Sunday, September 14, 2008


With the war in Iraq going much better, the economy has become the key issue. Before the Republican convention, voters preferred Obama on the economy by 16 points. Now it's nearly tied. Boston Globe columnist Jeff Jacoby on some reasons why:

Obama claims his proposal would lower taxes for 95 percent of Americans, but well over 43 million tax returns, one-third of all those filed, already reflect an income tax liability of zero. In fact, Obama says, his plan would eliminate income taxes for an additional 10 million taxpayers. What he is really proposing, therefore, is not tax relief but a bald transfer of cash - $1,000 per family, he pledges - from the wealthiest Americans to everyone else.

Why only $1,000? Why not $10,000? Wouldn't that help the economy even more? What is the "fair share" the rich must pay, Senator Obama? The top 1% of earners already pay 40% of all income taxes.

Obama also favors increasing the capital gains tax from 15% to 20-25%. Obama argues that we had robust growth during the Clinton administration when the tax rate was 28%. This is misleading because we saw better economic growth after the rate was cut to 20% in 1997.
Obama doesn't favor increasing the capital gains tax to increase tax revenue, but because of "fairness." From a primary debate with moderator Charlie Gibson (Youtube video):

Gibson: "In each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?"

Obama: "Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness."

Wow. McCain would leave the capital gains rate alone and favors lower taxes for all Americans, including the "rich," who are typically small business owners who are creating jobs for other Americans and producing goods and services we enjoy.


Kyle Hommes said...

The fact that the richest 1 percent pays 40 percent of the taxes seems outlandish, but they also possess 38 percent of the nations wealth, so if you divide it by percentage of wealth it makes a little more sense.

I agree with you that "punishing" the rich is not necessarily the answer, but I don't think rewarding the rich is the answer either, and some of the republican "trickle down" policies have to the illusion of rewards for the rich.

What I want to see is a system that works for all people, and I truly believe that the system we have in America today works better for the "rich" than for those who are part of the working class. I don't think it is socialism to try and regulate companies to an extent that allows the working class to succeed in America. However, simply trying to redistribute wealth, or even legislating for that purpose seems somewhat futile. It is the system that needs to be fixed, moving the wealth and not fixing the system will do nothing.

I don't know enough about economics to understand whether the Republican policies will work better or whether the Democrats' policies will work better. What I do know is that there are income and wealth inequalities that exist in America, and I really only see the Democrats talking about them.

Jon Vander Plas said...

Of course there is economic inequality in America. People are different, they have different skills and work ethics. People also choose professions with more in mind than their paycheck. One of the reasons free markets work is because the professions most in demand get paid the most. If we paid engineers and philosophy majors the same, we'd get way too many philosophy majors and not nearly enough engineers.

The bottom 50% of earners only pay about 3% of all income taxes. Is the tax system really biased against them?

The very idea that wealth must trickle down to all members of society regardless of their productivity is something of a straw man. Free markets are intended allow maximum efficiency and growth by letting people keep what they produce. However, look at how businesses are run and tell me how this is unjust to the working class: an entrepreneur gets some money together (maxing out his credit, borrowing from friends and family) and risks it on an idea. He hires employees and pays them whether or not he makes dollar one. Most new businesses will fail. The employees will get paid, the entrepreneur usually loses a lot of money. Why does he do it? Because if he succeeds, he can make a lot of money. If you lower his incentive through higher taxes or more regulation, maybe he decides against starting the business (and creating jobs) in the first place. This is why it is good to keep everyone's tax rate low.

Economic inequality does not equal social injustice, but class warfare makes for good politics if you're a Democrat.

Rudi said...

... in bed.

(that last paragraph sounds like a fortune cookie. Your lucky numbers are 2, 5, 8, 19, 35, and 43).

Kyle Hommes said...

