The Repeal of ObamaCare—What Will We Be Left with?

We know the new administration is dedicated to the repeal of the Alternative Care Act. Since we don’t want to be left with no health care whatsoever or a totally destructive substitute for the present one, we are all curious to learn what the other side is proposing to replace it. This suggestion from the other side which we found in the Tuesday Wall Street Journal therefore catches our attention and may interest you. Do you think it might work?


By JOHN C. GOODMAN, Jan. 23, 2017

The provision was buried deep in a 1,000-page bill that Congress passed in December by large bipartisan majorities. Most lawmakers probably didn’t know it was there. Yet it is the start of an answer to the biggest question on Washington’s mind: What to do about ObamaCare?

The 21st Century Cures Act, which President Obama signed Dec. 13, focuses mainly on helping patients obtain breakthrough drugs and medical devices. But it also includes provisions that will give small employers—those with fewer than 50 workers—more flexibility in the insurance marketplace. As Republicans debate how to replace ObamaCare, giving that same flexibility to all employers would be a perfect place to start.

One reason that most Americans get health insurance through work is that there are tax advantages for doing so: Employers can pay for the insurance with pretax dollars. If companies wanted to simply give their workers cash, and let the employees choose their own insurance, that money would be taxed by Uncle Sam.

The problem is that this system ties the worker’s insurance to his job. If he quits, he loses coverage. Polls have consistently shown that what employees most want in health insurance is portability. They want to own their policy and take it from job to job.

Many companies would like to accommodate this by giving employees a “defined contribution”—a fixed amount of money—and letting them choose their own health insurance. Thanks to the 21st Century Cures Act, small employers now can do this. They can put pretax dollars into accounts called Health Reimbursement Arrangements, or HRAs. Workers can then use that money to buy their own health coverage.

This represents an abrupt reversal of policy. Since 2015 the Obama administration has been threatening to punish any employer who used HRA accounts in this way with a fine as high as $100 per employee per day.

Small companies were already exempt from ObamaCare’s employer mandate, but this has taken on increased importance. They are now the only employers that can choose how health insurance will be subsidized by the federal government. They can (1) use pretax dollars to provide health insurance directly; (2) pay higher taxable wages and allow the employees to buy their own insurance, benefiting from the ObamaCare tax credits if they quality; or (3) put pretax dollars into an HRA. Extending this freedom to all employers would be a remarkably effective solution to ObamaCare’s many problems.


One reason so little progress has been made in increasing employer-based coverage is that larger companies are meeting the law’s minimum requirements by offering low-wage workers bronze ObamaCare plans. But these plans might have deductibles of $6,000 or more and premiums equal to 9.5% of the employee’s wage. Workers routinely reject this kind of coverage.

What if these firms were given the same choice that small businesses have? What if they could put money into an HRA for each employee, which the worker could then use to purchase coverage on his own, with the help of tax credits?

Economists like tax credits because of their incentive effects. They subsidize the first dollars of coverage (basic insurance we want everyone to have) instead of the last dollars (extensive policies with bells and whistles). Such credits also allow employees to forgo unneeded coverage and increase their take-home pay, without tax penalty.

The tax credits offered in the ObamaCare exchanges favor low-wage workers, since the subsidies start high and phase out as income rises. On the other hand, the ability to buy insurance with pretax dollars favors high-wage workers, since the value of that option depends on the employee’s tax bracket. But a universal tax credit, which is what some Republicans are proposing, would offer the same amount for everyone, regardless of income.

These changes wouldn’t solve every problem with ObamaCare. Lawmakers would still need to stop the race to the bottom in which insurers try to attract healthy people and scare off sick ones with narrow networks and sky-high deductibles. One method: Impose financial penalties on insurers who drive enrollees to other plans. Another issue is how to prevent people from gaming the system by remaining uninsured until they get sick. Medicare has managed to do that by charging seniors higher premiums if they don’t sign up when they are eligible.

Fortunately, there is legislation to accomplish all this and more. Rep. Pete Sessions (R., Texas) and Sen. Bill Cassidy (R., La.) have offered a bill to create a universal tax credit worth $2,500 for an adult and $8,000 for a family of four. That’s generous enough to allow everyone access to Medicaid-like coverage. The bill would remove federal impediments to portable insurance, offer large employers a choice of tax regimes (tax credits or the current system), and give every American access to a Health Savings Account.

We have already done much of this for small businesses without any partisan bickering at all. It should be a no-brainer to give big companies the same flexibility.


Doctor and nurse conferring in hospital corridor

Goodbye, Health Care?

Mr. Goodman is president of the Goodman Institute for Public Policy Research and the author of “Priceless: Solving America’s Healthcare Crisis” (Independent Institute, 2012).

