Archive for the ‘Economy’ Category

Fix the Roads

Friday, September 12th, 2014

The elder Mayor Daley’s political credo was that as long as you picked up the garbage, plowed the snow, and fixed the roads, Chicago voters wouldn’t care what other political shenanigans went on. He was a practical politician in a city that famously “worked”.

The same can’t be said for the current state of Michigan. Even though Republicans control the Senate, the House, and the Governor’s mansion; they can’t seem to come up a plan to fund road reconstruction.

This is not a new problem.

The whole country went into recession in 2001 but the Michigan economy didn’t start growing again until 2009. Road funding suffered during that period of time as did funding for many public services.

Then there is the general trend of more efficient vehicles. That means the state is effectively getting less money in fuel taxes per mile driven on the roads. Michigan is not, however, the only state with that problem.

Last year’s severe winter, however, elevated Michigan’s problem to a crisis.

Experts say that many of the deteriorating roads in the state have now passed the point where they can be effectively repaired. Instead they must be completely rebuilt.

The estimated additional cost to simply keep the current situation from getting worse is somewhere around $1B.

The cost to bring the roads back to a national standard is twice that.

Part of the problem in Michigan is that we have some of the lowest tolls and fines for overweight vehicles in our part of the country. We charge overweight vehicles a $50 flat fee while all of the surrounding states charge fees based on weight, mileage, and even bridges crossed. This situation is part of the “friendly” auto manufacturing climate that has grown up in this state over decades.

Paradoxically, Michigan also has the sixth highest gas taxes in country.

But it ranks last in per capita road spending.

That’s because, at least in Michigan, the sales tax on gas goes into the general fund rather than the road fund.

While this makes funding more challenging, the basic realities remain. The state has to spend significantly more money on the roads than it has been spending. Fortunately the citizens in Michigan recognize this and overwhelmingly support increased taxes to fix the roads.

The solution is obvious. You’ve got to raise taxes on somebody to generate another $1B – $2B in revenue. So why isn’t it getting done?

In simplest terms – Ideology

The republican legislative majorities occurred during the Tea Party wave election of 2010.

They are now faced with the reality that there is no practical way to fund the roads without raising taxes. They already cut funding to schools and eliminated senior citizen state tax breaks to fund a billion dollar business tax reduction – knowing that they still had this issue to deal with.

The governor, to his credit, put a tax hike proposal on the table.

So did the Republican Senate Majority leader, who happens to be term limited and as a result can’t run for election again.

They all received the support of the Democrats, but all failed to get sufficient Republican votes to pass.

It is now so bad, that the Senate Majority Leader has admitted that he is out of ideas.

“We’ve come close to getting the votes necessary to fix this longstanding problem. But quite frankly, we’re looking at all ideas now – newer ideas,” said Richardville. “And we’re not afraid to entertain anything from anyone.”

So faced with a real crisis regarding Michigan roads and the prospect of another brutal winter that will damage even more roads beyond the point of repair, Tea Party Republicans refuse to vote for any plan that raises taxes or fees on anybody.

I can’t think of any clearer example of the folly of the ideology that has overtaken the Republican Party. There are consequences to a philosophy that believes no tax can be justified and economic growth will offset any loss of revenue. It is impossible for economic growth to generate sufficient additional tax revenue to solve this problem. The deteriorating roads are impacting economic growth today preventing the promised stimulation from low business taxes.

As Mayor Daley understood, voters expect government to provide a set of basic services. Voters are also wise enough to realize that they have to pay for these services.

Hopefully voters will recognize that this party is unable to govern because of their “no tax” philosophy and vote them out.

Root Cause – Ferguson Riots

Thursday, August 28th, 2014

The death in Ferguson of an unarmed teenager and subsequent unrest raise a couple of basic questions.

The first is obvious. There is no question that a police officer shot an unarmed citizen multiple times. The teenager died from his wounds. What happened in the moments leading up to gunshots being fired are still in dispute. We have a legal process that assumes that people are innocent until proven guilty. A grand jury has been empowered to determine whether or not the officer should face charges. Until that grand jury brings back a verdict, there is not much more useful to comment on the incident.

