Bloomberg View, in effect the editorial board for the financial news giant Bloomberg, has endorsed raising the Social Security income tax  cap above $110,000.

This helps explain why Bloomberg View supports raising taxes on income over the $110,000 ceiling on wages subject to Social Security’s 12.4 percent payroll tax as part of a plan that closes more than half of the financing gap with new taxes.

Beezer here.  Read the article because it easily drills down through the data showing the challenges Social Security faces.  People will have to save more, particularly those in the labor and lower middle class.  Social Security hasn’t been a front and center component of the Presidential campaigns, although Romney has recently attacked Obama regarding Social Security.  The truth is Romney and Obama both face the necessity to raise SS taxes, either implicitly by raising the SS eligibility age upwards (this age shift upward essentially shifts costs to individuals who will need to save more), or directly in the form of raising the cap, which Bloomberg endorses as part of the long term solution.  Economics Prof. Robert Reich, Labor Secretary during President Bill Clinton’s first term, recommends a new cap of $180,000 which he claims basically makes SS solvent throughout the Baby Boom retirement years.

From economist’s view which highlights a column by former Clinton Labor Secretary Robert Reich, an economics professor.

JP Morgan Chase,  Goldman Sachs, BP, Chevron, WalMart, and billionaires Charles and David Koch are launching a multi-million dollar TV ad buy Tuesday blasting President Obama over the national debt….

The front group for the ad is Crossroads GPS, the sister organization to the super PAC American Crossroads run by Republican political operative Karl Rove.

Because Crossroads GPS is a tax-exempt nonprofit group, it can spend unlimited money on politics — and it doesn’t have to reveal where it gets the dough.

By law, all it has to do is spend most of the money on policy “issues,” which is a fig leaf for partisan politics.

Here’s what counts as an issue ad, as opposed to a partisan one. The narrator in the ad Crossroads GPS is launching solemnly intones: “In 2008, Barack Obama said, ‘We can’t mortgage our children’s future on a mountain of debt.’ Now he’s adding $4 billion in debt every day, borrowing from China for his spending. Every second, growing our debt faster than our economy,” he continues. “Tell Obama, stop the spending.”

This is a baldface lie, by the way.

Obama isn’t adding to the debt every day. The debt is growing because of obligations entered into long ago, many under George W. Bush – including two giant tax cuts that went mostly to the very wealthy that were supposed to be temporary and which are still going, courtesy of Republican blackmail over raising the debt limit.

In reality, government spending as a portion of GDP keeps dropping…..

According to the reliable inside-Washington source “Politico,” the Koch brothers’ network alone will be spending $400 million over the next six months trying to defeat Obama, which is more than Senator John McCain spent on his entire 2008 campaign.

Big corporations and Wall Street are also secretly funneling big bucks into front groups like the U.S. Chamber of Commerce that will use the money to air anti-Obama ads, while keeping secret the identities of these firms.

Looking at the all the anti-Obama super PACs and political fronts like Crossroads GPS, Politico estimates the anti-Obama forces (including the Romney campaign) will outspend Obama and pro-Obama groups by 2 to 1….

I’m not a conspiracy theorist (you can’t have served in Washington and seriously believe more than two people can hold on to a big story without it leaking), but I fear that at least since 2010 we’ve been witnessing a quiet, slow-motion coup d’etat whose purpose is to repeal every bit of progressive legislation since the New Deal and entrench the privileged positions of the wealthy and powerful — who haven’t been as wealthy or as powerful since the Gilded Age of the late 19th century.

Its techique is to inundate America with a few big lies, told over and over (the debt is Obama’s fault and it’s out of control; corporations and the very rich are the “job creators” that need tax cuts; government is the enemy, and its regulations are strangling the private sector; unions are bad; and so on), and tell them so often they’re taken as fact.

Beezer here.   The truth is that under the Obama administration direct government spending has declined at the fastest rate since the return of troops from the Korean War.   The truth is that under the Obama administration there have been a  series of tax cuts in addition to those enacted under President Bush, so many that our funding of government is at its lowest point in 50 years.  The truth is that for the past two years we’ve had the Republican agenda (tax cuts, slash government spending) all along.  The results?  Once stimulus spending stopped the economy began to slow down.  This means deficits will increase because fewer jobs created means less government income even as government support systems, like unemployment insurance and food assistance programs, have to spend more money.  The truth is these TV ads are propaganda to frighten the public at large into giving up their hard won benefits like Social Security and Medicare, rather than support tax reform that includes progressively higher marginal rates the higher you go up the income ladder.   The truth is the US Supreme Court in it’s Citizens United decision overturned a century of law restraining the amount of spending corporate treasuries can use for partisan political campaign advertising.  The floodgates are now full open.  And these organization are tax exempt as well.  What a mess.

