Tag Archives: inequality

The Looming End of Net Neutrality (and why you should care)

Should the economy be organized to benefit producers and consumers, or a few big middlemen? We’ve been answering that question wrong since Ronald Reagan, and we’re about to do it again.


The FCC, with its new Republican majority, is proposing to end the era of net neutrality. If you’re some kind of internet nerd, you probably already know exactly what that means and have had a strong opinion about it for a long time. If not, though, it probably sounds like one of those intense debates nerds often have about mysterious topics like databases or user interfaces: You have no idea what they’re talking about, you don’t bother to find out, and whatever results from the argument, it never seems to bite you.

This one is going to bite you. When the bite comes, it might arrive in a form you won’t easily connect back to this decision. But it is going to bite you. It’s going to bite the whole economy.

To explain how and why, let me detour through a subject you probably do care about: economic inequality. Here’s a graph I keep posting in one form or another, because I think it points to the most significant fact in American politics: Up until around 1980, median income closely tracked productivity. And then something happened to disconnect them. Productivity kept increasing, but median income stagnated.

Unsurprisingly, this has led to a concentration of income at the top: The people who make wages have lost ground, while the people who pay wages have gained.

And the greatest concentration has been at the very tip-top: The share of wealth held by the top tenth of a percent has reached levels not seen since the Great Depression.

So what happened in 1980? The facile answer is that Ronald Reagan was elected president. But that explanation is too simple, because a president doesn’t deal out national wealth like a deck of cards. What did Reagan do, if anything, that touched off this new Gilded Age of concentrated wealth?

Again, there’s a too-simple answer: He cut taxes on the rich, and he broke unions. Those actions certainly did help the wealthy and harm the middle class, but they’re not enough to explain what happened. If that were all he did, subsequent presidents should have been able to undo it.

To really understand the Reagan impact, you need to apply David Graeber’s definition of a successful revolution: Reagan changed the political common sense of his era in a way that has stuck ever since. Since Reagan, one of the basic debates in American politics has been framed as Freedom vs. Regulation, with a corollary debate of Productivity vs. Regulation. In each case, Regulation was framed as the wrong side to be on: It limits our freedom and strangles our productivity.

The result has been a completely reshuffled economy, which I first started discussing in a 2012 post “Monopoly’s Role in Inequality“.

[M]arkets are created by rules, and the rules can be structured to favor either the ends (producers and consumers) or the middle. Producers and consumers benefit from transparent markets, where the rules force middlemen to treat everyone more-or-less the same.

But markets can also be structured to give middlemen as much freedom as possible. The most profitable way to use that freedom is to create choke-points where a toll can be extracted or one producer can be played off against another. In an opaque market, the way to get rich is not to produce things, but to build middleman power that allows you to dictate terms up and down the supply chain.

What we have today, after nearly 40 years of freedom-for-the-middleman de-regulation, is an economy full of choke points. The path to vast wealth is not to make something people want (as Henry Ford made cheap automobiles) or to discover something people need (as J. Paul Getty and H. L. Hunt found oil), but to insinuate yourself between producers and consumers, create a monopolistic choke point, and charge tolls.

WalMart and Amazon, for example, are choke points; if you want to sell a product to the general public, you have to deal with them on their terms. Visa and MasterCard are choke points; retailers need them, and have to pay whatever fees they set. Cable companies are choke points; creators of TV shows can’t reach viewers without them. Google is a choke point; if you’re hoping to get around WalMart and Amazon by selling over the internet, your website needs to show up when people search for your type of product. [1]

The upshot is that post-Reagan America is no longer a place where you can build a better mousetrap and expect the world to beat a path to your door. Instead, you build the mousetrap, and then you pay off the owners of the choke points between yourself and the mousetrap-buying public. Maybe some small profit will be left for you and maybe it won’t, but the choke-point owners will do well. [2]

There are a few things worth noticing about this situation:

  • In the short run, the choke-point owners often look like the good guys. Amazon has low prices; Visa gives you cash back. Middlemen often temporarily align with consumers in order to gain more power over producers. But the pattern of all monopolists remains: Once power is consolidated, it will encroach in both directions.
  • We all need producers. You’re not just a consumer who spends money, you need to make money too. And since ordinary people have no chance of owning their own choke points, most of us have to make money by finding a place on the productive side of the economy, by participating in the delivery of some good or service. Choke points stop middle-class people from moving up by starting their own businesses, and they siphon money away from the kinds of productive businesses that hire people.
  • “Freedom” can be anti-productivity. Given the prevailing post-Reagan political common sense, that sounds like a contradiction, but it really isn’t. If middlemen have freedom to play producers off against each other and keep the lion’s share of profits for themselves, then more of the economy’s investment will be in middlemen, and less in producers. Conversely, regulations that limit the power of middlemen are pro-productivity.

Now let’s get back to net neutrality: The point of net neutrality regulations is to control middlemen who own a major chunk of our economic infrastructure: the internet service providers like Comcast, Verizon, and AT&T. Once they’re freed from regulation, you can expect them to set up choke points and charge tolls. (This is how it works in Portugal.)

If you provide some service over the internet, for example, you will find yourself competing for the favor of ISPs rather than consumers. Maybe Netflix will pay Verizon so that its streaming service comes in faster and with higher quality than Amazon Prime; or maybe Amazon will outbid it. [3] In either case, the new revenue stream for Verizon either means higher prices for consumers or less spent by Amazon or Netflix on new content. It’s basically just a wound through which Verizon can suck blood out of the productive economy.

Wired suggests that we guess how the ISPs will use this power by looking at what they already do in data-limited plans:

When AT&T customers access its DirecTV Now video-streaming service, the data doesn’t count against their plan’s data limits. Verizon, likewise, exempts its Go90 service from its customers’ data plans. T-Mobile allows multiple video and music streaming services to bypass its data limits, essentially allowing it to pick winners and losers in those categories.

Consumers will likely see more arrangements like these, granting or blocking access to specific content … Net neutrality advocates have long worried that these sorts of preferential offerings harm competition, and by extension, consumers, by making it harder for smaller providers to compete. A company like Netflix or Amazon can likely shell out to sponsor data, but smaller companies don’t necessarily have the budget. … the future internet, then, could look a more extreme version of today’s mobile plans, with different pricing tiers for different levels of video quality for different apps. That means more customer choice, but perhaps not in the way anyone actually wants.

In the conservative fantasy world, the toll collectors will use some fraction of their windfall profits to improve their broadband networks (just as corporations in general will generously use their Trump tax cuts to hire more workers and pay them higher wages). In reality, though, it will be one more opportunity for parasites to latch on to the productive economy. The parasites will do well; ordinary people, not so much.


[1] Apple is an interesting hybrid. It makes things people want, like iPhones. But it too sees how the post-Reagan economy works and wants to evolve into a choke-point company. Already, its App Store is a choke point for software builders, iTunes is a choke point for music producers, and it would like ApplePay to become a choke point upstream from Visa and MasterCard.

[2] A choke point I face on this blog is Facebook. Three years ago, Facebook’s algorithms allowed posts on no-name blogs to go viral. (2014’s “Not a Tea Party, a Confederate Party” got more than half a million hits.) Now that’s much harder. (2017’s most popular Sift post has less than 4,000 hits.) Meanwhile, I’m constantly bombarded with suggestions that I should pay Facebook to get more visibility. I suspect Google does something similar to video bloggers on YouTube.

The analogy isn’t quite perfect, because I’m not trying to make money off my readers. But Josh Marshall at TPM is trying to make money, in an environment he described recently as a “digital media crash“. The situation was tough to begin with, and then …

Then came the platform monopolies: Google, Facebook and a few others. Over the last five years or so but accelerating rapidly in the last 24 months, they’ve gobbled up almost all of the growth in advertising revenue and begun to engross a substantial amount of the existing advertising revenue as well.

That increased flow of money to the platform monopolies takes it away from the actual journalists who find out things and explain them to you.

[3] One article endorsing the FCC proposal points to the ambiguous role of choke-point giants like Amazon and Google.

Net neutrality’s dubious value is made obvious by the misleading way Democrats and many news outlets reported the decision. “F.C.C. plans net neutrality repeal in a victory for telecoms,” wrote the New York Times. Missing from the headline or lede was that the decision was a loss for Netflix, Amazon, Google, and other corporate giants that provide content.

The logic of this should be obvious: Amazon and Google are on the side of the general public on this issue, but for their own reasons: They don’t want new choke points to be constructed upstream from their choke points.

What’s a 21st Century Equivalent of the Homestead Act?

A typical featured article on this blog is supposed to tell my readers something they might not already know, or at least to get them to think about it in a different way. But this time I’m just trying to raise a question, hoping that the combined wisdom and creativity of the readership will come up with stuff I haven’t thought of.

Before I ask the question, some background: One of the most radical things the United States government ever did was pass the Homestead Act (actually the Homestead Acts; there were a series of them). Beginning in 1850, and picking up steam after the Civil War, the government gave away relatively small plots of land — usually 160 acres — to settlers who over a period of five years would build a home on the land, live there, “improve” the land to make it farmable, and then farm it. Wikipedia claims that 10% of the total area of the United States was given away in this manner, to the benefit of 1.6 million families. [1]

I doubt Karl Marx had much influence on the U.S. Congress (though he was writing during this era) and there’s nothing particularly communist about establishing 1.6 million plots of private property. But I like to look at the Homestead Act in the light of the Marxist concept of the means of production. In a nutshell, the means of production is whatever resources are necessary to turn labor into goods and services. So, in a given society at a given state of technology,

Labor + X = Goods and Services

Solve for X, and that’s the means of production. Today, X is complicated: factories and patents and communication systems and whatever. But for most of human history, the means of production had mostly been land. And it still could be, even in the 19th century with its growing industrial economy; if you had fertile land, you could work it and produce sustenance for yourself, plus some extra to trade.

To Marx, the problem of capitalism is that the means of production — land, factories, mines, and so on — wind up privately owned by a fairly small group of people, and everybody else can only get access to the means of production by negotiating with those people. In other words, your productivity is not up to you; you can’t just go work and collect the fruit of your labor, you need an employer to hire you, so that you can have a job and get paid. Your labor only counts if you can get an employer’s permission to use his access to the means of production. Otherwise, you’re like a landless farmer or an auto worker who has been laid off from the factory.

Marx foresaw a vicious cycle: The narrower the ownership of the means of production became, the less bargaining power a worker would have, and the larger the premium an employer could demand in order to grant access. [2] This imbalance in bargaining power would increase the concentration of wealth, making the ownership of the means of production even narrower.

Usually, communists end up talking about state ownership of the means of production, but I want to point out that that’s a method, not a goal. What is really important is universal access to the means of production. State ownership is one way to try to do that, and I’m not sure how many other ways there might be — that’s part of the question here — but the real goal should be access: If all the people who want to work can find a way to turn their effort into goods and services, without needing to make a extortionate deal with some gatekeeper, then we’re on to something.

