Cry Socialism! and let slip the dogs of war.

Alexandra Ocasio-Cortez and Elizabeth Warren have done a good job at provoking conservative outrage with their recent tax proposals. AOC, who has learned in a hurry how to get under conservatives' skin, has suggested the creation of a new 70% marginal tax rate on incomes above $10 million. Warren, in the meantime, has taken a more novel approach, suggesting the creation of a "wealth tax" of 2% on assets over $50 million, rising to 3% on assets of $1 billion or more.

Fox News host Mark Levin has led the charge from the right, railing against AOC as the harbinger of the rise of a Marxist state in America. “I have a question for Beto O’Dork,” Mark Levin ranted, persisting in the name-calling that clearly appeals to his listeners, but only degrades the prospect of serious political discourse. “I have a question for Alexandria Ocasio-Ocasio. I have a question for Bernie Sanders. I have a question for all of them. How will the ‘Democratic-Socialist Republic of America’ that you seek to create – how can you ensure us that it won’t turn into Venezuela?”

Warren has garnered less vitriol than AOC for her proposal. That may be because attacking AOC has quickly become a cause célèbre on the right, or it could be due to sticker shock. 70%, after all, is a high number. However, Warren's proposal is actually more unusual, as while marginal tax rates have been as high as 70% as recently as the 1970s, the federal government has never had a wealth tax.

It is worth noting that "wealth taxes" have long existed at the state level, even though we don't call them that. We call them property taxes, which are a staple of taxation at the state and local level. For a large majority of Americans, whose wealth is overwhelmingly concentrated in their primary residence, the property tax is effectively a wealth tax (though it should more accurately be called an "asset tax," as homes are taxed at their full value without regard to outstanding mortgages). "Personal property taxes" – applied in the same manner as real property taxes but applied against stocks, bonds and other assets – have been on the books in many states dating back to the 1800s. While many have been repealed, the notion of taxing individual wealth directly, as opposed to income, is not unheard of in our history.

A primary argument among economists against both of these tax proposals is that they disregard the history of tax avoidance – measures, illegal and legal, that people tend to take to avoid taxation when it is seen as confiscatory. While supporters of new taxes on the rich tend to describe them in terms of "fairness," fairness is ultimately in the eyes of the beholder. Real property taxes have remained in place at the local level while personal property taxes have been repealed, not because of a philosophical aversion to taxing wealth as much as due to the practical reality that personal property is easily relocated to jurisdictions – other states or off-shore tax havens – where taxes are lower or non-existent. Those who question the practicality of what AOC has proposed are quick to point to the history of marginal income tax rates at the federal level, which suggests that in practice higher rates have resulted in higher levels of tax avoidance rather than increased total tax collections. As illustrated in this graphic, while marginal tax rates were in the 70-90% range for much of the 20th century, those rates did not translate into higher revenues to the federal government as a percent of GDP.

The proposals put forth by AOC and Elizabeth Warren, however, are not fundamentally about tax efficiency, but rather in response to the widespread sentiment that "the system" is no longer working for the working and middle classes, as reflected in the graphic here that illustrates the steadily declining share of income in the United States flowing to middle income households since 1970. In 2016, the two presidential contenders that did the most to disrupt and transform their respective political parties – Donald Trump and Bernie Sanders – each ran on a message that the system was not working for average Americans. The data supporting the notion that the U.S. economic system has failed to deliver for working class and middle-class families was encapsulated during the 2016 election in the oft-cited observation that median real wages today remain below where they were 40 years ago. In his review of Adam Tooze's book about the societal impact of the 2008 financial collapse – Crashed: How a Decade of Financial Crises Changed the World –  University of Chicago economic historian Jon Levy tied this argument to the parallel issue of income inequality, pointing out not just that incomes were flat in real terms for families in the lower half of the income distribution over the thirty-five year period from 1980 to 2014, but that during the same period incomes for the top 10% more than doubled, for the top 1% more than tripled, and for the top 0.001% – which is to say the top one thousand or so households – grew more than seven-fold.

