Thursday, January 22, 2009

Jobless Claims Rise-Again

Once again, jobless claims are up, last week seeing more of them than at any time since 1982 (the latter part of which was a post-World War II record for unemployment in the U.S.).

Remember, the official figures always understate the severity of the situation, but even they show that the situation is pretty bad. Read about it in this piece from Reuters.

Income in America, 1973-

As reported in the press (right now kicking around the 7.2 percent official unemployment rate), 2008 was a particularly bad year for American workers. Nonetheless, one can say that it is just one more bad year in a lengthening string of bad years.

The year 1973 is often seen as a turning point for the U.S. economy. Between that year, and 2006 (the last year to end before the current recession), per capita GDP went up from $6,521 in 1973 (about $29,600 after adjustment for inflation) to $44,073, a roughly 49 percent increase. What most people actually earned, however, seems to tell quite a different story.

Mean Income
When current dollar figures are adjusted using the Consumer Price Index (CPI), mean income rose ten percent for males, 64 percent for females in the 1973-2006 period.1 When considered as a proportion of per capita GDP, however, male mean income fell from 142 percent of per capita GDP to just 106 percent of it. For females, income went from 58 percent of per capita GDP to just 64 percent of it.

Median Income
A measure of the mean, however, has its limitations when covering such a wide range of figures as a survey of incomes produces, making the figures on median income well worth examining. As it turns out, this has not merely stagnated, but dropped. As of 2006, the median male income ($32,265 in current dollars) was actually 12 percent less than it was in 1973 ($36,578 in 2006 dollars, after adjustment using the Consumer Price Index, which suggests a higher inflation rate than that used in the Census's data sets).

Median female income did increase, by about 60 percent in real terms (to about $20,000 a year). However, when reconsidered relative to per capita GDP, median male income went from 124 percent of per capita GDP to 73 percent of it during those thirty-three years; while for women the increase was a mere 3 percent, from 42 percent of per capita GDP in 1973 to 45 percent of it in 2006.

The picture becomes particularly interesting when the total figures are broken down by the level of educational attainment. The available data does not indicate what happened during the 1970s and 1980s, but it does show what happened in the 1990s and 2000s. Males 25 years and over who have less than a bachelor's degree saw their median income stagnate in real terms after 1990. Those with some college and no degree, or an associate's degree, actually saw their income fall slightly by the end of the period.

Those who have attained four year degrees earned just 6 percent more in 2006 than they did in 1991-their median income falling from 167 percent of per capita GDP, to 139 percent in that same time frame.

By the same measure, women with college degrees also saw their income fall relative to per capita GDP, though to a more limited extent, from 64 percent to 60 percent of it.

The Minimum Wage
Not surprisingly, the lack of increase has been felt especially sharply at the bottom of the pay scale. In 1968, the minimum wage was $1.60. While it kept up with inflation through the 1970s, it was allowed to slip in the three decades since. Simply to recover the purchasing power it had forty years ago, it would need to be revised up to $10 today. To reflect the per capita GDP increase between 1968 and 2008, it would need to be in the range of $16. That is close to three times its present level, and more than twice what it will be when the recent increase takes effect in mid-2009.

Putting It All Together
In short, what the figures show is that the growth of income has not kept up with the reported growth of GDP (which is to say, it has fallen in relative terms). In fact, not only has it grown much more slowly in real terms, but for many-those earning minimum wage, or near to it; men closer to the lower than the higher end of the labor market in general-income actually fell. Women appear to have done better, but they still earn substantially less than men by just about every measure.

Readers should keep in mind that CPI is often thought to understate inflation, rather than overstate it, in which case the picture presented above may be optimistic. (That is especially the case with large expenses like housing, education, and health care, the prices of all of which have been going up faster than inflation; and it is worth noting that it does not account for the spikes in the prices of food and energy.)

Additionally, annual money income does not tell the whole story. The picture also includes longer working hours-20 percent more than in 1970, according to Fareed Zakaria (who actually has the gall to celebrate the fact)-which suggests that the gains have been more limited, the losses more severe than they appear at first glance.

And of course, when they lose their jobs, Americans have to do without new ones for a longer time. The period of unemployment averaged about 10 weeks in the 1970s, but that figure has since risen to 16.9 weeks. (Keep in mind that it has long been the practice of the Bureau of Labor Statistics to regard anything more than 15 weeks as "long-term" unemployment.)

