Thom Hartmann -vs- Paul Krugman

[pilsner]

Paul Krugman has repeatedly claimed in various forums that it would be a mistake to raise taxes on the wealthy during a time that the economy is tanking. Here's Krugman on "Face the Nation," 12/28/08:

Mr. KRUGMAN: Well, it–they didn’t do anything. In fact, they did perverse stuff. I mean, Herbert Hoover raised taxes in the face of a slump, he–people were cutting spending in the face of a slump, and the Federal Reserve of the time sort of didn’t understand the risks.

Thom Hartmann has been hitting the meme that tax hikes on top earners are critically important to revive the economy, as Larry Beinhart brilliantly writes about here:

http://www.alternet.org/workplace/106410/tax_cuts:_the_b.s._and_the_facts/?page=entire

and here:

http://www.alternet.org/story/106979/why_the_economy_grows_like_crazy_amid_high_taxes/?page=entire

Here's a snippet of Beinhart's case for high taxes:

The brute facts are these:


Large income tax cuts are followed by a bubble and then a crash.


High income taxes correlate with economic growth.


Income tax increases are followed by economic growth.


Moderate income tax cuts are followed by a flat economy.


All of this is especially true as applied to the top tax rates, the amount paid on income that exceeds the highest bracket.

The Three Great Tax Cuts: Boom, Bubble, Crash

1. Hoover

During World War I, the top marginal tax rate went up to 73 percent -- not the highest ever, but pretty high.

In 1922, a series of rate cuts began. Down to 56 percent, 46 percent, and finally, in 1925, it went down to 25 percent.

The stock market took off. There was a boom. But the boom was a bubble.

It was followed by the Great Crash of 1929.

There were bank failures and the Great Depression.

2. Reagan

From Franklin Roosevelt's second term all the way through to Jimmy Carter -- from 1936 until 1982 -- the top rate was in the 70 to 92 percent range.

Then along came Reagan in 1981. In 1982, he cut that down to 50 percent.

The economy went into "the worst recession since the Great Depression."

His supporters argued that it was all Carter's fault and that the new policies would take time to work. The tax cuts stayed in place. In 1987, there was another round of tax cuts. They took the top rate down to 38.5 percent. It would stimulate the economy!

There was a boom. But it was a bubble.

Then, in October 1987, there was a crash -- the worst since '29. It was called Black Monday.

Much of the bubble money had gone into -- ohmigod! -- real estate.

Suddenly there were bank failures! More than during the Great Depression. There was a Savings & Loan crisis! There had to be a bailout.

3. Bush II

George Bush came into office with the healthiest, post powerful economy in American history.

He immediately cut taxes. The top marginal rate went down from 39 percent to 35 percent. He also cut capital gains taxes and inheritance taxes. A recession immediately ensued. But he persisted.

Eventually, the economy began to grow.

Employment didn't grow very much. Median income went down. The stock market was pretty flat. But the financial sector -- and only the sector -- grew.

Which should have made it obvious to someone, that it was … a bubble.

There was a crash.

Bank failures. A bailout.

The three worst economic disasters in American history follow the exact same pattern: tax cuts, boom, bubble, crash.

High Taxes Correlate with Strong Economic Growth

The four periods of greatest economic growth in American history, by pretty much any measure, are:


World War II (1941-45): top tax rate varied from 88 to 94 percent


Post-war under Truman and Eisenhower: top rate bounced around from 81 to 92 percent


Clinton years: Clinton raised Bush's top rate of 31 percent to 37 percent and then to 39 percent


First two Roosevelt administrations (1933-40). When Roosevelt came into office, Hoover had already raised the tax rate in 1932 from 25 percent to 63 percent. Roosevelt raised it again in 1936 to 79 percent.

A lot of ink, sweat and ranting have gone into proving that the New Deal did not end the Great Depression. Nonetheless, the economy grew 58 percent from the time Roosevelt came into office and when the United States entered the war.

Some of that anti-New Deal rhetoric also claims that the recovery began under Hoover. Perhaps, but to say so is also to say that it began with tax hikes.

Likewise, many right-wing critics insist that the Clinton boom actually started under Bush the First. It is necessary to remember that Bush the First also raised taxes (from 28 percent to 31 percent) and was soundly thrashed by the conservatives for doing so. Stephen Moore of the Cato Institute called it "The Crime of the Century" and explained at length how it had brought ruin to America.

Tax Increases Are Followed by Economic Growth

Three of the four high-growth periods cited above followed significant tax hikes......

I say Hartmann (and Beinhart) win over the Nobel Prize winner Krugman in a first round knockout!

[Idealism]

1. Those two usually agree but on three issues Thom differs from Paul:

Raising taxes on the wealthy- Thom is right
Free Trade- Thom is right (Prof. Krugman is for it)
Entering into WW2 got us out of the great depression- Thom is right (Krugman says the war was the only stimulus package the nation needed at that time).

Both men are brilliant, and I usually agree with Prof. Krugman and have read him widely. Thom I listen to most afternoons and these three issues are the only that I know of that these two intellectuals disagree on.

[pilsner]

2. You definately know Hartmann well

I would add that Krugman was a strong supporter of HRC in the Dem primary.

Thom was careful on his show to give HRC the benefit of the doubt on his show, but I think he was personally pulling for anyone but HRC.

[Idealism]

4. Yeah he played it smart when it came to the primaries

I think hes more like-minded to Kucinich, but he realizes that poor Dennis isn't a viable Presidential candidate at this time :(

[chimpymustgo]

14. Krugman said he liked Clinton's healthcare plan better than Obama's. You're making up the rest.

[mrreowwr_kittty]

41. I think Krugman was not so much an HRC supporter as an Obama basher.

The Obama camp hurt Krugman's fee fees when they pointed out inconsistencies in his statements on health care mandates. After that, Krugman went on the warpath against Obama. Column after column about how horrible Obama was because of that one difference between his and Clinton's plans. Meanwhile, Krugman only mustered up enough outrage to write a single column criticizing McCain's travesty of a plan, which was odd considering how health care was supposedly so important to him and all.

