Posted on 3rd November 2010 by Administrator in Economy |Politics |Social Issues


Hat tip to Thinker for sending this link from Neil Howe’s blog. Turnings are all about the mood of the country. The liberal MSM is absolutely pissed off about the results from yesterday. They don’t understand what is happening. These “intellectuals” look down on the masses from their glittering thrones. They see us all as piss boys. “Wait for the shake!!!” You can be sure that 99% of these liberal douchebags haven’t read The Fourth Turning. They consider it some sort of prophecy bullshit like Nostradomus. It is a history book. It sticks to the facts of history. The theory of generational cycles is provable over and over again. If you have read the book, you understand why things are happening. We don’t know what will happen, but the country’s reaction is predictable.

Fraud, corruption and greed come first. Economic collapse comes next. Pain, suffering and war complete the cycle. Sound like fun?

Tue 2 Nov 2010

Election Day and The Age of Austerity

Posted by Neil Howe under 4th Turning (Crisis), Economics

In the U.S., we’re raising our top marginal rate up past 50%–but without any of the huge spending cuts.  In 2010, the typical top marginal tax rate on ordinary income in America was about 44% (35% federal, plus 2.8 in uncapped Medicare tax, plus an average of maybe 6% for state taxes).  By 2013, due to the expiration of the Bush tax cuts, a hike in the Medicare tax (thanks to Obama’s health-care reform), and a phase-out of itemized deductions, this top rate will rise by about 7 percentage points—to just around 50%.  The top rate in New York City and California will be well over 50%.

A 50%+ top marginal tax rate is today high even by European standards.  So you might be wondering… if marginal rates on ordinary income are approaching (or even exceeding) Europe’s, why has Europe always been able to extract a much greater share of GDP out of its economy in the form of government revenues?  The answer is that Europe’s *inframarginal* rates have always been much higher—meaning that Europe taxes its middle and lower-middle classes much more heavily than we do.  The bulk of their welfare state, after all, is paid for by one-rate-fits-all value-added taxes and payroll taxes.  The U.S. federal income tax code, by contrast, leaves the middle class pretty much untouched, while ramping up steeply at higher incomes. 

Europe is not cutting its high personal tax rates and in the UK  David Cameron is even boosting them.  On the other hand, both Europe and the UK continue to cut their tax rates on *capital* income, so that over the last decade the U.S. has come to be regarded as a punitive outlier in its treatment of capital income.  (Case in point, Cameron’s proposed hike in the capital gains tax rate is the one hike that is not likely to be enacted.)  In this new “age of austerity,” Europe is following the brutal law of “efficient taxation,” to use the economists’ lingo.  To wit, you raise tax rates on those who don’t have a choice about whether or where to earn their income… and you lower tax rates on those who do.  As the age of austerity worsens, European voters may insist that governments pin down and regulate the wealth and income of capital owners more rigorously so that they can tax capital at higher rates.  We’ll see.  I can easily envision this happening in America.  Even if the GOP wins big, I doubt that a more populist GOP party will make big cuts in capital gains or estate taxes a big priority. 

As for the bond markets, it is true that the U.S. can borrow freely at very low interest rates and will probably continue to be able to do so unless or until the global economic situation becomes truly catastrophic.  The reason is that, due to America’s unique superpower status, bad news anywhere in the world (even here in the U.S.) causes people around the world to invest in U.S. bonds as a safe haven.  So even our own bad decisions cause only others to suffer.   Valéry Giscard d’Estaing (former Finance Minister of France), in a closely related context, once called this America’s “ exorbitant privilege.”  Other countries do not have this privilege.  So the UK, Japan, France, and Germany all have to take bold measures against the specter of fiscal insolvency lest the same thing happens to them (sudden hikes in interest rates, and a bond market crash) that has happened now to several of the PIIGS countries. 

