That Magic $250,000 a Year

Various conservatives have remarked upon the significance of the Obamian $250,000 a year dividing line. Above that are the rich that must "pay a little more" in taxes and below it are--well, the liberals.

Otherwise why wouldn't Democrats be demonizing everyone over $150,000 a year, or $100,000 a year, or anyone over the median of about $50,000 a year?

Reihan Salam takes a look at this.

In an essay titled “Desperately Seeking Revenue,” Rosanne Altshuler, Katherine Lim, and Roberton Williams of the Tax Policy Center found that achieving a budget deficit of 3 percent of GDP by 2020 through tax increases on over-$250,000s would require doubling their rates, kicking the top rate to 76.8 percent.

A far less damaging strategy would be to reduce "tax expenditures", or loopholes, in the federal income tax, but that would affect liberals, especially in the $100,000 to $250,000 range, and they are the core base of Obama vote.

When our liberal friends go on about how the rich have benefited from the Reagan and Bush eras they neatly elide their own situation. For over the last 50 years there has been a huge increase in employment of experts in government, from colleges to regulatory agencies, that has hugely benefited liberals. Of course, liberals don't earn multimillion dollar salaries in these jobs but they do earn good money, often propelling a liberal couple into the six-figure income bracket.

Charles Murray is saying the same thing in his upcoming book about how well the upper-middle class has done on a variety of statistical indices in relation to the rest of America, most notably, in marriage.

The culture war is, of course, a class war between the upper-middle class, the educated elite, and the rest of the middle class. Up to now this war has been a stalemate because the liberal elite has bought the support of the underclass and other financially stressed Americans with the money of the rich (who pay 40 percent of federal income tax on 22 percent of the income).

My guess is that the major political achievement of the Obama administration is going be chopping off another limb of the Democratic coalition. With every decade it becomes more and more obvious that the administrative welfare state that tosses crumbs to the poor and the middle class is in fact government of the educated elite, by the educated elite, and for the educated elite. Everything else government does is just window dressing and tactical compromise.

In the New York Times today Paul Krugman chastises the elite for blaming the ordinary American for the mess we are in. He politely shows how the Bush elite brought all the messes down on our heads. Of course he would, he's writing for liberal NYT readers. But when you get past Krugman's partisan pot-shots, it is the educated elite of liberals that has brought the current spending crisis to a head, and it is liberals--those lucky few in the $100,000 to $250,000 a year range--that will soon feel the wrath of the people.

Why Obamomics is Failing

Today, with 244,000 new jobs from the Labor Department's Establishment Survey, people are talking about "better than expected."

But if you look, as I do, at the Household Survey you see a downtick in Employment of 190,000 and an uptick in Labor Force of 15,000. (That's why the Unemployment Rate went up to 9.0 percent.)

What is going wrong with the Obama recovery, which Jay Cost shows is the worst in 50 years? I will tell you why. The problem is that the ruling class of the educated elite is grasping the wrong end of the stick. At both ends.

Back in the old days, humans lived in egalitarian hunter-gatherer bands. Their government was up close and personal, and it wasn't very powerful. Humans hate it when other people have power over them. Then came the agricultural age, and egalitarianism went out the window, replaced by rigid hierarchy that we know and hate as the feudal system.

But then, about 500 years ago, a new age began to dawn. It combined, in a curious way, both hierarchy and equality. We call it democratic capitalism.

On the one hand, everyone was to be considered equal "in the sight of God" as we say. On the other hand, hierarchy was allowed to form as successful businessmen piled up huge fortunes in the new economy that delivered mass-produced goods for the ordinary person. So we may say that, while the hunter-gatherers were egalitarian right across the board, and the agriculturalists were hierarchical right across the board, the new democratic capitalism embraced political equality and economic hierarchy.

But then arose a reactionary movement that tried to turn the new democratic capitalism upside down. Let us call it social democracy, the rule of the educated elite. This movement of well-born and well-educated men and women sought to impose egalitarianism on the economy, and hierarchy on politics. They were scandalized by inequality of economic condition, but insisted that government should be controlled and staffed by people like them, educated experts that could develop a rational economy and politics out of the chaos of the free market. But the trouble is that it doesn't work.

The new rule of the educated elite doesn't work in economic terms because the hierarchy of the educated experts, attempting to impose equality on the economy with their faddish ideas on planning, energy, education, health care, and the relief of the poor, just cannot adapt to the irreducible complexity of the economy. You can say: we should pursue alternative, clean energy solutions. But the economy is likely to prove you wrong, or deliver clean energy in an unexpected way. As things start to go wrong, of course, the educated experts turn to more and more hierarchy and compulsion to impose their egalitarian solutions on the economy.

