We are just setting ourselves up for another burst bubble if we do not reconcile our tax rates. There were ZERO economic meltdowns, ZERO collapses, ZERO depressions while our top marginal tax rate was between 70% and 90%. Yet, at every point in American history where the top tax rate was cut significantly there has soon followed a major economic calamity. These include the 1st Great Depression (which followed the slashing of top rates in the 20s, leading to a short-lived bubble which quickly burst) and our current Great Big Depression (we’ve now had 3 decades of taxes for the richest being cut and 3 decades of continual wall street tom-foolery and continued hardship felt by the rest of working Americans). Reversing Bushie’s tax cut is a start, but nothing significant will result unless we reconcile the tax rate back to what it was during the most prosperous time in recent American history, where we actually had a middle class.

explain why so many of the sports figures with huge amonut of income become us citizens? the reason is they pay less taxes than anyplace else on earth. sad fact is we have to pay taxes, now granted we have huge amounts of waste, but the rich need to pay their share.

“Your statement: ‘crowding-out effect: the incomes of those at the top have crowded out those at the bottom’ is economically incorrect it assumes that capitol is static when the opposite is the truth.”

It assumes nothing of the sort. Economic growth comes from, and in the long run can only come from, increases in the productive powers of labor. This can be done through a number of means: qualitative and/or quantitative increases in the stock of physically productive capital; scientific progress, and the discovery and technical implementation of new physical principles; the development of more and better public infrastructure, which translates into the production of physical savings and the lowering of economic overhead throughout the economy; an increase in the skill level of the workforce; and so on.

But I never said or implied that the capital stock is static – although, if you believe the oft-parroted myth that “government can’t create wealth,” you are tacitly making such a claim. What I will say, which is backed up by objective fact, is that inequality in the distribution of wealth and the supply of capital goods and other means of production have little to do with each other, and may in fact have an inverse relationship. The Democratic Republic of the Congo has the world’s highest degree of economic inequality, and is among the world’s least capitalized economies. France is the world’s most capital-intensive economy, and they have a very low degree of economic inequality as well as a very progressive tax structure. Back home here, the total supply of productive capital in the US economy has been decreasing steadily for decades, while economic inequality has been increasing. So, the whole notion that a greater degree of economic inequality means a greater capital stock is totally false. Indeed, the opposite seems to be the case.

It seems that the problem here is that you conflate the hoarding of paper assets by a small elite with the formation and accumulation of productive capital. Or, put another way, that the more wealth the rich acquire, the more actually productive capital there is in the economy. This is clearly not the case – there is no guarantee that the increase in the volume of savings possessed by the rich is not merely the result of a transfer from the working and middle classes. But hey, economic inequality in the US today is at levels unseen since feudal times, so that must mean the economy is booming, right? Err… not so much.

“When capital is generated the total pool of available capital increases and there for that is more for everyone.”

That is by no means assured. First of all, let’s be clear: financial capital is not the same thing as productive capital. The notion that “what’s good for Wall Street is good for main street” has been utterly obliterated by the experience of the last decade or so.

Now, even assuming you mean productive capital, perhaps the rich merely consume the increased productive surplus themselves? Or maybe new capital goods are created/purchased by a firm not with the intention of increasing production? For example, in the 1990’s, the Gillette corporation built new factories in Europe, but not to substantially increase their manufacturing output. Instead, they let it sit mostly idle, so as to apply downward pressure on wages at their US plants – in case the US workers decided that they deserved a share of the firm’s rising profits since they produced them, management could merely shift production to their European facilities, so as to keep their domestic markets supplied. In other words, the sole purpose of this investment was not to increase sales/production, only to use the slack production capacity as a bludgeon with which to beat their labor force.

Many, many similar examples exist. The point is that unless there’s some mechanism to ensure that workers share in the increased economic surplus they’ve produced, firms often find that it’s more profitable (in the short term of course; in the long run, it’s untenable) to drive down wages (which merely creates more accounting profits), rather than increase aggregate production (from which most benefit). In short, your claim is only true if industry is already operating at full capacity; however, since WWII, US industry has only operated at an average of about 70% of capacity. Right now, it’s even lower – barely over 50%.