Now let’s return to the Homestead Act. What it did was vastly increase the number of Americans with access to the means of production. Mind you, it didn’t establish universal access — if you were a freedman sharecropping in Georgia, or were making pennies an hour in some dangerous factory in Connecticut, you had little prospect of assembling a big enough stake to go out West and homestead for five years — but it was vastly expanded access.

So now you’re in a position to understand what I’m asking: What would do that now? What change could we make (where we includes but is not necessarily limited to the federal government) that would vastly increase access to whatever the means of production is today?


[1] Probably most of you have already realized that this was an example of robbing Peter to pay Paul. The only reason the U.S. government had all this land to give was that they were in the process of stealing it from the Native Americans.

I would argue that at this point the decision to rob Peter had already been made; I doubt any major figure in the government saw much future for the Native Americans other than being pushed back onto reservations or annihilated. However we do the moral calculations today, at the time Congress saw itself with the power (and even the right, though don’t ask me to defend it) to dispose of that land however it wanted.

Given that robbery-in-progress, I think the decision to pay Paul is still remarkable. It certainly wasn’t the only thing Congress could have done. The government could have applied the Spanish model, and created a bunch of large haciendas to be controlled by a wealthy elite. Or it could have applied the English model, and granted the land in huge swathes to public/private companies like the East India Company or the Virginia Company, who could develop it for profit. What it did instead created a middle class of small landowners rather than an aristocracy or a managerial elite.

[2] Workers don’t usually pay an explicit “premium for access to the means of production”, but it’s implicit when a profitable business pays low wages: Money comes in and the owner keeps the lion’s share. If you don’t like it, go get another job.

One way to read the productivity vs. wages graphs I post every few months is that access premiums have been growing since the mid-1970s, and really started to accelerate in the mid-1980s.

A Real Pro-Police Agenda is Liberal

Police are killing and being killed because we keep putting them in impossible situations. Let’s stop.


Americans love to tell stories with well-marked villains. For the last two or three years, my social network of liberal friends has been telling a lot of stories about black men killed by police, and in nearly all of them the police are the villains: They strangled Eric Garner as he gasped “I can’t breathe.” They gunned down 12-year-old Tamir Rice with barely a thought. They shot Alton Sterling at point-blank range, while two officers were holding him down. They killed John Crawford III in a Walmart where he was planning to buy a toy gun.

Conservatives have also been telling police stories, but theirs have different villains. Sometimes they make villains out of the same people who were victims in the liberal stories: Michael Brown was a thug, and Tamir Rice was acting like one. Freddie Gray injured himself to make police look bad.

Sometimes the villains are the civil rights leaders who mobilize a community to protest, the people Bill O’Reilly calls “the grievance industry“.

Sometimes the villains are the Black Lives Matter protesters and their allies — people like me and my liberal friends, who are “anti-police”. When gunmen killed police in Dallas on July 7 and in Baton Rouge yesterday, such story-tellers felt validated: This is what happens when you villainize police. People start killing them.

Occasionally, the villains are fantasy people who exist only in the perverse imaginations of hate-mongers like Donald Trump. When Black Lives Matter protests continued after the Dallas shooting, he made up this lie about people who honor the assassin:

The other night you had 11 cities potentially in a blow-up stage. Marches all over the United States—and tough marches. Anger. Hatred. Hatred! Started by a maniac! And some people ask for a moment of silence for him. For the killer!

Not even his campaign can explain where he got that or what he based it on. But of course he offers no apology. (A more typical BLM response to the shootings came from DeRay McKesson, who had been arrested in the demonstrations immediately after Alton Sterling’s death: “The movement began as a call to end violence. That call remains. … My prayers are with the victims of all violence.”)

Three narratives. In short, what we’ve been seeing in the media are two opposing narratives: the liberal “anti-police” narrative in which police are killing young black men for no good reason, and the conservative “pro-police” narrative in which young black men deserve to be killed, and unscrupulous political leaders get publicity by raising anger against the police, resulting in unstable minds deciding to kill them.

I want to propose a third narrative that supports both the police who are trying to do their jobs without killing or being killed, and also the communities of color that feel constantly harassed by police and in danger of violence from them.

Unfortunately, the villains in my story are most of the rest of us, who are in denial about the true state of our country: We throw police into the gap between our Fourth-of-July fantasies and the unjust society we actually live in. We tell them to make those contradictions work, and when they can’t we go looking for someone to blame: either the police themselves, or the victims of injustice they were supposed to keep under control so that we don’t have to notice them.

Scandinavia and Missouri. When liberals argue that violent police are not necessary, we often point to small Scandinavian countries. In Finland, for example, police handle about a million emergency calls every year. In 2013, they dealt with those million situations while firing exactly six bullets. With 5.4 million people, Finland is small as countries go. But it’s bigger than Chicago, and one Chicago police officer fired 16 shots into Laquan McDonald in 13 seconds.

Or take Iceland, which has had one fatal police shooting in its 71-year history. Sure, it only has about 330,000 people, but it’s bigger than Stockton, California, which had three fatal police shootings in the first five months of 2015.

That sounds bad for American police. But I want to propose a thought experiment: What if those non-trigger-happy Finnish and Icelandic police had been covering Ferguson, Missouri, the St. Louis suburb where Michael Brown was killed? The reason I choose Ferguson for my experiment is that we know a lot about what Ferguson police were asked to do, based on the Justice Department reports that got written after the Michael Brown shooting. Here’s what I think is the key sentence:

Ferguson’s law enforcement practices are shaped by the City’s focus on revenue rather than by public safety needs.

Let me flesh that out a little: Like several other near suburbs of St. Louis, the kind populated by the people who get pushed out of city centers as they gentrify, Ferguson doesn’t have a sufficient tax base to support schools, street repair, and the other services it needs to offer. Neither St. Louis County nor the State of Missouri wants to take responsibility for this situation, so Ferguson and various other towns came up with what probably seemed like the only solution: They’d use the police and the municipal courts to squeeze fines out of poor people.

In other words, the relationship between the police and the mostly black community was designed to be adversarial, a predator/prey arrangement: The purpose of the police was to find violations they could ticket people for, and the purpose of the courts was to make compliance difficult, so that small fines could be multiplied into ongoing revenue streams. (John Oliver did a great job describing how this system works in municipalities across the country.) When citizens found themselves unable to pay their fines, the police would be called on again to bring them to what was essentially a debtor’s prison.

I’m willing to bet that the Finnish and Icelandic police have no experience making a system like this work. Could they do it without ratcheting up their level of violence? I’ve got my doubts.

My point is that if you watched the Ferguson protests unfold and told a story that made either Michael Brown or Darren Wilson the villain, you missed the bigger picture: Both of them were victims (though of course not equally). Michael Brown had to live (and then die) in a hellish community, and Darren Wilson’s job was to enforce that Hell, and keep it from leaking out and bothering the people who live in more privileged communities.

When social services fail. If you Google “mentally ill man killed by police in parents yard”, you don’t just get one story. That’s a generic description of something that happens over and over. The mother of a victim in Denver described her experience: “I told the cops he was mentally ill. He was schizophrenic. I called for help. I didn’t call for them to kill him.”

The ACLU notes the larger pattern:

Many people recognize the names Eric Garner, Michael Brown, and Tamir Rice, African-American men, and a child, killed by the police.

Less well known are the names Milton Hall, James Boyd, Ezell Ford, Kajieme Powell, and Tanisha Anderson.

They are people with psychiatric disabilities – most of them people of color – shot and killed by police. In many cases, police were responding to requests for assistance to get the person mental health care.

Teresa Sheehan’s name might also be included in the list. In 2008, she was shot five times by police after her caseworker sought assistance in getting her to the hospital for treatment. She, unlike the others, survived. And she sued.

Schools increasingly have been using police to handle discipline problems. Cops don’t understand kids any better than teachers — probably less so — but they are empowered to use more force. So they do.

As we cut taxes and cut the government services that they fund, police are left to pick up the slack. If you find yourself in a situation you can’t handle, you call 911 and they send the police. The officers who arrive probably have no more training to deal with the situation than you do, but they have no one to pass the buck to. They are not psychologists or negotiators, and the tools they have been trained to use are guns and tasers. The barked orders that will get compliance from a drug dealer may not work on a psychotic or a bratty middle-school student throwing a fit, but it’s what they know.

Sometimes it goes wrong.

Sentinels of the gated community. In the Ozzie-and-Harriet fantasy of middle class America, police are seldom necessary, and when they do show up, they help find a lost child or support the community in some other way. Citizens in this vision of America comply with laws voluntarily, because the laws were made by and for people like them. If you find injustice, you just tell someone, and eventually the word gets to people who can solve the problem.

If the United States was ever that country, it isn’t now, and the situation is getting worse. Again, let’s compare to Finland and Iceland: In a list of 34 OECD countries, Iceland had the lowest level of income inequality after taxes and transfers, with a GINI coefficient of .244. Finland was a bit higher at .260. The United States was the second-most-unequal country (after Chile, a country we don’t usually compare ourselves to), with a .380 coefficient.

When 17 of those same countries are compared according to a standard measure of social mobility (the correlation between the wages of fathers and sons), the United States is the fourth most immobile society. Iceland is not listed, but Finland has the third most fluid society, after fellow Scandinavian countries Denmark and Norway.

As our distribution of wealth and income gets more skewed, our restrictions on campaign contributions are being dismantled, with the result that the concerns of middle-class people — much less the poor — draw less and less attention from government officials. A study by two Princeton political scientists concluded:

When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover … even when fairly large majorities of Americans favor policy change, they generally do not get it.

In short, we are becoming a society of haves and have-nots. The lack of social mobility means that if you are born a have-not, you have less and less chance of doing anything about it. And if you can get a lot of have-nots to support changes to make the system fairer … you probably still can’t do anything about it.

In that situation, the case for voluntarily obeying the laws gets less and less compelling. And Sheriff Andy of Mayberry has to get replaced by people who look a lot scarier.

A real pro-police agenda. The phrase “pro-police agenda” conjures up images of bigger budgets, ever more militarized hardware, and decreased accountability when bad things inevitably happen. But that’s “pro-police” only if you believe that police actually want the role we have given them, or that a future as paid thugs for the 1% appeals to them.

But I suspect a lot of American cops envy those Finns who only had to fire six bullets in a million emergency situations, or the Icelanders who only had to kill one person in 71 years.

That’s not some magic of the Northern climate, it’s democratic socialism. It’s the best public school system in the world. It’s mental healthcare integrated into a national healthcare system that interacts with schools and businesses. It’s tuition-free universities. It’s an economy where your parents’ income doesn’t decide your caste. It’s a political system not dominated by money. It’s refusing to segregate poor people into dysfunctional communities.

We could do all that here. And if we did, the United States would be a much easier country to police.

Death, Taxes, and the American Dream

As executor of my father’s estate, I learned that the #1 argument against “the Death Tax” is completely false.


