbed the profits of the last 5 years, and who destabilized the damned economy in the first place.

                            I'd say that it wouldn't be horrible for the top 5% or 10% to pay some more taxes as well--but the real target, and what needs to be dealt with immediately, is the top 1%--and especially the top .01%. If we could deal with the top .01% and tax them fairly (including getting putting a cork in the ridiculous offshoring) we'd be well on our way back to sanity, and then we could see what a fair tax would be on the top 1%, the top 5%, the top 10%, etc.

                            There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

                            by SouthernLiberalinMD on Tue Jul 15, 2014 at 03:20:18 PM PDT

                            [ Parent ]

                          •  The top 5% of earners makes $186K per year (0+ / 0-)

                            why do you think that is too much money and so they should keep less of it?

                            What evidence do you have that $186K per year is too much income?

                            "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                            by Auburn Parks on Tue Jul 15, 2014 at 04:17:50 PM PDT

                            [ Parent ]

                          •  That's not precisely what I said. (0+ / 0-)
                            And yeah, I'm fine with targeting primarily the top 1%, or perhaps even the top .01%. I know where the money's going, and who's absorbed the profits of the last 5 years, and who destabilized the damned economy in the first place.

                            There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

                            by SouthernLiberalinMD on Tue Jul 15, 2014 at 07:31:29 PM PDT

                            [ Parent ]

                          •  a (0+ / 0-)

                            "I'd say that it wouldn't be horrible for the top 5% or 10% to pay some more taxes as well--"

                            "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                            by Auburn Parks on Tue Jul 15, 2014 at 08:57:17 PM PDT

                            [ Parent ]

                        •  And yes Cons are worthless hypocrites. (0+ / 0-)

                          If your goal for higher taxes on the wealthy is to force business owners to invest more of their money into expanding businesses and not as exorbitant CEO take-home pay, then the first thing we need to do is to treat ALL income the same.

                          It would do no good whatsoever to put a 90% income tax in place and maintain a 20% capital gains tax, rich people would simply not take salary.

                          So treat all income the same, tax at least 75% on income over $20 million a year and that will become an effective income ceiling.

                          But there is another component to this, businesses don't expand and hire workers unless the demand forces them to. Thats why supply side effects don't really work in the USA. And companies aren't going to increase wages the day after the tax gets instituted, thats why we need to increase Demand through FICA cuts (or just send everyone a $500 check every month) until demand is high enough to force businesses to hire more workers. Then once the virtuous feedback loop is initiated, the Govt can pull back on its contribution to the private sector (deficit).

                          Remember, the golden years of the 50's and 60's weren't just because of high ta rates, there was high union membership and labor bargaining power, we were a net exporter (which adds to the domestic money supply and thus demand) we had high tax rates, high worker purchasing power, and there were no other opportunities for rich people  make money other than in the real economy. The financial sector was so small, the only way to get rich was by running an actual business. Now, there are a million ways to get rich bby not making anything in the real economy at all.

                          We are never going to recreate the exact conditions of the 50's and 60's where we had high growth and smallish deficits. There is no alternative going forward to using the infinite capacity of the US Govt to generate consumer demand and worker purchasing power..

                          "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                          by Auburn Parks on Tue Jul 15, 2014 at 08:58:41 AM PDT

                          [ Parent ]

                  •  Oh. Oops. (1+ / 0-)
                    Recommended by:
                    offgrid

                    I should have read farther down before I launched that response at you. Sorry.

                    I certainly agree with all of this:

                    So thats all I'm trying to do, trying to get our community (progressives) to understand accounting and basic economics, so that we have the intellectual framework  from which we can make coherent arguments. After all, we can't win progressive policy if we accept the Right wing framing and lie that the Govts budget works the same way as a household budget.
                    I'm not sure anymore that I agree with this:
                    But if the people demand something enough, the Pols will come around.
                    Trying to work on the question of what we can do if the above is no longer true.

                    Your work on currency may end up being incredibly helpful once we truly start to work (politically) in a way that suits and honors the reality of our current conditions.

                    There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

                    by SouthernLiberalinMD on Mon Jul 14, 2014 at 12:36:15 PM PDT

                    [ Parent ]

      •  Advocating for tax cuts is your idea (3+ / 0-)
        Recommended by:
        costello7, NoMoreLies, cybrestrike

        for how to get money out of the plutocracy?

        If that's the case, why is the plutocracy constantly funding things like Freedom Works to do just that?

        There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

        by SouthernLiberalinMD on Mon Jul 14, 2014 at 08:11:13 AM PDT

        [ Parent ]

        •  No, FICA tax cuts are my method for giving (0+ / 0-)

          working and middle class people a 7.5% raise.

          FICA is the most regressive tax in the country, federal Income taxes are the most progressive.

          Rich people don't want to cut FICA because they don't really pay much if any FICA tax, whereas they pay the majority of Federal Income tax dollars.

          basically, the moral of this story is that REAL wages don't go up (post 1983) unless unemployment approaches or gets below 5%. And since employment and wages wont go up until we have the aggregate demand necessary to force businesses to hire all those millions of unemployed and pay their workers more money. So I'm simply advocating for the Govt to increase aggregate demand by increasing the deficit. The fastest way to do that is to cut taxes for the middle and working class.

          I also think we need lots of infrastructure spending, but FICA taxes are much quicker than large scale construction projects at creating more private sector income and thus spending.

          "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

          by Auburn Parks on Mon Jul 14, 2014 at 11:21:31 AM PDT

          [ Parent ]

          •  I'm not certain anymore that simple laws of supply (1+ / 0-)
            Recommended by:
            cybrestrike

            and demand apply.

            Not sure what to do if they don't.

            What I mean is, I'm not certain that the big multinationals will respond in a simple way to a nationally-based rise in demand (i.e. Demand=I expand my operations/hire more people/pay out more wages because I'm getting more business/which then creates more spending power/which enables more demand to get expressed/and so on). I'm not sure the big players are as, uh, neutrally responsive as that. Smaller businesses might be, but they're having a hell of a time in this incredibly uneven playing field.

            Hard to put into words what I mean.

            There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

            by SouthernLiberalinMD on Mon Jul 14, 2014 at 12:45:22 PM PDT

            [ Parent ]

            •  You are right, even with the best MMT fiscal polic (0+ / 0-)

              implemented, most likely, we will still not get sustained full employment. Which is why MMTer''s recognize that the only way to achieve true full employment is to have a Job Guarantee funded by the dollar sovereign.

              "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

              by Auburn Parks on Tue Jul 15, 2014 at 09:00:14 AM PDT

              [ Parent ]

  •  The top corporate tax rate has been 35% since (7+ / 0-)

    1993.  Since your premise involves "business planning" with plants, equipment and the like this is an important point.  You have conflated the corporate tax rate with personal taxes and in so doing have not helped Johnston's argument at all.   Corporations do not plan around the top marginal individual rates.   A sub-S could in theory but few of them buy plants.

    I am not defending Bush's deficit-causing individual tax cuts but DKJ has a very weak argument.

    I will paraphrase Warren Buffett when he scoffs at the GOP notion that high taxes hurt business investment, "I don't ask what the tax rate is when someone brings me a billion dollar idea".  

    It is still true.

    "The way to see by faith is to shut the eye of reason." - Thomas Paine

    by shrike on Sun Jul 13, 2014 at 04:09:08 PM PDT

    •  Disagree (16+ / 0-)

      Because for that to be true, companies would still be reinvesting in their businesses and their people, not figuring out how to keep all their profits.

      Why aren't they? Because they no longer have the incentive.

      "Inevitability" diminishes free will and replaces it with self-fulfilling prophecies."--Geenius At Wrok

      by lunachickie on Sun Jul 13, 2014 at 04:35:39 PM PDT

      [ Parent ]

    •  marginal rate ≠ effective rate (15+ / 0-)

      the effective rate is in most cases less than the marginal rate, which is what individuals and corporations pay in the real world.

      nice try at deflection and distraction, though.

      "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce." - Adam Smith: The Wealth of Nations

      by ozsea1 on Sun Jul 13, 2014 at 04:40:43 PM PDT

      [ Parent ]

      •  Bush changed neither - so DKJ is still wrong. (2+ / 0-)
        Recommended by:
        jobobo, Argyrios

        Who are you fluffing today?
         

        Comfortable Class bankster fluffer / nm
        You guys are the reason the best financial people quit posting here.   Nothing but insults when your little pet theories are challenged.  

