Sunday, December 28, 2014

The Thirdworldization of America Continues

As I remarked some time ago, the Republican vision for America seems to be to make it the world's richest Third World country. Consider, I said, these frequent characteristics of Third World countries:
  • Life is extremely pleasant for the rich, and extremely difficult for everyone else.
  • Economic growth is hampered by poor transportation systems and crumbling infrastructure.
  • Environmental regulation is minimal.
  • The only widely respected public institution is the military.
Now, it appears, we can add one more item to the Republican wish list:
  • The government tortures people.

Saturday, December 13, 2014

Dept. of Naming Things: Inequality

A story in today's New York Times about how people have lost faith in the American Dream has this interesting passage:
“I don’t know what you mean by an unequal distribution of wealth,” said Robert Monti, a 74-year-old retired social studies teacher from Niagara Falls, N.Y., who identified himself as “a registered Democrat but haven’t voted Democrat in years.” 
 He said, “It’s a proven fact that everybody can’t make the same amount of money, and it’s a ridiculous assumption that they can. You’ll never have economic equality. Ever.”
Well, he's got a point. If inequality is the problem, surely what we want is equality. And practically nobody believes in equality of wealth or income.

So people should stop talking about economic inequality as the problem. The problem is really (choose one or more):
  • the concentration of wealth and income at the top
  • the fact that wealth and income are so skewed
  • economic inequity
  • economic unfairness
  • the redistribution of income from the 99% to the 1%
There is one kind of equality, though, that Americans do believe in: political equality. Political inequality--the fact that the rich have so much political power--is at least as great a concern to Americans as the increasing concentration of wealth and income. And, of course, it will be hard to do much about the unfair income distribution without doing something about political inequality.

But the latter requires the Democrats to make a serious effort toward campaign finance reform.  So far, they've lacked the ganas for that. Or maybe the cojones.

Friday, December 12, 2014

Republicans Parody Themselves

If you're a Republican politician, what's the stereotype you struggle against? That Republicans are out of touch with ordinary people and only care about rich people and corporations.

So when Republicans won control of the Senate, what are the two issues where future majority leader Mitch McConnell says they may be able to work with Democrats? (a) The Keystone XL pipeline and (b) repealing the medical-devices tax. Yes, Mitch, that's definitely what American voters gave you a mandate to do. The people who care about these things are (a) the Koch brothers, and (b) medical-device manufacturers.

And with the recent fight in the House over the government spending bill, what were the key issues? Republicans wanted to (a) extend government insurance to cover the riskiest trades made by banks, and (b) allow the rich to give more money to political parties. Just what the public was demanding, another bailout for the banks and more money in politics.

If the Republicans are willing to be this naked about their priorities, Democrats should make them pay for it. They need a Mocker-in-Chief. Normally that's a good role for the Vice President. Unfortunately, this time he was busy lobbying for the bill.

Thursday, December 11, 2014

If "the Democrats' Real Problem" Is Insoluble...What Then?

Writing shortly after the midterm elections, Josh Marshall had an article in TPM about "the Democrats' Real Problem." He agrees with those who say that the Democrats should have run on the economy, which is actually booming right now. But, he points out, this doesn't really resonate with voters, because wages haven't gone up. So it doesn't feel like a boom to voters. (Of course, gentle reader, you already knew that.) And that, he says is the Democrats' real problem:
[M]any Democrats look at all this and say... the party needs to embrace economic populism ... But I think this misses the point. The great political reality of our time is that Democrats don't know (and nobody else does either) how to get wage growth and ... economic growth ... back into sync...So find the policies, if there are any, build a political coalition around them. (Emphasis added.)
 And if there aren't any?

Let's consider that for a moment. The top 1% captured 95% of the income gains in the first three years of the recovery. Suppose that continues to be true, and wages in the US continue to stagnate while the economy grows. What then?

