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Wednesday, March 02, 2011

Split In Two

There are two or perhaps three primary issues being battled over in Wisconsin. The first is the actual deal which public sector unions have vs. what the government wishes them to have; the second is whether they should be allowed to collectively bargain and negotiate the terms of their working in general; and the third (related to the second) is whether public sector employees should be allowed to unionize at all. Let's split them up simply and figure out what seems fair.

1) Pay & Benefits

The average Wisconsin public school teacher salary is $56,500. The average amount they receive in benefits $43,505, or 74.2 cents for each dollar earned. Employees of private companies average approximately 24.3 cents in fringe benefits. (To calculate yours, take the monetary value of your pension, health insurance, etc. which are provided by your work and divide that by your gross salary. My most recent job that was approximately 13 cents, and I had a great health care plan.)

Included in this is a regular pension of 13% (the 6.2% employee contribution is paid not by the employees but by the state), a second pension of 4.2% (all from the state), and a classified pension of 5.5% (employee contribution is contributed by the state not the employee). I'm highlighting this only because it seems incredibly silly that even the portions which are supposed to be employee-contributed are in fact state-contributed. There's more detail in the WSJ piece, but essentially, public sector employees receive almost as much in benefits as they do in pay - and over 3 times as much as typical private employees.

2) Collective Bargaining

Gov. Walker and most taxpayers would like to end the ability of public sector workers to collectively bargain - i.e., be able to negotiate as a group like they are currently able to do. As noted previously, FDR and other major Democratic leaders opposed the ability to do so; in fact, even AFL-CIO leader George Meany opposed this:
Why? Because unlike in the private economy, a public union has a natural monopoly over government services. An industrial union will fight for a greater share of corporate profits, but it also knows that a business must make profits or it will move or shut down. The union chief for teachers, transit workers or firemen knows that the city is not going to close the schools, buses or firehouses.

This monopoly power, in turn, gives public unions inordinate sway over elected officials. The money they collect from member dues helps to elect politicians who are then supposed to represent the taxpayers during the next round of collective bargaining. In effect union representatives sit on both sides of the bargaining table, with no one sitting in for taxpayers. In 2006 in New Jersey, this led to the preposterous episode in which Governor Jon Corzine addressed a Trenton rally of thousands of public workers and shouted, "We will fight for a fair contract." He was promising to fight himself.
In addition, government union workers care not about protecting more workers, but protecting their sweet deal. They would rather allow jobs to be cut than give up their collective bargaining rights. That speaks volumes about the priorities of the union. It's unfair to taxpayers to be held hostage by the people who are meant to be working on their behalf. It would be like a cabbie being allowed to demand extra cash continuously while on a deserted highway - except you're not allowed to use any other cab. Without rules to stop such activity, the people who are supposed to work for the people end up owning the people.

3) Public Sector Unions

Firstly, some history:
In 1960, 31.9% of the private work force belonged to a union, compared to only 10.8% of government workers. By 2010, the numbers had more than reversed, with 36.2% of public workers in unions but only 6.9% in the private economy. 
In fact, until 1962, federal workers were not allowed to unionize at all. JFK at that point allowed some to organize, hoping to gain support for his next election. Perhaps more importantly, at the federal level, government union workers are not allowed to collectively bargain even today. The linked article suggests this is why President Obama quickly quieted on the subject and on his support for the unions: He did not want too much attention focused his way, particularly as he will certainly not allow this to change.

This fact allow belies the notion floated by some union supporters that taking away their collective bargaining rights will somehow cause union workers to be taken advantage of. Federal workers do quite nicely for themselves despite their lack of ability to bargain collectively, and it seems laughable to suggest that qualified government employees will somehow be stuck in horrible jobs that treat them poorly - it doesn't behoove the public to attempt to take advantage of people attempting to service their needs (an argument weak enough in 21st century corporations), and even if there were such a case, a qualified employee would certainly be able to move to the private sector with ease.

Perhaps a better way to explain this is by showing how a lack of protectionism for current public employees will essentially turn those positions into competitive ones, much like the private sector. Government can't simply take advantage, because people will simply not work for a bad employer. If there are too many teachers, then it's proper that some of them be cut. If that leads to poor education, it seems logical that voters would vote in a government that is willing to pay more for education, which will lead to better hiring practices. It would function just like the private sector, except with the added advantage of an entire population to answer to and whom can actually vote you out.

All in all, it seems quite clear that what the Democrats of yesterday realized needs to be learned by the politicians and people of today: Government unions cannot be allowed to have sway over the purse of government, as it leads to the economic destruction of the people whom government is meant to represent. Instead, it is these union members who should remember that they too are of the people, put in their positions by the people, and ultimately are there to be of service for the people - not only for themselves.

27 comments:

  1. 1) Teachers are worth far more than they are paid. This is true even if you're an amoral person who cares only about money. Think about the value of helping one kid become a successful employee instead of a criminal, or a very successful businessperson instead of a mediocre one, in purely economic terms. HUGE benefit to society. Then think about how many times a teacher might do that (or contribute to that) over the course of a career. Good teachers also work many, many more hours than conservatives give them credit for. My wife works at least 60 hours a week during the school year, and her summer is not as long as the kids' by at least a few weeks.