The other equally obvious question is why did the residents of Ferguson react as they did?

The sad reality is that police are killing people at the rate of about 400 a year for the past five years according to the FBI. These are “justified” homicides. There aren’t any FBI statistics on unjustified homicides where police offices are put on trial and found guilty of a homicide.

An independent report assembled from media, obits, and facebook pages provides a little more detail.

ferguson graphic 1

There are additional statistics from the Bureau of Justice Statistics that also have bearing.

44% of the contact that an African American has with the police is for a traffic stop. But African Americans are three times as likely as white drivers and two times as likely as Hispanic drivers to be searched during a traffic stop. Statistics also show that this higher rate of searches doesn’t result in the discovery of any more drugs or guns than the any other traffic stop.

These same statistics (compiled by fivethirtyeight.com) show that African Americans are three times as likely to be threatened by force during their encounters with police and twice as likely to actually have force used against them. A majority of those who reported force being used against them felt it was excessive. But the interesting final statistic is that when you break down all of those people who feel that they were subject to force, African Americans were the least likely of all of the racial divisions to regard that force as excessive.

ferguson graphic 2

But this is happening in communities across the country. Ferguson is no different than any of the larger cities profiled in these statistics. Why is it that only Ferguson burst into flames?

Here are some more statistics from Politfact.

Ferguson is 67% African American. Four decades ago Ferguson was 99% white.

The Ferguson police department is 94% white. The police chief is white. The mayor is white and the local prosecuting attorney is white. The judges are white. The school board is mostly white.

Even this isn’t that unusual in communities that have experienced rapid demographic changes. It takes a while for the new majority to assert itself politically.

Ferguson is special in a way not obvious from all of these statistics.

They are a classic speed trap complete with a predatory court system. But as the demographic in Ferguson changed, so did the targets for traffic enforcement. Instead of targeting out of towners, Ferguson targets its own population of poor African Americans. Fines and court fees are the second largest source of Ferguson’s revenue. According to a white paper by Arch City Defenders, in 2013 Ferguson Municipal Court issued 24,532 arrest warrants for unpaid fines in 12,018 cases. That is the equivalent of 3 warrants per Ferguson household.

How can that happen?

Because the court system is rigged to benefit those who can afford a lawyer and punish those who can’t. According to the report, “the bench routinely starts hearing cases 30 minutes before the appointed time and then locks the doors to the building as early as five minutes after the official hour, a practice that could easily lead a defendant arriving even slightly late receiving an additional charge for failure to appear.”

NPR goes on to report that those who can’t afford to pay the thousands of dollars in fines and fees associated with a single violation, are put on payment plans by the courts with interest rates sometimes as high as 12%. Even though the Supreme Court has ruled that people can’t be jailed for failing to pay their bills, Ferguson regularly issues arrest warrants for those who miss payments. It also requires those on payment plans to appear in court monthly. This inevitably results in missed court dates which create additional fines and arrest warrants. When people get arrested, they lose their jobs, which makes it all that much more difficult for them to pay their fines.

A community group has been organizing arrest warrant amnesties for these non-violent offenders. Earlier this month 3000 people in Ferguson, 15% of the total population of Ferguson, lined up to participate in the program.

The result is a deeply polarized and isolated community. Because so many residents of Ferguson have open arrest warrants, they fear getting stopped, resent the police, and feel imprisoned in their own homes.

“It’s a risk to go to the store,” says Ahmed. “Outside of that community, it’s a risk to go to any educational institution, to get a job, to go for job interviews. Especially since most of the jobs are maybe 5 to 10 miles away. So some of them just don’t even try anymore.”

The African American population in Ferguson not only distrust the police, but also the courts. They feel the system is deliberately rigged against them, and statistics suggest that it is.