The Obama administration is testing the concept of social democracy, the rule of the educated experts, to destruction. What is needed is not for targeted government programs to create green jobs and very fast trains with the rich paying "a little more" in taxes to make sure that the results are egalitarian. What is needed is for the government to create a level economic playing field where all people can compete to serve the consumers with the best products and services. That means dissolving all the special subsidies and mandates that assume that the educated expert knows best, and lowering tax rates and regulations so that the best economic actors can get on with finding out what a recovering economy needs to get its mojo going.

Let's say this again. The whole point of democratic capitalism is to treat everyone equally before government and the law. Then it says: go get 'em, and the people that figure out what the consumers want, and deliver it to them with innovation and reliability get to make tons of money, which they then probably give away in philanthropy years later. People that are good at this, or just lucky, get to climb the greasy pole and get more resources to deploy to back up their ideas. People that aren't so good at this game get to work for other people.

The question is: why does the educated elite work to hard to destroy the remarkable combination of equality and hierarchy that we call democratic capitalism and turn it upside down? What is their problem?

Pew Voter Survey: Takeaways

The reliably establishment liberal Pew Research Center for the People and the Press has a new study of the US electorate, and David Paul Kuhn at realclearpolitics.com has a good all-round review of its findings.

In this study Pew divided the electorate into nine categories. Mostly Republicans were divided into Staunch Conservatives and Main-Street Republicans; Mostly Independents were divided into Libertarians, Disaffecteds and Post-Moderns; Mostly Democrats were divided into New Coalition Democrats, Hard-Pressed Democrats, and Solid Liberals. On the side-lines and not really connected to politics at all were Bystanders.

This "typology" contrasts with the groupings in the Pew 2005 voter survey which came out with the following: Republican-leaning groups were Enterprisers, Social Conservatives, Pro-government Conservatives; middle groups were Upbeats, Disaffecteds, Bystanders; and Democratic leaners were Conservative Democrats, Disadvantaged Democrats, and Liberals.

It's interesting to ponder on the changes to the typology. Pew has pulled Libertarians out of the Republican camp and Conservative Democrats out of the Democratic camp. They have rearranged the Republicans, blurring the ideological line between social and economic conservatives and identifying conservatives by intensity. They have created two Obama era groups, the independent Post-Moderns and the New-Coalition Democrats. It seems to me that those two groups are the most loosely attached to the Democratic camp.

But here are two interesting takeaways from the data in the new survey.

• Once a liberal, always a liberal. Pew shows the age distribution of each group and it shows, e.g., that Staunch Conservatives (like me) are older than adults generally. One group, Post-Moderns is heavily weighted with young adults. But Solid Liberals and New Coalition Democrats track almost exactly with the national age profile. In other words, they don't become more or less Democrat as they age.
• Hispanics aren't "hard-pressed". Looking at the numbers by race, blacks are heavily represented in the New-Coalition Democrats and Hard-Pressed Democrats (and non-existent in Staunch Conservatives). Hispanics are different. They are heavily represented in the New-Coalition Democrats but underrepresented in the Hard-Pressed Democrats category. The implication is obvious. Hispanics are much less tightly bound to Democrats. They are open season for 2012.

It is troubling for this conservative to look at the questions and their phrasing. One question asks whether corporations make too much profit. Are people really exercised about that? And there are no questions about social programs other than helping poor people too much or not enough. Are issues like education and entitlements "off the table?" Or are pretty well all voters except Staunch Conservatives agreed on the wonders of big government? And how about a question on "government has too much power" rather than government has too much waste? The answer is, of course, that if Pew were ahead of the game, asking questions that exercised 2012 voters, we would already know who is going to win.

Monbiot's Big Problem

Environmentalists face an impossible problem, according to The Guardian's George Monbiot. On the one hand they are pointing to catastrophe, the end of non-renewable resources, so we should cut back. Yet new resources keep appearing. So, maybe we have reached "Peak Oil." Meanwhile there is "tar sands, shale gas and coal." The predictions of catastrophe keep getting put off.

On the other hand, environmentalists are trying to get us to cut back, and people just don't do that.

In east Africa, for example, I've seen how, when supplies of paraffin or kerosene are disrupted, people don't give up cooking; they cut down more trees. History shows us that wherever large-scale collapse has occurred, psychopaths take over. This is hardly conducive to the rational use of natural assets...

All of us in the environment movement, in other words – whether we propose accommodation, radical downsizing or collapse – are lost. None of us yet has a convincing account of how humanity can get out of this mess. None of our chosen solutions break the atomising, planet-wrecking project. I hope that by laying out the problem I can encourage us to address it more logically, to abandon magical thinking and to recognise the contradictions we confront. But even that could be a tall order.

