In a study for the Manhattan Institute, I set upper-income tax rates at their revenue-maximizing level, while paring back tax loopholes and fighting tax evasion. As background, the Congressional Budget Office projects that our budget deficits—which currently exceed 7% of gross domestic project—will surpass 10% of GDP over the next three decades. My research shows that the “tax the rich” model would raise at most 2% of GDP in additional revenue over the long term.
If this seems low, it’s because the U.S. tax code is already the most progressive of the 38 Organization for Economic Cooperation and Development member countries. The U.S. taxes the wealthy at European rates, while taxing the middle class at considerably lower rates.
My intrepid Mercatus Center colleague, Veronique de Rugy, continues her valiant crusade against the U.S. government’s addiction to indebtedness. (And here’s Vero’s warning, expressed on the Lars Larson show, of the dangers of U.S. government indebtedness.)
The Myth of American Inequality argues that the American Dream is alive and well. Contrary to accepted wisdom, the country shows a high rate of income mobility despite the government essentially discouraging many individuals from rising above relative poverty. Two sets of numbers stand out.
Consider first absolute earned-income mobility, correcting for overestimates of inflation. Gramm et al. find that in 2017, 44 percent of households earned a real income that would have placed them in the top quintile in 1967.
Second, we consider relative intergenerational income mobility (income being defined roughly as taxable income plus some government transfers) by following each one of two generations of families with panel data. Three different studies are used to follow the position of adult children across income quintiles during the first or second decades of the 2000s compared with the position of their parents’ families. If perfect mobility obtained, the family incomes of the now-adult children would be distributed randomly across the five quintiles; with zero mobility, at the other extreme, the children’s family incomes would all fall in the same quintile as their parents’ families. The results of the three studies all fall between those extremes, but much closer to the random case—that is, to perfect mobility: “On average…, adult children’s income distribution showed that 29.2 percent of adult children stayed in the same quintile as their parents.” The rest, 70.8 percent, changed quintile. For example, 63 percent of bottom-quintile children moved up to another quintile with their families, and 62 percent of the top quintile moved down.
Tyler Cowen reckons that Javier Milei’s chances of succeeding in carrying out his agenda in Argentina are 30% to 40% – which estimate Tyler reasonable describes as “generous.” [DBx: I estimate Milei’s chances of success to be much lower – well below 10%. I very much hope that I’m wrong, for, like Tyler, I fervently want Milei to succeed. But politics (and policy) being downstream from culture….]
The bottom line is that the rich and powerful often are more interested in preserving their wealth than they are in policies that enable the creation of new wealth.
Especially since they might lose out if there is creative destruction!
Megan McArdle wisely wonders how far down the road people should go in banning expressions of hate. Her opening paragraphs give a good sense of her concerns:
Checking my cellphone bill the other day, I found myself wondering just how many Nazis use the same service as me. Probably hundreds, since I use one of the three biggest cell providers in the country. What were the ethics, I wondered, of paying a company that was being used to spread hate?
If this question seems somewhat absurd to you, you probably haven’t been following the controversy over Nazis on Substack.
Dan Hannan decries Republicans’ embrace of Trump. (HT Phil Magness) Two slices:
What would Donald Trump have to do for Republicans to disown him? Stand for a third term in 2028? Close down Congress? Expel a couple of states from the Union because they had crossed him?
It’s a serious question. In 2016, Republicans swallowed their doubts and went along with a fantasist who had come late and malevolently to their party. They did not much care for him, but they could plausibly tell themselves that he represented an aberration, an interruption in normal service. Most likely, he would lose the presidential election; but, if he somehow won, so much the better. Anyone would be better than Hillary.
This time, no one can pretend that he is a blip. Trump and Trumpery have conquered every outpost of the GOP. His margin of victory in Iowa was 24%, smashing Bob Dole’s previous record of 12%. The idea that the constitutionalists, Reaganites, and Straussian conservatives who care about character might somehow rally behind an alternative candidate has been exposed as wishful thinking. Even if you somehow lumped them all together, those good people would be outnumbered by the MAGA loudmouths.
It takes a real effort to remember the pre-Trump Republican Party. But recall that, in 2016, Trump lost Iowa to Ted Cruz. “He stole it,” said Trump in defeat, in a display of the petulant neediness that, to my continuing bewilderment, does nothing to put off his supporters. “The State of Iowa should disqualify Ted Cruz from the most recent election on the basis that he cheated — a total fraud!”
The country that was founded as an antidote to arbitrary power has fallen for a personality cult. The city on the hill is set, this time knowingly, to make a liar and petty crook its first citizen. The things that elevated and ennobled America — optimism, political pluralism, the ability to disagree with civility, respect for the law, respect for the ballot box — are scorned by those who claim to be patriots. God help them. God help the rest of us.