Tag Archives: inequality

10 Years After: The Post-Recovery Economy

The recovery from the Great Recession didn’t bring back some previous state of prosperity and resume growth from there. It created a new economy that, in some ways, may never again be what it was.


In addition to 9-11, which was a Tuesday this year, this week included one other important anniversary: Saturday marked ten years since the collapse of the Lehman Brothers investment bank, the spark that ignited the financial crisis that started the Great Recession.

Like most major world events, the Great Recession didn’t begin in an instant and didn’t have a single cause. Just as Europe had started sliding towards World War I long before Archduke Ferdinand’s assassination, the world financial system had been showing signs of strain long before Lehman declared bankruptcy. But Lehman had been one of the biggest players in the international financial markets, so its insolvency was a huge shock: If their debts weren’t good, whose were? Who knew what other financial institutions were insolvent, now that Lehman wouldn’t be repaying its loans? Suddenly, banks were afraid to loan money even to other banks, and the dominoes began to fall.

The worst financial panics are marked by cascading waves of bankruptcies. Alice can’t pay Bob, and Bob had been counting on Alice’s money to pay Charlie and Darlene, who now won’t be able to meet their payrolls. Charlie and Darlene’s employees, in turn, won’t be able to pay their rent, and so their landlords won’t be able to make their mortgage payments to the bank, which may also become insolvent. Where does it stop?

Wikipedia sums up the effects:

While the recession technically lasted from December 2007-June 2009 (the nominal GDP trough), many important economic variables did not regain pre-recession (November or Q4 2007) levels until 2011-2016. For example, real GDP fell $650 billion (4.3%) and did not recover its $15 trillion pre-recession level until Q3 2011. Household net worth, which reflects the value of both stock markets and housing prices, fell $11.5 trillion (17.3%) and did not regain its pre-recession level of $66.4 trillion until Q3 2012. The number of persons with jobs (total non-farm payrolls) fell 8.6 million (6.2%) and did not regain the pre-recession level of 138.3 million until May 2014. The unemployment rate peaked at 10.0% in October 2009 and did not return to its pre-recession level of 4.7% until May 2016.

This week, the New York Times ran a series of articles pointing out all the ways in which the economy has still not recovered. Or, putting it another way, how the economy has changed. We haven’t simply returned to some previous state of prosperity and continued growing from there. We have entered a new economy, parts of which may never return to previous levels of prosperity.

The most significant change is an increase in inequality. The lower your pre-Lehman income and net worth, the longer it has taken the recovery to reach you. People at the top of the economy are far better off than they have ever been. But people at the bottom are still waiting to get back to where they were, and some never will. In fact, if you take the top 10% of earners out of your statistics, the 90% who are left are only just now getting back to their 2006 incomes, and that’s only because of tax cuts and government programs like unemployment insurance, Food Stamps, and ObamaCare. If you just look at pre-tax income, it’s still underwater.

Wikipedia noted that household net worth was back to its pre-Lehman levels by 2012. But that number has been pulled up by the huge gains of the richest households. Median household net worth, the net worth of the households in the middle of the economy, has still not recovered. In fact, it is still below its level at the beginning of the previous recession, the one that started when the dot-com bubble burst in 2000 and 2001.

GDP recovered by 2011, but Wednesday the Census Bureau announced that median household income had only just recovered by 2017.

[T]he details of the report raised questions about whether middle-class households — which have experienced an economic “lost decade” — are now likely to see actual income gains or if they will simply tread water. One reason for concern is that income growth slowed in 2017, to 1.8 percent. Median income had grown more rapidly in previous years, by 5.2 percent in 2015 and 3.2 percent in 2016.

Another NYT article (by Nelson Schwartz) digs a little deeper:

Data from the Federal Reserve show that over the last decade and a half, the proportion of family income from wages has dropped from nearly 70 percent to just under 61 percent. It’s an extraordinary shift, driven largely by the investment profits of the very wealthy. In short, the people who possess tradable assets, especially stocks, have enjoyed a recovery that Americans dependent on savings or income from their weekly paycheck have yet to see. Ten years after the financial crisis, getting ahead by going to work every day seems quaint, akin to using the phone book to find a number or renting a video at Blockbuster.