How Elites Forsake Their Countrymen


Look what turned up in today’s Wall Street Journal: a shocking article about how today’s moneyed class, the famous 1 percent, the new oligarchs, are keen to push globalism, immigration, internationalism, whatever you care to call it that matches workers’ salaries world-wide against each other, and take full credit for their humanitarianism, as long as they themselves don’t come in contact with or suffer unpleasant consequences from their generosity. That they leave to the working-class people, from whom they have long ago dissociated themselves, to work out: how to get on with foreigners with totally different cultural and religious backgrounds, willing to work for much less pay.


The article points out this international elite is truly that–international–and  has no sense of loyalty to the fellow countrymen from whom they emerged. This has long been evident. It is only surprising that it should appear in the Wall Street Journal and not the New York Times. Bravo to Peggy Noonan, who wrote this piece for the journal,  for bringing it to our attention. We have abbreviated the original.

. . . I close with a story that I haven’t seen in the mainstream press. This week the Daily Caller’s Peter Hasson reported that recent Syrian refugees being resettled in Virginia, were sent to the state’s poorest communities. Data from the State Department showed that almost all Virginia’s refugees since October “have been placed in towns with lower incomes and higher poverty rates, hours away from the wealthy suburbs outside of Washington, DC” Of 121 refugees, 112 were placed in communities at least 100 miles from the nation’s capital. The suburban counties of Fairfax, Loudoun and Arlington—among the wealthiest in the nation, and home to high concentrations of those who create, and populate, government and the media—have received only nine refugees.

Some of the detachment isn’t unconscious. Some of it is sheer and clever self-protection. At least on some level they can take care of their own. Nothing in their lives will get worse. The challenge of integrating different cultures, negotiating daily tensions, dealing with crime and extremism and fearfulness on the street—that was put on those with comparatively little, whom I’ve called the unprotected. They were left to struggle, not gradually and over the years but suddenly and in an air of ongoing crisis that shows no signs of ending—because nobody cares about them enough to stop it.


The powerful show no particular sign of worrying about any of this. When the working and middle class pushed back in shocked indignation, the people on top called them “xenophobic,” “narrow-minded,” “racist.” The detached, who made the decisions and bore none of the costs, got to be called “humanist,” “compassionate,” and “hero of human rights.”

The larger point is that this is something we are seeing all over, the top detaching itself from the bottom, feeling little loyalty to it or affiliation with it. It is a theme I see working its way throughout the West’s power centers. At its heart it is not only a detachment from, but a lack of interest in, the lives of your countrymen, of those who are not at the table, and who understand that they’ve been abandoned by their leaders’ selfishness and mad virtue-signaling.

On Wall Street, where they used to make statesmen, they now barely make citizens. CEOs are consumed with short-term thinking, stock prices, quarterly profits. They don’t really believe that they have to be involved with “America” now; they see their job as thinking globally and meeting shareholder expectations.

In Silicon Valley the idea of “the national interest” is not much discussed. They adhere to higher, more abstract, more global values. They’re not about America, they’re about . . . well, I suppose they’d say the future.

In Hollywood the wealthy protect their own children from cultural decay, from the sick images they create for all the screens, but they don’t mind if poor, unparented children from broken-up families get those messages and, in the way of things, act on them down the road.

From what I’ve seen of those in power throughout business and politics now, the people of your country are not your countrymen, they’re aliens whose bizarre emotions you must attempt occasionally to anticipate and manage.

In Manhattan, my little island off the continent, I see the children of the global business elite marry each other and settle in London or New York or Mumbai. They send their children to the same schools and are alert to all class markers. And those elites, of Mumbai and Manhattan, do not often identify with, or see a connection to or an obligation toward, the rough, struggling people who live at the bottom in their countries. In fact, they fear them, and often devise ways, when home, of not having their wealth and worldly success fully noticed.

                                        His “Home away from Home”Unknown-2Music mogul David Geffen purchased “Pelorus” from Russian oligarch Roman Abramovich in May 2011. Since one helicopter pad just isn’t enough, this superyacht has two, in addition to two swimming pools and a collection of smaller boats on the tender deck. One guest suite has a wall that lowers to transform into an ultra-private veranda. Cost: $300 million

Affluence detaches, power adds distance to experience. I don’t have it fully right in my mind but something big is happening here with this division between the leaders and the led. It is very much a feature of our age. But it is odd that our elites have abandoned or are abandoning the idea that they belong to a country, that they have ties that bring responsibilities, that they should feel loyalty to their people or, at the very least, a grounded respect.