[tsuki]

35. Krugman and Hartmann view the economy from different perspectives, if that is what

you call them. Krugman looks at the financial market, and Hartmann looks at the working man.

Financial markets were still down in 1937, but thanks to rural electrification, my grandmother had a fridge and electric sewing machine. Grandfather bought a truck for the farm, although he still used mules when he sprayed the apples.

My grandfather wrote to his sister in 1937, "we almost starved under Hoover, but that things were looking up."

[Ian David]

3. I've only seen Thom lose an argument ONCE.

That was with some woman from the nuclear power industry.

It wasn't because Thom was necessarily wrong, but because the woman was prepared better than Thom was in this one, rare instance.

But then after the break, Thom's callers "fixed it in post" and won the argument for him over the next half-hour or so.

I imagine that Thom would win a rematch.

I also think that Terry Jeffries must put a gun in his mouth and ponder pulling the trigger every time he hangs-up the phone after talking to Thom.

[Idealism]

5. How funny are some of those Ayn Rand deciples?

They are reduced to sputtering chimpanzees after Thom gets done with them :D

[Ian David]

7. I miss Dewey.

I know, that's a non-sequitor.

Dewey used to call Sam Seder.

[Idealism]

13. Me too :/

On another note, am I the only one tired of Bernie Sanders being on the show week after week?

[Jim Sagle]

17. You may not be the only one, but you can't prove it by me. Bernie RRRAWWWXXX!!!!

[Idealism]

19. I think hes a good guy but

He realizes he is on national air and he talks like a politician, not really expressing indepth views. I like him personally and I also understand that what he says can come back to bite him, but I just wish I could hear him speak in a closed forum so that he doesn't have to worry about opinions being politically advantageous.

[pilsner]

44. Nope, I skip over Bernie's hour these days

He gets the same old questions and answers them the same way. Otherwise, I listen to podcasts of the rest of Hartmann's shows religiously.

[smokey nj]

38. Dewey was GREAT! I also miss Hy from Staten Island, another of Sam's regular wingnut callers.

[pilsner]

6. same with Carrie Lucas

[Ian David]

8. The lady from Independent Woman's Forum probably carves her flesh after calling Thom. n/t

[pilsner]

9. The point of my post is this-

Obama is not going to support raising taxes on millionaires (income, dividend and capital gains) when a prize-winning liberal like Krugman is all over the place saying that such hikes are "perverse" at this time.

How to persuade Krugman on this?

[Idealism]

10. After reading Krugmans last book, he makes it pretty clear

when he think is an acceptable time to raise taxes on the top brackets: when key fed rates get raised. Obviously, that means not in a recession, as the government historically cuts rates during a downturn.

[pilsner]

11. Aren't rates now rock bottom?

And have no where to go but up?

[Idealism]

12. Yes, but that doesn't appear likely in the near future

The Fed may emulate Japanese policy during their last decade-long economic downturn and cut funds rates to zero. Currently the rate sits at 25 basis points (0.25%). I suspect if the key rate does get cut to zero it will remain there for no longer than a year, so by late 2009 we will see the rate get raised. Hopefully by 2010 the rich will start paying their fair share, although it may well happen earlier.

[pilsner]

15. Flat tax on FICA earnings

I enjoy bringing up the idea of a flat tax for Social Security to cons. Nothing makes them twist like a pretzel more.

[Idealism]

16. There already is a flat tax on social security

No one pays over taxes on it over their first $104,000 per year. Obama was talking about raising the cap however because it is a bit rediculous that Bill Gates and a high school teacher pay the same amount per year in social security taxes.

[pilsner]

18. Sure, there's one rate,

but as you know, the cap effectively creates a system in which the mega-wealthy pay little, percentage-wise.

I think of a flat tax being all income taxed at the same rate. Neil Boortz's postcard solution for filing income taxes.

[Idealism]

20. Problem with flat taxes of any kind

is that they're regressive taxes. I wish we could scale it to income, similar to capital gains two-tiered brackets. Not sure if Obama is going to do that, but I can hope :)

[MajorChode]

23. How can flat be regressive?

I'm not sure I follow you here. If the rate is indeed flat for everyone it isn't regressive, but neither is it progressive.

Most taxes should be progressive, but the reality is almost none of them are. In reality, federal income taxes are progressive to a point, then they are severely regressive due to the effect of low equity income taxes.

You don't hear the Republicons speak much of flat taxes these days. It was big back in the early 90's when their real objective was to lower capital gains taxes, but they got that without the flat tax. Now the effective rate of the super rich is the same as some of the poorest Americans. If you figure in FICA they actually pay a much lower effective rate. I guess the possible exception is Huckabee's plan for a consumer based VAT style tax, but that's even more regressive.

Any talk of making taxes effectively progressive to "conservatives" invokes talk of "class warefare" or "socialism", or some other worthless argument meant to appeal to people's emotions rather than their reason. Unfortunately more often than not those tactics work because they are simple for those on the left side of the bell curve to understand and you can fit them into a 30 second sound bite.

I don't know if there is ever any hope of truly reforming the tax code.

[Idealism]

28. They are regressive because of the tax burden

People may all pay the same dollar amount, but one dollar to someone making 40,000 per year is A LOT more valuable than someone making 400,000/year. It still puts an undue burden on the poor, who have a higher tax burden than millionaires.