    How many people do you know who went into teaching for the cushy salary + benefits? Please. People go because it's a calling, otherwise nobody would put up with that nonsense.

    2) The reason benefits are so good is because every time the teachers go to negotiate salaries, the government short-sightedly offers benefits instead. This is not the teachers' nor the unions' fault.

    3) The fact that private sector jobs don't have good benefits is an argument for private sector unionization, not against public sector unionization.

    4) Your teeth-gnashing about how public unions don't care about anything but securing "sweet deals" is belied by reality. In reality, the union in Wisconsin already agreed to take pay cuts because of the economy. I mean that just happened in reality. You need to update your mental model.

    5) Why do conservatives always link to opinion pieces as evidence?

    6) Since you recognize the power of unions in electing Democrats, maybe you can admit that this move by the Wisconsin governor has little to do with the economy (again, the unions already agreed to the pay cuts they were told were necessary) and a lot to do with politics?

    7) This whole "oh no, the economy is bad, now teachers (and Planned Parenthood and PBS etc etc) have to sacrifice" is such BS. The economy is bad because the Republicans wrecked it.

    The deficit is there in large part because the Republicans slashed rich people's taxes. How about restoring the tax rates and slashing Defense? Voila, deficit gone. But oh no, we can't do that. Lets cut something non-important, like frickin' education and medical services. I can't tell you how disgusted I am by Republicans.

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  2. 1) Agreed, I'm not disputing that. In fact, I would suggest that much as fire/police are usually in a different class than other govt. workers, so should teachers. I actually believe that in today's times it's so much easier to see allocations of costs, we should be analyzing each piece on its own merits. I'm guessing you'd agree as well on that one.

    2) It's not the teachers' fault, but it is a shared issue of unions and government. Both were well aware of this issue and chose to ignore it. See this piece in the NY Times which points this out well (has other flaws) - Click.

    3) They DO have good benefits - just not outrageous ones. The point is that these are completely out of line with what's normal.

    4) That's not belied by the reality of union negotiations of the past 50 years! We had an MTA strike here recently - the benefits demanded were completely outrageous.

    5) Huh? The evidence they quote is factual, too. Why do liberals put their opinions into news pieces instead of keeping them separate? :)

    6) That's ridiculous - he ran on a platform of saving the WI economy by doing exactly this.

    7) Oh, BS. Republicans didn't wreck it, and neither did lower taxes - outrageous government spending and bailouts did. Also, let's stay on point?

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  3. 1) Agreed, I'm not disputing that.

    Huh? If you agree teachers are underpair, how can you insist that public unions will get too much compensation?? How can you go along with the narrative that this is an important place to cut spending?

    3) They DO have good benefits - just not outrageous ones. The point is that these are completely out of line with what's normal.

    Outrageous according to whom? They are in line with what was normal for professionals until the Republicans killed many unions and went to war against the middle class for the last 50 years.

    4) That's not belied by the reality of union negotiations of the past 50 years! We had an MTA strike here recently - the benefits demanded were completely outrageous.

    Again, outrageous according to whom? I don't live in NY so I don't know the details. Still, even if their demands were over the top, it doesn't mean that no public unions should ever exist. It's a negotiation.

    5) Huh? The evidence they quote is factual, too. Why do liberals put their opinions into news pieces instead of keeping them separate? :)

    How do you know it's factual? For example, it looks like he's at least including paying for retired teachers' pensions as a benefit of the current teachers, which is obviously deceptive.

    6) That's ridiculous - he ran on a platform of saving the WI economy by doing exactly this.

    He made a claim while campaigning therefore it's true? WTF?

    7) Oh, BS. Republicans didn't wreck it, and neither did lower taxes - outrageous government spending and bailouts did. Also, let's stay on point?

    That is the point. Republicans have been trying to "starve the beast" for decades. They've been running up massive deficits and cutting taxes in the hopes that some day they'd get to say, "Oh, gee, that's too bad, I guess we'll have to cut some of this social spending." It's just downright evil.

    You care so much about deficits, how about not slashing taxes on the rich?? How about balancing your own damn budgets?

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  4. 1) Let me clarify - classroom teachers are underpaid. I don't think therapists are necessarily, though I think states pay differently. Overall, though, I think teachers are somewhat underpaid in terms of their value - but I do think that the market plays a role. One of the best pieces of news I just read was that they're stopping LIFO on teachers, so better teachers will now stay over older bad ones. But most government workers aren't necessarily teachers, and I do feel that the benefits are still over the top. Give them more pay now, less benefits later which are far more costly.

    2) Nice, you skipped that one. :P

    3) Huh? 75% on top of salary was normal? How are those companies doing now? The first ones that come to mind are the car companies - and they've been destroyed by their competitors.

    4) They weren't even getting positive press here.

    Public unions shouldn't exist due to the reasons enumerated in the post, and the arguments that they are needed is silly when there are 2 million federal workers who aren't being mistreated.

    5) Huh? No, it's showing that they will be paid during retirement as well. He's just using their numbers for the calculation, but certainly that will be a cost directly related to these people.

    6) Seriously? A guy runs on a platform, it makes sense, and now carries it out, but you're saying it must be BS because you don't like it?

