Kevin Drum - September 2010

The Case For More Tax Brackets

| Tue Sep. 7, 2010 1:29 PM EDT

Annie Lowrey continues her campaign for a higher tax bracket or two:

For the past 20 years, the top income tax bracket has started around $370,000, and top marginal tax rate has stayed between 35 and 39.6 percent. But since the mid-1990s, the richest have gotten richer, earning a higher and higher share of all income while paying the same income tax rate as more moderate-income workers.

Indeed they have. I recommend some class warfare here, except that the classes in question will be the well-off, the rich, and the super rich. How about if we reduce the top rate on the well-off (say, those making between $200,000 and $370,000), raise it on the rich (between $370,000 and $1 million), and raise it a bunch on the super rich (over $1 million). If you really want to get ambitious, you could even add yet another bracket that kicks in around, say, $5 million.

Why not? As Annie points out, we used to have more brackets. There's no law that says everyone over $370,000 should pay the exact same rate, and the supply-side theory that the super rich will lose all their ambition if their tax rates go up is based on essentially no evidence at all. What's more, the rich and the super rich (not the merely well off) are the ones who have really done well over the past couple of decades, so higher brackets for them make sense. The winners here would be all the lawyers and doctors and accountants in the well-off bracket. The losers would be hedge fund managers, Fortune 500 CEOs, and Goldman Sachs traders in the rich and super-rich brackets.

Which ones would the Republican Party support? We'll make this all revenue neutral, of course, so they don't have to break the blood oath that Grover Norquist has forced them all to sign. Want to take a guess?

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Obama's FDR Moment

| Tue Sep. 7, 2010 12:24 PM EDT

President Obama's Labor Day speech in Milwaukee is getting a lot of attention, partly for his claim that "powerful interests" in Washington "talk about me like a dog," which I admit I can't completely parse. Then there's this (starting around 44:00):

These are the folks whose policies helped devastate our middle class. They drove our economy into a ditch. And we got in there and put on our boots and we pushed and we shoved. And we were sweating and these guys were standing, watching us and sipping on a Slurpee. (Laughter.) And they were pointing at us saying, how come you’re not pushing harder, how come you’re not pushing faster? And then when we finally got the car up -- and it’s got a few dings and a few dents, it’s got some mud on it, we’re going to have to do some work on it -- they point to everybody and say, look what these guys did to your car. (Laughter.) After we got it out of the ditch! And then they got the nerve to ask for the keys back! (Laughter and applause.) I don’t want to give them the keys back. They don’t know how to drive. (Applause.)

I mean, I want everything to think about it here. When you want to go forward in your car, what do you do?

AUDIENCE: D!

THE PRESIDENT: You put it in D. They’re going to pop it in reverse. They’d have those special interests riding shotgun, then they’d hit the gas and we’d be right back in the ditch. (Laughter.)

Sure, he's delivered some of these lines before. And they're sort of corny. But I like it anyway. It sounds very FDR-esque to me: a full-throated attack on the opposition party and on corporate interests, but delivered with wit and humor. More like this, please.

Basel III Rumor Mill Update

| Tue Sep. 7, 2010 11:09 AM EDT

Really, you just can't blog enough about the Basel Accords on international banking capital standards, can you? As you recall, we're now up to Basel III (numbered like popes and Super Bowls), what with Basel II not looking so healthy after the 2008 financial crisis, and the question is whether Basel III is really going to tighten things up on the bank capital front. The answer, apparently is yes: Die Zeit reports not only that the basic ("Tier 1") capital requirement is going up from 4% to 6%, but a couple of other requirements are being layered on top of that as well. This is good news, but the problem is that defining capital is legendarily tricky, and banks will probably respond to the new rules by including all manner of dodgy-looking assets as part of their Tier 1 capital. Felix Salmon takes it from there:

Ah, you say, but can’t they just be clever with definitions, including all manner of dodgy-looking assets as part of their Tier 1 capital? Well, yes. So there’s a parallel set of requirements for what they’re calling Core Tier 1: essentially, pure equity. That has a minimum of 5%, plus a conservation buffer of 2.5%, plus a countercyclical capital buffer of another 2.5%.

This would be a genuine improvement if it survives the final negotiation process, which will include furious lobbying from the international financial community. And it's almost exactly what I was arguing in favor of a few months ago. So cross your fingers and hope that the gnomes of Basel stick to their guns and make it happen. If we can agree on a simpler definition of capital (and, hopefully, a simpler definition of assets to go along with it), the banking system will be safer than it was before. Not perfect, but better. And right now, better is good news indeed.