Basically, there are two dividing lines: About a fifth the households in America either own nothing to speak of, or have debts that are greater than their assets. They live paycheck-to-paycheck, and miss out entirely on that 39% of national household income that now comes from something other than wages.

A large chunk of households in the middle of the economy have a positive net worth, but that wealth is almost entirely in the form of home equity. (Their IRAs or 401(k)s may own a few shares of stock, but those shares are not a significant percentage of their assets.) After paying the mortgage, they also live paycheck-to-paycheck. In most of the country, house prices collapsed in the Great Recession, and (except in a few hot markets) they haven’t grown much (if at all) in the last ten years, so these families’ net worth has remained relatively stagnant.

But at the top of the economy, people own stocks. They get dividends and capital gains that are taxed at a lower rate. And the government’s economic-recovery policies worked much better for them than for homeowners.

Like the bankers, shareholders and investors were also bailed out. By cutting interest rates to near zero and pumping trillions — yes, you read that right — into the economy, the Federal Reserve essentially put a trampoline under the stock market. The subsequent bounce produced a windfall, but only for a limited group of beneficiaries. Only about half of American households have any exposure to the stock market, including 401(k)’s and retirement plans, and ownership of the shares of individual companies is clustered among upper-income families.

For homeowners, there wasn’t much of a rescue package from Washington, and eight million succumbed to foreclosure. Sometimes, eviction came in the form of marshals with court orders; in other cases, families quietly handed over the keys to the bank and just walked away. Although home prices in hot markets have fully recovered, many homeowners are still underwater in the worst-hit states like Florida, Arizona and Nevada. Meanwhile, more Americans are renting and have little prospect of ever owning a home.

The housing crash hit middle-class black and Hispanic families harder than middle-class white families, worsening the racial wealth gap.

[F]amilies in the latter two groups were more dependent on housing as their principal form of investment. Not only were both minority groups harder hit by foreclosures, but Hispanics were also twice as likely as other Americans to be living in Sun Belt states where the housing crash was most severe.

In 2016, net worth among white middle-income families was 19 percent below 2007 levels, adjusted for inflation. But among blacks, it was down 40 percent, and Hispanics saw a drop of 46 percent.

Young people have also been set back. With their parents’ home equity all but gone, they face a choice between entering the economy without marketable skills and borrowing heavily to go to college or get other training. Student debt, says the NYT, “is now the second-largest category of consumer debt outstanding, after mortgages.”

A personal view comes from NYT editor M. H. Miller, who tells of his parents attending his 2009 graduation while facing foreclosure. At an age when previous generations of Americans were taking on mortgages and building for the future, Miller still owes $100K of student debt. “The financial crisis remains the defining trauma of my generation,” he says.

Finally, we come to what has happened at the bottom levels of the job market, covered by Matthew Desmond. He follows Vanessa Solivan, a home health aide raising three children in Trenton, New Jersey.

In May, Vanessa finally secured a spot in public housing. But for almost three years, she had belonged to the “working homeless,” a now-necessary phrase in today’s low-wage/high-rent society. … After juggling the kids and managing her diabetes, Vanessa is able to work 20 to 30 hours a week, which earns her around $1,200 a month. And that’s when things go well.

These days, we’re told that the American economy is strong. Unemployment is down, the Dow Jones industrial average is north of 25,000 and millions of jobs are going unfilled. But for people like Vanessa, the question is not, Can I land a job? (The answer is almost certainly, Yes, you can.) Instead the question is, What kinds of jobs are available to people without much education? By and large, the answer is: jobs that do not pay enough to live on.

It’s not that safety-net programs don’t help; on the contrary, they lift millions of families above the poverty line each year. But one of the most effective antipoverty solutions is a decent-paying job, and those have become scarce for people like Vanessa. Today, 41.7 million laborers — nearly a third of the American work force — earn less than $12 an hour, and almost none of their employers offer health insurance.

Desmond did well to focus on Vanessa. I suspect that the majority of NYT readers (whom I picture as better off than most Americans) have little contact with low-wage workers. Janitors, dishwashers, and busboys are almost invisible. Farm workers are out there in the country somewhere doing God-knows-what. You can imagine that waitresses make a lot in tips, and a few of them actually do. When your personal experiences don’t connect you to people, it’s easy to accept stereotyped accounts of their lives and problems: It’s their own fault. They just need to work harder and stay off drugs. If they learned to practice middle-class virtues, they’d be middle class themselves soon enough.

