Drudge has a link to Krugman’s piece at the NYT as his big headline today. Why? Because Krugman, ever the idiot that he is, is rambling on about a 91% tax rate from 1950, and how the “rich must pay their fair share”.
the ’50s — the Twinkie Era — do offer lessons that remain relevant in the 21st century. Above all, the success of the postwar American economy demonstrates that, contrary to today’s conservative orthodoxy, you can have prosperity without demeaning workers and coddling the rich.
Today’s conservative orthodoxy isn’t about either coddling the rich or demeaning workers. Bosses don’t get good results from employees who are hurt, and bosses who are favored by government (like Obama and bestest buddy Jeffrey Immelt from GE) means that there is no free market as the govt. picks winners and losers. A rising tide raises all boats.
Consider the question of tax rates on the wealthy. The modern American right, and much of the alleged center, is obsessed with the notion that low tax rates at the top are essential to growth. Remember that Erskine Bowles and Alan Simpson, charged with producing a plan to curb deficits, nonetheless somehow ended up listing “lower tax rates” as a “guiding principle.”
Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today.
And here we’re going to begin the misty-eyed dreaming of days gone by from the leftist perspective. Lower tax rates at every level are necessary for growth. Lower tax rates at the top free up capital, and stability in government and politics establishes confidence in business owners to go out and expand their businesses, leading to more and better paid employees. The current administration’s populist “eat the rich” attitude is something that’s setting back business development, and their fickle and flawed creation of a socialist health care system is causing businesses to respond to that uncertainty as well.
The tax rates of the 1950s, with a lot of analysis, could also be looked at as why the economy didn’t develop even faster. Let’s keep in mind that there were still bureaucrats from the FDR era in government, and the government was still busy being huge, still impacted in size by WWII and going off to Korea to fight another war as well. Also, ask what amount of those rates were actually paid versus what the rates were.
Nor were high taxes the only burden wealthy businessmen had to bear. They also faced a labor force with a degree of bargaining power hard to imagine today. In 1955 roughly a third of American workers were union members. In the biggest companies, management and labor bargained as equals, so much so that it was common to talk about corporations serving an array of “stakeholders” as opposed to merely serving stockholders.
Squeezed between high taxes and empowered workers, executives were relatively impoverished by the standards of either earlier or later generations. In 1955 Fortune magazine published an essay, “How top executives live,” which emphasized how modest their lifestyles had become compared with days of yore. The vast mansions, armies of servants, and huge yachts of the 1920s were no more; by 1955 the typical executive, Fortune claimed, lived in a smallish suburban house, relied on part-time help and skippered his own relatively small boat.
Putting burdens on businessmen ignores that that’s also putting burdens on the business. Also keep in mind that the character of the nation was different then. In 1955, unions hadn’t become as bad as they are today, with things like “job banks“:
One of the benefits negotiated by the United Auto Workers was the former jobs bank program, under which laid-off members once received 95 percent of their take-home pay and benefits. More than 12,000 UAW members were paid this benefit in 2005
Union sloth is legendary, but the character of the country also worked against it in those days.
Executives weren’t the only ones relatively impoverished.
The average American in 1955 wasn’t very well off, either. The were better off than in the Depression (some of them), and they were better off than when they were conscripted, but they weren’t well off. Consider this (pulled off the net in 2 seconds):
Average Yearly Wages $4.130.00 (around $2/hour, or alternately TheCostofLiving.com says average yearly wages were only $3301, and so does the Social Security Adminstration at $3301.44)
Minimum Hourly Rate $1.00
Average Cost of a new car $1,900.00
Black and White TV $99.95
Right now, I’m sitting typing at a computer that can instantly communicate with millions of people across the world, with processing power unimaginable in 1955. If you’re reading this, it’s most likely also on an incredibly powerful computer that would still be deep in the realm of science fiction for 1955, or even reading it on a handheld tablet, phone, or some other device that could not exist in 1955.
Right now, the average American wage is around $43,000, hardly a trifiling amount. A new car in 2011 can run you as low as $13,600… of course, that’s before taxes and government fees. Let’s say you don’t want a Kia as a price point even, and would prefer something made by an American-owned company. You can get a Ford Fiesta for around $14,200, before the government gets involved with tax, title, and license fees. Now the average cost might be a little higher, but the substantive cost is very different. The lowest-grade car you can find today has technological advances that did not exist in 1955. The Fiesta gets 29 mpg on a bad day. A car from 1955 would be running in the 10s for fuel efficiency. And how about safety?
As for the cost of a B&W TV set… well, those are difficult to find anymore. Consider that your phone can probably watch youtube videos with a lot more choices than CBS, ABC, NBC and maybe a local station or two. But what kind of TV can we get today for $99.95? How about a 19″ LED ($99.98 online)? Compare the size and performance with back then.
