The Politics of Entitlement

Mitt Romney calls it the "politics of envy." "The rich are different than you and me" to quote F. Scott Fitzgerald, but, let me assure you, contrary to Hemingway's rejoinder, it isn't just because they have more money. There is a sense of entitlement, something one (they) can "talk about in quiet rooms" but never in public because the rabble might grumble. The full quote from Fitzgerald's, The Rich Boy, beautifully tells about this kind of wealth: Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them, makes them soft, where we are hard, cynical where we are trustful, in a way that, unless you were born rich, it is very difficult to understand.

Oh, to be a fly on the wall of Romney's campaign headquarters, advisors pouring over his tax returns trying to determine if they should be released, and, if so, when, how many, in what detail, and what explanations (spin) should accompany them. Bring on the Madison Avenue types to brand and package his wealth as a sort of "Romney Success Cereal." I am "successful" (i.e. "rich"). Vote for me, and you can be like me with a nice looking Father-Knows-Best family thrown in for good measure!

His tax returns are probably hundreds of pages and there may be multiple returns depending on how he has set up Family Limited Partnerships, etc. They probably reflect some form of tithing as by "Commandment of God" Mormons are expected to pay 10% of their gross income to the church -- including income from trust funds and food stamps (no chance of the latter) to be a member of the church "in good standing" and therefore receive its "blessings."

While religion should not be an issue in this or any election, and I will vote for any candidate I think best suited for the job, no matter what the religion, even (gasp!) an atheist, undoubtedly this is an issue for the American electorate (which would never elect an atheist), and therefore what is revealed in Romney's tax return may have a bearing.

But, mostly, it will be about how his tax handlers may have manipulated the issue of earned vs. unearned income. And this cannot be determined by one year's return. When asked about his intentions to release multiple years' tax returns at a recent Republican "debate" he chortled with his patented disingenuous laugh, "maybe." In fact, every time his wealth comes up as an issue he looks like a deer in the headlights, trying to portray himself as having lived "real streets of America" and having come from modest means (father, president of American Motors, and later Governor of Michigan).

The greater the wealth the greater the opportunity to shift income between "earned" (taxed up to the maximum 35%) to "unearned" (income from investments and in private equity, "the carry" which is taxed at 15%) It was not long ago when those figures were approximately in equilibrium, but the Bush era changed all of that and Wall Street would like to keep it that way. Masters of the Universe, unite! A reasonable measure of economic equality has become a corpse of the American Dream.

This election year is conjuring up the most virulent politics in history, Super PACs having contributed to this, something that should be abolished. Here, in Florida, we are now being besieged by them on the airways, Romney having a presence in political advertising even weeks before. The Republicans would like us to believe that calling to roll back the Bush "temporary" tax cuts is the "politics of envy" and that "class warfare" is actually a tactic in an overarching strategy by Obama to make a "welfare class" dependent on the Federal government and therefore more likely to vote Democrat. Talk about conspiracy theories. Might as bring up the issue of his birth certificate again.

Ironically, if I had to hold my nose and vote for just one of the remaining Republicans, my default candidate would be Romney. But as much as I find wanting in President Obama, he has the right idea when he said "don't compare me to the Almighty; compare me to the alternative."


Jan. 24 Follow-Up: "The" Return was released -- as expected, hundreds of pages but everything legal and above board, an effective tax rate of 13.9 percent. Romney also contributed what would be expected to the Mormon Church, so, on both counts he is absolved of any wrong doing. But if there was ever a clarion call for a more sensible tax code, this is it. I've written repeatedly over the years about the issue of economic inequality and just clicking that label at the bottom of this entry will bring most of them up, so no sense going into great detail.

However, I will say the following fearing this point gets lost in all the rhetoric about what motivates people to work: the Republicans argue that lowering the tax rate for everyone (Gingrich proposes a zero tax rate for capital gains) will magically create jobs, economic growth, and therefore the necessary revenue for the Federal Government to do its job, albeit at a reduced level (with cuts in just about every area of social welfare as everyone would "then" be working). But if their theory is wrong, we will be right back onto the same economic precipice at the end of the Bush Presidency.

Romney says his success was due to "working hard." Did he do so because of an effective tax rate of 13.9 percent? At the end of the Reagan Presidency my effective rate was 33 percent. Did I work "less hard" as president of a publishing company than Romney did in private equity? My mistake was to work for a W-2 rather than for carried interest. This kind of tax code games the system so, indeed, the rich can only get richer while everyone else is mired in economic limbo at best.

Jobs do not "happen" because of the tax code alone. They come from education, a passion for working, jobs being valued by society no matter what they are, entrepreneurial vision, a host of other, more relevant, factors.

