Naked Capitalism Link of the Day

Today's link from naked capitalism: Anxiety keeps the super-rich safe from middle-class rage, at the Guardian:

But the gap between the richest 1% or 2% and everybody else in the top 20% or 30% is now so great and growing so rapidly that, one might reasonably think, it should change the terms of political trade. The income distance may be huge but the social distance is not. Those in the top 2% and the next 28% have often been to the same schools and universities. More important, they compete for scarce resources: places in fee-charging schools, houses in the best areas, high-end personal services. The super-rich have provoked raging inflation in the prices of these goods. Many of the not-so-rich were born into the professional classes and high expectations. Now, to their surprise, they find themselves struggling. In income distribution, their interests are closer to those of the mass of the population than to people they once saw as their peers.
They are not, however, imminently likely to join a crusade for equality. This generation of the middle classes has internalised the values of individualist aspiration, as zealously propagated by Tony Blair as by Margaret Thatcher. It does not look to the application of social justice to improve its lot. It expects to rely on its own efforts to get ahead and, crucially, to maintain its position
As psychologists will tell you, fear of loss is more powerful than the prospect of gain. The struggling middle classes look down more anxiously than they look up, particularly in recession and sluggish recovery. Polls show they dislike high income inequalities but are lukewarm about redistribution. They worry that they are unlikely to benefit and may even lose from it; and worse still, those below them will be pulled up sufficiently to threaten their status. This is exactly the mindset in the US, where individualist values are more deeply embedded. Americans accepted tax cuts for the rich with equanimity. Better to let the rich keep their money, they calculated, than to have it benefit economic and social inferiors.
As Runciman observed, "most people's lives are governed more by the resentment of narrow inequalities, the cultivation of modest ambitions and the preservation of small differentials" than by the larger picture of social justice. That applies as much to the professional as to the working classes.

I've long been puzzled by why my friend who never made more than $50,000 a year thinks people who make $75,000 to $100,000 are overpaid and need to sacrifice, while thinking that people who make $1,000,000 have earned it and should be able to keep more of it.  I think it's just that he really doesn't know anybody who makes a million a year, while he knows a lot of people in the 75 to 100 thousand range, and he sees that they blow money on stuff they don't need.  It still seems strange, but I think he associates the million a year person with some amazing invention or something, and that they worked hard to get that money.  I tried to point out that such people make enough that they can pay higher marginal rates on very high amounts of income, but he tells me that they deserve what they get.  I think eventually people in the middle class will get mad at the super rich, and if they do, those guys up top better watch out.  When the scales fall from peoples' eyes, they are going to be out for blood.

One other note, today's links showed me one of the best post titles of all time: Longtop Financial: lessons in the morphology of sin, loss of virginity and your 17 year old daughter, at Bronte Capital. 

How the Very Rich Are Different

Chuck Marr compares how Republicans treat the very wealthy compared to average Americans (via Mark Thoma):

Congressional Republican leaders are trying to put a new twist on how the very rich are different.  By seeking to reduce long-term deficits entirely through huge budget cuts that fall disproportionately on low-income programs — rather than a balanced package of budget cuts and tax increases — they are effectively arguing that wealthy Americans shouldn’t have to sit with other Americans at the table where sacrifices will be made.
As the chart shows, the top 400 have enjoyed the best of both worlds over the past couple of decades:  dramatically higher incomes and much lower taxes.  Between 1992 and 2008 (the period the IRS data cover), the average share of their incomes that these households paid in federal taxes dropped from 26 percent to 18 percent, while their annual incomes shot up by over 700 percent, after inflation.  And still, Republican leaders insist that wealthy Americans shouldn’t pay a penny more in taxes.

He goes on to highlight planned Republican cuts to Medicaid, Medicare and Pell Grants, and how those will affect Americans who are definitely not very wealthy.  It amazes me that Republicans claim all Americans should share in the sacrifice, but don't ask the best-off Americans to give anything more up.  It is truly bizarre.  Never in the past 60 years have the wealthiest Americans paid less in tax, yet Republicans won't acknowledge that this fact is one of the main reasons we are in such dire financial straits.  And yet when the time comes for sacrifice, people who have benefitted so much as tax rates came down, aren't asked to pay rates closer to what they used to.  Unbelievable.