Against that backdrop, the 2008 financial crisis and ensuing recession had a particularly devastating impact on the financial security of middle class families. According to data compiled by NYU economist Edward Wolff, median household wealth in the United States increased by 50% during the decades preceding the 2008 collapse, growing from $80,400 in 1983 to $118,600 in 2007, in real terms. By 2013, median household wealth had collapsed, falling to $65,800, suggesting that for a large share of American families more than thirty years of savings had been wiped out. To make matters worse, over the same time period, the percentage of American households with zero savings increased from 15.5% to 21.8%.

Over that same time period, the 60% of American families in the three middle income quintiles – those whose income lay between 20% and 80% of income distribution in the U.S. – saw their indebtedness increase and their financial flexibility decrease.  Those families saw their indebtedness effectively double over the period from 1983 to 2013, with debt-to-net-worth ratios growing from 37.4% to 64.0% and debt-to-income ratios growing from 66.9% to 125.0%, respectively. This increase in household debt is a significant factor because for families – like corporations – a higher debt ratio leads to increased financial stress in the event of financial downturns. The problems attendant to increased household debt were exacerbated by reforms to federal bank statutes in 2005 that made it harder for families to deal with debt problems. Finally, even as families saw their aggregate net worth deteriorate over that thirty-year period, the share of household wealth held in cash or other liquid forms – as compared to home equity or pension accounts – declined from 21.4% to 8.1%, meaning that families were less able to deal with adversity when it arose.

Mark Levin may be right that "Americans Do Not Like Big, Authoritarian, Centralized Government," but he is missing the point. The Tea Party and Occupy movements were both animated by resentments toward Wall Street and the notion that the system is rigged, and those resentments were grounded in real evidence that the economic and political system has failed a large portion of Americans. AOC's proposal for a 70% tax rate might prove to be only marginally or even counter productive – either from the standpoint of revenue generation or addressing growing income inequality – but for many workers, and many voters, what matters is that she is feeling their pain.

When Mark Levin berates Democrats for ignoring the lessons of Venezuela, he might do well to consider the observation of his Fox News comrade-in-arms Tucker Carlson. For several months now, Carlson has raised the hackles of fellow conservatives for suggesting that the GOP is failing to come to terms with popular dissatisfaction with the status quo that has spread well beyond the Trump base. “Look what happened in Venezuela. People looked up one day and they’re like, ‘Wait a second, nine families control the whole economy but we still have the vote, and to punish them, we’re going to elect this guy, Hugo Chávez, and then Nicolás Maduro.'” 

In a similar vein, concern that popular dissatisfaction is leading to a fraying of the global commitment to capitalism across the advanced democratic nations was widely voiced at the World Economic Forum this week. Writing from Davos, Katherine Bell, the editor of Barron's, reflected the anxiety among political, civic and business leaders in the face of growing populist movements on the left and the right. She bemoaned the rise of anti-trade, anti-globalization sentiments at a time when the global embrace of capitalism is widely credited with engendering previously unimaginable improvements in the quality of life across the globe, including lifting a billion people out of extreme poverty over the past three decades, cutting the percentage of the world population living in extreme poverty nearly in half, and reducing child mortality in low- and middle-income countries by 40%.

The notion that the system is broken at home is the flip side of a system that has produced the dramatic achievements across the world that Bell cited. The decline in global poverty has come about in large part as a product of the end of the Cold War, the global embrace of the world economic order championed by the United States, and the ensuing entry of hundreds of millions workers into interconnected global labor markets. Over the past half-century, the opening up of China and India, and the transformation of Southeast Asia, underpinned the globalization and outsourcing of jobs that in turn suppressed the incomes and unsettled the lives and livelihoods of workers at home.

The political tensions that gave us Donald Trump and Bernie Sanders, and now AOC and Elizabeth Warren, are tensions inherent in a world that is struggling to balance the moral, political and economic consequences of capitalism and democracy. Mark Levin and other conservatives – and now Michael Bloomberg and Howard Schultz have jumped on board – should take a deep breath before they continue down the well-worn path of name-calling and crying "Socialism!" at every proposal that comes down the road seeking to ameliorate popular discontent. Socialism is not a product of marginal tax rates, and the creation of a 70% rate would not make America a socialist country in 2020 any more than America was a socialist country during the Eisenhower years when top marginal tax rate was 90%. Instead, the rising appeal of socialism in public opinion polling should be seen – as Tucker Carlson aptly observed – as a result of a system that may be producing miracles abroad, but has produced a real sense of financial insecurity and instability for a large share of Americans at home. Those Americans vote, and rather than sloganeering and name-calling, politicians and pundits would be better served to take their concerns seriously.