It’s against this backdrop that two teenage African American boys were stopped by a white Ferguson police officer for walking in the street. They all knew what was going to happen next. The officer was going to check to see if the boys had any warrants. He would arrest them if they did, and issue them a jaywalking ticket if they didn’t. That ticket would cost each of them money that they didn’t have. They were going to end up in jail either way. These kids just kept walking. It may have been foolish, as young men often are, but they likely felt that they didn’t have many other choices. They challenged the police officer’s authority because they regarded it as illegitimate. According to one account, they also asked if he was going to shoot them for jaywalking – an obvious reference to Ferguson’s “speed trap” justice system. The officer responded by backing up his vehicle and confronting these two boys. That confrontation resulted in one of them being shot to death.

That death caused an outpouring of frustration, violence, and crime from a community that felt that it had no other options. Unfortunately, it is what humans around the world do when they feel their governments give them no other options.

That’s the root cause.

Immigration Hysteria

Wednesday, July 23rd, 2014

Over the past two years, large numbers of unaccompanied mostly teenage boys from Central America entered the US illegally and immediately turned themselves over to authorities. The trip cost their families up to $10,000.

Why?

Poverty, violence, persecution, and exploitation in their native countries.

85% have family in the United States.

A 2008 Bush child sex-trafficking law requires a court hearing before non-border country children can be deported. The flood of non-border country children overwhelmed available judicial resources. HHS ran out of room to house children waiting for backlogged hearings. Immigration Control couldn’t legally deport them. So most of the children were placed with their relatives.

The good news is that the flow of children has slowed. Our government is successfully defeating the rumor in Central America that children receive amnesty.

Rumors aren’t as easily defeated here.

The Obama administration proposed a tardy but reasonable plan. Dramatically increase holding and processing capacity. Help Central American countries improve living conditions and political stability. Reform the 2008 child-trafficking law as part of a larger immigration reform package.

Republicans refused to fund any part of the plan.

Instead radical extremists whipped up xenophobic fears of child-terrorists to gain political advantage. The same Republicans who want to sue the President for lax law enforcement demand that he ignore the 2008 child-trafficking law. Texas governor Rick Perry sent 1000 National Guard troops to the border. Local officials complained. Since the troops can’t deport these kids without a hearing, they can only greet them, take them into custody, and scare away the tourists.

Those opposed to immigration reform will likely survive yet another election cycle by continuing to portray illegal immigration as an enforcement problem. Clearly these children are not criminals. They and their parents are risking their lives and savings for a better future.

It’s past time that we have a rational immigration policy that promotes our economic growth and regulates the flow of legal guest workers. We are a nation built on the promise of a better future for those willing to work hard, abide by our laws, pay taxes, shop in our stores, learn our language, and cherish our kids.

Immigration reform will happen when supporters punish the bigoted and fearful opponents of reform both in the pocket book and at the polls.

What Republicans view as an advantage in 2014 may set them up for another crushing defeat in 2016.

Magic Thinking and Personal Interest

Thursday, June 19th, 2014

We’ve talked about confirmation bias in the past and how we are all susceptible. Confirmation bias is when we accept those things that support our particular view of the world and reject those things which call that view into question. A version of this is Moral Intuition. That’s when we respond to a particular issue emotionally and then use our rational brain to create arguments supporting what we have already decided must be true because it aligns with our moral foundations.

These biases lead to Magic Thinking. That is when we invent or accept views completely unsupported by science or fact because this particular view is consistent with our world view.

Here’s an example of Magic Thinking.

God makes political choices
This is a simple one to work through. God, as described in the Bible, is all-loving, all-knowing, all-powerful, and perfect. He created us in His image and likeness which means in His eyes we are perfect too. He supplies our every need. So why would this God involve Himself in politics at all? It is akin to praying that God influence the outcome of a sporting event. Why would He bother? It is our responsibility to “work out our own salvation with fear and trembling”. Then Paul goes on to say, “For it is God which worketh in you both to will and to do of his good pleasure.” Events unfold to further God’s will, not to satisfy our own particular personal plan. That will is His desire for us to increase in grace and in our understanding of Him. So the unfolding of God’s plan is generally the path that does the most good and blesses everyone. There are no losers in God’s plan. Winning is strictly a human concept. It is Magic Thinking to expect a prayer for victory to be answered. A much more effective prayer is one that humbly seeks direction and alignment with the plan that is already in place for us.

