If Republicans Insist on Negotiations, This Time They Have to Pay.

There’s an interesting line of thought being tested in the blogosphere that alleges that Democrats actually have to negotiate with Republicans, but not in order to give them any sort of concessions, but on the contrary, to get something out of it, as Republicans are seeking for a face-saving way out. Peter Beinart thinks that it would be beneficial for Democrats to provide them with such a way out.

I couldn’t help but recall a great American short story by O. Henry, The Ransom of Red Chief, that deliciously describes exactly this sort of predicament. Two swindlers, short of $2000 for a business venture, devise a plan to kidnap a 10-yeat old son of a wealthy citizen. The kid thinks he’s an Indian Chief on a warpath and only welcomes this sort of development. The two hapless kidnappers didn’t account for such a turn of events, as the kid terrorizes them with violent games. As the boy’s father, the prominent Ebenezer Dorset, responds to kidnappers in a note, he’s fully aware of the predicament those guys got themselves into, and shrewdly demands a payment of $250 just to take the boy back.

The end of the story needs to be quoted in full:

It was just twelve o’clock when we knocked at Ebenezer’s front door. Just at the moment when I should have been abstracting the fifteen hundred dollars from the box under the tree, according to the original proposition, Bill was counting out two hundred and fifty dollars into Dorset’s hand.

When the kid found out we were going to leave him at home he started up a howl like a calliope and fastened himself as tight as a leech to Bill’s leg. His father peeled him away gradually, like a porous plaster.

     “How long can you hold him?” asks Bill.

“I’m not as strong as I used to be,” says old Dorset, “but I think I can promise you ten minutes.”

“Enough,” says Bill. “In ten minutes I shall cross the Central, Southern and Middle Western States, and be legging it trippingly for the Canadian border.”

And, as dark as it was, and as fat as Bill was, and as good a runner as I am, he was a good mile and a half out of Summit before I could catch up with him.

If Republicans want to get out of the hole they dug themselves into they have to pay something for it.

Powerful Pretending To Be Powerless.

It’s becoming a recurring theme: men of power pretending or even believing to be the little guy, sort of “Mr. Smith goes to Washington”-type, speaking truth to power. Here’s a Republican congressman from TX, who supported the shutdown, telling park ranger “How do you look at them and deny them access?”, referring to a group of WWII veterans trying to enter the memorial. Unbelievably, he blames the poor park ranger (who probably doesn’t even get paid because of the shutdown) for the shutdown!

This kind of behavior is common among the “trickle-down” and Ayn Rand crowd: they blame the hoi polloi, the Joe Schmos for their troubles. But in order to not look like complete assholes, they have to turn everything around and pretend that it is them who are the little guy, the salt of the earth, and it is those food stamp recipients, the unions and the unemployed who are the real threat.

I think that for some, and Krugman made a good point about it recently, it’s not enough to just be rich and powerful. One has to be adored and admired. It’s like the next step after you have amassed fortunes and made powerful friends and opened your own charity. Your next step is to become a hero, but since opportunities for heroism are limited, you enter the make-belief world, a parallel realm, where you are the persecuted minority and everyone else is out to get you. You find someone who can’t really fight back and make a grand stand.

What fucks!

Why Walter White is like GOP.

It’s hard to ignore the metaphors so abundantly offered to us, to use at our discretion, by the writers of Breaking Bad.


When I first started watching Breaking Bad this past August – a one week crash course of watching the entire 5 seasons, holding my breath and with my jaw on the floor – I found myself celebrating Walter White’s liberation, even though it came via abominable means. The meek and scared school teacher making $43K a year, stepped upon and humiliated by his students and his car wash boss, with terminal diagnosis, a few thousands to his name in the bank, in those ridiculous tighty-whities, those “sensible” Clarks shoes, driving that pathetic Pontiac Aztec – how could one not feel sorry for the guy and not cheer his finding his mojo? How could an average middle-class working man not relate to this character?