Of course, for a skeptic like me, it is the environmentalists that are doing the magical thinking.

First of all, the very word "non-renewable" is dicey. In the strict sense, everything is non-renewable. Wood is very non-renewable because on current energy consumption levels, we would cut down every tree on the planet in a couple of years to burn wood for energy. Oil is non-renewable because, obviously, there is a fixed amount in the planet. Nuclear fission is non-renewable because there is a fixed amount of fissionable material on the planet. For that matter, wind and hydro are non-renewable, but only on a time scale of billions of years.

In other words, "non-renewable" just means that we'll have to come up with a better idea some time in the near future. But that is the story of human life. When things can't go on forever, they stop, and humans think up another way to live. When environmentalists point to catastrophe, they are merely telling us that, sooner or later, we are going to have to adapt to new circumstances. Of course we will! That's what humans do.

Also, we humans have really been doing something about "trashing an ever greater proportion of the world's surface." An example I like to rehearse was told to me by a German in 1989. Germany had a real problem over pollution along the Rhine, he said. Every time there's an industrial spill we get a fish kill and a huge media feeding frenzy. What people didn't realize is that 30 years before there were no fish kills because there were no fish in the Rhine!

We should be careful of all catastrophism. Repent, for the end of the world is nigh, is a religious approach. It is very easy to smuggle it into science and then use science to legislate our moral agenda. The problem with all prophesies of the End of the World is that we might be wrong. When environmentalists predict catastrophe and it doesn't come, they begin to look less and less like rational advocates and more and more like religious cultists.

But the human, social, way to deal with problems is to adapt. We usually can't predict what will go wrong, but we humans are certainly good a responding to a crisis and all pulling together in the aftermath of disaster.

Bureaucracy vs. Prosperity

Compare the US Social Security system with the Chilean pension system. The US Social Security system has an unfunded liability of trillions of dollars. The Chilean pension system is celebrating its 30th anniversary and has presided over an economic boom in Chile, according to Monica Showalter.

Over the last three decades these accounts have averaged annual returns of 9.23% above inflation. By contrast, U.S. Social Security pays a 1% to 2% (theoretical) return, and even less for new workers.

Chilean workers are putting 10 percent of their income away in a real savings plan that will create jobs for their children when they are ready to retire. In the US, the 12.6 percent FICA tax just goes to pay current retirees. No savings; no jobs for the next generation.

There is a message here. The bureaucratic, administrative method is a dead method. It transfers money from productive uses into the political bazaar of government programs. And there is never enough, so the government always ends up cheating with the tax of inflation. But the free economy is different. There the system of credit and ownership rewards people for serving their fellows with products and services. People save for retirement and contribute to the prosperity of the next generation. They retire when they can afford to, not when they hit 30 years service in a government bureaucracy, or age 62 in the government's Social Security program. The free economy is a self-adjusting system. You want to live frugally and save money? Then you get to build a nest egg and you get to quit work when your nest egg is big enough. You want to spend it and live large? No problem, but reckon on working till you drop.

Talk to the man in the street, though, and you'll find someone that would rather rely on the government than the stock market. He believes in political power rather than economic power, in Senator Claghorn rather than Fidelity and Vanguard.

Meanwhile there is the example of Chile, where the private sector has given ordinary people 9 percent on their retirement money, compared to 1-2 percent in the US Social Security system.

Bin Laden Dead: Now What?

My argument for electing President Obama is that the nation had to put Democrats in charge of foreign policy to force them to confront reality. Democrats had spent the eight years of President Bush in opportunistically trashing everything he did, inspired by the left-wing culture that always looks for oppression and then denounces it.

The result has been gratifying, as Democrats have re-upped the Patriot Act, kept Guantanamo open, maintained rendition of terrorists, and abandoned the notion of trying terrorists in civilian courts.

Additionally, the Arab Spring has completely liquidated the Democratic idea of re-engaging the Arab political rulers.

But now, with the death of Osama bin Laden the question of the War on Terror raises its head. What is the War on Terror--or whatever you want to call it--really about? Democrats have trouble with this because of their culture of opposing oppression. This has prompted them to co-opt marginalized peoples and use them for their own purposes, as they used the working class as an excuse to build their centralized administrative state, and African Americans as an excuse to interfere in all relations between Americans that involve race. In other words, the liberal agenda is always to pluck oppressed peoples off feudal estates and slave plantations and move them onto the liberal plantation where the marginalized peoples are just as subordinate as before.