It is a truth universally acknowledged, that a great fortune seeking to pass from one generation of aristocrats to the next must be in need of tax relief. To this end, Thursday the House voted (mostly on party lines) to repeal the federal estate tax, a.k.a. the Death Tax.

Now, you might wonder why House Republicans would do that, given (1) Obama is sure to veto it if it gets that far, and (2) Republicans now claim they want to do something about income inequality. (They used to say it wasn’t a problem; now suddenly it is.)

So far in the 2016 cycle, the announcement speeches of all the Republican presidential candidates have centered on the next generation’s loss of hope in the American Dream. Typically they say something like this: “For me [or my parents or grandparents — I can’t wait to hear how far back Jeb Bush has to go before he finds someone who struggled] America was a place where you could come with nothing and achieve anything. I want that to continue to be true for future generations of Americans.”

None of them are talking about the old European Dream of establishing a dynasty that hands a huge fortune down through the centuries. But actions speak louder than words, and that’s the tax plan their party has united behind.

Who pays the Death Tax? As it currently stands, the federal estate tax only applies to estates larger than $5.43 million, so it is literally a multi-millionaires’ tax. The whole point of the Death-Tax framing is to fudge that fact. Everybody dies, so something called a “Death Tax” sounds like it ought to affect everyone.

But, sadly, not everybody leaves a multi-million-dollar estate. According to WaPo’s Plum Line, only 1 out of every 553 estates owes any estate tax at all. And that one gets to skim $5.43 million off the top ($10.86 million if the heir is a surviving spouse), so even if you’re fortunate enough to die with $6 million or $7 million, your estate is still not going to pay much.

So repealing the tax has nothing to do with passing a small family farm from father to son, or letting a Mom-and-Pop business continue as a Brother-Sister-and-Two-Cousins business. The real issue is the American equivalent of keeping Pemberley in the Darcy family or saving Downton Abbey for the Crawleys. Repealing the estate tax is all about the plutocracy maintaining itself.

The fairness argument. Even after Citizens United, we still have enough of a democracy that politicians can’t just admit they’re serving the hereditary aristocracy. So what do they say?

The usual argument against the estate tax is that it’s unjust, because the money is being taxed twice. I’m not sure exactly why double-taxation would be unjust — that’s a different discussion — but for now let’s just go with it: As the money came in, it was trimmed by the income tax, so taxing it again at death is unfair. The Patriot Post begins its ringing denunciation of the Death Tax like this:

There are lots of persuasive reasons to kill this odious tax. The money in a person’s estate has already been taxed over the lifetime that it was earned.

Persuasive? Maybe. It’s also false.

Dad’s farm. I’ve been hearing that double-taxation argument for years, but I didn’t realize how wrong it was until I became executor of my father’s will. One of the things Dad left behind was the family farm: a 160-acre square whose abstract of title includes documents going back to the Homestead Act.

My parents bought the farm from my grandparents in 1950 for $30,000, and I sold it to a cousin in 2013 for … well, considerably more than that. (It’s good Illinois topsoil, and Dad took care not to let it erode.) Because of the way the tax laws work, no one ever paid tax on that capital gain: not my parents while they were alive (because they didn’t realize the capital gain by selling), not the estate (which was under the $5 million limit), and not me or my sister (because of a nifty little loophole called stepped-up basis).

That’s not some special arrangement for farms; it applied to the rest of the estate as well. Mom and Dad were conservative investors who didn’t buy or sell that often, so the non-farm portion of their holdings consisted of a house and some stocks they had held for many years (and usually bought for a lot less than the current value). As a result, the great majority of what my sister and I inherited is money that, to this day, has never been taxed.

That’s not unusual. According to the Center on Budget and Policy Priorities:

Estimates recently made by economists James Poterba and Scott Weisbenner, based on data from the Survey of Consumer Finances, suggest that unrealized capital gains make up about 37 percent of the value of estates worth more than $1 million and about 56 percent of estates worth more than $10 million.

I’ll take a wild guess and say that the percentage keeps getting higher and higher as the estates get larger.

Heirs and entrepreneurs. If you look at the top of a list of the richest Americans, you might think we’re still an entrepreneurial society: Bill Gates, Warren Buffett, Larry Ellison — all founders of major corporate empires. That case gets only slightly dicier with the next two names: Charles and David Koch, who inherited Koch Industries from their Dad, but did manage it aggressively and multiplied its value. Dad’s company wasn’t a household name, but Charles and David’s company is. That’s why they’re on the list.

Four of the next five, though, are the heirs of Sam Walton, founder of WalMart. The singular virtue that makes the Waltons multi-billionaires is that they were born in the right place. Most of what they inherited was WalMart stock that Sam had owned since the founding, when it was worth virtually nothing. When he died, that vast capital gain disappeared for tax purposes, just like the gain on Dad’s farm. So the federal estate tax was the only tax that money ever faced.

Now imagine the “Death Tax” gone. The Gates, Buffett, Ellison, and Koch fortunes are in Microsoft, Berkshire Hathaway, Oracle and Koch stock. The vast capital gains on those holdings have never been taxed. Without an estate tax, that stock is just handed off directly to the heirs, who can hand it off to their heirs.

It never gets taxed. Ever.

That’s how you build a hereditary aristocracy.

But the rich have foundations. Another excuse for getting rid of the Death Tax is that the very rich find ways around it anyway. Look at Gates and Buffett: They’ve put billions into the Gates Foundation, money that the tax man will never see.

That continues a long American tradition, going back to the Rockefeller Foundation and the Ford Foundation. Andrew Carnegie’s money wound up in countless libraries, museums, and universities, rather than in the federal treasury.

I’m not sure why that’s supposed to be a criticism of the estate tax. If Bill Gates wants his money to fight malaria in Africa rather than lower the federal deficit, I’m OK with that. John D. Rockefeller decided to found the University of Chicago rather than hand his money over to the government. I got my graduate degrees there, so it worked out fine as far as I’m concerned.

Without the Death Tax. You know what would be worse than that? If the richest-Americans list were still dominated by Rockefellers and Fords and Carnegies. That would make us a fundamentally different kind of country.

It could have worked out that way. I’m not sure I buy Celebrity Net Worth’s estimate that Rockefeller, Carnegie, and Henry Ford put together were worth about $800 billion in today’s dollars — that would be about ten times Bill Gates — but I don’t doubt that those fortunes would still be competitive if the heirs could have held them together and invested them well.

Without the “Death Tax” either collecting taxes or pressuring billionaires to find other ways to dispose of their money, a century from now we could be that kind of country — the kind where the wealthiest people aren’t entrepreneurs, they’re heirs. The richest-Americans list of 2115 might consist almost entirely of Waltons and Ellisons and Kochs. The way to get on that list would be to marry into one of those empires, not try to start one of your own.

If thing work out that way, I’m sure the politicians of 2115 will still give inspiring speeches about the American Dream. But it will be the old European Dream of the Medicis and the Rothschilds that has won out. Don’t waste your time trying to invent the Next Big Thing, just hope your daughter finds her Darcy. Then keep handing the money down your family line forever.

Can Conservatives Solve Poverty?

 

Paul Ryan engages the problem, but can’t remove his ideological blinders.


Paul Ryan has spent years developing a reputation as Captain Cut: cut discretionary spending, cut entitlements, and most of all cut any program designed to help the poor. His budget proposals have meshed well with the other part of his reputation (which he sometimes claims and sometimes disowns): a follower of Ayn Rand, the author/philosopher who saw politics as a competition between Makers and Takers.

Recently, though, Ryan has been coming under the influence of the “reform conservatives” or “reformicons”: a small group of young conservative intellectuals like Yuval Levin and Ramesh Ponnuru — occasionally supported by the NYT’s conservative columnists Ross Douthat and David Brooks — who believe the Republican Party can’t in win the long run as the Party of No, and yet who don’t want to return to the center and compromise with Democrats. Instead, they want to see the GOP claim the Party of Ideas mantle by developing a set of distinctively conservative approaches to solving the very real problems that face America’s middle class: paying for health care, educating their children, finding good jobs, and so on.

And somewhere along the way, conservatives need to come up with their own plan for dealing with poverty, either because they actually care about the poor, or (more cynically) because they know a lot of middle-class voters don’t respond well to the harsh image conservatives have been cultivating. So the message has to be: “We care … we just care differently.”

The root cause of poverty: poor people. But if reform conservatism is going to take over the Republican Party rather than split off from it, it needs to stay in tune with the core sensibilities of the conservative movement. In particular, it can’t change the conservative view of the root cause of poverty: poor people.

I mean, what else could it be? Poverty can’t be capitalism’s fault, because capitalism is the only moral economic system. The problem can’t be the rich soaking up too much of the national output, because the rich are job creators whose wealth benefits everyone. Poverty can’t come from racism, because racism ended in the 1960s. (So if poverty seems to be concentrated in certain racial groups, they must have a cultural problem.)

Consequently, any conservative poverty program has to focus on fixing the character flaws of poor people: They need discipline. They need a work ethic. They need to learn to save their pennies rather than blowing everything on drugs and bling, and to control their libidos rather than spawning children they can’t feed.

The only other possible place to put the blame is government: Government has taken advantage of poor people’s lack of character by offering them benefits. This has made them dependent on government the way an addict is dependent on his drug. Addiction — pushers and addicts — is the fundamental conservative model of the liberal welfare state.

That’s their explanation of why people are still poor, 50 years after LBJ declared war on poverty: Liberals never intended to end poverty, any more than pushers want to end drug addiction. They just want to keep poor people dependent on government benefits, so that they’ll elect Democrats to keep the juice flowing.

So now you can see the outlines of a conservative poverty message: demand more of poor people, teach them middle-class virtues, target benefits more efficiently, and keep benefits flowing just long enough to wean the poor away from their dependency. Then they’ll be back on the path to wealth like the rest of America.

That message won’t convert many poor people, but that’s not really where it’s aimed. It’s supposed to comfort suburban moms, who lean Republican on other issues, but need to believe they’re voting for a plan more compassionate than Scrooge’s prisons and workhouses.

Ryan’s two reports. Paul Ryan is approaching this issue systematically, laying groundwork for the long term rather than grabbing for a few days of headlines.

He started down this path in March, with The War on Poverty: 50 Years Later (which I reviewed). WoP@50 identified and evaluated 92 separate federal programs aimed at helping the poor, and suggested that the government should have a more integrated approach to poverty that builds on the programs that work and eliminates the ones that don’t. He continued in July with Expanding Opportunity in America, which sketches a framework for that integrated approach without making any cost estimates other than to stipulate that the whole program should be “deficit neutral”.

This is not a budget-cutting exercise -— this is a reform proposal. This consolidation does not make judgments about an optimal level of spending.

EOiA‘s approach has two pieces: An expansion of the earned income tax credit to put money directly into the hands of the working poor, and block grants to the states who can use them to provide a variety of other services currently provided either by the federal government or a federal/state partnership: direct welfare payments, job training, child care, drug treatment, housing subsidies, food support, and so on.