Faith, Education and Income

Interesting post from David Leonhardt:

The chart in the magazine looks at the percentage of people with a four-year college degree and the percentage of people with family income of at least $75,000 a year, using data from Pew. Here are the percentages if the education cutoff is changed to at least some college (including a two-year degree) and the family income cutoff is changed to $50,000:

	%, at least some college	%, family income $50k+
Hindus	84	80
Reform Jews	83	81
Unitarians	81	55
Conservative Jews	79	74
Anglicans/Episcopalians	76	63
Buddhists	74	56
Orthodox Christians	68	57
Presbyterians	64	60
Secular	60	55
Mormons	60	54
Methodists	56	53
Lutherans	53	54
TOTAL U.S.	50	48
Catholics	47	49
Muslims	47	41
Baptists	40	36
Unaffiliated religious	39	37
Pentecostals	33	29
Jehovah’s Witnesses	31	35

Here are the percentages of people with a post-graduate degree and with family income of at least $100,000 a year:

	%, post-grad degree	%, family income, $100k+
Hindus	43	48
Reform Jews	55	35
Conservative Jews	43	35
Unitarians	26	29
Buddhists	22	26
Anglicans/Episcopalians	35	25
Orthodox Christians	28	18
Presbyterians	26	18
Secular	23	16
Methodists	20	13
TOTAL U.S.	18	11
Mormons	16	10
Catholics	19	10
Muslims	16	10
Lutherans	16	9
Baptists	11	6
Unaffiliated religious	12	6
Pentecostals	7	3
Jehovah’s Witnesses	9	3

In every case, the correlation between education and income is extremely strong.

Sears Looks at Moving When Tax Incentives Expire

This makes me rethink my appreciation of Craftsman tools:

 Sears Holdings Corp (SHLD.O) is looking at whether to move its corporate headquarters after the state and local incentives that brought it to Hoffman Estates, Illinois, a northwest Chicago suburb, expire in 2012. The company, which says it is in the early stages of the process, has had some preliminary discussions with the village of Hoffman Estates, a Chicago suburb northwest of the city, and commissioned a study to assess the economic impact of its departure on the village and the state, spokesman Chris Brathwaite told Reuters.
"We owe it to our associates and shareholders to consider options and alternatives and intend to be very thoughtful and thorough in our deliberations," he said.
In the wake of a huge income tax increase enacted by Illinois in January to address a budget deficit that was heading toward $15 billion, states like New Jersey and Wisconsin launched plans to sway Illinois-based businesses to relocate.
And while Illinois continues to struggle with unpaid bills, it granted a tax break worth about $100 million over 10 years to Motorola Mobility Inc (MMI.N) last week to ensure that the company remains in the state.
Sears is struggling and trying to shake things up with a new chief executive officer, Lou D'Ambrosio.
Its sales have fallen every year since it was formed by the 2005 merger of Sears and Kmart, but the first quarter results it reported last week were its worst sales showing since the merger.

State and local governments are engaged in a downward spiral when it comes to competition for business relocations.  This looks to me like Sears taking advantage of Illinois and Hoffman Estates in order to get some new incentives.  If the headquarters is moved to Wisconsin or New Jersey or some other state run by an asshole Republican governor, I don't think I'll be buying anything from Sears.  I think their only real options in leaving Illinois would be to sneak over the border to Wisconsin or Indiana to avoid the state income tax increase, as there are too many workers who would have to relocate to go to Texas or New Jersey.  This looks to me to be out of the Bob Evans playbook, where they discussed moving to Texas prior to getting a sweetheart deal to move from Columbus to New Albany.  This is a game which only benefits corporations while screwing all taxpayers.  It needs to end.

Naked Capitalism Link of the Day

Today: Capitalists Who Make vs. Capitalists Who Take, by Dylan Ratigan:

Looking today at our economy, it’s difficult to see who is creating that higher level of value.   Companies pump up their near-term income by accounting tricks, pump up stock prices for shareholders, without creating real value, all of which has had a hugely negative effect on our global economy.
Umair Haque, is at the forefront of pushing for a new way of looking at what, and how, we grow our economy.  He says:

We have a problem — you know, what is this crisis really about? Is it a debt crisis? Is it a liquidity crisis? I think it’s deeper. It’s a crisis of real value creation and we seemed to kind of have hit the limits of our ability to create real value. And for me, real value is what I call “thick value.” And that’s a little bit analogous to what Michael Porter has recently called “shared value.” For me there are three pillars of real value. It has to be sustainable. It can’t go up in a puff of smoke next year like it happened with the banking crisis. It has to be meaningful, that is, it has to reflect real tangible benefits to people on the other side of the transaction of the relationship. And I think that it has to be authentic.