One alternative is to do nothing. (Philosophically, libertarian. This is just the result of individual decisions; no need for government intervention.) But we should understand that this means resigning ourselves to a permanent aristocracy. The rich would continue to get richer, and pass their wealth on to their children.

The other alternative is to say, "The growth in our economy should be shared widely across the population." (Philosophically, Rawlsian. If people didn't know whether they would end up among the 1% or the 99%, they would surely prefer  this alternative.) So we should take some of those income gains and spend them on things that benefit the 99%. For example:
  • Raise the minimum wage and expand the Earned Income Tax Credit. Contrary to what Marshall believes, raising the minimum wage doesn't benefit only the poor. At every income level except the very top, people benefit, on average, from an increase. Maybe that explains why it gets so much support.
  • Increase Pell grants, and cut the interest rate on student loans.  For the 70 percent of the class of 2014 that had student loan debt, the average debt was $33,000 (source). That's just a bit less than the national debt per person, but it has to be paid off in 25 years.
  • Spend more on repairing infrastructure, especially transportation.  Rather than step into the quagmire of  how many jobs this will create, just call it something we need, and something we owe to future generations. 
  • Mandate paid maternity leave.  We're one of about three or four countries in the entire world without it. Chad has paid maternity leave, for crying out loud. Nepal has paid maternity leave. Haiti has paid maternity leave.
All of these policies poll at more than seventy percent support. They're not as good, perhaps, as higher wages, but they would make the life of the middle class a lot easier. And the middle class knows it.

We can pay for them by increasing taxes at the top. There's plenty of room for increasing top marginal rates; in the booming sixties the top rate was 70%. But an easy sell on equity grounds is simply to tax dividends and capital gains at the same rate as wages and salaries.

(And while we're at it, how about raising the estate tax from 40% to 90% above, say, $50 million? This shouldn't be a great hardship--a billionaire can still leave his heirs more than $100 million, which should be enough to give the grandchildren a good start in life.)

So these policies end up looking a lot like the "economic populism" of the much-feared "Elizabeth Warren wing" of the Democratic Party. The assumption has been that these policies are extreme, and so will frighten moderates. The polling numbers don't support that assumption; quite the contrary.

Of course, policies like these would never get through a Republican-controlled Congress. That's the point: that's why Democrats should run on them. Although raising money may be a problem.

Sunday, November 16, 2014

Note on Charlie Baker

All this nattering about how the Democrats lost so big that even Massachusetts elected a Republican governor... it's coming from people who don't know anything about Massachusetts. First, before the current governor, a Democrat, the previous four governors were all Republicans. Very moderate Republicans. Second, Charlie Baker, the Republican, was endorsed by the liberal Boston Globe. In fact, the Globe endorsement could easily have swung the election, as a shift of 20,000 votes would have changed the outcome. Whatever the Democrats' problems are, Massachusetts does not exemplify them.

Tuesday, November 11, 2014

Comment on the Agreement with China About Climate Change

This seems huge to me, at least five minutes after reading about it. What strikes me about it is how it cuts the legs out from under Sen. Inhofe, Rush Limbaugh and all the other "hoax!"-criers. I mean, you could believe, maybe, that Obama and the Democrats were trying to fool the American people about climate change, for their own nefarious purposes, but is anyone going to believe that they fooled the Chinese? Even if you believe that Obama secretly wants to destroy America, do you believe that the Chinese want to destroy China? I just don't see what Republicans are going to say about this. But no doubt they'll come up with something.

UPDATE: Here's one Times reader's online comment about the announcement of a tentative deal in Lima:
Burbank Burner Genoa, NV 1 minute ago 
Since there is no "Global Warming" nor is there any human caused "Climate Change" this accord is a complete fraud. China, India, and most of the underdeveloped countries will simply ignore it. Only liberals in the US are stupid enough to commit economic suicide for zero reason. What a colossal waste of time, money, The smaller countries are there to try to get their version of obamaphones. It is all about money. They don't believe the hoax.
Not sure what "obamaphones" are? Check here.