Follow David Paul on Twitter @dpaul. He is working on a book, with a working title of "FedExit! To Save Our Democracy, It’s Time to Let Alabama Be Alabama and Set California Free."

Artwork by Joe Dworetzky. Check out Joe's political cartooning at www.jayduret.com. Follow him on Twitter @jayduret or Instagram at @joefaces.

The return of Karl Rove.

It's over!

Or is it? Today, by a voice vote, the Senate passed legislation that was identical to legislation they passed more than a month ago. In a sense, nothing has changed, but it may be that everything has changed.

For weeks now, Republicans in Congress – notably Mitch McConnell – remained in their bunker and declined to play a material role in ending the government shutdown, as it devolved into a battle of wills between Donald Trump and House Speaker Nancy Pelosi. Instead, Republican senators who ventured into the fray had little to offer beyond pleading with Democrats to come around and give the President what he wants.

Speaking on CNN midway through the month-long shutdown, a visibly angry Wisconsin Republican Senator Ron Johnson lambasted Democrats for not giving Trump his money. Johnson argued that building the wall was central to Trump's campaign, that he won, and that therefore the Democrats had an obligation to give him his money. No one on the show bothered to point out that campaign pledges are rarely, if ever, binding on the opposition party. Barack Obama learned as much when his signature initiative – the Affordable Care Act – failed to win a single GOP vote in either house of Congress.

In a similar vein, last week, Georgia Republican Senator David Perdue pushed the notion that the onus was on the Democrats to cough up the money, because, he argued, if Trump agreed to reopen government, he would "lose his leverage" to get what he wants. "Right now," Perdue explained, "what the Democrats are saying is, 'Well look, give us what we want and maybe we'll come back in two or three months and talk about what you want.' That's not the way negotiations work in the real world."

Perhaps that is the way negotiations work in the business world where Perdue and Trump toiled before they came to Washington, but it is not actually how the Constitution works. In the world where Trump and Perdue now live, the separation of powers established in the Constitution means that presidents have to work with Congress to get what they want. Presidents can wheel and deal, they can cajole and bully, and they can go over the head of Congress and take their case to the people. They can even lie to the public about what's at stake in an effort to get their way, but at the end of the day, if they want money, they have to get the votes in Congress.

Mitch McConnell and Paul Ryan both understood this. They knew that Trump wanted money for his wall and that it had been central to his campaign, yet for two years, they declined to even bring it up for a vote. A number of conservatives opposed the wall on the basis of cost, while many mainstream Republicans – including most of those from border states – shared the view of Texas Republican Congressman Will Hurd, whose district includes the longest stretch of the U.S. border with Mexico. Hurd has been outspoken in suggesting that a wall along the lines that the President has been demanding represents the most expensive and least effective form of border security. Hurd has advocated instead for investments in border security technology, as well as increased funding for the Coast Guard, which now is only able to respond to 25% of the actionable intelligence it receives on maritime drug smuggling operations.

While Republicans have fallen in line behind Trump on most issues over the past two years, when it comes to the border, they simply haven't bought into his argument that it constituted a national security crisis. As much as Trump might pound the table on the issue, data from the Drug Enforcement Administration and Department of Homeland Security data suggest that illegal crossings have declined by more than 90% from the real crisis years a decade or more ago, and that the proposed wall would have little impact on drugs entering the country. Ironically, the closest Congress came to funding Trump's wall was in the form of a bi-partisan deal last February that would have given him $25 billion for his wall in exchange for a DACA fix, but Trump walked away from that deal at the last minute after objections from conservatives.

