2011 - %3, August

Entrepreneurs and Their Taxes

| Fri Aug. 26, 2011 12:17 PM EDT

Herbert Grubel says that Warren Buffett's plan to raise taxes on the wealthy wouldn't do much good:

Recently, he used his formidable reputation to suggest in the New York Times, Financial Post and an interview with Charlie Rose on PBS that the U.S. government should raise taxes on the 400 super-rich, who in 2008 together earned $90.9 billion and paid only on average 21.5 percent of it in taxes. That is lower than the average percentage paid by most middle-income Americans.

....[If taxes on the super-rich went up to 50%] revenues from the top 400 earners would go up by $26 billion....Since this year alone, the U.S. federal deficit will be around $1.4 trillion, or $3.8 billion a day, the new revenue would cover less than seven days of deficits. The numbers are even worse for total federal spending. In 2010, that amounted to $3.6 trillion or $9.7 billion a day. Buffett’s new taxes up against that would be gone in just 2.7 days.

But these numbers are excessively optimistic because the amount raised by higher taxes is likely to be much smaller than $26 billion discussed above. That is because, as he notes, a large proportion of the total income of the super-rich comes from capital gains and financial trading, which is at the discretion of taxpayers.

Grubel is right. Raising taxes on 400 people won't do much good. But he seems unaware that this argument points directly to a simple solution: instead of raising taxes on 400 rich people, raise them on 4 million rich people. That would cover a lot more than seven days of the deficit. And that top 4 million has done mighty well for itself over the past three decades.1

The rest of Grubel's piece is a tired repetition of the usual talking points about how returning taxes to their Clinton-era levels would devastate the morale of entrepreneurs everywhere, all of whom are hoping to become the next Warren Buffett. These entrepreneurs, of course, did just fine in the 60s, when tax rates were considerably higher than they are today, and they did just fine in the 90s, when top rates were a crushing 4.6 percentage points higher than they are now. Buffett is right and Grubel is wrong: entrepreneurs can get discouraged, but not by the difference of a few points in their tax rates 20 years in the future. For most of these guys, a difference of five points in their tax rate is simply dwarfed by the key factor in their success: whether their company does well. That's it. If your company does well you'll be rich regardless of whether capital gains rates are 15% or 30%. If it doesn't, you won't. End of story.

It's a different story for corporate CEOs, Wall Street traders, and the idle rich. For them, this stuff really matters. But entrepreneurs? They just want you to buy their stuff. Don't believe the snake-oil salesmen who tell you otherwise.

1A reader reminds me that Buffett is well aware of his. His recent NYT op-ed, after calling for spending cuts, specifically endorsed higher taxes on a wide range of the wealthy:

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

That's not 4 million, but it's a lot more than 400.

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The Tea Party is Dead, Long Live the Tea Party

| Fri Aug. 26, 2011 11:28 AM EDT

Is the Tea Party dead? Dave Weigel points out that, unlike 2010, Tea Party challenges to Republican incumbents have gone nowhere this year. Once vulnerable Senate candidates like Orrin Hatch, Richard Lugar, and Olympia Snowe now look pretty safe. But that's only because, for all practical purposes, they've abased themselves so utterly to the Tea Party's demands:

The Tea Party, the Club for Growth—the whole movement has succeeded in driving Republicans further to the right. Nuking a few moderates in primaries was only part of that—a great story for the horse-race media, but not something that would keep up as the GOP was purified....Republicans seem to have figured this out. It's increasingly likely that no incumbent Republican will lose a primary to a Tea Partier in 2012. The movement can consolidate its gains. Safe districts and the fear of primaries do more to keep Republicans straight than the occasional wins.

I think this was always the endgame for the Tea Party. Just like every other fluorescence of right-wing activism over the past 50 years, its destiny was to flare up, get incorporated into the Republican Party, and then die out. The big difference this time has been just how complete its incorporation has been. Ultra-conservative flare-ups in the past have been increasingly potent — the John Birch Society was more successful than the Liberty League, the Gingrich-inflected Clinton conspiracy theorists were more successful than the Birchers, and the Tea Party in turn has been more successful than the Gringrichites — which has brought us to the point where there's really no meaningful distance between the ultras and the Republican Party establishment. The Tea Party really is dying away, I think, but only because their victory has been so total. For the time being, anyway, they control the Republican Party from top to bottom.