        "The way to see by faith is to shut the eye of reason." - Thomas Paine

        by shrike on Sun Jul 13, 2014 at 04:47:51 PM PDT

        [ Parent ]

        •  Insults because you lie (10+ / 0-)

          The top individual federal income tax rate was dropped from 39.5% to 35% by the Bush Tax rates. Corporate tax rates do not apply to most companies in America, most companies are Limited Liability Companies, S-Corps, Partnerships and Sole Proprietorships for which the business taxes are paid through the owners individual income taxes. It's not at all true that the Bush tax cuts changed neither marginal tax rates or effective tax rates for top earners. That is a lie.

          Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

          by RMForbes on Sun Jul 13, 2014 at 06:10:26 PM PDT

          [ Parent ]

          •  I anticipated a bullshit reply like yours (0+ / 0-)

            So I added this in my original comment.

            A sub-S could in theory but few of them buy plants.
            Corporations that build plants are almost NEVER S-Corps or sole proprietors.  

            From the OP:

            If you look under the hood of the industrial economy, you easily see why there is this counter-intuitive relationship between tax rates and economic growth . With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business -- in plants, equipment, staff, research and development, new products and all the rest. But if tax rates are low, then there is more incentive to pull the wealth out, by declaring it as profits that are taxed at what turns out to be too low a rate. In other words, low taxes create an incentive for profit taking.
            The OP is talking C-Corps and you know it.

            "The way to see by faith is to shut the eye of reason." - Thomas Paine

            by shrike on Sun Jul 13, 2014 at 06:26:14 PM PDT

            [ Parent ]

            •  No I don't know it because it's not true (12+ / 0-)

              Most companies are not C-Corps and the factory I worked at was built by a S-Corp. Small business employ over 65% of American employees, and it was up to 85% before the tax incentives created by the top income marginal rate of 67% were lost when the top marginal rate was dropped to 28% early in the Reagan Administration. S-Corps are just as likely to expand and invest in new equipment, staff and R&D as C-Corps.

              Just because it's not C-Corp controlled heavy industry does not mean healthy growing smaller companies can't and don't have a significant impact on our domestic economy, they obviously do. The same tax incentives that spur reinvestment in heavy industry work the same on small businesses.

              If tax rates are too low it becomes more profitable to take profits out of any business, C-Corp or S-Corp, to invest in the Wall Street casino. When there are excessive profits flowing into Wall Street it creates a bubble in the market and does not build more domestic factories.

              When top individual income marginal rates are higher investors are more conservative with their investments so there is far less volatility in the markets and no more booms and busts. The tax incentives, no matter how a business is organized, work the same because it's the individual income tax rates that create those incentives and has absolutely nothing to do with the corporate tax rates.  

              Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

              by RMForbes on Sun Jul 13, 2014 at 07:31:42 PM PDT

              [ Parent ]

              •  The fact that there are more S-Corps is irrelevant (0+ / 0-)

                since personal service S-corps get taxed at the same 35% that C-corps do.

                Anyway, that $6.6 trillion "cost" DKJ pulls out of his ass is absurd.  That is the point.

                Anyway, he got called out here:

                http://bonddad.blogspot.com/...

                We'll see how he responds (if he does).

                "The way to see by faith is to shut the eye of reason." - Thomas Paine

                by shrike on Sun Jul 13, 2014 at 08:23:55 PM PDT

                [ Parent ]

                •  bonddad? (5+ / 0-)

                  now that figures.

                  "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce." - Adam Smith: The Wealth of Nations

                  by ozsea1 on Sun Jul 13, 2014 at 08:36:05 PM PDT

                  [ Parent ]

                •  What are you talking about? (7+ / 0-)

                  S-Corps are not taxed at the same 35% corporate tax rate. That special rate only applies to C-Corps, all other business forms pay taxes on their profits as part of the individual income taxes of the owner(s) on schedule C. Any profit on the schedule C is added to any other income on their 1040.

                  Personally, I would have put the cost of the Bush tax cuts far higher considering that they were created during a time of war. Do you know of any other government that reduced taxes while waging war?

                  Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

                  by RMForbes on Sun Jul 13, 2014 at 09:26:56 PM PDT

                  [ Parent ]

                  •  You're wrong again. Personal service S-corps (0+ / 0-)

                    are taxed at 35%.

                    http://smallbusiness.chron.com/...

                    DKJ's article is bullshit.  

                    "The way to see by faith is to shut the eye of reason." - Thomas Paine

                    by shrike on Mon Jul 14, 2014 at 08:13:47 AM PDT

                    [ Parent ]

                    •  it's the marginal rate (3+ / 0-)
                      Recommended by:
                      RMForbes, costello7, cybrestrike

                      now, run along; there are still some stalls to muck out.

                      "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce." - Adam Smith: The Wealth of Nations

                      by ozsea1 on Mon Jul 14, 2014 at 10:24:08 AM PDT

                      [ Parent ]

                    •  You are wrong, in the link you gave (3+ / 0-)
                      Recommended by:
                      costello7, offgrid, cybrestrike

                      they were comparing the tax advantages of moving a larger professional business from a C-Corp to a LLC. A C-corp is owned by shareholders and the profits do not get dispersed directly to the owner(s) like every other business form. That is why C-Corps are required to pay a flat rate on their realized profits. C-Corps also get a few other tax advantages that other businesses don't.

                      I worked for the last decade at a computer software company that produced business accounting and POS software/systems. We were organized as an S-corp. It was my job to help small business owners setup their accounting systems. Every small business I had contact with did not pay the flat 35% corporate tax rate, they took the profits as personal income and paid the marginal income tax rates on that profit.

                      Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

                      by RMForbes on Mon Jul 14, 2014 at 11:10:33 AM PDT

                      [ Parent ]

    •  The budget was back to its normal private sector (0+ / 0-)

      surplus position because of the recession not because of W's tax cuts.

      http://mythfighter.com/...

      "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

      by Auburn Parks on Sun Jul 13, 2014 at 04:44:10 PM PDT

      [ Parent ]

      •  I didn't mention the recession nor its cause (2+ / 0-)
        Recommended by:
        Sparhawk, qofdisks

        I just said the Bush tax cuts led to higher deficits.

        "The way to see by faith is to shut the eye of reason." - Thomas Paine

        by shrike on Sun Jul 13, 2014 at 04:55:34 PM PDT

        [ Parent ]

        •  Higher than ceterus paribus, but the 2nd (0+ / 0-)

          lowest private sector surpluses (average) on record since the Carter administration. Bush's administration was not characterized by high private sector surpluses.

          "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

          by Auburn Parks on Sun Jul 13, 2014 at 05:00:15 PM PDT

          [ Parent ]

    •  Look at out of control CEO pay (24+ / 0-)

      which is an expense to a company, but is strictly personal income for the CEO. And other top executives. In essence, a corporation has become the preferred vehicle for pillaging the economy. Bill Black has written a LOT about this, and how accounting control fraud allows executives to loot their companies. Just look at the title of Black's book: The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry.

      Black notes that we are still, literally, paying the bill for bailing out the Savings and Loans from that crisis.

      A conservative is a scab for the oligarchy.

      by NBBooks on Sun Jul 13, 2014 at 06:16:27 PM PDT

      [ Parent ]

    •  I think it comes into play, (0+ / 0-)

      when nobody has a billion dollar idea.

      However, the tax cuts themselves didn't directly cause the destruction in wealth, which is why some of the headlines create confusion, but they do represent a missed opportunity and did contribute to conditions where speculation could thrive.

       I don't know how significant the marginal rate changes on individual income are versus the treatment of carried interest, however. Even here, the diarist is talking more about repatriation issues, tax losses created thru transfer pricing, and the like.  Bush's policies contributed to these, but they are not what we might commonly think of as "the Bush tax cuts" in political parlance.  

      Difficult, difficult, lemon difficult.

      by Loge on Mon Jul 14, 2014 at 10:15:55 AM PDT

      [ Parent ]

  •  Umm. Taxes remove money from the economy (3+ / 0-)
    Recommended by:
    shrike, thestructureguy, Argyrios

    and spending adds money to the economy. This stuff ain't rocket science, its macroeconomics.

    This is a fundamental fact of economics and accounting, and it very easily demonstrates the ridiculous notion that the Bush Tax cuts actually cost people money. The Bush Tax cuts were very much weighted towards the wealthy (just as all Con and corporate Dem policies are) but they certainly didn't cause the Great Recession or the Great Depression.

    Much too high levels of private debt caused both as when private debt shrinks (or the Govt runs a budget surplus), the money supply shrinks, and when the money supply shrinks, depressions result:

    Private debt to GDP:
    http://static.seekingalpha.com/...

    "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

    by Auburn Parks on Sun Jul 13, 2014 at 04:40:34 PM PDT

    •  "when the money supply shrinks" (11+ / 0-)

      or is sequestered (hoarded) and removed from circulation.

