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Bill Moyersis a treasure.  Yesterday (23 Feb 2013) he interviewed Richard Wolff, in an episode titled Taming Capitalism Gone Wild.

The show is worth watching, and I discuss it a bit more beyond the orange swirls, but one morsel, so precious, came out during the show: FDR, during his time of crisis, proposed a 100% tax rate on the rich.

Roosevelt’s debt ceiling battle actually began right after Pearl Harbor. The nation needed a revenue boost to wage and win the war.

FDR and his New Dealers wanted to finance the war equitably, with stiff tax rates on high incomes. How stiff? FDR proposed a 100 percent top tax rate. At a time of “grave national danger,” Roosevelt told Congress in April 1942, “no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year.” That would be about $350,000 in today’s dollars.

FDR "settled" for a marginal tax rate of 94%.

Makes today's super-wealthy seem pretty whiny and greedy, doesn't it?

Back to the show with Moyers and Wolff (and some time devoted to the restaurant industry, which is well worth watching, but which I will not cover here).  Wolff made some excellent points about our capitalist system:

1. In many schools, there are two Economics departments.  One serves those who want theory; the other serves those getting degrees in business.

2. The ideas behind capitalism - the theory - are frequently not borne out by reality.

3. People are frequently not rational in their behavior.  Even when an idea is not being borne out by reality, or especially when an idea is not being borne out by reality, they will cling to it all the more fiercely.  

4. One major problem with the theories which support our capitalist system - such as "the invisible hand" - is that they absolve the powerful of any responsibility.  They can claim that market forces compelled them to do what they did.

*

Some ideas and observations of my own:

There have been two counter-intuitive economic theories bandied about for the last several decades.  One is Keynesian economics, in which governments should spend more, not less, to get their economies going.  And I think we should recognize how counter-intuitive this is.  The other is trickle-down economics, famously called "voodoo economics" by Bush I before he gave away another piece of his soul.

One major problem with our forecasts is that we tend to draw straight lines and never work in possible changes.  The US economy did spectacularly in the latter half of the 20th century, and presumed that it would always be the world leader.  And we still have plenty of resources.  But there is nothing that guarantees us this position.  Not only do we need to earn it, we need to understand that others are working hard too.

We should do more to expose the outrageous salaries being paid in industries that are broken.  Health care is one; the university system is another.

Obama should remind people what the rich paid in the time of crisis: a 94% rate.  If he throws that number around - if we throw that number around - it will make his negotiating position seem mild indeed.

*

Tired of politics?  Need to escape?  Try my Greek mythology based novels, either the story of Oedipus from the point of view of Jocasta, or a trilogy about Niobe, whose children were murdered by the gods - or were they?

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Comment Preferences

  •  94% statutory rate saw an effective rate under 50% (3+ / 0-)
    Recommended by:
    chloris creator, doc2, Victor Ward

    maybe even 40%.

    ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Sun Feb 24, 2013 at 03:34:24 PM PST

    •  could you expand your comment (1+ / 0-)
      Recommended by:
      Roger Fox

      and explain what you mean by statutory and effective?  by effective are you talking about the marginal rate?  Or the total rate on an entire income of, say $30,000 back in 1943?

      www.tapestryofbronze.com

      by chloris creator on Sun Feb 24, 2013 at 03:36:41 PM PST

      [ Parent ]

      •  top marginal/statutory rate in 1945 was 94% (4+ / 0-)

        After shelters, deductions, and exemptions, is the effective rate. I attended a panel discussion in Princeton NJ about a year ago, Paul Krugman was on the panel, he stated he doubted the effective rate on the top marginal rate was never higher than 40%. Data back then was sparse.

        In 1980 the top marginal rate was 70%, the effective rate was 23%. Today its 39.6% and about 21%.

        ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Sun Feb 24, 2013 at 04:15:05 PM PST

        [ Parent ]

        •  but to get more from the richest (0+ / 0-)

          we need to raise the rates.  and close a few loopholes.

          www.tapestryofbronze.com

          by chloris creator on Sun Feb 24, 2013 at 04:17:29 PM PST

          [ Parent ]

          •  Yes and no. 2 ways to go about this (2+ / 0-)
            Recommended by:
            Words In Action, Victor Ward

            Pre 1986 TRA there were many shelters, deductions, and exemptions. Post 86TRA most shelters, deductions, and exemptions were removed.

            So if we leave our shelters, deductions, and exemptions the way they are, heres an approximation of what would work:

            add 6 more brackets

            40%-2million
            41%-4million
            42%-8million
            43% 12million
            44%-24million
            45%-48million

            If we bring back the pre 1986 TRA shelters, deductions, and exemptions then this would work out to about the same impact on the top 1%:

            45%-2million
            50%-4million
            55%-8million
            65% 12million
            65%-24million
            70%-48million

            Pre 1986 TRA shelters, deductions, and exemptions,  these loopholes rewarded domestic investment, specifically long term domestic investment, a good hunk of the money was in Manufacturing.

            AS you might guess, after the 1986 TRA, the domestic investment landscape in the US drastically changed, combined with tax breaks for outsourcing, jobs started to leave the US in droves.

            Another thing you might have noticed is that each recession after the 1986 TRA (1990, 2000, 2008-2013) all saw jobless recoveries.

            And what made these recoveries even more jobless was infrastructure spending dropped from 5% of GDP to 1.3%.

            ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

            by Roger Fox on Sun Feb 24, 2013 at 04:45:24 PM PST

            [ Parent ]

    •  yeah. The tax code back then was very different. (3+ / 0-)

      When people bring up the 90% tax rates from back then and compare them to marginal rates tody, they're mixing apples and oranges. Some know they are being disingenuous, others really don't know the truth so they actually think people paid such high rates. Either way, it just ain't so.

    •  The 94% rate was only the top marginal rate (0+ / 0-)

      The average effective tax rates for top income earners was about 49%-52% throughout the decades after WWII until when the Reagan Administration reduced the top marginal rate to 28%. The average effective tax rate for average working Americans during these years was about 25%. Now the top earners are enjoying half the effective tax rates as average Americans.

      Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

      by RMForbes on Sun Feb 24, 2013 at 04:20:13 PM PST

      [ Parent ]

      •  None of those numbers are correct (2+ / 0-)
        Recommended by:
        ozsea1, Victor Ward

        The average effective top income tax rate from 1979 to 2009 was never over 25%.

        And Paul Krugman, 15 ft from my face told me it was never over 40%

        http://www.taxpolicycenter.org/...

        ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Sun Feb 24, 2013 at 06:09:20 PM PST

        [ Parent ]

        •  Federal effective tax rates aren't just income tax (0+ / 0-)

          Federal effective tax rates include all federal taxes including Payroll taxes, capital gains and excise taxes.

          Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

          by RMForbes on Mon Feb 25, 2013 at 12:21:45 PM PST

          [ Parent ]

          •  data for effwctive rates (0+ / 0-)

            Prior to 1979 are incomplete at best and none existant as a single metric prior to 1960.

            ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

            by Roger Fox on Mon Feb 25, 2013 at 01:33:04 PM PST

            [ Parent ]

          •  Follow the tax policy center link (0+ / 0-)

            effective total Fed tax rate in 1979 was 35.1%.

            The average effective tax rate for average working Americans during these years was about 25%.
            Sorry,  the middle quintile paid 18.9% in 1979, quite a bit less than your 25%.

            ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

            by Roger Fox on Mon Feb 25, 2013 at 02:03:00 PM PST

            [ Parent ]

  •  FDR hated war profiteering (4+ / 0-)

    With a 100% top marginal tax rate on all income all he thought he could effectively stop war profiteering. But the high top marginal tax rate was even more effective in creating a more egalitarian society in America. Our working/middle class grew to the largest and most affluent in human history during the decades after WWII while the top marginal rate remained high and CEO's were compensated at 20-30 times their lowest paid employee.

    Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

    by RMForbes on Sun Feb 24, 2013 at 04:03:06 PM PST

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