Oh, shit. Brooks has an idea.

I wrote about a consumption tax, as proposed by Cornell economist Robert Frank. He suggests imposing a more progressive tax structure, with much higher rates on the very rich. But one would not be taxed on what one saved.

Well, guess who is putting forth the same idea? Would you believe David Brooks, of all people? Of course, he doesn’t miss an opportunity to talk about reining in entitlements. He calls it an “X Tax,” which he attributes to a dead Princeton economist. I doubt he could stomach borrowing from a liberal economist like Frank.

Getting screwed

The New York Times performs another public service by analyzing tax rates and revenues across different income groups over time. I am not surprised that the Times confirmed what we already know: the rich are paying less; the poor are paying more. The paper includes an informative graphic, which you can find here.

As it happens, federal income taxes represent a shrinking share of total taxes paid by Americans. Increasingly, we’re paying more to state and local governments in property and sales taxes. These taxes disproportionately burden the poor while favoring the rich. Here in Washington state, the lack of an income tax and a relatively high sales tax combine to create one of the most regressive tax structures in the nation.

Yet, I dare say, many of us continue to complain that our income taxes are too high, especially among the “job creators,” who feel picked on by Obama, whom some have described as “socialist.” Only in America.

But in fact, most Americans in 2010 paid far less in total taxes — federal, state and local — than they would have paid 30 years ago. According to an analysis by The New York Times, the combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980.

Meanwhile, Congressional Republicans have flatly rejected Obama’s newest package on the eve of the “fiscal cliff.” Channeling Nancy, they’re committed to “just say no” to any proposal to raise taxes. One economist who echoes this view offers what he presumably considers wisdom. The Times:

But Douglas Holtz-Eakin, a prominent conservative economist, said the changes in taxation over the last three decades reflected a conscious and successful strategy to encourage economic growth that should be reinforced, not reversed.

Mr. Holtz-Eakin, a former director of the Congressional Budget Office who is the president of the American Action Forum, said government should reduce deficits primarily through spending cuts, particularly to Medicare and Medicaid, the health programs that are the largest source of projected increases in the federal debt.

“We can’t grow our way out of it, and we can’t tax our way out of it,” he said of the government’s fiscal predicament. “We have a spending problem, period.”

He’s painted a huge bull’s eye on the Rest of Us, those who now depend or will depend heavily on those programs derisively called “entitlements.” And he’s got to be joking about lower taxes encouraging economic growth.

I’ve written several times about the decline in economic growth since the beginning of the Great Divergence, roughly corresponding with Reagan’s first term. Despite sharp reductions in marginal tax rates on income, which have overwhelmingly benefitted the rich and very rich (now called “job creators” and, I guess, “gods”), the economy has sputtered. Also, when tax rates were at their highest (above 90 percent) the economy grew as never before or since.

change in real gdp and marginal tax

Screw the Republicans. They have no compulsion compunction about screwing you.

The ocean wins

The Frontline segment Climate of Doubt includes a piece on the North Carolina coastline. (You can find it at about the 37-minute mark in the program.) A group of the state’s scientists were asked to evaluate the effects of climate change on sea-level rise. They concluded that the most likely scenario would result in a 39-inch escalation, or over three feet, within a few decades. Should that happen, coastal property would be under water. Developers were furious. They fought back, demanding that a new study be done, this one to include climate skeptics and naysayers. But as geologist Stanley Riggs said, “The ocean’s going to win,” regardless of the politics.

In this morning’s New York Times David Halbfinger reports that those who own property along the New York and New Jersey coasts will be required to purchase flood insurance and that premiums for their coverage would add up to thousands of dollars a year. NJ governor Christie has recently requested $37 billion from the federal government to repair damages inflicted by hurricane Sandy, which devastated much of the Atlantic coastline.

North Carolina did not escape Sandy. Indeed, the houses and property shown in the Frontline program were either ruined or partially destroyed. You can see pictures of Sandy’s toll on the NC coast via a Google search. Here’s one photograph:

It seems that the ocean is winning.

Modeling falsity

A friend provided me with a copy of a study done of a German prisoner-of-war camp during WWII. For those of you who have seen the movie The Great Escape you have an idea of the bartering that takes place between prisoners and, less frequently, between prisoners and their captors. The author concluded that the introduction of a new commodity in relatively large quantities increased the “price” of the prisoners’ other objects. In other words, the prison experienced inflation.

Most economists hold that increasing the money supply eventually drives up the price of goods and services, including wages. When the Federal Reserve began doing just that following the Great Recession, predictions came fast and furious: we would be soon suffering from hyperinflation. “Zimbabwe” was the example of choice, although Weimar Germany received much attention, too.

Well, inflation did not rise, despite a dramatic explosion of the monetary base. Why not?

Paul Krugman argues that a Keynesian model, one that assumes a constraint in aggregate demand, explains low inflation during “quantitative easing.” Keynes himself upset conventional wisdom when he suggested that people’s unwillingness or, more likely, their inability to buy things would prolong a depression. He created controversy when he said that only a federal government could stimulate the economy during severe recessions. Moreover, under depressed conditions expanding the monetary base would not trigger inflation. John Hicks et al. subsequently encapsulated Keynes’s thinking in a macroeconomIic model called “IS/LM.”