      The supply is "reduced", but more importantly, the velocity is reduced, resulting in (among other effects) reduced economic activity.

      "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce." - Adam Smith: The Wealth of Nations

      by ozsea1 on Sun Jul 13, 2014 at 04:46:23 PM PDT

      [ Parent ]

      •  I won't disagree with your comments, which is why (1+ / 0-)
        Recommended by:
        ozsea1

        the income inequality index also shows the same two peaks at the same time:

        http://www.the-crises.com/...

        Unfortunately, we have no way of calculating the velocity of money ex-ante, as its a ex-post identity as you're just dividing the number of times the money supply recycles in order to get a certain amount of GDP.

        "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

        by Auburn Parks on Sun Jul 13, 2014 at 04:58:11 PM PDT

        [ Parent ]

      •  Ridiculous garbage. Money "hoarded" still shows (1+ / 0-)
        Recommended by:
        Sparhawk

        up in the money supply or in broader counterparts like the old M3 or in M1 and M2 if kept in commercial bank accounts.

        "The way to see by faith is to shut the eye of reason." - Thomas Paine

        by shrike on Sun Jul 13, 2014 at 05:01:15 PM PDT

        [ Parent ]

        •  Right, I think thats why we see the quotes (1+ / 0-)
          Recommended by:
          ozsea1

          and parenthesizes in the comment.

          "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

          by Auburn Parks on Sun Jul 13, 2014 at 05:16:07 PM PDT

          [ Parent ]

    •  And good tax incentives put even more money in (2+ / 0-)
      Recommended by:
      BlackGriffen, Words In Action

      The economy.

      Democrats used to be smsrt enough to know that the right kind of tax incentives can create new, well paying jobs and stimulate more economic growth and security. Strange how some have lost the ability to comprehend those facts.

      Money is property, not speech. Overturn Citizens United.

      by Betty Pinson on Sun Jul 13, 2014 at 05:11:15 PM PDT

      [ Parent ]

      •  By definition, taxes can't add to the money supply (1+ / 0-)
        Recommended by:
        ozsea1

        This is just a simple fact. But I totally agree that tax policy can indeed have enormous effects on the economy.

        Thats why we should tax "Bads" (excessive incomes, pollution, speculation, bad health, fatty foods, etc) and not tax "Goods" like labor and food.

        "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

        by Auburn Parks on Sun Jul 13, 2014 at 05:18:17 PM PDT

        [ Parent ]

        •  Tax incentives (1+ / 0-)
          Recommended by:
          Words In Action

          Being deliberately obtuse again?

          Money is property, not speech. Overturn Citizens United.

          by Betty Pinson on Sun Jul 13, 2014 at 05:19:38 PM PDT

          [ Parent ]

          •  Tax incentives are something like charitable (0+ / 0-)

            deductions. They don't add to your money, they jjust let you keep more of the money you already have. I'm not being obtuse, you just don't seem to have a good grasp on economics.

            "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

            by Auburn Parks on Sun Jul 13, 2014 at 05:24:29 PM PDT

            [ Parent ]

            •  uhh, this is the diary that is confusing corporate (1+ / 0-)
              Recommended by:
              Sparhawk

              tax rates which have remained unchanged since 1993 with individual tax rates.

              And Betty said is was "clear and fact based".

              "The way to see by faith is to shut the eye of reason." - Thomas Paine

              by shrike on Sun Jul 13, 2014 at 05:27:56 PM PDT

              [ Parent ]

            •  Depends on the incentive (0+ / 0-)

              Like linking those tax cutsbto investing in plant, equipment leasing, R&D investment, all tied to US production. As the diarist pointed out, those kinds of tax incentives create US jobs.

              Money is property, not speech. Overturn Citizens United.

              by Betty Pinson on Sun Jul 13, 2014 at 06:07:50 PM PDT

              [ Parent ]

              •  Taxes cannit add to the money supply. Therefore (1+ / 0-)
                Recommended by:
                jobobo

                tax incentives cannot either. This is not complicated.

                "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                by Auburn Parks on Sun Jul 13, 2014 at 06:12:11 PM PDT

                [ Parent ]

                •  Incentives can create new jobs (0+ / 0-)

                  Which, in turn, improves the economy, adding to the money supply.

                  You're wrong in pushing for tax cuts for the wealthy.

                  Money is property, not speech. Overturn Citizens United.

                  by Betty Pinson on Sun Jul 13, 2014 at 08:26:41 PM PDT

                  [ Parent ]

                •  "Taxes cannit add to the money supply." (0+ / 0-)

                  If we Taxed everything coming here from China at a 6% rate  we would have plenty of money to invest in infrastructure , and  add to the money supply

                  So once again you are wrong

                  How we pay Chinese taxes. 20% of their government revenue from import taxes

                  Posted on 07 July 2011 by Michael Stumo.

                  Matching Chinese border taxes would raise $2 trillion: How the US can avoid savage cuts to social security and steep income tax increases while paying for new infrastructure and leveling the playing field for US manufacturers

                  The biggest difference in the way the Chinese and American governments raise revenue is that Beijing relies much more heavily on import taxes. More than 20% of Chinese central government revenue in 2009 was generated from import taxes, while the comparable figure for the US was just 1.4%.

                  link

                  Beer Drinkers & Hell Raisers

                  by Patango on Sun Jul 13, 2014 at 08:38:07 PM PDT

                  [ Parent ]

                  •  Umm.....no. The Govt's budget is not like your (0+ / 0-)

                    budget. You need to borrow or earn money to spend because its illegal for you to create US Dollars. If you try, you go to jail for counterfeiting. The only body on Earth with the Consituttional authority to create US Dollars is Congress.

                    Therefore, taxes don't provide dollars for the Federal  Govt to spend. The Dollar doesn't come from you and me, it comes from the US Govt. Whether taxes are $0 or $100 trillion per year, the ability of the Govt to spend money by increasing digital entries on the Fed's computer spreadhseet is obviously infinite.

                    And btw, it would be the spending that adds the money to the economy, not the taxing.

                    Taxing removes money and spending adds money.

                    "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                    by Auburn Parks on Mon Jul 14, 2014 at 05:14:57 AM PDT

                    [ Parent ]

                    •  Your 6th grade level self obsessed analogies (0+ / 0-)

                      that skirt the subject are quite bizarre

                      Beer Drinkers & Hell Raisers

                      by Patango on Mon Jul 14, 2014 at 08:03:56 AM PDT

                      [ Parent ]

                      •  This stuff is not that complicated, so explaining (0+ / 0-)

                        it can also be done simply. Which begs the question....

                        Why dont you understand this simple stuff?

                        "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                        by Auburn Parks on Mon Jul 14, 2014 at 11:06:10 AM PDT

                        [ Parent ]

                        •  There is nothing in my comments that suggests (0+ / 0-)

                          I miss understand anything you said

                           

                              "Taxes cannit add to the money supply."
                          Does not even relate to the diary to begin with , it is just talking in circles of what you want to change the discussion too

                          And an import tax does indeed add to the money supply

                          And as the diary points out , taxing Romney at 20% , instead of 11% , means less money for his Cayman Island accounts STASH , and more money for schools and teachers and students , adding to the money supply

                          Beer Drinkers & Hell Raisers

                          by Patango on Mon Jul 14, 2014 at 06:19:31 PM PDT

                          [ Parent ]

                          •  I honestly can't see what problem you are having (0+ / 0-)

                            about this.

                            "and more money for schools and teachers and students"

                            No, we don't need Romney's money to spend on teachers and students, this is what you are failing to recognize. We are not dependent on rich peooplee and China in order to spend money federally. The US Dollar comes from the US Govt, not from rich people.

                             "....adding to the money supply"

                            Exactly the spending adds to the money supply, the taxes subtract from the money supply. Not a difficult concept to grasp.

                            "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                            by Auburn Parks on Mon Jul 14, 2014 at 08:09:05 PM PDT

                            [ Parent ]

                          •  So taxes do not pay for anything (0+ / 0-)

                            and the fore father/mothers got it all wrong when they mentioned them and included them in the U S Constitution

                            OK ayn rand

                            Let us know when you start the Unicorn Nation

                            Beer Drinkers & Hell Raisers

                            by Patango on Mon Jul 14, 2014 at 09:42:21 PM PDT

                            [ Parent ]

                          •  I never said thatt there was no reason to have (0+ / 0-)

                            taxes, they are very necessary, just not to acquire the digital entries that are on the Fed's balance sheet. Which is how the Govt spends money via reserves that only the Fed can create currently.

                            But the forefathers had it right, thats why they included this little beauty:

                            The power to coin money and regulate the value thereof.