    7) That's such bull. How about cutting spending and not taking money away from people? How about not letting people rely on government? I'm sitting here blogging because I can: I get free insurance, I get unemployment, we get WIC. Sure, I think that those have some good impacts (I can continue looking for an appropriate job rather than just taking anything), but there's some really bad ones, too.

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  5. 1)Let me clarify - classroom teachers are underpaid.

    So this whole argument is stupid. You say that public unions get more for their members than they deserve and yet you admit that the teacher's union has not done that.

    Give them more pay now, less benefits later which are far more costly.

    Well, obviously, in fairytale land where governments make decisions based on long-term concerns.

    2) Nice, you skipped that one. :P

    The unions were seeking fair compensation. This was the only option provided to them that came close. It's not their fault politicians did that.

    3) Huh? 75% on top of salary was normal?

    Pensions were normal. Health care was normal. I think we've already established why the benefit/salary ratio is off, so it's dishonest of you to keep referring to it.

    How are those companies doing now? The first ones that come to mind are the car companies - and they've been destroyed by their competitors.

    Because they were making inferior products. Nothing to do with unions and everything to do with management and short-term thinking.

    4)Public unions shouldn't exist due to the reasons enumerated in the post

    Uh, no. The reasons enumerated were wrong. You can show no actual harm that's their fault. We've covered that.

    and the arguments that they are needed is silly when there are 2 million federal workers who aren't being mistreated.

    Way to shift the burden of proof. You need to show they are harmful, they don't need to prove to you that they are needed.

    5) Huh? No, it's showing that they will be paid during retirement as well. He's just using their numbers for the calculation, but certainly that will be a cost directly related to these people.

    No, it's double-counting. It's counting money for their pensions AND for retired pensions.

    6) Seriously? A guy runs on a platform, it makes sense, and now carries it out, but you're saying it must be BS because you don't like it?

    That he ran on the platform is irrelevant. It's BS because getting rid of collective bargaining does not solve the budget problem.

    7) That's such bull. How about cutting spending and not taking money away from people?

    Where are you going to actually cut enough spending to make it balance out? I don't understand why Republicans have to be different from the overwhelming majority of every other democracy on the planet and oppose things that all those other countries accept as completely normal and healthy like universal health care and significantly progressive taxation. You're seriously ruining the country.

    How about not letting people rely on government? I'm sitting here blogging because I can: I get free insurance, I get unemployment, we get WIC. Sure, I think that those have some good impacts (I can continue looking for an appropriate job rather than just taking anything), but there's some really bad ones, too.

    Yeah, so there is some harm, but it's still better than you being out on the streets. What's your point? Nothing is 100% positive or negative.

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  6. 1) Why fairytales? It's time to start demanding this from our governments. I'm hoping to write a post on a related subject soon.

    2) I don't think that's true.

    3) How is that normal?! When did we establish that?

    It's not just the inferior products: Their costs per hour are almost double those of Honda and Toyota.

    4) Huh? The second and third parts of the post.

    5) I don't think you're reading it right. They pay for SS/Medicare (standard), pension (both sides), another supplemental pension, and in some cases a classified pension. I believe the 20.2 number is averaged from the two types. The discussion about paying again is on healthcare - which is the case, they pay at both points.

    6) It keeps it from becoming a problem (for this reason) again.

    7) Snort. Seriously? What countries have successful UHC that isn't killing them financially AND keeping care improving? What country has heavy "progressive" taxation that is doing so fantastic? Not to mention, what exactly is fair about it?

    My point is costs outweigh the benefits. Had my taxes not been so high when I was working, I'd be able to support myself just fine - except with more freedom of choice. And there wouldn't be levels of waste in the middle.

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  7. What countries have successful UHC that isn't killing them financially AND keeping care improving?

    Most western democracies spend less on health care and have better results than us.

    What country has heavy "progressive" taxation that is doing so fantastic?

    Most countries aren't doing fantastic right now, but we were doing a lot better when taxation was more progressive. The middle class has been stagnant for decades as we've made it less progressive, while the rich have gotten insanely richer.

    Not to mention, what exactly is fair about it?

    Um, people who can afford more, contribute more? It's just basic human decency. I don't understand why it's such a huge deal for Republicans. Even the rich people (on average) aren't as opposed to it as much as Republicans are.

    Had my taxes not been so high when I was working, I'd be able to support myself just fine - except with more freedom of choice. And there wouldn't be levels of waste in the middle.

    I don't think you're the primary target demographic for WIC. Most people don't make anywhere near what you were making. Anyway, what happens when people are less responsible than you think you would have been had you had lower taxes? We just say screw it, it's their fault for not saving, let them lose their home and starve?

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  8. JA - I disagree on health care, and how those numbers would translate into the USA. Remind me to send you a paper I helped compose on it one day.

    Most countries aren't doing fantastic right now, but we were doing a lot better when taxation was more progressive. The middle class has been stagnant for decades as we've made it less progressive, while the rich have gotten insanely richer.

    That's just not true. Look at the charts from the CBO. Taxes are more "progressive" now than ever, and we're also way worse off. (Interesting aside from that set of slides is how reliant the CBO is on really incredible increases in tax revenue collection, and even so we'd still be adding to the deficit each year. Scary as hell.)

    Um, people who can afford more, contribute more? It's just basic human decency. I don't understand why it's such a huge deal for Republicans. Even the rich people (on average) aren't as opposed to it as much as Republicans are.