It’s easier to make money in the short-term through exploitation and the extraction and much more labor intensive with a higher failure rate and a much greater degree of challenge to actually advance and create something that is new and different and differentiates in its creation of value.  “So to me, this is a crisis that is about failing to create real value, but it is a crisis of our institutions.  And it’s a crisis that is of things like GDP and corporate profits, and the ways in which we measure and conceive of income.  And so to really get to grips with this crisis, I think we have to begin by taking a cold hard look at those things,” says Umair.

This is an extremely important distinction which should be made.  Much of the growth in GDP in the finance sector is just extracting rents from others.  That is not productive.  When people trumpet private sector activity over government spending, you must ask what value is gained.  Private profit which doesn't increase value doesn't gain society anything.  Infrastructure investment isn't being maintained, and further privatization won't improve that in most cases.  We need to refigure such issues.

Selling Out

AP:

As 2010 drew to a close, the mayor of Newark, N.J., was staring into a budget abyss so deep that he sold 16 city buildings to pay the bills. They included the architecturally significant Newark Symphony Hall and the police and fire headquarters. In New York, the transit authority may sell its Madison Avenue headquarters, complete with an underground tunnel connected to Grand Central Terminal and air rights to build a skyscraper on top.
And soon, if state legislators have their way, private investors will be able to buy plenty of other municipal treasures: power plants in Wisconsin, prisons in Louisiana and Ohio and municipal buildings in Boston.
The Great Government Tag Sale is on. As states and cities struggle with billions of dollars in shortfalls, elected officials are increasingly selling public assets to cover their costs. Sometimes municipalities sell the buildings to pocket a one-time pile of cash and then lease them back so they can continue to use them.

This is pathetic.  We are going to get screwed by private investors who buy these properties, because too many people just hate government.  Taxes on the state and federal level keep getting slashed to help out the people who don't need help, while everybody else has to pay more.  This will not end well.

What Happened to Sarah Palin?

Joshua Green goes back to Sarah Palin's fight against the oil companies in Alaska, and asks what might have been:

Let’s stop here and go back for a moment to the convention speech—the alchemic moment of excitement and fantasy when Sarah Palin became the star of national politics. Listening to it today, you can practically hear her shift registers, the state figure morphing into a national one, the old Palin becoming the new. She touches on the pipeline, the corruption, how she broke the oil companies’ “monopoly on power” and ended a “culture of self-dealing.” But all of that is overshadowed by the full-throated assault on Barack Obama, rooted in deep cultural resentment, that became the campaign’s ethos and remains Palin’s identity. What resonate are her charges that Obama wanted to “forfeit” the war in Iraq and that he condescended to “working people” with talk of “how bitterly they cling to their religion and guns.”
That didn’t carry her to Washington, but it did reshape the contours of American politics. Today, there aren’t many Republicans of the type Palin was in Alaska; but nearly every Republican seeking the White House strives to evoke the more grievance-driven themes of her convention speech. Regardless of whether she runs too, her influence will be more broadly and deeply felt than anyone else’s. But it’s hard to believe that her party, or her country, or even Palin herself, is better off for that.
What if history had written a different ending? What if she had tried to do for the nation what she did for Alaska? The possibility is tantalizing and not hard to imagine. The week after the Republican convention, Lehman Brothers collapsed, and the whole economy suddenly seemed poised to go down with it. Palin might have been the torchbearer of reform, a role that would have come naturally. Everything about her—the aggressiveness, the gift for articulating resentments, her record and even her old allies in Alaska—would once more have been channeled against a foe worth pursuing. Palin, not Obama, might ultimately have come to represent “Change We Can Believe In.” What had he done that could possibly compare with how she had faced down special interests in Alaska?

I am violating my original rule of not mentioning Sarah Palin unless she announces a run for President, which I made on my first day of blogging.  I think she may have come up in an aside on a post or two, but I generally haven't followed her soap opera.  I think this article is definitely worth reading, as it presents an interesting portrayal of Alaska, the oil industry and Sarah Palin's amazing, really, accomplishment in taking on her own party and  Big Oil.  I think it is interesting when mentioning the convention speech that he also doesn't mention the mantra of that convention, "Drill, Baby, Drill."  Somehow, the ultimate slogan of obsequiousness to Big Oil became the rallying cry most often voiced by the one opponent of the industry in Alaska that beat them.  Unfortunately, the former governor's personal flaws and biases combined with her competitive nature to undermine all that she actually did accomplish.  I think Joshua Green's article title is correct, "The Tragedy of Sarah Palin."  The whole thing is worth reading.