Thursday, November 6, 2014

Obama and Ebola

God, that guy irritates me!

We were recently treated to Republicans around the country running scare ads about Ebola and how it's some sort of failure by Obama. There was a failure of leadership by Obama, but it wasn't a management failure. It was a political failure. Once again, he doesn't talk to people, doesn't explain, doesn't lead.

Obama should have given a brief prime-time speech on TV. (And for Pete's sake, what is so hard about sitting at a desk in the Oval Office? It's reassuring.) Something like this:

" [......] First of all, you are not going to get Ebola, nor is anyone in your family. So far in America, there has been one death from Ebola, and one person is currently infected. Both of  them were infected in West Africa. What the Centers for Disease Control said was true: it's only transmitted by bodily fluids, and people are not infectious until they're showing  symptoms. The people at risk are the people caring for Ebola victims in the later stages of the disease, when it gets pretty messy.

"Unfortunately, some politicians are irresponsibly stirring  up panic about this, coming up with all sorts of ridiculous theories about how Ebola might be transmitted. Well, if there's something wrong with your car, who are you going to take it to, a mechanic or a politician? Similarly, when it comes to dealing with infectious diseases, I'd rather talk to an expert.

"There is no outbreak of Ebola in America. There is one in West Africa, and that's a problem for us, for a couple of reasons.

"First, it's a humanitarian crisis, just like an earthquake in Haiti or a tsunami in Asia. But also, we need to get the disease under control, before it starts spreading to other countries.

The medical workers who have gone to West Africa, at some personal risk, to fight Ebola are heroes, and we all owe them a debt of gratitude.

"We need to fight Ebola with determination, not panic. [........]"

A speech like that might have made a difference in close races.

UPDATE: OK, I owe Obama an apology. It appears it's not so easy these days for the President to give a speech on TV. Astonishingly, none of the major networks carried Obama's immigration speech, a major policy announcement on a highly controversial issue that was only 15 minutes long. Something about sweeps week, I think.

Wednesday, November 5, 2014

Ad for an Imaginary Democratic Candidate Who Wasn't Running From Obama

"By the numbers, the economy's doing really well.

"The unemployment rate is below 6% for the first time since before the crash. Even with the crash, the economy under Obama has created more jobs than in Bush's entire Presidency. In the last quarter, the economy grew at an annual rate of three and a half percent.

"So why doesn't it feel better?

"Because for the average family, it isn't  better. The income of the average family hasn't gone up at all. While the economy's been growing, 95% of the gains have gone to the top 1%. They've had a recovery, but the average family hasn't.

"Are Republican economic policies going to fix this? Don't hold your breath. To begin with, we need to increase the minimum wage. Then we need to get rid of some of the tax loopholes the favor the rich.

"The economy's growing. Now it's time for some of that growth to reach the rest of us."

Wednesday, October 29, 2014

Why Are the Democrats So Lame?

The newspapers are full of stories about how Democrats are struggling against Obama's low popularity, how they'll probably lose the Senate and lose ground in the House, and so on. "Oh, woe is me!" cry the Democrats. "Obama... the election... Obama...Oh, dear! Whatever shall we do?"

No doubt the pundits are right (or, if not the pundits, then at least the statisticians), and that's about how the elections will play out. But here's what puzzles me: the Democrats are way ahead on the issues.

The what?

Yes, you know. The issues. This election seems curiously devoid of discussion of actual policies. That's much more of a problem for Democrats, because the policies they favor are favored by large majorities of Americans. They need policy discussion to turn out their base, and to sway moderates. If there are no issues, then the topic becomes Obama, which doesn't seem to be working very well for them.