Thomas Piketty, Continued

Taxation of Excessive Incomes–An American Invention, Part II


Furthermore, the Great Depression of the 1930s struck the United States with extreme force, and many people blamed the economic and financial elites for having enriched themselves while leading the country to ruin. (Bear in mind that the share of top incomes in the US national income peaked in the late 1920s, largely due to enormous capital gains on stocks.) Roosevelt came to power in 1933, when the crisis was already three years old and one-quarter of the country was unemployed. He immediately decided on a sharp increase in the top income tax rate, which had been decreased to 25 percent in the late 1920s and again under Hoover’s disastrous presidency. The top rate rose to 63 percent in 1933 and then to 79 percent in 1937, surpassing the previous record of 1919. In 1942 the Victory Tax Act raised the top rate to 88 percent, and in i944 it went up again to 94 percent, due to various surtaxes. The top rate then stabilized at around 90 percent until the mid-1960s, but then it fell to 70 percent in the early 1980s. All told, over the period 1932-1980, nearly half a century, the federal income tax rate in the United States averaged 81 percent.

The Anglo-Saxon attraction to progressive taxation became even clearer when we look at the estate tax. In the United States, the top estate tax remained between 70 to 80 percent from the 1930s to the 1980s, while in France and Germany the top rate never exceeded 30-40 percent except for the years 1946-1949 in Germany (see Figure 14.2).

IMG_0549 (1)

The only country to match or surpass peak US estate rates was Britain. The rates applicable to the highest British incomes as well as estates in the 1940s was 98 percent, a peak attained in the 1970s—an absolute historical record. Note, too, that both countries distinguished between “earned income,” that is, income from labor (including both wages and nonwage compensation) and “unearned income,” meaning capital income (rent, interests, dividends, etc.). The top rates indicated indicated in Figure 14.1 for the United States and Britain applied to unearned income. At times, the top rate on earned income was slightly lower, especially in the 1970s. This distinction is interesting, because it is a translation into fiscal terms of the suspicion that surrounded very high incomes: all excessively high incomes were suspect, but unearned incomes were more suspect than earned incomes. The contrast between attitudes then and now, with capital income treated more favorably today than labor income treated more favorably today than labor income in many countries, especially in Europe, is striking. Note, too, that although the threshold for application of the to rates has varied over time, it has always been extremely high: expressed in terms of average income in the decade 2000-2010, the threshold has generally ranged between 500,000 and 1 million euros. In terms of today’s income distribution, the top rate would therefore apply to less than 1 percent of the population (generally somewhere between 0.1 and 0.5 percent).


Highclere Castle, Hampshire, England, traditional  country seat of the Earl of Carnarvon, was designed in the 19th century by Sir Charles Barry, architect of the Houses of Parliament, in the Jacobean Revival style. It sits in a 1000 acre park  designed a century earlier by Capability Brown, England’s foremost landscape designer. Today the Earl and his family live in “a modest cottage on the grounds,” no longer able to afford the upkeep of such a magnificent domicile.

The urge to tax unearned income more heavily than earned income reflects an attitude that is also consistent with a steeply progressive inheritance tax. The British case is particularly interesting in the long-run perspective. Britain was the country with highest concentration of wealth in the nineteenth and twentieth centuries. The shocks (destruction, expropriation) endured by large fortunes fell less heavily there than on the continent, yet Britain chose to impose its own fiscal shock—less violent than war but nonetheless significant: the top range ranged from 70 to 80 percent or more throughout the period 1940-1980. No other country devoted more thought to the taxation of inheritance in the twentieth century, especially between the two wars. In November 1938, Josiah Wedgewood, in the preface to a new edition of his classic 1929 book on inheritance, agreed with his compatriot Bertrand Russell that the “plutodemocracies” and their hereditary elites had failed to stem the tides of fascism. He was convinced that “political democracies that do not democratize their economic systems are inherently unstable.” In his eyes, a steeply progressive inheritance tax was the main tool for achieving the economic democratization that he believed to be necessary.


And the Jews’ passover was at hand, and Jesus went up to Jerusalem  And found in the temple those that sold oxen and sheep and doves, and the changers of money sitting: And when he had made a scour…

Source: About

Pension Holders Need a New Retirement Plan, Not Stock Tips

Why Force Amateurs to Gamble Their Future on Shaky Stock Prices?

dont-be-surprised-if-this-is-the-start-of-a-stock-market-crash- Floor of the New York stock exchange October 31, 1929
Steven Rattner, who wrote this article, is a Wall Street executive and a contributing opinion writer to the New York Times. It appeared in the June 21 issue.

 HAVING long fretted over the state of our retirement system, I was delighted that the Department of Labor is vigorously defending its new rule requiring brokers to recommend only investments that are in the best interests of holders of retirement accounts.

