What Does Occupy Want? They Want Back the American Dream Stolen by Wall Street

Things used to feel fair: if you worked hard, chances were pretty good that you could support your family, buy a house (in most places), get medical care, and maybe send your kids to college. But no more. There are now lots of hard-working Americans who can't buy a house, don't have health insurance, and can't afford to send their kids to college.

This means that the American dream - the dream of opportunity, of getting ahead and earning a better future for your children - is broken. That dream, that hope, for all Americans, however real or unreal it was, kept America going through good times and bad. But now, more and more Americans (and there were always some) are realizing that the dream is empty, and how hard they work does not matter. They see nothing in the future but an endless struggle to stay alive, to feed their family, keep the car running, to pay the rent and the utilities.

Unless you are Peter Darbee, who got a $35 million severance package when he resigned as CEO of Pacific Gas & Electric Company after a gas pipeline explosion killed eight people and the company's stock price took a dive. Or John Paulson, who made billions of dollars from his special deals with Goldman Sachs - deals designed to blow up in others' faces.

No wonder people are pissed off. How did we get to this point? It took a while, and there were plenty of warnings, but both Republicans and Democrats kept us on a steady course toward disaster for working Americans, and enabled the plundering of our future by ruthless Wall Street buccaneers. A craven Congress blinded by money heedlessly gutted the nation's defenses against the sheer greed that would ultimately cost American taxpayers trillions of dollars - and one precious dream.

From Reagan and his "trickle down" economics that blessed the rich keeping more and sharing less, through Clinton's quashing of attempts to think about regulating the derivatives markets, to Bush 2 and Obama, the Republicans and Democrats in the White House and Congress share the blame.

Neither Republican nor Democratic presidents enforced the anti-trust laws designed to keep banks from getting "too big to fail." Both Republican and Democratic congresses willingly - even proudly - eliminated the protections put in place after the 1929 stock crash and the Great Depression. Both Republicans and Democrats ignored the clear warnings: the savings and loan crisis of the 1980s, the failure of Long-Term Capital Management in the 1990s, and the few bold voices telling them "this is a bad idea." Instead they kept listening to the siren song of Alan Greenspan and the big corporations urging them to blindly trust in unregulated markets - regardless of the real-world evidence.

While things were going okay for most people (even if they weren't getting super-rich like the top 1%) they were content to just live their lives. The Occupy movement (and to a lesser extent, the Tea Party movement) is a sign that things are no longer going okay for most people in America. People are pissed off that they got ripped off, and particularly pissed off that the very government that is supposed to protect them from getting ripped off opened the door to the robbers.

Yes, we want the dream back. But now we want back more than just a dream. This time it needs to be real.

Weird Tax Plans

I actually don't have a major problem with a flat income tax. I like the simplicity of it. Yes, I know progressive tax schemes are "fairer" - $2,000 in taxes for someone making $20,000 a year is a bigger burden than $20,000 in taxes on someone making $200,000. Yes, they are both 10%. But one person only has $18,000 left, while the other one still has $180,000. At $18,000, every little bit counts. At $180,000, not so much.

That said, I would only go for a flat income tax if 1) it covered all realized income from all sources, and 2) there are NO tax deductions or tax credits (except maybe a deduction for charitable contributions). This would go a long way to even out the fairness, as wealthy folks could no longer benefit disproportionately from tax avoidance schemes (that only the wealthy can afford). Even the old mortgage interest deduction mostly helps the wealthy (and creates perverse land use incentives).

Rick Perry's flat tax plan (described here: http://www.bbc.co.uk/news/world-us-canada-15451162) does not meet that criteria. It is full of loopholes that would make it meaningless except as a tool for avoiding taxes.

First, his flat rate of 20% is voluntary - you could pay the current rate if you wanted. Great, two different possible tax rates - way to (not) make things simpler. Okay, the poor might be able to choose a lower rate, but the rich get to have their accountants comparison shop between different tax plans.

Second, his plan would still allow for mortgage interest deductions, and would completely eliminate taxes on capital gains and dividends. Who gets capital gains and dividends? No, it is not the poor, or even most of the middle class. Under Perry's plan, the rich get a huge break - a lower tax rate, NO taxes on capital gains and dividends, and they get to keep the mortgage interest deduction. And tax avoidance schemes would still abound, with a focus on shifting as much income as possible to capital gains and dividends.