But for how long? Good question. Look me up in another decade or so and I'll let you know.

Our Grim Economic Destiny

| Fri Aug. 26, 2011 10:52 AM EDT

It's now crystal clear that (a) there will be no further monetary stimulus, (b) there will be no further fiscal stimulus, (c) Europe is in real trouble that it's very unlikely to address aggressively, and (d) China's growth is slowing. We should be investing enormous amounts of money into green research and green adaptation (higher efficiency, conservation, etc.) but we're not, and there's little prospect of this happening in the near future.

It's very hard for me to be optimistic about the economy in any way these days. Karl Smith keeps trying to tell me that pent-up demand for housing will drive recovery, and I'm sort of clinging to that. Maybe he's right. But it remains the case that it takes money to buy a new house, no matter how pent-up your own personal demand is, and I don't know where that's going to come from. Last week a friend of mine finally gave up on keeping the mobile home she bought a few years ago. She just flatly can't find a job, so she's selling it (she hopes) and moving in with her sister. That has to stop happening before housing can recover, and so far I'm not sure it's stopping.

I guess 9% unemployment is the new normal. Given our current unwillingness to do anything about it, I wouldn't be surprised to see us stay at this level for two or three more years. Maybe longer. Maybe a lot longer.

What the Washington Post Gets Wrong on Dominionism

| Fri Aug. 26, 2011 10:10 AM EDT

The world's largest straw man, if I had to guess, is most likely located in central North Dakota, somewhere near the world's largest Holstein cow and the world's largest sandhill crane. But this Washington Post column, from former George W. Bush speechwriter Michael Gerson, certainly has to be a part of the conversation. It's a few days old, but it presents an argument that I imagine we'll be hearing pretty frequently over the next year or so: liberals are totally paranoid when it comes to the religious views of GOP presidential candidates. (To wit: Here are Ralph Reed and Lisa Miller making that exact point.)

Gerson, who is generally credited with applying an Evangelical varnish to Bush's every uterrance, takes on the argument—promoted to various degrees by Ryan Lizza, Forrest Wilder, Michelle Goldberg, and myself—that Texas Gov. Rick Perry and Minnesota Rep. Michele Bachmann are part of a movement to turn the country into a Christian state. Here's how Gerson summarizes that argument:

Perry admittedly doesn't attend a Dominionist church or make Dominionist arguments, but he once allowed himself to be prayed for by some suspicious characters. Bachmann once attended a school that had a law review that said some disturbing things. She assisted a professor who once spoke at a convention that included some alarming people. Her belief that federal tax rates should not be higher than 10 percent, Goldberg explains, is "common in Reconstructionist circles."

The evidence that Bachmann may countenance the death penalty for adulterers? Support for low marginal tax rates.

Bachmann is prone to Tea Party overstatement and religious-right cliches. She opened herself to criticism by recommending a book that features Southern Civil War revisionism. But there is no evidence from the careers of Bachmann or Perry that they wish to turn America into a theocratic prison camp.

Map of the Day: The Anti-Sharia Panic

| Fri Aug. 26, 2011 9:48 AM EDT

The Center for American Progress released a very comprehensive report Friday morning that traces the origins, extent, organs, and funding sources of the Islamophobia movement. The thesis is that there's no "vast right-wing conspiracy behind the rise of Islamophobia in our nation but rather a small, tightly networked group of misinformation experts guiding an effort that reaches millions of Americans through effective advocates, media partners, and grassroots organizing." They pinpoint a handful of think-tanks and non-profits that are responsible for the intellectual (to put it generously) grist that's served as the basis for everything from mosque protests to lawsuits to legislation to hate crimes, and follow the money, revealing that a huge lump of the funding—$42 million over nine years—comes from just seven sources.

