The Twinkie Segue


Hmmm, how can we possible use Twinkies as a segue for a post about 1950’s economic policy? Let’s ask the Shill One!

The Twinkie Manifesto

The Twinkie, it turns out, was introduced way back in 1930. In our memories, however, the iconic snack will forever be identified with the 1950s, when Hostess popularized the brand by sponsoring “The Howdy Doody Show.” And the demise of Hostess has unleashed a wave of baby boomer nostalgia for a seemingly more innocent time.

Needless to say, it wasn’t really innocent. But the ’50s — the Twinkie Era — do offer lessons that remain relevant in the 21st century. Above all, the success of the postwar American economy demonstrates that, contrary to today’s conservative orthodoxy, you can have prosperity without demeaning workers and coddling the rich.

Consider the question of tax rates on the wealthy. The modern American right, and much of the alleged center, is obsessed with the notion that low tax rates at the top are essential to growth. Remember that Erskine Bowles and Alan Simpson, charged with producing a plan to curb deficits, nonetheless somehow ended up listing “lower tax rates” as a “guiding principle.”

Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today.

Nor were high taxes the only burden wealthy businessmen had to bear. They also faced a labor force with a degree of bargaining power hard to imagine today. In 1955 roughly a third of American workers were union members. In the biggest companies, management and labor bargained as equals, so much so that it was common to talk about corporations serving an array of “stakeholders” as opposed to merely serving stockholders.

[…]

The data confirm Fortune’s impressions. Between the 1920s and the 1950s real incomes for the richest Americans fell sharply, not just compared with the middle class but in absolute terms. According to estimates by the economists Thomas Piketty and Emmanuel Saez, in 1955 the real incomes of the top 0.01 percent of Americans were less than half what they had been in the late 1920s, and their share of total income was down by three-quarters.


See? That’s how you do it!

Of course Mr. Krugman leaves out a couple important data points, like WWII and the Great Depression. The United States was the only major industrial power to emerge relatively unscathed from World War II. Europe and Asia were physically and financially devastated, Great Britain’s colonial empire was falling apart, and the Soviet Union was stuck with an economic system that did not work.

Meanwhile our infrastructure was undamaged and we were operating at full industrial capacity. War time shortages of fuel, rubber and other materials had ended, and we were able to take advantage of new technologies developed during the war.

I have read a lot of articles about the Great Depression, and none of them blame the stock market crash and the world-wide economic collapse that followed on the incomes of the upper 0.01 percent. But it is easy to see why those incomes dropped between the 1920’s and the 1950’s.

Articles like this one bother me because they fail to show causality. Krugman presents some data that, while accurate, is nonetheless dishonest because of how it is presented. He gives the impression (without explicitly saying it) that if we simply raised the top marginal tax rates back up to 91% we could re-create the economic conditions of an earlier generation.

The world has changed dramatically since Dwight Eisenhower was president. In many ways we are more prosperous than we were back then. (Look around your home and start counting all the things that did not exist in 1955.) The problem is the inflation of our expectations hasn’t matched reality.

Twinkies are a relic of a bygone era. Let bygones be bygones.



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38 Responses to The Twinkie Segue

  1. HELENK says:

    1950s. my first after school job. washing dishes in a hospital for 37 cents an hour.

  2. votermom says:

    How I despise Krugman now. He’s turned into one of those technocrats that use their professorial credentials to lend a veneer of respectability to authoritarian lawlessness.
    If this were a movie he’d be one of the supporting characters disposed of in-mid blather by the annoyed strongman he supports.

  3. lyn5 says:

    You can have my Twinkie when you pry it from my cold, dead fingers. Thank you, Chuck.

  4. yttik says:

    “Twinkies are a relic of a bygone era. Let bygones be bygones.”

    I disagree. I don’t think we should declare things to be relics of a bygone era and dump them in the trash heap of history. Twinkies was doing a couple billion a year in business. They may not have had the sales of their hay days, but they weren’t going under because of a lack of consumers.

    Smart people warned us about the housing bubble burst that was coming. Phase two is the pension bubble. Hostess is one of the well known victims, but all over the country governments and businesses are facing it. Companies, governments, employers have billions of dollars in “unfunded mandates,” money they now owe to former employees, some of which was insured by the Gov, some which was invested in the market. They depended on current employees to pay into the system, but with less employees and a tight economy, it just can’t be done.