[MajorChode]

31. It depends on how you define "flat"

Anyone I've ever heard of that talked about a flat tax meant a flat rate, until now. If the flat rate were 10%, that's $4k to someone making $40K and $40K to someone making $400K.

I don't know anyone that has suggested everyone pay the same dollar amount. I don't think even the fat junkie has ever made that suggestion. It wouldn't even come close to working anyway. Total federal spending is almost $3 trillion per year. Divide that per 300 million people and you get $10K for every man, woman, and child in the US. I don't think too many working families could cover that bill.

[OwnedByFerrets]

49. Great post and you nailed it...I rarely miss "the smartest man in the room"

[Postman]

21. What do you think of Ravi Batra?

The Supply/Demand argument he lays out for fixing the economy makes sense to me. Then again, I don't know much about economics. Thom regularly uses it to hammer Reaganomics.

The source of Demand is "wages". The Source of Supply is "productivity"

Since the founding of the country up until the Reagan Administration, wages and productivity have pretty much tracked each other. When Reagan took office, that all went away. Productivity continued to rise but wages remained stagnant creating a drag on Demand (because working people spend most if not all of their paychecks thus creating Demand) To fill the void left by less wages, people went into debt using credit cards, refinancing their homes, etc., etc. Now we have come to the end of that road and Ravi Batra and Thom say that a solution would be to RAISE WAGES to give people more money to spend to grow the economy...

[ProfessorGAC]

27. Not Only Do I Agree With That. . .

. . .but, it's mathematically provable. In fact, econometric modeling makes it pretty obvious that the economy is driven by middle class consumption.

With lower real wages going to the middle class, and fewer middle class folks because of an employment deficit, the economy can only gradually move upward, if at all. (Like now.)

The solution of creating more discretionary income for the largest collection of "spenders" is not only a good idea, but may be the only sustainable one.
GAC

[MajorChode]

22. There's really a lot more to the economy than simply taxes

Raygun blamed Carter for the '81 recession and he was actually correct. However this was a planned recession. Carter appointed Paul Volcker as fed chairman and he reversed the failed monetary policy that went all the way back to the Nixon days and probably well before. Volcker knew his policies would probably create a recession, but it was a bitter pill we all had to swallow. The end result was the end of stagflation and many years of economic prosperity. Raygun might have made his bones throwing Carter under the bus, but he still reappointed Volcker when his term was up.

So-called conservatives like to point to the Raygun tax cuts as proof of their methods, but they were mostly irrelevant. Raygun made one tax cut, yet signed at least 7 tax increases before he left office. The end result was the effective tax rate was about the same from when he took office to when he left. The top marginal tax rate is really meaningless. It was over 90% back in the early 70's, but even rich people never paid that much. Nixon himself paid almost no taxes despite having millions in income during his presiduncy. As Raygun made his big and only tax cut, the economy was going in the toilet and as he was passing numerous major tax increases it was booming. Go figure.

The Neo-cons most favorite economist is Leisure Suit Laffer who drew his famous curve for Cheney on a cocktail napkin back in the Raygun days and they have been following his worthless advice ever since. His most recent prediction in 2006 was that there would be no recession and the housing bubble wouldn't burst in the next 2 years. Most other economists consider him an idiot. It's no wonder the Republicans love him.

[Postman]

24. Couldn't you attribute the economy under Carter and the Reagan Recession to...

Vietnam War/Great Society spending catching up with us?

Also, neo-cons like to point to Reagan as a time when the economy boomed. They conveniently leave out of the equation that anybody can make an economy look good when you go on a spending spree with your credit card, which is essentially what Reagan did, running up the largest budget deficits up to that time....

[MajorChode]

25. I wouldn't

The thing you must understand is what was going on at the time economically and the prevailing economic theory of the day.

During the time of Nixon, and probably before, the philosophy was that unemployment should be held low no matter what. Nixon appointed Authur Burns to the fed and told him to flood the economy with money which created the illusion of prosperity for a time. It was all smoke and mirrors. When even Burns had the good sense to resist, Nixon strong armed him and got his way.

The natural result was inflation, but they thought they could just keep adding fuel to the fire. Since the GDP was making good gains, they just assumed that high inflation was less important than unemployment and would eventually take care of itself. Nixon was facing reelection and he wasn't going to allow the fed to tighten the monetary policy no matter what, so they tried fixing the problem at the other end with price controls which brought about more disaster. Eventually they got to the point at which even low interest rates could not control unemployment. Stagflation and high unemployment eventually resulted.

Ford came along and thought the answer was to stick a "Whip Inflation Now" button on your lapel, a thumb up your ass, and hope the problem goes away.

Carter was the first President to actually deal with the economic problems in a way that made sense. The corrections that had to be made were long overdue. His public opinion suffered greatly for it, but the reality is he had one of the best economic policies of any president before or since. He deserves all the credit for defeating stagflation and much of the economic prosperity of the 80's. His energy policies are the reason why we didn't see the oil crunch happen a decade before and if we had simply continued with his lead we probably never would have.

Raygun is a completely different case study. The man understood as much about the economy as a pig knows about Sunday, but as an actor he could read a script and put things in simplistic terms even the dumbest of Americans could understand. The people loved him for it, but he was a smoke and mirrors man just like Nixon. The only difference was he was better at it.

[Greyhound]

34. Not at all, at least not directly...

The Vietnam war was a vehicle to expand military spending. After the war the outlay slowed down, but the expansion of their budget continued unabated. Similarly to how they ratchet up the price of gasoline, a big jump for the shock value and then a decline to more than it was.

The Great Society programs followed the normal process of government programs, administration and regulatory expenses steadily increase while the funds going to what the program was started for diminish to secure the positions of the program's employees.

So we continually pay more and more to get less and less.

