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The Better Part

by Captain Future Mon Oct 31st, 2005 at 04:05:18 AM EST

Thinking socially can result in economic competitiveness - a great article from front page (with a small edit) ~ whataboutbob

This is a kind of adjunct or continuation to the subject and general ideas of the post here a few days ago by Jerome a Paris, with the theme "wealth capture is not wealth creation."  The tone is different, as is perspective, coming from the U.S.  But that's what makes a community fun.

 Since the Reagan years, the reigning economic orthodoxy in the U.S. and therefore in the globalized economy has become that economies succeed when the wealthy and corporations are free from taxes, government is virtually nonexistent except to subsidize favored corporations, and businesses cut costs by shedding jobs to countries where living standards are poor and labor is therefore cheap, and by forcing employees in western nations to work harder and longer for less pay and smaller pensions and health care support that can be disappeared at any time, while businesses spend freely on lobbyists, legal and illicit graft, and executive pay and perks, all in response not to the longterm health of a company, an industry or a polity, but to keep stock prices going higher by means of favorable quarterly reports.


This philosophy, considered radical everywhere but in the U.S., is increasingly been forced on other nations by the U.S. and its puppet international institutions. But necessary to that philosophy's success is that economies that pursue other courses of action be less successful, and even fail, so that this particular approach doesn't look like a convenient mask on the greed and avarice of a few already wealthy and powerful cabals.

But the evidence is growing that this philosophy is not the only guide to prosperity, if it is such a guide at all.

To truly globalize this radical view, the U.S. economy must constantly be inflated as the most successful in the world, and other economies, particularly those of European nations that have evolved a philosophy mixing market capitalism with social supports, be seen as failures.

Unfortunately the only way that strategy can succeed is if Americans are ignorant of what's going on in Europe, and why. So far, we are.

There's been plenty of evidence given here previously on successful European economies, and specifically in the post I mentioned.  News of economic strength in Germany and Italy were cited in the comments.  Here's one more example, told in detail in a story from Reuters.

Fifty years ago, Finland was known for little more than the wood pulp from its endless forests. A poverty-stricken land of poorly educated loggers and farmers on the edge of the Arctic Circle, few paid it any attention.

Today,this small Nordic nation boasts a thriving hi-tech economy ranked the most competitive in the world, the best educated citizenry of all the industrialized countries, and a welfare state that has created one of the globe's most egalitarian societies.

The article points out that Finland's success is due in part to it being a small, homogeneous country, which once were its major drawbacks. But any nation can decide to invest in itself by investing, for example, in education and related social services.

Mr. Nygard and his partner, Minna Sirelius, have certainly enjoyed the fruits of Finland's exceptionalism. Neither of them paid a cent for their university education, though they took seven years to complete their respective degrees in history and psychology. Ms. Sirelius enjoyed free healthcare throughout her pregnancy and the birth of their daughter, Emilia, and she plans to stay on leave from her job in IBM's human resources department for 11 months.

She can afford to: The government is paying her 60 percent of her salary to look after her baby. Next year Nygard and Sirelius will choose among the Finnish-, Swedish-, English-, or Spanish-language day-care centers in their neighborhood, and the state will pick up four-fifths of the cost.

If either of them loses their job, they will be able to count on unemployment benefits that range up to 70 percent of their salaries for 18 months. And when they retire they can look forward to generous pensions that amount, for the average Finn, to 60 percent of their last salary.

These benefits come at a cost, of course: Finland levies some of the highest taxes in the world, and if Ms. Sirelius does well in her career, she will pay more than 45 percent of her personal income toward taxes. But she does not object. "I feel that is what keeps our society and country running," she explains. "We can't keep the welfare state running unless everyone pitches in and helps with the costs."

---snip--

But what Mikko Kautto, a researcher at the government's Welfare Research Center, calls "universalist thinking," goes further. Finns do not regard social spending as a drag on economic growth and job creation, he says, but as a positive force.

"The merit of thinking socially," he argues, "is that having everybody involved, with all our human capital working for the benefit of society, is part of the reason for our [economic] competitiveness."

The World Economic Forum which runs annual business summits in Davos, Switzerland, has ranked Finland the most competitive economy in the world, ahead of the United States, for four of the past five years.

---snip--

Making sure that every Finnish child, wherever he lived and whatever his background, could get a decent education had a very deliberate goal, says Riita Lampola, head of international relations for the Finnish Board of Education, which oversees schooling.

High level education is the key to what Pekka Himanen, a brilliant young philosopher who advises the Finnish government, calls his country's "virtuous circle."

"When people can fulfill their potential they become innovators," Dr. Himanen argues. "The innovative economy is competitive and makes it possible to finance the welfare state, which is not just a cost, but a sustainable basis for the economy, producing new innovators with social protection."

Other European countries could copy Finland's efforts to improve its education system, Himanen insists, just as they could emulate Finland's heavy investment in research and development.

Finland is still recovering from years of economic crisis, the article continues, so its services are not yet on par with neighboring Scandinavian countries. But this model is widely supported in Finland, especially in a changing world economy.

Indeed, says Mr. Rouvinen, the challenges of globalization mean that "we specifically need our social model. As a small country on the edge of the world we will have steep ups and downs. We have to have mechanisms so that individuals won't suffer from that."

In the end, says Jorma Sipila, the Chancellor of Tampere University, Finland's inclusive social model is its best guarantee for the future. "The conditions for a flourishing economy are so demanding that the state has to make social investments to raise competent people and take care of dropouts so that they carry their share of the burden," he argues. "Marrying prosperity and social protection is the only sustainable future."

That's all the excerpts from the Reuters article, which is here in full: Egalitarian Finland most competitive, too

Social supports are long-term investments. Yet even on their own terms, though business people talk about investment, so few seem to believe in it or understand it on a larger scale. Businesses are often captives of their own mythologies of cost-cutting and short-term profits.

Consider the publishing business in the U.S., which has gotten increasingly enslaved to short-term, high-profit margin thinking. Then you go into a huge Barnes & Noble and see portraits ringing the wall of famous writers who now are the brand names that give these stores their identity, and few if any of them made anybody any money for a long time. And today they just wouldn't be published by commercial trade publishers.

Quality is future-oriented. Decently paid workers with health care and cared-for families return investment in many, many ways, for generations. Europe is years ahead, perhaps light years ahead, in the sometimes difficult enterprise of dealing with all realities: those of world economics, the common good, the greater good, the ecological and energy and design practices for long-term prosperity.

Economics is health. The soul of a nation is as important as its wealth. It is the better part of its wealth.
 

Display:
Excellent article!! An great find on Finland discussion...exactly the point being made in many conversations here...so this is supporting data. Thank you.

(Recommend!!)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia

by whataboutbob on Fri Oct 28th, 2005 at 03:07:48 AM EST
Unfortunately the only way that strategy can succeed is if Americans are ignorant of what's going on in Europe, and why. So far, we are.
There is another way: you can try to subvert the European model(s) before Americans have a chance to find out about them.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 03:53:22 AM EST
[ Parent ]
(Editing note: I changed your yahoo link to an embedded quote...seemed to have made the article too wide, but now fits onto the screeen. Don't know why some un-embedded links do this...)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Fri Oct 28th, 2005 at 04:38:10 AM EST
thanks.  I was wondering what did that, or whether it was just my computer.

Well, I'm off to sleep.  Have a great day.

"The end of all intelligent analysis is to clear the way for synthesis." H.G. Wells "It's not dark yet, but it's getting there." Bob Dylan

by Captain Future (captainfuture is at sbcglobal dot net) on Fri Oct 28th, 2005 at 06:21:01 AM EST
[ Parent ]
Note that Finland abolished the strict tracking model (with great controversy)

In Finland it is very rare for someone from outside the administration to be appointed to the higher posts within it, even though there is not a closed career system. Finland does not have any elite educational establishment for the production of future high ranking civil servants along the lines of France's Ecole Nationale d'Administration, the ENA. Nor does Finland have very hierarchical administrative structures as in some southern European countries
here

In fact, the Finnish educational system is the result of abolishing something that looked like the French system.