The more you learn about how an economy actually works, or doesn’t work as was recently the case, the more you realize some supposed leadership types have no idea what they are talking about.  Literally no idea.

Take for example Republican presidential candidate Rick Santorum’s scolding of Americans for their ‘immoral’ lifestyles and their tolerance of alternative lifestyles.  Professor Robert Reich makes a legitimate point that Santorum may be scolding the wrong folks.

There is moral rot in America but it’s not found in the private behavior of ordinary people. It’s located in the public behavior of people who control our economy and are turning our democracy into a financial slush pump. It’s found in Wall Street fraud, exorbitant pay of top executives, financial conflicts of interest, insider trading, and the outright bribery of public officials through unlimited campaign “donations.”

Meanwhile, Paul Krugman claims applying austerity policies in our current slump not only doesn’t work, but makes things worse.   And of course Krugman supplies a link to a new academic paper about to be published that provides a factual based argument against austerity.  Krugman says it’s the equivalent of the ancient medical treatment of bloodletting:  A purge that instead of helping, makes the patient sicker.

Brad DeLong and Larry Summers have a paper in progress about fiscal policy in a liquidity trap; some of the analytics here. The bottom line, fleshed out with a lot of evidence, is one that others — including me and Christy Romer — have been arguing for a while: expansionary fiscal policy under these conditions doesn’t just aid the economy in the short run, it may well even improve the long-run fiscal prospect. And austerity may be self-defeating even in fiscal terms.

If this is right (and I think it is), austerity-loving pundits and policy makers really are like medieval doctors who believed in treating illness by bleeding their patients, making the patients even sicker, leading to more bleeding.

Meanwhile, over at Economist’s View, professor Mark Thoma highlights some recent work by economist Peter Diamond who, along with economist Emmanuel, believes the optimal maximum tax rate on income is somewhere between 50% and 70%.

…Diamond also pointed to some of his own recent research, with economist  Emmanuel Saez of the University of California at Berkeley, which found that the  optimal marginal income tax rate on the highest earners — those making $400,000  or more per year — is well above the current 36 percent, or even the 39 percent  level that existed during the 1990s.

“The Washington debate right now is between the Bush and Clinton tax rates on  the top,” Diamond said. But his work with Saez shows that a more efficient rate  for raising revenue — without significantly deterring the wealthy from trying to  earn more — is “somewhere between the tax rate at the top in Reagan’s first  administration, which was 50 percent, and the tax rate at the top from the  Johnson years up to the Reagan change, which was 70 percent.” …

And from a related article published from an MIT economics forum:

To be sure, the basic numbers on economic inequality in the United States are striking, as detailed at the event. In 1980, the top 1 percent of U.S. households earned about 10 percent of the nation’s income; today that top percentile receives about 25 percent of income. The top 10 percent of households accounted for a bit more than 30 percent of income from World War II until about 1980, but now receives 50 percent of all income

Beezer here. As Krugman always does, Thoma provides a link to the original article.  Funny how these academics insist on linking to the underlying papers instead of making statements without proper research to back them up.  Of course, if you don’t have any research to support your opinions it’s impossible to provide any.  Austerity is exactly the wrong policy.  We are not overtaxed, or at least the wealthy certainly are not overtaxed.  And if anyone has displayed anti-social or immoral behaviour it’s been coming from the top down, not the bottom up.  But none of this is about truth anyway.  It’s all about power and suppressing competition.  Not capitalistic, and not Democratic either.

We often cite professor Robert Reich, former Labor Secretary under President Bill Clinton, because he has the ability to distill sometimes complicated issues down to easy to understand explanations.  He’s done another good job in this regard with a recent column about the decline of America’s public institutions and public goods.  And of course he ties this decline to a corresponding decline in our attitudes towards these institutions.

From the article:

Mitt Romney speaks derisively of what he terms the Democrats’ “entitlement” society in contrast to his “opportunity” society. At least he still envisions a society.  But he hasn’t explained how ordinary Americans will be able to take advantage of good opportunities without good public schools, affordable higher education, good roads, and adequate health care.