My Bet is on Roger's Version

And by "Roger's Version" I'm not referring to one of my favorite Updike novels but my high school grade advisor and teacher, with whom I am in contact for reasons explained here.

Roger Brickner was passionate about politics when I participated in the mock political convention he staged the year I graduated in 1960, on the eve of Kennedy's election. Remarkably, now 51 years later, he is still passionate and his political analysis has been prescient, better I think than the political analysts we are exposed to on the battle between Fox and MSNBC. Survey research is a highly statistical discipline but the results can be problematic due to methodological flaws, question bias, and socially desirable responses, people trying to put themselves in a favorable light when answering questions (vs. what they do in the voting booth). I prefer the old fashion educated opinion, and they don't get much better on the topic of politics -- or as enthusiastic -- than Roger's broadcast emails during an election year. I have his permission to bring them to light in my blog from time to time and here is his latest one on the upcoming Republican primaries in January....

Dear Friends:

What a difference those two weeks were in terms of the Republican race for a nominee. It is getting down to a battle between Gingrich and Romney, but with Paul holding in there tenaciously in third place. All the others on a national basis will be in single digits when it comes time to vote in just one month's time. These others could exceed once in a while their single digit status. Bachmann in Iowa and Huntsman in NH for instance.

In this discussion I will confine myself to the primaries and caucus scheduled for January.

IOWA CAUCUS Jan 3 These votes will be divided proportionally... I believe a 15% threshold is required to get ANY delegates. the Iowa caucus is a whole afternoon and evening event (ordeal?... read only the dedicated hang in there). I am not ready to give exact percentages yet, but I see the following order GINGRICH, closely followed by ROMNEY, then PAUL, but PAUL will probably fall short of 15%. Therefore I would expect GINGRICH to win a majority of the 28 delegates. This will be a good boost for his challenge to Romney.

NEW HAMPSHIRE PRIMARY Jan 10 these votes will be divided proportionally with a 15% threshold to get ANY delegates. I now see the order as ROMNEY by a wide margin. GINGRICH second and PAUL third. Coming in a respectable fourth is HUNTSMAN, but I would doubt he would reach the 15% threshold . With just 12 delegates (such a fuss NH makes over so few delegates) I would expect the results to show ROMNEY 8 delegates, GINGRICH 2 delegates and PAUL 2 delegates.

SUMMARY OF FIRST TWO CONTESTS

ROMNEY 19, GINGRICH 19, PAUL 2. Close race !!

SOUTH CAROLINA PRIMARY Jan 21 These delegates will be winner take all. I see GINGRICH winning by at least 10 points, thus gathering all 25 delegates.

SUMMARY OF FIRST THREE CONTESTS

GINGRICH 44, ROMNEY 19, PAUL 2

FLORIDA PRIMARY Jan 31 These delegates are winner take all,. I see GINGRICH beating ROMNEY by wide margin. It will be a very bad night for ROMNEY. All 50 delegates will go to the Georgian neighbor GINGRICH.

SUMMARY OF THE FIRST FOUR CONTESTS

GINGRICH 94, ROMNEY 19, PAUL 2.

It will be imperative for ROMNEY to bounce back in the four caucus states of NEVADA, MAINE, COLORADO and MINNESOTA between Feb. 4-7. There are no SOUTHERN states here and ROMNEY must do well to get the balance of delegates more even. I will be looking into these states in the next two weeks and will be able to comment better at that time on whether ROMNEY can keep in the race. One note, the really big northern states of NEW YORK (Apr 24) NEW JERSEY (June 5) PENNSYLVANIA (Apr 24) OHIO (June 12) MICHIGAN (Feb. 28) ILLINOIS (Mar 20) and CALIFORNIA (June 5) seem to be in ROMNEY's column so the decisive delegate numbers may not be known until quite late. Watch MICHIGAN on Feb 28 and ILLINOIS on Mar. 20 as a clue to how these other big northern states will swing.

There is still the chance that for the first time since 1948 the nomination for the Rep. nominee might go beyond the first ballot. A long shot, but an exciting possibility.

THIRD PARTIES? I could see BACHMANN get into it if ROMNEY became the nominee. I'm sure she would get less than 5% of the vote, but it would hurt ROMNEY. PAUL keeps saying he will not run a third party, but he has done it before and may do it again. He would be worth 5-10% of the vote. Because of his war stance he could hurt OBAMA the most. All this is just speculation, but not outside of the possible this election cycle.

I continue to believe that OBAMA will beat GINGRICH by a margin greater than he won in 2008. A ROMNEY candidacy would be a very close race, perhaps a narrow victory for him and if not OBAMA would do less well than he did in 2008 against MC CAIN But we have 11 months before we will know better.