So what does lead to social injustice? Walk into an urban public school, severely underfunded because of the way schools are districted, and tell me that economic inequality doesn't equal social inequality. If those people made more money they would probably move to a different part of the city and send their kids to better schools. How much money someone makes determines social position. Economics are inextricably linked to social justice.

Jon Vander Plas said...

I have a hard time believing that the problem with public education is funding. The average spending per pupil is over $9,000 a year. It's much higher in many "underfunded" schools in the Chicago area. Most private schools provide a much better education for less money. If money was the answer, how come Obama was able to spend $100 million in grants on the Chicago public schools when he was chairman of the board for the Annenburg Challenge, with absolutely no detectable improvement in the schools? Did he need another $100 million?

A dirty little secret about public schools is that when people ask "how are the schools in such and such area?" they aren't questioning the quality of the teaching, they are asking about the characteristics of the students.

Social class is not fixed. This is the main tenet of marxism and it is demonstrably false in capitalist systems like our own. As I stated in a comment earlier, there is remarkable upward mobility in this country.

Economics are linked to social justice. My argument is that providing equal opportunity is just, but enforcing equal results requires injustice.

Speaking of fortune cookies, I hate fortunes that aren't fortunes. A wise saying is not a fortune!

Kyle Hommes said...

True, money doesn't fix the system, but there are definitely underfunded schools, but I think it matters how education money is spent as well.

My point was that money determines whether or not people live in good neighborhoods, go to good schools, and make good contacts in their life.

Yes, in a capitalist system people go up and down, but somehow there is always a lower quintile and it has been making less and less. Also, the poor move up, but not all the way, and the rich move down, but not all the way. There is a gap, and it is based on privilege.

The more I work with kids in poverty, the more I release how blessed I am. I would love to say that I have gotten to where I am because of my own hard work, but it just isn't true. I was born into a loving family that paid for me to go to private schools, and I now have a master's degree after very little sacrifice. For some kids I work with, there is no way that could ever happen, and it isn't because they don't have the ability, they just didn't get the chance.

I guess I just don't know what to do with the fact that some people are born into good situations and others are not. Socialism isn't going to fix that. Honestly I think Capitalism goes further than any other system. What I would like, though, is a way to allow those born into awful situations a greater chance at success. On the surface, everyone has equal opportunity, but one's environment goes a long way in determining how far one goes. I don't want to give anyone a free ride, i just want to try to even out the environments.

Ask yourself this question. Would you send your kid to the worst school in Chicago? If the answer is no, then there must be some sort of inequality in schools. If it is not good enough for your own kid, why should someone else have to send their kid there. I don't see the Democrats as promoting socialism, I see them as wanting to make everyone's chances at success equal in a capitalist society by evening out environmental inequality.

Tom and Stacia said...

I am a HUGE Kyle Hommes fan -- who are you and when can I meet you??? :-) I just sat down to respond to this post and read yours and realized I couldn't have said it better myself. Thanks!

Jon Vander Plas said...

Kyle Hommes is a member of a very exclusive group. He is a graduate of the two premier academic institutions in Michigan: Kalamazoo Christian High School and Calvin College.

I believe that this country has more opportunities to succeed than anywhere in the world and that is because of a free market that attracts capital. Punishing those that provide capital to fund these opportunities also punishes everyone further down the chain. Also, the richest 1% and the top 1% of earners are by no means the same people.

I believe that the main problem for those born into lower-income families to overcome is cultural. My parents both grew up poor, but my grandparents valued hard work and education. There are a lot of families that don't value hard work or education. Many kids have an anti-intellectual bias and don't think it's cool to do well in school or to speak standard English. Studies have shown that the number of hours spent on homework is directly correlated with performance on standardized tests. Asians put in the most time, then whites, then blacks. Guess how the test scores come out.

Spending more and more on education doesn't change this culture. Some of the best funded schools in the nation also have the worst test scores. So what to do? I am not an education major, but I think more local control would be good. School choice would be even better. Privatizing the whole system and demolishing the NEA would be best. Any other ideas?