His “entitlements” are mostly a mirage anyway. Medicare is the only entitlement growing faster than the GDP but that’s because the costs of health care are growing faster than the economy, and any attempt to turn Medicare into a voucher — without either raising the voucher in tandem with those costs or somehow taming  them — will just reduce the elderly’s access to health care. Social Security, for its part, hasn’t contributed to the budget deficit; it’s had surpluses for years.

Other safety nets are in tatters. Unemployment insurance reaches just 40 percent of the jobless these days (largely because eligibility requires having had a steady full-time job for a number of years rather than, as with most people, a string of jobs or part-time work).

What could Mitt be talking about? Outside of defense, domestic discretionary spending is down sharply as a percent of the economy. Add in declines in state and local spending, and total public spending on education, infrastructure, and basic research has dropped from 12 percent of GDP in the 1970s to less than 3 percent by 2011.

Only in one respect is Romney right. America has created a whopping entitlement for the biggest Wall Street banks and their top executives — who, unlike most of the rest of us, are no longer allowed to fail. They can also borrow from the Fed at almost no cost, then lend the money out at 3 to 6 percent.

All told, Wall Street’s entitlement is the biggest offered by the federal government, even though it doesn’t show up in the budget. And it’s not even a public good. It’s just private gain.

We’re losing public goods available to all, supported by the tax payments of all and especially the better off. In its place we have private goods available to the very rich, supported by the rest of us.

Beezer here.  Reich goes through the recent history of America’s investment in public goods and traces out the steady decline in our public good investments compared to what we did after WWII.   As incomes steadily migrated up the income ladder rather than the other direction, fewer and fewer members of the middle class or labor could afford to pay for public goods.  And those at the top of the income ladder simply moved their homes, their recreation choices, and their children into private institutions.  This decoupling of society’s big winners from public financing of public goods now leaves much of what we built in tatters.  Instead of being alarmed by this development, those with the huge incomes like Mitt Romney deride what has been weakened in our public sphere.   Thanks to economist’s view for highlighting Prof. Reich’s article.

Yesterday President made an historic speech at Osawatomie, Kansas.  Osawatomie??  Yes.  From President Obama’s speech yesterday.

Theodore Roosevelt disagreed. He was the Republican son of a wealthy family. He praised what the titans of industry had done to create jobs and grow the economy. He believed then what we know is true today, that the free market is the greatest force for economic progress in human history. It’s led to a prosperity and a standard of living unmatched by the rest of the world. But Roosevelt also knew that the free market has never been a free license to take whatever you can from whomever you can. (Applause.) He understood the free market only works when there are rules of the road that ensure competition is fair and open and honest. And so he busted up monopolies, forcing those companies to compete for consumers with better services and better prices. And today, they still must. He fought to make sure businesses couldn’t profit by exploiting children or selling food or medicine that wasn’t safe. And today, they still can’t. And in 1910, Teddy Roosevelt came here to Osawatomie and he laid out his vision for what he called a New Nationalism. “Our country,” he said, “…means nothing unless it means the triumph of a real democracy…of an economic system under which each man shall be guaranteed the opportunity to show the best that there is in him.” (Applause.)

And in addition to selecting Osawatomie for his updated version of Roosevelt’s original ‘New Nationalism’ speech, Obama points out his mother was born in Wichita, her mother was from Augusta and her father was from El Dorado–all Kansas communities.  ‘So my Kansas roots run deep,’ said the President.

I recommend you read the speech in its entirety, but if you cannot, then read former Labor Secretary Robert Reich’s review.   Reich thinks Obama’s speech at Osawatomie yesterday will be considered  ‘The Most Important Economic Speech of His Presidency.’

The President’s speech today in Osawatomie, Kansas — where Teddy Roosevelt gave his “New Nationalism” speech in 1910 — is the most important economic speech of his presidency in terms of connecting the dots, laying out the reasons behind our economic and political crises, and asserting a willingness to take on the powerful and the privileged that have gamed the system to their advantage……

Here are the highlights (and, if you’ll pardon me, my annotations):

For most Americans, the basic bargain that made this country great has eroded. Long before the recession hit, hard work stopped paying off for too many people. Fewer and fewer of the folks who contributed to the success of our economy actually benefitted from that success. Those at the very top grew wealthier from their incomes and investments than ever before. But everyone else struggled with costs that were growing and paychecks that weren’t – and too many families found themselves racking up more and more debt just to keep up.

