Saturday, August 22, 2009

Let's talk taxes

And just to keep it neat and simple, let's talk local taxes. City or county taxes.

It is taxes that allows the county of Los Angeles to run a public library system. I was at the library a couple of times this week, and I saw a lot of kids who probably come from low-income families, I saw people using the free computers to look for jobs and print out resumes, I saw old people reading the newspapers, and so on. It seemed to me like a very good thing. Most countries don't have anything like the public libraries we have, not even England or Japan.

If it were not for our public libraries, people with the money to spare could buy books in bookstores or through I can afford to buy books, and I do spend a fair amount of money per year buying my own books, magazines, and videos. I don't depend on the public library, though I like going there.

But if less government is better government, and if lower taxes are better than higher taxes, then it follows that we would be better off without taxing people to pay for libraries. If rich people want to donate books to poor kids, that's their choice, but why should successful, prosperous people who work hard and earn enough money to buy their own books have their money confiscated to allow access to books by people who haven't made the same good choices in their own lives?

Why should booksellers have to compete against public libraries that completely undercut them on cost? If we eliminated public libraries, more copies of books would be sold, increasing the income of hard-working authors, which would be good for the economy. Why should JK Rowling sell only one or two copies of Harry Potter to the library, to be read by dozens of kids? It seems awfully unfair to Borders and as well as Blockbuster, JK Rowling, and Houghton Mifflin that they pay taxes which then go to undermine their profits!

And ya know what? I bet some of those kids I saw at the library the other day speaking a foreign language have parents who came into the country illegally. That elderly Korean guy reading the Korean newspaper (my tax dollars being used to buy foreign language books and newspapers?!) could have over-stayed his visa. He may very well be an illegal himself.

This is essentially the same argument that is used on a broader scale to argue that we can't afford health care for all, that high taxes are unfair, that government should stay out of our lives. Is it convincing in regards to public libraries? Would anyone vote to close down their local libraries and sell the buildings in order to raise money, so as to lower taxes?

We take things like public libraries (and public schools and public highway systems) for granted. But if they had to be voted into existence now, would such a proposal pass? Or would people be standing up at meetings screaming, "I buy my own damn books and newspapers and dvds, and I'll be damned if I'll let some bureaucrat decide what books the city should buy. I fought for this country, and why should I be forced to pay for books in Korean and Japanese and Spanish, which I don't even read, or pay for books that are going to be read by kids whose parents came here illegally!! This thing will bankrupt us!"

Wednesday, August 19, 2009

Guilded Age 2

Paul Krugman recently posted a graph showing over almost 100 years what percentage of the nation's income lands in the pockets of the top 0.01% of the country. In other words, it's a measure of inequality, or the growth in wealth of the richest of the rich.

When the record-keeping began in 1913, the top sliver of the country earned less than 3% of the money earned in that year. (In a strictly egalitarian society they would, I suppose, have earned 0.01%) The income of the rich peaked in 1928, just at the verge of the Great Depression, with the wealthiest one-hundredth of a percent of the population receiving 5% of the income. After the crash, their share dropped down to around 2%, and then there was a long moderation, from 1943 to around 1983, when the rich's share of all income earned hovered just above 1%.

Since I remember much of that time period, I can say that it was a time when the working class became the real heart and soul of America. Working men could buy houses and cars and take their 5 or 6 kids on vacation, and their wives could stay home and raise the kids. Middle class people could send their kids to college, and college students from the lower middle class could work for 3 months and earn enough to pay their room and board for the next 9 months. If they took a year off, they could save enough to pay for 2 years of school. It was a good time, in other words. And rich people seemed to be doing ok too. (though I didn't know any of them! But you didn't hear of too many jumps out of Wall Street windows!)

The picture begins to change in the 80s, with the rich crossing the 2% line for the first time since 1938. And then the line bounces between 2 and 3% for a while, and suddenly between 1997 and 2007, it leaps up to 6%, the highest level ever.

The data only goes as far as 2007, but there does seem to be a notable coincidence--the last time the rich controlled so much of the income, the Great Depression happened. This time, we're calling it the Great Recession of 2008.

Do I point this out because I'm jealous of the top 0.01% of income earners and want to punish them for being richer than me. No, I assure you, that's not the point.

The point is that it is deleterious for everyone, for the entire economy, when a very small number of people receive a large share of the wealth that is generated. Why? Because money that is spent creates demand for goods and services, creating jobs and opportunities for those in the lower segments of the population. And if those jobs are paid a slightly higher proportion of the income that comes into a corporation, it benefits everyone. That's why we had widespread prosperity and growth from WW2 till the 1980s.

But when money pours into the pockets of the very rich, they have no need to spend it. They invest it in the stock market instead, producing bubbles as capital expands much faster than the markets for actual good and services (since those at the bottom are more numerous but have less to spend.)

The spike is probably somewhat self-generating--as more money is in the hands of the wealthy, they invest more, driving up the price of stocks artificially, creating paper wealth, which shows up as income. But meanwhile, the real wealth, which is produced at the bottom of the food chain, and also largely consumed there, stagnates, so the spike leads directly to the crash. Paper wealth evaporates, reducing the rich folks share of the income, but not actually touching their lifestyle, while at the bottom, people living paycheck to paycheck lose their homes and their jobs and their health insurance, and their kids lose their chance to go to college, so the crash, though it hurts the rich more on paper, actually hurts the poor in personal ways.

What could stop the spike and collapse pattern? It seems like 2 things--more reasonable behavior by corporate boards, stopping the inflationary spiral of top executive pay and spreading the wealth more evenly down through the totem pole (Wal-Mart, for instance, doesn't *have* to create the 3 richest people in the country and also pay its workers low wages. The see-saw could tip the other way.)

And government could provide the nudge in the form of a tax system that treat all income equally, whether it is earned by work or by investment, and by raising the marginal tax rate on large incomes, so that corporations and small businesses would be incentivized to leave the profits at work in the company productively, rather than sucking them out and distributing them in wages and bonuses, which money is used for speculation rather than worthwhile investment in actual productivity.

Who's really Killing Granny?

No death panels needed, really.

Try to imagine yourself in this situation: You are 60 years old. You ran your own business for years, paid for your own health insurance, and then you had the misfortune to be diagnosed with cancer. Three times. You can't work as hard as you used to, but you can and must still work. So you find a job that covers your insurance.

And then you get fired.

Not so bad--COBRA requires that you be allowed to keep your coverage, as long as you pay for it. For 18 months. So for the past 14 months, this 59 year old cancer survivor has lived on unemployment, paid probably more than her income to remain covered, and searched for a job that will include health benefits. Not surprisingly, in this economy, the market for older, cancer-surviving, grey-haired women isn't all that hot, and so far, she hasn't found a job. If she doesn't have one in December, she will be without income and without health insurance.

She had medical bills to pay out of pocket in 2005 of $33,000, so odds are that those took a big bite out of her savings. And of course, if she was a real smart cookie, she had money in mutual funds in a 401k, but those have dropped by half for most of us, so it's pretty unlikely she can pay for private medical insurance anyhow, but with her medical history, under our current system, it's most likely that no insurance company in the country would take her at any price.

God forbid that we should have rationing. God forbid that we should have inefficient bureaucracy. Thanks heavens we have the freedom to choose our own doctors.

And if you worked all your life and have the misfortune to have a life-threatening illness before age 65, well let's hope God is on your side, because otherwise, you are on your own.

Here's the story and a picture of this woman. Look at her and think about her when you think of why our "health care system" might need a few tweaks.