Instead of playing defense, they should be on the attack. For example:
  • Increase the minimum wage to $10.10 per hour. Some Democrats are using this, of course. According to the Pew Research Center, it polls at 73% support, with 50% saying it would make them more likely to vote for a candidate (versus 19% saying it would make them less likely). John Boehner has already declared his opposition, so Republican House candidates are pretty much stuck on this one. 
  • Break the power of big money in politics.  A Reuters/Ipsos poll found that 76% of Americans think that the amount of money in politics has given the rich more power than other Americans. And they're not wrong. This is the huge silent issue of American politics; politicians just do not want to talk about it. I'll bet you didn't know that the Democrats have a campaign-finance reform bill, the Government By the People Act. It's not the ideal bill, but it's pretty good and it's got a name. Candidates should be running on it--a generalized promise to do something is not going to impress anyone. 
  • Increase spending on infrastructure. A Gallup poll last year found more than 70 percent would vote for "a Federal government program that would spend government money to put people to work on urgent infrastructure repairs." A good place to turn on its head the Republican line about "intergenerational theft."
  • Keep guns out of the hands of criminals and unstable people. Expanded background checks continue to be overwhelmingly popular; a report on one recent poll announced: "In Georgia there's 71/22 support for them, in Tennessee it's 67/26, and in Arkansas it's 60/31." The Republicans blocked this in the Senate. I think the Democrats' reflex is, if you can't say something libertarian about guns, don't say anything at all, but the polling suggests that's wrong.
    If I were an adviser to a Democratic candidate, I would be telling my candidate to run ads on those issues over and over. And to ask his opponent what his position is.

    A final issue I would throw in if I were running against a Republican House incumbent:
    • Congress should work at least as many days per year as an American kid in elementary school.  Doesn't sound too onerous, right? But it's around 180 days, while the House is scheduled to be in session this year for 113 days. I don't know of any polling on this, but I think the only reason there isn't an uproar is that no one knows about it.
    I'm not arguing that issues campaigns are better for democracy than mood campaigns, though that might be true. It's simply that at the moment, a mood campaign favors Republicans, and an issues campaign favors Democrats. The Democrats seem to be waiting for issues to fall from the skies. They should be looking at their feet.

    Sunday, June 22, 2014

    Every Economist in America Is Wrong: The Minimum Wage Is Better Than the EITC

    Maybe I'm missing something obvious, but...

    Let's say we want to help low-wage workers. Which of these plans sounds better to you?

    Plan A
    Tax:  Rich
    Benefit:  Poor and middle class

    Plan B
    Tax:  Rich and middle class
    Benefit:  Poor and rich

    It's a matter of taste, but I think most people would prefer Plan A. Plan A is the minimum wage. Plan B is the Earned Income Tax Credit.

    You may recall my discussion of this in a recent post. The basic economic analysis is that the minimum wage is equivalent to a tax on low-wage jobs and a transfer of the revenue from that tax to workers in those jobs. Economists, even liberal economists, see a few problems with that.
    • A lot of the transfer doesn't go to poor people. A good chunk of it goes to people from non-poor households. 
    • Putting a tax on low-wage jobs would be expected to reduce the number of low-wage jobs. This seems obvious, but is now hotly contested, with a substantial amount of empirical research finding zero effect; the consensus now is that the effect is zero or small.
    • Businesses will pass along some of their cost increases to customers, who may be poor themselves.
    Much better, economists say, to use the Earned Income Tax Credit. This is a wage subsidy which is targeted at the poor. It presumably is funded from general tax revenues, so it doesn't discourage low-wage jobs. And it doesn't get passed along, because it's not a cost to employers. In fact, a portion of it ends up benefiting employers, because the wage subsidy reduces the wage employers have to pay. (For example, if I'm paying my employees $7/hour, and employees get a $1/hour subsidy, I may find  that I can pay them only $6.50 per hour, so they end up with a wage of $7.50.) If that's true, I may actually increase my hiring. You can find a liberal economist's view of the minimum wage here and a conservative economist's here.