Roger

Here is Roger's updated forecast dated Dec. 26...

Dear friends:

I trust you have all had a very Merry Christmas this Holiday season. I enjoyed an excellent meal with a schoolboy friend of 65 years in NYC.

The shifting sands of elective politics continue to rearrange the landscape. I will look at the first three contests.

IOWA The latest "flavor of the month" is beginning to slip. Between Newt Gingrich's mouth and his poor organizational support ( failed to get on VA ballot) is catching up with him in the eyes of the voters. This shows in my latest estimate for the Iowa caucus on Jan 3. My expectations:

1 ROMNEY (20-25%) 8 delegates
2 PAUL (20-25%) 8 delegates
3 GINGRICH (15-20%) 6 delegates
4 PERRY (15-20%) 6 delegates
5 BACHMAN ( 5-10%)
6 SANTORUM ( 5-10%)
7 HUNTSMAN (5-10%)

Three weeks ago, before the decline in Gingrich became apparent, I had him leading, but he has fallen back to third place now. Paul, certainly not the flavor for ANY month will give Romney a good race for first place. I have to say that Santorum is likely to quit when, after traveling to every Iowa county, he will only draw single digits. Same for Bachman, but she may, inexplicably, hold on for a while, though I do not see her getting into double digits anywhere.

Next comes my state of NEW HAMPSHIRE on Jan 10. My prediction made on Dec 3 still seems to hold except I expect Gingrich to fall back to third place, while, once again Paul moves up at his expense.

1 ROMNEY (35-40%) 6 delegates
2 PAUL (15-20%) 3 delegates
3 GINGRICH (15-20%) 3 delegates
4 HUNTSMAN (10-15%)
The rest that are still in the race should get in the low single digits.

DELEGATES TOTAL(JAN 10) ROMNEY 14 PAUL 11 GINGRICH 9, PERRY 6

SOUTH CAROLINA votes on Jan. 21. If GINGRICH can't do well here he never will.

1 GINGRICH (30-35%) 11 delegates
2 ROMNEY (25-30%) 9 delegates
3 PAUL (15-20% 5 delegates
4 BACHMAN ( 5-10%) if she is still in the race
5 PERRY ( 5-10%)

This is the least certain of my predictions as events will have a lot to do with the results of this event still 4 weeks away. Unless Gingrich wins by more than just a few points here I would expect him to do less and less, including FLORIDA which will come up ten days later. Perry, also should be looking weak in a southern state like SC. Does this leave the non-ROMNEY candidate to be the eccentric RON PAUL?? How fascinating that would be.

Finally, the president and the Democrats in the dysfunctional Congress came up winners over the NO NO NO crowd who focus on OBAMA rather than on issues they espouse. When will they learn? Are they trying hard to lose the HOUSE OF REPS?? More on these after the Reps. decide on who will be their standard bearer.

Have a Happy New Year!! Roger

Show Us The Figures, Rick

By now Rick Perry's opinion piece in today's Wall Street Journal is making some waves. In many ways I agree with you, Rick, particularly about simplifying the tax code. But that does not mean a simple graduated tax structure has to be thrown out (in favor of the regressive flat tax) and it does not mean one has to entirely do away with capital gains taxation (usually the realm of the wealthy, so that, too, is another regressive move) or does it mean that a carefully thought out, and fair, inheritance tax shouldn't be retained (concentration of wealth doesn't enhance the American dream, it erodes it). And I'm all for responsibly addressing the twin Swords of Damocles that loom in our future, Medicare and Social Security. I'm even for a balanced budget, but not via Constitutional Amendment (imagine having to raise $$ in a crisis with congressional bickering stalling the process, not to mention transitional issues).

So while I agree with many of the feel-good measures, Rick, how does your op-ed piece constitute a "plan?" Show us the figures, Rick -- how many jobs evolve from massive tax cuts and would those jobs materialize anyhow with the next business cycle? Where is the evidence? Or, is this merely an ideological belief?

And that is my problem in accepting your "plan" as a serious one. Furthermore, Rick, you were not the first Republican candidate with a flat tax agenda. Cain beat you to the Texas punch and Gingrich now says he's for an optional flat tax rate of 15%, which beats yours by five percent. By your own logic, that ought to create even more jobs! And Romney now says he's always been for a flat tax. Sounds like a game of Texas Hold 'em. Are all you Republican candidates in? -- place your bets.