But lots and lots of professional-class folks have had needed home health aides at one time or another, either while recovering from something themselves or when they were trying to keep aging parents out of a nursing home. I dealt with several in my parents’ final years, and I know the agency didn’t charge us enough to pay them very well. The aides are not nurses, but they do hard, necessary work. The ones I met did it cheerfully, without complaining. None of the negative stereotypes of low-wage workers — that they’re lazy, stupid, resentful, unreliable, irresponsible, and have to be watched every minute — applied to the aides who took care of Mom and Dad.

In short, when I picture a home health aide, I picture someone who deserves to have a decent life. (Whether anyone deserves not to have a decent life is another question. But surely home health aides shouldn’t fall into that abyss.) The thought of Vanessa doing all the work she can get and still living in her car — that’s jarring to me in a way that stories of other low-wage workers might not be. I can’t easily make up some excuse to explain it, or make it seem just. I suspect that a lot of NYT readers had a similar reaction.

Similarly, many professional-class people recall the low-paying jobs they held as teen-agers, or during the summers of their college years, and may regard the experience as a harmless hazing that welcomes young people into the workforce. But Vanessa is 33, and is not on the road to some future prosperity. This is her life, and it’s the life of a lot of adult Americans.

The Bureau of Labor Statistics defines a “working poor” person as someone below the poverty line who spent at least half the year either working or looking for employment. In 2016, there were roughly 7.6 million Americans who fell into this category. Most working poor people are over 35, while fewer than five in 100 are between the ages of 16 and 19. In other words, the working poor are not primarily teenagers bagging groceries or scooping ice cream in paper hats. They are adults — and often parents — wiping down hotel showers and toilets, taking food orders and bussing tables, eviscerating chickens at meat-processing plants, minding children at 24-hour day care centers, picking berries, emptying trash cans, stacking grocery shelves at midnight, driving taxis and Ubers, answering customer-service hotlines, smoothing hot asphalt on freeways, teaching community-college students as adjunct professors and, yes, bagging groceries and scooping ice cream in paper hats.

There was never a golden age when the American Dream (whatever it may have been in that era) was available to all on equal terms. Inequality has always been with us, and has been increasing since the late 1970s. It is not some new development of the last ten years, but class lines have increasingly hardened since the Great Recession.

If you are a child of wealth, your path to success is comparatively smooth: As a child, you will get whatever help you need to maximize your talents and your attractiveness to elite colleges. With appropriate effort on your part, you will graduate not just with a punched ticket to the professional class, but without debt. If at some point your further development requires either more training or the capital to start a business, that won’t be a problem. Quite likely, you will reach 40 in good shape, ready to give your own children similar advantages, but with no awareness of ever having taken a “handout”. You got the grades, you did the work, you started the business — by what right can these socialists tax “your” money away and spend it on the people who lost the games you won?

But if your parents are not rich, you face difficult hurdles and choices. Depending on where you live, public schools may or may not give you the grounding you need to move on and get an advanced education. If that path is available to you, will it be worth all the money you will have to borrow? Or should you take your chances in the unskilled workforce, knowing that jobs and wages can evaporate in an instant, and that the best you can hope for is to scrape by from one week to the next?

That is our “recovered” economy. It’s “booming”, we are told. And for many people, it is. But not for everybody.

Outlines of a Reading Project on Class

Lately I’ve been reading a lot about the class divide in America — a topic that has been on my mind for several years, but has acquired a new significance in the Trump Era. Probably all this research will eventually result in a long article where I try to find some deeper insight, but in the meantime I’ll just summarize what I’ve been reading, in case you want to read along with me.

A great place to start is “The 9.9% is the New American Aristocracy” by Matthew Stewart in The Atlantic. Wealth, as many authors have shown, is increasingly accumulating in the top tenth of a percent. But beneath that layer of plutocrats is the rest of the top 10%, which mostly consists of educated professionals with a decent amount of economic security, who have pleasant homes in safe neighborhoods with good schools, read magazines like The Atlantic, and do physical labor only to the extent they want to. (I wasn’t born into this class, but that’s where I am now. I suspect most — but not all — of my readers are 9.9-percenters also.)