“Now I grant you that this is only true in a Capitalist economy operating a free market.”

Ah yes, the “free market.” If only one existed, we’d have the capitalist utopia you imagine. Of course, in the real world, you find that collusion (e.g., price and wage fixing, and other forms of anti-competitive practice) amongst large enterprises is the norm, and “free market” competition is a very rare exception – if it exists at all. In practice (and I am well aware that Friedmanites and Hayekians have a very difficult time distinguishing between fantasy and reality), instead of “free market competition,” you find cartels, monopolies, oligopolies, monopsonies, oligopsonies, and on and on.

“In a socialist economy the capital is static mandated by the government.”

What on earth are you talking about?? To my knowledge, there is not a single “socialist” economy in the world which has a zero-growth policy. The Soviet Union was THE “truly socialist” economy. In 1917, there was virtually no industry in the country. By 1941, they were turning out tanks, planes, rifles, and all sorts of munitions in the millions. Now, sorry if I seem harsh, but you can’t make absolutely false, totally absurd statements like that and expect to be taken seriously.

As to how socialist economies actually work, we must first realize that “socialism” is an extremely nebulous term; these days, all it really means is that production should be organized to benefit the whole society, not just a small elite. As a practical matter, we can conceptually divide socialist economies into two different types: on the one hand, you have those of the command-and-control sort, such as that which existed in the USSR, where the state owns almost all capital, and makes all or nearly all decisions concerning production. On the other hand, you have those approximating the Dirigisme model used (very successfully, I might add) in post-WWII France, and emulated in many other countries. Under the Dirigisme model, the state has a strong directive role in production and usually owns some of the strategically important large industries; however, small and medium-sized enterprises operate as in a capitalist system. It’s actually debatable as to whether or not this model is truly “socialist,” as the highest form of capital organization remains the equities markets, but that’s just arguing semantics. Likewise, there is never a hard-and-fast distinction in practice – the Social Market Economy of Germany is mostly privatized, but heavily regulated and unionized, and the labor unions hold seats on the boards of most major companies; the Soviets, on the other hand, set the standard for a centrally planned economy, but even under Stalin, private enterprise never disappeared entirely (though it was only about 1% of the economy for most of the Union’s history). Other variants exist, but these are the two primary models of teh socializms.

So, under the Soviet model, basic production guidelines were put forward by the Politburo in a series of 5-year plans; these included outlines of major investment projects, preliminary targets for the production of basic commodities, and general economic strategy. After approval and revision by the Communist Party’s Central Committee, the plan was sent to government ministries for further review, revision and elaboration. Next, the economic plan went to Gosplan, the Soviet planning agency. Gosplan would gather data on enterprise inventories, and ensure input commodities were provided for the planned outputs for each sector of the economy. The plan was then broken down further for individual regions, economic ministries, enterprises, and so forth. During this process, there were various reviews and bargaining procedures. The individual enterprises – which weren’t all that different from capitalist companies – of course were responsible for doing the actual production.

However, totally contrary to your assertion, the Soviet Economy was always oriented around (and nearly always achieved, until the late 70’s) high growth through the development of heavy industry and large infrastructure projects. This approach was quite successful for a long time: by the 1970’s, the Soviet economy was the 2nd largest in the world; destitution, starvation, and unemployment (all rampant pre-1917) had become virtually non-existent; industrial and infrastructure development were closing in on Western standards; and living standards had risen many-fold since the revolution.