  5. tommy says:

    Krugman……once upon a time, in a galaxy far, far away, I used to admire him. The problem with the dude is that he has permitted his ideology to take over the facts of economic reality. Idiots like Krugman sit on a high perch, and try and dictate what the facts are. They’re not the ones governing, so realities don’t intrude on their worldview. An example is the Estonian President vs. Krugman. That tells me all I need to know. Krugman cherry-picks datapoints to support his own worldview. As an economist, he is now a complete failure. His ideology is almost like a religion for him now. Even faced with data, facts & reality, he’ll cling on to the prog gospel.

  6. votermom says:

  7. piper says:

    Waiting for Krugman to turn over his wealth to the government which we all know wont’t happened – he’ll be screaming unfair, unfair and other crap.
    Many people including the occupiers think that raising taxes is the answer and life will be good for all. Confusion reigns among word gobble gook. Taxes will be raised on earned income / salary not on accumulated wealth already in banks and investments. The rich will continue to live on their dividend checks while the rest of the working class will pay more for less.
    BTW – never cared for Hostess – twinkies – much too much artificial sweetners. We loved going with my father to the bakery on Saturdays buying doughnuts, tortes, cupcakes – delicious.

  8. DeniseVB says:

    My sister and I sat in the Howdy Doody Peanut Gallery and went home with a bag of goodies from the sponsors. I just remember the minature loaf of Wonder Bread and seeing Clarabelle off camera smoking. Did you know the original Clarabelle went on to become Captain Kangaroo ? Ahhh, childhood memories 😉

  9. swanspirit says:

    Did you ever notice David Gregory looks just like Howdy Doody ? All he needs are the freckles and red hair dye .. The puppet strings are already visible

  10. tommy says:

    ‘Uruguayan President Jose Mujica has been dubbed as the “poorest president” in the world, as he lives on a ramshackle farm and is known for giving away 90% of his earnings to charity. The charismatic 77 year old has refused to adapt his lifestyle to embrace the trappings of power that come with the being the countrys figurehead. Mujica gives 90% of his monthly salary, the equivalent of £7500, away to charity leaving him with just £485/month to live off. The part-time farmers proudest and most valuable possessions are his tired looking Volkswagen Beetle and his 3-legged dog Manuela’. Are we ever gonna get individuals like these? No, don’t so.

  11. HELENK says:

    http://www.bloomberg.com/news/2012-11-18/2013-looks-a-lot-like-1937-in-four-fearsome-ways.html

    will history repeat it’s self and will it be the 1950s or the 1930s

  12. 49erDweet says:

    Great catch, myiq. Krugidiot conveniently omits the apparently irrelevant information labor costs in those days – in spite of unionization – were a much lower percentage of production costs AND profit margins were in the 300% range, not like today’s 65%. Minor details when one’s mind is closed.

  13. HELENK says:

    #BREAKING: #Hostess isn’t going out of business just yet. Judge orders company to mediate with union. http://t.co/OyjE8OIF

  14. HELENK says:

    this may be a stupid question.
    why does the company have to go to court to get permission to sell what they own?????

  15. blowme0bama says:

    Think of all the wonderful things government could have done with all the wealth that escaped it all these years had the marginal tax rates have been at levels advocated by Krugman /sarcasm off

    Yeah, I’m trying to think of a single beneficial thing.

  16. myiq2xu says:

    http://www.cato.org/pubs/wtpapers/Nostalgianomics.pdf

    But several factors were especially conducive to strong performance at that time. There was a pent-up demand for goods and services after the privations of the Great Depression and the mobilization of World War II. There was also a pent-up supply of new products that couldn’t be brought to market during the depression and war years. That pent-up supply was augmented by technological and organizational breakthroughs accelerated by the imperatives of total war. Big advances in transportation, communications, and air conditioning stimulated catch-up growth in the underdeveloped South and underpopulated West. And rapid upgrades in human capital (first explosive growth in high school graduates, then explosive growth in college graduates) doubtless helped to spur productivity gains.

  17. Jamie says:

    Great article and facts about the iconic Twinkie. I just had a graphic come through my Twitter feed that I thought you might like. It’s about Twinkies and their birth to death.. Its pretty funny and almost written like a obituary.

    http://www.riptapparel.com/blog/infographic-the-twinkie-a-look-back-at-the-life-of-an-icon/

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