But it would be naïve to expect that line of story – Walter White, the kind and powerful drug kingpin who only seeks to provide for his family – to keep us on the edge of our seats for 5 years. Turning him into a Hulk-like character would be, no pun intended, a death sentence.

“Provide for his family” – a guiding mantra that we hear from Walt White throughout the entire series, while being an initial justification for his new occupation, at this point is just an illusion in Walt’s mind. The damage that his actions brought to those dear to him is beyond repair.

Walter White has created a monster. And then lost control of it. GOP, the moderate, mainstream, Rockefeller-type that dominated US political arena for decades has been devoured by Uncle Jacks that, when GOP called on them, came and collected. Without them the GOP is impotent, with them the GOP is doomed.

The parallel is too obvious to ignore:

“You don’t get to just clap your hands and say “I’m out” after building a drug empire, killing people and ordering people killed, and putting your friends and family in jeopardy: “’I built you,’ Walt is yelling. “’I created you,‘” Dr. Frankenstein insists at his creation as it tears him apart.”

Now Walt is in a corner, just like the GOP, from which it’s hard to get out without either admitting the wrongdoing, the entire premise of your existence for the last few years (or decades) and inability to do the right thing. Surrendering would negate his life’s work – leaving his family in a worse shape than when he started on this path. Digging his heels seems to be the only option to his entrenched mind.

“America, you stupid bitch!” We almost hear GOP screaming. “We’re only doing it for YOU, because we love you! You’re a family!”

But the truth is, neither Walt nor GOP demonstrate the love for those they supposedly go into such trouble to protect. It was perfectly captured in this review by Maureen Ryan:

“Walt did and does care about his family, but here’s the big lie: They were never his top priority. Not really. They were a priority, but they were not the leading priority. Control and self-aggrandizement were always his top goals, and as “Granite State” came to a close, control and self-aggrandizement were still the things that came first. Walt’s greatest crime is not just lying to everyone around him, but lying to himself, especially about that.”

Control and self-aggrandizement. Yeah, like this guy – the Uncle Jack of modern Republican caucus, only with more piety and a Harvard Law degree. Do you think he would hesitate to pull the trigger on things America needs now if it served his own interests and ambitions? Hell, he’s already pulling it. GOP has created him but now they’re having second thoughts. Walt White having second thoughts on the Uncle Jacks Nazi crew is an understatement of the year. We’ll probably see a great finale. In both cases.

Inflation of Labor

Republicans now are rediscovering the “middle class”. Rubio made sure to make “middle class” the focus of his SOTU reply. It’s a welcome about face in a party that just a few months ago was celebrating business owners (as opposed to people who work for them) on Labor Day. It wasn’t surprising: the current Republican dogma coalesced around the idea that only business owners work hard; everyone else is either lazy or not entrepreneurial enough. In Republican mind, whoever didn’t become business owner or “made payroll” is implicitly a lesser member of society, a leech and a moocher.

Republicans love to keep their focus on inflation: there was no shortage of dire warnings coming from the right quarters about inflation that was just around the corner. The inflation that they had in mind never materialized, but in the meantime the other type of inflation – labor inflation has been devastating the communities for decades but received little attention of the doomsayers.

Back in the day, the time that many conservatives are nostalgic about, the 1950-60s, it was possible for a man with a high-school diploma to work at a factory and get paid enough to provide a middle-class lifestyle for his entire family. For a man with a college degree the career paths were wide-open and his chances of successful employment were even more robust. To achieve and maintain a middle-class lifestyle one didn’t need a double-income family and didn’t need to leave home and 6am and get home at 12am and be available on weekends. Since then “success” has been redefined. To be considered successful these days you have to negate your own self and turn into a machine.