Hats off to the Obama administration for forcefully addressing the very real conflict between commission-based financial advisers and their clients. But the country’s retirement problems are vast and require much more reform. In fact, we need a complete revamping of our pension arrangements.

Once upon a time, many Americans enjoyed an employer-based, defined-benefit system in which they could depend on a no-hassle pension of a specified amount.

But about two decades ago, faced with mounting costs and increased regulatory burdens, employers began replacing traditional plans with “defined contribution” plans like 401(k)’s.

That created two immense problems. First, only about 10 percent of participants have been contributing the maximum amount allowable.

As a consequence, the average American household approaching retirement in 2013 had just $111,000 in 401(k)’s and I.R.A.s, a fraction of the six to 11 times annual earnings needed to be financially secure, according to calculations by Alicia Munnell, an economist and retirement expert at Boston College.

More important, the move to defined-contribution plans turned every American with a retirement account into an investment manager — a tough business for even the savviest professionals.

Last November, Goldman Sachs — an exceptional firm — issued six investment recommendations for 2016: buy stocks in large banks, sell yen and so forth. In early February, Goldman abandoned five of them, after huge losses in just a few short weeks.

Nor are the Wall Street firms’ records with individual stocks anything to brag about. In this year’s first quarter, the stocks rated highest by analysts fell and the stocks rated lowest rose.

If highly paid professionals often fail to deliver, the notion of amateurs trying to play the game is nuts. What sane person would try to rewire his house or take out her own appendix? And yet under our supposedly improved retirement system, Americans are encouraged to allocate their assets, evaluate mutual funds and even select individual stocks.

It ain’t working. In the first quarter of 2016, domestic mutual funds — a favorite investment vehicle for these retirement accounts despite their chronic underperformance — had their poorest showing in nearly two decades. Through June 15, the 20 most popular funds for 401(k) assets were up 0.6 percent so far in 2016, compared with 2.4 percent for the Standard & Poor’s index.

Finally, even with reforms like the new Labor Department rule, the system is rigged against most individuals: As small investors, they pay higher fees and don’t have access to the smartest advisers. As a professional investment manager, I’m appalled at what I see happening to many friends.

While we can’t simply blow up the current system, we should take the smaller step of requiring companies (other than small businesses) to offer revamped 401(k)’s, including mandatory contributions from employers and employees totaling at least 10 percent of wages annually.

Those funds should be professionally managed by independent, multiemployer entities created for this purpose and structured to avoid the conflicts of interest inherent in our current system. (To minimize the burden on Americans who are already struggling, the program would be phased in.)

Until we fix the broader mess, individuals should follow a few simple rules:

  • Try to save as much as possible of your income, ideally 10 percent to 15 percent.
  • Never, ever pick a stock or an actively managed mutual fund. Use only low-cost index funds.
  • Emphasize equities when you are young; fixed income as you get older. Better yet, consider target-date funds, which do this rebalancing for you.
  • If you have a good 401(k) plan and you change jobs, either leave it where it is or move it to your new employer; I.R.A.s should be your last choice. They often come with higher fees and at least until the new rule takes effect, bad advice.
  • Don’t cash out early.

As a nation, we indisputably face a retirement crisis. The one advantage of our current system is that we each have the ability not to make it worse.

Trump Backs Off Hint of Raising Taxes on the Rich

The 1 percent can breathe a small collective sigh of relief says Peter Eavis in today’s NYTimes


Hillary Clinton’s platform contains many new taxes for the wealthy, and in recent days it seemed that Donald J. Trump might be moving in the same direction. When asked Sunday on “Meet the Press” about taxing the rich, Mr. Trump said: “For the wealthy, I think, frankly, it’s going to go up. And you know what? It really should go up.”

He now says he wasn’t talking about the current income tax rate for people in the highest bracket, which is 39.6 percent. If he had been, it would have been a big move for Mr. Trump, the presumptive Republican nominee, to push that rate higher. His official tax plan envisions a top rate of 25 percent.

In a phone interview on Monday, I sought clarification from Mr. Trump on his remarks about raising taxes on the rich. I asked him whether the highest earners would be paying more than 39.6 percent if he were president.

“No, in fact, you’d be lower than that,” Mr. Trump said.

But how, given that he had said that taxes would be going up for the wealthy? Mr. Trump explained that he meant he might have to accept a top tax rate that is higher than the 25 percent his plan calls for. To get his tax plans through Congress, he would probably have to compromise, but even after such concessions, the top rate would be lower than it is now, he said.