Krugman has not shied away from skewering those who first predicted inflation following the Fed’s actions then held fast to their beliefs and models. On his blog this morning he offers some advice to mistaken colleagues:

So here’s what should have happened: economists propounding these other approaches should have said, “Gosh, I seem to have been wrong. I need to rethink my approach.”

Many, if not most, individuals are loath to abandon hypotheses and models. In the case of macroeconomists who predicted inflation, a common rationale is that “it will happen,” while stopping far short of telling us when. Krugman includes a link to television interview with Peter Schiff, who is challenged on his hyperinflation prediction, going back to 2008. Rather than admitting that he was wrong or that whatever model he may have been relying on was incorrect, he merely replies that if we continue with business as usual (“printing money” and expanding government) then we will see high inflation, upwards of 30 percent or more. And the Russians were always coming.

Thomas Kuhn, in his famous book The Structure of Scientific Revolutions, argued that scientists get comfortable with a “paradigm,” which seems to work—that is, it explains observations. Until, of course, new phenomena case to fit. Rather than jettison their models, however, scientists question the data or the methodology or even the motives of researchers. Kuhn suggested that old models die hard, and that it can take years before a new paradigm finally emerges.

Krugman cites Cullen Roche, who writes the blog Pragmatic Capitalism. I find his approach healthy. In discussing how Shiff and others got it wrong, Roche says:

Anyhow, there’s a real power in being wrong. The quote “there are no mistakes, only lessons” is completely true if you actually live your life that way. I like to say “it’s in being wrong that we learn to be right”. So when I see people being called out for their mistakes (in a respectable and mature way) I think that should generally be applauded because it provides the platform for learning and improvement.

Now there’s an interesting motto: Dare to be wrong! You might actually learn something.

The scenic route

I have travelled the Sounder train just once, a lovely trip from Everett to Seattle, then back again later that day. The passenger compartment was spotless, newish, and comfortable. The route takes one along Puget Sound, up close and personal, with the Olympic Mountains forming a gorgeous backdrop. I thought, if I were commuting this would be the way to go.

Evidently not that many people agree. Despite the horrible congestion along I-5, no matter when, commuters still favor their cars, and this is a problem. Traveling by automobile burns excess carbons and wastes countless hours sitting idly in a barely moving goo—and cars and gas are expensive. Yet, taking the train may be worse.

As Bill Sheets has been reporting in the Everett Herald, the Burlington Northern-Santa Fe line suffers from scores of mudslides, the result of combining lots of rain and impermeable hilltop surfaces with steep slopes adjacent to the tracks. Sheets:

The hillsides along the tracks between Everett and Seattle are the worst slide area for trains in Western Washington, said David Smelser, a high-speed rail program manager for the state Department of Transportation.

The problem, he said, isn’t just the slopes — it’s the runoff from developed areas above the slopes along the route.

Oh, I should point out that the Everett-to-Seattle journey is anything but “high-speed.” It is relaxing and, as I said, lovely, provided the sun is out and the landscape visible.

The more fundamental problem with Sounder is the route. First, it doesn’t actually go through or connect population centers. Second, the rails are owned by BNSF, which has priority. Thus, the commuter train runs only a few times in the early morning and late afternoon. Outside those narrow windows, you’ll have to take a bus or hitch a ride if you’re stuck in Seattle and need to get home sooner.

On these pages I’ve consistently railed against our collective stupidity. It is displayed front and center on public transportation. In a word, it sucks, if it exists at all.

A few years ago I looked at vehicle miles travelled. Here’s a chart showing the number of gallons of gasoline consumed annually from 1983 to 2008, assuming 24 mpg. (According to this site, the average was 23.1 in 1980 and 24.7 in 2004.)

The good news: consumption began tapering off in 2006 and 2007. The bad news: there’s still a lot of gasoline being consumed by driving cars and trucks.

What about carbon emissions?

Burning carbons is a bad idea, as anyone even vaguely familiar with the science of climate change can appreciate. Washington state, given its high percentage of hydroelectric power, emits less carbon dioxide than coal-dependent states. So the transportation sector leads the way in carbon emissions (2010 EPA data).

Initiative 937 requires electric utilities that serve more than 25,000 customers to gradually increase the amount of renewables in their supply portfolios as they maximize their conservation potential. But we were already a “green” state, with most of the electricity generated through hydroelectric facilities. We’re becoming even greener, as utilities add thousands of megawatts of wind energy. Still, the state has not seriously addressed its transportation sector.

The simplest way to do this is to get people out of their cars and trucks and into trains. But the Sounder route will not do it. Here’s a rough illustration of the path (white line along the water to the left).

The population centers rim I-5 and not the water. So, why didn’t the powers that be select a train-dedicated corridor somewhat parallel to the freeway?


We can imagine how expensive, not to mention disruptive, it would be to acquire the real estate. Years of sprawling development have gobbled up the most desirable locations to build tracks.

Yet, and here’s the tragedy, it would be far less expensive had Puget Sound Transit purchased the proper path, built the line, then ran dozens of trains each day at all hours—than the aggregate costs of so many thousands of motorists buying their own private vehicles and the fuel to run them. But we’re wedded to individual solutions while disdaining public strategies that would be cheaper and far more convenient.

In a few years those of us still kicking will finally have an epiphany. We’ll realize that we’ve really screwed up in our obsession with the automobile. But it will be too late, far too late, to do anything. If only we had acted sooner, most will be force to confess.

Quite the legacy.