For reformers, education was the principal arena. The traditional Finnish system was conservative and divisive: Kids were selected for an academic track at the end of fourth grade. Those not chosen had no chance at higher education. Universities were relatively few, and mostly mediocre.

Aho and his colleagues thought schooling should be "comprehensive," keeping all kids together in the same schools for nine years without tracking them by ability. Only for "upper secondary," or high school, would academic students be separated from those with vocational interests. The schools would be administered by municipal governments, but at the outset, the substance of the reform would be controlled by the National Board of Education and the government in Helsinki.

by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 11:05:15 AM EST
Good contribution, except it is an European model - practised in a lot of countries other than Finland, including other Scandinavian ones and Eastern European ones under and partially after communism.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Oct 28th, 2005 at 11:31:35 AM EST
[ Parent ]
What many people do not realize is that the US educational system was, with some obvious exceptions, a radically egalitarian system produced with very high investment. New York City, until the 1970s, had one of the most impressive free schooling systems. City College graduates were high prestige and high skill and tuition free. The system of state universities complemented a strong elementary and high school system. What you see in the early 1970s (while Finland was going the other way) was a destruction of this system - City College was crushed by Rockefeller, the University of California system was attacked by Ron Reagan while the system of free primary schooling was being destroyed through the Jarvis amendments. (and yes, I do know that the system was not egalitarian for blacks and there were major problems with it, but ... )
 
by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 11:47:14 AM EST
[ Parent ]
Actually, in California there is an insidious little critter called "Prop 13". It was a ballot measure (referendum) passed in the 1970's whereby property taxes were substantially reduced, gutting the State's budget and eliminating many extracurricular school programs overnight. I have a friend who was a teenager at the time and he said his summer camps disappeared overnight. Prop 13 is a classic example of the middle class identifying with the fabulously wealthy and voting to eliminate a tax on the wealthy to their own detriment.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 11:57:21 AM EST
[ Parent ]
Jarvis was the author of Prop 13. But it's more complex than you say. Prop 13 saved homes for many middle class people and slowed down the class segregation of California cities. Without Prop 13, as real-estate values grew, taxes would follow. You can still find working class people in SF who own their own homes that are now worth millions. What should have happened, was a replacement of property tax with state income tax/capital gains to pay for education and maybe a stiff real-estate transaction tax.
by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 12:20:07 PM EST
[ Parent ]
Without Prop 13, as real-estate values grew, taxes would follow.
Well, yeah, isn't that the whole point? It makes more sense to tax rent than to tax wages, profit or interest.

As a direct result of Prop 13, after-school and summer programs evaporated, the UC went from being free to being starved for cash, and so on and so forth.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 12:32:33 PM EST
[ Parent ]
I can't follow you... it's possibly my still imperfect English. What does that mean, tax rent?

The way I interpreted and further-thought what citizen k wrote, working-class people would have to pay even more from their wages for homes valued even higher, in the end forcing them to sell their homes.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Oct 28th, 2005 at 12:37:55 PM EST
[ Parent ]
No, it is my imperfect economics.

Anyway, the point is that right now, people who own Malibu mansions with private beaches pay a negligible amount in property taxes, at a time when California had to declare a budget emergency. All of California's troubles might have been solved just by repealing Prop 13.

To put it another way: Californians can't have their cake and eat it. If they want state-funded programs they have to pay state taxes. Counties and cities are funded by the state to a large extent. LA was threatening to close hospitals and shut doen public transportation, not to mention the fact that the state could not afford to pay for its electricity.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 12:43:10 PM EST
[ Parent ]
Hm... first thought, shoot it down if you like, but wouldn't the best thing be to tax homeowners differentially when they sell their homes? That way, it would appear to me, the rich Hollywood actor or plastic surgeon (who move often anyway) will be reached, but the poor worker who happens to live in an area that turned hype after he moved there won't be forced to sell and leave. Also, maybe a tax on building additions.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Oct 28th, 2005 at 02:33:07 PM EST
[ Parent ]
Okay, I'm going to have to jump in because 1)  I lived through this problem in Los Angeles and 2)  I think it's a perfect, if extreme, example of why the right has gotten so much political power over here.

Your points about taxes being necessary for social services is well-taken.  I couldn't agree more.  That said, there have been very real problems and the issue has been killing the Dems with the working classes.  We keep saying people are voting against their interests when they vote for these Republican tax initiatives, but they're not.  In the long-term, that's true, but many are voting for their short term survival.  The Dems refusal to protect the working class has allowed the Rs to exploit them.

Despite all the talk of mansions and Malibu beach houses, post-WWII, California had an enormous middle class.  Whole cities of tract homes were built as affordable housing.  There were many retirement communities.  Huge amounts of farming.  Ports, shipyards, oil refineries, Douglas and Northup.  Tons of jobs.  Millions of workers.  Even the movie industry employs far more working class people than wealthy celebrities and producers.

So what happened was that California had a huge influx of wealth.  Property sky-rocketed.  And the property taxes were not based on the price at which you bought your house, but reassessed every year or so on the current value.  That's fine for the state, for developers and corporations.  But if you're just some average person, you bought the house in a middle class neighborhood for, say $40,000, and suddenly you're told it is valued at a quarter million and you're paying double your mortgage on taxes.  You have to move.

So in about a five-year period, the middle class was destroyed and basically run out of the major metro area.  This was a very real, very traumatic problem.  When prop 13 came along, there was no way in hell it wasn't going to pass, because people's lives depended on it.  For anyone living in California at the time, this was obvious.

So, I can see why the right would want this, how it damaged the economy, and how it helped their wealthy constiuency.  What I don't understand is why the left didn't step in to protect their own and counter the damage.  Voters were presented with an all or nothing choice -- stop the taxes or keep the taxes.  Both were very bad options.  

It would have been nice if there had been some discussion of alternatives.  If a prop 13-type tax structure had been proposed for only single-family dwellings on one property, for instance.  Instead, the problems of the working class were ignored and this dreadful thing passed and gave the wealthy the same break as the people who needed it.  It's also done a huge amount of damage to the state and made everything worse.

Almost thirty years later, we're still saying how bad it was, how significant it was, how it ruined the state, but we're still not accepting the fact that we made a big mistake by ignoring the fact that it addressed real problems.  We're still minimizing those problems and watching the cycle repeat over and over.  Prop 13 was a terrible solution to the problem, but it acknowledged the problem and addressed it.  We lost because we denied the problem and ignored it.  I believe that's still the case in a lot of these issues and that we'll start winning when we start proposing our own solutions.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Fri Oct 28th, 2005 at 02:56:21 PM EST
[ Parent ]
This failure to protect the working class is common to social democrats world-wide. I think that the Mitterand regime in France and the Blair regime in the UK are perfect examples of failed reform parties - like the US Democratic party. Thomas Franks book could easily have been written about the working class areas of France that have gone to the right or about East Germany instead of Kansas. In some ways, Finland is interesting because it has an egalitarian social democracy - and this is very different from the Grand Ecole/Harvard JFK School/Cambridge social democracy in other places. Jospin is no more convincing as an egalitarian than Kerry was as a populist.
by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 06:24:12 PM EST
[ Parent ]
The left generally does not understand economics --- they seem to think that money is dirty and that understanding economics will soil your brain or something like that.

This stuff is difficult. You not only have to understand the issues, but be able to design a policy whose consequences you understand and that you can eplain to the public.