    Um, they do? They would in a flat tax, too. The idea that you pay a tax not on each dollar, but a HIGHER tax on each additional dollar is remarkably unfair. I'd much rather have a (say) 35K threshold consumption tax. Now THAT would be fair and let those who are less fortunate keep all they earn.

    I don't think you're the primary target demographic for WIC. Most people don't make anywhere near what you were making. Anyway, what happens when people are less responsible than you think you would have been had you had lower taxes? We just say screw it, it's their fault for not saving, let them lose their home and starve?

    To some extent, yes! That's exactly why bailouts are so horrible: The banks had literally no risk. No matter what, they knew in the end their largest possible losses would be protected by government. It's Bush's (and one of Obama's) largest failing as President. He completely blew it.

    It's amazing how quickly people change when they see there actually are consequences to their actions, and that it is the job of government to protect them from others, not from their own selfishness or laziness.

    It's more crazy that you have to pay for someone else being irresponsible. It's like nobody's read Chicken Little.

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  9. Taxes are more "progressive" now than ever,

    Dishonest. Total revenues from the rich might be up but that's only because they've been getting richer and richer. Rates have gone down for them as you well know.

    The idea that you pay a tax not on each dollar, but a HIGHER tax on each additional dollar is remarkably unfair.

    Look, you're not just right about it because you keep saying it. There's no objective "fair" here. I think progressive is more fair, you apparently think flatter is more fair. It's a matter of opinion. What's not a matter of opinion is that the Bush tax cuts (now extended by Obama!) have drastically added to the deficit.

    To some extent, yes! That's exactly why bailouts are so horrible: The banks had literally no risk. No matter what, they knew in the end their largest possible losses would be protected by government. It's Bush's (and one of Obama's) largest failing as President. He completely blew it.

    I think it was Bush's finest moment, and one that might eventually redeem him in history. When it really mattered, he totally abandoned Republican propaganda and did what was necessary. I honestly think his advisers pulled him aside and said something like, "Look this stuff we tell the people is useful for getting elected and cutting taxes, but that's just smoke and mirrors. If you don't bail them out, it's going to be a national tragedy."

    If the bankers were counting on being bailed out, they were right. The lesson isn't to completely destroy the economy to teach them a lesson and hope they act rationally in the future but to use regulations to prevent them from having the power to blow up the economy in the first place.

    It's amazing how quickly people change when they see there actually are consequences to their actions, and that it is the job of government to protect them from others, not from their own selfishness or laziness.

    This is an asinine, oversimplified view of human behavior that has very little basis in reality. It's also callously brutal. "Oh, well, now you're out on the street and starving, but next time you'll know better!"

    It's more crazy that you have to pay for someone else being irresponsible. It's like nobody's read Chicken Little.

    It's called being a decent human being and realizing that people make mistakes.

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  10. Dishonest. Total revenues from the rich might be up but that's only because they've been getting richer and richer. Rates have gone down for them as you well know.

    The percentage of total revenues from the rich is higher than ever, and from the lowest is lower than ever. What are you talking about?

    Look, you're not just right about it because you keep saying it. There's no objective "fair" here. I think progressive is more fair, you apparently think flatter is more fair. It's a matter of opinion. What's not a matter of opinion is that the Bush tax cuts (now extended by Obama!) have drastically added to the deficit.

    False. The Bush tax cuts quickly turned into much higher revenues, which were then smashed by the housing market bubble - a completely unrelated incident.

    I think it was Bush's finest moment, and one that might eventually redeem him in history. When it really mattered, he totally abandoned Republican propaganda and did what was necessary. I honestly think his advisers pulled him aside and said something like, "Look this stuff we tell the people is useful for getting elected and cutting taxes, but that's just smoke and mirrors. If you don't bail them out, it's going to be a national tragedy."

    Completely disagree. It's exactly that approach that causes so many long-term problems. It's that short-sighted vs. long-term approach we talk about over and over again: You care about the now, I care about the forever.

    If the bankers were counting on being bailed out, they were right. The lesson isn't to completely destroy the economy to teach them a lesson and hope they act rationally in the future but to use regulations to prevent them from having the power to blow up the economy in the first place.

    LOL. Really!? You think regulations would have stopped this? The regulations were there! They were completely ignored by the government funded Fannie and Freddie, and the banks - and on top of that, liberal policies (not Liberal) on who should be given mortgages really capped it off. All regulations do is let individuals think they can trust the banks over common sense.

    This is an asinine, oversimplified view of human behavior that has very little basis in reality. It's also callously brutal. "Oh, well, now you're out on the street and starving, but next time you'll know better!"

    No, it's realistic. It's amazing how in almost any other society, those who are forced to fend for themselves learn quickly to do so - but here in the US, their first instinct is to demand that their government give them a hand. More importantly, a lot more people would do a far better job of not getting into that mess in the first place.

    It's called being a decent human being and realizing that people make mistakes.

    So help them out. Support charities. Don't force others to support their mistakes - that's just wrong. This is especially true when so much of the mistakes are not made my people making innocent mistakes, but by people making entirely conscious ones - like the banks.

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  11. The percentage of total revenues from the rich is higher than ever, and from the lowest is lower than ever. What are you talking about?