I'll be diving into this a bit more deeply later, but for now I just wanted to highlight this map, which is an updated/spiffier version of the one I created way back when:

Courtesy of CAPCourtesy of CAP

Given the deep-seated religious tensions at play here, I think the Islamophobia movement goes a bit deeper than the report necessarily gives it credit for—plenty of pastors would be talking about "Clash of Civilizations" regardless of whether Frank Gaffney gets his check from the Richard Mellon Scaife Foundation. But this map, charting the mushrooming of nearly-identical bills to ban Islamic law from being applied in American courts, shows the power that a small but dedicated network—led, in this case, by Arizona attorney David Yerushalmi—can have.

Mitt Romney's VP Flip-Flop

| Fri Aug. 26, 2011 5:20 AM EDT
2012 GOP presidential candidate Mitt Romney at a campaign stop on Aug. 17, 2011.

If you say that Mitt Romney flip-flops on the issues, you might as well be saying that Lindsay Lohan is sometimes fitted with an ankle monitor. It's such an obvious, well-worn, widely noted fact at this point that it's almost pointless to keep bringing it up.

The 2012 Republican presidential candidate has notoriously gone back and forth on gay rights, immigration issues, abortion rights, and even conservative Reagan-love. More recently, Romney couldn't figure out whether or not he had said that Barack Obama made the Great Recession worse and "made it last longer." (For the record, he did say all that.)

Now the former governor of Massachusetts can add this flop to the extensive and eclectic list:

During an August 25 campaign stop in Exeter, New Hampshire, candidate Romney said this, according to Holly Shulman of the New Hampshire Democratic Party: "You know, I think it's kind of presumptuous for someone running for president to already, you know, have in mind who would be their vice president."

Now here's what the former Massachusetts governor announced at a fundraiser at the Virginia Beach home of Republican state senator Jeff McWaters on July 25, according to the right-wing website Bearing Drift:

Romney said that [Virginia Governor Bob] McDonnell has been an "incredible governor" and will be on "any candidate's short-list" for Vice President...[H]e reiterated that the short list is "McDonnell, Governor Christie of New Jersey and Marco Rubio of Florida."

I can already hear the conservative defense of Romney's latest change of heart: "Stop nitpicking at everything Mitt Romney says or does, especially something so insignificant like thinking about VP picks! What about Obama's flip-flops on the debt ceiling or closing Gitmo or Mubarak, and so on?"

Granted, no political party has a monopoly on their candidates conveniently changing their minds, and some of those criticisms of the president are indeed worth examining. But Mitt Romney can't even decide whether he should decide to decide on his preliminary VP picks. Surely those on the Obama-loathing right, who can't seem to get enough of calling the president indecisive, can see the irony in the fact that one of their 2012 frontrunners pulls this stuff so casually and so often, right? Right?

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Accepting a Tamed Wilderness

| Fri Aug. 26, 2011 5:15 AM EDT

Rambunctious Garden
Emma Marris
Bloomsbury

Imagine an untouched stream. If you're picturing a tortuous channel with high banks, environmental journalist Emma Marris will tell you how wrong you are. Almost everything we think of as natural has been altered by humans, she argues. In the case of the winding stream, the high banks are probably a relic from seventeenth century mill dams, and we have only come to think of them as natural over centuries of environmental amnesia. Marris insists that if nature is impure, this calls for a new approach to conservation.

For her manifesto out this week from Bloomsbury, Rambunctious Garden, Marris trots from Hawaii to Yellowstone National Park to Poland in search of fresh conservation styles. Each spot illustrates a different set of environmental priorities, and Marris uses them to prove one of her central points: that wildly different ecosystem management styles can exist on the same planet. In fact, we need to try strategy we can think of in order to find out what works.

California Defied Own Scientists With Pesticide Approval

| Fri Aug. 26, 2011 5:06 AM EDT

Earlier this year, several environmental groups sued the State of California for approving the agricultural use of methyl iodide, a harmful pesticide. Methyl iodide is known to cause miscarriages, thyroid dysfunction, and cancer, and it's applied to crops like strawberries and peppers. Public outcry has been growing: just this week, farmworkers and environmentalists stood on the steps of the state capitol demanding Governor Jerry Brown make good on his promise to reconsider the substance's approval. While farmworkers are worried about their health, scientists should be concerned too: new documents released by court-order due to the lawsuit show the state cherry-picking data to back up weakened restrictions for the chemical.