Hindsight is a great counsellor.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 06:37:11 PM EST
[ Parent ]
And the right does almost everything for their own economics and pretends it's for other reasons.  :-)

Maybe we can eventually make language a complete impediment to understanding. -Hobbes
by Izzy (izzy at eurotrib dot com) on Fri Oct 28th, 2005 at 06:46:16 PM EST
[ Parent ]
The right is pragmatic in opposition and ruthless in power.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 06:53:57 PM EST
[ Parent ]
Yes -- I loved what you said:

one of the reasons that the right has managed to preserve a fake-populist appeal is this type of carelessness on the part of the left

And I think you're right.  People are people the world over, and these patterns repeat across geographic boundaries and throughout history.  I think we have more in common than we have differences.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Fri Oct 28th, 2005 at 06:42:25 PM EST
[ Parent ]
If you were to look at Social Democracy through a Marxist prism you might make the case that the function of Social Democracy is not to protect the working class but protect the Bourgeois Democracy from the working class by giving the latter just enough incentives.

Social Democratic parties are idealistic in opposition and pragmatic in Government.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 06:42:34 PM EST
[ Parent ]
Thus it is ALWAYS better to have social democrats (à la Jospin or Kerry) in power - both the government and the opposition are pragmatic, and the lefties are somewhat silenced.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Oct 28th, 2005 at 07:00:12 PM EST
[ Parent ]
Maybe that's why Scandinavia is prosperous.

Years ago (must have been 1999/2000) in the Danish daily Politiken they had a humorous article describing the parties in the Danish political spectrum. There were 6 or 8 of them, and all the descriptions started with the words "Social Democrats who...".

I mean, the Danish Conservative party is called "Left" (Venstre), for Crissakes!

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 07:09:29 PM EST
[ Parent ]
"Failure to protect the working class?"

As opposed to whom, the right? Are you aware of what has happened to wages and social mobility in the US in the last 25 years?

And about the left's supposed "ignorance" of economics, again, as opposed to whom? Supply-side conservatives?

When the left runs the economy, the economy performs for better. For everyone, including the middle class.

So enough nonsense about the left's alleged "ignorance" of economics.

by TGeraghty on Fri Oct 28th, 2005 at 07:05:07 PM EST
[ Parent ]
Hey, I'm on the left and I don't know jack twat about economics.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 07:10:39 PM EST
[ Parent ]
Maybe not, but your post on taxes above is textbook economics.

The concept of rent was originally intended to mean the return to any factor of production that is fixed in supply. Like, say, agricultural land.

So taxing rent, in theory, is not distortionary because it does not change the quantity supplied of the fixed factor (or else it's supply would not be fixed).

Taxing wages, interest, or profits does reduce the supply of those factors.

So I guess you could argue that economic theorists don't know anything about economics, but using your post as evidence of the left's so-called ignorance of economics is just wrong.

As for the California tax revolt of the 1970s, the real culprit behind it was inflation. The value of real assets like housing tends to rise right along with the price level, which caused much of the problem with rising property taxes.

So if we can bash the left for anything it is not having a serious anti-inflation program in the 1970s.

by TGeraghty on Fri Oct 28th, 2005 at 08:43:30 PM EST
[ Parent ]
So, chalk it up to the oil shocks.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 08:46:25 PM EST
[ Parent ]
I don't know anything about economics, but I'm learning...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 08:53:21 PM EST
[ Parent ]
Now, would it be better than taxing rent to have collective ownership of fixed factors (the commons)?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 09:03:59 PM EST
[ Parent ]
It all depends, I suppose. Collective ownership and economic regulation through political processes have their own costs and perversities, as anybody who lived in the old communist bloc can attest.

For example, US land policy in the 19th century can be posed as a choice between collective ownership/regulation of land and private ownership through distributing the land to individuals and letting the state appropriate some of the benefit through levying property taxes. The US took the private ownership/property tax route and it turned out pretty well - it spurred economic growth, higher wages, an equitable distribution of wealth. It's very hard to argue that the collective ownership route could have done any better, and it potentially could have done much, much worse.

I don't think there is any easy, single solution that applies equally well to all places and times. Regulation, taxation, individual property rights, collective ownership are all tools in the policy toolbox that have to be combined in various ways at various times depending on the circumstances.

by TGeraghty on Fri Oct 28th, 2005 at 09:22:31 PM EST
[ Parent ]
I lived through Clinton and Carter in the US and somehow missed that revival of high wage jobs, union membership, affordable housing and so on perhaps due to the noise of NAFTA, welfare reform, and other goodies. And I'd appreciate some pointers on the similar events during the Mitterand regime. The height of Enronomics was during Bill Clinton's presidency and the French Socialists built many of the HLMs. Or am I dreaming?

The phenomenon of "Reagan Democrats" is a worldwide problem and it cannot be addressed by railing at the venality and corruption of the right. What do you think is responsible for the political success of Berlusconi, Sarkozy, and Bush? Stupidity? Bad press (because we all know that the press used to be so left wing)?

by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 09:51:36 PM EST
[ Parent ]
I lived through Clinton . . . in the US and somehow missed that revival of high wage jobs

Well, then you weren't paying attention:

The post-1996 labor market: the benefits of full employment

In May 1997 [the unemployment rate] fell below 5% for the first time since 1973, and in September 2000 it hit 3.9%, the lowest rate in three decades.

The move toward full employment was extremely beneficial to millions of working families whose fortunes had been battered by slack demand for decades. As is usually the case when the labor market tightens up, the least advantaged posted the strongest gains.

For example, while the overall rate fell by 2.1 percentage points from 1994 to 2000 - from 6.1% to 4.0% - the rate for African Americans fell 3.9 percentage points, from 11.5% to 7.6%. The decline for black teenagers was particularly steep, from 35.2% to 24.7%, a drop of over 10 percentage points. For all blacks and for black teens - and for Hispanics as well - the 2000 rates were the lowest since data collection on these groups began in the early 1970s.

The most important result of all this labor market tightening is that these employment gains translated into higher wages and incomes for broad groups of working-class families that had seen their incomes stagnate over the previous few decades.

  • The real hourly earnings of low-wage male workers, after falling at an annual rate of 1% from 1973 to 1995, a 20% cumulative loss, grew 1.5% per year from 1995 to 2000. For low-wage women, wages were flat over the earlier period, but grew 1.8% annually in the latter 1990s.

  • The real wages of high school dropouts grew 1% per year after 1995, after falling at about that rate from 1973 to 1995.

  • After falling 0.6% annually over the 1980s and early 1990s, the real income of the poorest 20% of families grew by 2% per year from 1995 to 1999 (such data are only available through 1999). In real 1999 dollars, low-income families were $400 worse off in 1995 than in 1989. By 1995, their average income had increased by $1,000.

  • This rise in income for the poorest families led to dramatic declines in poverty rates, especially for African American families, whose poverty rates fell 5.7 percentage points from 1995 to 1999 while the overall rate fell by 2 points (yet by 1999 the black poverty rate was still 23.6%, compared to 11.8% for the overall rate.)

Finally, the tight labor market, and the resulting increase in the bargaining power of low-wage workers, led to a clear slowing in the growth of inequality.

And yes, job growth and wage growth were also higher under Carter, too, than afterward.

You might check out the links from the previous post that you obviously ignored.

Whatever is causing the phenomenon of "Reagan Democrats," it has nothing to do with the reality of left policies.

Maybe part of it has to do with so-called progressives who don't bother to defend and publicize the real achievements of left economic policy, but would rather spend their time bitching about how stupid the left (other than themselves, of course) is.

by TGeraghty on Sat Oct 29th, 2005 at 12:37:45 AM EST
[ Parent ]
Hi. :-)

I left you a, um, "note" down below.  You'll find it under the title "not bullshit."

I hope it's okay... <ducking>

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sat Oct 29th, 2005 at 05:35:54 AM EST
[ Parent ]
I don't understand if you are being ironic or otherwise. Could you make your points directly please?

Please state what you think happened under Mitterrand (you might want to check if it happened during a right wing or a left wing government in that period, though) and whether you think it's good or bad. And maybe you can do the same for Jospin's government (under President Chirac).