China's Old-Fashioned Banking Fraud

| Tue Sep. 7, 2010 10:33 AM EDT

David Pierson of the LA Times reports on the bubble-rific city of Hangzhou, which has lately become the leading edge of China's looming property bust:

The median price for a 1,000-square-foot home here in July was $290,366, a steep 18.2% drop from the previous month because so many high-end homes have been taken off the market. By comparison, a national index of median prices rose 1.6% over the same period.

....Experts said up to half of Hangzhou's housing market has been driven by investors rather than homeowners — double the estimated national rate. In this no-holds-barred environment, raising capital was easy if you knew how. In a scheme called "returning the flat," small groups of speculators would sell the same property to each other to drive up the listed value of a home. With each transaction, the next speculator could obtain a larger mortgage, using the excess cash from the lender to invest in other properties. The conspirators would then divide the profits once they unloaded the property outside their circle.

"A flat could be worth 10 times more by the time they were done," said Chen Zhencheng, director of the National Real Estate Management Alliance, who said that the practice broke no laws. "This was happening in 30% to 50% of some building projects. The places were full of speculators."

Roughly speaking, I think this is just the old-fashioned version of what Wall Street did with structured finance during the aughts. It's also a lot easier to understand. If Americans ever figure out that this is what happened, they might actually start to get seriously mad at the banking industry instead of just faux mad as they are now.

The Mind of America

| Tue Sep. 7, 2010 12:32 AM EDT

A new Washington Post poll is out. Selected questions are shown below. Summary: Americans trust Democrats more to handle the country's problems, they think Democrats represent their values better, they think Democrats are more concerned with the needs of people like them, and they think Democrats deserve to be reelected at a higher rate than Republicans. They also think (though I didn't show it below) that George Bush is substantially more to blame for our economic woes than Barack Obama.

And the result of all this? They say they plan to vote for Republicans by landslide numbers. It's the economy, stupid.

Working the Refs

| Mon Sep. 6, 2010 11:09 AM EDT

Is the GOP paying for ad space on the Washington Post's front page these days? Check out this story today:

Small businesses feel squeezed by Obama policies

Last year, even as he struggled through the worst of the recession, Chris Upham said revenue at his District-based real estate and construction businesses doubled — allowing him to hire two agents.

But Upham said he hasn't increased his staff thus far in 2010 and he doesn't expect to for the remainder of the year. That's because his taxes rose sevenfold.

....The White House appears poised to respond to a growing backlash from businesspeople about the crush of higher taxes. Among the ideas being explored were a temporary payroll-tax holiday and permanent extension of the expired research-and-development tax credit, ways to offset the impending elapse of tax cuts for the top 2 percent of households.

Italics mine. There's nothing intrinsically wrong with running a story about higher taxes or new regulations, but only if there really are higher taxes or new regulations to complain about. However, the story has nothing — literally nothing — about any recent tax increases on businesses. I have no idea why Upham's taxes rose, but I can only guess that perhaps he paid virtually nothing last year and then paid seven times that much this year as his income went up. So maybe his taxes went from $100 to $700, or something like that. But who knows? Post reporter V. Dion Haynes just credulously quoted Upham and apparently didn't bother to ask anything further. So we have no idea where these illusory new taxes are coming from.

As for regulations, that's equally mysterious. Upham himself suggests that his hiring plans are due more to a real estate slowdown caused by the end of the homebuyer's tax credit than anything else. So what else is there? We're told that Obama's small business loan program has been "wildly popular." We're told that hiring mostly depends on boosting consumer spending. We're introduced to Luc Brami, who was delighted with the $9,000 payroll tax break he got from an Obama program to spur hiring of the unemployed. We're told that, "In all, the administration has implemented about a dozen small-business programs, including a health-care tax credit; more opportunities for women business owners to receive government contracts; and cuts in capital gains taxes."

So where's the actual problem? Well, there's a quote from a flack for the right-wing National Federation of Independent Business complaining about future provisions from healthcare reform. There's another quote from a flack complaining about a new regulation regarding 1099 reporting requirements. And there's a guy from a government contracting firm who doesn't plan to take advantage of the payroll tax break because it doesn't offset the entire salary of a new employee.