The unwillingness of Democrats to give Trump a far smaller amount of money this time around goes beyond the niceties of upholding constitutional principles regarding the separation of powers or the bi-partisan view that the proposed wall would be an expensive and ineffective use of funds. Rather, it is the recognition that if Trump is successful in using the leverage of a governmental shutdown to achieve his political purposes in this instance, it will fundamentally alter the balance of power in the nation's capital. At last week's March for Life in Washington, DC, Trump supporters on the religious right were enraptured by Trump's willingness to shut down the government and stick it to the Democrats. Lost as the media focused on the Coventry Catholic teenagers were suggestions from right-to-life activists that Trump should follow up on his shutdown of the government over the border wall with a shutdown to force an end to federal funding of Planned Parenthood. While liberal commentators often chastise Congressional Republicans for their fear of Donald Trump's tweets, one can only imagine the shudder of horror felt by Democratic leaders at the thought of the tweets yet to come demanding an end to Planned Parenthood funding, or some similarly contentious concession, as the price of ending a future government shutdown. If Trump were to succeed in his current wall funding strategy, this might well be an irresistible next step.

What remains puzzling in all of this is how Trump allowed himself to be backed into a corner in the first place, cowed as he appears to have been by right-wing pundit and instigator Ann Coulter. Unlike conservative talk show hosts like Rush Limbaugh and Mark Levin, who have been defining political correctness on the right for decades, Coulter is more gadfly than conservative heavyweight, and has no legions of daily listeners who hang on her every word. Instead, she is a prolific author in an era when reading books has waned, whose life is a non-stop book tour as she seeks to stay in the public eye.

For Coulter, the media attention over the past month has been a gift of unimaginable proportions. Each time journalists and pundits jump on a comment she makes while a guest on some show – as they did last week when she pronounced that Trump will be "dead, dead, dead" if he fails to win money for his wall – she can hear the cha-ching of book sales and speaking fees. No one misread Coulter's motives more than San Francisco Congresswoman Jackie Speier, who begged Coulter to give Trump the OK to open up the government. Far from wanting it to end, Coulter is living the dream; after years of traveling the country, flogging her wares, the government shutdown has finally elevated her to the pinnacle of conservative punditry.

The odd part is why Trump sat passively by as Coulter accused him of "scamming" his supporters, and railed away about "the millions of illegals pouring into our country every year." Famous as a political counterpuncher who hits back "ten times harder" against those who attack him, Trump could have easily rebuffed her claims. Far from scamming his followers, he has diligently delivered what he promised in his campaign rallies – from tax cuts to judges to guns to undermining the ACA to confronting China on trade – and even as Republicans declined to fund his wall, he has taken harsh stances on both legal and illegal immigration. In the wake of Coulter's comments, Trump could have responded not just that her numbers are flat out wrong, but that on his watch, not only have illegal border crossings reached the lowest levels in nearly half a century, but with more undocumented immigrants leaving the country than coming in, net migration is now negative.

Perhaps Trump was wary to take on Ann Coulter because she is a woman. Or perhaps he believed that to suggest that the immigration "crisis" is abating would undercut the visceral bond Trump has nurtured with his followers. But for whatever reason, even as he spoke from the Rose Garden announcing the agreement to allow the government to reopen, he quickly veered off of his prepared text and once again amped up his crisis rhetoric. Coulter was not placated. "Good news for George Herbert Walker Bush," she tweeted minutes after he was done speaking, "as of today, he is no longer the biggest wimp ever to serve as President of the United States."

When the history of this moment is written, a key actor may turn out to be long-time Republican campaign guru and Democrat nemesis Karl Rove. While Mitch McConnell has been widely excoriated in the press for not playing a constructive role in resolving the wall funding crisis over the past month, his ability to maneuver has been sorely constrained by the tight grip the President holds over members of his caucus. McConnell fears that the 2020 election cycle could be a repeat of the disastrous Watergate election of 1974, when the GOP was decimated in the wake of the resignation of Richard Nixon. Earlier this week, he brought Rove in to discuss the political lay of the land with Republican Senators. He hoped that Rove – who is as good as they come at reading polls – would shake up his colleagues, particularly the 22 Senators up for re-election just over eighteen months from now.