They are not unrelated factors: the scarcity of jobs (always much worse than the official unemployment figures) and the greater insecurity that goes with it has exerted a downward pressure on wages.

I could go on, talking about the credentialing crisis, and the lengthening commutes (and lack of decent public transport to help out with them), and all the rest of it, and the price that these things exact from the people who have to put up with them, but if you have read this far, I am sure you have heard the story before, many, many times. The only part you have yet to see is a happy ending. For all the hopes surrounding the new administration, I am very doubtful that we will actually see that.

1 All data on reported income comes from the U.S. Census Bureau.

So Much For Antarctica

"Oh yeah? What about Antarctica? It's actually cooling!" has long been a standard response from the greenhouse-effect-is-a-myth crowd (whose members remain astonishingly numerous) when confronted with the facts.

It's a weak argument. Average temperatures are just that, and global warming is not necessarily inconsistent with instances of localized cooling. (It has, for instance, long been anticipated that warmer global temperatures would lead to the "shutdown" of the Gulf Stream, resulting in a colder western Europe, for instance.) However, a new report, which is being published in Nature, suggests that Antarctica may not be the exception they have so often made it out to be.

I don't think this will sway them much. Still, I hope we get past the nonsense and start seeing serious action on the issue soon.

Wednesday, January 21, 2009

John Mueller on WMD Terror

When the risk of WMD terrorism is raised, the tone of the discussion is usually near-panic. Political scientist John Mueller offers the too-rarely-seen other side of the issue in a new book, Atomic Obsession, on which the Global Security Newswire reported on January 13. (You can check out the article here.)

Monday, January 19, 2009

EU Deficits

As one might expect, the U.S. isn't the only country looking at budgetary woes. The Eurozone will see its overall budget deficit hit 4 percent of GDP this year (the longtime "red line" indicating real trouble), and perhaps 4.4 percent next year. Read about it in this article from Reuters.

Global Warming and Agriculture

In case anyone needs a reminder: climate change is not an "ecological problem" existing in convenient isolation from our economic well-being. Not only will coastal real estate, freshwater supplies and public health suffer in the face of such developments, but our forestry, fisheries and agriculture will all take a hit (indeed, already seem to be doing so), and new research appearing in Science suggests the impact in the last area may be more severe than generally appreciated. (You can read about it here.)

New Article Up

The title's "Things That No Longer Seem So Futuristic After 2008," which should be self-explanatory, and it's at The Fix. You can link to it here.

The Theory of the Leisure Class: An Economic Study of Institutions, by Thorstein Veblen

New York: Viking, 1931, pp. 404.

Thorstein Veblen's The Theory of the Leisure Class: An Economic Study of Institutions identifies the origin of a leisure class as such in its distinguishing itself from its "inferiors" in its living by prowess in exploit rather than diligence. That prowess, which was once demonstrated by the hunter's trophies, later came to be demonstrated by conspicuous leisure (e.g., exemption from materially productive, "industrial," labor). Increasingly, it also came to be indicated by conspicuous consumption signifying wealth (on the grounds that only those who are wealthy, implicitly by virtue of their prowess, can afford to sustain such "pecuniary damage"). As a result, waste is a mark of the "pecuniary reputability" which is the proof of standing and mastery in societies with sharp, elaborate status schemes.

Along with that mastery goes what Veblen terms a "pecuniary" (acquisitive, predatory) ethos, epitomized by the aristocratic sportsman-warrior, in contrast with the "industrial" (productive, work-oriented) one more relevant to the practical operation and guidance of economic life in the advanced societies of his own time (the Western world, circa 1900), and it may safely be said, ours.

In demonstrating the continued presence and significance of the acquisitive mentality, he examines its manifestations in a broad gamut of cultural institutions, including the world of work, religion, education, sports, the operation of charitable foundations, and the place of women in society (his discussion of which reminds one how much contemporary feminism shies away from turning an economic lens on the objects of its criticism).