Case managers. So far none of that is surprising. But the next piece is: Ryan imagines a system in which the government does not define a uniform set of entitlements that anyone fitting the definition automatically can get. Instead, he envisions each aid recipient working with a case manager who has discretion to create an individualized package of benefits.

Together, client and manager would work out a plan to solve whatever character issues and lack of qualifications prevent the client from getting a good job and leaving government assistance behind. This plan would become a “contract” that the client would sign and the manager would enforce.

Under each life plan, if the individual meets the benchmarks ahead of schedule, then he or she could be rewarded. For example, if the goal of an individual’s plan is to find a job within six months, and he or she starts working within three months, he or she could receive a bonus. Bonuses could take a number of creative forms, such as a savings bond. … [But] the opportunity plan could stipulate consequences for breaches of its terms, most likely immediate sanctions and a reduction in benefits.

If you’re an optimist like Reihan Salam, you can picture this working marvelously.

The theory behind having smart, dedicated caseworkers working on behalf of people who are down on their luck is that spending a bit more time and money now could help save time and money later. If someone takes the time to understand your personal situation and the particular challenges you face, there’s a better likelihood you’ll have a successful outcome down the line.

… People with low or no earnings … face diverse obstacles. Some need short-term help to, say, fix their car, which will allow them to commute to work, or to make a deposit on a rental apartment. Others don’t have the skills they need to earn enough to support themselves and, for whatever reason, will have a very hard time acquiring them. Sure, you could give both kinds of people food stamps and call it a day. Or you could recognize that one-size-fits-all programs don’t do justice to the ways in which individual circumstances vary.

But you can also picture the amount of power a case manager would have over her clients and wonder how to prevent abuse. And that means paying not just case managers (who might spend a considerable amount of time on each case), but also inspectors and supervisors to keep an eye on the case managers. Whether the efficiency gained by tailoring benefits would pay for that overhead is debatable.

Also, Ryan imagines the case workers not being government employees. Catholic Charities comes up in one example, and he might even be thinking of privatized for-profit case management. The first possibility makes me wonder how the law would prevent Guru Bob Charities from taking over the lives of Guru Bob’s followers. And the second has me thinking about the corruption that has accompanied privatized public schools. In a state that doesn’t seem concerned about its poor — Mississippi comes to mind — who’s going to care if the federal block grant winds up as corporate profit?

And finally, what happens if you get to the point in your contract where you’re supposed to be working, but the economy has crashed and there just are no jobs? Or there are only part-time minimum-wage jobs that won’t get you above the poverty level? The whole concept suffers from the Musical Chairs Fallacy*: No matter how quick or alert you train the players to be, somebody’s going to be eliminated if there aren’t enough chairs.

Jamelle Bouie calls the whole approach “breath-takingly paternalistic” and “wrong-headed”.

At some point in their lives, millions of Americans will experience a short spell of poverty. Not because they don’t have a plan to fix their lives or lack the skills to move forward, but because our economy isn’t run to create demand for labor, isn’t equipped to deliver stable work to everyone who wants it, and wasn’t built to address the distributive needs of everyone who works.

I am struck by the difference between how we think of the poor and how we think of corporations. If a poor person gets help and then doesn’t look for a job as hard as we think he should, we are morally outraged. But if a corporate tax cut is justified by the jobs it will create, and some corporation pockets the money but doesn’t create any jobs … well, no big deal. We take for granted that a corporation will be clever in the way it manipulates government programs, but the same cleverness in a poor person is reprehensible.

Independence. For the most part, Ryan’s committee has studied the issue by talking to conservative poverty experts rather than to poor people. (Why would they? If poor people were smart, they wouldn’t be poor.) But they did let one impoverished woman testify, and the culture clash was obvious.

It centered on the word independence. Tianna Gaines-Turner is a mother of three who is married and lives with her husband. They both work low-paying jobs. Her children all suffer from asthma and two are epileptic. Rep. Todd Rokita (R-IN) offered a thought experiment in which current poverty programs were increased fivefold. People would be lifted out of poverty, he said, but it wouldn’t “break of the cycle of dependency”. Gaines-Turner replied, “I am independent on the program.” In other words, her family can have its own apartment and she and her husband can take care of their own children, rather than being homeless or in a shelter or giving their children up to someone else.

It’s precisely that “independence on the program” that Ryan would do away with. Rather than claiming benefits her situation entitles her to, Gaines-Turner would go hat-in-hand to a case manager, who would tell her how to live and cut her off if she didn’t obey.

What Ryan gets right. The two main ways to help the working poor are by increasing either the minimum wage (where the additional money comes from the employer) or the earned income tax credit (where it comes from the government). There’s an argument to be had over which is better, but either is better than nothing. I see the EITC as largely a subsidy to WalMart (which can go on paying wages its workers can’t live on), but I can swallow that if it’s the only politically viable choice.**

Ryan also proposes making the EITC easier to collect, so that you don’t have wait and file a tax return at the end of the year. I can get behind that.

And the most important change in conservative thinking is buried deep in EOiA: Ryan has noticed how lives and families are disrupted by long prison sentences for non-violent drug offenders.

A growing body of research exposes the high costs of incarceration. To help low-risk, non-violent offenders re-enter society, rebuild their families, and pursue careers, this proposal would revise mandatory-minimum guidelines and couple expanded enrollment in rehabilitative programing with an earned-time-credit system in federal prisons.

Liberals should jump on this. If Ryan is serious, it could have a huge impact.

But is he serious? I really have no idea. Quite possibly these reports are all window dressing, so that Republicans can say, “We have our own poverty plan.” Presumably in a few months Ryan will produce the third report in his trilogy, where he starts using numbers. That should tell us something.


* A version of the Composition Fallacy.

** Ryan argues that increasing the minimum wage would kill jobs that poor people need, but that point undermines his worldview. You can’t logically claim that anyone who tries hard enough can find a job at $7.25, but that job availability suddenly becomes a problem at $9. The overall ability of the economy to create enough jobs either is a problem or it isn’t. You can’t assert it in some situations and ignore it in others.

 

The Real Politics of Envy

Whose message is actually capitalizing on envy and resentment?


Tuesday, Politico reported the latest example of — this is happening so often we need to give it a name — Plutocrat Persecution Psychosis:

“I hope it’s not working,” Ken Langone, the billionaire co-founder of Home Depot and major GOP donor, said of populist political appeals. “Because if you go back to 1933, with different words, this is what Hitler was saying in Germany. You don’t survive as a society if you encourage and thrive on envy or jealousy.”

Yes, Langone is echoing fellow PPP sufferer Tom Perkins, who recently warned in The Wall Street Journal that a “Progressive Kristallnact” against the 1% is on its way. (Apparently, only being allowed to vote once — in spite of all his money — chafes on Perkins. Those of us free from the burden of vast wealth can barely hope to imagine what other persecutions he suffers.)

I could sympathize if some terrorist group were burning down mansions, or assassinating “malefactors of great wealth” as Teddy Roosevelt used to call them. But no, this Nazi-like persecution seems to consist mainly of calls to raise our low taxes on the very wealthy (and their corporations), to insist that they pay their employees a somewhat higher minimum wage, and a few rhetorical flourishes that fall far short of having the President of the United States refer to you as a malefactor of great wealth (or, as Teddy’s cousin Franklin put it a few years later “unscrupulous money changers“).

But let’s ignore the over-the-top Hitler reference — many others have taken Langone to task for that — and focus on Langone’s underlying points:

  • There is a growing politics of envy in America.
  • Liberal rhetoric about inequality is based on that envy.
  • The primary push towards envy and resentment in our politics comes from the Left.

I figure this is the venom that is supposed to stay in the public’s bloodstream after the Hitler-barb is plucked out. That’s how these things work: If Langone had compared your moustache to Hitler’s, and you denied it without calling sufficient attention to the fact that you don’t have a moustache, what would stick in the public mind is the vague sense that your moustache is probably more like Stalin’s, or maybe Ming the Merciless’.

Before addressing any of that, let’s spiff up the terminology a little: envy here is actually short for envy-based resentment. By itself, envy is just wishing that some aspect of another person’s life could be part of my life, and it isn’t necessarily destructive. (If I envy a friend’s ability to speak French, maybe I’ll go take a class.) Consumer capitalism couldn’t function without this non-destructive kind of envy. If Americans looked at the neighbor’s fancy new car and just said, “Good for him!” the economy would probably collapse or something

Resentment, on the other hand, wishes others harm, and envy-based resentment means wishing people harm because they have some advantage I wish I had. (Somebody ought to give that fancy new car a dent or two.) So, for example, as a writer I envy Stephen King’s ability to fill a complicated plot with interesting characters. But that’s benign, because I don’t resent him — I don’t wish bad things would happen to him to even the score between us. (If good things would cause him to finish his next novel faster, I’m all for them.)

This distinction is important because of course the rest of us envy the rich. (Think of all the places I would have gone if traveling were as simple as telling my pilot to fire up the jet.) But whether we resent them, and whether that resentment motivates our politics, is another matter entirely.

It’s an article of faith among the very rich that liberal policies (like progressive taxation and regulations that sometimes block the most direct path towards amassing even greater fortunes) are primarily motivated by resentment: We lesser mortals want the government to even the score a little by inflicting some pain on the lords of wealth. Part of Mitt Romney’s core message (said in almost the same words in interviews here and 11 months later here) was: “If one’s priority is to punish highly-successful people, then vote for the Democrats.” And CPAC front-runner Rand Paul echoed that sentiment in his 2014 State of the Union response:

If we allow ourselves to succumb to the politics of envy, we miss the fact that money and jobs flow to where they are welcome. If you punish successful business men and women, their companies and the jobs these companies create will go overseas.

The idea that you might just want to raise revenue by getting it from the people who would miss it the least; or that even though you have nothing against the rich personally, you think that a vast and growing gap between rich and poor is unhealthy for society … that just doesn’t figure. The only conceivable reason you might support a policy the rich don’t like is because you are burning with resentment and want to see them punished for having more than you do.

Jonathan Chait examined this claim and could find no supporting evidence — not even in columns promoting it. (That’s why Langone had to specify “with different words”. You can’t defend his point if you restrict yourself to what people are actually saying.) Politicians, no matter how liberal, are not promising to wreak vengeance on the 1%.

In practice, the politics of class emerge from the context of budgetary choices, where Democrats have positioned themselves against low taxes for the rich for the sole reason that it would come at the expense of more important fiscal priorities. … Gore, Kerry, and Obama were all making the exact same point: Clinton-era tax rates for the rich needed to stay in place not because the rich needed to be punished, but because cutting those rates would create more painful alternatives, like higher structural deficits or cuts to necessary programs.