                            That power lies exclusively with the People, through Congress. But I guess you think Constitutionally guaranteed rights are unicorn stuff eh??

                            "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                            by Auburn Parks on Mon Jul 14, 2014 at 10:32:58 PM PDT

                            [ Parent ]

                          •  AP (0+ / 0-)
                            just not to acquire the digital entries that are on the Fed's balance sheet. Which is how the Govt spends money via reserves that only the Fed can create currently.
                            That was not relative to what we are discussing either , just like the last 2 word salads you posted and I pointed out , that is why this is 5th grade level gibberish , it comes from no where , it goes no where , and makes little sense to anything but the merry go round in your mind
                            I never said thatt there was no reason to have taxes
                            Right after you said

                             

                            We are not dependent on rich peooplee (TAXES)and China (TAXES) in order to spend money federally. The US Dollar comes from the US Govt, not from rich people.

                             "....(TAXES) add to the money supply"

                            Exactly the spending (of TAXES) adds to the money supply, the taxes subtract from the money supply. Not a difficult concept to grasp.

                            You can pretend we were not discussing taxes all you want , your comments come off looking foolish is all

                            Have fun in the rabbit troll hole

                            Beer Drinkers & Hell Raisers

                            by Patango on Mon Jul 14, 2014 at 11:10:49 PM PDT

                            [ Parent ]

                          •  I'm trying to be nice to you. Your arguments are (0+ / 0-)

                            just so bad.

                            Lets try this as simply as we can:

                            1) Federal taxes aren't needed to fund federal spending.

                            2) Taxes are necessary for other important reasons:
                            a: to establish a baseline demand for a fiat currency
                            b: to control aggregate demand and thus inflation
                            c: to punish or encourage different economic activities (encourage = tax-deductions for charities or home ownership, Punish = pollution, speculation, excessive wealth, etc.)

                            I'm not pretending we are not discussing taxes. I am clearly saying that you don't understand very much about monetary system operations, accounting or macroeconomics.

                            You think the Govt's budget works like your personal budget and thats just ridiculous. The Govt legislated into existence the modern iteration of the US DOllar in 1913 with the passage of the Federal Reserve Act. They created an entire currency out of nothing, because thats what the Constitution allows We The People to do.

                            "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

                            by Auburn Parks on Tue Jul 15, 2014 at 08:42:58 AM PDT

                            [ Parent ]

                      •  consider reading Web of Debt. (1+ / 0-)
                        Recommended by:
                        cybrestrike

                        There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

                        by SouthernLiberalinMD on Mon Jul 14, 2014 at 03:34:45 PM PDT

                        [ Parent ]

                        •  " consider reading Web of Debt. " (0+ / 0-)

                          Consider reading the diary

                          Web of nonsense

                          Financial crises always spark interest in marginal critics of the system. One that’s attracted interest on the left is Ellen Brown, who’s got a book and a website called Web of Debt. She and her kind should be given wide berth.

                          Brown is a fine example of a mode of thinking that sees the problems of capitalism—like the polarization of rich and poor and the system’s vulnerability to periodic crises—as primarily financial in origin. She writes on her website:

                             Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions—including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices—and robbing you of the value of your money.

                          How people can spend the time it takes to write a book and still get so much wrong? For much of the 19th century, our money system was largely private. Individual banks issued notes of varying reliability, with limited geographic acceptance. And the national and international monetary system was based on gold, an entirely private and stateless standard.

                          The Federal Reserve is a public–private hybrid, but it’s a lot more public than the system that preceded it. And it’s also brought a measure of stability to the system that was badly lacking in the 19th century. Almost half of the last decades of the 19th century were times of recession or depression. Commodity prices declined steadily, putting great strain on farmers in particular. There is absolutely nothing about the monetary system of the late 19th century that offers a model, unless you’re a wacko libertarian.

                          This has nothing to do with the diary or my comment

                          Beer Drinkers & Hell Raisers

                          by Patango on Mon Jul 14, 2014 at 05:46:52 PM PDT

                          [ Parent ]

                •  Money supply is not as (0+ / 0-)

                  important for social wellbeing.  Local money circulation is what matters.

    •  Taxes Move Money, not Remove (7+ / 0-)

      That's not true. Taxes only remove money from the economy if government receipts exceed spending. If the government is spending as much as it taxes, then it's simply moving the money, not removing it.

      •  You are right on one hand, and you have exactly (0+ / 0-)

        described the reason why sustained Govt budget surpluses have preceded all 8 major US depressions:

        http://www.epicoalition.org/...

        On the other hand, you are referring to the cycle of taxing and spending (a totally reasonable thing to be referring to), its just a different scale than what I'm talking about.

        Taken separately, taxes remove money from the economy and spending adds it. The net effect of the whole cycle becomes the budget balance.

        Deficits add money to the economy and surpluses remove money.

        We are both making true statements, just from different perspectives or levels of abstraction as it were.

        "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

        by Auburn Parks on Mon Jul 14, 2014 at 06:27:48 AM PDT

        [ Parent ]

    •  no, taxes don't remove money from the economy (7+ / 0-)

      I pay school taxes. This money is used to pay teachers and all the other employees and stuff that goes with a school system (which now includes the good folks at Pearson!).

      those people all spend their money to buy stuff.

      this is obvious. why do people say these things?

      An ambulance can only go so fast - Neil Young

      by mightymouse on Mon Jul 14, 2014 at 05:19:12 AM PDT

      [ Parent ]

      •  We're talking te federal level here.. (0+ / 0-)

        State and local Govts budgets (school taxes) are just like household budgets as its illegal for Illinois or Texas to create US Dollars.

        Here's a example, the NY subway token system:

        You would probably accept that NY subway tokens come from the NY transit authority, and so you would never make the mistake of thinking that you need to provide the tokens the subway system needs in order to operate.

        This is exactly the same situation that we have with the US Dollar and its creator and issuer, the US Govt. Its just that nobody has repeatedly lied to you about the nature of subway tokens that you don't have this same misunderstanding

        "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

        by Auburn Parks on Mon Jul 14, 2014 at 06:24:05 AM PDT

        [ Parent ]

        •  most of my taxes go to state and local (2+ / 0-)
          Recommended by:
          congenitalefty, burlydee

          and federal taxes receipts are also returned to the economy.

          your original comment was wrong in various levels.

          An ambulance can only go so fast - Neil Young

          by mightymouse on Mon Jul 14, 2014 at 06:55:58 AM PDT

          [ Parent ]

          •  Please feel free to point out any instance where I (0+ / 0-)

            have been wrong.

            Where do you think the US DOllar comes from?

            "The Earth is my country and Science my religion" Christiaan Huygens. The gold standard ended on August 15, 1971, its time we start acting like it. If we can afford full employment killing Germans, we can afford full employment during peace-time.

            by Auburn Parks on Mon Jul 14, 2014 at 11:07:21 AM PDT

            [ Parent ]

  •  Evidence based economics (15+ / 0-)

    You nailed it.

    Yes, its important to illustrate the causal factors that tax cuts resulted in a massive drain on the US economy and personal wealth of the middle and lower classes. A lot of economists, and regular folks knew that would be the result when the last round of tax cuts were being debated.

    The insanity has continued to the degree that many states and municipalities can no longer function, as a result of constant tax cut schemes.  The evidence has always been there, throughout history,  that cutting resources and opportunity for the general public always results in the concentration of wealth and power in the hands of a few.

    When it comes to some Dems and neolibs failure to accept these fundamental facts, to paraphrase Upton Sinclair, it is difficult to get someone to understand something when their income depends on them not understanding it.

    In that respect, neolibs are just as corrupt and ignorant ad the right wingers they claim to despise.

    Money is property, not speech. Overturn Citizens United.

    by Betty Pinson on Sun Jul 13, 2014 at 04:51:01 PM PDT

  •  How can you make so much sense? (7+ / 0-)

    I'm not being facetious! This diary makes so much sense about so many economic topics that I have been struggling to understand for so long.

    I feel like I've been in a dim room trying to make out various, vaguely ill-defined shapes and you come in and turn on the lights!

    Who are you and how dare you make so much sense?

  •  Just as an aside... (3+ / 0-)

    ...I really don't think the US would want to invade Bermuda and the Cayman Islands. There's the small problem that they're not independent nations, they're British Overseas Territories.

    I would point to the Falkland Islands as an example of how the British regard people invading their overseas territories.

    •  If we hadn't helped the Brits... (8+ / 0-)

      ...the Args would have won.  The USAF played a key role in logistics, trust me.  Also they no longer have an aircraft carrier where jets can take off.

      OTOH if we invade Bermuda and the Caymans the money will be laundered elsewhere, like in Wall Street itself.