Please be explicit. I have no idea how to reply to your above post as it is way too ambiguous.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Oct 29th, 2005 at 04:32:40 AM EST
[ Parent ]
Jospin and Clinton managed the economies far better than their idiotic successors, but this does not mean they managed in ways that adressed the anxieties of those being displaced by globalization or other changes. What was Jospin's strategy for countering the, justified, fear that French factory workers and engineers would find jobs gone to Asia and French skilled trades would find themselves competing with Polish workers (with perhaps a better work ethic and certainly a lower price)?

I know what Clinton's NAFTA amelioriation policy was - mostly bullshit.

I guess that if you are going to sell people on the idea of a large and intrustive state, you cannot also ask them to jump into the dangers of the market. And this has absolutely nothing to do with the actual failures of the right.

by citizen k (sansracine yahoo.fr) on Sat Oct 29th, 2005 at 05:42:31 PM EST
[ Parent ]
"A better work ethic," huh?

Wow, you are a great friend to the rich-world working class.

by TGeraghty on Sat Oct 29th, 2005 at 07:55:42 PM EST
[ Parent ]
For you it's a football game and you have to make the right cheers for the right side.
by citizen k (sansracine yahoo.fr) on Sun Oct 30th, 2005 at 02:33:47 PM EST
[ Parent ]
I still do not undersztand what your point it.

Jospins's strategy was to get unemployment down from 12.5% to 8.5% in 4 years. That certainly addressed a lot of anxieties.

Clinton ditto. I don't remember that people were so worried about the economy in 1997-2000 in either country, and the right certainly did not campaign on economic anxiety in the respective electoral campaigns.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Oct 30th, 2005 at 01:58:45 AM EST
[ Parent ]
I think this is a rather subtle issue of economic analysis, but an easy issue of perception. The Democrats in the US and Socialists in France, lost public perception as the defender of working people under both Clinton and Jospin. As you note elsewhere, the unemployed and lower working class vote La Pen.  
by citizen k (sansracine yahoo.fr) on Sun Oct 30th, 2005 at 02:39:54 PM EST
[ Parent ]
Le Pen does not have an right-wing economic message. He's protectionistic and populist. He has a xenophobic, authoritarian message, but that is not economic.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Oct 30th, 2005 at 02:56:47 PM EST
[ Parent ]
What does that mean, tax rent?

It means that rent is earnings on the merit of sitting on some resource and doing nothing with it. The economic agent actually doing something with the resource is the one paying the rent.

Wages are earnings for labour.

Profits are earnings for investing capital productively.

Interest are earnings for saving capital.

Now, if you are going to tax rent alone, you hit the renters but not owners. If you tax property you tax everyone as landlords will pass some of the tax on to their tenants.

Taxing property incentivates selling the property to who will use it. Taxing wages, profits or savings discourages labour, investment or prudence, respectively.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 12:59:59 PM EST
[ Parent ]
California housing prices began to skyrocket in the early '70's, because the weather and the natural beauty make this an incredibly great place to live.  All housing prices, not just Malibu mansions, skyrocketed.  The property tax was computed based on the estimated new value of the home.  It's not uncommon here for someone to own a home for a long time, want to retire in their home, and find their home is worth 4 times what they bought it for--if you raised your family and kept the home for 30 years, the multiple is much higher.

So for example, a middle class family buys a home for $500,000--yes it happens often here,,,,how, you borrow as much as you can, work your tail off, maybe husband and wife both, and get the mortgage paid off--it's not easy, but many, many Californians have done that.

So now the kids are grown, you want to retire, the house is paid off.  But the house is now worth $2 million, and the 1.2% (roughly & it varies from county to county, a little) property tax means you owed $24,000 per year.  This in general didn't hurt the actors and producers in Malibu, who make more money than CEO's <snark>, but it sure blew away the retirement plans of the upper middle class on down.  

Californians didn't think this was fair, so for property tax purposes your house value today can only go up as much as inflation, measured by the CPI.

Maybe ciitizenk is correct that other taxes should have been raised to compensate.  However California state income tax is one of the highest in the country at 9.3%, and capital gains are taxed at that same rate!  So the Federal tax on capital gains is 15%, and the state tax is only 40% less.  I guess another approach would be to look at running the state government more efficiently--but, that would be crazy wouldn't it?,,,,,sorry I lost my head.<snark>

by wchurchill on Fri Oct 28th, 2005 at 02:01:59 PM EST
[ Parent ]
So for example, a middle class family buys a home for $500,000--yes it happens often here,,,,how, you borrow as much as you can, work your tail off, maybe husband and wife both, and get the mortgage paid off--it's not easy, but many, many Californians have done that.

Hm, that would seem to be part of the dangerous practice of living beyond one's means, part of the current auto-pilot flight to disaster of the US economy. To avoid large boom/bust swings and waves of personal bankrupcies, I think this should indeed be discouraged.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Oct 28th, 2005 at 02:41:38 PM EST
[ Parent ]
personally, though I try to limit my own financial risk in the way i manage my affairs, I feel a little uncomfortable with telling other people what they should do, or having some higher authority dictate to people what level of risk they should take.

in California, or other very desirous areas, I'm afraid your suggestion might dictate that the middle class can't live there, at least in the more desirable areas.

I would also note that your statement that " part of the current auto-pilot flight to disaster of the US economy" is an opinion, not a fact, though I realize it is an opinion held by a number of posters on this site.  I for one don't share that opinion.

by wchurchill on Fri Oct 28th, 2005 at 03:29:08 PM EST
[ Parent ]
Hm, that would seem to be part of the dangerous practice of living beyond one's means, part of the current auto-pilot flight to disaster of the US economy. To avoid large boom/bust swings and waves of personal bankrupcies, I think this should indeed be discouraged.

Actually, at least in Los Angeles, if you can't afford a $500,000 house, you're not getting a house.  If you can't afford the payments, it's likely you can't afford the rents there, either.  The property values are crazy.

In the neighborhoods I grew up in, all small craftsmen and spanish bungalows which used to be working class, you can't touch a house now for under $650,000 and renting a one bedroom apartment is going to cost you at least $950/mo.  So these prices aren't always an indication of over-extending, they're just the reality of finding a place to live.

My best friend down there is a teacher.  She lived with roommates and saved like mad and bought a house with her husband about 15 years ago during one of the downturns in the market.  It was a tiny fixer-upper in an iffy neighborhood.  Lucky for them they predicted correctly and the neighborhood went up instead of down while they made massive improvements.  

They've sold twice since then and, although they make big profits, they have to put it right back into another house or they'd have to leave the area.  And it's a huge area -- you'd have to move about 60 miles inland -- to areas with no jobs -- before you'd start finding cheaper housing and then you'd have the huge commutes.  Their current home is now worth over $700,000, but they would not be able to afford an apartment on thei income.

The small middle (or working?) class that's left in Los Angeles, spend a lot of time moving around trying to guage which neighborhoods will polarize into wealth or poverty.  There's not much middle left.  I mentioned the neighborhoods I grew up in, and I've visited there through the years.  I've seen the houses go from worthless to exhorbitant three times since then.  To my eyes, that's not a problem with the population and their decisions, it's evidence of a problem with the system.  People have to live somewhere, and they shouldn't have the instability of insane real-estate markets herding them around.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Fri Oct 28th, 2005 at 04:30:52 PM EST
[ Parent ]
No. Taxing property also discourages working/middle class home ownership. In the absence of Prop 13 type rules, a working class neighborhood or farm can be converted to luxury housing by the act of a single investment in upscale housing.