Toiling away from paycheck to paycheck and working harder and longer hours is required nowadays just to keep one’s head above water. The world where business owners work 24/7/365 and everyone else works from 9 to 5 with an hour break for lunch is a fantasy. Let’s examine a minimum wage worker working shifts at Walmart. If he or she works 8 hours a day they would make roughly $15K a year. I would argue that if this person is presented with an opportunity to work longer hours or find another part-time job, say, at nearby Taco Bell, he would take it. Many do. We’ve all heard stories about people working 2-3 jobs. Or let’s even take an average Wall Street employee: no matter how entrepreneurial they might feel about themselves – they are still just glorified salary workers (with bonus). They are expected to be on-call 24/7 checking their blackberries at night and on weekends and they have acquiesced to this way of life as a default and some, in some masochistic way, even consider it a badge of honor. Working hard and especially reveling in your hard work is as American as apple pie. Our entire way of life now is treating the best-case scenario as a base-case scenario. In other words, there were times when working 8-hour days meant to be average and working 12-hour days and weekends meant to be successful. Now, for many, to work 12-hour days plus weekends is a given, a base-case scenario.

Humans have a great adaptive mechanism – we can get used to many things and we can accomplish remarkable feats especially if we’re in a survival mode. But we can only stretch our productivity so much, and after a certain point more workload becomes detrimental to an individual, counterproductive for companies, and eventually damaging to society. We physically can’t work more than 24 hours, we can’t be at 2 places at the same time, we can’t win on every trade. At some point there will be no room left to push harder. The benefits of longer hours and constant availability are becoming marginal. To take success onto the next level from what is considered successful career today is to become superhuman, develop magical powers or to rig the game. And if you have no way of doing it – you’re just an average, talentless, lazy schmuck. But don’t dare to complain about it – to complain is un-American.

There’s clearly an inflation of labor for those holding a wage job. Over the years the normalcy of 8-hour work days turned into 10-hour work days and then into 12-hour work days, but the benefits are failing to keep up with the contributing effort. The jobs for which a high-school diploma was sufficient, now require a college degree; and where before a college degree would provide job security for life, a graduate degree is required and yet it is no longer a guarantee of lifelong employment. It’s hard to say which came first: inflation of college degrees or inflation of labor. Surely, today this labor inflation can be attributed to high unemployment rate, but this phenomenon was prevalent even during the roaring years prior to the 2008 collapse.

The “moochers” that Republicans keep talking about are stretched too thin. They are one accident, one blown tire, one missed paycheck away from not being able to keep afloat. It is only in the imaginary world of self-declared “makers” everyone else lives off of the fruits of their labor. In the real world, “makers” expect everyone to be on call at all times for pennies and then have the chutzpah to accuse them of being lazy. Well, at least some in the GOP, who actually have to win elections rather than exercise their wits at the expense of an average Joe, are rediscovering that such attitude is damaging the brand. I’m following their transformation with great interest.

Conservatism reduction to the absurd.

One can feel sorry for Boehner: he tried to strengthen, if only from the PR perspective, the Republican position pre-fiscal cliff, only to be humiliated by his own crazies.

Boehner introduced a Plan B to Congress that included tax cuts for those making under $1mln a year. The plan was simple – to pass it with the partisan vote of 218 Republicans, so that bill would act as a fallback position/some leverage to present to the public when the fiscal cliff happens on January 1st. Of course, everyone, including Boehner, knew that this bill has no chance of passing Senate and being signed by Obama; the whole purpose of this bill was to show the public: “See? We also have a plan! That cuts taxes for 99.8%! But Democrats refuse to cooperate!”  The passage would at least somehow give the Republicans a piece of legislation to wave in front of critics and to give the public, who doesn’t have time for details, the impression that something is being done. Well, they failed even at that due to the crazy wing, for whom to raise taxes on millionaires is anathema and for whom having even slightly better PR position is worse than maintaining their ideological purity. Plan B failed to pass the House.

Which only clears the way for Obama to let the “cliff” proceed. Come January and accompanying spending cuts and increased taxes, both sides will be ready to do something about it for real. Obama will introduce a tax cutting bill, goes across the country to promote “tax cuts and recovery” theme, dares Republicans not to pass it, they grudgingly acquiesce, and Obama and the Democrats will become known as tax cutters and the promoters of economic growth.

