Saturday, October 1, 2011

The Baseline Scenario Agrees: Republicons are Inveterate Turd-Polishers









Providing evidence for my thesis that Republicons either simply do not know what they are talking about -or- engage in Orwellian NewSpeak in an effort to obfuscate lies they want to tell to ignorant and/or low-information voters, this from The Baseline Scenario:

Black Is White

By James Kwak

I wasn’t sure what the Social Security wage base was (it’s $106,800, by the way), so I Googled “payroll tax cap.” The number one hit is a post at a blog modestly called The American Thinker. I wouldn’t ordinarily want to bring more attention to it, but it was the #1 hit, and according to Quantcast it has a million unique visitors per month, so nothing I do will affect it one way or another.
Anyway, the thrust of the argument is that we shouldn’t eliminate the cap on wages subject to the payroll tax because “America simply can’t afford it.”
Such plans for expanding an already-huge entitlement are beyond irresponsible, they’re frightful.  Klein and Weller aren’t serious men.  When reading their ideas for Social Security expansion in this time of trillion-dollar federal deficits, one realizes that progressives are unconcerned about America’s fiscal crisis.
You read that correctly. The argument is that increasing the wage base, which would bring in more revenues and reduce the deficit, is a bad thing—because of our fiscal crisis.
This claim is based on the idea that uncapping the wage base would also mean that benefits would have to be uncapped. That does seem like the sensible way to do it. But the way the benefit formula is written, when you increase the wage base, revenues go up much more than benefits. That’s because after the second breakpoint your monthly benefit is only 15 percent of your average indexed monthly earnings. So raising the wage base reduces the deficit, which is a good thing in a “fiscal crisis.”

Austerity is NOT Prosperity.

And modern capitalist markets fail... often in terms of distributional equity.  Economic returns to scale (among other things) ensures that - if left unchecked - modern financial capitalism will over time result in the top income/wealth groups earning/owning an ever increasingly disproportionate share of the economic pie.  Whether income/wealth inequality is a feature or a bug of the system depends upon how extreme the imbalance is - in either direction:
  • excessive inequality results in socio-political instability & misallocated investment that impairs sustainable long-term economic growth; 
  • insufficient inequality results in inadequate incentives to sustain optimal long-term economic growth.
Raising the base wage not only reduces the deficit -- which the Republicons claim to desire, but don't really [else they would not resist lifting the base wage cap to reduce the deficit] -- but also, if inequality is excessive (and by virtually any & all measures available [r.g., Gini coefficient], it IS), then raising base wgaes mitigates political instability & investment misallocation.

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