There are points at which I felt Veblen overreached. Leisure in itself is a significant good, a point not recognized in Veblen's study. While Veblen acknowledges that the motives are not always easily separable from one another (the purest conspicuous consumption is that of goods which do not even offer aesthetic satisfaction or physical comfort), material and aesthetic pleasure, hygiene and other such goods probably count for more than he allows, even at the more extreme end of financial extravagance, where a great deal of expenditure buys vanishingly small increments of these things. And though he admits the limits of his economic, material focus, it still may be that he is excessively utilitarian in his assessments (for instance, in his criticism of higher education).

On the whole, however, Veblen's theory has considerable explanatory power, shedding light on a wide range of phenomena. Reading his book I found myself thinking of the eagerness of so many businessmen to identify themselves with warriors and the warrior ethic (as with those who look to Sun Tzu as a guide); of what exactly is meant when people say that participation in team sports is a character-builder; of the differences between America and Europe in their respective outlooks on matters like war, peace, capitalism, socialism, welfare and religion (the latter a point to which Veblen devotes a number of pages in a discussion that seems surprisingly contemporary); of the role of the balance between these two mentalities in the rise and fall of great economic powers over history, in the ascendancy and decline of the Netherlands, Britain and (many argue) the United States today. I thought of how much of the mentality he describes fits in neatly with what has been written about the authoritarian personality by thinkers like Theodor Adorno.

I also thought of the political trends which have swept the world since the 1970s, particularly the economic ones: the worship of wealth and the mystical exaltation of "the market" (assumed as a matter of faith to inscrutably deliver the natural and optimal result); the (over)financialization of the global economy (especially the massive expenditure of energy and wealth on the staging and fending off of hostile takeovers, much like premodern princes spending bloody and treasure on squabbles over fiefs) and the tendency to dismiss the actual production of goods and services as the central function of an economy among celebrants of those developments; the more broadly conservative mood of politics, which has not been unrelated to the heightened prestige of economic elites, from the British monarchy to Donald Trump. Considering it all, it does not seem to me an exaggeration to say that the last several decades saw the resurgence of the leisure class, not only as a political power, but the esteem in which its values are held in the culture at large.

Unrest in Eastern Europe

The protests continue in Greece--as have other incidents, including domestic terror attacks staged against the police. (Those only newly following the issue can check out my earlier coverage of the matter, in this blog post, and my subsequent follow-up to it.)

Readers should note that Greece is far from being alone in facing such discontent, Bulgaria and the three post-Soviet Baltic republics (Estonia, Latvia and Lithuania) all having unrest of their own related to government corruption, economic contraction and yet another round of painful reforms imposed on them by international financial institutions, which you can read about in this Guardian article here.

Sunday, January 11, 2009

The Bigger Unemployment Picture

The headlines are reporting a 7.2 percent official unemployment rate, but as usual, this just skims the surface of the subject. Counting in the marginally attached, the discouraged and people who want full-time work but have settled for part-time instead, the figures goes up to a much higher 13.5 percent. In fact, the Bureau of Labor Statistics reported in December that the number of "involuntary part-time workers" had by itself nearly doubled from 3.9 million in April 2006 to 7.3 million that November.

Monday, January 5, 2009

Looking Back: Ray Kurzweil's 2009

In his 1999 book The Age of Spiritual Machines, Ray Kurzweil offered a host of predictions for 2009.

I put them to the test in this article. As it turns out, Kurzweil's prescience has proved underwhelming, and the article also probes into why he has been so far off the mark.

Public Transportation and Energy Efficiency
1/5/09
50 Best Inventions (?)
1/2/09
Welcome Back
1/2/09

Public Transportation and Energy Efficiency

Reconsidering the issue of how the world might cope with the contraction of oil supplies in the next two decades, I found myself thinking about the issue of public transport. It is often said that a trip on mass transit uses only half as much oil as a trip by car, and equally often, we see such figures challenged.

One set of numbers that has attracted attention is the Department of Energy's calculation in the Transportation Energy Data Book (specifically, Table 2.12 of the Data Book's 27th edition) that countrywide buses may actually use more British Thermal Units than trucks when measured on a passenger-mile basis, 4200 BTUs per passenger-mile compared with a bit under 4,000 for trucks, and 3,500 for cars.