But does that mean that resentment isn’t a factor in politics or that no one is trying to fan that flame? No, it doesn’t, because resentment-stoking is a constant drumbeat from the Right. Consider, for example, this ad that the Club for Growth ran in Wisconsin in 2011 during Governor Scott Walker’s successful campaign to bust the state employees’ unions.

All across Wisconsin, people are making sacrifices to keep their jobs. Frozen wages. Pay cuts. And paying more for health care. But state workers haven’t had to sacrifice. … It’s not fair. … It’s time state employees paid their fair share, just like the rest of us.

The ad doesn’t promise that anything good will happen to “the rest of us” if the unions are broken. You could imagine an argument similar to the Gore/Kerry/Obama point about taxes: “We’re sorry that we can’t fully fund the pensions of our hard-working teachers and other state employees, but something has to give and we’d rather keep taxes low and spend our limited resources on other priorities.” But instead, this ad is about punishing the state employees, because their unions have shielded them from the kind of employer aggression that has victimized private-sector workers; so let’s bust their union and make them suffer the way other working people suffer.

That’s pure resentment, a political movement very directly trying to “encourage and thrive on envy”. If someone knows of anything nearly that explicit coming from the Left, I’d like to see it.

Or recall the Right’s campaign against Sandra Fluke, when she had the audacity to defend ObamaCare’s contraception mandate. (Rush Limbaugh became the face of this campaign, but he was far from alone, as this timeline makes clear.) Limbaugh’s focus wasn’t that his listeners would benefit from cancelling the mandate. (That would be a hard case to make, since it’s possible that the prevented pregnancies save insurance companies more money than the contraception costs.) Instead, he pounded on the notion that Fluke is a slut: She’s having so much sex she can’t afford her contraception (as if the pill worked that way). He painted a picture in which Fluke has the kind of sex life Limbaugh’s older male listeners can only wish for, so they should want to screw that up for her.

Resentment.

Or consider the way the Right campaigns against the poor. Remember the “lucky duckies” who don’t have to pay income tax (because they’re too poor)? Or the way that Fox News made one lobster-eating surfer a symbol of all Food Stamp recipients? (Jon Stewart’s take-down of this whole campaign is priceless.) Somewhere, “America’s poor are actually living the good life” as a promo for Fox’s “Entitlement Nation” special put it — and all without working like you do. Don’t you wish you could get by without working? Don’t you want to screw the people who (you imagine) do? Take something away from them? Maybe harass them with drug tests that cost more than they save? Because the point isn’t to save money — or to do you any good at all — it’s to inflict harm on people who might be getting away with something you daydream about.

That’s the primary way the politics of resentment affects our economic debate. It’s not directed at the rich by the Left, but at the poor by the Right.

Across the board, one side is trying to encourage and thrive on envy and jealousy: It’s the Right, not the Left.

Does Paul Ryan Care About Poverty Now?

Ryan’s new report obscures a broad consensus about the government’s role in helping the poor.


On the surface, poverty appears to be one of America’s most polarizing issues. Liberals contend that people are poor because our economy doesn’t provide enough opportunities to get ahead. Conservatives argue that people are poor for personal reasons, because they are too lazy or feckless or drug-addicted to take advantage of the opportunities the system offers (or could offer if not for government interference).

Both sides can find examples to back their case. No matter how hard it might be to get out of poverty, some people muster heroic efforts and make it, while others confound every attempt to help them. In between are the people who jump at the brass ring, but somehow don’t manage to jump high enough. Maybe the ring could be lower, maybe they could jump higher — you can frame it either way. You could look at almost any failing individual and say, “He could be doing more.” But you can also find plenty of poor people whose struggles make you ask “Why does it have to be this hard?”

The partisan debate obscures something important: Underneath the polarized opinions about poor people in the abstract, Americans share a broad consensus about the kinds of people who need help and the kinds of things that should be done to help them. For example, just about everyone believes that the best way out of poverty is to get a good-paying job. Conservatives sometimes try to claim this position as their own, but in fact it’s pretty much universal. (Liberals disagree about how to create good jobs, not the value of getting one if you’re poor.)

That get-out-of-poverty-by-working plan might fail for one of four reasons:

  • There are no jobs for people like you.
  • The jobs you can get don’t pay enough to keep you out of poverty.
  • There are good-paying jobs available, but you don’t have the skills to get them.
  • There are jobs you could get if you wanted them, but you’d rather not work.

There’s even a broad public consensus about the appropriate government role in each case:

  • If there really is no job for you, the government should either create a job (by say, funding a WPA-style public works program or subsidizing jobs in the private sector) or support you directly at some level consistent with human dignity (through old-age pensions, disability payments, or long-term unemployment insurance during deep recessions).
  • If you are working at the only kind of job available, the government should provide (or make your employer provide) the extra little nudge you need to stay out of poverty. (Hence the minimum wage, the earned income tax credit, and a variety of supplemental programs like Food Stamps.)
  • If all you need to prosper is training, the government should help you get it. (Free public schools, inexpensive community colleges, job training programs, student grants and loans, and so on.)
  • But if you just don’t want to work, the government shouldn’t help you at all. You need to learn to take responsibility for yourself.

A few people would argue with each of those positions, but not anywhere near a majority. Our substantive political arguments over poverty aren’t about what to do with the people in each category, but rather which category is typical and how well government programs target the people in the category they’re supposed to help.

So liberal rhetoric focuses on people in the first three categories, who are legitimately seeking the help that Americans are proud to provide for each other. (Some other countries may let good people starve in the streets, but that’s not who we are.) Conservative rhetoric focuses on people in the fourth category who nonetheless get benefits because they masquerade as people in one of the first three categories: They aren’t really disabled, they are getting by fine without assistance (and so blow their Food Stamps on luxuries), and they aren’t really looking for a job or training for one. They’re just soaking up government benefits because they can. If those benefits went away, they’d realize that they have to get off their butts and work.

Few seriously dispute that both kinds of people exist: those who need and deserve government help, and those who get it even though they shouldn’t. The argument is more about the number of people in each group and (more subtly) something I’ve called the mercy/severity balance: How many people who need and deserve your help are you willing to leave to fend for themselves in order to prevent one lazy guy from cashing his government check and laughing at you?

For example: The USDA estimates that about 1% of Food Stamps are illegally sold for cash, while 3% of benefits are overpayments to people who either don’t qualify or shouldn’t get as much as they got. Does this strike you as a huge scandal that brings the legitimacy of whole program into question? Or do you focus instead on the good done for families who qualify for Food Stamps legitimately and use them as they were intended?

If somebody came up with an auditing program that would eliminate this waste and fraud, but would cost more (because paying auditors is expensive) than it saved, would you be for it or against it? What if it cost double what it saved? Ten times? A hundred?

From the conservative focus on the fourth category comes the conservative anti-poverty plan: If the way out of poverty is to take jobs that are readily available, and if the possibility of conning the government is keeping people from taking those jobs, then the way to reduce poverty is to cut government anti-poverty programs. Of course this means that some number of people who need and deserve help won’t get it, but that’s collateral damage.

Now you’re in a position to understand The War on Poverty: 50 Years Later, a report put out last Monday by the staff of the Republican majority of the House Budget Committee, i.e., Paul Ryan’s staff. In particular, you understand its conclusion:

Today, the poverty rate is stuck at 15 percent — the highest in a generation. And the trends are not encouraging. Federal programs are not only failing to address the problem. They are also in some significant respects making it worse.

The report looks extremely well supported — it has 683 footnotes, most of which reference reports by academic or government researchers (sometimes inaccurately). But looks are deceiving. For example, you’d think a statement like “Federal programs … are making it worse” would be footnoted to death. It’s not. Instead, what you’ll see if you go through the report’s review of nearly 100 government programs, is a lot of “results were not demonstrated” (said about the Low Income Home Energy Assistance Program) or “The program’s costs outweigh its benefits to society” (Job Corps) or “the program didn’t have any performance metrics or targets for the level of performance.” (Emergency Food and Shelter Program). I quit after reviewing about half the programs, but I didn’t find a single “Poor people would be better off without this program” with a footnote to a study proving that point.

That’s typical. The ten-page Overview at the front of the report seems to float freely above the evidence collected in subsequent sections. A lot of the evidence presented in the overview is of the correlation-is-not-causation variety. For example:

The Brookings Institution’s Ron Haskins and Isabel Sawhill point out that if a person works full time, gets a high-school education, and waits until he or she is married to have children, the chances of being poor are just 2 percent.

Of course, a lot of things are probably already going right in your life if you’re able finish high school, find a full-time job, and attract someone you’d want to marry. It’s not any great surprise that you’re not poor, and I’m not sure what there is to learn from that fact.

Only 2.7 percent of Americans above the age of 16 who worked full time year-round were in poverty, even in 2007 — before the Great Recession had taken firm hold.

Since recessions increase poverty by raising unemployment, it shouldn’t surprise anyone that people who kept their jobs didn’t get poorer. And what really should grab our attention is: There are people who work full time year-round and are still poor! Why isn’t that rate zero?

Another substantive claim of the overview is:

since the beginning of the War on Poverty … male labor-force participation has fallen dramatically. In 1965, it was approximately 80 percent. Today, it has fallen to a record low of below 70 percent. Since 2009 alone, male labor-force participation has fallen 3.3 percentage points. Among working-age men, the labor-force participation rate has fallen from 97 percent in 1965 to 88 percent in 2013. In recent years, female labor-force participation has also declined. Since it reached its record high of 60.3 percent in 2000, female labor-force participation has fallen to 56.9 percent — declining 2.5 percentage points since 2009. And among working-age women, the labor-force participation rate has fallen from 77 percent to 74 percent from 2000 to 2013.

But again, what’s the cause? The War on Poverty has coincided with a long-term reduction in male labor-force participation, but is there some reason to believe that’s anything more than a coincidence?

The implication is that anti-poverty programs encourage laziness, particularly in men. To conservatives, I’m sure this conjures up images of able-bodied 20-somethings choosing to hang around on street corners rather than look for work. (Liberals are more likely to picture multinational corporations shipping jobs overseas.) But if you get into the discussions of specific programs that the report claims discourage work, you get a different picture. For example:

[E]xpansions of the [earned income tax credit] are associated with a reduction in labor market participation by married mothers.

In other words, in poor households where both parents work, mothers are likely to cut back their hours (and spend more time at home with the kids) if the family is better able to get by on what the father makes. Another example:

SSI reduces the labor supply of likely SSI participants aged 62–64. A $100 increase in SSI benefits is associated with a 5 percent reduction in the employment rate.

In other words, people who are limping towards retirement with disabilities will retire sooner if they can afford to. That’s not exactly strapping young dudes hanging out on street corners, is it? (Maybe one of those young guys will get the job that the guy with the bad back retired from.)

So when you get down to details, the overview-level statements are less convincing than they sound. And that connects to a third point:

Congress has taken a haphazard approach to this problem; it has expanded programs and created new ones with little regard to how these changes fit into the larger effort. Rather than provide a roadmap out of poverty, Washington has created a complex web of programs that are often difficult to navigate.