If I can return to my theme, one of the reasons that the right has managed to preserve a fake-populist appeal is this type of carelessness on the part of the left. Plumbers who live in, say, Sunnyside or Issy will not be thrilled by a "social justice" proposal that takes their homes.
 

by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 02:05:27 PM EST
[ Parent ]
This is a good discussion, better than any I've heard here.  I wasn't living in California at the time of Prop 13, but even in Boston the teachers there considered it the end of the world.  And in some respects they were right.  Whether real estate taxation was the right or wrong way to finance public education, the fact is that funding dropped significantly. Before prop 13, California's educational system, from preschool through public universities, was widely considered to be the best in the U.S.  Now (when I am living in CA), the elementary through high school public schools are near the bottom, if not the worst in the states.  The two public systems of higher education are hurting, experiencing cutbacks every year.  One such state university has not purchased a new book for the library in two years, nor will it do so this year.

The prop 13 impulse did spread to other states.  Public education is in deep trouble in the U.S. And many if not most private universities are feeling squeezed as well.

"The end of all intelligent analysis is to clear the way for synthesis." H.G. Wells "It's not dark yet, but it's getting there." Bob Dylan

by Captain Future (captainfuture is at sbcglobal dot net) on Fri Oct 28th, 2005 at 04:20:45 PM EST
[ Parent ]
I'm actually glad I brought up Prop 13, because like Cap'n Future I think this has been really instructive.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 06:08:53 PM EST
[ Parent ]
I'm glad you brought it up as well.  Over here, especially in the west, it's an issue that's difficult to discuss at all because of both the terrible consequences and all the political rhetoric.  Just saying "Prop 13" over here is almost guaranteed to start a fight.  Makes a sensible discussion of the issues and problems next to impossible.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes
by Izzy (izzy at eurotrib dot com) on Fri Oct 28th, 2005 at 06:16:15 PM EST
[ Parent ]
So what is your alternative tax policy that would have spared middle-class California homeowners from rising property taxes while continuing to provide the funds to maintain California's top-quality (in the 1970s, although not anymore) education and infrastructure?

You don't think those programs and public investments helped California's middle class get to where it was in 1978?

Or can we just chalk up the problems to "waste, fraud, and abuse" on the part of government? Nobody but the bureaucrats and the fat-cat politicians have to give up anything?

by TGeraghty on Fri Oct 28th, 2005 at 07:13:04 PM EST
[ Parent ]
I think that Ronald Reagan rose to power on that resentment and that was not a good result. I think that American leftists and liberals spent a lot of time reassuring each other of how right they were while the loonie toons and corporatists systematically increased their power.
by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 09:01:01 PM EST
[ Parent ]
You didn't answer my question.
by TGeraghty on Fri Oct 28th, 2005 at 09:10:56 PM EST
[ Parent ]
Your question is an evasion of the actual issue, but if you really want an answer, there should have been a real-estate transfer tax with an exception for inheritance. The left could then have run against speculators and for taking the tax burden off honest working people instead of allowing the right to grab the high ground and destroy public education.
by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 09:36:49 PM EST
[ Parent ]
How is my question an "evasion" of the actual issue?

The issue is the alleged stupidity of "the left" in dealing with the 70s California tax revolt.

So, asking for an alternative policy that would (a) preserve the public investments that helped make possible California economic prosperity while (b) relieving the rising property tax burden on the middle class is part of what is needed to fruitfully engage the issue, not the aimless bitching of your previous posts.

Now that you have actually proposed something, we might ask questions like who would have paid this "real estate transfer tax" Are you telling me that if I'm a middle-class homeowner who has to relocate for a promotion or a new job, that I'm going to get socked with this tax, while my neighbor who stays put doesn't pay a dime? That sounds like it could have some real economic disincentive effects.

Then there's this:

Nevada is collecting millions of dollars in real property transfer taxes that a Las Vegas Realtor believes should be exempt under state law.

Bob Lamonte, owner and broker . . . believes the tax discriminates against married couples . . .

Or this:

In recent testimony before the Legislature's Joint Committee on Taxation, DRI/McGraw-Hill Senior Associate Economist Asieh Mansour stated that the transfer tax will raise the cost of ownership and impact young and low-income families disproportionately.

"Young families are more price-sensitive than older families," Mr. Mansour stated. "Families buying houses are more price-sensitive when the parents and their children are younger. This tax places an unfair burden on young, first-time home buyers. The transfer tax is among the most inequitable and least fair taxes."

Gee, no way conservatives would ever have a field day with that one.

Not to trash the idea of a real estate transfer tax, but whatever alternative we come up with to raise revenues, the conservatives will marshal arguments against it.

In the end, the "strategy" for the left is to defend fair taxation as the means to responsibly pay for public investments that are vital to maintaining economic growth and rising living standards, and to propose and enact policies that make tax systems more progressive.

That's not an evasion of the issue, that IS the issue.

by TGeraghty on Sat Oct 29th, 2005 at 01:01:33 AM EST
[ Parent ]
There is no recipe for easy success, but the point being made here is that the right was able to sell itself as the protector of the middle class because the left provided no alternative. I think the statistics you provide for Clinton are misleading as well because a vast increase in construction jobs masked a decline in union jobs. If the left is the party of NAFTA and "welfare reform" and increased property taxes in the US, and if it is the party of Bussels bureaucracy and "rationalization" in Europe, it will lose. It doesn't matter if you think differently and if the right is totally dishonest in its fake populism, the program of "it's ok for you to lose your house because schools are important" or "it's ok for you to lose your job to polish plumbers because in the end europe is better" is a losing program.
The purpose of politics is to advance your agenda and political programs that entrench your opposition in power are failures.
by citizen k (sansracine yahoo.fr) on Sat Oct 29th, 2005 at 12:56:17 PM EST
[ Parent ]
Taxing property also discourages working/middle class home ownership.

And why should home ownership be a policy goal? Don't get me wrong: I'm middle class and want to own my home. But I am also willing to entertain the possibility that that is economically unsound.

It would work just as well to have community property of land and having people lease, not purchase, their home. Money spent improving the land you lease, or building on it, would be discounted from the mortgage principal or lease payments, or deduced from taxes.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 09:23:05 PM EST
[ Parent ]
I'd love to see the advertising campaign for this platform.
by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 09:40:34 PM EST
[ Parent ]
It's very easy to advertise "use your equity for conspicuous consumption: refinance your mortgage", but that does not make it sound economic policy.

The UK has an elaborate system of property ownership with both freeholds and leaseholds. I think I am beginning to understand the point of leaseholds, actually. Not that they make intuitive sense, but they may make economic sense.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 09:49:19 PM EST
[ Parent ]
Maybe I'm just to cynical and old, but I'm not satisfied with being right. I'd like a political program that could actually, you know, win popular support.
by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 09:52:55 PM EST
[ Parent ]
Yes, all true, and a good point to hit on the noose of public-schools-are-failure types with is that the system did function.

Actually, though this is not a European theme, due to the 'reforms' that might await us too, this too would be a nice diary theme for you!

Here is a point I'd add to your list of destructive measures: the combination of the schoolboard system and the march of creationism. (To regular ET readers: you might want to skip this upteenth-time reiteration :-))

If I was told it right, a large part of oversight and decisions for US public schools is not done by state/federal authorities, but schoolboards dominated by parents. Their remit includes decisions on which schoolbook to purchase on an open market, which can be diverse due to lack of detailed curriculum standards.

The creationist march through schoolboards over the last 60 years meant that market pressure could be exerted on publishers to continually reduce the treatment of material objectionable to creationists (which, under the header 'evolution', includes parts of all sciences). This achieved a general country-wide reduction of education standards in science, and indirectly it had a pulling effect on others too. (There is a Stephen Jay Gould essay illustrating this with comparisons of subsequent editions of the same biology textbook.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Oct 28th, 2005 at 12:33:05 PM EST
[ Parent ]
Secret of Finland's success is fairly simple.

It started with internationally highly competitive paper and pulp industries in 1920's that made sure money flowed in. Following WW2 and bloody awful era of war preparations in late 1940's the government simply forced metal industries to be created and modernized. This hard core formed basis of Finnish industries in 1950's to late 1970's. The high tech industries built around electronics came first and computing based system followed. Although their size of total economic production was small in 1990 it was becoming obvious that these areas were growing faster than traditional manufacturing and paper industries.