The Data Book's authors are careful to warn readers against simplistic comparisons between one mode and another, and it is right to do so. Given that many more of those car-miles than bus-miles are on the highway, where vehicles generally get better mileage, it would seem that the above comparison is slanted in favor of cars and trucks. The mile-counting also fails to capture the fact that bus trips are much less likely to be door to door than car trips, their passengers walking a stretch of the distance uncounted in the above analysis (though one has to wonder whether that fully compensates for the extra distances traveled on the more convoluted bus routes). And bus drivers do not circle around endlessly looking for parking spots the way car drivers do, adding unnecessarily to their total mileage.

It is also worth noting that the use of BTUs overlooks important differences in energy forms, overall energy use and oil use two different matters. Buses generally run on diesel, not gasoline, which is about a third more efficient, and studies which look at the difference in oil use (and in particular, the gasoline that would have been used in the absence of public transport, like ICF International's Public Transportation and Petroleum Savings in the U.S.: Reducing Dependence on Oil) tend to produce a more favorable picture of public transport's impact. And despite all its problems, the rail component of American public transport is still more efficient than private car use (while having the additional virtue of being able to operate on electricity), so that when mass transit is taken as a whole, it does not fare so poorly.

The fact that studies in other countries often post better numbers is not irrelevant. Low ridership in the U.S. is a factor in this study (the Data Book assumes 8.8 passengers on a bus, on average, make of that what you will), but this goes only so far in explaining the issue. The Public Transport Users Association of Victoria, Australia, cites Australian Greenhouse Office figures showing that even lightly loaded buses (carrying just 10 passengers, only slightly more than in the American case) are three times as energy-efficient as private cars. (Indeed, one has to wonder what a more detailed examination would produce, and in particular, how New York and Boston stack up against the Sun Belt sprawl of Atlanta, Dallas, Los Angeles or Miami-where visiting New Yorkers are more than willing to lecture locals on the comparative shabbiness of their city's service.)

Additionally, when the energy cost of manufacturing cars, as opposed to buses and trains, is counted in, the resulting figures strongly favor the latter. The same may go for the public infrastructure necessary to support them, one assessment positing that public transport consumes just 1/16th as much infrastructure. Given the energy costs of so much construction, and the fact that asphalt production is itself a major oil consumer, this too holds out the prospect of considerable potential savings through greater investment in this area.

In the end, the data would seem to validate the claims for public transport's greater energy efficiency, and especially its oil efficiency. And assuming that the much-discussed stimulus package actually materializes, doesn't get whittled down to nearly nothing, and ends up actually containing a substantial component of infrastructure spending (none of these things is certain, and the last has a tendency to be overhyped, as seems to have been the case in Japan's stimulus packages during the 1990s), then mass transit will be an especially worthy area for such spending.

Societal Slack in World War II and Today

By Nader Elhefnawy

After the September 11th attacks, it became very fashionable to draw parallels between the present moment and World War II on a number of levels, not least of them, the prospect of the country mobilizing (to some degree) in similar fashion. Of course, the comparisons have become less frequent, with the passing of the "Greatest Generation" mania of the 1990s; an increasingly skeptical attitude toward the conflicts fought under the larger heading of the War on Terror; and the appearance of much more rigorous economic analysis of the situation, like Joseph Stiglitz's recent The Three Trillion Dollar War.

Nonetheless, with those claims ringing in my ears, I penned an article which ran in Parameters in 2004 which attempted to look at the comparison with a little more rigor. (The piece, "National Mobilization: An Option in Future Conflicts?" can be found by clicking here.) Given my recent revisiting of the question of societal slack, it seemed fitting to revisit this particular discussion as well, the last really total" war involving the major industrial powers being a particularly useful test of the capacity for mobilization of this kind.1

One may as well start with the sheer scale of the war effort. The total defense outlays by the U.S. government for the 1941-1946 period comes to about $3.75 trillion in 2008 dollars, with the budget peaking at nearly a trillion dollars a year in 1944 and 1945.2 Daunting a figure as that still is by today's standards, it represents more than twice the country's whole gross domestic product in 1940, when the mobilization began.

This extraordinary effort was only conceivable because of three factors:

* The comparatively low preexisting levels of taxation, spending and debt.
* The political feasibility of progressive taxation.
* The rapid growth of the U.S. economy during (and after) the war.