Both of these issues are easily remedied, but we lack the will to do it.

[Postman]

75. Nonsense.

You have it reversed.

The Pentagon budget has been a program to secure positions of huge cost over-runs for private contractors. And has been allocated a budget, year after year that has skyrocketed coming at a social cost to the American people to the point where every other developed nation in the world has a higher standard of living than the US. (Eisenhower's Speech)

And borrowing money up to the wazoo to pay for things that get used once (bombs) and have no redeeming or repeat value (like building bridges and roads) to society will eventually come due (inflation)

Social programs such as Social Security run overhead costs at around 3% as opposed to the overhead for private insurance companies running at 15%

The most efficient means of delivering services to people is through government programs with oversight.

[Greyhound]

76. That is almost exactly what I said. The costs of the Pentagon didn't

go down after the war was lost, and less and less of the money we spent on LBJ's, well-intentioned but horribly executed, "Great Society" programs went to where it was intended. You of all people know how government budgets work.

We do need (desperately) a societal "floor" below which no American is allowed to sink, but the people that matter are determined to block any such initiative that can actually do the job.

Just look at how LBJ's welfare system destroyed the black family by requiring black men to leave in order for the women and kids to receive benefits, and prevented those women from getting out of the system by cutting off those benefits every time they started to get ahead. It was a disgrace and ensured that it would become an easy target for the republiks to attack.

Of course, it took a republik congress and Bill Clinton to really finish it off.

[Idealism]

29. You are forgetting the oil shocks

Those set us into recession more than any policy of Carter or Reagan

[MajorChode]

33. I'm not convinced

Even if you believed that oil prices were largely to blame for those recessions, you still have to give Carter credit because his energy policies slashed oil demand and caused crude prices to free fall. CAFE really did work brilliantly, and if it had been continued and SUV loopholes closed, there would probably never been a spike which started around 2004. Had his alternate energy initiatives been expanded we probably could have been completely energy independent by now.

[Mr Rabble]

26. This really isnt accurate-

The Clinton economy was actually a disaster for the majority of the population. Wages were stagnant and in many cases actually declined. This was also a period where investor rights were championed over workers rights. NAFTA anyone?

While I agree with the basic premise of this post, the Clinton years were awful for many of us, and really accelerated the neo-liberal policies that have now officially destroyed the economy.

[MajorChode]

30. This really isn't accurate-

The Clinton economy actually wasn't a disaster for the majority of the population. Wages increased across the entire spectrum under Clinton, and the largest increases were seen among the bottom 20% of income earners.

Furthermore unemployment went down every single year he was in office, millions of people rose above the poverty line, and inflation was low. He started his presidency with record budget deficits and left it with record surpluses.

In other words, more people were working, they were making more money, less were living in poverty, inflation didn't erode their earnings, and the government paid it's bills for the first time in over a decade.

[Mr Rabble]

51. Major, did you live through the 90's?

Because if you did and this is your memory of it, you are doing quite well for yourself.

Go back and read the business press from the time and see what they had to say about labor. You know, us. See what the Clinton administration did to labor.
Notice that corporate profits zoomed, in some cases 50% year over year, while the rest of us struggled.

[MajorChode]

52. My union card has a date in the 80's on it

...when I became a charter member.

Thanks for your concern.

But it really doesn't matter what I did or did not live through. The data is plain enough for anyone to see on the BLS, the census, or numerous university web sites.

If you think your anecdotal recollections trumps the archived data when it comes to what the majority of the population was experiencing, you are sadly mistaken.

http://www.census.gov/hhes/www/income/histinc/h03AR.html

[Selatius]

71. It depends on how one interprets the data.

If the bottom fifth increased their income 3.5% each year, while the top 1 percent increased their income 10% or 15% each year, it would translate out into a widening income gap, which isn't healthy for any society in terms of maintaining stability.

Referencing median income tables on the census website, individual median income rose faster in the 1950s and 1960s than they did in the 1990s, and the post-world war boom is still considered one of the biggest in American history.

[MajorChode]

32. Krugman is dead wrong on this

I do admire Paul Krugman, but you can indeed raise taxes on the rich during a recession, and furthermore it's a great idea if you lower taxes on the middle and lower classes at the same time.

If you look at taxes in terms of GDP, which is almost $13 trillion, a $3 trillion tax burden only requires a 23% flat tax, but that assumes all income from all sources is taxed on a flat rate.

Basically what this means is that if you pay more than 23% of your income in federal taxes (which includes social security), the government thinks you need to pay more than your "fair share". If you have an average income of $40K, you pay 25% plus 6.2% in SS or over 31%. It doesn't take a rocket scientist to figure out that since most people pay far more than 23%, there must be those out there paying less.

So who is it? Is it the poor? Not really. If you have only $20,000 of income you still pay 15% + 6% SS or 21%. So they are getting a bit of a break, but not much. On the other hand, if you are super rich and get the lion's share of your income through returns on equity (as most of the super rich do), you only pay 15%. When you consider the richest 1% in this country collect 20% of the total income and have 40% of the total wealth, you really start to understand who is getting the biggest break regardless of what the fat junkie would have you believe.

So consider a tax scale that is truly progressive. Let's say we actually taxed the top 1% at a top tax bracket rate of 35% with no more exclusions or reductions on where the income came from. You would collect over $900 billion in taxes. Now lets say you taxed the next 19% at 30% under the same conditions. You would collect over $1.5 trillion in taxes. So what tax rate would you need to access the bottom 80%? Well, there's only $600 billion in tax burden left. Since the bottom 80% collects 40% of the total income of the US, they would only have to be taxed at a 12% rate (that includes SS).