This explains why—to bring the discussion back around to turnings—America may be the last place in the world to experience the “age of austerity,” that is, to experience the 4T mood in its full economic brutality.  To America, and to America alone, there seems to be no penalty at all to endless borrowing at zero interest rates… and if that is so, then why do any of us need to worry?  Of course, I may be mistaking here the opinions of America’s elites (e.g.,  Paul Krugman) for the opinions of ordinary citizens.  The midterms may be very revealing in this regard.  I’ve had several opportunities in the last few months to visit cities in the Midwest.  In each of them, I ask my hosts, what issues really concern local voters in the midterms?  And they say, the huge and growing federal deficit.  And then I say, yes, of course, sure, but what do they *really* worry about?  And then the hosts say, no, honestly, they are *really* worried about the country going bankrupt.  I found these conversations very ominous and very [4T].  Bankruptcy is all in the eye of the beholder.  If most people come to view an institution or government as insolvent, a landslide of distrust, hedging, aversion, falling confidence, and nonparticipation begins to feed on itself until, in the end, the institution or government does indeed become insolvent.  Most Americans believe that their government cannot continue to borrow for long without toppling off the brink.  That becomes an important social fact, regardless of the opinion of the  Council of Economic Advisors.

  1. Dave Sohigian says:

    I am a big fan of Strauss and Howe (full disclaimer: I manage Neil’s blog), but I don’t think that liberals are at fault for ignoring “The Fourth Turning”. Both sides of the aisle don’t seem to have much historical context when confronting the issues we face today. Although I do think Obama has referred back several times to similar periods in history (with references to Lincoln, FDR and Washington) I don’t believe he, or anyone else in Washington, can see the big picture the way that Strauss and Howe present it.

    The issues we face today are such a perfect picture of the “Crisis” turning that it is scary. I think the most important thing is not how liberals or conservatives act at this time but how the various generations behave. If Boomers can’t face up to the fact that their idealistic rantings (of every political stripe) are a big part of the problem, then we are in trouble. Same goes for Gen Xers (like myself) who stick with a survivalist attitude and fall into cynicism. And we need Millennials to step up to their role as young heros rather than being self-indulgent youth. It’s a task for all of us and the partisan fighting does not help much (although it is certainly a character of the crisis too).

    I have been reading some interesting books on the role of the US as a superpower. “The End of Arrogance” is the current title I am working on, and I think that understanding generations really helps put our future into perspective. What position will the US be in the next turning vs. China? Only time will tell, but our in-fighting has to end eventually for us to stand much of a chance of confronting the climax of the crisis, whatever form it might take.

    Like or Dislike: Thumb up 4 Thumb down 0

    3rd November 2010 at 2:00 pm

  2. admin says:


    Thanks for your response. I agree that both sides ignore the turnings of history. But watching how angry the commentators on MSNBC were last night made me realize they have no clue what is coming. The anger, disillusionment, cynicism and denial are all part of the 4th Turning mood shift. I think 2012 will prove to be a pivotal year in the history of our country. Every previous 4th Turning had a Prophet leader during the worst of the Crisis. Obama doesn’t fit.

    Like or Dislike: Thumb up 4 Thumb down 1

    3rd November 2010 at 2:19 pm

  3. RogueEconomist says:

    Looking hard on the Horizon, I don’t see any Candidates for Prophet.


    Like or Dislike: Thumb up 3 Thumb down 1

    3rd November 2010 at 2:28 pm

  4. Smokey says:

    DP’s the Prophet.

    Like or Dislike: Thumb up 3 Thumb down 0

    3rd November 2010 at 2:30 pm

  5. admin says:

    Prophet pertains to an age group. The next leader of the US will likely have been born between 1943 and 1960. You should really read the book.

    Like or Dislike: Thumb up 3 Thumb down 0

    3rd November 2010 at 2:44 pm

  6. Thinker says:

    But keep in mind, George Washington was a Nomad.

    Still, I don’t believe Obama will see us out of this… even though he’s a Joneser (Boom/X cusp) and expresses much Prophet-like idealism with his Nomad-like pragmatism, I don’t believe he has the gravitas to pull us all together. I especially believe that, after reading the “insider’s” interview. Chances are, he’ll go down in history as the Buchanan/Hoover to the champion Lincoln/FDR, who is yet to be identified.