    As a percentage of income, smart guy, not as a total.

    False. The Bush tax cuts quickly turned into much higher revenues, which were then smashed by the housing market bubble - a completely unrelated incident.

    WTF?!?!?!?!?!?!??! Please tell me you don't honestly believe that!

    "Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. "It's logically possible" that a tax cut could spur sufficient economic growth to pay for itself, Viard said. "But there's no evidence that these tax cuts would come anywhere close to that."

    Economists at the nonpartisan Congressional Budget Office and in the Treasury Department have reached the same conclusion. An analysis of Treasury data prepared last month by the Congressional Research Service estimates that economic growth fueled by the cuts is likely to generate revenue worth about 7 percent of the total cost of the cuts, a broad package of rate reductions and tax credits that has returned an estimated $1.1 trillion to taxpayers since 2001.

    Robert Carroll, deputy assistant Treasury secretary for tax analysis, said neither the president nor anyone else in the administration is claiming that tax cuts alone produced the unexpected surge in revenue. "As a matter of principle, we do not think tax cuts pay for themselves," Carroll said.
    (WaPo)

    Are you that big a sucker that you believe propaganda even the
    Bush administration couldn't get behind?

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  12. (cont.)


    Completely disagree. It's exactly that approach that causes so many long-term problems. It's that short-sighted vs. long-term approach we talk about over and over again: You care about the now, I care about the forever.

    Letting the economy tank now would have enormous long-term effects. Just think of all the missed productivity.

    LOL. Really!? You think regulations would have stopped this? The regulations were there! They were completely ignored by the government funded Fannie and Freddie, and the banks - and on top of that, liberal policies (not Liberal) on who should be given mortgages really capped it off. All regulations do is let individuals think they can trust the banks over common sense.

    The regulations were not there, not all of them. It's true that the ratings agencies engaged in fraud (in laymen's speak, I don't know about the technicalities) but there is no reason the banks should have been allowed to leverage the way they did. It was legal and it shouldn't have been.

    No, it's realistic. It's amazing how in almost any other society, those who are forced to fend for themselves learn quickly to do so

    BS. People who make mistakes in other societies with worse safety nets end up impoverished, homeless, sick, and/or dead.

    - but here in the US, their first instinct is to demand that their government give them a hand. More importantly, a lot more people would do a far better job of not getting into that mess in the first place.

    You're stating this as a fact, but you don't offer any evidence. I think you're just moralizing. You can't just project your own character traits (very intelligent, cautious) onto the whole population. HALF of Americans have IQs of 100 or below. Tons have addiction problems. Tons are barely getting by. Increasing the consequences of failure will not help most of them avoid failing, because they're not homo rationalus, they're human beings.

    So help them out. Support charities.

    Yeah, the right always says this, but can't point to evidence that charities sufficiently meed that need. There's no reason to believe they would.

    Don't force others to support their mistakes - that's just wrong. This is especially true when so much of the mistakes are not made my people making innocent mistakes, but by people making entirely conscious ones - like the banks.

    The banks are a different story. They were bailed out not because of them but because of us. We were basically extorted, because not bailing them out would have cost US more than bailing them out would. We should have bailed them out to save ourselves and then punished the individuals responsible and installed regulations to prevent it from happening again, of course, but both parties are too in the pocket of big business to do that.

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  13. As a percentage of income, smart guy, not as a total.

    Why would that matter? You of all people would think that the most fair is not percentage of income, but that the overall tax burden of the country is born by the rich. It is now more than at any time in history prior.

    WTF?!?!?!?!?!?!??! Please tell me you don't honestly believe that!

    You think the Bush tax cuts were related to the housing bubble!?

    Are you that big a sucker that you believe propaganda even the
    Bush administration couldn't get behind?


    You didn't read the whole article. It's clear how the tax cuts in turn fueled economic growth... and the huge boon in tax dollars was from that economic growth. When people say that tax cuts raise revenues, they don't mean solely - they mean the net effect. I thought that was implied.

    Letting the economy tank now would have enormous long-term effects. Just think of all the missed productivity.

    I send you back to the Marx (!) quote from long ago - people don't have the patience for the boom-bust cycle of capitalism, unwilling to take the short-term downs for the long-term ups.

    Cushioning now will cost us more later than the hurt now would help us later.

    The regulations were not there, not all of them. It's true that the ratings agencies engaged in fraud (in laymen's speak, I don't know about the technicalities) but there is no reason the banks should have been allowed to leverage the way they did. It was legal and it shouldn't have been.

    Huh? It's the opposite. The issue isn't that they leveraged or shouldn't be allowed to, it's that people are wrongly satisfied that the government protects them. Artificially clamping down leverage can only hurt the economy - every situation has different capabilities with leverage. Here, they were WAY overleveraged - and some of that was because their formulas were wrong because they'd never had to account for such huge default risks (people who should never have gotten mortgages), and once they did realize this, they basically tried to mitigate the risk in new securities. They also felt comfortable taking such a huge risk because they knew they'd be bailed out. I'd rather not get into the detail, but there's no regulations short of stopping free trade that would stop such a thing from happening. The best solution to it all is transparency, which I think you'd agree with even if you still wanted regulations. With transparency, decisions by people can be made with intelligence rather than guesswork, and the power doesn't reside with the banks only.