Congress has not passed some of President Obama’s more ambitious tax proposals, and it may be only slightly more receptive to the next president. Mr. Trump, for instance, would find it particularly hard to slash tax rates if the Democrats controlled the Senate after November. And Mrs. Clinton is highly unlikely to get all she wants if the Republicans keep majorities in both houses.

That doesn’t mean that tax issues won’t be prominent in the election. Mr. Trump and Mrs. Clinton can use their tax plans to define themselves — and their opponent — as they woo undecided voters.

Mr. Trump’s tax cuts may help win over voters who are concerned about his other ideas or the tone of his campaign.

Still, some of his support comes from people whose economic prospects have dimmed as the wealthy have gotten richer. And according to tax analysts, the rich would have a bigger tax windfall than the middle class under Mr. Trump.

The Tax Policy Center, a joint project of the center-left Urban Institute and Brookings Institution, calculates that Mr. Trump’s policies would on average give the top 1 percent of taxpayers a federal tax cut of $275,000, or 17.5 percent of their after-tax income, while middle-income households would get a $2,700 tax cut, equivalent to 5 percent of their after-tax income.

So, I asked Mr. Trump, why not tax the rich at higher rates than they are subject to today?

“I really want to keep taxes for everybody as low as possible,” he said. “When you start making them too high, you are going to lose people from the country, and oftentimes these are the people who create the jobs.”

Mr. Trump’s tax plans could leave him vulnerable on another front. Budget analysts say that slashing taxes by the amounts he envisions would lead to a sharp drop in revenue. The Tax Policy Center estimates a drop in revenue of $9.5 trillion over 10 years. To put that sum in perspective, the federal government took in revenue of $3.2 trillion last year. If spending were not cut in response, and a much faster-growing economy did not provide a lot more revenue, the federal government would have to borrow to cover the shortfall, pushing up the national debt.

These predictions of a big shortfall allow Mrs. Clinton to promote herself as a sound fiscal manager, which could help in her efforts to attract moderate Republicans put off by Mr. Trump. Mrs. Clinton’s tax increases would in theory mostly offset her spending, according to a study by the Committee for a Responsible Federal Budget, a bipartisan policy organization.

Mr. Trump, for his part, disputes the notion that steep declines in revenue would result from his tax cuts. “Those numbers are crazy,” he said, noting that the economy grew strongly after the big Reagan tax cuts. (It’s worth noting that the economy also grew strongly after tax increases by Bill Clinton.)

And what if Mrs. Clinton says she is the fiscal conservative and he is not? “But she’s not going to get the economy going,” Mr. Trump said.

By focusing her tax increases almost entirely on the wealthy, Mrs. Clinton says she does not have to squeeze more from the middle class. That stance helps her strike a chord with voters who are concerned about income inequality and, if she locks up the nomination, could help her pull in Bernie Sanders supporters in November.

In Mrs. Clinton’s tax plan, a large chunk of the extra revenue would come from limiting how much high earners can deduct from their taxable income. People would pay an extra 4 percent of tax on income over $5 million. And those with income over $1 million would face a minimum tax of 30 percent, called the Buffett Rule. Mrs. Clinton’s proposed changes to estate taxes would also lead to the rich paying more.

Mr. Trump, in addition to cutting income taxes for the rich, intends to get rid of the estate tax altogether.

Still, there are elements of his plan that he might highlight if he is accused of favoring the wealthy. Like Mrs. Clinton, he wants to reduce or eliminate deductions for the rich. When I asked Mr. Trump what type of deductions he intended to limit, he said, “We are preparing a list of the various deductions and we are going to release that next week.”

Maybe then the 1 percent will be able to see if there is anything to fear from Mr. Trump.


The Donor Class

Buried in today’s lead editorial in the Wall Street Journal by Daniel Henninger is the following clear identification of the plutocrats who for the last forty years have been shaping our politics from their duck blinds. “Prend garde!” (stay alert) is our message this morning.


For anyone whose job now is to unify the Republican Party after its neutron-bomb primary, the problem doesn’t run just down ballot, but also down donor. There is a risk the donors might start turning off the party’s financial oxygen, down or up ballot, when Donald Trump needs more of it than even he’s got.

Understand, this isn’t about the money. It’s about the reasons behind the money.

Sentenced as he’s been to hang out with Republicans and compete against Ted Cruz the past year, Mr. Trump by now has heard of “the donor class.”

Allow me to explain.

The idea of a “donor class” was conjured by the people who picked Ted Cruz as their candidate to take control of the Republican Party—essentially, a coup. Also folded in as a target of this largely manufactured anger was the “Establishment.” Mr. Koch at some point must have noticed these people really weren’t distinguishing between crony capitalists, his own bête noire, and conservative contributors.