    We need to look at other Prophets (Boomers) who can step to the forefront and lead us in our darkest hours. They’re not giving me much hope, at the moment, though.

    Like or Dislike: Thumb up 3 Thumb down 0

    3rd November 2010 at 3:06 pm

  7. admin says:


    These are the Boomers or near Boomers that are on the radar screen. They don’t give me much hope either:

    Romney (born 1947)
    Gingrich (born 1943)
    Barbour (born 1947)
    Huckabee (born 1955)

    H. Clinton (born 1947)
    Bloomberg (born 1942) – end of Silent generation

    An early Nomad would be Chris Christie ( born 1962)

    Like or Dislike: Thumb up 2 Thumb down 1

    3rd November 2010 at 3:17 pm

  8. Matt says:

    I think you should have a link where we can discuss the 4th Turning, almost like a book club. I am in the process of reading it now, thanks to TBP. I bought a bunch of books after first reading TBP, 4th Turning and some Michael Lewis and Ron Paul. Fascinating stuff.

    Like or Dislike: Thumb up 3 Thumb down 0

    3rd November 2010 at 3:25 pm

  9. admin says:


    Neil Howe suggested I create a separate section on the website for 4th Turning related posts. This was when it took 4 hours to log on. I’ll see what I can do.

    Like or Dislike: Thumb up 4 Thumb down 0

    3rd November 2010 at 3:36 pm

  10. LLPOH says:

    The US desperately needs a VAT or flat tax. That nearly 50% of the population pays no net tax needs to be dealt with. There must be mutual obligation for all citizens.

    Well-loved. Like or Dislike: Thumb up 6 Thumb down 1

    3rd November 2010 at 7:07 pm

  11. Dave says:

    I’m thinking that as a late Silent Generationer (1940) I should heed the advice and get out of the way. It’s too late to buy a farm, don’t own enough to buy gold, don’t have enough land to grow my food, and don’t own any guns. It should be fairly easy to get rid of me when the end comes, if I’m still here. If I’m not, well good fucking luck to the rest of you.

    Like or Dislike: Thumb up 1 Thumb down 0

    3rd November 2010 at 7:24 pm

  12. Terry says:

    Admin -

    I would enjoy a separate, but linked, section for 4th Turning related posts.

    Like or Dislike: Thumb up 1 Thumb down 0

    3rd November 2010 at 2:08 am

  13. flash says:

    Only a fool would ever trust a government -nothing new here-, but when trust in the financial sector blows, then the dam will burst ,fer shure.

    Jesse has a fine post on this very thing.

    Read the rest here:

    MF Global’s Customer Assets – STOLEN – And Nothing You Hold In This System Is Safe

    As suspected, MF Global brazenly took liquid assets like Treasuries and warehouse receipts, but not cash which would have been more quickly missed, from customer accounts to post as illegal collateral for emergency funding with a lender who must have known that they were receiving stolen goods.

    When things fell apart, the lender simply took the collateral and liquidated it, and kept the money.

    And now they are refusing to even acknowledge this transaction, and apparently the management of MF Global is not yet talking. Why? Because it was an insider deal, and they don’t want to give back the stolen money.

    When ‘non-consequential’ customers were requesting their funds, they were issued checks instead of wire transfers. The checks of course were not honored and bounced. But days later, and just hours before the bankruptcy filing, MF Global was paying BONUSES to its UK traders. Remarkable in light of how much dirty business the NY firms have been outsourcing to London. Follow the hush money.

    This is a scandal of the first order, and a severe test for the Obama Justice Department, the regulatory agencies, and the exchanges. This is a great crime, undeniably premeditated, and possibly the tip of an iceberg that would shake the public confidence in a deeply corrupt financial system.