Obama has already chipped away at the traditionally Republican domain of  strong foreigh policy by killing Bin Laden. Now he’s trespassing into the holiest of the holy of the Conservatism – fiscal responsibility. He leaves them no ground to stand on. What do they have left? What do current conservatives stand for? Obama smartly touches everything that they hold dear and they begin to despise the very positions that they previously held simply because they view them as contaminated. But all Obama does is govern as a center-right politician and that drives them nuts, because Obama is not supposed to be that. He’s supposed to be a caricature that they have internalized.

I do feel sorry for conservatives. Traditional conservatives used to have very good ideas that I find compelling: fiscal responsibility; personal responsibility; foreign policy restraint; right to privacy; respect for social contract and social cohesion, patriotism. But now they seem to have been reduced to the absurd with their unyielding zeal: fiscal responsibility means holding the country they allegedly love hostage; personal responisbility means you’re on your own even if you did everything right; foreign policy means calling for sending troops to every conflict worldwide; right to privacy does not include the right to reproductive privacy; social contract means worshipping the rich as “job creators”, and patriotism took a form of jingoism.

Current political disagreements are not between left and right, not between liberal and conservative. It’s between practical and ideological, reasonable and absurd. If it is Obama who will save the conservatism from its impostors, so be it.

Conservatives are having epiphanies on tax rates (although not at WSJ).

Here’s the kind of article that I would only expect to find on the pages of Wall Street Journal. A tired and refuted by numerous studies argument for lower taxes on the rich. You see, the author argues, the rich pay a larger share of all income taxes (even more than they paid in 1950s) and thus their taxes should be cut.

In 1958, approximately two million filers (4.4% of all taxpayers) earned the $12,000 or more for married couples needed to face marginal rates as high as 30%. These Americans paid about 35% of all income taxes. And now? In 2010, 3.9 million taxpayers (2.75% of all taxpayers) were subjected to rates that were 33% or higher. These Americans—many of whom would hardly call themselves wealthy—reported an adjusted gross income of $209,000 or higher, and they paid 49.7% of all income taxes.

This is what puzzles me most in such arguments – consistent and probably deliberate refusal to look at other factors of such disproportion, such as increasingly barbell-shaped nature of income distribution. Also, notice how artfully the author uses those making $209,000 to make a point about the rich paying too much taxes, and then turns around and points out that they are not rich at all. Lumping together those making $209,000 and the 0.01% is convenient for 2 reasons: You get to show how large a share of taxes paid by that group while still making an impression on the layman reader that it is the 1% that pay 50% share of all taxes. What share of that 50% is paid by the middle class (and I do consider those making $209,000 middle class) is not explored at all.

The following is a simplistic and extreme example just to illustrate my point. Suppose we have a town with 100 citizens. 98 citizens are making $10,000 and 2 citizens making $500,000: At the flat rate of 35% the 98 guys’ share of total income taxes would be $10,000*98*0.35=$343,000 and the 2 rich guys’ share of total income taxes would be $500,000*2*0.35=$350,000 – more than 50%!! Outrageous, if you dismiss the fact that the 2 guys are making 50 times more than those 98 moochers.

Now imagine that the income is more evenly distributed: 30 guys make $10,000; 60 guys make $20,000 and 5 guys make $100,000 (notice that the size of the total pie didn’t change). Now the share of the top bracket would contribute 5*$100,000*0.35=$175,000. And the share that all others would contribute – I’ll spare you the calculation – $525,000. Could it be that the rich paid less total share of taxes during the times when the income distribution was more even? As was the case in the 1950s?

These back of the envelope calculations would be even more compelling if I used the true rates. In reality, the bottom 30 guys pay no taxes at all (because they are too poor to pay any taxes); the top 5 guys pay 15% (as in capital gains), and the burden of taxation is being carried by those 60 guys in the middle. Since those 60 guys work for a living – they still would pay 35% rate and would generate $420,000 in taxes; but the top 5 guys would pay only $75,000 in taxes. Not only the burden is being carries entirely by middle class, we are not even generating the same amount of tax revenues as we would if everyone paid the same rate.