Imagine what Republicans might say if Congress had taken a unified approach. Wait, we don’t have to imagine, because the Affordable Care Act was a unified program with a comprehensive vision of increasing access to health care. Republicans complained about its mammoth size and invented all kinds of scary stories about what might be hidden in that enormous law.

That’s why there are hundreds of anti-poverty programs. If liberals presented one unified program to help the poor, we’d hear about this incredible octopus that had its tentacles in everything and was thousands of pages long and had an unimaginable cost. Every story of someone abusing a poverty program would be an argument against the whole thing. So instead, we have $65 million going to a separate “Education for Homeless Children and Youth” program and $11.5 million for “Job Placement and Training” for American Indians. If you want to cut them, you have to explain why you don’t want to educate homeless children and youth, or find jobs for Indians.

This is the basic dichotomy of American politics: In the abstract, voters will tell you that government spends too much. But the vast majority of things that the government spends money on are popular. No one would be happier than liberals if we could create a unified vision of how to help the poor, and then fund that vision. But I doubt that’s what Ryan is talking about, and I fear that he wants to unify the anti-poverty hydra so that there is only one throat to cut.

In short, it would be wonderful if Ryan’s report represented an honest attempt to examine what works and what doesn’t, and to assemble a unified program to do what the broad consensus of Americans want done: support the unemployable, find a job for everybody who wants one, make sure that people who work full time stay out of poverty, train people who have the talent and desire to move up to skilled labor or the professions — and keep lazy people from abusing the system.

I wish I could believe it did.


An interesting side-debate raised in the footnotes of the report is whether the War on Poverty is failing at all. The report references “Winning the War: Poverty from the Great Society to the Great Recession” by Bruce Meyer of the University of Chicago and James Sullivan of Notre Dame. They propose measuring poverty by consumption rather than income, and they adjust for inflation differently. I can’t judge whether they’re right or not, but they show a different story than the official poverty rate. Their measure of poverty starts far higher 50 years ago and drops far lower today.


Another side-debate could happen over what success means. The report says:

The true measure of success is the number of people who get off these programs and get out of poverty.

And certainly everyone should agree that when a government program helps a poor person get a good job and join the middle class, that’s a success story. But limiting the suffering of the poor is a worthy goal in itself, and sometimes a government program succeeds simply by keeping things from getting worse.

For example: The United States has a terrible rate of what public-health professionals call “amenable mortality” — people who die of treatable conditions because they don’t get appropriate medical care. If the subsidies in ObamaCare bring that rate down, I’ll count that as a success.

Occupying the State of the Union

The conventional wisdom about Occupy Wall Street is that it failed. It made a splash and generated headlines, but ultimately it elected no candidates, passed no laws, and didn’t even leave behind a memorable lost-cause proposal like the Equal Rights Amendment. So it was all a big waste of the activists’ effort and our attention.

By contrast, the Tea Party did elect candidates and has influenced all kinds of laws, especially at the state level. Without the Tea Party, the government wouldn’t have shut down last October. You may not consider that much of an accomplishment, but it is proof of continuing influence. The Tea Party may eventually even displace the Republican establishment and take over half of the two-party system.

What has Occupy done to rival that?

But all along, Occupy visionaries like David Graeber were defining success differently:

For the last quarter millennium or so, revolutions have consisted above all of planetwide transformations of political common sense. … What they really do is transform basic assumptions about what politics is ultimately about. In the wake of a revolution, ideas that had been considered veritably lunatic fringe quickly become the accepted currency of debate.

The French Revolution, for example, failed to hold power, “but afterward, institutions inspired by the French Revolution … were put in place pretty much everywhere.” Suddenly, it was obvious that monarchy was obsolete. Not only did people around the globe believe that, they believed that they had always believed it.

Now consider President Obama’s 2014 State of the Union and the responses from Cathy McMorris Rodgers (for the Republican Party), Mike Lee (for the Tea Party), and Rand Paul (who seems to be a party unto himself). Maybe it’s not surprising that President Obama would talk about inequality and how difficult it is to stay in the middle class:

Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have  barely budged. Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by – let alone get ahead.

But here’s the interesting thing: The responders accepted that framing of the problem, they just tried to shift the blame.*

Bear in mind how conservatives used to respond whenever liberals tried to make inequality an issue: Wealth has nothing to do with poverty. Wealth is conjured out of the aether by creative capitalists, not usurped from the common inheritance or distilled from the blood and sweat of the laboring masses. So talk about poverty if you must, but don’t talk about wealth and poverty in the same paragraph, because they’re totally separate phenomena. This was still the conservative conventional wisdom two weeks ago, when David Brooks argued (in his own italics):

to frame the issue as income inequality is to lump together different issues that are not especially related.

More than just conservative dogma, some version of that argument has been the conventional wisdom of Very Serious People for decades. It has been fine for liberal politicians to talk about the plight of the poor or the struggles of the middle class, but if they combined that downward-looking and sideways-looking compassion with an upward-looking head-shake at the explosion of wealth among the few, mainstream pundits would start lobbing phrases like “class warfare” and “redistribution of wealth” — warning shots that come just before “Why don’t you go back to the Soviet Union, comrade?”.

But post-Occupy, everybody knows about the 99% and the 1%. And it’s no longer anti-American to point out that the 1% (and mostly the .01%) have owned all the productivity growth of recent decades.

Mike Lee’s Tea Party response doesn’t deny any of this, but instead tries to pin it on government and President Obama:

This inequality crisis presents itself in three principal forms: immobility among the poor, who are being trapped in poverty by big-government programs; insecurity in the middle class, where families are struggling just to get by and can’t seem to get ahead; and cronyist privilege at the top, where political and economic insiders twist the immense power of the federal government to profit at the expense of everyone else.** … [W]here does this new inequality come from? From government – every time it takes rights and opportunities away from the American people and gives them instead to politicians, bureaucrats, and special interests.

Rodgers points to the same problems, but calls them by a different names and promises that vague, unnamed Republican “plans” will solve them.

our mission – not only as Republicans, but as Americans, is to once again to ensure that we are not bound by where we come from, but empowered by what we can become. That is the gap Republicans are working to close. It’s the gap we all face: between where you are and where you want to be. The President talks a lot about income inequality. But the real gap we face today is one of opportunity inequality… And with this Administration’s policies, that gap has become far too wide. We see this gap growing every single day.

And this is where the spin becomes obvious, because the metaphor changes: The gap “between where you are and where you want to be” would seem to be in front of you, between you and the people whose examples inspire you to be more successful. Republicans are going to help you bridge that gap, so that you can be rich too.

But as Rodgers gets down to cases, it’s clear she’s talking about a chasm opening up behind middle-class voters, threatening to suck them into poverty as it has already claimed so many of their friends and family:

We see it in our neighbors who are struggling to find job, a husband who’s now working just part-time, a child who drops out of college because she can’t afford tuition, or parents who are outliving their life’s savings. Last month, more Americans stopped looking for a job than found one. Too many people are falling further and further behind because, right now, the President’s policies are making people’s lives harder. Republicans have plans to close the gap.

Even Rand Paul has to recognize the hollowing out of the middle class, though (unlike the others) he sticks to the old-time religion that the rich will save us, if only we let them keep getting richer. (It never worked before, but it will if we give it one more shot.)

Parents worry about their children growing up in a country where good jobs are few and far between. More than ever before, Americans wonder how they’ll afford to send their kids to college, and what will happen if they lose their job. … Prosperity comes when more money is left in the private marketplace. … Economic growth will come when we lower taxes for everyone, especially people who own businesses and create jobs.

Another piece of conservative dogma has been to blame the poor for failing; their laziness, crime, drug addiction, and general irresponsibility is dragging down the rest of us. And if people are falling out of the middle class — losing their jobs, getting their homes foreclosed, failing to send their kids to college — well, that’s their own damn fault. We aren’t failing them; they’re failing us.

Recall the opening shot of the Tea Party’s rebellion, Rick Santelli’s famous rant a few weeks after Obama took office. Backed by a cheering mob of traders on the Chicago Mercantile Exchange, Santelli challenged the new president:

How about this, president and administration: Why don’t you put up a web site to have people vote on the internet to see if we really want to subsidize the losers’ mortgages? Or would we like to at least buy cars and buy houses in foreclosure and give them to people that might have a chance to actually prosper down the road, and reward people that could carry the water instead of drink the water? … [Gesturing to include all the traders***] This is America! How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills? Raise their hands! [boos from the crowd]

Tuesday night no one was blaming the “losers” for falling out of the middle class, or fantasizing about picking the bones of their foreclosures. Instead, everyone sympathized with growing middle-class anxiety: how hard it is to find good jobs, how hard it is to pay for college, how insecure you feel even if you currently have a good job. Everyone acknowledged that Americans are losing faith in the old nostrums: work hard, study hard, say no to drugs, get married, buy a house, pay your bills … it just doesn’t seem like enough any more. You might do all that and still lose out, even as billionaires get ever richer.

Everyone but Rand Paul is acknowledging that some kind of gap needs to be bridged, that some people have more of this vaguely defined “opportunity” that you wish you had. Mike Lee is even denouncing “privilege at the top”, though he blames this privilege on government favors rather than the normal workings of capitalism.

It’s important to realize what we’re seeing: an early stage in the “transformation of political common sense”. People who believed and may still believe that OWS was horribly misguided and failed completely — those same people see the world differently now. The problem isn’t that a few “losers” are dragging the rest of us down. The problem is that there’s a 99% and a 1%. We’re arguing about what caused that and how to fix it, but we all see the problem now.

Thank you, Occupy.


* Ultimately they’ll lose that argument, because the facts are clearly against them. Look at the graphs: This problem didn’t start with Obama. It started in the Carter-Reagan years. If your explanation doesn’t account for that, you’re just spinning.

I explain it by Carter and the Democrats in Congress turning to the right: de-regulation, lower capital gains taxes, free trade deals, and turning a blind eye to union-busting. That all started slowly under Carter and then really took off during the Reagan administration. The long version of this story is in Thomas Edsall’s The New Politics of Inequality from 1985, but William Anderson of the conservative Mises Institute noted the same thing in 2000:

Republicans like to point to the failures of the Carter Administration and then claim that Ronald Reagan brought us into the present era. Alas, while I prefer Reagan to Carter, I cannot say that the above statement is true. Granted, much occurred during the Reagan Administration that was good, but if truth be known, many of the important initiatives that enabled those boundaries to expand came from Carter’s presidency.

I agree completely, if you reverse the value judgments and define “the present era” as the Second Gilded Age.


** Perversely, the purest examples of cronyism are due to a trend conservatives champion: privatizing public services like prisons or public schools.


*** I love the assumption that the well-compensated wheeler-dealers on the CME represent “America” and the people who “carry the water”. I think it’s arguable that American productivity would go up if the Earth swallowed the Chicago Mercantile Exchange whole. The people who really “carry the water” are the ones who grow stuff and build stuff and deliver services. The water-carrier is the single mother who cuts your hair (and who may need Food Stamps to feed her son), not the venture capitalist who conjured up millions by franchising Supercuts.