Kyle Hommes said...

Studies also show that culture of origin and poverty are factors on standardized tests. Larger factors than amount of homework done.

In my internship last semester I came across a girl who was the salutatorian at an urban high school in Denver. She had a 4.0 GPA, and was a Hispanic illegal immigrant. Her ACT score was 15. This girl did her homework religiously, but because the ACT is written and normed for white Americans, there were concepts on it that she did not understand. It is not just, if at all, a lack of desire.

My problem with school of choice, which by the way is not new, it was put in place by NCLB, is that there are still going to be failing schools. Parents will be able to yank there kids out of them, if they understand how to do it (many parents in poverty do not know how to work the system). And, just the existence of "choice" schools means that there are schools that people would not choose, and what happens to the students in them.

The problem with schools is not that they are run by the government, nor is it really that they are underfunded, although I don't think more money would hurt. The reason American schools don't perform as well as other countries is because we are far more diverse than other countries. If we only had to reach one culture, our schools would not be in as bad of shape as they are now. The only way to fix our schools is to provide better, multicultural education, and that means reworking standardized tests, if not abandoning them all together. It also means that we need to stop punishing failing schools, and try to actually figure out how to make them better. NCLB had some great goals, but it did not provide any resources for schools that were not making the grade.

I'm guessing then that you would not send your child to the worst school in Chicago. Why not? If family and culture is what really matter, shouldn't all schools be able to provide the same education for your child? Why have school choice if family and culture is what determines educational success?

If the main problem for lower-income families is cultural, how can you say that there are equal opportunities in this country? They have to overcome their culture to get ahead.

Jon Vander Plas said...

We both want a good education for every kid. One disagreement we might have is whether it is unfair that some kids go to better schools, even though their parents deliberately choose to live in areas with higher taxes in order to get better schools. We also probably disagree on how to improve poor schools.

My wife Sarah, a first grade teacher, believes that many standardized tests do have biases that should be corrected too. I'll plead my ignorance on the subject, but ask you to consider that the ACT and SAT are used to predict collegiate performance and need to be useful tools. I knew a girl in high school that went to Battle Creek Central. She was a 4.0 student but got a 16 on her ACT. She was white and she was not bright, she just looked pretty good in comparison with the kids who didn't even try.

I wouldn't send my kids to the schools in inner city Chicago because of the culture of the kids that go there. There is much more violence, drugs, behavior problems, and less desire to learn than they would encounter at the private school we intend to send these theoretical children. The culture of the other students would adversely affect our kids.

The kids that go to these schools have little choice of where to go. If there was competition, they could go to schools that did a better job combating a self-destructive culture and provided a better education. Schools that couldn't compete would go out of business and the kids would be better off for it.

You can't have it both ways - people claim that schools with poor test scores need more funding, but then say that it's not fair to judge performance based on test scores because of the quality of students affects the test scores. How would you know if you had two schools that were equal in the education they provided students, when the quality of students in each school is much different?

Are you saying we need more income redistribution because some people aren't willing to work as hard as others? Doesn't that reward bad behavior and punish good?

Kyle Hommes said...

I don't want income redistribution. I would, however, be in favor of everyone making a livable wage, and of CEO's make less than they currently make.

Jon Vander Plas said...

It would be great if every job in America paid enough to clothe and feed a family of four. However, if government tries to enforce a "living wage" by increasing the minimum wage, they end up hurting low-skill workers instead of helping them. The reason is that paying above market rates for labor drives up unemployment. Just because the government issues a decree that you must pay someone $10 an hour doesn't mean the employee is worth keeping around at $10/hr. So you help those who keep their jobs and hurt many that don't get jobs. It also drives up prices, and inflation causes interest rates to rise, making it more difficult to afford loans.

I think it's outrageous when CEO's get crazy pay packages when their performance doesn't warrant them. However, I don't think it's any of the government's business how much private businesses pay their employees as long as it is disclosed properly to shareholders.