Their historic bad luck is that Donald Trump stole the real anger, and they lost everything—the party, the presidency and credibility. Saying amid the GOP primaries that it’s “possible” he could support Hillary was a Kochian shot across the bow of the manic Republicans.

Charles Koch’s history, like that of hundreds of other “donors” from his generation—most of them builders of their own businesses—runs parallel to the rise of the conservative movement as a political force since Ronald Reagan.

These men and a not insignificant number of women would say they’ve been in the business for decades of finding out how to make America great again, and keep it that way.

That movement ran alongside the Republican Party and at times overlapped with it.

Mr. Koch years ago helped start the Cato Institute. Other funders were behind the Hoover Institution, the American Enterprise Institute, the original Heritage Foundation, the Competitive Enterprise Institute and many state-based think tanks.

These donors wanted a politics based on ideas, not just data-slicing votes by neighborhood.

Those ideas—on taxes, regulation, public pensions, commercial liability, welfare, education, policing—fed into a long list of often unlikely electoral victories.

Most recently, it has produced Republican governors in Democratic states: Bruce Rauner in Illinois, Rick Snyder in Michigan, Larry Hogan in Maryland, Charlie Baker in Massachusetts, Chris Christie in New Jersey and Scott Walker in Wisconsin. The Left demonizes something called “the Koch brothers” because this movement turned the Democrats into losers.

A remarkable number of these governors, like Mr. Trump, were businessmen, party outsiders. But they absorbed the ideas of successful conservatism. Whether this was “presidential” or “gubernatorial” is beside the point. It worked.

The counterpart to all this is the galaxy of wealthy liberal donors who will pay for Hillary’s war on Donald Trump to protect what they achieved in the Obama years.





Two books recently have placed the ultimate blame for our current crisis squarely in the laps of the liberal class: Chris Hedges’ Death of the Liberal Class and Thomas Frank’s Listen, Liberal. We will skip over the first because, if Hedges is right, it’s the end of our world as we know it and some of us still have hope that our situation can be saved within our own terms (that is, without resort to violent revolution).

 But the second book by Thomas Frank should give us pause, because most of us are caught in it. His thesis is this, that the professional class, the teachers, lawyers, doctors, architects, etc., on whom our country has counted for so long to remain objective, above the political fray, and steer our democracy over the shoals of greed and corruption and self-interest, has lost its objectivity, no longer associates itself with the working class, the labor unions, the unlucky, and has joined the rarified ranks of the well-educated and the privileged. We are on the wrong side of the class war! Listen to him:


In his syndicated New York Times column for November 21, 2008, David Brooks saluted president-elect Obama for the savvy personnel choices he was then announcing. . .

It was the educational pedigree of the then-forming Team Obama that won the columnist’s esteem. Nearly every person Brooks mentioned—the new president’s economic advisers, even the first lady—had collected a degree from an Ivy League institution, more than one in most cases. . .

Brooks has been obsessed with the tastes and habits of the East Coast meritocracy for as long as I have been reading him, and though he sometimes mocks, he always comes back to his essential conviction, the article of faith that makes a writer like him fit so comfortably at the Times: the well-graduated are truly great people. . .

Brooks did not point out that choosing so many people from the same class background—every single one of them, as he said was a professional-might by itself guarantee closed minds and ideological conformity. Nobody else pointed this out, either. We always overlook the class interests of professionals because we have trouble thinking of professionals as a “class” in the first place: like David Brooks, we think of them as merely as “the best.” They are where they are because they are so smart, not because they are born to an earldom or something.


Truth to be told, lots of Americans were relieved to see people of talent replace George W. Bush’s administration of hacks and cronies back in 2008. Those were frightening times. Still, if we want to understand what’s wrong with liberalism, what keeps this movement from doing something about inequality or about our reversion to a nineteenth-century social pattern, this is where we are going to have to look: at the assumptions and collective interests of professionals, the Democratic Party’s favorite constituency. . .

“Professionals,” on the other hand, are an enormous and prosperous group, the people with the jobs that every parent wants their child to grow up and get. In addition to doctors, lawyers, the clergy, architects and engineers—the core professional groups—the category includes economists, experts in international development, political scientists, managers, financial planners, computer programmers, aerospace designers, and even peoplewho write books like this one.

Professionals are a high-status group, but what gives them their lofty position is learning, not income. They rule because they are talented, because they are smart. A good sociological definition of professionalism is “a second hierarchy”—second to the main hierarchy of money, that is—“based on credential expertise.” Which is to say, a social order supported by test scores and advanced degrees and defended by the many professional associations that have been set up over the years to correct practice, enforce professional ethics, and wage war on the unlicensed. . .