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  14. BS. People who make mistakes in other societies with worse safety nets end up impoverished, homeless, sick, and/or dead.

    Show me a truly free market society where that's the case. I can show you plenty of more socialist-style governments where it is, though.

    You're stating this as a fact, but you don't offer any evidence. I think you're just moralizing. You can't just project your own character traits (very intelligent, cautious) onto the whole population. HALF of Americans have IQs of 100 or below. Tons have addiction problems. Tons are barely getting by. Increasing the consequences of failure will not help most of them avoid failing, because they're not homo rationalus, they're human beings.

    That's simply not the case. Look how well the USA does as a whole whenever it has faced true adversity. The rags-to-riches stories in this country are well ahead of others. More importantly, the statistics of decades of social programs show an increasing reliance on them as they're expanded. 48% of this country now receives more in benefits than they pay in taxes. Is that normal?

    Yeah, the right always says this, but can't point to evidence that charities sufficiently meed that need. There's no reason to believe they would.

    Why not? Good charities have always done a fantastic job at a fraction of the costs, thanks to volunteers and the like. Unfortunately now so much of charitable giving goes to overhead - thanks to extensive government regulations and mismanagement - but there's a nice movement in the charitable world to transparency as well, allowing people to give money to organizations which are more efficient.

    The banks are a different story. They were bailed out not because of them but because of us. We were basically extorted, because not bailing them out would have cost US more than bailing them out would. We should have bailed them out to save ourselves and then punished the individuals responsible and installed regulations to prevent it from happening again, of course, but both parties are too in the pocket of big business to do that.

    I actually think that's completely wrong. We would have had a huge short-term hit, yes. But we'd have recovered fairly quickly. By shoring up the banks, we basically are pretending things are still worth a bit more than they are. We're spending a fortune to make that be true, but the risks haven't changed at all. See the Marx point above. People love to say the right is in with the banks, but it's simply false: True economic conservatives couldn't care less about the banks. They should live and die like everyone else.

    All seriousness - what would have happened had we let the banks fail? The people who would have directly suffered most are the people most responsible - instead of that suffering being shifted from them onto everyone else. The most important point in economics should be true value and transparency - by definition, allowing bubbles to exist is horribly wrong and can only lead to disaster.

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  15. Why would that matter? You of all people would think that the most fair is not percentage of income, but that the overall tax burden of the country is born by the rich.

    Um, no. The fact that the rich have some a disproportionate amount of the income does not imply that their rates should be lowered.

    You think the Bush tax cuts were related to the housing bubble!?

    I was referring to your claim that "The Bush tax cuts quickly turned into much higher revenues," which is a blatant lie/falsehood.

    You didn't read the whole article. It's clear how the tax cuts in turn fueled economic growth... and the huge boon in tax dollars was from that economic growth. When people say that tax cuts raise revenues, they don't mean solely - they mean the net effect. I thought that was implied.

    The net effect nowhere NEAR made up for the lost revenue.

    I send you back to the Marx (!) quote from long ago - people don't have the patience for the boom-bust cycle of capitalism, unwilling to take the short-term downs for the long-term ups.

    Um, duh?

    Cushioning now will cost us more later than the hurt now would help us later.

    Disagree. I don't see how the hurt would help us later. I don't believe the bankers thought the crash would happen. I also don't believe that not bailing them out would make them enough risk averse in the future that they wouldn't take similar EXTREMELY PROFITABLE risks in the future. I'd say the burden of evidence is on you since you're making such a wild claim.

    Artificially clamping down leverage can only hurt the economy - every situation has different capabilities with leverage. Here, they were WAY overleveraged

    Sentences one and two contradict each other. If we had "artificially" clamped down so that they couldn't get WAY overleveraged, it would have prevented the crash.

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  16. Show me a truly free market society where that's the case. I can show you plenty of more socialist-style governments where it is, though.

    Yah, convenient "No true Scotsman" there. How about you show me one example where it works?

    That's simply not the case. Look how well the USA does as a whole whenever it has faced true adversity.

    What does "as a whole" mean? How is this relevant?

    The rags-to-riches stories in this country are well ahead of others.

    You're talking about outliers, people with exceptional talents and motivation who happened to have been poor. But income mobility is as high as right-wing propaganda would lead you to believe, and it's been decreasing for decades because of Republican policies.

    More importantly, the statistics of decades of social programs show an increasing reliance on them as they're expanded. 48% of this country now receives more in benefits than they pay in taxes. Is that normal?

    I don't know, we'd have to get into specifics. I'm sure you're not taking into account, for example, that there are a lot of "benefits" that the rich disproportionately benefit from indirectly. For example, the owners of WalMart benefit very disproportionately from the high-way systems, from contract enforcement, from law enforcement, etc. etc.

    Why not? Good charities have always done a fantastic job at a fraction of the costs, thanks to volunteers and the like.

    Only for things that the donators/participants happen to be personally interested in. There's no evidence that they could step in and adequately address all the things the government does. Handing out bibles, sure. Having a soup kitchen in one particular neighborhood? Of course. But who's organizing and coordinating and making sure everybody's covered?

    I actually think that's completely wrong. We would have had a huge short-term hit, yes. But we'd have recovered fairly quickly.