Making Money in Microseconds

Via Ritholtz, Donald McKenzie looks at computerized trading and high frequency trading algorithms:

Little of this has to do directly with human action. None of us can react to an event in a millisecond: the fastest we can achieve is around 140 milliseconds, and that’s only for the simplest stimulus, a sudden sound. The periodicities and spasms found by Hasbrouck and Saar are the traces of an epochal shift. As recently as 20 years ago, the heart of most financial markets was a trading floor on which human beings did deals with each other face to face. The ‘open outcry’ trading pits at the Chicago Mercantile Exchange, for example, were often a mêlée of hundreds of sweating, shouting, gesticulating bodies. Now, the heart of many markets (at least in standard products such as shares) is an air-conditioned warehouse full of computers supervised by only a handful of maintenance staff.
The deals that used to be struck on trading floors now take place via ‘matching engines’, computer systems that process buy and sell orders and execute a trade if they find a buy order and a sell order that match. The matching engines of the New York Stock Exchange, for example, aren’t in the exchange’s century-old Broad Street headquarters with its Corinthian columns and sculptures, but in a giant new 400,000-square-foot plain-brick data centre in Mahwah, New Jersey, 30 miles from downtown Manhattan. Nobody minds you taking photos of the Broad Street building’s striking neoclassical façade, but try photographing the Mahwah data centre and you’ll find the police quickly taking an interest: it’s classed as part of the critical infrastructure of the United States.
Human beings can, and still do, send orders from their computers to the matching engines, but this accounts for less than half of all US share trading. The remainder is algorithmic: it results from share-trading computer programs. Some of these programs are used by big institutions such as mutual funds, pension funds and insurance companies, or by brokers acting on their behalf. The drawback of being big is that when you try to buy or sell a large block of shares, the order typically can’t be executed straightaway (if it’s a large order to buy, for example, it will usually exceed the number of sell orders in the matching engine that are close to the current market price), and if traders spot a large order that has been only partly executed they will change their own orders and their price quotes in order to exploit the knowledge. The result is what market participants call ‘slippage’: prices rise as you try to buy, and fall as you try to sell.

It is legalized looting to allow market makers to take advantage of the data to take little amounts of money on vast numbers of shares, but try getting that practice banned.  It seems detrimental to this country that our brightest minds are being used to come up with trading algorithms to shave tiny amounts of money from retail traders and pension funds and deposit that in investment banker bonuses.

Taxes in the U.S.

Matthew Yglesias includes the following chart in his post about whether the U.S. can preserve Medicare as currently constituted:

One thing to note is that each of those other countries has some sort National Health System which covers more people than our government does.  Once you figure in the privately funded portion of our health care system, which could truly be looked at as a privately administered tax which is paid to health insurance companies, doctors, hospitals and malpractice insurance providers, we would probably move up on the list a decent amount.  Also, imagine how low our taxes could be if we didn't carry the burden of defending all these other developed world countries who spend very little on defense.

Naked Capitalism Link of the Day

Today's link: Why ETF's give an uneasy sense of deja vu, at the Financial Times:

And even if investors are wise enough to understand the risks of individual ETFs, the bigger structural impact is not well understood. The FSB, for example, fears that liquidity mismatches and poor collateral practices could create unpleasant markets jolts in a crisis. It also notes there are potential conflicts of interest because of “the dual role of some banks as ETF provider and derivative counterparty.” And there is another, more basic concern: precisely because the market has exploded with such stunning speed, it may be changing flows in unpredictable ways.
The commodities sector is one case in point: though politicians like to blame hedge fund “speculators” for price swings, ETFs may be as important as hedge funds in recent price trends. But many other asset classes are affected too. As I noted in a recent column, recent swings in the Vix (volatility index) may reflect a recent boom in volatility-linked notes.
Some canny hedge funds, of course, understand these shifts, and are making profits by trading these flows. But less agile investors risk being stranded (including those invested in ETFs). And, more broadly, “the impact of such innovations on market liquidity and on financial institutions servicing the management of the fund is not yet fully understood by market participants, especially during episodes of acute market stress,” the FSB says. Just look at this week’s stunning swing in the silver market. Or, for that matter, last year’s “flash crash”.

I just read a story the other day saying that the triple-long or triple-short ETF's were being held by some investors long-term, even though these Funds' value goes to nothing over time, and they were only meant to be traded over short intra-day periods.  Similarly, the commodity ETFs were getting gouged by the regular market traders each time they had to roll their long positions.  Retail investors always are the patsies at the table.