Mitch McConnell's choice of Rove may turn out to have been a cunning move. In the wake of mid-term elections where independent voters turned on the GOP, and armed with polls that indicate that barely one in five independents have bought into the President's contention that we face a crisis at the border, Rove made the case that while Donald Trump has consistently declined to expand his base of support beyond his core supporters and conservatives, that will be a losing strategy for Republican Senators. With polls suggesting that independents now make up nearly half of the electorate, Rove argued that the 2020 race will be won by those who expand their support and win independents to their side, while those who choose to stand firm, relying only on conservatives alone, will be sent packing.

While Nancy Pelosi has been successful at wresting the initiative back from the President, it remains to be seen if the furious reaction of conservatives will stiffen Trump's spine and put us back where we started. Today was but a respite; if we are going to put this political crisis behind us, McConnell and Senate Republicans will not be able to continue to stand on the sidelines. McConnell knew that if he was going to successfully intervene, and ultimately garner the votes that will be necessary to push through a final resolution, he first needed to shake his members up. His objective in bringing in Karl Rove was nothing less than to instill a balance of terror in the minds of Senate Republicans: members of his caucus may be consumed by fear of the President and his tweets, but he had to make them understand – as Rove laid out in excruciating detail – that they have even more to fear from the voters eighteen months down the road.


Follow David Paul on Twitter @dpaul. He is working on a book, with a working title of "FedExit! To Save Our Democracy, It’s Time to Let Alabama Be Alabama and Set California Free."

Artwork by Joe Dworetzky. Check out Joe's political cartooning at www.jayduret.com. Follow him on Twitter @jayduret or Instagram at @joefaces.

The lies people fight for.

Don't matter who did what to who at this point. Fact is, we went to war and now there ain't no goin' back. I mean, shit, it's what war is, you know? Once you in it, you in it. If it's a lie, then we fight on that lie. But we gotta fight.

– Slim Charles, The Wire

Many years ago, I asked a client of mine – the manager of a regional airport along the Florida coast – about his strikingly elegant, gold cigarette lighter. "It is a perk of the job," he replied. "From time to time, when I arrive at work in the morning, I will find that drug smugglers will have abandoned a small plane on the tarmac. One time, they left this lighter behind, sitting on the wing."

Our southern border may be a pipeline for vast quantities of illegal drugs, as Donald Trump suggested in his Oval Office speech this week, but according to reports by the Drug Enforcement Administration, only a tiny share of those drugs are carried by individuals through the holes in existing border walls and fences that Trump proposes to replace with his bigger wall. Instead – if the DEA reports are to be believed – the lion's share of illegal drugs make their way into the country through a variety of other means, including cars and tractor trailer rigs through legal ports of entry, fishing boats, private aircraft (like the one my client described on the tarmac in Fort Myers), tunnels that go from Mexico to safe-houses on the U.S. side of the border, and delivered door-to-door by U.S. Postal Service Priority Mail.

If the DEA data were not enough to undermine Trump's argument for his wall, the Department of Homeland Security went the extra mile to debunk the President's argument in a report published in late 2017. In that report, the DHS estimated that successful illegal crossings along the southwest border declined by 91% from 2000 to 2016, and that over the ten year span from 2006 to 2016 the number of "got aways" – those who cross illegally and are not arrested or turned back – declined by 83%. Overall, the DHS reports suggests that the overall level of illegal crossings is now down to levels last seen in the 1970s.

It probably goes without saying at this point that Donald Trump's Wall is not about public policy. It is not about taming the $500 billion illegal drug trade that he pointed to in his speech. It is not about the 4,000 terrorists that Sarah Sanders claimed crossed the southern border, or the crimes committed by immigrants that Trump cited in his speech. Rather, the wall is simply a rallying cry. Or, to be more precise, it is an applause line. Trump said it best in an interview with the New York Times editorial board in January 2016, before a single primary vote had been cast: “You know,” he commented at the time, “if it gets a little boring, if I see people starting to sort of, maybe thinking about leaving, I can sort of tell the audience, I just say, ‘We will build The Wall!’ and they go nuts.” 