    Of course you think that. But that's not what most experts think. I don't see why you are confident in your belief.

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  17. (cont.)


    By shoring up the banks, we basically are pretending things are still worth a bit more than they are.

    I don't think that's a fair characterization. We're not pretending, we're making it true.

    but the risks haven't changed at all.

    I agree with that, but only because we haven't taken any of the necessary steps, not because of your silly giant stick (let the banks fail and next time they'll know better) idea.

    People love to say the right is in with the banks, but it's simply false: True economic conservatives couldn't care less about the banks. They should live and die like everyone else.

    Their personal feelings are irrelevant. Their policies de facto favor concentrations of wealth. And where is the wealth? Banks. This is the central flaw of conservative economics, by the way. They don't take into account the disproportionate effect of money! They have this mythology where it's always a fair fight, but in reality, as soon as one entity acquires some money/power, it's no longer a fair fight because they can leverage their money/power in an endless positive feedback loop until all money/power centralizes under just a few entities. This has happened in every deregulized/nonregulated field. It's just a natural feature of the truly free market. That's why we need laws, regulations, progressive taxation, and social spending to keep things fair. The market must be constantly tended to keep things fair and provide a safety net for the "less fit."

    All seriousness - what would have happened had we let the banks fail?

    Seriously? Surely you can find someone more qualified than I to answer, like 90% of all professional economists not employed by a right-wing "think tank."

    The most important point in economics should be true value and transparency - by definition, allowing bubbles to exist is horribly wrong and can only lead to disaster.

    Bubbles are natural in free market capitalism. Transparency is a start, but again, it relies on the non-existent homo rationalus to be truly effective. We need regulations.

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  18. Um, no. The fact that the rich have some a disproportionate amount of the income does not imply that their rates should be lowered.

    Huh? So it's not enough that they have the highEST rates, and it's not enough that they pay far more of the gross total than ever? What would be "fair"??

    I was referring to your claim that "The Bush tax cuts quickly turned into much higher revenues," which is a blatant lie/falsehood.

    That's not true. IIRC even Charlie Hall and others were acknowledging this back then.

    The net effect nowhere NEAR made up for the lost revenue.

    Huh!? Even that article notes that the net effect is greater than ever - they are in dispute over whether that's all due to the tax cuts.

    Um, duh?

    So let's sacrifice our futures for feeling a little less crunched now?

    Disagree. I don't see how the hurt would help us later. I don't believe the bankers thought the crash would happen. I also don't believe that not bailing them out would make them enough risk averse in the future that they wouldn't take similar EXTREMELY PROFITABLE risks in the future. I'd say the burden of evidence is on you since you're making such a wild claim.

    This was a major dispute in 2008, and I don't think a crazy one. Bush ultimately decided that the short-term crunch (whether financially or politically, we'll never know) was too great. But there's plenty of basis for the suggestion, and the bailout clearly didn't help as it was supposed/hoped to.

    Sentences one and two contradict each other. If we had "artificially" clamped down so that they couldn't get WAY overleveraged, it would have prevented the crash.

    No, you're misunderstanding. Artifical clamps wouldn't help, period. As for whether they were overleveraged - yes, they were. But lack of transparency as to how overleveraged they were is the bigger issue, not regulations.

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  19. Yah, convenient "No true Scotsman" there. How about you show me one example where it works?

    Fair enough. :) I will, if you get enough people to vote for the right candidates...! ;)

    You're talking about outliers, people with exceptional talents and motivation who happened to have been poor. But income mobility is as high as right-wing propaganda would lead you to believe, and it's been decreasing for decades because of Republican policies.

    Huh? Perhaps it's been decreasing due to increased social welfare programs making the easy route that much more comfortable. It directly coincides with such activity.

    Sorry - phone - TBC. :)

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  20. Huh? So it's not enough that they have the highEST rates, and it's not enough that they pay far more of the gross total than ever? What would be "fair"??

    Again, I don't think there's a particular number that is objectively more "fair" but we were doing just fine when the rates were at least a few points higher as they were for decades and decades.

    Huh!? Even that article notes that the net effect is greater than ever - they are in dispute over whether that's all due to the tax cuts.

    They -- people from the Bush administration! -- explicitly said that what you are claiming is not something they believe.

    So let's sacrifice our futures for feeling a little less crunched now?

    There's no sacrifice of the future. It's take the best course of action to minimize the harm. Your simplistic operant conditioning psychobabble is just a hypothesis and it would be an enormous gamble to take what we know would be big harm now to see if it pays off in the future.

    and the bailout clearly didn't help as it was supposed/hoped to.

    That's not clear at all.

    No, you're misunderstanding. Artifical clamps wouldn't help, period.

    Oh, well if you say "period," then fine. *eyeroll* It has to be artificial. No natural clamp has yet been proven to cause greedy risk-takers to voluntarily act responsibly and risk-averse.

    As for whether they were overleveraged - yes, they were. But lack of transparency as to how overleveraged they were is the bigger issue, not regulations.