Professionals predict the weather. They organize our financial deals and determine the rules of engagement. They design our cities and draw the traffic patterns through which the rest of us travel. Professionals know when someone is guilty of a moral or criminal misdeed and they also know precisely what form of retribution that culpability should take.

ch25_01Teachers know what we must learn; architects know what our buildings must look like; economists know what the Federal Reserve’s discount rate should be; art critics know what is in good taste ad what is in bad. Although we are the subjects of all these diagnoses and prescriptions, the group to which the professionals ultimately answer is not the public but their peers (and, of course, their clients). They listen mainly to one another. The professions are autonomous; they are not required to heed voices from below their circle of expertise.

In this way professions build and maintain monopolies over their designated field. Now, “monopoly” is admittedly a tough word, but it isnot really a controversial one among sociologists who write about the professions. “Monopolizing knowledge,” according to one group of sociologists, is a baseline description of what professionals do; this is why they restrict entry to their filds Professions certify the expertise of insiders while negating and dismissing the knowledge-claims of outsiders.

Specialized knowledge is, of course, a necessity in this complicated world of ours. From ship captains to neurosurgeons, modern society depends heavily on people with technical expertise. And so nations grant professionals their elevated status, the sociological theory continues, in exchange for a promise of public service. The professions are supposed to be disinterested occupations or even “social trustees”; unlike other elements of society they are not supposed to be motivated by profit or greed. . .

With the rise of the post-industrial economy in the last few decades, the range of professionals has exploded. To use the voguish term, these are “knowledge workers,” and many of them don’t fit easily into the old frame work. They are often employees rather than independent practitioners, taking orders from some corporate manager instead of spending their lives in private practice. These modern professionals aren’t workers per se, and they aren’t capitalists either, strictly speaking. Some professionals share certain features with these other groups, however. The accountant at your neighborhood tax preparation chain, for example, are sometimes just scraping by. And teachers are often union members, just like blue-collar workers. At the other end of the scale, certain lucky professionals in Silicon Valley happen to be our leading capitalists. And the gulf between the professional hedge fund managers and the rich folks whose money they invest is small indeed.


As these last two examples suggest, the top ranks of the professions are made up of highly affluent people. They are not the billionaire Wal-Mart clan, but they have a claim to leadership nevertheless. These two power structures, one of ownership and the other of knowledge, live side by side, sometimes in conflict with one another but usually in comity.

The concern of this book is not investigating the particular expertise of any given profession, but rather the politics of professionalism in a larger sense. As the political scientist Frank Fischer writes in Technocracy and the Politics of Expertise, professionalism is more than an occupational category; it is “a postindustrial ideology.” For many, it provides an entire framework for understanding our modern world.

As a political ideology, professionalism carries enormous potential for mischief. For starters, it is obviously and inherently undemocratic, prioritizing the views of experts over those of the public. That is tolerable to a certain degree—no one really objects to rules mandating that only trained pilots fly jetliners, for example. But what happens when an entire category of experts stops thinking of itself as “social trustees”? What happens when they abuse their monopoly power? What happens when they start looking mainly after their own interests, which is to say, start acting as a class?

This series presenting the thesis of Thomas Frank’s book Listen, Liberal will be continued in future blogs.

One Top Taxpayer Moved, and New Jersey Shuddered



Our top-heavy economy has come to this: One man can move out of New Jersey and put the entire state budget at risk. Other states are facing similar situations as a greater share of income — and tax revenue — becomes concentrated in the hands of a few.

Last month, during a routine review of New Jersey’s finances, one could sense the alarm. The state’s wealthiest resident had reportedly “shifted his personal and business domicile to another state,” Frank W. Haines III, New Jersey’s legislative budget and finance officer, told a State Senate committee. If the news were true, New Jersey would lose so much in tax revenue that “we may be facing an unusual degree of income tax forecast risk,” Mr. Haines said.


The New Jersey resident (unnamed by Mr. Haines) is the hedge-fund billionaire David Tepper. In December, Mr. Tepper declared himself a resident of Florida after living for over 20 years in New Jersey.He later moved the official headquarters of his hedge-fund, Appaloosa Management, to Miami.

Mr. Tepper, 58, declined to comment on his move. He does have family — his mother and sister — who live in Florida. But several New Jersey lawmakers cited his relocation as proof that the state’s tax rates, up from 6.37 percent in 1996, are chasing away the rich. Florida has no personal income tax.

“If you’re making hundreds of millions of dollars and you’re paying close to 10 percent to the state of New Jersey, you do the math,” said Jon Bramnick, the Republican leader in the New Jersey Assembly. “You can save millions a year by moving to Florida. How can you blame him?”