The low preexisting levels of spending and debt allowed the U.S. government great scope in raising more revenue, by enlarging taxation and borrowing additional funds. In 1940, Federal revenue was equal to 6.8 percent of GDP, while Federal debt came to $52 billion ($790 billion in 2008 dollars) 52 percent of Gross Domestic Product.3 During the war, taxes tripled to over 20 percent of GDP by 1944-45. Debt quadrupled to $260 billion ($3.16 trillion in 2008 dollars) by 1946.4

Progressive taxation was indispensable to that enlargement of taxation. The share of individual income tax in Federal receipts tripled between 1940 and 1944, from 13.6 to 45 percent (and from roughly 1 to 9.4 percent of GDP), with the highest bracket set at 91 percent. Additionally, corporate income tax swelled to a record 39.8 percent of receipts in 1943 (and from roughly 1 percent to about 7 percent of GDP between 1940 and 1944-45).

And of course, economic expansion was the base on which everything else was built. In 1940, American GDP was $101 billion (roughly $1.58 trillion in 2008 dollars) according to the Bureau of Economic Analysis. By 1945, it was $219 billion (or $2.7 trillion), an over 70 percent increase. It was that growth which permitted the U.S. government to take in so much more revenue (equal to 45 percent of 1940 GDP in the last year of the war), and spend so much (the $82 billion defense bill of 1945 being equivalent to a trillion of today's dollars, and roughly 63 percent of 1940 GDP).5

It also enabled the Federal government to bear a vastly expanded debt, about four times as large as at the war's start. Relative to GDP it was twice as big in 1946 as 1940-but just 121 percent of it after the growth of the interceding years.6 With the readjustment of the U.S. economy in the following years, the economy was about as large in 1950 as it had been at the end of the war, but from 1950-1973 it continued to grow rapidly, averaging 4.2 percent a year in real terms. As a result, the level of Federal debt to domestic product actually fell all the way through the 1970s, from its 1946 level to 32 percent in 1981.

A proportionate level of effort today would mean ramping up annual defense spending up to the area of $9 trillion, and $35 trillion for the whole period, supported by the raising of Federal revenues to $7 trillion a year, and the amassing of perhaps $30 trillion in Federal debt, all by 2014. Assuming a reason to attempt such an effort was to appear, does it seem plausible that this would work out?

My conclusion then, which I still stand by, is that it is very doubtful. The U.S. is in most respects a fiscally more constrained country than it was in the years before and after World War II. While the total share of Federal receipts in GDP has dipped somewhat due to the tax cuts after 2001, it is still at 18 percent. Gross Federal debt, which held roughly steady from 1948 to 1981 in real terms (hovering around $2.3 trillion in today's dollars), has since quadrupled, expanding markedly faster than GDP so that it is now equal to 68 percent of Gross Domestic Product, and the continuing deficits may be much worse than they look.7 Progressive taxation on the scale of the World War II era also seems more doubtful, even under emergency circumstances, as Christopher Hood observed in a recent article, "The Tax State in the Information Age."8

Additionally, while future economic growth is hard to predict under such altered circumstances, there are reasons to think it would not be so dramatic. One is that the U.S. economy is far less manufacturing-intensive, and much more service-oriented, meaning slower productivity growth, and overall growth, for the foreseeable future. Meanwhile, it may be that modern industrial bases, geared toward far greater efficiency than the plants of the 1940s were capable of achieving, may secure that efficiency at the price of flexibility. In the event of an emergency requiring a dramatic redirection of industrial output, all of this may imply a frustrating shortage of capacity-and perhaps, an experience more reminiscent of Britain's during the war than the U.S.'s.9

In short, while the U.S. is a much wealthier and more productive society today than it was in the 1940s (with more than five times the GDP of 1945, roughly nine times what it had in 1940), it may have relatively less slack. Those who would resort to the analogy should keep that difference in mind.