    Baseless assertion, like all your others. You have all these claims and no historical examples of your ideas ever actually working. You're just sure that they will work. I'm all for transparency, but I'm skeptical that it's enough. I just think you're giving people too much credit for being rational. Even being rational might not be enough. It might be perfectly rational for a banker to accept, say a 1% risk of total bankruptcy for a 99% chance of huge reward. If that 1% risk, though, involves crashing the national economy, then we have to forbid him from doing it. We can't just make it "transparent."

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  21. Fair enough. :) I will, if you get enough people to vote for the right candidates...! ;)

    So you admit it's just a hypothesis right now. Why should we gamble the country on it, especially when it's a minority position not agreed to by a majority of the experts?

    Huh? Perhaps it's been decreasing due to increased social welfare programs making the easy route that much more comfortable.

    Give me a break.

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  22. I don't know, we'd have to get into specifics.

    Would love to! :D

    I'm sure you're not taking into account, for example, that there are a lot of "benefits" that the rich disproportionately benefit from indirectly. For example, the owners of WalMart benefit very disproportionately from the high-way systems, from contract enforcement, from law enforcement, etc. etc.

    Actually I am - I'd love for everything to be on a consumption tax basis, as noted earlier. I don't know why liberals who make this argument aren't in agreement. Determine the normal base amount of spending needed for a lower-middle class life, say $35K, don't tax that, and charge a consumption tax on everything else: NO breaks.

    Only for things that the donators/participants happen to be personally interested in. There's no evidence that they could step in and adequately address all the things the government does. Handing out bibles, sure. Having a soup kitchen in one particular neighborhood? Of course. But who's organizing and coordinating and making sure everybody's covered?

    Who is now, and at what cost? Is it more effective than charities (I'd say no, when govt. averages $1.63 spent for every dollar added)? I think that's a very weak argument.

    Of course you think that. But that's not what most experts think. I don't see why you are confident in your belief.

    Plenty of experts feel this way, but it's easier to push off problems for later rather than face them now. In the Noonan piece I linked to today, the beginning of the piece discusses how a major problem is the approach of politicians: They simply don't believe that any crisis really is one, because they've always heard that and "well, we're still here". It's a serious problem.

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  23. Again, I don't think there's a particular number that is objectively more "fair" but we were doing just fine when the rates were at least a few points higher as they were for decades and decades.

    But that doesn't make sense! You'd rather the poor paying a larger portion of the overall tax burden!? Think about that logically!

    They -- people from the Bush administration! -- explicitly said that what you are claiming is not something they believe.

    Woah, you read that wrong: When it occurred, an already former member of the administration said this statement. Many people disagree with him. Let's not make it sound like Bush's people at that time put him to making a statement saying one thing while arguing the opposite to the media, that's silly.

    There's no sacrifice of the future. It's take the best course of action to minimize the harm. Your simplistic operant conditioning psychobabble is just a hypothesis and it would be an enormous gamble to take what we know would be big harm now to see if it pays off in the future.

    What are you talking about? It's obvious that there's a long-term negative effect, that's inarguable. You can argue that it's worth it (and be wrong :) ), but you can't claim it doesn't exist.

    That's not clear at all.

    WHAT?! You can't seriously believe that.

    Oh, well if you say "period," then fine. *eyeroll* It has to be artificial. No natural clamp has yet been proven to cause greedy risk-takers to voluntarily act responsibly and risk-averse.

    That's completely false!! Transparency and competition do all the time. Without government intervention, it's risk vs. reward, Period.

    Baseless assertion, like all your others. You have all these claims and no historical examples of your ideas ever actually working. You're just sure that they will work. I'm all for transparency, but I'm skeptical that it's enough. I just think you're giving people too much credit for being rational. Even being rational might not be enough. It might be perfectly rational for a banker to accept, say a 1% risk of total bankruptcy for a 99% chance of huge reward. If that 1% risk, though, involves crashing the national economy, then we have to forbid him from doing it. We can't just make it "transparent."

    How could it crash the national economy? In a free market nothing can have that kind of overall impact, that's the point. There's an automatic segregation of investments among various risk takers. Those willing to take huge risks for huge rewards are actually at risk - no bailouts. There's literally millions of examples of this on a day to day basis in every day business. I've lived it.

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  24. So you admit it's just a hypothesis right now. Why should we gamble the country on it, especially when it's a minority position not agreed to by a majority of the experts?

    Absolutely not - I'd just love to try it on a larger scale. And what experts? There's articles and articles ripping economists who've been wrong far more than right the past years, when average businessmen were arguing as much. I'm not impressed.

    Give me a break.

    Really? You don't think that social programs have played a major role?

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  25. This discussion among others has motivated me to make my first post in a long time. :-)

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  26. On that note, I'd say there are two "load-bearing arguments" here. One is that you think progressive taxation is unfair. The other is that the free market is essentially self-regulating.

    The first is just a matter of opinion and the second is so obviously opposed by history that I can't see any point in arguing with you about it. If reality hasn't convinced you you're wrong, I don't see how I could. :-)

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  27. JA - I saw. :) Agree on the load-bearing and cosmetic points re: what's important in a discussion.

    Actually, the load bearing arguments here are that unions get far more than is fair for what they do; that it is unwise to allow unions to collectively bargain; that it is immoral to allow public unions to do so; and on top of that, progressive taxation is more than already occurring and the markets are generally best left unregulated.

    You forget the moral side of almost all of these arguments. This is a country based on free choice.

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