However, due primarily to inept and short-sighted leadership, the USSR ran into three major problems beginning in the 1970’s: first, while the defense and related sectors remained top-notch until the end, for a variety of reasons, it became increasingly difficult (in no small part due to official state ideology) to transfer scientific and productive improvements from the defense sector to the civilian economy; this led to continued growth in the defense sector, but much slower growth in civilian production. Second, due to the high oil prices during this time, the USSR was flush with foreign exchange earnings. This induced the intelligentsia to stop making adequate investments in infrastructure and industrial production, instead relying on forex subsidies to enterprises to encourage growth. When oil tanked in the 1980’s, these subsidies became unsustainable, their balance of payments deficit exploded, so to maintain output, the leadership was forced to go deeply into debt. Third, the debacle in Afghanistan wreaked havoc on the already stagnating economy, necessitated even more foreign borrowing, and began a process of physical breakdown of the economy. Gorbachev of came to power in the 1980’s, but rather than rebuild the physical economy, he engaged in draconian austerity policies (which only aggravated the ongoing physical breakdown) and dismantled parts of the planning apparatus, which did not result in an increased role of market forces, but merely led to chaos, rampant shortages of goods, and shortly thereafter, the collapse of the USSR.

—

As for the “Euro-Socialists,” as you call them, you don’t know what you’re talking about here either. The general philosophy of European economic policy is that the state provides some direction for private production, as well provision of an array of high-quality social services, while the private sector does most of the heavy lifting. Basically, they’re just not as dogmatic about economic policy over there; if the state can do something best, then the policy is for the state to do it, if the private sector can do it better, then it tends to be a private-sector activity. To go back to France again, which provides a typical example (and because I’ve lived there) the state owns majority stakes in the railroad system (SNCF), the power grid (EDF), gas infrastructure (GDF), the national airline (Air France), the state nuclear plant manufacturer (Areva), and the mail service (La Poste). However, these are not structured as government agencies, but rather as société anonymes (S.A.‘s, public corporations). Most of these companies have a minority of their stock listed on public exchanges. The state also has minority stakes in many other large companies, mostly in the aerospace and defense, oil & gas production, banking, transport, and telecom sectors. However, these companies aren’t as vertically integrated as their US counterparts; a much greater share of production occurs in fully private small- and medium-sized enterprises. All of the shops, cafes, and restaurants are privately-run small businesses. Agriculture is almost all family farms.

Health care is sort of complicated: one of 3 state insurance funds pays for 70-95% of necessary procedures, and most people have what they call “top-up” private insurance for the balance. General practitioners are almost exclusively private practitioners, as are lower percentage of specialists; I’d say a little over half of the hospitals are publicly owned and managed. All-in-all, the French health care system routinely scores as the best in the world, and I concur completely with that assessment. I’d much rather be sick there than over here – not least because I know I won’t have to file for bankruptcy if I require some expensive treatment.

If you ask me, I think their Dirigisme approach works extremely well, and it’s really impressive what they’ve accomplished. I mean, this is a country with no energy resources other than a bit of uranium, and they’re one of the world’s largest energy exporters. You can take a high-speed train and get from Paris to the Med in just a few hours. There’s almost no poverty, and despite some racial/ethnic/religious tensions, crime is a small fraction of what it is here. They only work 35 hours a week, but they’re the most productive workforce in the world, and they make a good bit more than Americans for the same work. So yeah, it’s just great, all of it – the schools, the culture, the food, the wine, the women, the language, the 6 weeks of guaranteed vacation – it all kicks the hell out of what we’ve got here on the American economic plantation. Well, except for all of that god-awful accordion music, but hey, no place is perfect. In fact, I’m highly considering moving back in a few months. Especially considering that the fake American consumer economy is collapsing, whilst France and Germany which, according to free-market fanatics and laissez-faire Talibanis, have “socialist” economies (e.g., economies based on scientific and technological development, social solidarity, the production of useful things, and taking care of the needs of the population. This stands in stark contrast to the American economy, which is now solidly based on real estate and financial derivatives speculation, nickel-and-diming your fellow citizens to death, worldwide banking ponzi schemes, the wanton slaughter of poor brown people around the globe, and the shoveling of ever-greater quantities of GMO franken-foods down the pie-hole of the brain-dead, morbidly obese American consumer like some duck on a Foie Gras farm.) are already in recovery.

“This causes their economies to stagnate to the degree the collectivist tendencies of socialism are enforced.”

Seeing as how you’ve already embarrassed yourself enough by spouting your warmed-over, incessantly debunked Reagan-era talking points, I don’t think this even requires a response.

