Friday, January 11, 2019

AOC Meets Mainstream Press - Krugman, Dowd, Friedman, 60 Minutes, Meet the Press

Over the past weekend, AOC was featured in all of the above with some of the most progressive ideas put on the table in decades. Yet the far left trashes her just as much as the right. I'll get to that another time.

Remember Krugman trashing Bernie economics two years ago?

The Economics of Soaking the Rich

What does Alexandria Ocasio-Cortez know about tax policy? A lot.
Paul Krugman
Opinion Columnist

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad — and in their madness they’re inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane.
The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from … the United States, for 35 years after World War II — including the most successful period of economic growth in our history.
To be more specific, Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.
Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.
What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.
So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.
In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.
Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.
And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.
An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.
So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas — and tax policy is at the heart of the crazy.
You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

Look at the history of top marginal income tax rates (left) versus growth in real GDP per capita (right, measured over 10 years, to smooth out short-run fluctuations.):

Top tax rates and growthCreditTax Policy Center, BEA
What we see is that America used to have very high tax rates on the rich — higher even than those AOC is proposing — and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.
Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious.
And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively.
Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.

 Here's the Maureen Dowd column:
WASHINGTON — Lucky there’s no Saturday detention at the Capitol.
Republicans — and some Democrats — would certainly make like Mr. Vernon, the “Breakfast Club” disciplinarian, and lock down the irrepressible Alexandria Ocasio-Cortez. She’s only been in town a moment and has already, in this city of acronyms, become famous enough to supersede the shorthand for the Architect of the Capitol.
A.O.C. now simply signifies the congresswoman from the Bronx and Queens.
No longer content with Nancy Pelosi, the right craves a new she-devil. Republicans have mocked Ocasio-Cortez’s hardscrabble story, howled at her proposal to soak the rich with a 70 percent tax, scrutinized her clothes and booed her at Pelosi’s swearing-in. A.O.C. saucily tweeted back, “Don’t hate me cause you ain’t me, fellas.”
The frenzy reached new absurdity when a tweet popped up with a video of her with friends at Boston University doing a dance from “The Breakfast Club,” with this slam: “Here is America’s favorite commie know-it-all acting like the clueless nitwit she is.” Holy Footloose.
“It is unsurprising to me that Republicans would think having fun should be disqualifying or illegal,” she told The Hill.
Like many other attempts to ding A.O.C., this one boomeranged. The clip was the coolest thing in politics since Barack Obama tangoed in Argentina.
“That’s it, Alexandria you’re in the club,” tweeted Molly Ringwald, one of the actresses from the 1985 movie.
When Obama got to the White House, Republicans trembled at his midichlorian count, but their fear faded as he grew more professorial and remote. A.O.C., despite some stumbles and lacunae in political knowledge, is more adept at using the force, especially on social media.
She claimed the mantle of dancing queen, tweeting out a new boogie in front of her congressional office to Edwin Starr’s antiwar anthem “War,” and taunting: “I hear the GOP thinks women dancing are scandalous. Wait till they find out Congresswomen dance too!”
The tableau at the Capitol Thursday, as Nancy Pelosi reclaimed the gavel, was redolent of that iconic “Breakfast Club” scene, with all its rebellious energy and zeal to fight The Man.

When Ocasio-Cortez, a leader of the brat pack that has put the old guard on notice, voted for Pelosi, it was an electric visual: two fierce women, a controlled 78-year-old capping her career and an uncontrollable 29-year-old starting hers, joining forces to fight the 72-year-old Neanderthal in the Oval Office.
I loved seeing the splotches of bright colors, from Pelosi’s hot pink dress to A.O.C.’s gleaming white suffragette-inspired suit, in a chamber that was once a monochromatic sea of men in gray pinstripes. When I covered an earlier “Year of the Woman,” after disgust over the Hill-Thomas hearings swept a group of women into Congress, it was startling to see the first dapples of gold and pink and red lighting up the House floor in 1993.
Cynthia McKinney, a young black freshman wearing gold sneakers, slacks, braided hair and a Mickey Mouse watch, stepped into an elevator in the Capitol and was rebuffed by the elevator operator, who icily repeated three times, “This elevator is for members only” before finally noticing McKinney’s congressional pin.
On Thursday, 102 women, nearly all Democrats, were sworn in as House members. This influx produced a gratifying inconvenience, reported by The Washington Post: a line for the first time to get into the ladies room off the floor of the House.
Pelosi is the ultimate rebuttal to the 1992 Barbie doll who chirped “Math class is tough.” The new speaker can count, legislate, horse-trade and stroke. But she’s also unapologetically tough. “She’ll cut your head off and you won’t even know you’re bleeding,” Alexandra Pelosi said of her mother the other day.
But Madam Speaker will need a few fancy dance steps of her own to keep her exuberant freshmen and her socialist wing in line, so that the centrist Democrats in the country’s middle are not alienated and President Trump does not become, of all things, a sympathetic figure.
Hours after Rashida Tlaib became one of the first two Muslim women in Congress, Tlaib told a cheering crowd that “we’re going to go in there and impeach” Trump, referring to him with a raunchy word that made many Democrats cringe.

Put on the spot to comment, Pelosi handled it deftly, saying that, being from an older generation, she did not like the coarse language but that she’s “not in the censorship business” and that it wasn’t worse than what Trump has said.
Indeed, Trump used the word publicly a number of times, including at a 2015 rally, and Kanye West spewed it over the Resolute desk recently while Trump laughed.
Liz Cheney, part of the Republican House leadership, complained about “foul language,” ignoring the fact that her father used an epithet during an argument about Halliburton and Iraq on the Senate floor. Trump huffily called Tlaib’s vulgarism “disgraceful” and “highly disrespectful to the United States of America.”
The spectacle of Republicans as snowflakes is rich. But while the fiery spirit among the new Democrats is refreshing and members of Congress are entitled to say what they want, the brat pack may want to avoid getting too far over their skis while their learning curve is steep.
They should focus on the big picture: Trump is doing such an amazing job as a vulgarian and villain, it would be a shame to get in the way.


  1. Love her...

    And, this ain't a bad thing either...

  2. The democratic establishment will never allow their donor/globalist class (Bloomberg et al) to be taxed at this rate. As the
    2020 election draws near AOC will be a luxury they cannot afford.


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