Collectively, we control more than half of American’s wealth, a percentage that has held fairly steady for decades. The gains of the top .1% mostly haven’t come from us, but at the expense of the bottom 90%. Stewart says:

By any sociological or financial measure, it’s good to be us. It’s even better to be our kids. In our health, family life, friendship networks, and level of education, not to mention money, we are crushing the competition below. But we do have a blind spot, and it is located right in the center of the mirror: We seem to be the last to notice just how rapidly we’ve morphed, or what we’ve morphed into.

What we’ve morphed into is a hereditary aristocracy; it’s increasingly hard for people not born into this class to join. On its surface, the system looks like a meritocracy, but we’ve gamed it. Winning the race requires the kind of preparation that only aristocratic kids are in a position to get. Like Jane Austen’s aristocrats, we have a strong tendency to intermarry, closing off that point of entry. We also feel very little guilt about leaving the classes below us in the dust: In the Game of Life, we tell ourselves, they just didn’t measure up. (Chris Hayes made a similar point several years ago in The Twilight of the Elites.)

The middle-working class — let’s leave the boundaries of that vague for now — consists of people who didn’t make it into the aristocracy, but have what Joan Williams in her book White Working Class calls “settled lives”: They aren’t college educated, but they are consistently employed and have stable homes with (mostly) solid families. They typically have jobs rather than careers, and they get their identities from family and community (often a church community) rather than from their professions. (Even if you have lucrative lifelong employment as a plumber or electrician, it’s what you do, not who you are.)

Members of this class take a lot of pride in the disagreeable things they’ve had to do to stay out of poverty — the long hours of unrewarding work, the desires they’ve had to suppress, the dreams they’ve had to defer, etc. — and they picture poor people as lacking the same moral stamina. (That’s why it aggravates them when government programs let the undeserving poor enjoy some of the same rewards they take pride in earning. Liberals, they feel, are trying to erode the significance of their moral achievement.) They have different cultural values than the aristocrats and are annoyed by our belief that they tried to be us, but just failed. They don’t actually want to be us, but they envy our generational stability, because (as the kinds of jobs that underwrite settled lives go away) they see no guarantees that their children won’t be poor.

They also resent the hell out of us, much more than they resent the .1%. The plutocrats are like distant kings, but working-class folks have to deal with aristocrats every day. We’re their bosses and the doctors who talk down to them. We’re their hard-to-please clients, the consultants who come in to tell them that they’re doing it all wrong, and the experts who observe and interview them in hopes of replacing them with machines. We’re the talking heads on TV who use big words and insist that they’d agree with us if only they had read enough books to know what they’re talking about.

Trump made it to the White House by playing on that resentment. (Historically, the 9.9% has been split between the parties or even leaned Republican. But many never-Trump conservatives are 9.9 percenters, and congressional seats in professional-class suburbs are viewed by Democrats as pick-up opportunities.) Since taking office he has done virtually nothing to help the working class — not even the white working class. But he remains popular among them because he gives voice to their resentment of the 9.9%.

Williams’ point is that we aristocrats should try harder to understand and show respect to the working class, which is true as far as it goes. But The Washington Post’s Paul Waldman points out a disagreeable truth: Professional-class liberals — or even just reality-based anti-Trump conservatives — are kidding themselves if they think respect is some kind of “magic key that Democrats can use to unlock the hearts of white people who vote Republican”. No matter how respectful a candidate or a set of policies might be, that message will never get through the filter of “an entire industry that’s devoted to convincing white people that liberal elitists look down on them.”

If you doubt this, I’d encourage you to tune in to Fox News or listen to conservative talk radio for a week. When you do, you’ll find that again and again you’re told stories of some excess of campus political correctness, some obscure liberal professor who said something offensive, some liberal celebrity who said something crude about rednecks or some Democratic politician who displayed a lack of knowledge of a conservative cultural marker. The message is pounded home over and over: They hate you and everything you stand for.

Essentially, conservative media is like the community gossip who constantly starts conversations with “Did you hear what so-and-so just said about you?” No matter how respectful the bulk of us may eventually learn to be, somebody somewhere is always going to be dissing working-class whites, and Fox News will make sure that they hear about it.

Even when that disrespect is absent, it is easily manufactured. Waldman points out how out-of-context quotes were used to skewer Barack Obama and Hillary Clinton. Everyone knows that Clinton thinks working-class Trump voters are “deplorable”, and Obama believes they are “clinging to guns and religion”.