The state's Department of Pesticide Regulation (DPR) is at the center of this mess: the department has been without a head since the previous one resigned in spring. DPR management chose to cherry-pick data (some of it from the department's own scientific reports) to support smaller buffer zones and higher concentrations of methyl iodide. The problem: the data was from different scenarios using different variables. In a memo with the subject line "Potential Misinterpretation of Methyl Iodide Risk Assessment," a DPR supervising toxicologist wrote: "It is not scientifically credible to select a value or assumption from one and combine it with a value or assumption from another." The DPR toxicologist said the data were "not interchangeable" and called management's approach "mix and match."

DPR management's mixing and matching was used to show that fields sprayed with methyl iodide would require smaller buffer zones. The highest level of protection scientists investigated would have required buffer zones of several hundred feet to several miles around affected fields. DPR acknowledged in the new documents that this level of protection "was recommended by scientists" but still chose to reduce the buffer zones, saying that such requirements would be "excessive" and cause hardship on methyl iodide manufacturer Arysta "due to its economic viability." "Homes and schools are literally 25 feet away from these fields," said Paul Towers. Towers is a spokesperson for Pesticide Action Network, one of the parties to the lawsuit against the state. "This puts rural communities at risk."

In addition to reducing buffer zones, California's DPR chose to outright ignore warnings from its own scientists regarding methyl iodide's effects on pregnant women, children, and infants. This risk assessment report notes several times that the department had not tested methyl iodide for neurological damage to fetuses. DPR scientists recommended that "an additional 'safety factor' of 10 is needed to take the post-natal neurotoxic effects into consideration, since the rabbit studies delivered some live pups at the end of gestation but no neurotoxicity studies were conducted." In the end, DPR scientists recommended that California set its limit for methyl iodide at 2 parts-per-million in order to reduce chances of miscarriage. This level was published in a peer-reviewed scientific journal without incident. However, the EPA and Arysta chose to allow 10 parts-per-million, citing the rabbit studies. These rabbit studies, importantly, measured miscarriages as a percentage of fetal death per litter. Rabbits have up to 15 offspring in each litter, while humans usually only gestate one fetus at a time.

Due to the dangers of methyl iodide, both Washington state and New York have refused to allow its use, even though the EPA has approved it. If documents like these keep coming out of the state, maybe methyl iodide will be pulled from California just as quickly as it was approved in the first place.

Ft. Hood Shooting: What's the Army Hiding?

| Fri Aug. 26, 2011 5:00 AM EDT
The remains of Ft. Hood shooting victim Sgt. Amy S. Krueger are carried to a waiting aircraft.

Nidal Malik Hasan, the Army major accused of killing 13 and wounding 32 in the 2009 shooting rampage at Ft. Hood, is on his way to a court-martial that could sentence him to death. But in a break with military custom, the Army won't release the critical report that convinced authorities to indict Hasan for capital murder. It's a decision that has some reporters wondering what the service doesn't want them to see.

Sig Christenson, a military writer for the San Antonio Express-News who has covered the Hasan case from the start, says the Army is acting fishy. "Sometimes, the military as an institution fights harder to do as it pleases than it does to preserve your First Amendment rights," he writes. Christenson is an officer of Military Reporters and Editors, which supports journalists who cover defense affairs, and he's asked the group's attorney to provide a legal opinion on whether the Army's violating open-records rules. (Full disclosure: I am a MRE board member.) Other major media organizations are expected to sign on to a letter demanding the Army explain why it's keeping the report under wraps. "You cannot condition access to the courts," he states. It's not the first roadblock Army authorities have thrown in front of reporters covering the Hasan case: Journalists say that at one point, they were told not to ask prosecutors certain questions, or else they'd face expulsion from the court.

We're Still at War: Photo of the Day for August 26, 2011

Fri Aug. 26, 2011 4:57 AM EDT

SECURITY HALT

US Army Spc. Adam Supino takes a break while on a security halt during an operation in the Alingar district in Afghanistan's Laghman province, Aug. 21, 2011. Supino is an M249 squad automatic weapon gunner assigned to the Laghman Provincial Reconstruction Team. Team members participated in searching a village thought to house Taliban fighters and others making roadside bombs. US Air Force photo by Staff Sgt. Ryan Crane.