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April 05, 2006
The Death of Fordism
Daivd Leonhardt has a good piece in today's Times on the death of Fordism -- that oh-so-comforting economic philosophy that productive workers should be paid expansive wages and the middle class should drive the country's economic growth. As he notes, what we've seen is a shift towards what I'll call Hiltonism -- that the economy should be driven by growth at the top, and the middle class should be squeezed so the rich can amass ever more riches. This is trickle down economics, it started with Reagan, it continues today. It's why we pass things like the dividend tax cut:
Americans with annual incomes of $1 million or more, about one-tenth of 1 percent all taxpayers, reaped 43 percent of all the savings on investment taxes in 2003....The analyses show that more than 70 percent of the tax savings on investment income went to the top 2 percent, about 2.6 million taxpayers.
By contrast, few taxpayers with modest incomes benefited because most of them who own stocks held them in retirement accounts, which are not eligible for the investment income tax cuts. Money in these accounts is not taxed until withdrawal, when the higher rates on wages apply.
It's why our marginal tax rates are so low. We, as a society, have elected a series of presidents who believe growth best driven by the extremely wealthy, and economic policy should be aimed at making them wealthier. In that context, middle class stagnation is hardly the sort of problem that merits the interruption of afternoon tea, much less a restructuring of our tax system. And this wasn't an accident; it was the inevitable result of the economic policies explicitly advocated by Ronald Reagan, both George Bush's, and even Bill Clinton. Leonhardt's right to say that Fordism is dead, but for whatever reason, he never mentions that we're the ones who killed it.
April 5, 2006 | Permalink
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Comments
I think your conclusions are right, but I kind of resent your terminology.
Posted by: Tom Hilton | Apr 5, 2006 12:51:50 PM
What terminology?
Posted by: Ezra | Apr 5, 2006 1:07:49 PM
Ah, nevermind ;-)
Posted by: Ezra | Apr 5, 2006 1:08:17 PM
What's important to note here is that the empirical evidence indicates that "Fordism" is much more successful at growing an economy than is "Hiltonism" (sorry Tom). In fact, the logical long-term outcome of Hiltonism is the emergence of a third world economy. In other words, Hiltonism is supported because wealthy and powerful people like it and pressure the government to implement it, not because it's good for the overall economy.
Posted by: Rebecca Allen,PhD,ARNP | Apr 5, 2006 1:21:15 PM
Yeah, I think your terminology is lame too. Why not Reaganism? Or voodoo economics? Has Paris, or any other Hilton, come out explicitly in favor of it? If you're just naming rich people, you could say Buffett or Soros and be equally unfair.
Posted by: Allen K. | Apr 5, 2006 1:24:48 PM
Except, IIRC, both Buffet and Soros criticized the tax cuts as wholly unnecessary. I believe it was Buffet who said his assistant needed a tax cut way more than he did.
Posted by: Shakespeare's Sister | Apr 5, 2006 1:27:15 PM
That's right--Buffett and Soros both have a sense of responsibility toward society as a whole. Neither is a good example of what Ezra's talking about.
But then I'm not sure Paris Hilton is necessarily the best model either, because as far as I know she hasn't been lobbying aggressively for the tax shifting from which she benefits. It would be better to name this phenomenon after a billionaire who has been lobbying for exactly this kind of policy (Scaifeism, maybe?).
Who, um, doesn't have my last name.
;-)
Posted by: Tom Hilton | Apr 5, 2006 1:37:05 PM
There is more than economics at play in the two policy alternatives. A stable, upwardly mobile middle class is a bedrock of democracy, and a strong incentive for the poor to work hard at insuring that their children will be better off than they were. Societies where wealth is concentrated in few rich hands are ripe for instability politically (and ultimately economically).
The only thing I ever agreed with Reagan on was his 'are you better off than you were 4 (or 8) years ago?' The evidence seems conclusive that for a very large part of the population under Bush II the answer is NO.
Conservative myths about economics not only don't die, they don't fade away either.
Posted by: JimPortlandOR | Apr 5, 2006 1:37:40 PM
"the logical long-term outcome of Hiltonism..."
is the desire spend endless hours watching TV shows dedicated to size 0 cretins who spend all of their inheiritance on shoes, little yappy dogs, and their posse of drugg-addled idiots.
Posted by: CParis | Apr 5, 2006 1:40:37 PM
If I recall correctly, the point of employing Paris Hilton as the poster child for the idle rich is to signal to working-class voters that the wealthy have bad moral values.
Posted by: mike | Apr 5, 2006 2:07:52 PM
"We, as a society, have elected a series of presidents who believe growth best driven by the extremely wealthy, and economic policy should be aimed at making them wealthier. "
Is there any evidence that Bush, or most of the GOP politicians, are doing this because they sincerely
believe that this will grow the economy better?
I'd put my money on them doing it because they want
the rich to get richer, and don't give a flying f*ck
about the poor getting poorer, as long as their
preachers and AM radio propagandists keep them voting
Republican.
Posted by: Barry | Apr 5, 2006 3:21:07 PM
Oh, Ezra, your class warfare never ends. I'm not rich, but even *I* understand that they foot most of the bills even at today's marginal rates. The lower 50% of income earners pay little or nothing. Bottom line is the the rich make the wheels go 'round and 'round by paying your bills.
Posted by: Fred Jones | Apr 5, 2006 4:11:41 PM
I mentioned Buffett and Soros exactly because their being rich isn't enough reason to name something like this after them. Likewise, I am not convinced that the Hiltons deserve it. Reagan does.
Posted by: Allen K. | Apr 5, 2006 4:36:40 PM
I'm sure the average person living in poverty would love to quadruple their income and pay federal taxes, Fred.
Posted by: spike | Apr 5, 2006 4:39:24 PM
I'm not rich, but even *I* understand that they foot most of the bills even at today's marginal rates. The lower 50% of income earners pay little or nothing.
Fred, is this where you trot out those statistics that are based solely on income tax and exclude payroll and sales taxes? Because, really, you don't have to bother. We've all figured out that little dodge.
Posted by: Tom Hilton | Apr 5, 2006 4:42:32 PM
Fred,
This isn't 'class warfare' but keep on with the current tax policy and the wealthy will soon find out what real class warfare is - you might want to read up on Huey Long.
Posted by: Fledermaus | Apr 5, 2006 7:14:38 PM
"What's important to note here is that the empirical evidence indicates that "Fordism" is much more successful at growing an economy than is "Hiltonism."
Empirical evidence indicates nothing of the sort. What's happened to economic growth since we cut marginal tax rates? Perhaps you prefer a return to the days of the 91% bracket? The US continues to be the economic engine that drives the world, that is not an accident it is a choice.
There is no getting around the fact that the vast majority of taxes in this country are paid by upper income earners, no matter how you slice it up. Not a dodge, just facts, and the empirical evidence actually backs that one up.
Posted by: Alex | Apr 6, 2006 1:06:25 PM