So those who think the rich can't afford to pay more, or that the government can't afford for the middle and lower classes to pay less, I say they are completely full of shit. I have to pay pretty much the amount my tax bracket says I have to pay plus social security. The super rich pay 15% in capital gains and dividend taxes and that's it, assuming they don't have their money invested in one of Romney's off-shore tax havens.

I'm really tired of this fallacy being projected by the fat junkie dittoheads of this world that say the rich deserve to pay less because their money somehow is more effective in growing the economy. That's bullshit. A dollar spent by Joe Sixpack goes just as far as a dollar spent by Joe Millionaire, and both go to grow the economy and to create jobs and more wealth. History has never proven these morons right, and in fact, the reverse is true. When you make the rich pay what they can and cut the burden on those who aren't rich, the economy soars and everyone gets richer, including those who are already rich.

[pilsner]

36. The hypocrisy and double standards of the Libertarians

is that they claim that taxes on the wealthy should be kept low in order to "create jobs" and drive the economy.

Yet, the Libertarians tend to be cheerleaders when jobs are sent overseas. They basically say American workers make too much and won't submit to sweatshop working conditions.

Few in the corporate media call them out on this.

[MajorChode]

39. A libertarian is just an anarchist that lacks committment

Furthermore they feel that the answer to failed conservative policies are that we just need to take them 3 or 4 steps farther.

They believe the private sector is always more efficient, yet they ignore evidence to the contrary.

They don't believe in regulating business, yet they ignore the severe problems that happens when you don't.

They don't believe in any social programs whatsoever, because greed will always take care of everyone.

They believe that genocide, starving kids, AIDS, and every other world problem is fine so long as it's not their spouse or child that is starving, murdered, or getting raped.

They believe their should be a toll booth on every road and bridge and pretty much any other service the government provides should be charged for so the rich can pay even less.

They don't believe in central banking, yet they ignore the problems that occur when you don't have a central bank.

They believe the private sector always has a better and less corrupt solution, yet they ignore all the vast corporate corruption.

If any of their ideas have been proven failures (and most of them have), they just say it's because their libertarian utopia has never been fully implemented. In other words, the only way they are ever going to admit they are wrong is if we try EVERYTHING they are suggesting, and then if it doesn't work, they might think about admitting they didn't quite have it right.

In other words, they don't really live in the world the rest of us call reality. Their loony ideas are quite amusing though, so I guess they offer some value in the form of entertainment.

[ThomWV]

37. Dear sweet Jesus, Krugman is a Nobel-class economist and Hartmann is a radio host

Who you gonna believe?

[MajorChode]

40. Kind of a false dichotomy no?

Milton Friedman won a nobel prize also and I don't put much stock in what he had to offer. Lot's of Nobel prize winners were eventually proven wrong. I seriously doubt if Krugman himself believes he is right 100% of the time.

[Greyhound]

43. Well actually he is a well respected researcher, author, and historian.

The radio host thing came much later. But no, he is not an economist.

OTOH, economist and meteorologist are the two professions where the practitioner can be wrong most of the time and remain employed.

[ThomWV]

57. The two disiplines have a lot more in common than that

Mathmatics

[Greyhound]

59. With a degree in computer science, and minors in chemistry and biology,

I've aced a few math classes myself and know that mathematical models can, and frequently are, wrong if you fail to take everything into account.

Economics is not physics or chemistry, where the laws are known (and meet the criteria of scientific laws), it is still young and subject to philosophical bias and there have been no laws established (again, I'm referring to laws that meet the criteria of a scientific law, not the accepted wisdom of practitioner's).

For example one of the economic "laws" states; Law of supply and demand. In a free market, the equilibrium price of a good is that at which the quantity supplied equals the quantity demanded.

This statement is false in it's first qualifier, "In a free market", there is no free market as any market, is not free and cannot be free due to the nature of the market. There are and will always be dominant influences in that market eliminating the possibility of equality.

Weather and economic models are too complex, too little understood, and with too many variables and unknowns to be accurate, if this were not true, it would be possible to predict either with 100% accuracy.

[pilsner]

46. Krugman earned his Nobel for his research regarding Free Trade n/t

[Raineyb]

63. I'm going with Hartmann

Based on the economist he does have on his show Dr. Ravi Bahtra, I'd say that the policies that Thom Hartman supports is better for us than what Krugman is currently proposing. Especially since Krugman seems to be saying that we can't afford to raise taxes on the very people who have been raking in all the dough in the first place.

The class war is real, but it's the rich who have been waging it against the poor and middle class and they're winning.

Regards

[girl gone mad]

65. Maybe not the guy who said..

in the Times just a few short months ago that oil prices were only high because of demand and there was little, if any, speculation taking place. Krugman was dead wrong.

I think his understanding of the current crisis also leaves something to be desired. http://globaleconomicanalysis.blogspot.com/2008/12/krugman-still-wrong-after-all-these.html

[Hippo_Tron]

42. Correct me if I'm wrong but didn't Roosevelt raise taxes during an economic downturn?

[leftofthedial]

45. Krugman, a beacon of reason during the last decades, has been

much more "conservative" and amenable to supply-side crapola like the Wall Street giveaway since he became a celebrity.

[depakid]

50. Not sure what you've been reading-

but the opposite is true.

Have a look at his blog.

If anything, he's even more decidedly REJECTED supply side theories in favor of Keynsian polices- and has sounded a LOT more like a fair trader than an unrepentant globalist of late.

[pilsner]

47. Krugman's blog

Posts from people at Krugman's blog who support higher taxes on the wealthy and fair trade might be helpful. Certainly Krugman is a true progressive and is an ally. But, I forgot that he also supported the Giveaway to the Wall Street bankers.

http://krugman.blogs.nytimes.com/

[BzaDem]

54. I certainly hope Krugman supported the 700b bailout.

The people against the bailout were either

a) right-wing free-marketeers or
b) people who were willing to let the entire economy tank MUCH further than now or even in 1931, causing massive pain to everyone in the middle and lower classes, because they were blinded by pure anger, emotion, and populist rhetoric.

