October 24, 2014
David Brooks has a tough job. He is supposed to present an intellectually respectable case for a political party that denies human caused global warming and has questions about evolution and the shape of the earth. This is why he must depart from the truth in laying out the path forward for the economy in his column this morning.
He gives us four items to move the economy forward, but we don’t have to get beyond the first one to realize that he is not serious. Brooks tells us:
“If you get outside the partisan boxes, there’s a completely obvious agenda to create more middle-class, satisfying jobs. The federal government should borrow money at current interest rates to build infrastructure, including better bus networks so workers can get to distant jobs. The fact that the federal government has not passed major infrastructure legislation is mind-boggling, considering how much support there is from both parties.”
Really? There is bipartisan support for having the federal government borrow money (i.e. run larger deficits) to build up the infrastructure? Is Paul Ryan calling for this? Ted Cruz? Marco Rubio? John Boehner? Who are the Republicans who are there demanding that the government run larger deficits to build up the infrastructure?
Brooks could do the country an enormous public service here by naming names. The reality is that President Obama has been unable to get any notable Republican support for even nickel and dime infrastructure projects. It probably wouldn’t even matter if he agreed to restrict the spending to Republican congressional districts.
Then we get Brooks telling us:
“The government should reduce its generosity to people who are not working but increase its support for people who are. That means reducing health benefits for the affluent elderly.”
There are two questions that come up here. First what is the definition of “affluent” and second what counts as “generosity.” When we were debating tax brackets in 2012 the Republicans insisted that you wouldn’t be wealthy enough to pay higher taxes unless your income was above $400,000 a year. By contrast, President Obama put the cutoff at $250,000.
If we accept either of these definitions and think that the excessive generosity takes the form of Social Security and Medicare benefits, then we can stop right here. The money involved is too trivial to make any difference in the lives of working people. In order to have anything worth the trouble we would have redefine affluent to something like an income of $40,000 a year.
Of course if we include payments of interest on government bonds to affluent people as part of the government’s generosity it would be a different story. Wealthy people who are not working get a huge amount of interest on government bonds. If we took that away from them, then we would have lots of money to help working people. Some folks may object that the rich paid for these bonds, but of course the “affluent” elderly also paid for their Social Security and Medicare. So we need clear guidance from Brooks on where he wants to go on this one.
Next we have Brooks endorsing a tax plan from two Republican senators:
“But at least we could have the sort of tax reform that Senators Marco Rubio and Mike Lee have suggested, which would simplify the code while subsidizing middle-class families. The fact that Washington hasn’t even made a run at serious tax reform is another sign of utter political malpractice.”
I searched the web and the two senators’ web sites. The only evidence I could find of Senators Rubio and Lee’s tax plan is this oped in the Wall Street Journal. This piece tells us that they want to add $2,500 to the child tax credit. Their credit would be refundable and even go to rich people who are not working (so much for Brooks’ complaint in the prior paragraph). This means it would cost around $180 billion a year. That’s roughly 1.0 percent of GDP or 5.0 percent of the budget, or 220 percent of the food stamp budget.
Their proposal also calls for lowering corporate income taxes and individual tax rates. However if you thought that Rubio and Lee have a way to pay for these tax cuts you would be imagining things. This is the Wall Street Journal and a David Brooks column, not places where numbers are expected to add up. (I’m fine with larger budget deficits, but I know these folks aren’t.)
The Rubio and Lee column includes the annoyingly inaccurate comment:
“They [parents] of course pay payroll taxes, like everyone else. But unlike adults without children, they also shoulder the financial burden of raising the next generation of taxpayers, who will grow up to fund the Social Security and Medicare benefits of all future seniors.”
Actually, adults without children pay taxes that educate children. Perhaps those taxes should be higher, but their assertion here is simply not true. Also, we do not need anyone in the United States to have children to “fund the Social Security and Medicare benefits of all future seniors.” It is almost inconceivable to imagine a scenario in which the country could not produce enough supply (remember we are suffering now from too much supply) to meet the needs of people on Social Security and Medicare. Furthermore, if there ever is a problem with a labor shortage in the United States, there is no shortage of foreigners who would be happy to come here and work.
In short, it’s great that people are having kids and we should have a country where they can be raised properly without impoverishing their parents. However, people having kids are not doing a public service.
Then we have Brooks’ call on immigration:
“Third, the immigration system should turn into a talent recruiting system, a relentless effort to get the world’s most gifted and driven people to move to our shores.”
Hmmm, our doctors are paid twice as much as their counterparts in other wealthy countries. If we use immigration to get their wages in line, it would lead to large gains to the economy and a substantial reduction in inequality. (Almost all doctors are in the top 2.0 percent.) Somehow I don’t think immigration of doctors and other highly paid professionals is on Brooks’ agenda. (We can use the taxes from doctor immigrants from developing countries to reimburse them for their education so that they can train 2-3 doctors for everyone that comes here.)
Finally, we get silliness about college education.
“Fourth, there has to be a doubling-down on human capital, from early-education programs to community colleges and beyond. Today, too many people are focused on the top 1 percent. But, as economist David Autor has shown, if you took all the wealth gains the top 1 percent made between 1979 and 2012 and spread it to the bottom 99 percent, each household would get a payment of only $7,000. But if you take a two-earner, high-school-educated couple and get them college degrees, their income goes up by $58,000 per year. Inequality is mostly a human capital problem.”
It’s hard to know where to start on that one. First, why take the wealth of the top 1 percent rather than redirect the annual income flows. The shift over the last 30 years comes to about $1.2 trillion annually. That comes to $12,000 a year for an average family of the bottom 80 percent. On the education side, there are already many people, especially men, who do not benefit from a college education. This number would vastly increase if we massively expanded college enrollment. It is probably a good idea to have more people go to college, but it is an illusion to imagine that this is a solution to inequality.
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