1 Slack includes, but is broader than, "mobilizable wealth" as discussed by John Mearsheimer, among others, as slack also includes in-built resilience. For a discussion of mobilizable wealth in international politics, see John J. Mearsheimer, The Tragedy of Great Power Politics (New York: W.W. Norton, 2001), pp. 62-65.
2 Budget of the U.S. Government Fiscal Year 2004 (Washington D.C.: Government Printing Office, 2003), Table 6.1, p. 109. Some might argue that the full cost of World War II did not end there, considering a range of expenses including the continuing occupations of Germany and Japan. However, the demobilization of U.S. forces was largely completed as of mid-1947, a year in which the defense budget was an eighth of its 1944-45 peak (when it ran nearly a trillion dollars a year, after adjustment for inflation). After that point, the immediate problems of the Cold War could be considered more relevant to defense planning.
3 Budget 2004, Table 1.3, pp. 25-26.
4 Budget 2004, Table 7.1, pp. 116-117.
5 In all, the defense bill came to a quarter of U.S. GDP for the years 1941-6.
6 The enlargement of the size of the government and its debt is even more dramatic if the war is seen as part of a larger crisis, beginning with the Great Depression of 1929. Total government spending went from 9.1 percent of GDP in 1929 to 14.7 percent in 1940, mostly as a result of the Federal government's share of GDP quadrupling from 1.6 percent in 1929 (prior to that time, state and local government were much larger) to 6.8 percent of it in 1940. Gross Federal debt also came close to quadrupling between 1929 and 1940 (from 16 to 52 percent of GDP, even after the economy, between 1936 and 1940, grew 20 percent above its 1929 level), before the war began. Combined with the quadrupling of the debt again in the war years, this resulted in the U.S. carrying fifteen times as much debt in 1946 as it had in 1929. (During the period as a whole, the economy expanded by a factor of two.)
7 Officially, the U.S. Federal deficit in 2006 was $248 billion, roughly two percent of GDP. However, when corporate-style accounting was brought to bear on the problem, the figure was in the area $1.3 trillion, closer to a staggering 9-10 percent. Dennis Cauchon, "Taxpayers on the Hook for $59 trillion," USA Today, May 28, 2007. Accessed at http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm. This is also without considering the likely overstatement of U.S. GDP as a result of inflated growth estimates, particularly during the last decade; and perhaps, other economic changes not adequately registered by GDP, like deindustrialization, the depreciation of infrastructure, and the enlargement of private debt. See Kevin Phillips, Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism (New York: Viking, 2008), pp. 85-88. According to the think tank Redefining Progress, which developed the Genuine Progress Indicator (GPI) as an alternative, U.S. per capita GPI has stayed roughly flat for the last three decades. See Dr. John Talberth, Clifford Cobb and Noah Slattery, The Genuine Progress Indicator 2006: A Tool for Sustainable Development (Oakland, CA: Redefining Progress, 2007). Accessed at http://www.rprogress.org/publications/2007/GPI%202006.pdf.
8 Christopher Hood, "The Tax State in the Information Age," in T.V. Paul, John A. Hall and G. John Ikenberry, eds., The Nation-State in Question (Princeton, N.J.: Princeton University, 2003), p. 217.
9 An interesting account of this can be found in Paul Kennedy, The Contradiction Between British Strategic Planning and Economic Requirements in the Era of the two World Wars (Washington D.C.: International Security Studies Program, Wilson Center, 1979). The essentials of his analysis can also be found in the latter chapters of his book The Rise and Fall of British Naval Mastery (London: Macmillan, 1983).

Societal Slack and Progressive Taxation

By Nader Elhefnawy

Societal slack is not simply a matter of society's total resources, but specifically those resources which are both unutilized, and accessible for a given purpose, whether absorbing some shock, responding to some challenge or seizing an unforeseen opportunity.

At least according to the conventional measures, today's societies, certainly the advanced industrial ones, are wealthier than they have ever been. Nonetheless, the accessibility of that wealth is another matter, and where taxation (the capacity to bear which is an important part of societal slack) is concerned, financial and political reality has always made income distribution important.

Recent years have seen a trend toward regressive taxation, in the fashion for flat taxes and value-added taxes, and the reduction of taxes paid by corporations and people with high incomes.

The U.S. has been no exception. This may seem surprising, given the publicity afforded to figures released in recent years indicating that the collection of individual income tax has become more rather than less progressive since the 1980s, in particular a widely cited Tax Foundation analysis from last year.1 This holds that the wealthiest 1 percent went from paying 19 percent of Federal income tax to 39 percent of it from 1980 to 2005. However, the same data also indicates that their share of the nation's adjusted gross income went from 8.46 percent to 21.2 percent in the same period. This means that even as their share of the country's wealth went up 150 percent, their share of the income tax bill only went up 107 percent. In other words, the growth of their share of the wealth outpaced the growth of their share of the tax burden, implying the reverse.