While many argued that the bailout was not perfect, and that changes should have been made, no serious non-right-wing economist would argue that nothing should have been done.

[pilsner]

55. Rep. Peter DeFazio

proposed serious alternative plans to Paulson's give-away to Wall Street. The Dem Leadership pulled the rug out from DeFazio in Caucus meetings though.

No doubt, it would have been idiotic to do nothing. No one is saying that.

[Raineyb]

64. How's that bailout working out?

Oh right, it's not. Just as predicted the banks are pissing away the money, no one knows where the hell its going and the economy is still tanking.

Oh, and even worse instead of lending the money the banks are using it to further consolidate as if what we need is more big business.

Regards

[pilsner]

48. 12/31 Hartmann show

Did anyone else hear Gerald Celente of www.trendsresearch.com on Hartmann Wednesday? He predicted the financial meltdown in November of 2007 and is now predicting that a massive number of banks will fail in 2009.

[BzaDem]

53. Hartmann is absolutely wrong, and Krugman is absolutely right. Hartmann's 'case' is bull.

The truth is that anyone who has taken a basic macro-economics class knows that raising taxes in the middle of a recession would hurt the economy (per Keynesian economics). Anyone who argues otherwise either hasn't taken a basic macroeconomics class or is allowing an ideological predisposition to trump actual economics. I'm not saying that raising taxes on the wealthy is a bad idea in general -- it is just an unbelievable thing to suggest in a deep recession.

Hartmann essentially says that because tax cuts for the wealthy occurred at times just prior to economic calamities, that these tax cuts actually CAUSED the calamities. That is a typical logical fallacy used by people who don't know what they are talking about.

I mean, Hartmann is seriously claiming that tax cuts for the wealthy were what caused (or even contributed) to the great Depression? Really? The causes of the great depression are vast and will continue to be debated, but few real economists would make a serious argument that marginal tax cuts were any kind of major cause.

As for number 2, anyone who knows anything about history knows that the recession of 81-82 was caused by a tightening of the money supply through monetary policy, not lower marginal tax rates through fiscal policy. Paul Volcker of the Federal Reserve instituted tight money because of massive double-digit inflation.

Number 3 is almost as laughable as number 1. The dot-com bust was caused by lowering the individual marginal tax rate from 39 to 35 percent? And then the financial crisis and current recession were caused by this same tax cut? Give me a break. There were many causes of the current financial crisis -- especially a lack of regulation. But the cause wasn't (and few other than Hartmann would argue that the cause was) a marginal tax decrease.

[pilsner]

56. Here, I'll set the record straight

Here are two essays by Larry Beinhart that, I believe, accurately describe why Hartmann believes that taxes should be raised on the wealthy ASAP. To say Beinhart's (and Hartmann's) case is bull, is to deny 100 years of economic history:

http://www.alternet.org/story/106979/why_the_economy_grows_like_crazy_amid_high_taxes/?page=entire

and

http://www.alternet.org/workplace/106410/tax_cuts:_the_b.s._and_the_facts/?page=entire

[BzaDem]

62. Again, the three "examples" he provides have demonstrable alternative causes.

The Reagan recession had nothing to do with tax policy. The recession was specifically engineered by the Fed for the purpose of reducing inflation from high double digits to low single digits (by an increase in interest rates). Again, I don't think any real economist would dispute this.

As for the situation in the 1930s, he does not portray it accurately. Hoover did exactly what Hartmann proposed after the stock market crash -- he raised marginal income taxes on the wealthy. (He also pushed for the passage of large increases in tarrifs). The economy was not drastically hurt initially after the stock market crash -- the 25% unemployment came only after the increase in taxes and tarrifs in a recession. So even if we were to assume like Hartmann does that one proves causation by showing a correlation, this style of argument works completely against Hartmann here.

And as for the current financial crisis, anyone who has studied it knows that its causes really have little to do with marginal tax rates.

And even if you accept EVERYTHING Hartmann and Beinhart says, NONE of it says to increase taxes in the MIDDLE of a deep recession. His arguments might make more sense in a boom period. I think taxes should be raised on the wealthy -- just not in the middle of a recession, where mainstream, uncontroversial macroeconomics makes clear that it will do significant damage.

There is a reason why your position is taken by an author and a radio host while my position is taken by economists.

[pilsner]

68. Why the Economy Grows like Crazy Amid High Taxes (on the wealthy)

The reason for increasing taxes ASAP has been ignored on this thread. Here's the reasoning from Beinhart's article:

High taxes create an incentive to reinvest profits into long-term growth.

With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business -- in plants, equipment, staff, research and development, new products and all the rest.

The higher taxes are (and from 1940 to 1964 the top rates were around 90 percent), the more this is true.

This creates a bias toward long-term planning.

If a business is planning for the long term, it wants a happy, stable work force. It becomes worthwhile to pay good wages and offer decent benefits.

Low taxes create an incentive for profit taking.

It is easy to confuse profitability with wealth creation.

They are not the same.

President Eisenhower built the interstate highway system. There is no doubt that this gave the country an asset of great value, one that was very productive. It created great "wealth." But, aside from the construction companies that contracted the work, it was not profitable.

Selling subprime mortgages, trading in derivatives, packaging mortgage-backed securities and "flipping" condos were all very profitable but did not create wealth.

The theory is that if the rich can keep their money, they will invest in businesses that create jobs, more businesses, more tax revenue and greater "wealth" for the nation.

That sounds like logic and common sense. But is it, in practice, what happened?

Once tax cutting began, the culture of business changed.