“I recommend you read “Cowboy Capitalism: European Myths, American Reality” By Olaf Gersemann”

I’ve heard of it – more neo-liberal garbage about how the Europeans should abandon common sense, common decency, civil society, and social solidarity, and instead adopt the American credo of the last few decades: “GIMME IT, IT’S MINE! GIMME GIMME! I DON’T OWE ANYONE ANYTHING, I’M A SELF-MADE MAN!!! GIMME MORE! I WANT IT NOW!!! WHAT, YOU DON’T HAVE HEALTH INSURANCE?! WHO CARES, YOU LAZY CANCER KID?! I don’t care if you’re 9 years old and have leukemia, PULL YOURSELF UP BY YOUR BOOTSTRAPS AND GO GET A JOB WITH BENEFITS ALREADY! SCREW YOU KID, I PAY ENOUGH TAXES ALREADY! IT’S MINE! IT’S ALL MINE! GIMME GIMME GIMME!!! MORE MORE MORE!!!”

Yeah, real great that’s worked out for us. Me, I think I’m going to move back across the pond. I’m sure your free-market slogans and laissez-faire dogmas will be a great comfort as the phony American economy descends into neo-feudalism and Zimbabwean living standards. Oh wait – you’ll just go back to wallowing in willful ignorance and your trusty old anti-politics. Yes, just blame everything on that evil gubmint! It’s all the gubmint’s fault!

“The main characteristic of socialism (and of communism for that matter) is public ownership of the means of production, and, therefore, the abolition of private property.”

Not private property entirely, just capital. Even the Soviet Union had personal property rights.

“Under fascism, people retain the pretense of private property, but the government holds total power over its use and disposal.”

No, under fascism, real government – an organization formed by and for the general public to advance the general welfare – doesn’t actually exist; it is merely a subsidiary of private corporations. So it’s private capital that makes such decisions. The trend in unregulated or loosely-regulated capitalism is towards consolidation and cartelization; however, once this reaches a point in which a few oligopolies dominate every industry, these cartels cannot expand any further, the ruling oligarchs take over the state and turn to cuts in wages and production to restore profitability. This is the essence of fascism: it is the end game of laissez-faire capitalism IN PRACTICE (though I realize not according to free-market dogma).

“Under both systems, sacrifice is invoked as a magic, omnipotent solution in any crisis”

You don’t know what you’re talking about; stop copying talking points verbatim off of the Mises Institute website. In fact, it is under laissez-faire capitalism that sacrifice is demanded by those least able to provide it. We’re seeing this now all over the world: the people are constantly told that they must sacrifice their wages, living standards, pensions, social services, etc, all in the name of “competitiveness” – that great ideological fetish of the well-to-do.

“The socialist-communist axis keeps promising to achieve abundance, material comfort and security for its victims, in some indeterminate future”

While I don’t consider myself a socialist, it is simply false to say that socialist societies have not delivered on those promises. As more than 50% of their economies are in the public sector, you’d probably call the Nordic countries “socialist” – although maybe you won’t, as they have some of the highest standards of living in the world. The Soviet Union also experienced tremendous economic success up until the 1980’s; in 1917, the Russian Empire was a backwards, feudalistic, largely undeveloped land mass with a tiny aristocracy and the rest of the population living in abject poverty. Not 30 years later, the USSR was an economic, military, and political superpower. So the whole notion that socialism necessarily “creates poverty” is a demonstrable falsehood.

“Bottom line they are both totalitarian, collectivist systems”

I’m sure you think most, if not all of Europe is “socialist.” Is France a totalitarian state? How about Finland? And Germany? I’ve spent considerable time in all of these countries, and I can say without hesitation that they’re freer than the USA. Any hierarchical society can become totalitarian if the ruled don’t hold the rulers accountable and keep them in check. However, laissez-faire capitalism is necessarily a totalitarian system, intrinsically and by definition – it demands total subservience of the population to the twin idols of “the market” and “competition.” If you don’t like it, well tough shit, because you have no other alternative. That is the essence of totalitarianism.

“Try Capitalism.”

Your conception of “pure” capitalism has never existed and will never exist. It is a pipe dream and a marketing slogan, nothing more.