      We need to increase taxes to the 1%. Period.

      Daily Kos an oasis of truth. Truth that leads to action.

      by Shockwave on Sun Jul 13, 2014 at 06:56:22 PM PDT

      [ Parent ]

    •  There is a reaon why USA war plans in 1920s (8+ / 0-)

      included the possibility of war against Britain. See War Plan Red in Wikipedia.

      Here's part of a comment I wrote on Ian Welsh's blog a few weeks ago:

      One of the most important shifts caused by World War Two was that the traditional American suspicion and hostility to England was replaced by the “special relationship.” I do not think any scholar has yet looked at the issue of how this shift affected the American conception of what it means to be a republic. Recall that among the war plans drawn up in the early 1930s was one for war with Great Britain. Of course, the US alliance with the UK in World War One got the ball rolling, so to speak. Again, Chris Hedges has some terrific writing on how the anti-German fever of World War One crippled – one could almost say demolished – what was left of the populist movement. So perhaps it was inevitable by the time the US entered the second war, but I think that fully squelching our dislike for England as a monarchy and as an oligarchy, went a long way to facilitating the US assuming the full mantle of an imperial power itself. “World policeman” and all that, and certainly not forgetting the long history of imperial actions by the US in Central America, Cuba, Philippines, and elsewhere. You really need to be versed in early American history to understand the whole idea of “perfidious Albion” and what a radical shift it was to embark on a military alliance with Britain. (As a sidenote, back in the 1980s, I looked closely at the origins of the National Security Act of 1947. The pawprints of the British lion were all over the place. Part and parcel of it was the role British intelligence had in mentoring and teaching Bill Donovan and the OSS, which of course is the seed of the CIA.)

      The most tragic consequence of the death of Franklin Roosevelt, then, was that the United States slipped into a acquiescence to the re-establishment of the European colonial powers. This was not pre-ordained: Roosevelt’s son, Elliott, wrote that his father had some very nasty confrontations with Churchill in the war time summits, with Roosevelt telling Churchill to his face that the US was not fighting the war so that Britain could regain its empire. Interestingly, Churchill would later, in his memoirs, dismiss Elliott Roosevelt’s account as “rubbish” and most historians and scholars have fallen in line with Churchill. And, of course, the American right wing adores Churchill, but hates Roosevelt and the New Deal.

      A conservative is a scab for the oligarchy.

      by NBBooks on Sun Jul 13, 2014 at 08:58:34 PM PDT

      [ Parent ]

      •  I didn't see you wrote that (2+ / 0-)
        Recommended by:
        ozsea1, tardis10

        But if I had, I would have pointed out the absurdity so "So perhaps it was inevitable by the time the US entered the second war, but I think that fully squelching our dislike for England as a monarchy and as an oligarchy"

        Number one, England is a constitutional monarchy, with the acceptance of Parliament being the actual center of power (albeit with heavily influence from the monarch that has diminished over time) since before there was a United States, dating from the 1689 Bill of Rights which defined the limits of monarchical authority.

        And aside from the nobility and aristocracy, which by the 20the century was regarded as interesting but not really relevant when it came to political power, the UK was no more an oligarchy than the United States. Unless you think that Baron Whoever of Wherever was more powerful than John D. Rockefeller or any of his peers.

        Secondly, the differences between the UK and US pretty much went away after the War of 1812 (which even at the time people on both sides of the Atlantic thought was dumbass because there was no real reason to fight one another). The rest of the 19th century was a classic example of two countries peacefully settling border disputes and other issues even while a few people (mostly Americans, to be honest) kept trying to push for conflict. The navies of the two cooperated with the suppression of the Atlantic Slave Trade, and even during the US Civil War, the relationship stayed mostly peaceful.

        By the start of the 20th century, the idea of serious conflict between the two was considered ridiculously unlikely because it was recognized the two nations shared more than they differed.

        •  I tipped both NBB and your comments (0+ / 0-)

          it's a dialectic; process and consider two opposing (but thoughtful) points of view without going cuckoo-bird.

          Cheers.

          "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce." - Adam Smith: The Wealth of Nations

          by ozsea1 on Sun Jul 13, 2014 at 09:56:56 PM PDT

          [ Parent ]

        •  Soemday, sit down and look at the Boards (3+ / 0-)
          Recommended by:
          ozsea1, cybrestrike, NoMoreLies

          of Directors of some of the top British companies like BP, Barclays, HSBC, and trace out the interlocking directorships, paying special attention to who's who among the Peerage, and extend the links outward to other major companies in the world. Your fantasy world will quickly crumble.

          The list provided here is a good place to start. beginning with number one, Barclays.

          Your assertion "Secondly, the differences between the UK and US pretty much went away after the War of 1812" is simply wrong. Entirely erroneous. Here, for example is a link to Henry Carey's 1865 The Way to Outdo England Without Fighting Her.

          It's also more than interesting that no one has ever published a study of what British intelligence was doing in the period just before and during the American Civil War. You can find lots of material on the Pinkertons, and on the Confederate spy service, and on the Union Army's espionage operations. Why nothing on the British?

          In point of fact, war with England was a very real possibility during and after the Civil War. Any decent book on the history of naval technology notes the huge impact the development of a working revolving turret and the high speed steam engines developed by the US Navy's Bureau of Steam Engineering under Admiral Benjamin Franklin Ishwerwood, which the Royal Navy was not able to match until the late 1870s. That's one reason why the British decided to settle the Alabama claims, for example.

          A conservative is a scab for the oligarchy.

          by NBBooks on Mon Jul 14, 2014 at 07:58:01 AM PDT

          [ Parent ]

      •  see my comment below, please / nm (0+ / 0-)

        "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce." - Adam Smith: The Wealth of Nations

        by ozsea1 on Sun Jul 13, 2014 at 09:54:19 PM PDT

        [ Parent ]

      •  FDR was against France going back to Viet Nam (2+ / 0-)
        Recommended by:
        Dallasdoc, ozsea1

        it's a shame he didn't hold on longer.

        very interesting comment.

        An ambulance can only go so fast - Neil Young

        by mightymouse on Mon Jul 14, 2014 at 05:24:11 AM PDT

        [ Parent ]

    •  US ≠ Argentina (0+ / 0-)

      ... the idea of an invasion is far-fetched, of course ...

      An ambulance can only go so fast - Neil Young

      by mightymouse on Mon Jul 14, 2014 at 05:21:29 AM PDT

      [ Parent ]

  •  Re (1+ / 0-)
    Recommended by:
    shrike
    This means that, if allowed by the lack of government surveillance and regulations, markets and private investors prefer to invest in credit default swaps, or futures on the dollar-yen valuation, or some other speculative instrument, instead of actual industry and infrastructure that increases the economic potential of society.
    (A) This is creepy, no thanks

    (B) Investing in the things you mention does increase societal economic potential. If they didn't, it would be impossible to make any money doing them. All these "speculative" instruments rely on increasing base economic productivity to work. If you can make money on yen future trades, it is only because the yen and dollar are out of whack, which has real economic impacts on things like steel, antibiotics, etc.

    (-5.50,-6.67): Left Libertarian
    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

    by Sparhawk on Sun Jul 13, 2014 at 05:38:20 PM PDT

  •  There is one federal agency that I would like see (9+ / 0-)

    go. The DEA is a completely redundant and completely unnecessary federal agency. They have been given far too much power over the drug scheduling process and how new drugs are tested. Law enforcement agencies like the DEA should never have a say over how the laws they enforce are created. It's time we completely disbanded the DEA.

    Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

    by RMForbes on Sun Jul 13, 2014 at 06:20:43 PM PDT

    •  Harder than you think (0+ / 0-)

      The DEA is the grandchild of the federal Prohibition bureau.  In the 1920s, it was notoriously corrupt.  It was also staffed by right-wing patronage appointees drawn from groups such as evangelical Christians.

      The drug laws are there as: (1) a sop to religious conservatives in the 1930s, and (2) a sop to the confederates, who could use them to incarcerate African-Americans, and most importantly (3) an excuse to keep all those unstable, heavily armed, right wing angry white men employed.  (3) is why everyone else signed off on (1) and (2).

      It is a safe bet that disbanding the DEA (still corrupt, still right wing, still racist) will have the same effect today.  You will have tens of thousands of armed DEA agents staging a revolt.

      •  It may be hard but the DEA was created by Nixon (2+ / 0-)
        Recommended by:
        offgrid, bluezen

        when he started the failed war on drugs. The other drug agencies that came out of the Harrison Act still exist, the DEA is completely redundant.

        I wouldn't be worried about disbanding the DEA, their budget and personnel would be put to better use in the other federal agencies like the ATF which is currently extremely undermanned and underfunded.

        Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

        by RMForbes on Mon Jul 14, 2014 at 11:25:59 AM PDT

        [ Parent ]

  •  This is why (9+ / 0-)

    Democrats and liberals will be consigned to rump, regional status despite their assertions that the coming demographic changes will give them a permanent majority.

    Regardless of how many presidential elections the GOP loses they are always able to move the nation ever rightward by first repeating the lie over and over then getting the media echo chamber to do the same thing, thereby spreading the lie further.

    Liberals and Democrats then view the lies as "conventional wisdom" and accept the premises without question.

    The best example of this was when Obama pivoted on a dime from Stimulus-in-Chief prior to the 2010 mid terms to Deficit Hawk-in-Chief after the 2010 midterms.

  •  Why is Obama supporting TPP, TPIP, TISA? (9+ / 0-)

    these will make things worse

    and they are done in secret

    economics has trumped governance with neo liberalism

    do you recall that quaint idea, The Rule of Law

    several of the points of this definition are being violated including separation of powers in which the legislative branch has gone AWOL

    I highlighted a few words below

    The U.S. Army field manual* defines "the rule of law" as follows: "The rule of law refers to a principle of governance in which all persons, institutions and entities, public and private, including the State itself, are accountable to laws that are publicly promulgated, equally enforced, and independently adjudicated, and which are consistent with international human rights norms and standards. It requires, as well, measures to ensure adherence to the principles of supremacy of law, equality before the law, accountability to the law, fairness in the application of the law, separation of powers, participation in decision-making, legal certainty, avoidance of arbitrariness and procedural and legal transparency."
    America Fails the 'Rule of Law' Test
    The U.S. doesn't even come close to meeting the standards articulated by its own army. Why isn't establishment Washington alarmed?
    •  Because the Democratic Party establishment... (3+ / 0-)
      Recommended by:
      Don midwest, tardis10, NoMoreLies

      ...is run by neoliberals.

      And one important thing to remember:
      Neoliberals do not believe in democracy.

      That's why they legislate in secret, keep the general public out of the discussion (they generally despise the involvement of the plebes), and are not concerned about how policy affects normal people.

      That's why Race to the Top (and teaching to the test while decimating public confidence in teaching as a profession) is a disaster.
      That's why we don't have a Public Option in the ACA.
      That's why TTIP, TPP, CIPSCA (and it's bastard child), and any other deregulatory policies continue to be promoted.

      They believe in total corporate control that usurps national sovereignty as a means to achieve world stability (that One World Order wasn't a conspiracy in the end--it was the goal). Which is, in itself, completely insane.

      Fighting against centrist, authoritarian, and conservative policies since 2002.

      by cybrestrike on Mon Jul 14, 2014 at 05:51:13 AM PDT

      [ Parent ]

  •  An excellent summary (5+ / 0-)

    of what is going on in the economy. I would add 2 other reasons we are in the state we are in is 1) CEOs were allowed to take their salaries in stocks, instead of reinvesting their own companies-illegal until Raygun and 2) low taxes on the wealthiest allows them to speculate in the markets, thereby creating bubbles...and  the rest is history.
    And 3rd, a PS if you will, the financialization of our economy...how is a hedge fund manager more important than a cardiac surgeon?
    H/T to Thom Hartmann on his excellent summation on this.
    We on the progressive side have to stop pretending that the Neoliberals are our friends. Nothing is further from the truth.

    What do we want? Universal health care! When do we want it? Now!

    by cagernant on Sun Jul 13, 2014 at 08:27:54 PM PDT

  •  Great diary (6+ / 0-)

    funny that your first quote came from a post yesterday that I had responded to. That person said that taxation could not right the broken economy, because if we raise taxes on the rich they will move away. I'm like, so what?

    A true craftsman will meticulously construct the apparatus of his own demise.

    by onionjim on Mon Jul 14, 2014 at 04:11:23 AM PDT

  •  The tl;dr version: (1+ / 0-)
    Recommended by:
    Words In Action

    The only way helping the rich get richer will help you is if the only way the rich can get richer is to make you richer, too.

    Nobody deserves poverty.

    by nominalize on Mon Jul 14, 2014 at 06:35:17 AM PDT

  •  The General Welfare Conundrum: a political futbol. (1+ / 0-)
    Recommended by:
    ozsea1

    In the Federalist Papers, Madison wrote:

    If Congress can employ money indefinitely to the general welfare, and are the sole judges of the general welfare, they may take the care of religion in to their own hands; they may appoint teachers in every State, county, and parish and pay them out of the public treasury; they may take into their own hands the education of children, establishing in like manner schools throughout the Union; they may assume the provision of the poor . . . Were the power of Congress to be established in the latitude contended for, it would subvert the very foundations, and transmute the very nature of the limited government established by the people of America.

    “With respect to the words general welfare, I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creator.”

    The suppression of uncomfortable ideas may be common in religion or in politics, but it is not the path to knowledge, and there is no place for it in the endeavor of science. Carl Sagan

    by Kvetchnrelease on Mon Jul 14, 2014 at 06:37:13 AM PDT

    •  Well, no worries. (0+ / 0-)

      The general welfare has been mothballed for three decades. I would take that to be a safely limited and metaphorical use of the Constitution; safe for Madison, the strict constructionists, and other defenders of the landed, white, male gentry whose benefit and protection the creators of the Constitution contemplated...

      I've never left a blank space on a ballot... but I will not vote for someone [who vows] to spy on me. I will not do it. - dclawyer06

      Trust, but verify. - Reagan
      Vote, but Occupy. - commonmass

      by Words In Action on Mon Jul 14, 2014 at 07:06:33 AM PDT

      [ Parent ]

      •  Well ya, freedom is great for protected and even (0+ / 0-)

        those who are not landed, white, male gentry. I find it odd, that the diarist would emphasize general welfare in a diary supporting more government intrusion when in fact general welfare was used as a limit on taxing powers.

        The suppression of uncomfortable ideas may be common in religion or in politics, but it is not the path to knowledge, and there is no place for it in the endeavor of science. Carl Sagan

        by Kvetchnrelease on Mon Jul 14, 2014 at 08:40:38 AM PDT

        [ Parent ]

        •  I wrote about the issue in November 2011 (3+ / 0-)

          Constitutional Foundation of the US Economy: Powers are Implied Not Enumerated:

          The decision by Washington to adopt and support Hamilton’s interpretation of implied powers has reverberated down to this day. Without Hamilton’s interpretation of implied powers, the U.S. government would look significantly different than it does today. Chernow explains that
          Hamilton's plea for the bank had a continuing life in American history, partly from the influence it exerted upon Chief Justice John Marshall. When Daniel Webster made oral arguments for the Second Bank of the United States in the landmark case of McCulloch v. Maryland in 1819, he quoted Hamilton's 1791 memo to Washington on the necessary-and-proper clause. In words that distinctly echoed Hamilton's, Marshall said that necessary didn't mean indispensable so much as appropriate. Repeatedly in American history, Hamilton's flexible definition of the word necessary was to free government to handle unforeseen emergencies. Henry Cabot Lodge later referred to the doctrine of implied powers enunciated by Hamilton as "the most formidable weapon in the armory of the Constitution ... capable of conferring on the federal government powers of almost any extent." Hamilton was not the master builder of the Constitution: the laurels surely go to James Madison. He was, however, its foremost interpreter, starting with The Federalist and continuing with his Treasury tenure, when he had to expound constitutional doctrines to accomplish his goals. He lived, in theory and practice, every syllable of the Constitution. For that reason, historian Clinton Rossiter insisted that Hamilton's "works and words have been more consequential than those of any other American in shaping the Constitution under which we live.”

          As another lawyer, William Pinkney, argued before the Supreme Court, also in McCulloch v. Maryland:

          It was impossible for the framers of the constitution to specify prospectively all these means, both because it would have involved an immense variety of details, and because it would have been impossible for them to foresee the infinite variety of circumstances in such an unexampled state of political society as ours, forever changing and forever improving. How unwise would it have been to legislate immutably for exigencies which had not then occurred, and which must have been forseen but dimly and imperfectly. The security against abuse is to be found in the constitution and nature of the government, in its popular character and structure. The statute book of the United States is filled with powers derived from implication.

          The decision in the case was unanimous, and it was written by Chief Justice Marshall:

          A Constitution, to contain an accurate detail of all the subdivisions of which its great powers will admit, and of all the means by which they may be carried into execution, would partake of the prolixity of a legal code, and could scarcely be embraced by the human mind.