Using the Bureau of Labor and Statistics Inflation Calculator, $99.95 in 1955 would get us $862.69 in today’s money. Let’s see what we can get for a TV now. With online purchasing, I can find an $828 TV that’s a color LCD TV with a 55″ screen. Notice a quality of life difference yet?
Going back to the car really quickly, the $1900 for a car translates to $16,399. So you can still afford an average car or light SUV that will last much, much longer than an old car, will require less maintenance, get better mileage, be safer with regards to crash ratings and brakes and belts and airbags, and provide features like power windows, AM/FM/CD/aux jack radio, AIR CONDITIONING, and other features that simply didn’t exist in 1955, or were prohibitively expensive.
Krugman’s desire to see the US reduced to the 1950s ignores a massive substantive increase in quality of life as he tries to reduce the rich to groveling at the temple of the state.
The data confirm Fortune’s impressions. Between the 1920s and the 1950s real incomes for the richest Americans fell sharply, not just compared with the middle class but in absolute terms. According to estimates by the economists Thomas Piketty and Emmanuel Saez, in 1955 the real incomes of the top 0.01 percent of Americans were less than half what they had been in the late 1920s, and their share of total income was down by three-quarters.
Why are lower incomes for anyone a good thing? There was also a depression in the 1930s and there was that war thing in the 1940s, and the 1920s were a time of prosperity. By the 1950s, there were still two decades worth of monetary policy damage and war costs being recovered from.
Today, of course, the mansions, armies of servants and yachts are back, bigger than ever — and any hint of policies that might crimp plutocrats’ style is met with cries of “socialism.” Indeed, the whole Romney campaign was based on the premise that President Obama’s threat to modestly raise taxes on top incomes, plus his temerity in suggesting that some bankers had behaved badly, were crippling the economy.
Yes, for many reasons. Eating the rich is foolish. They’re the most prosperous in society, often for good reason. They produce things – often capital for others’ ideas, but often the ideas themselves. Consider this guy:
He makes some music that lots of folks really, really like. His music talents and his ability to spot others with musical talent has led him to becoming a very, very rich man. He’s worth $460,000,000. Half a billion dollars.
The comical hypocrisy of Obama visiting a self-made man worth nearly half a billion dollars to beg for money so he can screw the rich and hiding a $280,000 tower of champagne so no one can see how rich he is… is, well… rich. Jay-Z isn’t going to get hit with 91% taxes anyway (if you hang out with the pres, you get favors), and his success wouldn’t have been possible in the 1950s, either. If he wants servants and yachts, good for him. He earned them (and his employment of them helps them as well).
If Jay-Z were taxed at a 91% rate, however, what would his music empire be worth? If every year, rather than be able to reinvest in new promotions, reinvest in new shows, put money down to back new artists, or even to just lavishly spend stuff on himself, which improves those who provide luxury goods, how much poorer would we as a nation be? Maybe that last phrase is a bit over the top for somebody who’s a rapper, but consider that his money is spent somewhere, it goes somewhere, it’s reinvested somewhere, and there are a lot of people whose lives do depend or are at least influenced by, whether directly or indirectly, how much he makes and spends. And not just the champagne producers. Every small venue that hosts somebody he promotes is making money, the sound and lighting guys at those venues are getting paid because the venue’s full, everybody who’s making merchandising and t-shirts and everybody who’s providing concessions to the shows – that’s a lot of income and improvements in life that come from one man’s large amount of wealth being directed back into his own business.
Krugman’s statement about Obama’s connection with bankers is equally stupid. Obama was elected in no small part by bankers donating to him in 2008. And he’s put those big banks in charge of everything. And even though they elected him in 2008 and has spent four years demonizing his old friends, he still has friends in those big banks. The bankers who “behaved badly” are those who are in collusion with him.
Surely, then, the far less plutocrat-friendly environment of the 1950s must have been an economic disaster, right?
Actually, some people thought so at the time. Paul Ryan and many other modern conservatives are devotees of Ayn Rand. Well, the collapsing, moocher-infested nation she portrayed in “Atlas Shrugged,” published in 1957, was basically Dwight Eisenhower’s America.
Yes, Eisenhower’s America, where individual wealth was confiscated and ideas were confiscated and man was forced to serve man under the cruel collectivist boot of the state. /sarc Krugman, you’re an idiot, and have clearly never read the book (then again, Paul Krugman doesn’t read his own books, so who knows). Krugman, please watch:
Strange to say, however, the oppressed executives Fortune portrayed in 1955 didn’t go Galt and deprive the nation of their talents. On the contrary, if Fortune is to be believed, they were working harder than ever. And the high-tax, strong-union decades after World War II were in fact marked by spectacular, widely shared economic growth: nothing before or since has matched the doubling of median family income between 1947 and 1973.