    If a registered broker can simply take Treasuries and receipts for physical assets like gold and silver from customer accounts and give them to a complicit crony lender, and then look at the public with a straight face and say the money is missing and they do not know where it is, then no one’s accounts are safe, anywhere, at any bank or broker, in the US financial system.

    This has every appearance of a legally sanctioned theft, pure and simple.

    Here is a synopsis of the likely events from Forbes:

    Music-Pete Seeger

    To Everything (Turn, Turn, Turn)
    There is a season (Turn, Turn, Turn)
    And a time to every purpose, under Heaven

    A time to be born, a time to die
    A time to plant, a time to reap
    A time to kill, a time to heal
    A time to laugh, a time to weep

    To Everything (Turn, Turn, Turn)
    There is a season (Turn, Turn, Turn)
    And a time to every purpose, under Heaven

    A time to build up,a time to break down
    A time to dance, a time to mourn
    A time to cast away stones, a time to gather stones together

    To Everything (Turn, Turn, Turn)
    There is a season (Turn, Turn, Turn)
    And a time to every purpose, under Heaven

    A time of love, a time of hate
    A time of war, a time of peace
    A time you may embrace, a time to refrain from embracing

    To Everything (Turn, Turn, Turn)
    There is a season (Turn, Turn, Turn)
    And a time to every purpose, under Heaven

    A time to gain, a time to lose
    A time to rend, a time to sew
    A time for love, a time for hate
    A time for peace, I swear it’s not too late
    [ Lyrics from:

    Like or Dislike: Thumb up 1 Thumb down 0

    3rd November 2010 at 7:10 am

  14. Administrator says:


    I have a library of Fourth Turning articles on the bottom right of the page.

    Like or Dislike: Thumb up 1 Thumb down 0

    3rd November 2010 at 7:43 am

  15. Kill Bill says:

    An early Nomad would be Chris Christie -JQ

    I have a hard time believing that.

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    3rd November 2010 at 7:59 am

  16. ssgconway says:

    One often ignored reason for europeans tolerating higher taxes is that until a generation or two ago, they had homogenious societies. The welfare state that they supported helped people like them, and related, at least distantly, to them. That isn’t a perfect rationale, but it fits for many Euro nations. America has always had not only an individualistic bent but also an aversion by many to paying for ‘welfare’ for ‘them.’ Polygot societies probably are less tolerant, in general, of wealth transfers. The America that supported the New Deal and the Great Society was also more homogenous than was the case either before of after that 4T, and that would fit with the overall pattern of homogeniety as a predictor of acceptance of higher taxes and spending.

    Like or Dislike: Thumb up 1 Thumb down 0

    3rd November 2010 at 8:30 am

  17. Thinker says:

    Jim, you should consider adding the Neil Howe interview from Financial Sense that you posted this week to your 4T Library.

    Like or Dislike: Thumb up 1 Thumb down 0

    3rd November 2010 at 8:59 am

  18. Administrator says:

    Will do.

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    3rd November 2010 at 9:00 am

  19. Girl Replacement « The Burning Platform | ObamaCare Colorado says:

    […] Neil Howe – The Mood is Darkening […]

    Like or Dislike: Thumb up 0 Thumb down 1

    3rd November 2010 at 10:11 pm

  20. Arizona says:

    HAS anyone ever told you guys,THAT ALL OF YOU ,live in a dream world,where things just work out ALL ON THEIR OWN,….WELL not this time they won’t,to many americans are sound asleep,AND when they wakeup ,they’ll be on the wrong side of the battle,BECAUSE THEIR GOOOD LAW ABIDDING CITIZENS,and soon they’ll be dead ones……..MOST americans aren’t EVEN going to see the end coming,and its also the reason the whole country will fall to the chinese and russians………..

    Like or Dislike: Thumb up 0 Thumb down 2

    3rd November 2010 at 7:22 pm

  21. llpoh says:

    Arizona – something is wrong with your KEYboard. YOu SHould look inTO that.

    Like or Dislike: Thumb up 0 Thumb down 0

    3rd November 2010 at 7:34 pm

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