The current consensus society was built up in 1970's (before that time life in Finland was probably fairly similar to atmosphere in East Coast US in late 1950's). Health care system of clinics and hospitals were extended to entire country and comprehensive school system was overhauled in 1970's. The mass university system was being built in 1980's and came into fruition in early 1990's.

Finland has succeeded in growing faster than for example UK in a long run (few hundreds of years or so) but a lot of that has been traditional catching up to higher income countries.

The real secret of success of Finnish system is in governance. Although everyone agrees that public sector is quite large and in some cases (local administration) probably too high, the success lies in ability to both see challenges and necessary changes but also in ability to carry out necessary reforms to allow society to cope with them. Reforms do not mean just this or that but also ability to cover people caught in the maelström of change. This allows creative destruction and constant reform.

The question of setting up larger and smaller countries has also been somewhat misleading. The smaller countries that are successfull usually depend on very few spearhead industries that allow them to succeed. Larger countries have more resources and usually have either larger or more robust spearheads to rely upon. This allows them to weather in crises or mismanagement far longer than smaller countries that must be constantly on alert for staying abroast of competition.

Finally, I also believe that a lot of discussion of success or failure of European experiment has forgotten forest from the trees. Even a cursory look through EU reports and discussion shows that need and work towards reforms in many member-countries is quite alive and well. I also believe that shock therapy not too good solution and I think that constant reform works best. However, perceptions die hard.

by Nikita on Fri Oct 28th, 2005 at 11:35:01 AM EST
Maybe Finland is just an example of the randomness of life: if a few visionary (or lucky) executives had not decided to switch their medium sized TV and machinery manufacturing company to an equipment provider for the nascent European GSM mobile phone market, then finland would not have today's supergiant Nokia, which singlehandedly improves Finland's score on everything: GDP, exports, high tech equipment & fraduates, R&D, market cap, competitivity...

And btw, Europe's decision to have a single standard for mobil phone also ensured that a dynamic industry was created and thrived. So more kudos to the few bureaucrats in Brussels that set this up in the early 90s.

Or maybe Finland's best competitive advantage is that they have access to cheap vodka just across the border in St Petersburg.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Oct 28th, 2005 at 03:56:11 PM EST
The last suggestion is refuted by the economic condition of Russia. You might need to postulate, close but not too close as a determining condition.

¡Pobre Finlandia! Tan lejos de Dios y tan cerca de Rusia

by citizen k (sansracine yahoo.fr) on Fri Oct 28th, 2005 at 09:06:57 PM EST
[ Parent ]
By the way, the article that this diary refers to is actually part of a three-part series in the CSM:

It's informative, but it still has the implicit "USA/UK good, Europe bad" undertones to it.

Why anybody thinks that an economic model based on stagnant wages and skyrocketing economic and social inequality with living standards propped up by mushrooming levels of international and household debt, grossly inefficient energy use, and environmental degradation is politically or economically sustainable is beyond me.

by TGeraghty on Fri Oct 28th, 2005 at 09:10:14 PM EST
Why anybody thinks that an economic model based on stagnant wages and skyrocketing economic and social inequality with living standards propped up by mushrooming levels of international and household debt, grossly inefficient energy use, and environmental degradation is politically or economically sustainable is beyond me.

Isn't that what early 19th-century economists used to call "the steady state of capitalism"?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 09:14:09 PM EST
[ Parent ]
I mean, the "steady state" is certainly sustainable.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 09:14:45 PM EST
[ Parent ]
Maybe not politically sustainable after two centuries of experience with modern economic growth.
by TGeraghty on Fri Oct 28th, 2005 at 09:25:06 PM EST
[ Parent ]
Bread and circus can work miracles.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Oct 28th, 2005 at 09:35:12 PM EST
[ Parent ]
Because GDP grows and thus "average" income.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Oct 29th, 2005 at 04:28:54 AM EST
[ Parent ]
Yeah, I'm talkin' to you, TGeraghty.  And, sorry, but I'm starting a new comment because the argument up top is getting all squinched.  Also, it's late, I'm tired, and I'm not completely following which comments are replying to which.  But things seem to have gotten a bit testy, and I wanted to address a couple of points because I honestly think that, somewhere in this, is a key problem that should be discussed.

So I see I started a tad confrontational, but I really do want to be reasonable, so apologies right away if I offended.  I only wanted your attention. :-)

Now where was I?  What?

The issue is the alleged stupidity of "the left" in dealing with the 70s California tax revolt.

Oh, yeah.  That.  So I realize you weren't talking directly to me, but I feel somewhat responsible for introducing the line of reasoning which led to this pronouncment (accusation?).  In any case, we here on the left, wherever we fall on the spectrum, have every reason to be upset when we arguments which seem to invoke, however innocently, lines of attack and smears with which we've been bludgeoned repeatedly.

Now I certainly don't want to add to our own woes.  I'm adamantly against the right.  I think they're ruining everything.  And I'm also not one of those who is giving up on the Dems or into name-calling and futile pessimism.  I'm not a libertarian or a green.  I haven't washed my hands of the party or lost faith in the system.  I want the dems, the left,  the liberals, the progressive, all of 'em, to win.

However, that said, I think there are lessons to be learned by examining the 70s California tax revolt.  I think it bears discussion.  And I think the left did make a mistake and are still making mistakes when it comes to economic issues and the working class.

You bring up many good points about wonderful things the Dems have done for the working class, and you're right about those points.  You also point out that the economy has been better overall under the Democratic leadership and you're right about that as well.  However, none of those things has any bearing on whether or not they handled the tax revolt appropriately.  Maybe you think they did, but I don't.

What's more, I think the mistake they made there is the same mistake they keep making.  I think this very thing is part of the reason we are now in the mess we're in (and of course I mean besides the fact that the Republican's are actually creating the mess).  I don't want to criticize or ridicule.  I want to identify the mistake and learn from it.  I want to get out of the mess we're in.

Here's why I think they didn't handle it correctly -- the Republicans won.  So why did they win?  I think it's because Prop 13 and its subsequent spawn address real problems.  As I said before, I don't think they're the correct solution.  In fact, I know they make the problems worse.  But the problem is real and that's why people vote for these things.

Now I've often heard it said that people are voting against their interests or that they're stupid.  And that may very well be in some cases.  Half the population is of below average intelligence, after all.  And we who study this stuff know that these tax revolts are ultimately destructive to society.

But -- and it's a significant but -- people who are losing their houses are going to vote to keep their houses.  It's as simple as that.

Now in California at the time of Prop 13, a lot of people were losing their houses.  This is not disputed.  It wasn't an imaginary fear, it was something that was really happening.  In fact, enough people were losing their houses to absolutely guarantee that the proposition would pass a vote.

Everybody in California knew this at the time.  The problem had been building, blossoming, burgeoning -- exploding -- for several years throughout the major metropolitan areas.  People were pissed.  Lots of people.

Now it just so happens that some wealthy assholes cooked up this whole Prop 13 idea because they didn't want any of their tax money going to poor kids' schools.  It was a bad idea dreamed up by bad people for bad reasons.  No good would come of it.  Everybody knew this, too.  Even, evidently, teachers in Boston.

Okay, so everybody knew this was a terrible, horrible, bad idea that would have hellish repercussions and that it would pass in a landslide.  Everybody was well aware.

So why did it happen?  Because some rich people were assholes and a lot of the working-class didn't want to lose their houses.  Do you blame them?

Because that's where I think the Democrats failed in this fight.  The voters were given a choice -- keep the tax or get rid of the tax.  For most, when the tax is forcing you out of your home, this is no choice at all.

So why, when the Dems had control of the state, did they not during prop 13 or in the 7 years leading up to it, do something to stop the people from losing their homes?  There was a real-estate problem, a boom, a bubble, something.  People were testifying at the capitol, crying.  People were demonstrating, writing to the editors, the politicians, the tax-man, anyone.  Everyone knew this.