What to Make of Pope Francis?

Is Pope Francis’ denunciation of “unfettered capitalism” new? or long-standing Catholic doctrine most Americans have ignored and forgotten? Either way, does it matter?


The Catholic Church has always been torn: Is it the church of Jesus, who told a rich man, “Go, sell all that you own and give to the poor”? Or is it the church of the Emperor Constantine, who put the Rome in Roman Catholicism? Is it the church of Saint Francis or of the Borgia popes? Of liberation theology or of Franco’s fascist collaborators?

The church in recent American politics. In recent years the public face of the American church has been turned primarily towards sexual issues: abortion, contraception, and homosexuality. And so the bishops have become allies of the Republican Party; the American politician most publicly identified as Catholic has been Rick Santorum. American cardinals have denied communion to pro-choice Catholic politicians like John Kerry and Kathleen Sebelius, but when a Catholic conservative like Paul Ryan proposes slashing programs that help the poor, a letter of protest is deemed sufficient. (Cardinal Dolan, then president of the U.S. Council of Catholic Bishops, subsequently described Ryan as “a great public servant”.)

On ObamaCare, the American bishops have manufactured great outrage against the fairly minor point* of the contraception mandate, while saying relatively little about Medicaid expansion, which will provide health insurance to millions of the working poor.

Liberal Catholic tradition. Unknown to much of the American public, though, the Catholic Church has a long history of liberal economic positions, going back at least to the 1891 encyclical Rerum Novarum by Pope Leo XIII.

I encountered this tradition myself in 2005 after the death of Pope John Paul II, when I went back and read his 1981 encyclical Laborem Exercens. In that encyclical, the Pope re-examined the relationship between capital and labor, and rejected a point of view he called economism (that workers are just another factor of production, like tools or raw materials, rather than divinely created beings with souls), which he saw underlying both capitalism and communism. He also assigned a secondary and functional role to the institution of private property: If a system of private property leads to a better society, fine, but it’s not an end in itself.

So (unlike Rush Limbaugh) I was not shocked this week when I read headlines like Pope Francis attacks ‘tyranny’ of unfettered capitalism, ‘idolatory of money’. Is this actually something new, I wondered, or does it just look new from within the sex-obsessed bubble constructed by the American bishops and their Republican allies?

Symbols and gestures. Pope Francis made a strong first impression on the world when he rejected many of the regal trappings of the papacy and chose the name Francis, which harkens back to the voluntary poverty and simplicity of Saint Francis of Assisi.

He then made a series of conciliatory statements. About gays:

When I meet a gay person, I have to distinguish between their being gay and being part of a lobby. If they accept the Lord and have goodwill, who am I to judge them? They shouldn’t be marginalized. The tendency [to homosexuality] is not the problem … they’re our brothers.

And atheists:

We must meet one another doing good. ‘But I don’t believe, Father, I am an atheist!’ But do good: we will meet one another there.

Where Pope Benedict had enraged Muslims, Francis reached out them, sending a personal message to a leading imam in Cairo, calling for “understanding among Christians and Muslims in the world, to build peace and justice.”

And running through all of his statements was an awareness of the poor, those who have been cut off from the abundant produce of the planet God created to sustain all people.

So far, so good. But would he actually change anything?

Evangelii Gaudium. A week ago yesterday, the Vatican published an “apostolic exhortation” from Pope Francis. Apostolic exhortations are what the name implies: They’re meant to nudge people into action, not announce new doctrine.

Evangelii Gaudium (“the joy of the gospel”) is no different. Its purpose is to “encourage and guide the whole Church in a new phase of evangelization, one marked by enthusiasm and vitality”. Most of the text has nothing to do with politics or economics; it ranges through subjects as diverse as how the faithful should motivate themselves and advice to priests on preparing good homilies.

[In a couple of subjects — abortion and women priests — he announces that there will be no new doctrine, though he does make this interesting and enigmatic statement:

The reservation of the priesthood to males … is not a question open to discussion, but it can prove especially divisive if sacramental power is too closely identified with power in general.

Time will tell whether that is a fig leaf for continued patriarchy or an indication that women could come to have more power in the Church, even if they aren’t serving mass.]

But a document encouraging Catholics to make their faith felt in the world has to say something about what, specifically, the world should be made to feel. And here he did not focus on sexual issues, but on economic ones.

Each individual Christian and every community is called to be an instrument of God for the liberation and promotion of the poor, and for enabling them to be fully a part of society.

Each individual and every community. Not “the poor — that’s somebody else’s gig — I’m fighting against same-sex marriage”.

Catholic economics. Consistently through the years, Catholic economics has revolved around two ideas:

  • God created the world for everybody. Pope Francis is not staking out any new territory when he writes: “we must never forget that the planet belongs to all mankind and is meant for all mankind; the mere fact that some people are born in places with fewer resources or less development does not justify the fact that they are living with less dignity.”
  • God did not institute any particular economic system. Economic systems are human constructions, so they are not proper objects of veneration. God is not a capitalist, a communist, or anything else. So economic arrangements have to be justified in practical terms, by their results.

So even something as basic as private property or the freedom to buy and sell has only a functional justification. Protecting property or upholding economic freedom has no value in itself. Rather

The private ownership of goods is justified by the need to protect and increase them, so that they can better serve the common good. … Sadly, even human rights can be used as a justification for an inordinate defense of individual rights or the rights of the richer peoples.

This position puts the Church fundamentally at odds with Rand-style (or Ryan-style) libertarianism, in which property rights and economic freedom are moral values, not just useful tricks for increasing production. In Randism, the produce of the world rightfully belongs to the people who own the world; if those who own nothing are to survive, they must appeal to the charity of the owners. The owners are the Makers, the poor are the Takers.

Francis observes this position with horror:

We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35) has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption.

He calls on Catholics not just to give alms, but

to eliminate the structural causes of poverty and to promote the integral development of the poor … We are not simply talking about ensuring nourishment or a “dignified sustenance” for all people, but also their “general temporal welfare and prosperity”. This means education, access to health care, and above all employment, for it is through free, creative, participatory and mutually supportive labour that human beings express and enhance the dignity of their lives. A just wage enables them to have adequate access to all the other goods which are destined for our common use. [quotes from Pope John XXIII]

This can’t happen without political action that leads to structural change. The market won’t do it.

We can no longer trust in the unseen forces and the invisible hand of the market. Growth in justice requires more than economic growth, while presupposing such growth: it requires decisions, programmes, mechanisms and processes specifically geared to a better distribution of income, the creation of sources of employment and an integral promotion of the poor which goes beyond a simple welfare mentality.

A mind that worships the Market can only see God as dangerous.

[E]thics leads to a God who calls for a committed response which is outside of the categories of the marketplace. When these latter are absolutized, God can only be seen as uncontrollable, unmanageable, even dangerous, since he calls human beings to their full realization and to freedom from all forms of enslavement.

And a society that writes off the poor can never know peace or be safe from revolution.

Peace in society cannot be understood as pacification or the mere absence of violence resulting from the domination of one part of society over others. … When a society – whether local, national or global – is willing to leave a part of itself on the fringes, no political programmes or resources spent on law enforcement or surveillance systems can indefinitely guarantee tranquility. This is not the case simply because inequality provokes a violent reaction from those excluded from the system, but because the socioeconomic system is unjust at its root. Just as goodness tends to spread, the toleration of evil, which is injustice, tends to expand its baneful influence and quietly to undermine any political and social system, no matter how solid it may appear.

Is this new? No, this is Catholic economics as it has stood for more than a century, with roots going back even further. What’s new is a pope who seems willing to make this the center of his papacy. He has not changed any doctrine — at least not yet — but he has announced a new emphasis away from sex and towards economic justice. As he said in an interview shortly after taking office:

We cannot insist only on issues related to abortion, gay marriage and the use of contraceptive methods. This is not possible. I have not spoken much about these things, and I was reprimanded for that. But when we speak about these issues, we have to talk about them in a context. … The dogmatic and moral teachings of the church are not all equivalent. The church’s pastoral ministry cannot be obsessed with the transmission of a disjointed multitude of doctrines to be imposed insistently.

But the Pope’s re-prioritization of doctrine is going to be a problem for a lot of American bishops. As Jesuit Priest Thomas Reese wrote:

the bishops as a conference have been embarrassingly silent on economic justice during the worst economic crisis since the Great Depression. … Many bishops fear that speaking loudly about economic issues would help Democrats and undermine their alliance with the Republican Party on issues like gay marriage, abortion, and religious liberty. Some even think that the conference’s earlier letters, “Economic Justice for All” and “The Challenge of Peace,” were mistakes because they hurt their friends.

Conservative Catholic response. I recommend reading a thoughtful article by the conservative Catholic NYT columnist Ross Douthat. Douthat observes that the shoe is now on the other foot: For years liberal Catholics have had a yes-but relationship with the Vatican, remaining faithful by their own lights while refusing to get in line with official pronouncements on sexual issues. Now it’s conservatives who want to pick and choose which doctrines they support:

for Catholics who pride themselves on fidelity to Rome, the burden is on them — on us — to explain why a worldview that inspires left-leaning papal rhetoric also allows for right-of-center conclusions.

He attempts to do so, resting his case primarily on the practical effects of capitalism’s increased production, but then concludes:

This Catholic case for limited government, however, is not a case for the Ayn Randian temptation inherent to a capitalism-friendly politics. There is no Catholic warrant for valorizing entrepreneurs at the expense of ordinary workers, or for dismissing all regulation as unnecessary and all redistribution as immoral.

Let me state that conclusion more boldly: If capitalism is going to be justified by its practical ability to create prosperity even for the underclass, then that’s how it must be judged. You can’t talk about the wonders of increasing GDP in the abstract and then ignore the suffering of real people, or worse, blame them for their own suffering and label them as “takers” for wanting to share in the productivity of the planet God made for everyone.

Are you listening, Paul Ryan?


* They’ve been so successful at voicing their manufactured outrage that I need to explain this: Catholic institutions are not required to buy contraceptives for their employees or promote their use. The institutions in question are just required to provide health insurance (or pay a fine). Employees can use their health insurance for contraception if they decide to, just as they can use their wages to buy all sorts of things the Catholic Church disapproves of. The moral onus of choosing contraception (or not) falls on the employee, as it should.

As I have said at length elsewhere, construing this situation as some kind of moral issue for the employer is just passive aggression. They are hyper-extending the sensitivity of their consciences in order to control other people.

What do we know about Romney’s tax and budget plans?

The first Obama/Romney debate on Wednesday had a playground quality to it: One contestant would say “You did X”, the other would say “No I didn’t”, and then either Obama would let it drop or Romney would repeat “Yes you did!”. Jim Lehrer refused to play teacher, so it was left to fact-checkers and other pundits to determine the truth afterwards.