That's it. The 1099 thing is probably legit, but aside from that there are no new taxes documented in the piece and no evidence of burdensome new regulations. None. So what's going on? Surely if things were as bad as the flacks say they are, it would have been pretty easy to find plenty of good examples? Especially since I'm sure it was the flacks who produced the business owners quoted in the story in the first place.

Ladies and gentlemen, modern American journalism.

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Obama's Teeny Tiny Stimulus

| Mon Sep. 6, 2010 10:27 AM EDT

Barack Obama celebrates Labor Day:

President Obama on Monday is to call for as much as $50 billion in government spending to start up a long-term public works plan emphasizing transportation projects — roads, rail and airport runways — over the next six years.

....While Mr. Obama’s plan would call for investment over six years, the White House says it would be front-loaded with an initial investment of $50 billion in taxpayer money, to help create jobs in the shorter term. The administration says it would work with Congress to find ways to pay for the plan, so that it would not add to the nation’s rising deficit. One possibility would be to cut existing subsidies for oil and gas exploration and production.

This is all perfectly sensible. At the same time, if it's offset by other items in the budget it probably won't have any net stimulative effect. Essentially, we've given in to the deficit hawk brigade without even a fight.

Not that it matters, I suppose. It's too small to be more than a pinprick, and Republicans will probably filibuster to the death the right of our nation's oil and gas companies to their federal subsidies anyway. But I'm sure it will give Fox News something to roar about for the next month. Obama is socializing roadbuilding! He's endangering our supplies of oil and gas! It just shows his contempt for ordinary Americans!

Should be loads of fun.

Comics Bleg

| Sat Sep. 4, 2010 6:38 PM EDT

UPDATE: Thanks, everyone. I've found good homes for everything now. All help was much appreciated.

I feel a little guilty using the blog for purely personal business, but....what the hell. It's a long holiday weekend. Why not?

Here's the deal. I've got about two thousand old comic books that I need to dispose of. I'm reliably told that they're basically of no value. I checked with my local comics shop, and they didn't want them even for free. The local boys club wasn't interested. Our local library sells used books but didn't want seven boxes of comics. What to do?

I kinda hate to just toss them out. Surely someone must have an interest? But I don't know who. Thus this blog post. These are all 80s-90s DC books, mostly Superman, Batman, Justice League, that kind of stuff. All unbagged but in good shape. They aren't worth shipping anywhere, but if anyone in the Southern California area wants them and is willing to drop by my house and haul them off, you're welcome to them. Alternatively, if you know of a worthy cause who might want them, let me know. It just has to be local to Orange County. Email me at calpundit@cox.net if you're interested.

Friday Cat Blogging - 3 September 2010

| Fri Sep. 3, 2010 1:58 PM EDT

Today is Provide-Your-Own-Caption day. On the left, Domino is in a paper sack, every cat's favorite hiding place. On the right, Inkblot is obviously trying to tell me something. But what?

Need more cats? Check out Colleen Stratton's Psycho Kitties. It's probably not what you think. But her ten-years-in-the-making documentary needs your help. And there's a free preview!

And speaking of help, friend-of-the-blog Blue Girl is doing her annual fundraiser right now. If you have a few spare shekels lying around, head over and put them to good use.

UPDATE: Ha ha. Fooled you all. They're actually both saying the same thing. Answer below.

Private Sector vs. Public Sector

| Fri Sep. 3, 2010 1:47 PM EDT

Here is Steve Benen's chart showing private sector job gains and losses over the past few years:

Why look only at private sector jobs? Matt Yglesias suggests three tightly constrained reasons: it's good spin for the White House, it controls for one-time census gains and losses, and then there's a third thing about a conservative argument that I don't understand.

But the fact is that both total jobs and private sector jobs are important to look at. If you simply want to know how the actual, lived economy is doing, then you want to look at all jobs. After all, a job's a job, and if people are employed and getting a paycheck, that's a good thing. But that's not the only thing we should be interested in. In the medium term, government jobs can't support the economy forever. Sustained growth depends on the private sector, so it's critical to know how the private sector is doing. If it's improving, that means we can look forward to the economy starting to recover by itself without a lot of further federal intervention. But if the private sector is stalling, we can't.

That's important to know. And based on these figures, it sure looks as if, after a year of recovery, the private sector has stalled for the past three quarters. Who knows? Maybe things will magically turn around shortly. But that sure doesn't look like the right way to bet right now. More stimulus, please.