So I rail against the Republicans for this.  I hate them for it.  But you know what?  I expect them to have bad ideas.  I expect them to do asshole things for their asshole rich friends that hurt everyone else.  That's their job, in a way.  Their the party of the powerful and, as abhorrent as I often find their goals and methods, they do work hard to protect the powerful.  I expect nothing less of them.

But the Democrats job is to protect the powerless.  That means not just hoping Prop 13 wouldn't pass (they knew it would) but countering it.  That fucking law gave the same breaks to everyone.  Not just the poor, the middle, the people losing their houses, but also to the wealthy, the commercial interests.  Everybody got the break.  Why is that?

If someone at the time would have listened and addressed the problem and said -- hey!  you shouldn't lose your house -- then Prop 13 would not have passed with 65 percent of the vote and a 70 percent voter turnout.  

If someone had said -- there's a real problem here and we're going to pass this law for single-family dwelling which are a primary residence and perhaps worth less than X amount of dollars, but we are by-god not going to give this tax break to the people who profit the most from this land and its people -- if they had said that, then Prop 13 would have been toast.  No question.  

No one who was losing their house because of the wealthy "intruders" wanted them to get the tax break at all -- they were causing the damned problem!   Is how the thinking went.

So Prop 13 was terrible and all the predictions about how bad it would be have come true.  The whole vile cycle has spread like a virus since then.  But the simple truth is that everyone knew it would pass and everyone let it pass.  I don't see how that can be construed as anything but a mistake, if not an abject failure.  

The people who wanted the law used the people who needed it to make it so.  To this day, there has been no serious attempt to correct this inequity.  To this day, with the population even more divided into rich and poor, the only talk is of repealing it.  There has been no serious attempt to make exemptions and impose taxes based on wealth or on commercial property.  Why is that?

And I'm asking honestly, TGeraghty.  Perhaps I'm missing something.  Perhaps in my youth there was some element to this story that escaped me.  I'm just telling it like I remember it, but maybe I'm wrong.  Please, if you know, let me know so I can quit engaging in this line of discussion!  If these anti-tax abberations are passing for a different reason entirely from the one I'm surmising, then I'm more than happy to adjust my thinking on this matter.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sat Oct 29th, 2005 at 05:32:02 AM EST
I don't disagree with any of this.

Prop 13 (and the tax issue in general) has not been handled well by the left. Your points (and those of others) are well taken.

My problem with the line of discussion here is two things:

  1. Trying to turn this specific failure of political strategy and policy imagination into a general condemnation of the left's ability to "understand economics."

  2. Just complaining about it without grappling with the issue of "what should have been done."

The first is a canard that is easily demolished by simply looking at the economic record of left vs. right parties in the US and Britain, where policy differences between the two sides are most stark.

On the second point, it is pretty trivial to argue that the left "has made a mistake" on the tax issue in general or on Prop 13 specifically. The real challenge is specifying how you would provide property tax relief to people who need it. Do you raise other taxes? If so, which ones? What are the implications of raising those taxes? Do you cut spending? If so, which programs? Do you borrow more (tough to do at state level with balanced-budget requirements, and long-run unsustainable). For the left, how do you do all these things in an economically efficient way that helps the poor and the middle class and puts the burdens on those with the ability to pay? And besides that, what is your political strategy for getting these reforms passed?

I'm all ears for anybody who wants to really grapple with these issues, but I haven't heard anybody really do it yet.

by TGeraghty on Sat Oct 29th, 2005 at 06:05:21 AM EST
[ Parent ]
Thank you, TGeraghty!  I agree with all of your points!  And, honestly, I'm quite excited -- I have never gotten this far in this particular discussion before!!  How far is it from here to grappling?  I'd love to grapple!  Hell, I thought I was grappling!

Okay, so I'll pretend to know about grappling and start -- oh, crap... all I can think of is more questions!  It's about the raising taxes and cutting spending to make up for the tax reduction in the needed area.  First, we let them get the whole enchilada, so it seems to me it would have been much better just to limit the damage in the first place.  Then, getting the taxes would be a much smaller problem than the situation California is now in.  The state hasn't corrected it yet!

I'm unclear on the actual budget and reforms at this point, but as far as strategy, people are willing to give politicians quite a bit of leeway when they trust that those politicians are on their side.  Let's say the Dems had fought for some other law countering Prop 13.  The people would have seen them helping, standing up to the powerful on their behalf.  It would have generated goodwill and political capital.  It might have given the government as a whole less money for a time, but it would have given the Democrats more power to enact their agenda.

I think.  It's hellish late here and I'm turning in for the night, but I'll check back tomorrow to see if the grapple is in full swing!  Or if grappling has ensued.  Or something...

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sat Oct 29th, 2005 at 06:31:09 AM EST
[ Parent ]
By way of grappling, somebody suggested that a real estate transfer tax might be an alternative, which may or may not be a good idea (I'm not an expert on tax policy), but there do seem to be ready-made conservative arguments against it (biased against movers, married couples, young people).

And, reading your above post more closely, I see you suggested making the property tax more progressive through exemptions or taxing commercial property more heavily.

Why not have progressively increasing marginal rates, like the income tax? Why is the property tax usually a flat tax?

Also, the question of a left anti-inflation policy, since, as I argued above, general price inflation causes the increase in property values that brought matters to a head in the 1970s. Preferably one that does not throw millions of people out of work and deindustrialize large swathes of the economy.

by TGeraghty on Sat Oct 29th, 2005 at 06:54:20 AM EST
[ Parent ]
Perhaps this was said up or downthread, but a major part of the problem is local financing of schools.  This creates a vicious cycle, economically, demographically, and politically.  Local financing of schools distorts housing prices - since you are buying not just a house, but also schooling.  So, poorer towns see property values constrained, which leads to higher taxes in order to finance services, which are inferior, which leads to lower property values, etc.

Socially/demographically, this financing system creates a subtle economic apartheid, which is bad for democratic values and institutions.

Politically, of course, children (as citizens) should have equal access to education irrespective of the wealth of their parents or the location of their homes.

A minimal progressive alternative would be to finance education at the state or federal level.  A bolder progressive alternative would be to finance all local services at the state level, via a statewide, equal property tax.  The so-called left has not really proposed either of these ideas.  It has offered bandaids - state aid - in various states, but this does not touch the underlying dynamic, which continues to operate.

What do people think?  Where are the weaknesses in my argument?

by cambridgemac on Sat Oct 29th, 2005 at 08:22:45 AM EST
[ Parent ]
There are two problem: the less interesting is what the right policy should be. The more interesting is why it is that the left has failed to champion the interests of working people and failed to even notice that it is a problem.

This issue really struck me with the EU "non" vote in France. In one sense, it was obvious that the EU "non" vote was a terrible mistake. But looking over the debate, I didn't see a strong response to the "polish plumbers" fear that, no doubt, motivated many working people to vote essentially to confirm the Bush/Blair policy.

by citizen k (sansracine yahoo.fr) on Sat Oct 29th, 2005 at 01:16:34 PM EST
[ Parent ]
I actually think the constitution process was so flawed and there had been so little public debate that the "No" vote was a good thing. It has given European leaders pause: 'no' votes in Denmark and Ireland were ignored in the past, but France can't be ignored.

The treaty of Nice (Dec. 2002) was such a fiasco that the European Parliament voted to tell the Council of Ministers it was not acceptable. As a result the "Constitution" was written, but with little public debate. Most countries approved in Parliament and not in referendum. Much has been made of Spain's approval, but only 3 in 7 people bothered to vote. The "information" campaign was laughable, and the text distributed by the government was abridged.

