Can Pelosi Dance with Ocasio-Cortez?

By SAM URETSKY

Nancy Pelosi was never a good stand-in for Cruella Deville, unlike Paul Ryan, the flim-flam man whose ideas ran the gamut from A to B, up to and including the self-financing tax cut, but who was presented to the public as an intellectual wonk who was prepared to tackle difficult subjects.

One of the best descriptions of former-Speaker Ryan appeared in the web site the Ringer. “The outgoing speaker of the House leaves behind little more than Trump-era wreckage and lives on as an embodiment of how the quasi-populists overtook the pseudo-intellectuals of the Republican Party.” In contrast, Ms. Pelosi has been (per Paul Krugman) “... the most effective House speaker of modern times.” Her achievements included getting the Obama stimulus plan and Obamacare through the House, while blocking George W. Bush’s plan to privatize Social Security. She was unmatched at fund raising, and could deliver votes whenever votes were needed.

Perhaps because of her effectiveness, Republicans attempted to vilify her so that her Real Clear politics average was 32.5% favorable and 47.8% unfavorable. These numbers would be more convincing if, in 2001, Gallop conducted a survey asking Americans to identify the Speaker of the House. Six percent of the people polled identified the Speaker (Dennis Hastert, R-Ill). Another 6% said someone else. But 88% didn’t even try to guess. There’s no reason to believe that the voting people outside of San Francisco have been paying any more attention to anyone in Washington other than Donald Trump.

And so, this year the Republicans have a new target, Rep. Alexandria Ocasio-Cortez (D-N.Y.), the youngest, and arguably the most photogenic member of Congress. Rep.Ocasio-Cortez’s sins include a nearly decade-old video of her dancing as a student at Boston University, and an interview with 60 Minutes recommending a 70% marginal income tax rate for people with incomes above $10,000,000.

Since the days of Ronald Reagan, Republican orthodoxy has been the more you get the more you can keep. This is apparently based on the line from Oliver Wendell Holmes Sr. (The physician, not his son, the Supreme Court justice): “I only ask that heaven send / A little more than I can spend …”

In spite of this, a bit of arithmetic seems to show that Rep. Ocasio-Cortez’ numbers are roughly optimal from the viewpoint of economic analysis. In 2011, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance, along with Emmanuel Saez, published a paper, “The Case for a Progressive Tax: From Basic Research to Policy Recommendations,” in which they recommended a tax rate of 73% for the highest earners.

Since Rep. Ocasio-Cortez proposed high marginal tax rates, the actual take-home would be higher than these examples, since the first $10 million would be taxed at a lower, but unspecified, rate. Ginni Rometty, CEO of IBM had a total compensation of $96,764,750 in 2017. Take off 73% and she would be left with $26,126,482.50. Elon Musk of Tesla had a salary of only $45,936, but a total compensation package of $99,744,920, which, at a 73% tax rate, would leave him with $26,931,128.40. Marc Lore of Walmart, the highest-paid corporate executive, had a total compensation of $236,896,191, which would leave him with $63,961,971.57 after taxes. What ever happened to “wealth beyond avarice”? Note that Christina Romer, the former head of President Obama’s Council of Economic Advisers, in a 2011 paper, “The Effects of Marginal Tax Rates: Evidence from the Interwar Era,” recommended a marginal tax rate of 80%.

The Romer paper also states, “We find little evidence of an important relationship, suggesting that the long-run productivity effects of changes in marginal rates may also be small.” This finding quashes the Laffer Curve notion, popular among Republican tax cutters, that letting the filthy rich keep more of their income will lead to greater investment leading to more economic growth and higher incomes for the rest of us.

The Diamond-Saez paper made three recommendations: “First, very high earners should be subject to high and rising marginal tax rates on earnings. Second, low-income families should be encouraged to work with earnings subsidies, which should then be phased-out with high implicit marginal tax rates. Third, capital income should be taxed.”

In other words, Rep. Ocasio-Cortez seems to be in agreement with the best informed economic thought. If she can work together with Speaker Pelosi to get some of these ideas adopted, perhaps the rest of us will have something to dance about.

Sam Uretsky is a writer and pharmacist living in Louisville, Ky. Email sdu01@outlook.com.

From The Progressive Populist, February 15, 2019

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