Deductive Reasoning

Said a tax analytical gent:
"One should always make clear one's intent
On cutting deductions
To pay for reductions
In tax rates by 20%."

"Many have tried to appraise
The most likely of Mitt Romney's ways
Of sparing the loss
Of defraying the cost
Of the mortgage the middle class pays."

"Though the Gov'nor himself may not say
With what tax breaks he's doing away,
It's safe to foresee
Under Romney there'd be
Less incentive to do Schedule A."

'Twas not a gent, but a lady - Texas tax journalist Kay Bell - who analyzed Governor Mitt Romney's recent statements about his tax plan and concluded that "Romney left himself some wiggle room" in the degree to which his plan would keep the mortgage interest deduction. Says Ms. Bell:

He didn't say the mortgage interest and charitable gift deductions would remain just as they are. He said there would still be 'preferences' for them. Just spit-balling here, but since Romney again reiterated in that same Situation Room interview that he would limit deductions "particularly for people at the high end" of the income scale, it looks like some of Mitt's personal wealth peers might not get as much Schedule A bang for the tax buck as they currently do.

But would limiting some mortgage interest and charitable deductions be enough to make his tax plan revenue neutral as he insists it will be? Not many people outside the Romney campaign think so.

Though the Republican Presidential nominee hotly denies it, the non-partisan Tax Policy Center has concluded that his plan amounts to a $5 trillion tax cut over a decade, heavily tilted toward the rich, which could not be made revenue neutral without raising taxes on households with income below $200,000.

Waning Middle Class

A big social sciences trust
Researched and concluded, nonplussed:
"Our suburbanite set,
Adjusted for debt
And inflation, is actually bust."

Aaron Task and Henry Blodget of Yahoo! Finance alert us to a study conducted by the Pew Research Center. Pew looked at the data related to income and wealth inequality in the US and determined: the US economy sucks because the middle class is broke. Task and Blodget agree, in their discussion below, that US employers must hire more workers and pay them more, for the good of the economy as a whole. As Henry Ford realized a century ago, well-paid workers can afford to buy things, and their liquidity feeds a rising tide that lifts all boats. Can the private economy, which is sitting on mountains of idle cash, do this on its own without the intervention of our dysfunctional government? I ask you.

Flat As All That

"The median wage compensation,"
Said Krugman, "Has lain in stagnation."
For those who mistrusted,
His charts are adjusted
For medical plans and vacation.

Paul Krugman takes umbrage at those who doubt his assertion that US wages have stagnated since the 1970's (see chart). Yes, Dr. Krugman has thought this through, and the stagnation even takes the cost of health benefits into account, as detailed in this analysis from the Economic Policy Institute. Alarmingly, during the generation-and-a-half in which wages have barely risen, household debt has skyrocketed from 45% of GDP to nearly 100%, culminating in the mortgage meltdown. (Recovery alert: it has since moderated to about 85% of GDP.) The bottom line politically is that this plays into the Presidential choice in November. Mitt Romney has profited greatly from some of the policies and developments that led to the middle class stagnation, and defends them robustly on the campaign trail. Barack Obama, to be fair, does not represent the dramatic reversal of such policies that either he or his critics would have you believe, but he at least acknowledges the problem and proposes some ameliorative steps.

Tax Cut Extension

Said Obama: "My favorite motif
Is of middle-class tax-rate relief,
For the push that it prods
As well as my odds
Of remaining Commander-in-Chief."

Constructive Solutions

What should we have done if we craved
That America's middle be saved?
Researched and retooled,
Retrained and reschooled,
Reinvested, rebuilt and repaved.

Financial Times' Washington correspondent Edward Luce has written a book that nobody wants to hear, but everyone needs to read: Time to Start Thinking: America in the Age of Descent. In it, Mr. Luce discusses the causes, and some solutions, to the declining state of American affairs. One of the difficulties in winning public investment in the renewal of American competitiveness, as in the verse above, is that neither party is willing to admit the state of decline. Thus, where the government has addressed our problems, it has generally made them worse. The solutions, however, are fairly clear, once we acknowledge the issue.

Ronald Reagan, Union Supporter

"'To organize skilled and unskilled
Is a right that the law has fulfilled - '
A view I adopted
While on the red carpet
As head of the Screen Actors' Guild."   

The world's most glamorous celebration of organized labor - the Oscars - coincides this year with the effort by Wisconsin Governor Scott Walker to strip state workers of their right to organize. It is therefore worth recalling the words of an earlier Republican governor, president of SAG and President of the USA, who said that to organize labor is  "one of the most elemental human rights." 

Modest Proposals for Middle Class Solvency

An effective solution would feature that -
Regardless of whichever street you're at -
You're able to use
Funded vouchers to choose
A school which you'll find a good teacher at.

As lenders may oft have no scruple
To give rates that may even quadruple,
Federal usury laws
Are needed because
They'll look for a state with a loophole.

The middle class finds it's bedeviled
By strains that have bankruptcies trebled,
But it ought to be clear
The political sphere
Can again make the playing field leveled.    



This is the final installment in a week-long series of limericks based on The Two-Income Trap by Elizabeth Warren, looking at the financial problems of, and proposals to help, the American middle class.

Warren Week: I

Dr. Warren has laid out a map  
In her book called The Two-Income Trap,  
To explain how la vie works,  
When he works and she works,  
To widen the middle class gap.

This week Limericks Économiques looks at the strains on middle class America through the groundbreaking work of Elizabeth Warren.