The French "no" camp was a hodge-podge of different interests, but a large part of it was pro-EU people dissatisfied with the top-down, undemocratic turn that the EU process is taking. The national governments and the Commission are responsible for this so any positive change will have to come from the Parliament or the people, if it comes at all.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Oct 29th, 2005 at 03:57:37 PM EST
[ Parent ]
I really don't understand how you can separate the two - you champion the interests of working people by advocating and passing policies that improve their economic or social well-being. The issues of political strategy and policy are inextricably linked.

It's one thing to use your 20/20 hindsight to bash "the left."

What the hell do you plan to do about it?

by TGeraghty on Sat Oct 29th, 2005 at 07:47:59 PM EST
[ Parent ]
The left is often divided on matters of policy and that prevents them from cooperating on political action. Leftists believe a principled defeat is better than a pragmatic victory. Ideological purity trumps all.

The right is pragmatic about achieving power, is not picky about bedfellows (as long as we're speaking figuratively) and then bases its policies on IOUs.

It's clear who's going to have the upper hand.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Oct 29th, 2005 at 07:59:14 PM EST
[ Parent ]
Yes it is true that the left is divided (and that the right is far more adept at acquiring and using power).

Which is why I don't understand why this commentor keeps going on about the left being the party of "Polish plumbers" taking rich-world jobs, or "high property taxes," or "Brussels bureaucracy"

Sure, parts of the left in the US and Europe support things like NAFTA or the Bolkestein directive, but there are also the Oskar LaFontaines and Laurent Fabiuses and the fair trade movement in the US who oppose them.

In the US, I don't know of any "left" person that is happy with our regressive state tax systems. Just click on the links I provided below, debunking conservative myths about the economy and taxes.

A big part of the left's problem is people who call themselves "progressive" but go around parroting conservative themes rather than debunking them.

by TGeraghty on Sat Oct 29th, 2005 at 08:10:47 PM EST
[ Parent ]
A big part of the left's problem is people who call themselves "progressive" but go around parroting conservative themes rather than debunking them.

Well, I don't call myself progressive, but this is not much better than arguing the US would be winning in Iraq if it were not for them liberal doubters.

Laurent Fabiuses, if he is any better than Jospin (which I doubt), is not President of France. Jaques Chirac is President of France. The trade union movement in the US lost the NAFTA fight and has been losing membership for 30 years. So "debunking" right wing arugments does not work.

by citizen k (sansracine yahoo.fr) on Sat Oct 29th, 2005 at 11:35:58 PM EST
[ Parent ]
"debunking" right wing arugments does not work.

You might be able to make that statement if debunking right-wing arguments had actually been tried.

In fact, debunking right-wing myths is absolutely essential to any left political strategy for regaining power.

But who am I to argue? Again, when you present your positive proposals for getting the left back into power, I'm all ears. Why don't you write a diary about it?

by TGeraghty on Sun Oct 30th, 2005 at 01:20:57 AM EST
[ Parent ]
So "the left" has not made major errors, but has lost and and not even tried your favored strategy?

I have no idea what the correct strategy could be. I do know that the right is winning, and winning support of people who should not support it, and this I'd like to understand why instead of hearing a bunch of defensive crap about how any critique is recycling of right wing spin points.

by citizen k (sansracine yahoo.fr) on Sun Oct 30th, 2005 at 02:32:07 PM EST
[ Parent ]
In elections in the past year or two, the left won in Spain, in the UK, and did not really lose in Germany (indeed they are still in government). The left won 21 of 22 regions in the only recent nationwide elections in France, last year.

Maybe you want to argue that Tony Blair is not of the left in practise, but he is on labels...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Oct 30th, 2005 at 03:33:56 PM EST
[ Parent ]
Blair may not be of the left, but people in the UK vote in single-party constituencies and Blair did cost Labour of votes.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Oct 30th, 2005 at 04:44:20 PM EST
[ Parent ]
According to Clinton himself, his policies were "moderate republican". The Caniche's policies are to slash social services, expand arrest without trial, and follow the US into Iraq. And you previously contested my characterization of Chirac as on the right. So I believe you may well be able to define "the Left" in a way that will contradict my claim, but I'm not convinced this is a meaningful definition.
by citizen k (sansracine yahoo.fr) on Mon Oct 31st, 2005 at 08:56:28 PM EST
[ Parent ]
You're putting words in my mouth.

I have never said the left never made any major errors. I've also not argued that any critique is "recycling of right-wing spin points," but yours does seem to be mostly that.

For example, I'm sympathetic to the points made in this thread arguing that the left needed and needs a different policy and political strategy toward taxes. I also agree that some elements of the center-left (the Blair/Clinton axis) are far too worshipful of right-wing nonsense about "free markets" and deregulation and all that.

But turning that into a general bromide that the left "doesn't understand economics" or "has abandoned the working class" is nonsense, in my view. Certainly not on economic issues, which the US, British, and French record on these issues clearly show.

Why the working class has to a certain extent abandoned the left is an issue that is worth exploring. Perhaps it has something to do with cultural or social issues (nationalism, immigration, religion). Using those issues to peel off working class voters has been a strategy of the right going back to Disraeli in England or Bismarck in Germany (or McKinley in the US - the Democrats were the party of "rum, romanism and rebellion" long before "acid, amnesty, and abortion" ever came along.

I just don't think your posts have been all that helpful in uncovering the reasons why. Sorry.

by TGeraghty on Sun Oct 30th, 2005 at 08:32:35 PM EST
[ Parent ]
Do you actually think Chirac is right wing?

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Oct 30th, 2005 at 01:54:38 AM EST
[ Parent ]
Jerome, maybe you could explain what Gaullisme actually is?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Oct 30th, 2005 at 07:03:50 AM EST
[ Parent ]
Well, I could, I suppose. The problem is that Chirac is not a gaullist either, eventhough he likes to cloak himself in the clothes of de Gaulle...

Chirac is a girouette, he's an opportunist who does not believe in anything. He was communist in his youth, he was viciously anti-European in the 70s and 80s and a Thatcherite in the 80s, social populist in the 90s.

The only thing I will credit him for is that he has been pretty consistently anti-Le Pen, and he acknowledged Vichy France's responsibility for the crimes against the Jews and the collaboration during the war. For the rest, he has been mostly a vindicative statist / national populist with no coherent policy beyond protecting the farmers' subsidies and destroying his adversary of the day (a real talent of his, and still the biggest threat to Sarkozy's hopes to become president. Amongst his victims: Jacques Chaban-Delmas, Giscard d'Estaing, Raymond Barre, Edouard Balladur, Lionel Jospin, all either prime ministers or presidents who lost in their bids to be (re)elected President because of Chirac. Only Mitterrand proved superior to him at that game).

And his wife is worse (and extremely influential - it is usually said that she saved his ass in 2001).

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Oct 30th, 2005 at 03:11:26 PM EST
[ Parent ]

 Half the population is of below average intelligence, after all.

No, no, NO!

Half the population is below the median intelligence.

This is what kills the left on the economy, thinking that half the population is above the average income, when it is absolutely not true in an increasingly unequal economy. Half the population is above the median income, and in an unequal society, the median is much lower than the average.

(Think of a very simple population with 10 persons, one with an income of 10, and 9 with an income of 1. The average income is 1.9, but the median income is 1.)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Oct 29th, 2005 at 05:28:20 PM EST
[ Parent ]
Half the population is of below average intelligence, after all.

No, no, NO!

Half the population is below the median intelligence.

Moreover, intelligence is not a numerical quantity and so one can't speak of its average. I! is numerical, but going as far as to say that two people of IQ 100 and two people of IQ 90 and 110 have the same average intelligence does not actually mean anything.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Oct 29th, 2005 at 06:26:22 PM EST
[ Parent ]
Y'know, after I posted I was wondering if I should've but a winky sign after that line.  Now I know...  ;-)

Maybe we can eventually make language a complete impediment to understanding. -Hobbes
by Izzy (izzy at eurotrib dot com) on Sat Oct 29th, 2005 at 07:51:52 PM EST
[ Parent ]


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