          Marshall was not content to merely render the decision. He felt it necessary to directly discuss and dismiss the arguments in favor of the enumerated powers interpretation, noting “the baneful influence of this narrow construction” which would render “the Government incompetent to its great objects…”

          One of the Associate Justices that sat on the Marshall court was Joseph Story. A little over two decades after the McCulloch decision, in 1833, Justice Story published a three volume work, Commentaries on the Constitution, that remains the single most important legal guide to interpreting the Constitution. In Sections 1,238 to 1,289, Story dealt with the issue of implied powers, and it is well worth reading the entirety of Story’s discussion on the subject. In the interest of brevity, I will here quote only two key sentences:

          § 1238. The plain import of the clause is, that congress shall have all the incidental and instrumental powers, necessary and proper to carry into execution all the express powers.…

          § 1250. The motive for its insertion doubtless was, the desire to remove all possible doubt respecting the right to legislate on that vast mass of incidental powers, which must be involved in the constitution, if that instrument be not a splendid pageant, or a delusive phantom of sovereignty.

          For the next two centuries, the Supreme Court would make limited and narrow applications of the implied powers doctrine. Not until 1936, when it was deciding the constitutionality of the various programs and measures of the New Deal, did the Court finally issue a clear, unambiguous declaration in support of Hamilton’s and Story’s interpretation. Ironically, the Court, in United States v. Butler, 297 U.S. 1, 65 (1936), struck down the Agricultural Adjustment Act of 1933. But by inserting into its decision a clear endorsement of the implied powers doctrine, the Court was signaling a major shift: it had become more willing to accept that the First Great Depression required more robust interventions into the economy by the national government than ever before.

          Since the foundation of the Nation, sharp differences of opinion have persisted as to the true interpretation of the phrase. Madison asserted it amounted to no more than a reference to the other powers enumerated in the subsequent clauses of the same section; that, as the United States is a government of limited and enumerated powers, the grant of power to tax and spend for the general national welfare must be confined to the enumerated legislative fields committed to the Congress. In this view, the phrase is mere tautology, for taxation and appropriation are, or may be, necessary incidents of the exercise of any of the enumerated legislative powers. Hamilton, on the other hand, maintained the clause confers a power separate and distinct from those later enumerated, is not restricted in meaning by the grant of them, and Congress consequently has a substantive power to tax and to appropriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. Each contention has had the support of those whose views are entitled to weight. This court has noticed the question, but has never found it necessary to decide which is the true construction. Mr. Justice Story, in his Commentaries, espouses the Hamiltonian position. We shall not review the writings of public men and commentators or discuss the legislative practice. Study of all these leads us to conclude that the reading advocated by Mr. Justice Story is the correct one.

          A conservative is a scab for the oligarchy.

          by NBBooks on Mon Jul 14, 2014 at 09:46:54 AM PDT

          [ Parent ]

  •  Superb diary. Thank you nt (3+ / 0-)
  •  Hillary candid motto for dems "represent banks" (6+ / 0-)

    article begins with Hillary's comment but goes on to bigger stuff

    The problem is much broader than Hillary Clinton, extending to Team Obama that promised hope and change on the campaign trail, including a break from Clintonite insider coziness. Once in office, Obama chose:
    three successive White House chiefs of staff who’d made fortunes in the financial industry: Rahm Emanuel (amassed $16 million within a couple years of exiting the Clinton White House), William Daley (JPMorgan Chase) and Jacob Lew (Citigroup/now U.S. Treasury Secretary).

    Wall Streeters to dominate his economic team, including Clintonites like Larry Summers as chief economic advisor and Peter Orszag as budget director.

    Monsanto executives and lobbyists for influential food and agriculture posts.

    a corporate healthcare executive to preside over healthcare “reform,” while allowing pharmaceutical lobbyists to obstruct cost controls.

    an industry-connected nuclear power and fracking enthusiast as Secretary of Energy.

    two successive chairs of the Federal Communications Commission who’ve largely served corporate interests, including former lobbyist Tom Wheeler now undermining Net Neutrality.

    Hillary’s Candid Motto for Democratic Party: “Represent Banks”
  •  What's going on (2+ / 0-)
    Recommended by:
    tardis10, NoMoreLies

    There's actually several trends going on simultaneously.

    1. Shortage of aggregate demand.  (Some of that is the tax cuts, some of that is the shift in government spending toward unproductive purposes.  For example, defense spending, for all its deficiencies as a means of fiscal policy, did stimulate the economy -- witness Reagan's "Weaponized Keynesianism."

    2. Eliminating incentives to invest.  This is not just Wall Street (although Wall Street money lubricated the political process) but a specific characteristic of faith=based economics.  They don't just want to repeal FDR, they want to repeal Henry Ford as well.  (Thus, one wingnut explained to me that the energy crisis and subsequently global warming were caused by blue collar workers with cars and air conditioning that they manifestly didn't deserve.  Scratch the surface of right wing thought and you'll find a lot of this.)

    3. Deliberate suppression of incomes.  Sometimes this is overt (by allowing the usual spectrum of dubious employment practices) but much more is indirect, e.g. signing free trade agreements with countries whose police and military are there at least in part to force people to work for 50 cents a day.  What manufacturing is necessary moves to such regimes, eliminating all those high paying industrial jobs.  Again, scratch the surface of neo-liberalism and you'll see this writ large.  It is Tom Friedman's central economic thesis, as he pines for all those hard working Chinese engineers who will work 90 hour weeks for $5000/year, in contrast to lazy Americans who expect time off and a living wage.

    It's the same argument as always.  These are cultural decisions.  The total amount of wealth for oligarchs is also reduced, but the wealth is the means to an end, feudalism.

  •  Bush just said-"We're taking your money" (1+ / 0-)
    Recommended by:
    ozsea1

    He shut up all the born-agains by declaring himself one of them-even had a Faith-Based government program. He doesn't have a subtle bone in his body. He is one of the bad ones who call the shots. That is the main difference between some Republicans and some Democrats, except for Bernie Sanders, and Independent, who is looking mighty good as a Pres. candidate the more I see of him. People in the know say Hillary has gone completely over to the other side. Is that really true? Too mush smoke to believe it is not a fire, I  suppose. We have to get the SCOTUS back to a more normal body of justices, though. That means voting for whomever can win who is not a Republican who will appoint another Scalia.

    In 2010-37% of eligible American voters voted for their U.S. Reps. (Census) The 1% is not taking this country from us. We are giving it to them.

    by Incredulousinusa on Mon Jul 14, 2014 at 07:48:05 AM PDT

  •  I believe the discussion on DKOS (1+ / 0-)
    Recommended by:
    NYFM

    was in connection with this Diary.

    (for the record) :)

  •  Or, in other words: (3+ / 0-)
    Recommended by:
    Words In Action, NBBooks, cybrestrike
    There are two ways of viewing the Government's duty in matters affecting economic and social life. The first sees to it that a favored few are helped and hopes that some of their prosperity will leak through, sift through, to labor, to the farmer, to the small business man. That theory belongs to the party of Toryism, and I had hoped that most of the Tories left this country in 1776.
    Franklin Roosevelt, speech upon accepting the nomination, 1932

    There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

    by SouthernLiberalinMD on Mon Jul 14, 2014 at 08:03:55 AM PDT

  •  We used to have aristocrats who weren't Tories (3+ / 0-)
    Recommended by:
    Words In Action, ozsea1, cybrestrike

    in this country. Roosevelts, Kennedys, etc.

    Now the best we can do is Warren Buffet.

    There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

    by SouthernLiberalinMD on Mon Jul 14, 2014 at 08:04:37 AM PDT

    •  well, one of our well-known banking trolls (1+ / 0-)
      Recommended by:
      SouthernLiberalinMD
      Now the best we can do is Warren Buffet.
      keeps using his name as a Soros-like strawman in his comments.....

      "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce." - Adam Smith: The Wealth of Nations

      by ozsea1 on Mon Jul 14, 2014 at 08:51:45 AM PDT

      [ Parent ]

  •  Democrats struggle to be Democrats. (2+ / 0-)
    Recommended by:
    ozsea1, eyo

    Since the Party was usurped by the Third Way. And it's getting worse, which is why the wealth continues to concentrate.

    I've never left a blank space on a ballot... but I will not vote for someone [who vows] to spy on me. I will not do it. - dclawyer06

    Trust, but verify. - Reagan
    Vote, but Occupy. - commonmass

    by Words In Action on Mon Jul 14, 2014 at 08:23:32 AM PDT

  •  if you have a 401K, Bush cratered it (0+ / 0-)

    I've managed to invest some money, and during Bush's tenure I didn't make a dime.  In fact, I was losing money I initially invested.  I know you have to ride things like that out, but, it was a pretty nervous eight years.