Beyond the debate on taxing the rich, Mr. Tepper’s move is a case study in how tax collections are affected when income becomes very highly concentrated. With the top tenth of 1 percent of the population reaping the largest income gains, states with the highest tax rates on the rich are growing increasingly dependent on a smaller group of superearners for tax revenue.

In New York, California, Connecticut, Maryland and New Jersey, the top 1 percent pay a third or more of total income taxes. Now a handful of billionaires or even a single individual like Mr. Tepper can have a noticeable impact on state revenues and budgets.

California had to account for a “Facebook effect” in 2012 and 2013 after that company’s 2012 initial public offering of stock. The offering generated more than $1 billion in revenue — much of that from the chief executive, Mark Zuckerberg, and a small group of company shareholders. Washington, D.C., had an unexpected $50 million gain in its 2012 fiscal year — which helped create a budget surplus — after the death of a local billionaire increased its estate tax receipts.

Some academic research shows that high taxes are chasing the rich to lower-tax states, and anecdotes of tax-fleeing billionaires abound. But other studies say there is little evidence showing that the rich move solely for tax purposes. Millionaires and billionaires who move from the high-tax states in the Northeast to Florida, for instance, may be drawn by the sunshine, lifestyle and retirement culture, in addition to lower taxes.

While some high earners may be moving for tax reasons, New Jersey, New York, California and other states are replacing rich people faster than they are losing them. New Jersey had 237,000 millionaires in 2015, compared with 207,200 in 2006, according to Phoenix Marketing International, a research firm. New York added 69,500 millionaires from 2006 to 2015, to 437,900, while California added over 100,000 millionaires, to 772,600.

The best solution to the mega-taxpayer dilemma, some tax experts say, is for states to do a better job of tracking and forecasting the incomes of their top earners. Since the rich are the most mobile and are able to manage their investments just as easily in Miami as in Manhattan, states are devising new ways to monitor their top taxpayers and keep them from leaving.

“In a time of rising inequality, I’m not sure the right answer is lowering taxes or making them less progressive,” said Kim S. Rueben, senior fellow of the Urban-Brookings Tax Policy Center at the Urban Institute. “It’s more about keeping an eye on people, seeing where they are and enforcing the tax rules.”

New York is now more closely monitoring wealthy taxpayers who have homes in New York but claim Florida as their tax residence. And New Jersey is collecting data on all of the taxpayers who make more than $1 million to forecast their tax payments more accurately.

In California, 5,745 taxpayers earning $5 million or more generated more than $10 billion of income taxes in 2013, or about 19 percent of the state’s total, according to state officials.

“Any state that depends on income taxes is going to get sick whenever one of these guys gets a cold,” Mr. Sullivan said.

Hence New Jersey’s concern over Mr. Tepper’s departure. Whatever the reasons for his move, he is leaving for Florida at an especially opportune time for tax savings. Many hedge fund managers have for years used a tax loophole that allowed them to defer taxes on fees they earned through the use of offshore funds. A 2008 federal tax rule, however, requires them to declare those fees by the end of 2017 and pay any necessary federal, state and local taxes.

For some hedge fund managers, the amounts declared will probably be in the billions of dollars, accountants say. A spokesman for Mr. Tepper declined to comment on his overseas income. By moving to Florida, Mr. Tepper could avoid paying state income taxes on any such funds.

“If he’s bringing money back, you’re talking about a big possible gain,” Mr. Bramnick said. “So it’s a good time to move to Florida.”

Mr. Tepper regularly topped state wealth rankings as New Jersey’s richest resident. He also has homes in Miami Beach and the Hamptons. In 2012 and 2013, he also topped Alpha’s list of the highest-earning hedge fund managers, with estimated earnings of $2.2 billion in 2012 and $3.5 billion in 2013. His earnings fell to $400 million in 2014.

Mr. Tepper never publicly announced his move to Florida. But it became public on April 5, when Mr. Haines, citing a Bloomberg report, mentioned Mr. Tepper’s move in his remarks to the State Senate Budget and Appropriations Committee. In discussing the move, Mr. Haines said, “Even a 1 percent forecasting error in the income tax estimate is worth $140 million.”

Mr. Tepper’s payments may have even been higher. If Mr. Tepper earned $3.5 billion in 2013, his state tax bill could have been over $300 million, according to New Jersey accountants. Granted, his actual payments were probably far lower because of deferred income, charitable deductions and other accounting treatments. Yet Mr. Haines’s comments are believed to be the first time a state official has warned of a budget risk because of one resident’s relocation.

“We’ve had states mention risks from high-income groups, but never from a single taxpayer,” Ms. Rueben of the Tax Policy Center said.