It was no longer enough for a business to be a reasonably good business, making steady, reliable profits.

Indeed, that became a very bad condition for a business to be in. It made it a target for takeovers by people who were willing to milk them of their profits.

Among the ways you can get more profit out of a going business are:

Cutting the workforce -- possibly sacrificing long-term productivity
Cutting salaries -- who cares if the employees are unhappy? The balance sheet improves.
Selling off assets -- who cares what happens in 10 years? We can take the money now.
Outsourcing -- which sends the "wealth" somewhere else.
A whole host of devices were developed to do all of the above: junk bonds, leveraged buyouts, hostile takeovers, greenmail and the like.

Lots of money could be made that way -- for a small number of individuals. But it doesn't produce "wealth."

An environment in which profit-taking is cheap creates the conditions for a bubble.

Once you've taken your profit, and you have the cash in hand, you look for a place where you can get profits quickly, then again and again. Instead of examining how sound a company is, how well it's run, its debt load and its long-term prospects, other things become important -- such as the speed at which you can profit and the ease of entry.

Instead of investing in business -- which is difficult, slow and complicated -- investors go into markets.

They look for sectors that are hot. When investors find such an area, they flock to it. It heats up even more. People are seen making money, quickly and easily, simply by buying and selling, and they don't want to miss out.

Then there's a bubble -- which is followed by a crash.

Proponents of tax cuts take the position that taxes take money out of the economy.

That's flat out not true.

Governments don't keep the money they collect; they spend it. It goes right back in. It just takes a different route. It goes to different places.

The places that government puts money are important. More to the point, they are important for business.

All infrastructure is an invisible subsidy for all business.

It's easy to understand this when we're talking about roads.

It doesn't matter if your business doesn't ship anything by truck or even by bicycle. The fact that you can get to your office quickly and easily, that your mailperson can get to you without traveling on the back of a mule, is a subsidy of your business.

It's a little harder to see that when we're talking about soft infrastructure.

Laws, regulations and their enforcement. Social Security, unemployment insurance, public health and welfare. Education, research, support of sports, arts and culture. Parks and playgrounds. All of them create a society that is safer, more stable, and more able to produce and consume. They produce a better place in which to do business.

Read the whole article here:

http://www.alternet.org/story/106979/why_the_economy_grows_like_crazy_amid_high_taxes/?page=entire

[Selatius]

74. The economy crashed post-Stock Market Crash because the Fed tightened money supply.

The Federal Reserve was still a pretty new and untested institution with a weak catalog of solutions to problems. Their reaction in the 1930s was incorrect looking back. They should have increased the money supply by making credit easier to obtain, but they did the exact opposite. They attempted to shrink the money supply, which caused a cycle of deflation that began feeding on itself. It didn't crash necessarily because Hoover raised top marginal rates. It crashed because the Fed bled the economy of money when it needed it.

[Usrename]

58. Every time the wealthy get a rate cut everyone suffers.

You don't have to be a genius or have a high horse to figure that out.

Raising taxes on the rich in order to cut taxes on the working poor will grow the economy.

[BzaDem]

60. Have you taken Macroeconomics 101? This is really basic material.

Borrowing and/or expanding the money supply to give taxes to the working poor would help the economy. Raising taxes on the rich during this time would reverse that help and probably hurt the economy overall. The time to raise taxes on the rich is when the economy is not in a deep recession (the taxes can then be used to pay back the debt). You are correct that one doesn't have to be a genius to figure this out, but one does have to have a little knowledge of macroeconomics and be willing to look at the economics of the policy rather than just say whatever policy suits you ideologically.

[sutz12]

61. I think you are inadvertantly making Hartmann's point

Raising taxes on the wealthy would probably not have a serious negative impact on the economy as a whole while raising revenues. After all, if lowering marginal tax rates doesn't "help" why would raising them "hurt?" You tax the wealthy for the same reason criminals rob banks. That's where the money is.

The economy always involves income distribution. The latest incarnation has seen a major upward migration of wealth. We need a bit of a counter to that for a few years.

[Usrename]

66. You do make my point for me.

"Borrowing and/or expanding the money supply to give taxes to the working poor would help the economy. Raising taxes on the rich during this time would reverse that help and probably hurt the economy overall. "

What is this hysteresis in the system that ensures what you are claiming? Basically you are saying that the improvement (no matter how large) gained by tax-relief for the working poor must always be less than the harm (no matter how small) caused by increasing the taxes on the rich.

Borrowing isn't even mentioned anywhere in the observations I made, so you can figure on any combination of borrowing or expanding the money supply that you want.

[BzaDem]

72. I am saying we need to give tax cuts to the working poor without raising taxes anywhere else.

To do that, we need to run deficits. The greater the deficit (when the deficit is used properly, such as to provide tax relief to the working poor or for direct government spending), the more the economy will recover. The less of a deficit there is, the less the economy will recover. That's why we need lower taxes and greater spending to get us out of the recession. Taking money from the rich and giving to the working class just changes the hands of money; what is needed to get us out of the recession is new money altogether.

[Usrename]

73. Do you disagree with these observations?

From the article:

High taxes create an incentive to reinvest profits into long-term growth.

With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business -- in plants, equipment, staff, research and development, new products and all the rest.

...

Low taxes create an incentive for profit taking.

It is easy to confuse profitability with wealth creation.

They are not the same.

Is there an intellectual argument that you are making that disputes any of this?

[MajorChode]

77. The problem is, larger deficits really aren't an option

In a recession economy, it makes sense to cut taxes and run deficit spending to increase the money supply. Once you're out of the recession, you raise taxes again and pay your bills. The problem is, Bush borrowed money to give the richest Americans tax cuts, twice, in a non-recession economy. So now excessive deficit and debt is killing the economy, which takes the tax cut option off the table unless a commensurate or greater spending cut is made. Tax cuts are what got us into this mess and they aren't going to get us out.