But the real movement of history has been not from one plantation to another, but the expansion of trust and the extension of horizons. Capitalism teaches us to abandon the local culture of the land, in which a lord defends his patrimonial estate from pirates and plunderers, and to submit to a new global culture of service and trust. Other people are not a threat, but an opportunity for exchange.

This new culture developed initially in the northwestern European lands, and met resistance even in Europe where the Educated Youth interpreted the new way as a new exploitation. In the last century Russia, China, and India made epic attempts to resist the new culture. China gave up in 1979 and India in the 1990s, and are now the poster boys of capitalist growth if not yet democratic freedoms.

The problem is the Arabic lands of the Middle East. Islam seems to encourage a culture that resists strongly the new culture of trust and exchange, and oil provided a source of wealth that gave the means to resist. Liberals, sympathizing with the oppressed masses of the Middle East, pat them on the head and encourage them in their resistance to the new global capitalism.

But oil-fueled Islamism ends up being a direct attack on democratic capitalism and requires the democratic capitalist nations to counterattack or at least to contain it. This is the reality that Democrats have been facing in the last two years now that they are in power. In the last ten years, the notion of Islamic extremism was personalized in Osama bin Laden. But now that he is dead, the strategic question re-emerges. What are we trying to do about Islamic extremism, and why?

It is good that bin Laden has been killed on Obama's watch, for now he and the liberal ruling class of the educated elite must decide what our grand strategy should be.

We may all hope that, when Republicans take over the federal government after the fiasco of Obamanomics, that the foreign policy of the United States will be set for the next generation in a sensible practical defense of democratic capitalism and a measured offensive against those who attack it.

Educated Youth and Educated Elite

Our era is the Age of the Educated Elite. It is this elite that constitutes the Ruling Class, as Angelo Codevilla has argued. Its interests, its visions, its prejudices are what drive the culture, drive politics, and channel the economic sector.

This Educated Elite sits on high, in groves of Academe, in the judge's seat in our courtrooms, in the throbbing pulse of media, and the compulsive images of movies and TV.

Today we have a vast centralized administrative state because the Educated Elite wanted it. We have a cruel racial divide because the Educated Elite willed it and deepened it. We live in subjection to minute and pervasive government regulation because the Educated Elite has legislated its morality upon us.

The rule of the Educated Elite could never have succeeded without its alter ego, the angry and idealistic young people we may call Educated Youth. Beginning, let us say, with Marx and Engels in the 1840s, Educated Youth has played a critical role in the political project of the Educated Elite. It is Educated Youth that plays the "idealism" card. It is Educated Youth that runs the street protest action. It is Educated Youth that gets in the faces of the middle class and demands "change." In Emile Zola's Germinal it is the Educated Youth Etienne that provokes the miners into strikes and violence--and then abandons them to their fate and heads off to his next gig. In the Sixties it was Educated Youth that ran the big anti-war demonstrations and that demanded "change" from the academic establishment in the universities. What could the Educated Elite do but accede to the idealistic demands of Educated Youth?

By the time that the young Barack Obama came up through the system the role of Educated Youth had been formalized into the practice of "community organizing," with Educated Youth descending from on high into, say, the South Side of Chicago to organize the laid-off steelworkers.

In other words, the key active ingredient in the over-under coalition of the Educated Elite and the Helpless Victims is the organizing power of Educated Youth to whom falls the task of organizing and radicalizing the Helpless Victims for which government must supply pensions, health care, education, and welfare.

We may think of the modern education system, particularly the modern university, as a training system designed to produce Educated Youth, with the capstone being the highly rated selective college. The whole operation is rather like the Jesuit education system of old which was designed to indoctrinate the children of the faithful early and often and to identify and induct into the priesthood the best of the best.

It is obvious that any successful effort to dispatch the modern Ruling Class, the Educated Elite, onto the dust-heap of history must split the Educated Youth off from the Educated Elite. It must deny the officer class its supply of eager young subalterns ready and willing to die for the cause.

Central to this effort has to be a transformation of education. It must start with a large expansion of school choice, charter schools and vouchers. But the goal must be to get the government out of schooling altogether, on the principle that government education is a violation of the separation of church and state. Education is, in part, a cultural and religious thing. For sure, education is needed to make youngsters literate and numerate, but that is just a part of its social role. Education is also the business of creating adults in accordance with some moral/cultural vision of the good. Government should not do this, for if it does it acts as an establishment of secular religion, and the constitution forbids an establishment of religion.

The remarkable modern phenomenon of home-schooled children--from spelling bee winners to Tea Party activists--that easily out-shine the products of conventional schools are a living witness to the possibilities of a transformation of the education system. It is a witness to the difference between raising up a child and confining a child in a custodial facility.