Trump's speech this week was a spectacle of lies and dissembling. As DEA and DHS data suggest, there is no national security crisis at the border; to the contrary, the number of illegal crossings has declined dramatically over the past decade. It turns out that the 4,000 suspected terrorists Sanders referred to was a reference to State Department data on suspected terrorist arrivals at U.S. airports, while the number who have sought to enter the country via the southwest border turned out to be six – but not before Vice President Pence embarrassed himself by defending Sanders' claim on TV. Trump's penchant for pumping up crowds with stories about immigrant crime ignores the fact that native-born Americans commit crimes at a greater rate than those who arrive at our shores. And if Trump's objective, as he suggested in his speech, is to crack down on fentanyl and opioids flooding into the country – which should be his concern as those drugs are disproportionately impacting the lives and livelihoods of his base voters – he might better direct his rhetorical outrage at prescription drug regulation, the U.S. Postal Service that delivers drugs illegally purchased on the Internet, and Chinese President Xi Jingping, whose country is the major source of fentanyl production.


Donald Trump, as has long been evident, seems to love to lie. Ted Cruz made the argument that it was a pathological condition most eloquently during the Republican primaries, a view widely shared by Republicans before they did an about face and threw their lot in with him. Last month, Ann Coulter – one of Trump's most ardent supporters among the right wing commentariat – jumped on board. It was her piece in Breitbart entitled Gutless President in Wall-less Country that helped push Trump to walk away from a budget agreement he had said he would support and instead to head down the path that led to the government shutdown, and ultimately to the Oval Office speech. In her piece, Coulter excoriated Trump as a narcissist and sociopath who lied to his core supporters, claiming that he either "never intended to build the wall and was scamming voters all along, or he has no idea how to get it done and zero interest in finding out." 

The correct answer is that Trump was scamming his voters all along. He ranted about the Wall for the simple reason that – as he told the New York Times editorial board – it worked. Just like Birtherism worked and his attacks against the Central Park Five worked. For his entire career in public life, Donald Trump has been a shameless self-promoter who said whatever he wanted to say, with little or no concern for the consequences. Facts and truth were of no importance, all that mattered was that he won the attention that he craved. Up until he was elected President, he never had to worry about being accountable for what he said, or something as silly as having to follow through on his rhetoric.

The problem Trump now faces is that the cat may be out of the bag, and his supporters may be coming to realize they have been had. Coulter's piece excoriates Trump as a "vulgar publicity hound" whose supporters only tolerate him because he promised to deliver on the issues they care about. "In a country of 320 million people, I’m sure there are some, but I have yet to meet a person who said, 'Yeah, I don’t really care about immigration or trade, I just love his personality!'" 

There was a time when Trump believed there was nothing he could do that would lead his followers to turn on him. Now, however, the script has been flipped. Now, he is scared of them, and what will happen to him if he doesn't deliver a wall that he always thought was just a slogan he rolled out to amp up his crowds. Now, as Coulter warned, "he must know that if he doesn’t build the wall, he has zero chance of being re-elected and a 100 percent chance of being utterly humiliated." 

His arguments for the wall may all be predicated on lies, but for Trump there is no turning back; he is committed to – as Slim Charles would say – fighting on those lies, even if it means declaring a national emergency and fighting it out in court as he tries to save face with his base. He has been warned that he has to deliver, and he is clearly heeding the warning, as there are few things he fears more than humiliation.

Perhaps Democrats will offer him a way out. They could offer him his $5.7 billion in exchange for their long-sought DACA fix. After all, they offered him $25 billion in wall funding for a DACA fix last year, only to have him turn it down at the last minute. That could be a win-win: He gets his money – a pittance in the scheme of things – while they get DACA for twenty-five cents on the dollar.

But Democrats are dug in as well, and they may be unwilling to give Trump a win at any price. In that case, he will have no choice but to go down fighting on his lies. At that point, the calculus facing Mitch McConnell and Republican Senators will come into play. In the wake of the thrashing the GOP took in the mid-term elections, and faced with a visibly weakened President, those Senators will have to decide how much longer they are going to be willing to march in lockstep behind Donald Trump, accepting that his fights are their fights and that his lies are their lies.

Follow David Paul on Twitter @dpaul. He is working on a book, with a working title of "FedExit! To Save Our Democracy, It’s Time to Let Alabama Be Alabama and Set California Free."

Artwork by Joe Dworetzky. Check out Joe's political cartooning at www.jayduret.com. Follow him on Twitter @jayduret or Instagram at @joefaces.