At this point 2 clashing camps emerge: those who insist that the bottom 30 guys pay their share and those who insist that the top pay the same share as everyone else. I’m in the latter camp. In fact I would be willing to entertain the idea of a flat tax for everybody, as long as 2 conditions are met: capital gains are taxed at the same rate as ordinary income and the bottom guys are paid decent wages, so that paying 35% tax would not break their backs. But because I find that raising minimum wages to a satisfying level is an impossible feat (politically and practically), I, being realistic, simply advocate for raising the taxes on capital gains. And that’s where cries of class warfare begin to emerge. And that’s where I move to my next argument: Why is it that making money on money is supposed to be more sacred and revered than working for wages? Why are “entrepreneurs” (I use quotes, because I do not find anything entrepreneurial about investors who don’t produce anything and more often than not risk someone else’s money) more valuable members of society, as evidenced by tax rates, than teachers and nurses? If top bracket insist that they are “job creators”, shouldn’t Walmart workers, office workers, accountants, IT and other clock punchers insist on being called “business facilitators” and demand equal respect?

If this still seems like a sure path to socialism (or a “road to serfdom”) you have missed some recent epiphanies on the right. Here’s the quote from a recent American Conservative magazine article:

 A capital gains tax rate (making money off money) that is lower than the earned income rate (making money off work) is just not fair. Bestowing that rate on hedge-fund managers through a specially designed loophole is just not fair. Allowing the rich to take mortgage deductions for second and third homes, or for homes worth over $1 million, is just not fair. Allowing business owners like me to take myriad deductions that our employees cannot take is just not fair. But, most of all, allowing the wealthy to pay very low tax rates while interest on the war debt accumulates, deficits continue, and middle-class incomes deteriorate is just not fair.”

At conservative National Review magazine Ramesh Ponnuru seems to be getting a grip on reality: Especially refreshing is this passage:

“The Republican story about how societies prosper — not just the Romney story — dwelt on the heroic entrepreneur stifled by taxes and regulations: an important story with which most people do not identify. The ordinary person does not see himself as a great innovator. He, or she, is trying to make a living and support or maybe start a family. A conservative reform of our health-care system and tax code, among other institutions, might help with these goals. About this person, however, Republicans have had little to say.”

Even William Kristol at the Weekly Standard is seeing the light:

“After all, surely Republican members of Congress understand there’s something crazy about appearing to fight to the death for a tax code in which Mitt Romney and others pay a 14 percent tax on millions of capital income​—​while silently allowing the payroll tax on labor to go up from 13.3 percent to 15.3 percent for all the working stiffs?”

Fiscal Cliff Negotiations

A great long read here about what’s going on between Obama and Republicans in Congress during fiscal cliff negotiations. Here’s my summary:

Obama slammed his offer on the table and he wasn’t shy about it: $1.6trln of tax increases and $400bn of entitlement cuts. Considering that during debt ceiling talks in the summer of 2011 he almost had to beg Boehner for $800bn of tax increases and still didn’t get it, it’s a rather bold but totally justified move. The interesting part here, however, is the way Republicans approach that $400bn cuts in entitlements – which I have to remind you is what they badly wanted: they insist on Obama giving them details on specific programs to be cut. This is hilarious! The dialogue would go somewhat like this:

Republicans (badly wanting those cuts) to Obama: “So, show us what you would cut.”

Obama (incredulously): “Guys, you wanted it – you pick what to cut.”

Republicans: “No, you first”

Obama: “Wtf, you guys? Have you never bought a car before? Why should I negotiate with myself? You want it – you show me a bid.”

The reason that Republicans are unable to come up with specifics about what programs they want to cut is that those programs directly benefit middle class taxpayers: they include employer sponsored health insurance, 401(K) and pension plans, earned income tax credit and mortgage interest deduction. That’s why they want Obama to make the first move. And these are the guys who wanted to show us all how to run a country?!

Btw, here’s the CBO chart of the contributing factors for  US national debt just to give you a perspective:

contributors to public debt