Navy SEAL Pay Versus Wall Street

Dean Baker notes that ABC News mentioned Navy SEALS get paid about the same amount as school teachers.  He compares their pay to pay on Wall Street:

That is one possible comparison. There are other possible reference points. For example, the CEOs of Goldman Sachs and J.P. Morgan both pocket around $20 million a year. This means that they make almost twice as much in a day as a Navy Seal earns in a year. Not many bank heads have to worry about getting shot in the line of duty.
Of course some Wall Street types do even better. Hedge fund manager John Paulson reportedly pocketed $5 billion last year. If we assume a 3000 hour work year (presumably he had to put in some overtime), Paulson had to work about 2 minutes to earn as much as a Navy Seal does in a year. 

The Long View

From Economic Principals.  First, expectations of the future:

Some of what is going to happen over the next ten years is obvious. Global warming is going to be affirmed by experience. Human embryonic stem cell research will go forward, despite challenges in the courts.
Some is only slightly less obvious.  Social Security will be restored to actuarial balance through a mix of mild tax increases and benefit cuts.  Medicare will be preserved and, perhaps, extended through a second health-care statute.  The 15-member Independent Payment Advisory Board, established by the Affordable Care Act, will gradually morph into a Health Care Fed, a geographically decentralized organization with provider input engineered into the system at every level.
The harder problems that will become apparent in the next ten years have to do with the inequality that is growing all around the world.

Then, what he expects is the answer for economic inequality:

I belong to a luncheon club whose smartest member is a longtime investment manager whom I have observed for many years, He walked out of the room after a global tour d’horizon talk the other day and said on the sidewalk in front of the building, “The only things that can possibly address inequality of a magnitude that will soon be judged to be unacceptable in this country are much higher levels of taxation on the well-to-do and a negative income tax for the poor.”  I hadn’t heard it put so simply or succinctly before, but in the circumstances I was convinced instantly that he was right.
A “negative income tax” is a euphemism designed forty years ago to avoid what otherwise might have been called a “guaranteed annual wage,” when even Milton Friedman endorsed the idea.  Call it a “disability benefit” if you prefer.  We’ve learned a fair amount since then about how to entice workers to take low-paying jobs through earned income tax credits.
Some income floor beneath which citizens are not permitted to fall is the next frontier of social policy. Universal health care was the most recent skirmish in an ongoing campaign. The US will do fine in its economic competition with the newly industrializing world as long as its social fabric doesn’t become irreparably frayed. This is the world for which we are heading, and the sensible thing to do is to prepare for it.

It amazes me that Republicans are pushing for greater inequality, and Democrats can't adequately arouse voter concern about Republican policies.  It further amazes me that people I know who are not well-to-do are actively cheering for the rich and against the government and any sane progressive tax policy.  I had a guy on Facebook tell me that increasing dividend taxes is just theft by the government.  I'm certain that I make much more in dividends (and overall income) than he does, yet he is fighting to lower my taxes, while I want them to go up for the good of the country as a whole.  At this point, I am resigned to the fact that future policy may be terrible for the country, but I may benefit greatly.  I hope that isn't the case, but about 40-45% of the middle class seems to be working for their own destruction, just to spite brown people who are even poorer.  Dumbasses.

Market Failures-Pharmaceutical Example

Washington Post, via the nc links:

Doctors, hospitals and federal regulators are struggling to cope with an unprecedented surge in drug shortages in the United States that is endangering cancer patients, heart attack victims, accident survivors and a host of other ill people.
A record 211 medications became scarce in 2010 — triple the number in 2006 — and at least 89 new shortages have been recorded through the end of March, putting the nation on track for far more scarcities.
The paucities are forcing some medical centers to ration drugs — including one urgently needed by leukemia patients — postpone surgeries and other care, and scramble for substitutes, often resorting to alternatives that may be less effective, have more side effects and boost the risk for overdoses and other sometimes-fatal errors.
“It’s a crisis,” said Erin R. Fox, manager of the drug information service at the University of Utah, who monitors drug shortages for the American Society of Health-System Pharmacists. “Patients are at risk.”
The causes vary from drug to drug, but experts cite a confluence of factors: Consolidation in the pharmaceutical industry has left only a few manufacturers for many older, less profitable products, meaning that when raw material runs short, equipment breaks down or government regulators crack down, the snags can quickly spiral into shortages.
“It seems like there were a lot of things happening with consolidations and quality issues and more things coming from overseas,” said Allen J. Vaida, executive director of the Institute for Safe Medicine Practices, a nonprofit group that helped organize a conference last fall to examine the issue. “It just reached a point where the number of shortages was slowly going up and up, and now we have a national crisis with this huge shortage of critical medications.”
While the dearth that has garnered the most public attention is — ironically — for a barbiturate that is hindering prisons trying to execute inmates, the scarcities are having a much broader impact on keeping people alive, especially in emergency rooms, oncology wards and intensive care units.