“Strange to say?” Krugman’s worldview is so warped he doesn’t understand, and perhaps can’t understand.
The decades after World War II were because war-footing ended. The decades after World War II were because World War II ended the idiotic New Deal. The New Deal is what caused the Great Depression – governmental policies that established uncertainty in markets, governmental policies that picked winners and losers, governmental policies that sucked up the labor force into the CCC and other make work programs while simultaneously draining the rest of society and screwing up monetary policy.
The 1950s were a recovery from FDR years. They were a recovery from a decade of the New Deal and the war years. There was much to be improved on yet, but rest assured, 91% tax rates do not spur people to work harder.
Which brings us back to the nostalgia thing.
There are, let’s face it, some people in our political life who pine for the days when minorities and women knew their place, gays stayed firmly in the closet and congressmen asked, “Are you now or have you ever been?” The rest of us, however, are very glad those days are gone. We are, morally, a much better nation than we were. Oh, and the food has improved a lot, too.
Let’s see… people in political life who want minorities to know their place…
And women to know their place…
Krugman is just trolling here. The only people who agree with it, already agree with it. Those who look at it critically suddenly find his statements there, which are typical leftist slop, to be nonsense.
A couple paragraphs before he’s citing Ayn Rand, a female Russian Jew as an exemplar of right thought, and then suddenly women and minorities are supposed to “know their place?” I guess if their place is at the head of the table with ideas about equality based on character, then sure, absolutely.
Krugman is as ignorant of history as he is of basic economic laws. Let’s look at the civil rights act from the 1960s and who voted for it, just to torpedo this idiocy, just the very first stat here:
- Democratic Party: 152–96 (61–39%)
- Republican Party: 138–34 (80–20%)
In the 1950s even moreso, who was it that integrated schools? Let’s look at the Little Rock Nine from 1957. Segregation was pushed and integration resisted by DEMOCRAT Governor Orval Faubus. Integration was forced by Republican President Eisenhower.
As for the gay issue, there’s a difference between asking for special priviledges, special laws (hate crime laws are idiocy in many ways), and special treatment rather than asking for equal treatment (exercising equal rights prevents so-called “hate” crimes, too). Removing fedgov from marriage entirely, and leaving it up to religious organizations, would solve the issue entirely. And I’ve covered the issue with regards to the military before, which comes with a seperate set of problems that aren’t the same in regular society, and would make this long post even longer.
As for asking “Are you now or have you ever been?”… well, normal nations do that sort of thing anyway. Also, McCarthy, though overzealous, was often right. Consider just a few of those with communist sympathies in US government right now. Allen West makes the point quite well:
Moderator: What percentage of the American legislature do you think are card-carrying Marxists or International Socialist?
West: It’s a good question. I believe there’s about 78 to 81 members of the Democrat Party who are members of the Communist Party. It’s called the Congressional Progressive Caucus.
Congressman West’s office responded to questions from CBSMiami.com with the following statement:
“The Congressman was referring to the 76 members of the Congressional Progressive Caucus. The Communist Party has publicly referred to the Progressive Caucus as its allies. The Progressive Caucus speaks for itself. These individuals certainly aren’t proponents of free markets or individual economic freedom.”
As for the food being better… being a leftist who wants to control people’s lives, Krugman probably believes the death of the Twinkie is a good thing, but even factoring that out, the reason food has improved has been due to the ideas and implementation of people in agribusiness and food industries. Those who put their money behind new technology from the 1950s to now, even such things as microwaves, tv dinners, frozen pizzas, organic arugula and whatever else – these things have improved not because of labor or high taxes, but because of those who push the ideas forward. (Yes, laborers contribute by doing the grunt work, but they don’t do the skull sweat as laborers… though some who do grunt work also do skull sweat. The two aren’t exclusive by any means.)
And we finally get to the last part of this fisking of Krugman’s current Keynesian idiocy… except today he’s a lot more socialist.
Along the way, however, we’ve forgotten something important — namely, that economic justice and economic growth aren’t incompatible. America in the 1950s made the rich pay their fair share; it gave workers the power to bargain for decent wages and benefits; yet contrary to right-wing propaganda then and now, it prospered. And we can do that again.
Economic justice is socialism. It’s the idea that everyone should be equal, and that the state should make them so. That’s not equal justice under the law, that’s the demand for “justice” for the proletariat raging against the bourgeoisie; defining a caste system by economic income, pitting man against man, rather than acknowledging that everyone in their own capacity as an individual can earn and live as best they earn.