Of course, one can object that the Tax Reform Act of 1986 made data from before 1987 not strictly comparable with that from later years. However, such a trend is also clearly visible in the years after that date. From 1987 to 2005, the top 1 percent's share of national income went up 72 percent, its share of the tax bill just 59 percent-indicating a regressive change, not a progressive one at that level.

The claims for the progressive character of American taxation are also, and more significantly, offset by the dramatic reduction in corporate income tax. In 1944-45, this equaled 35 percent of Federal receipts, or about 7 percent of GDP.2 While it was quickly cut after World War II, it did not fall below 20 percent of Federal receipts until 1968. Since 1981, it has never accounted for more than 11 percent of receipts, or 2 percent of GDP, save for the 1994-2001 period when it reached and sometimes slightly exceeded that level.

At the same time, social insurance and retirement receipts have accounted for much more of Federal revenue, rising from 7.6 to 37 percent of receipts (1.6 to 6.7 percent of GDP) between 1945 and 1988, a level at which they have stayed since.3 This has been especially important given that borrowing from the Social Security account has been crucial to reducing government borrowing from external sources (creating the illusion of smaller deficits than would otherwise be the case) since the Bush I administration.4

The result, especially given a picture of widening inequality, is an increased reliance of the Federal tax base on a decreasing portion of the nation's wealth. Of course, one can argue that this situation, despite its frequent characterization as somehow inherent in the logic of twenty-first century economic life, may not be that after all; and that in an emergency warranting such action, governments would alter their tax pattern to take fuller advantage of their economic bases. During World War II, for instance, the Federal government levied famously high taxes on individual and corporate incomes (which began to drop soon after, though the sharpest cuts awaited the Reagan era). Nonetheless, governments do not always succeed in adopting such policies, the division over taxes producing a crucial divide among the elite in pre-revolutionary France, among other instances. Additionally, their response in a situation where the problem that needs to be met is less obvious, slower-moving or simply more prolonged (as is often expected to be the case with many of the twenty-first century's challenges) is likely to be far more muddled.

1 See Gerald Prante, "Summary of Latest Federal Individual Income Tax Data," Tax Foundation Fiscal Fact 104, Oct. 5, 2007.
2 Budget of the U.S. Government Fiscal Year 2004 (Washington D.C.: Government Printing Office, 2003), Table 2.2, pp. 31-32 and Table 2.3, pp. 33-34.
3 Keep in mind that Social Security this year was leveled on only the first $102,000 of income; while Medicare is supported by a flat tax. Social Security Adminsitration, Social Security Update 2008. Accessed at http://www.ssa.gov/pubs/10003.html.
4 One should also keep in mind that state and local taxes, not insignificant in the United States given its Federal structure, tend to be far less progressive.

Friday, January 2, 2009

50 Best Inventions (?)

Time magazine has offered a list of the year's fifty best inventions.

Unfortunately, the list makes me wonder if the people who compiled the list even know what an invention is. I like Hulu.com, but does it really count as an "invention" in the same way that "smog-eating cement" (#37) does, and if so, does Hulu.com really rate the number four slot? What about "Facebook for Spies" (#32)? For that matter, why do several different brands of electric car rate different slots, the Tesla Roadster (#2), the Chevy Volt (#7), the Aptera Electric Car (#46) each get their own, even though the hyperlinked articles do not show them to contain any really different, fundamental innovations?

Even sloppier, many of the things that may actually be considered "inventions" have yet to be invented properly speaking, the more exciting items generally just concepts characterized as still in development, like "Green Crude" (#11), or "Airborne Wind Power" (work on which did not begin in 2008, but much earlier, and which will deserve much more than the crummy #35 awarded it here if the R & D folks deliver the goods).

Most of the items on the round-up are certainly worth knowing about, but the presentation is a reminder of the execrable quality of journalism about science and technology, to which this article is no exception.

Welcome Back

Welcome back everybody. I hope you all had a good holiday.

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