I think there are several things to note here.  These are lower-profit products, so the companies don't have much interest in manufacturing them.  It is much more profitable to make sure a 70-year-old can get a hard on than it is to provide a drug to treat for leukemia.  Secondly, reliance on overseas production is both an issue as far as quality control, and tax avoidance.  Pharmaceutical companies were among the biggest gainers from the last overseas profit corporate tax holiday, which caused them to increase overseas production in expectation that it would happen again.  Off the Charts blog was featured among nc's links yesterday explaining why another corporate tax holiday would be a bad idea:

A similar tax holiday enacted in 2004 proved to be a complete policy failure. Its backers claimed that firms would use the repatriated earnings to invest in U.S. jobs and economic growth.  Instead, they mostly used the money for purposes that the tax-holiday legislation had sought to prohibit, such as repurchasing their own stock and paying bigger dividends to their shareholders.  Moreover, many firms actually laid off large numbers of U.S. workers even as they reaped multi-billion-dollar benefits from the tax holiday and passed them on to shareholders.  To cite just two examples, Pfizer — which repatriated around $37 billion in foreign profits, the most of any firm — eliminated around 10,000 American jobs in 2005, while Merck repatriated $15.9 billion and announced layoffs of 7,000 workers in 2005.  (These layoffs cannot be attributed to general economic weakness: they came at a time when the U.S. economy was growing significantly and adding jobs.)

Repeating the tax holiday would increase incentives to shift income overseas. Many companies responded to the 2004 holiday by shifting even more profits overseas. If Congress enacts a second tax holiday, rational corporate executives will conclude that more tax holidays are likely in the future.  That will make them even more inclined to invest abroad and less likely to invest in the United States.  That’s why Congress, in enacting the 2004 tax holiday, explicitly warned that it should be a one-time-only event.  It’s hard to see how the 14 million Americans who are out of work would benefit from having their government provide another enticement for companies to invest overseas.

I would directly attribute the Pfizer and Merck cuts in the U.S. to taking advantage of overseas tax shelters in places such as Ireland, Bermuda and the Cayman Islands in anticipation of future opportunities to repatriate overseas profits in another tax holiday.  Shareholder "rights" have become too cherished in our economy versus the good of society.  This is just one further example.  A major reordering in our society is overdue.

Consolidating Schools

Dana Goldstein gets to one of the key points as to why people fight tooth-and-nail against school consolidation (h/t The Dish):

Currently, New York State has some of the most regressive school districting in the country. Due to a system that has changed very little since the early 19th century, there are 697 school districts in New York. 
In Florida, the state closest to New York in terms of population, there are just 74 school districts.
Politically, consolidating school districts is very controversial, even though larger school systems are often able to offer more course options and other perks. In large part, this is because consolidation is a full frontal attack on white privilege and class privilege. Currently, the ability to pay Katonah property prices and taxes earns a family the right to prevent their children from attending school with the children of Mt. Kisco's Guatemalan day-laborers. Some people move to Katonah instead of to Mt. Kisco for exactly that reason.
To be sure, neighborhood school zoning can lead to de facto segregated schools even within districts that encompass entire counties. But there are many good examples of progressive large school distrcits. Montogomery County, MD has made great strides in educating both affluent and low-income children in part because of the community's and administration's conviction that this should be a shared responsibility. 

The other thing which goes unaddressed is that people assume that because suburban school kids test well, the reason is because the schools are good, as opposed to the concept that the cost-of-living might just segregate out students who would struggle with the tests.  Just because test scores overall might be lower, the kids scoring high on the tests would still get just as good of an education, but parents are uncomfortable with the concept.  It is a strange concept to think that Florida only has 74 school districts in the state, while my county (out of 88) has 9 school districts in it.

Ohio Taxpayers Subsidize Business Investment More than 48 Other States

From the Dayton Daily News:

Only two states - Maine and Oregon - have lower tax burdens for new business investments than Ohio, according to a new study released by the Council on State Taxation, a business-backed group, in conjunction with Ernst & Young, the professional services firm.
“Competitiveness of State and Local Taxes on New Investment” found that Ohio has an effective tax rate of 4.4 percent on new investment, lower than all states and the District of Columbia, except Oregon, with a 3.8 percent rate, and Maine, with a 3.0 percent rate, the lowest nationally.
The findings contrast with some other studies such as those done by the Tax Foundation, which has issued negative findings about Ohio’s business tax climate. The Tax Foundation in a report last year - 2011 State Business Tax Climate Index - rated Ohio 46th nationally in terms of a favorable tax climate.
The new study, released Tuesday, focuses on capital investments in industries that have location choices for factories and headquarters, not on investments tied to specific locations such as hotels and restaurants.