The option proposed by Obama, as I understand it, is to instead restructure the tax code so that the richest Americans, who are categorically undertaxed, are given a tax increase while the poor and middle classes are given a tax cut. While this may not increase the money supply, it does put money in the pockets of those most severely affected by the recession and it does encourage spending. So while it may or may not get us out of the recession any faster, neither do I think it will do more harm.

[Usrename]

79. I think this kind of restructuring has to be stimulative.

If money in a growing economy always moves in one direction, towards the wealthy (which is true by definition, a growing economy is creating more wealth), then it should be obvious that tax cuts to the rich bypasses 99% of the economy. Conversly, tax cuts (or increased spending) at the bottom end of the wealth distribution will expand the economy, since the money must change hands more times on it's way to creating wealth. This seems to be consistent with all the historic data.

[MajorChode]

80. That's one way to look at it

I choose not to look at it that way. What you're describing is a situation were you're assuming that wealth moves only one direction and that's towards those who have the most of it. Now certainly I can't argue that the reality of the current situation supports what you say, but I would argue that it it doesn't have to be that way. IMO the biggest reason why it is that way is because of a tax policy that is extremely tilted towards those who have the most wealth.

Most wealth is tied up in equity, so for practical purposes I will substitute wealth for equity to make it easier to understand my point.(which is not entirely correct but close enough).

The wealthiest Americans do not get taxed on their wealth and receive the lowest tax rate on the income generated from that wealth. The lower and middle classes get taxed on the value of their wealth, which tends to erode that wealth, and they get taxed at a much, much higher rate on their income. With tax policies like that, it's not hard to understand why wealth will always flow upwards. It's not because the wealthy are particularly smarter. It's because the deck is stacked against everyone else.

[Usrename]

81. You are absolutely correct.

And also it is the very wealthy that get the most benefit from our tax dollars. If each of the uber-wealthy had to amass their own private army to defend their own wealth from being stolen, it would cost them much more than it costs them now. They are the ones who are benefiting most from this government, not the folks on welfare. Definitely NOT the folks on welfare.

[MajorChode]

82. You're correct, but looking at it the wrong way

You're buying into the fat junkie's supposition that taxes are intended to pay for services that you receive from the government.

He then uses that strawman to justify that the rich deserve a tax cut because they are already paying more than their "fair share".

Every bit of this is bullshit and I refuse to buy into a dittohead argument based on a strawman. It's better to show why the strawman is false to begin with.

For the most part, taxes are based on your income or your wealth. As such, the more you have of either, the more you should be taxed on that basis. And wealth and/or income in one form should not receive more exclusions than other forms. The notion that government provides you a service that you are paying for like a blowjob from a streetwalker is ludicrous. The government simply serves the function of regulating a society, and the more benefit you receive from that society, the more you owe back to it. It's really that simple.

[Usrename]

85. the more benefit you receive from that society,

the more you owe back to it.

A subtle distinction, but a huge difference.

Thanks.

[gravity]

67. Thom Hartmann doesn't have authority to speak on this matter

His arguments are more political than having to do with economics.

When a liberal economists like Paul Krugman says that it might be a bad idea to raise taxes in a recession, then it could have merit. Krugman is highly intelligent and knows what he is talking about.

[pilsner]

69. What do you mean authority?

Krugman earned his Nobel for his work on Free Trade. Does one need a Nobel to have authority? btw, Milton Friedman also won a Nobel Prize.

Krugman supported the bank bailout heist. How's that working out?

I have 3 of Krugman's books on my bookshelf. He's a brilliant, courageous liberal. I just think progressives need to push back on him on a few issues---primarily raising taxes on the rich ASAP and Fair Trade.

[pilsner]

70. Let's return to Tax & Spend policies

This thread has ignored the fact that the bills are coming due---Iraq invasion/occupation, the upcoming stimulus/infrastructure upgrade bill, etc.

China and other countries aren't gonna keep footing the bill forever. The Middle and Working classes shouldn't be expected to cover most of it.

Obama ran on "spread the wealth." So be it.

[pilsner]

78. Thom twice tipped his hat to Krugman today

for Krugman's most recent NYT Op-Ed:

http://www.nytimes.com/2009/01/02/opinion/02krugman.html

Of course Hartmann and Krugman agree on 98% of the issues. They are two heavyweight liberals who take up a lot of my bookshelf space.

But, Thom is more the type to shake the tree and Paul to collect the nuts.

Wonder if Thom reads this blog? If so, keep up the great work!

[Peregrine Took]

83. Hartmann came way down in my estimation this week with his defense

of Israel and his odd summation regarding Northern Ireland where the "Catholics were beating up the Protestants" (paraphrasing but very close to what he said) and THAT was why the Republic of Ireland was formed - to keep the Catholics from attacking the poor prods.

He was trying to make a parallel between Gaza and Israel and the Republic of Ireland and Northern Ireland but the way he did it - it just didn't make sense at all.

[pilsner]

84. Did you hear the hour with Ray Hanania?

Yeah, I know what you mean. I think Thom was trying to say that political solutions need to be explored rather than military.

Did you hear his hour (12/31/08 Hour 1) Chicago talk show host and journalist Ray Hanania, on the topic of the Israeli conflict in Gaza and what might happen if Iran gets heavily involved.

Hanania is Palestinian-American. There was some powerful dialouge about bringing a peaceful solution. Psycho John Bolton debated Thom and Hanania the first segment. Not too much agreement there.

Grab the podcast here:

http://green960.com/cc-common/podcast/single_podcast.html?podcast=hartmann.xml