    What every economist thinks is what I thought, until, as I was writing that recent post, I read the Congressional Budget Office's report on the minimum wage. The media summarized the conclusions of the report as: raising the minimum wage will raise the incomes of the poor, but a small number will lose their jobs. But that summary, while true, misses the main point. Here, for example, is the Washington Post's Wonkblog:

    The CBO's report reminds us that the main effect of raising the minimum wage is to redistribute income from consumers and owners/higher-wage earners to lower-wage earners. As this chart shows, most people earning under six times the poverty line would benefit from the increase.

    When I read the CBO report and saw Figure 3, my eyes almost popped out of my head. "Everyone needs to see this chart!" I thought. And yet the people at Wonkblog not only saw it but posted it, and missed the point completely. Try this instead:

    The CBO's report reminds us that the main effect of raising the minimum wage is to redistribute income from the top 10% to the bottom 90%. As this chart shows, the average family earning up to six times the poverty line (around $150,000 per year for a family of four) would benefit from the increase, even net of price increases and job losses.

    Perhaps they didn't realize that 90% of all American families earn less than $150,000 per year, or didn't make the connection.

    Apparently, in a lot of middle-class families there is someone earning the minimum wage. Some small fraction of those people will lose jobs if the minimum wage increases, and all will pay slightly higher prices. But the net effect is to make them, on average, better off.

    What if your family earns, say,  $200,000 per year? That's more  upper-middle class than rich. Are you a net loser? Actually, we don't know, because everybody in the top ten percent is lumped together in the chart. Many things we once thought were true about the top 10 percent, like their getting a much larger share of national income than they used to, turn out to be mostly attributable to the top 1% (see Figure 2 here).

    My guess is that people earning $200,000 per year end up being slight net losers. But clearly the big losers are people who earn a big chunk of their income from business profits, and (I can't find an estimate, but) those people are overwhelmingly the rich.

    So as a first approximation, I'm going with Plan A above as a description of the effect of an increase in the minimum wage: hurts the rich, helps the poor and middle class.

    In contrast, the EITC, being "better targeted," does not directly benefit the middle class. And because it presumably comes out of income-tax revenue, a good chunk of the middle class, as well as the rich, end up paying for it. Moreover, as I discussed above, some of the benefits end up being captured by owners of businesses, i.e., the rich. Some of the minimum wage "leaks" out to the middle class; some of the EITC leaks out to the rich. Yet somehow economists consider the former more of a problem than the latter.

    Finally, there's the employment effect. As noted above, there's a large body of empirical work finding, surprisingly, that modest increases in the minimum wage have no effect on employment. I looked at the CBO report to find the basis for their estimate that 500,000 jobs would be lost. That's not a huge number-- it's about 0.3% of the labor force-- and there's a lot of imprecision around it, but I still wondered how they had come up with it.

    When I got down into the weeds, I found that they had done careful work. They ended up making separate calculations  for teenagers and adults, then adding them together. I was curious how much of their final estimate of 500,000 jobs lost was made up of teenagers. But they never said.  So, using CBO's "conclusion" that adult employment is about one-third as sensitive to changes in the minimum wage as teen employment, and the fact that almost a quarter of jobs at or below the minimum wage are held by teenagers, I tried to calculate it.

    My result is that 48% of the job losses will be by teenagers. The adult job loss is not 500,000; it's about 260,000. An editorial comment: When people argue that increasing the minimum wage will be ineffective, they always talk about teenagers. When they say there will be job losses, those teenagers are never mentioned.

    Here, then, are the main takeaways from my reading of :the CBO report:
    • The minimum wage transfers income from the top 10% of the population to the bottom 90%. Quite likely a large part of that transfer is coming from the top 1%, but we don't know.
    • The number of people losing jobs is modest, and almost half of them are teenagers.
    I can't quite get over the feeling I'm missing something, so if you happen to know any economists, run this by them.