We're winning the race to the bottom.  Excuse me, big business is winning at our expense.

Voodoo Economics Will Not Die

Tax Justice Network, via Mark Thoma:

George Bush the Elder (pictured) described the idea as Voo-Doo Economics, but like other too-good-to-be-true patent remedies, the idea that tax cuts for business stimulate investment and growth just won't die.

Over the past 30 years economists have researched and debated the case for tax cuts and generally concluded that the empirical evidence doesn't support the argument. In fact the more we consider the evidence the more risible the case for supply-side tax cuts becomes; read this, for example. Sadly the lack of empirical evidence doesn't deter some fanatics from pushing the case for all its worth, especially since politicians love ideas that go across well in soundbites.

It goes on to say that tax cuts on the wealthy lead to corporations paying executives more, and the government receiving less tax revenue.  It doesn't take a sharp mind to grasp that that is exactly what has happened in the U.S. over the past 30 years.

Believers in Tax Cuts Rely On Emotion, Not Facts

Noah, at Noahpinion:

Back in the 70's taxes on the rich were high, but now they're quite low. There's no room to cut them any more without forcing the American government into default (and, in fact, the Bush tax cuts will probably do this if not repealed). Any economic benefit that we might ever have gleaned from trickle-down economics had to have been tapped out way back in the 80s.

So who is still arguing that taxes on the rich are oppressively high? Well, rich people who don't mind if the country is forced into default, for one. And also people who, because of their personal morals, just really, really, really don't like progressive taxation. The winnowing of the conservative raison d'etre is going to produce the kind of "echo chamber" that Krugman sees, as well as the increasing moralization cited by Yglesias. Conservatives won the policy debate, back when Matt Yglesias and I were in diapers. What we call the "conservative intellectual movement" in 2011 is a handful of corrupt, silly, or monomaniacal people trying (somewhat lamely) to replicate the victory their forebears won in the 80s.

But actually, I think there is something even bigger that Yglesias and Krugman don't mention. Specifically, the debate about taxation may have been an intellectual one at the elite level, but on the level that really matters - mass opinion - it has always been about morals and emotions, and never about elasticities or deadweight losses. The idea that progressive taxation "punishes success" is something my dad was hearing back in the early 80s; my history teacher gave me that line back in '97, and I suspect it was a common refrain a century earlier than that. The "fairness" argument is not new. And on an even broader level, it was stereotypes of "welfare queens" and lazy minorities that turned working-class whites against social insurance (and against government programs in general) in the Reagan years.

It was these emotional and tribal appeals that shifted much of America to the Republican camp. The average working- or middle-class Republican voter doesn't have a clue who Greg Mankiw is, what determines economic growth rates, or how trickle-down economic policies are supposed to work. But, in whole or in part, he has bought into a narrative that tells him that he does a hard, honest day's work, and that taxes and government spending are nothing more than a way of punishing him for that hard day's work (and, probably, rewarding some black or Hispanic person for a life of indolence).

This is extremely well-said.  The facts don't matter.  Bush's tax cuts have only widened the deficit substantially, and have done nothing when it comes to economic growth.  Ask people what percentage of the U.S, budget goes to foreign aid and you'll hear some huge amount, like 10 or 20%.  I saw a guy I know post on facebook that if the government only cut out "stupid studies" they could almost solve the budget deficit.  But the root of most opposition to taxes is that the money goes to undeserving poor people.  I'd be happy if most people could tell me what percentage of their AGI they paid in federal income taxes.  I would guess that for most of them it is under 15%.  I would also guess that they would say 25%.  They would really be steamed if they knew somebody who didn't have any earned income, but received $86,700 in dividends would owe $0 in federal taxes (income or FICA).  The Bush tax cuts work as designed.  That doesn't help the deficit at all.

Republicans and Economic Inequality

Dainel Little (via Mark Thoma):

The political voice of the right, and the economic elite they serve, has never been louder.  And it is becoming more reckless in its attacks on the rest of society.  Immigrants come in for repressive legislation in Arizona and other states.  Racist voices that would never have been tolerated a generation ago are edging towards mainstream acceptability on the right. Self-righteous attempts to reverse health care reform are being trumpeted -- threatening one of the few gains that poor and uninsured people have made in decades.  And the now-systematic attack on public sector unions is visibly aimed at silencing one of the very few powerful voices that stand in the political sphere on behalf of ordinary working people.