Perry's plan is grossly unfair, needlessly complicated, and would only encourage new forms of legalized tax evasion for the most wealthy at the expense of everyone else, especially those Americans that work for a living. A true flat tax on all income, regardless of source, would be simpler and fairer.

Herman Cain's "9-9-9" plan, clearly named by someone with mass marketing experience, is even goofier. It starts with 9% taxes each on personal income, business income, and sales, but after a few years, the income taxes go away, and the sales tax goes way up - to somewhere over 20%. (And that is according to Fox News: http://www.foxnews.com/politics/2011/10/20/cain-adds-to-plan-angering-unions/)

Like it or not, we have a largely consumer-based economy. We depend on people buying things. So putting a high tax on purchases seems really counterproductive. Adding this new federal tax on top of state taxes could result in sales taxes approaching 30%. That makes it much harder to buy a car, or a computer, or pretty much anything. Why would we want to do that? (It perhaps could be better for the environment if people bought less stuff, but that does not seem to be Cain's intent.)

In addition, a sales tax of that level would likely lead to significant black market activity, as buyers would seek to avoid paying huge taxes, and sellers would want to help them in order to make more sales. Large black markets can lead to corruption, as (underpaid) officials can get paid to look the other way. A large black market would also mean that fewer taxes would be collected, and those would be collected in an arbitrary and unfair way, depending on whether a particular jurisdiction suppresses or allows a black market.

Destroying the basis for our economy, creating a black market and disrespect for law, and providing incentives for corruption, does not seem like a good idea, even if it does have a catchy name.

Neither Perry's nor Cain's tax plans make sense.

More Regulation or Less Regulation? That is NOT the Question.

During the 2010 election, a major media outlet presented me with a survey they said was developed by a range of political and policy experts. One of the questions was whether I favored more or less regulation. This is a silly and pointless question. The real issue is not how many regulations you have, but how good they are. Do they do what they are supposed to do?

Healthy competition, which is a fundamental basis for a functioning capitalist economy, requires regulations. Sports provide a good example. How about eliminating the rule against goaltending in basketball? Or the shot clock? (Who remembers the four-corners offense?) What about getting rid of the penalty for pass interference in football? Or limits on the number of players? ("Hey, I have 45 players, why are they limiting me to only using 11 at a time?")

Those are all regulations. But they serve a purpose of creating good competition. Getting rid of them would result in boring or one-sided games. Anarchy, rather than competition.

Going to the regulation of business, you could create one regulation that would completely stifle competition. Here is an example: all laptop computers sold in the United States must be made by Dell. Just one regulation, but suddenly there is no Apple, no Lenovo, no Sony. And how much incentive would Dell have to innovate or cut prices? None. Prices would be high, and there would be little or no innovation, all from just one regulation.

But you could also put in place a series of regulations that would create more competition. For example, US manufacturers complain that foreign manufacturers have a price advantage, which gives them an unfair competitive advantage. So one solution would be to add regulations that say: no laptop computer (or any component in that laptop computer) sold in the US can be made with child labor; no laptop computer sold in the US can be made by a process that results in a discharge of toxic chemicals to the air, water, or ground; and no laptop sold in the US can be made by slave or prison labor. Even though this is three times as many regulations as the previous example, the result would be that US manufacturers could better compete against foreign manufacturers.

Are there stupid regulations that should be eliminated? Yes, of course. Is blindly eliminating any and all regulations a good idea? No. There are fewer things more expensive and inefficient than a sloppy or botched deregulation. The savings-and-loan crisis and the California energy crisis are prime examples.

Most regulations are put in place one or two at a time, to address specific issues, and then they get adjusted as people figure out how to make them work. Deregulation should be done similarly - eliminate one or two regulations at a time that are no longer are effective, and adjust the remaining ones (or maybe eliminate one or two more) as people start to understand the new situation.

The real question is not how many regulations we should have, but rather how good they are. Quality, not quantity, is the right criteria.

Re-Starting Blog

I want to start posting items on my blog again. I know the election is over, so I thought about starting a new blog, but for now at least I think I will just post more to this one. So stay tuned for more posts!