America in the 1950s was still influenced heavily by decades of powerful progressive politicians, and “their fair share” is quite subjective. Fair in the use of “fair share” is typically taken as “marked by impartiality and honesty : free from self-interest, prejudice, or favoritism”. Not as in “that’s a fairly stupid thing to say, Krugman”, which would be fair in this definition: “moderately numerous, large, or significant <takes a fair amount of time>.”
Krugman, who ends by saying “right-wing propaganda” immediatly preceeds it with the union fairy tale of “gave workers the power to bargain for decent wages and benefits”. Workers always have the power to bargain. Person A selling Person B his labor in exchange for a wage and/or benefits is exercising his freedom as an individual to sell his skills at the highest level. Person B can take it or leave it, as can Person A, both free from interference. When Person B wants to pay for Person A’s labor, and Persons J,K,L,M, and O all are threatening Person B, suddenly Person A and B don’t have good footing to work anymore. Persons J,K,L,M, and O are busy telling Person B that they own Person B’s capital that Person B wants to pay for Person A’s labor with because they work at Person B’s shop. Now Person B can’t even hire Person A because he’s busy fighting with Persons J,K,L,M, and O, who have formed a gang against Person B… and against Person A.
Or let’s assume Person B and J,K,L,M, and O get along fine. Well when Person A shows up, he’s the junior guy. J,K,L,M and O get favorable treatment, while Person A gets shafted, and has to pay J,K,L,M, and O in order to work. Person A loses part of his salary just to be able to work at Person B’s business. And Person A has to pay for Person O, who’s JKLM’s representative, to tell him not to work while they fight with Person B.
Now, let’s assume there’s Person C. Person C is in a right-to-work state. Person C can see that Person A wants to work in B’s field. Person C offers a better rate to A than B can offer, and A doesn’t have to live under JKLMO anymore.
I’ve rambled a bit here (thanks for sticking with me, reader), but unions pit one group of workers against another. We’ve seen this just this last week in how the Teamsters union got screwed over by the Baker’s union. Normally it’s most easy to see in how the one man is isolated from the union, but here we have an even better example in how the Teamsters had reached a deal with Hostess, but te Bakers screwed them over and killed the company – and thus the Teamsters’ jobs are now gone.
Krugman’s entire piece is a vivid leftist fantasy about how eating the rich is great, how good unions are, and how big government is good. He’s a firm believer in Keynesian top-down economics (as has been detailed many, many times). His title of “The Twinkie Manifesto” is perhaps more appropriate than he thinks it is. It’s saccharine fluff for those who are already inclined to it, and distasteful to those who don’t like it.
I’m partial to Zingers myself.
As a final note here, and something I may make it’s own post (as this has gotten a bit long… though by fisking a “manifesto” it’s to be expected), an anecdote. My grandfather worked for a railroad for decades. In the 1950s, he was still working for the railroad, and the railroads are rather famous for their own unions, as well as having their own retirement programs that pre-date Social Security. Well, in this wonderful union world in which he worked, he would spend days after work at his house disassembling an old cistern in the backyard and breaking the bricks to make gravel for the driveway. In this rich, wonderful world of “decent wages and benefits”, my grandpa would take bricks from a broken cistern in the backyard at his house and break the bricks – by hand with a hammer – to make gravel for the driveway.
I’m not averse to hard work, but the 1950s economically were a relative improvement over previous decades. The Democrat economic issues Krugman brings up as good things to his mindset are just as abhorrent as bringing back Democrat racists and misogynists. We don’t need any of those ideas.
The nostalgic looks that many people have on the right are about going back to a time of much more moral certainty, and equality under the law. Communism was identified for what it was, a murderous statist ideology that killed millions. America was recognized for its greatness in allowing people freedom – which is why the struggle for civil rights came about, and often primarily driven by people on the Republican side of the house. Welfare was looked at derisively, hard work was a virtue (which also meant the character of unions, by their people, was different). The law was still respected, and though flawed, people sought to work to change it – again, the struggles of the civil rights era were about people defending themselves within the law. Civil disobedience works in a moral nation – not in an immoral one – and that’s why it did work in America, and improved the American condition.
No one wants to go back to cars with drum brakes and no seatbelts, no one wants to go back to black and white TV and no computers; no one wants to go back to segregation (though there are some places where it exists by choice of the residents, but that’s because of welfare and economic policies). No one wants to go back to the days when Democrat sheriffs, governors, mayors, congressman, and senators oppressed minorities and women. They do that enough today. Nobody wants government in their bedroom, and only the left wants discriminatory laws for different people.
And only self-named progressives want to go back to regressive, destructive taxes and powerful government controls.