The big mystery is -- why do the majority of Americans accept this shifting equation without protest? And how can progressive political organizations and movements do a better job of communicating the basic social realities of our economy and our democracy to a mass audience?  Social justice isn't a "special interest" -- it is a commitment to the fundamental interests and dignity of the majority of Americans.

I still can't get over how many folks I know who are struggling to get by still buy into the Republican crap.  I want to grab them and shake them and scream, "The Republicans and their big business buddies are screwing you and robbing you blind."  But all they want to do is talk about how Obama is a foreigner and is ruining this country. 

Why 47% of People Pay No Federal Income Tax

Because they are paying other taxes (via Mark Thoma):

Here's another way to put it. Americans pay different kinds of taxes to different entities. State and local taxes tend to be regressive. Payroll taxes, which fund Social Security and Medicare, are also regressive. To balance this out, we have a pretty progressive income tax. If you focus only on the income tax, it makes it look like the rich are getting screwed. But of course the income tax is just one element. And conservatives are working hard to make the tax code more regressive at every level of government.
The other trick is to describe the share of taxes paid by the rich in isolation. Wow, 1% paying 38% of the taxes! It sounds unfair. You intuitively think that 1% should be paying more like 1% of the taxes. But, of course, that number leaves out the proportion of the income earned by the rich. Indeed, as the rich earn a greater share of the income, their share of the tax burden rises as well. Conservatives in turn cite this fact to justify lower taxes on the rich.
It's pure propaganda, and what it lacks in quality it makes up in quantity. The right seems to have an unlimited number of talking heads, columnists, and pseudo-economists willing to peddle this nonsense.

What did the Wall Street Journal call people who had lower incomes and didn't owe federal income taxes, Lucky Duckies?  What a bunch of rich, ignorant jackasses:

And one "lucky ducky" wrote to the Journal editor, offering to share his luck (in a form of logical argument sometimes known as a modest proposal):

I will spend a year as a Wall Street Journal editor, while one lucky editor will spend a year in my underpaid shoes. I will receive an editor's salary, and suffer the outrage of paying federal income tax on that salary. The fortunate editor, on the other hand, will enjoy a relatively small federal income tax burden, as well as these other perks of near poverty: the gustatory delights of a diet rich in black beans, pinto beans, navy beans, chickpeas and, for a little variety, lentils; the thrill of scrambling to pay the rent or make the mortgage; the salutary effects of having no paid sick days; the slow satisfaction of saving up for months for a trip to the dentist; and the civic pride of knowing that, even as a lucky ducky, you still pay a third or more of your gross income in income taxes, payroll taxes, sales taxes and property taxes.

And yet Republicans always trot out their "rich people pay too much bullshit."

Naked Capitalism Link of the Day

Today's Link: How You Can Have a Billion-Dollar Income in America and Pay No Taxes, at Alternet.  It is an interview with David Cay Johnson.  From the interview:

DCJ: You will hear that the top 1 percent pay 40 percent of the taxes. It's not true. The federal individual income tax is only about one out of every five dollars of all taxes raised in America. We have federal taxes, state taxes, local taxes, payroll taxes, and I'm ignoring all the things that used to be covered by taxes that are now paid by fees -- three different fees for using the airport, surcharges when you rent a car, etc.
While it's true the top 1 percent are paying around 40 percent of the total income tax, in recent years they also have earned as much as 20 percent of the income -- 21 percent in 2008, the last year we have full data. Because their income has gone up vastly faster, the share of income tax paid by people at the top has gone up -- even though their rates have been cut.
It's important to recognize what's happened to incomes in America. More than half of the income in the top one percent goes to the top 10th of one percent -- one out of a thousand families in America. For every dollar they made on average in 1980, in the year 2008 they made $4, adjusted for inflation.
But in 2008 the bottom 90 percent of Americans earned on average a dollar and a penny for every dollar they earned in 1980. In 28 years, their average income went up 1 percent, $300 and change for the year, basically a dollar a day.
I did an analysis comparing 1961 incomes to 2007. The bottom 90 percent -- after higher income and social security taxes -- was making just a little bit more than they made in 1961. For each dollar in 1961, they made a dollar and twenty cents in 2007. The group at the top got $36.50 after tax per dollar they made in 1961. That's 180 times as much growth.

This must stop.  Income taxes must become much more progressive.  Go yell at your congressman.