Finally, the consequences of this class divide are discussed in Ganesh Sitaraman’s book The Crisis of the Middle-Class Constitution. Unlike previous republics, the United States didn’t write the class struggle into its constitution: Rome, for example, balanced an aristocratic Senate against the veto-wielding Tribunes of the People. Britain separated the House of Commons from the House of Lords. America didn’t do anything like that.

Instead, the Founders counted on relative equality of wealth and the presence of a large middle class to maintain a balanced society. Those are the conditions our system of government is designed for, and at various key points in American history (the homestead era, the Progressive Era, the New Deal) the government made deliberate choices that preserved the middle class and prevented either plutocratic domination or a revolution of the dispossessed.

Now we’re in an era of increased concentration of wealth and power by the .1%. Now more than ever, if we’re going to preserve our system of government, we need the 9.9% and the working class to band together against the domination of the super-rich. But how is that going to happen?

My taxes are half what I’d pay if I just made wages

OK Donald, I’m not going to publish my tax returns either, but I do want to reveal enough information about them to make a point.

Over the last few years, my wife and I have eased towards retirement, which means that an ever-higher percentage of our income comes from investments (interest, dividends, and capital gains) rather than wages. And I’ve watched our taxes go down accordingly, because the tax code is stacked against people who get their money by working. (I’ve been complaining about this at least since 2005. I made a related complaint about estate taxes after I settled my father’s estate in 2015. As a worker I paid one rate; as an investor I have paid a much lower rate, and as an heir I paid essentially nothing.)

I think 2017 was the first year (or maybe the first since that lucky investing year of 2004 that made my tax return look so shocking to me in 2005) that wages have been less than half of our income. And that made me wonder: If I refigured our federal income tax with the assumption that we had the same income, but it was all wages, what would that do to the tax we pay?

Answer: More than double it. A couple who had our same income, same deductions, and so on, but got all their income by working, would pay twice as much tax as we paid, and then a little more. (If you had a lot of wages and want to do my experiment in reverse, go to page 44 of the 1040 Instructions and fill out the Qualified Dividends and Capital Gains Tax Worksheet under the assumption that your whole income consists of capital gains. If you’re willing to share, you can post in the comments the percentage decrease you see.)

You might wonder how that is possible, since capital gains are supposedly taxed at 15%: low, but more than half the rate most wage-earners pay. The answer is that your first chunk of capital gains isn’t taxed at all.

Taxpayers in the 10 and 15 percent tax brackets pay no tax on long-term gains on most assets; taxpayers in the 25-, 28-, 33-, or 35- percent income tax brackets face a 15 percent rate on long-term capital gains. For those in the top 39.6 percent bracket for ordinary income, the rate is 20 percent.

If you don’t have a lot of wages, you only start paying those 15-20% rates after you’ve maxxed out the untaxed chunk.

A response you’ll sometimes hear from conservatives is: “Well, if that bothers you, you should make a voluntary contribution to the Treasury.” And that entirely misses the point. If the problem were my personal sense of guilt over being allowed to pull less than my weight, a contribution to the Treasury would deal with part of it. (I still would have the privilege of deciding for myself what my fair share is, though. That still would put me in a different class from people who have to either pay what they owe or go to jail.)

But my complaint isn’t that I lack some proper method to flagellate myself for having income. The guilt shouldn’t reside with those of us who fill out our tax returns honestly and arrive at the ridiculously low number the law intends us to pay. It’s with the politicians who write these rules, and (even moreso) with the people who use the outsized influence their wealth gives them to induce politicians to write such unfair rules in the first place.

Our tax system is unjust, and every person who earns wages should feel insulted and abused by it. Me sending an extra check to the Treasury would do absolutely nothing to change that.

The problem is structural, so the solution needs to be structural: All forms of income — wages, interest, dividends, capital gains — should be taxed the same. (That’s not a flat tax. Once you total up your income, the tax tables could still be progressive, with rich people paying a higher rate than poor people.) Not only would that change make our tax system fairer and more just, it would achieve goals conservatives are always claiming they support: Figuring out what you owe would be simpler, and the tax code would distort our economy less, since there would be no need for the shenanigans wealthy people pull to make their wages look like capital gains.

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.

pew-screenshotI 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.


UMP COVER.pagesOn 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.