There is a pioneering book of social psychology you should read, Rick: Gustave Le Bon's The Crowd; A Study of the Popular Mind. Hard to believe it was written in 1895 as your true-believer words "tax cut" could have been used by Le Bon as an example. Think of them in the context of a passage I underlined as a student: "The power of words is bound up with the images they evoke, and is quite independent of their real significance. Words whose sense is the most ill-defined are sometimes those that possess the most influence...Yet it is certain that a truly magical power is attached to those short syllables" [e.g. tax cut] "as they contained the solution to all problems. They synthesize the most diverse unconscious aspirations and the hope of their realization. Reason and arguments are incapable of combating certain words and formulas. They are uttered with solemnity...and as soon as they have been pronounced an expression of respect is visible on every countenance, and all heads bowed. By many they are considered as natural forces, as supernatural powers. They evoke grandiose and vague images in men's minds, but this very vagueness that wraps them in obscurity augments their mysterious power."

"Tax cut" is the holy grail for supply-siders -- a "mysterious power" indeed when it comes to resulting in more jobs. As Le Bon further says, those unexamined words "become vain sounds, whose principal utility is to relieve the person who employs them of the obligation of thinking." And, that seems to be the new "democracy" of the so-called "debates." As the late preeminent science fiction writer Isaac Asimov said in Newsweek (21 January 1980): “There is a cult of ignorance in the United States, and there always has been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that 'my ignorance is just as good as your knowledge.'” (Hat tip, The Big Picture)

Chauncey Gardiner Lives!

The Republican debate last night was laughable, sometimes downright embarrassing. Sound bites galore: "Everything is Obama's fault," "I'm a Christian" (choose your deity carefully), "I love family," "prosecute illegal immigrants and their employers" -- in fact electrocute them! (Who will pick Cain's apples and oranges?) "Less or even no taxes will create jobs." "9-9-9," "drill, drill, drill," "blah, blah, blah." If you can't say it, scream it over the other candidates.

Each has his/her shtick in these "debates" proclaiming a "plan" (as they like to call it), in 30 seconds or less. One cannot help of think of Jerzy Kosinski's prophetic novel, Being There, written more than 40 years ago about a simple minded gardener, Chance, who is catapulted to political fame, becoming "Chauncey Gardiner" when the media mistakes his comment, "I like to watch my garden grow" as a metaphor for the economy. That was Chauncey's "plan."

And did the CNN format remind you a little of American Idol or Dancing with the Stars? I honestly thought I'd see three judges emerge with scorecards. Text your winner America!

Let Them Eat Leftovers

Actually, this is closer to what he meant: "Let the idle poor buy the hand-me-downs of the job creators if they can't afford to pay a 9% national sales tax."

And the non-taxation of used goods is but one feature of Herman Cain's 9-9-9 catchy sounding "plan." Help, I find myself agreeing with Michele Bachmann: "the devil is in the details."

While his 9-9-9 plan is "transparent," it is also transparent that he fails to see it as a regressive tax. It sounds oh-so-fair on the surface, all individuals pay a 9 percent tax on earnings and a 9 percent national sales tax and voila, everything becomes an even playing field. One only has to run an equally simple spreadsheet to see how overwhelmingly regressive such a tax plan would be as at lower income levels, fixed expenses, such as food, shelter, transportation, insurance, health, and, of course, taxes, become 100% of one's earnings. Conversely, even with a national sales tax, very high income tax payers would have even a smaller share of their income taxed unless they spent every discretionary dollar at Tiffany's.

Even if all deductions are removed from the tax code, ones the affluent can more easily access, it is a long way from 9% to the current top 35% marginal rate. And eliminating the 15% capital gains tax is a net gain for those taxpayers. Doing away with the estate tax is another bonanza for the fabulously wealthy (no dispute on my part, though, the estate tax needs reform as outlined here).

Also if Mr. Cain is going to rely on reducing the payroll tax as a bone toss to the middle class, he is ignoring an increasingly large segment of the population -- retired folk who are living on non deferred savings accounts accumulated during their working careers (already subjected to payroll and income tax, and probably at a higher level). They don't get the offset of a reduced payroll tax and in effect this is a means of double taxing and further penalizing savers. And Mr. Cain likes to argue that the removal of the payroll tax is an offset for the average worker that would now have to pay "only" a 9% sales tax, failing to note that half of the 15.3% current payroll tax is presently paid by business.

Overzealous tax reformers advocating a flat tax, or a reduction in income tax, triumphantly use the "growth" card to fill in any revenue shortfall. "Trust me," they are saying, "reduce taxes and the economy will grow to such an extent that everyone will prosper." The "job creators" will work harder.

If, as Cain's supporters contend, the 9-9-9 plan raises as much revenue as the current flawed tax structure, then mostly it is on the backs of working stiffs. And while there are merits in simplifying the tax code, 9-9-9 is not one of them.

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