On no subject was the truth less obvious than on Romney’s budget plans. President Obama laid it out like this:

Governor Romney’s central economic plan calls for a $5 trillion tax cut — on top of the extension of the Bush tax cuts — that’s another trillion dollars — and $2 trillion in additional military spending that the military hasn’t asked for. That’s $8 trillion. How we pay for that, reduce the deficit, and make the investments that we need to make, without dumping those costs onto middle-class Americans, I think is one of the central questions of this campaign.

And Governor Romney flatly denied it:

I don’t have a $5 trillion tax cut. I don’t have a tax cut of a scale that you’re talking about. My view is that we ought to provide tax relief to people in the middle class. But I’m not going to reduce the share of taxes paid by high-income people.

Fact-checkers tried to apply their usual categories — true, false, misleading — but often they just added to the confusion. CNN, for example, said Obama’s charge was false, but graded Romney’s denial as “incomplete”, whatever that means.

Here’s what’s going on: The press is afraid of bias accusations, so it hides behind rules of objectivity that have gotten increasingly technical. Campaigns have gotten good at manipulating those rules, so the objective press has a hard time announcing simple judgments. Judgments, then, are left to the partisan voices, who just increase the noise.

The Weekly Sift makes a lesser claim: I’m not objective, I just try to be honest and give you enough links to check my accuracy. So let’s see if some common sense can cut through the confusion.

The $5 trillion tax cut. Mitt Romney has proposed a tax plan, sort of. On his web site, the full plan to “create 12 million new jobs” has four “economic pillars”, one of which is:

Reform The Nation’s Tax Code To Increase Growth And Job Creation.

o Reduce individual marginal income tax rates across-the-board by 20 percent, while keeping current low tax rates on dividends and capital gains. Reduce the corporate income tax rate – the highest in the world – to 25 percent.
o Broaden the tax base to ensure that tax reform is revenue-neutral.

The idea is that people pay a lower tax rate, but that more income gets taxed (“broaden the tax base”), so the government winds up with the same amount of money (“revenue neutral”).

There’s no reason that can’t work in theory, but notice that the marginal-tax-rate cut (the attractive part of the plan) is specified at 20%, while “broaden the tax base” (the unattractive part) is left vague. Elsewhere, Romney promises to eliminate the alternate minimum tax (which falls almost entirely on the wealthy) and the federal estate tax (which only applies to multi-million-dollar estates).

So if you evaluate Romney’s plan by what he has specified — the tax cuts — it’s a $5 trillion tax cut over the next ten years. Now, that’s not entirely fair, because whatever plan he eventually proposes to Congress would also specify the base-broadening part. The rate-cut is part of a “revenue neutral” tax plan in the same way that Cocoa Puffs are “part of this complete breakfast”.

So Romney is technically correct in saying “I don’t have a $5 trillion tax cut.” But let me flesh that out by putting true words in Romney’s mouth: “I don’t have a plan to cut government revenue by $5 trillion. I have a revenue-neutral plan, but the only part of it I’m willing to spell out before the election cuts federal revenue by $5 trillion.”

So he still needs to specify what currently untaxed income will be taxed in order to raise the $5 trillion that his plan needs to fulfill his revenue-neutral pledge.

Growth or funny money? If you read the details on the web site, a big chunk of that previously untaxed income is money that just wouldn’t exist otherwise. Romney’s plan estimates that the economy will grow at a 2.5% rate with the current tax system, but that under his plan (including his similarly vague plan to de-regulate business and other plans he considers growth-inducing) the economy will grow at a 4% rate.

When you compound that over ten years, the difference is huge. Current GDP is around $15 trillion per year. Ten years of 2.5% growth get you to $19 trillion, but ten years of 4% growth get you to $22 trillion, which is almost 16% bigger. So in the tenth year, the 20% rate cut is almost balanced by the growth alone. The extra income you need to broaden the tax base is almost entirely manna that fell from Heaven.

The question is whether you believe any of that. The idea that tax cuts create growth is dogma among conservatives, but recent history doesn’t bear them out. We were promised the cornucopia of growth when Bush cut taxes in 2001 and 2003, but it didn’t arrive. Even with a bubble-based illusion of growth, median household income declined. Atlantic’s Ronald Brownstein reports:

When Bill Clinton left office after 2000, the median income — the income line around which half of households come in above, and half fall below — stood at $52,500 (measured in inflation-adjusted 2008 dollars). When Bush left office after 2008, the median income had fallen to $50,303. That’s a decline of 4.2 per cent. That leaves Bush with the dubious distinction of becoming the only president in recent history to preside over an income decline through two presidential terms, notes Lawrence Mishel, president of the left-leaning Economic Policy Institute.

In the debate, Romney refused any historical comparison. (“My plan is not like anything that’s been tried before.”) But his web site justifies the growth assumptions by looking at the recovery from the 1981-82 recession during the Reagan administration. The problem is that this recession (like the one before it) looks nothing like the 1981-82 recession. The Reagan recession was brought on by the high interest rates (over 20%!) that the Fed imposed to kill off the inflation plague of the 1970s. As the Fed cut rates back to more normal levels, the economy could resume a normal growth pattern, plus make up for lost time.

The last two recessions were set off by popping bubbles: the dot-com bubble of the late 90s and the housing bubble of the Bush years. Recoveries from bubbles are slower, because the previous level was illusory. Let me repeat that: The Obama Recovery is slower than Reagan’s because the level we are trying to recover to was a mirage.

Even if we grant Romney’s 4% growth assumption, the difference in the first year would be small, while the tax-cut hit would be as large as ever. Would the Tea Party types in Congress really accept a budget where the deficit continued to climb for several years while we waited for growth to catch up?

I personally have no confidence in Romney’s growth assumptions. If he’s really going to broaden the tax base, he’s going to have to extend taxes to real income, not imaginary income from the growth fairy.

Deductions. The one real base-broadening idea Romney has floated is to cap deductions. In the debate he said:

But in order for us not to lose revenue, have the government run out of money, I also lower deductions and credits and exemptions, so that we keep taking in the same money when you also account for growth.

One trial balloon suggested that deductions be capped at $17,000, though in the debate Romney refused to be pinned down to any specific number:

what are the various ways we could bring down deductions, for instance? One way, for instance, would be to have a single number. Make up a number, $25,000, $50,000. Anybody can have deductions up to that amount. And then that number disappears for high-income people.

That approach has a problem: If you don’t accept Romney’s growth assumption, eliminating all deductions for upper-income people doesn’t replace the $5 trillion in revenue. So he’s forced to break his pledge not to raise taxes on middle-income people — not all middle-income people, but quite a few. When you add up mortgage interest, state and local taxes, medical expenses, and so on, it’s not hard for a household of slightly-above-average income to hit a $17,000 cap, and even easier to hit some much-lower cap that would really raise $5 trillion.

I know because I did my parents’ taxes last year. In 2011, my parents were in “the 47%” of people who paid no federal income tax. My mother died that year, and both parents spent time in nursing homes, so their medical expenses wiped out their $50,000 of income. Under the Romney plan, with a $17K deduction cap, they’d have owed thousands.

So Al Sharpton is right: “This election isn’t about Obama, it’s about your momma.”

Tax fairness. Romney’s pledge not to favor the rich in his tax plan is very carefully worded: “I’m not going to reduce the share of taxes paid by high-income people.”

This echoes a common conservative framing of taxes. Over the last 30 years, the share of the national income that has gone to the very rich has skyrocketed. Under Romney’s policies, it would presumably continue to skyrocket, because of de-regulation, non-enforcement of antitrust laws, and so on. But all he pledges is to keep their share of taxes the same.

Think about it this way: Imagine a two-person economy that makes $10, with $6 going to the richer guy and $4 to the poorer guy. Imagine their government collects $2 in taxes; let’s say $1.50 from the richer guy and 50 cents from the poorer guy, so that their after-tax incomes are $5.50 and $4.50.

Now imagine that inequality increases, so that the rich guy makes $8 and the poor guy $2. But suppose the government keeps their taxes the same: The rich guy still pays $1.50 and the poor guy 50 cents, so that their after-tax incomes are $6.50 and $1.50.

That system would fulfill Romney’s tax-fairness pledge: the rich guy still pays 75% of the taxes.  But it isn’t fair at all. The rich guy’s tax rate goes down from 25% to 18.75%. The poor guy’s goes up from 12.5% to 25%.

In short: When the rich make more of the money, their share of the taxes should increase, not stay the same.

Spending cuts. The situation on the spending side of Romney’s plan is similar: He has spelled out his spending increasesdefense, mostly. And he has pledged not to cut Medicare of Social Security benefits for anyone currently over 55. In other words, even if he serves eight years, he will never submit a budget that shows a spending cut in either of those two giant entitlements.

But he also pledges to get federal spending down to 20% of GDP by 2016, which (even with his optimistic 4% growth assumption) means $500 billion of annual cuts. The only sizable cut he identifies on his web site is $95 billion by repealing ObamaCare. But repealing ObamaCare also repeals the cost savings and tax increases it contains, and so increases the deficit rather than decreasing it. And “I want to take that $716 billion you’ve cut and put it back into Medicare.” not use it to decrease the deficit. And he was open to retaining the improved drug benefits ObamaCare adds to Medicare.

So the ObamaCare cut is illusion. It won’t cut the deficit.

Romney’s other specified cuts are Amtrak; the national endowments for art, humanities, and public broadcasting (bye-bye, Big Bird); the Legal Services Corporation; family planning; and foreign aid. By Romney’s own account, the total savings (other than ObamaCare) is only $2.6 billion of the $500 billion he says he needs.

So he has specified about half a percent of the cuts his budget needs under his optimistic assumptions. And the biggest parts of the budget — defense, Social Security, Medicare — are off limits. The non-ObamaCare cuts he has specified are insufficient even to cover the increase he wants in defense spending.

That’s why Obama accused him of “gutting our investments in schools and education”, and how Romney was able to deny it: “I reject the idea that I don’t believe in great teachers or more teachers. … I’m not going to cut education funding. I don’t have any plan to cut education funding and — and grants that go to people going to college.”

“I don’t have any plan to cut …” is a universal dodge for Romney. Because he doesn’t have any plan to cut spending, Romney can deny any specific thing you imagine must be cut to plug the huge hole in his budget. The Ryan budget is a little more specific about cuts, but Romney disclaims that as well. His campaign says “as president he will be putting together his own plan.” And Romney has emphasized that he, not Ryan, is “the guy running for president.”

In short, what Romney has given us is a lot of specifics that cut taxes and raise spending, coupled with vague promises to make it all come out right somehow. So electing Romney is sort of like hiring a trainer who promises you can eat more and lose weight. He has pictures of the lavish meals his plan will let you eat, and a graph of how your weight will go down.

How does it work? “Exercise” he says. What exercise? When? How much? “We can work all that out later.”