He’s absolutely right – and it’s the first time he or any other president has clearly stated the long-term structural problem that’s been widening the gap between the very top and everyone else for thirty years – the breaking of the basic bargain linking pay to productivity gains….

Beezer here.  Reich breaks down the President’s speech into its components and then adds his own observations about the importance of each component.  Reich believes the speech correctly explains our crisis, and in several important ways, does so for the first time.  Why it’s taken so long for Obama to reach this point is a mystery to us.   Our best guess is that the President has been working through to an understanding that makes sense to him, not just to this or that particular advisor he’s been listening to the past three years.  One good addition Reich makes in his analysis is to point out the work of Herbert Croly, who authored a best selling book entitled ‘The  Promise of American Life,’ in 1909 and no doubt influenced Roosevelt’s 1910 speech.

Former Labor Secretary under President Bill Clinton, economist Robert Reich, writes in his blog that the Social Darwinism of the late 1800s is back in vogue in the Republican Party.

During this period, known as the Gilded Age, so-called ‘robber barons’ accumulated massive wealth and openly bribed legislators to gain government aided advantages.  Women couldn’t vote, blacks still worked under Jim Crow, and income inequality was huge.

It was an era when the nation was mesmerized by the doctrine of free enterprise, but few Americans actually enjoyed much freedom. Robber barons like the financier Jay Gould, the railroad magnate Cornelius Vanderbilt, and the oil tycoon John D. Rockefeller, controlled much of American industry; the gap between rich and poor had turned into a chasm; urban slums festered; women couldn’t vote and black Americans were subject to Jim Crow; and the lackeys of rich literally deposited sacks of money on desks of pliant legislators.

Most tellingly, it was a time when the ideas of William Graham Sumner, a professor of political and social science at Yale, dominated American social thought. Sumner brought Charles Darwin to America and twisted him into a theory to fit the times.

Few Americans living today have read any of Sumner’s writings but they had an electrifying effect on America during the last three decades of the 19^th century.

To Sumner and his followers, life was a competitive struggle in which only the fittest could survive – and through this struggle societies became stronger over time. A correlate of this principle was that government should do little or nothing to help those in need because that would interfere with natural selection.

Listen to today’s Republican debates and you hear a continuous regurgitation of Sumner. “Civilization has a simple choice,” Sumner wrote in the 1880s. It’s either “liberty, inequality, survival of the fittest,” or “not-liberty, equality, survival of the unfittest. The former carries society forward and favors all its best members; the latter carries society downwards and favors all its worst members.”

Sound familiar?

Today’s Republican mantra defining the wealthy as ‘job creators’ has its origin in Sumner’s world view.

 Here’s Sumner, more than a century ago: “Millionaires are the product of natural selection, acting on the whole body of men to pick out those who can meet the requirement of certain work to be done… It is because they are thus selected that wealth aggregates under their hands – both their own and that intrusted to them … They may fairly be regarded as the naturally selected agents of society.” Although they live in luxury, “the bargain is a good one for society.”…..

Social Darwinism offered a moral justification for the wild inequities and social cruelties of the late nineteenth century. It allowed John D. Rockefeller, for example, to claim the fortune he accumulated through his giant Standard Oil Trust was “merely a survival of the fittest.” It was, he insisted “the working out of a law of nature and of God.”…

Not until the twentieth century did America reject Social Darwinism. We created the large middle class that became the core of our economy and democracy. We built safety nets to catch Americans who fell downward through no fault of their own. We designed regulations to protect against the inevitable excesses of free-market greed. We taxed the rich and invested in public goods – public schools, public universities, public transportation, public parks, public health – that made us all better off.

In short, we rejected the notion that each of us is on his or her own in a competitive contest for survival.

But make no mistake: If one of the current crop of Republican hopefuls becomes president, and if regressive Republicans take over the House or Senate, or both, Social Darwinism is back.

Beezer here.  Are we really going to roll back Social Security, Medicare and Medicaid, labor bargaining rights, the 40 hour work week, the Environmental Protection Agency?  If you listen to the current crop of Republican candidates for President, they all sound like acolytes of Sumner.   Have they actually studied Social Darwinism?  Or are they just repeating the mistakes made more than a century ago out of their pure ignorance?  Maybe the public needs to learn what America was like when Social Darwinism did rule American politics.