    Under Obama, I've not only gotten it all back, I've 'bout doubled it.   Conservatives like to act like they understand the market, but if you've got any money in it, you'll know they're completely full of bullshit.

    "Glenn Beck ends up looking like a fat, stupid child. His face should be wearing a chef's hat on the side of a box of eclairs. " - Doug Stanhope

    by Front Toward Enemy on Mon Jul 14, 2014 at 09:21:01 AM PDT

  •  This may be the best diary I've ever read! (0+ / 0-)

    The points are clear and well-supported.  Such an amazing read!

    The quote below is a great response to the recent trend toward libertarian attitudes.  Could be worth bringing into another diary where it would be easier to find - and more the focus.

    Admittedly, liberty “is one of the most important blessings which men possess,” but the idea that liberty is synonymous with complete freedom from restraint “is a most unwise, mistaken apprehension.” True liberty demands a system of legislation that will lead all members of society “to unite their exertions” for the public welfare. It should therefore be the policy of government to aid and foster certain activities or kinds of business that strengthen a nation, even as it should be the duty of government to repress “those fashions, habits, and practices, which tend to weaken, impoverish, and corrupt the people."
    The kind of information throughout this diary is a great reminder of what the founders really intended.  It is a wake-up call to progressives and the message needs to be brought to the public by our representatives and presidential candidates.  Let's hope there is at least one who will do that for us!

    Still trying to figure it all out

    by CindyV on Mon Jul 14, 2014 at 10:21:11 AM PDT

  •  Thanks for this excellent background n/t (1+ / 0-)
    Recommended by:
    Dartagnan
  •  This is a very impressive diary (1+ / 0-)
    Recommended by:
    NBBooks

    Almost no one reads Henry Carey anymore, but I wonder if my dad would appreciate him.  Tell me, how do your thoughts on economics mesh with those of Keynes, who argued that in a depression, temporary tax cuts might be appropriate?

    The Stars and Bars and the red swastika banner are both offerings to the same barbaric god.

    by amyzex on Mon Jul 14, 2014 at 11:06:19 AM PDT

    •  I commented on Keynes back in March (1+ / 0-)
      Recommended by:
      NoMoreLies

      so, I'm just going to copy and paste here. Here's a link to the full comment.
       

      For now, I'll just state some of my conclusions about Keynes. First, his ideas of government making up for the slack in aggregate demand during a depression or recession are mostly correct. However, other people had the idea before him, most notably the Mormon banker Marriner Eccles, who Franklin Roosevelt appointed as chairman of the Federal Reserve system.

      My major problem with Keynes is that he does not argue that the programs and projects the government funds must contribute to the general welfare. We do NOT want to simply hire people to dig holes and fill them back up again. This failure of Keynes is a reflection of his being a British economist, and his natural inclination to oppose and/or ignore the nineteenth century American System of political economy, in which the general welfare is the standard by which economic policies and results are measured. Or, to put it another way, Keynes does not understand or appreciate the importance of republicanism as an organizing principle of political economy. So far as Keynes is concerned, it does not matter whether or not the American Revolution ever occurred. (Much the same critique is applicable to Adam Smith, also). For Keynes, a country ruled by the people, has no intrinsic value over a country ruled by oligarchs. This has profound implications for economic policy making: Are you trying to sustain, uplift, and better a country of citizens? Or are you trying to buy off and placate a rabble?

      To further the understanding of why I do not like Keynes that much, it might also help to point out the massive failures of Keynesianism in the 1960s and 1970s. 1) There was the failure to discern and oppose the huge flows of dirty money from organized crime that funded the mergers and acquisitions and leverage buy out booms, which were the beginning of the dismantling and looting of the US industrial base. 2) There was the failure to understand and oppose the refusal to pay for the Vietnam War by raising taxes, and how that refusal was going to cause both inflation and recession - what became "stagflation." 3) There was no understanding or concern for the development of the new industrial and transportation base, which shifted from animal power and water power, to burning fossil fuels and using electricity. Keynesians simply accepted these developments as a given, and never tried to understand them as one specific epoch in the industrial and economic development of humanity. By contrast, statecraft in a republic demands that political leaders be familiar with the cutting edges of science and technology, so as to be able to steer economic development in such a way as to assure society does not bump up against environmental and resource limitations (the limitations which Jared Diamond explains so well in his book Collapse). Part of the cutting edges of science and technology is to identify and demarcate the environmental and resource limitations in which society's economy must operate. To be specific, Keynesians were totally unprepared to deal with the 1970s oil shocks specifically, and peak oil generally.

      A conservative is a scab for the oligarchy.

      by NBBooks on Mon Jul 14, 2014 at 02:35:16 PM PDT

      [ Parent ]

  •  Shorter version (0+ / 0-)

    The "markets" are like race horses, that run to run (make money). They will pick the easiest route to do it.

    The government is the jockey, using reins (regulations, taxes, etc.) and saddles (government agencies that ride on the "markets") to direct the horses ("markets") toward the goal of general welfare (the end of the race).

    Without the jockey, it's just horses running around, chasing each other and aimlessly wandering around, eating all the grass and crapping on everything.



    Women create the entire labor force.
    ---------------------------------------------
    Sympathy is the strongest instinct in human nature. - Charles Darwin

    by splashy on Mon Jul 14, 2014 at 11:31:28 AM PDT

  •  It only confuses neoliberal Democrats (0+ / 0-)

    Hillary does not have the benefit of a glib tongue.

    by The Dead Man on Mon Jul 14, 2014 at 04:31:40 PM PDT

  •  I am particularly pleased that this Diary (0+ / 0-)

    is being reposted on the site's FB page.  The meme of Bush's tax cuts having a negative overall impact on average Americans (in contravention of GOP conventional fantasy) could be a powerful weapon particularly if the GOP nominate Jeb Bush for 2016, as is quite possible.  The more shares and eyes this Diary reaches,  the better.

  •  This is a corollary of the theorem that economic (0+ / 0-)

    profit and rent have an overall negative effect on the economy. I would make the argument that we need about 5% of GDP reinvested for growth, but that's the entire economic need for profits. The rest is excess profits and economic rent and is theft of goods and services from the broad base of society. Worse is that it breaks the production-consumption cycle and depresses the economy. It also creates a debt-wealth servitude from the middle class to the rich. Trickle down is exactly wrong. It goes back to Reagan's bullshit argument: The rich aren't motivated because they don't have enough wealth and the poor aren't motivated because they have it too easy. We will never get over the damage that Reagan wrought, we will just change our perception when we become a crisis civilization.

  •  Investment in new plant and equipment used (1+ / 0-)
    Recommended by:
    IdaMena2

    to be incentivized, through tax deductions.  If the taxes are so low that the profits are wihdrawn as income, the re-investment never happens.  Low taxes are a double incentive for withdrawing profits!

    Please know I am not rude. I cannot rec anything from this browser. When I rec or post diaries I am a guest at some exotic locale's computer. Ayn is the bane!

    by Floyd Blue on Tue Jul 15, 2014 at 06:54:16 AM PDT

  •  median versus average (0+ / 0-)

    ``For each American taxpayer that is $48,000 in pre-tax personal income.''

    and nearly all of that would have accrued to the top 1%.  The median might be a few hundred bucks (half would have gotten more, half less).

  •  Higher taxes mean more reinvestment (0+ / 0-)

    I had this argument with several economists during the early days of the G.W. Bush administration when they were shilling for reducing tax rates.

    I even went to far as to write to one via the WSJ (before Rupert owned it) and attend a conference at Stanford where this was discussed.

    The fears I expressed that reduced capital gains taxes would create a disincentive to reinvest in their own operations have been proven accurate.

    However, we have seen a shift to invest off-shore where they can avoid taxes altogether - a very nice tax avoidance scheme made possible through buying members of congress.

  •  There are two kinds of Republicans (0+ / 0-)

    Greed heads and their frightened flunkies.

  •  Neo-liberal path to economic collapse (0+ / 0-)

    Another description for neo-liberal economic policies is using money needed to fix a rotting floor and an eroding foundation to instead purchase luxurious furnishings for one's home.

  •  it's simple it tracks current account deficits (0+ / 0-)

    if tax rates are low, the easiest way to increase profits
    is to offshore, the labor,  keep the profits.

    if tax rates are high, the incentive to offshore drops.

  •  Great Article (0+ / 0-)

    Don't forget that when people making less money still need real goods and services, they have to turn to credit. The great triumph of the WWII economy was that for just about the first time in modern history real incomes were commensurate with real costs and households could actually accumulate capitol instead of being in a constant state of debt. When a debt economy falters the defaulted debt counts as lost assets for the debt holders. Not that they are hurting, but they would have been if the government hadn't been obliged to bail them out.

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