Magic Thinking is dangerous for our democracy because it transforms important issues from facts to belief. Beliefs are highly emotional subjects. So any attempt to debate them is divisive. That’s because beliefs by their nature are personal. So when you question a belief, you are also calling into question the intelligence and honesty of the person holding that belief.

Some who seek to manipulate the public in order to advance their own agendas put a lot of effort into transforming political positions into beliefs.

Here are some other examples.

Climate Change
From a scientific perspective, there is wide agreement that the climate is changing and that the change is PRIMARILY caused by human activity. That doesn’t mean that all scientists agree on everything. There are certainly a small number of climate scientists who have dissenting views. It also doesn’t mean that the scientific models are perfect. They aren’t because our planet is a complex system. But those models continue to improve as climate scientists better understand how our planet is responding to the increased heat being retained by our atmosphere.

Magic Thinking claims that climate change is some sort of liberal conspiracy. The politics of personal interest is the best way to disprove that. Self interest in the scientific community is strongly biased toward disproving accepted theories. That’s how scientists make a name for themselves in their peer community. The scientific method REWARDS the person who is able to demonstrate that a popular theory is flawed. That reward is shared with those who can duplicate the experiments which support the new theory. In other words, a dissenting view supported by good research is always welcome in the scientific community.

There is also no proof that scientists who disagree with the generally accepted theories about climate change suffer financially. In fact, it is much the opposite. Those small number of dissenters from the majority view are richly rewarded for their positions by the powerful interests who oppose actions restricting the use of fossil fuels.

The politics of personal interest also provide a simple explanation for conservative opposition to any government actions to reduce emissions of greenhouse gases. The majority of the money financing conservative politicians who deny climate change comes from organizations linked to the Koch Brothers. Their wealth is based on fossil fuels. Their personal interests are opposed to any restrictions on the use of fossil fuels.

They have successfully deployed the same techniques originally developed by the Tobacco Industry to create doubt and confuse science and belief. If anything, it is testimony to the ethics of the scientific community that most climatologists have resisted the temptations of participating in the lucrative practice of junk science.

Free Markets
The Magic Thinking here is that free markets can regulate themselves. So any failure for free markets to operate successfully is attributed to too much government intervention rather than companies that have become too big to fail.

The reality is that while it is certainly possible for government to overreach, there is no evidence that free markets can effectively operate without regulation.

The politics of personal interest are a reliable measure of where this argument came from too. Who stands to benefit the most from a deregulation? Those entities that had been previously regulated, their management, and their stock holders. Who back the conservative politicians who promoted the agenda of deregulation? The same group.

One need look no further than China for examples of how industries behave in economies where there are no regulations. The environment is polluted. Workplaces kill workers. Products kill customers.

The Magic Thinking is on the part of individuals who have been convinced by these larger monied interests that deregulation benefits them. Just ask the people in Charleston, West Virginia where “business friendly” state regulations allowed a toxic chemical storage facility to be built upstream from their drinking water intake pipes. Magic Thinking in this case is the Libertarian view that the marketplace will punish bad corporate behavior. The facts are that at least in our version of capitalism, short term profits always trump long term unfunded liabilities (externalities).

What happens instead is that the offending company profits from their bad behavior. Those profits flow to company management and shareholders. When the externalities finally catch up with the company, the real costs of production are revealed. The cost of the damage done to either the environment, the workers, or the customers far outweighs the assets of the company. The company declares bankruptcy and taxpayers are often left holding the bill. Lawyers may make a little money attempting to recover some costs from those who profited, but most of those profits are long gone and will never be recovered.

Immigration
Just like climate change, this country is facing an undeniable demographic reality. Our population is aging. If we fail to embrace immigration, we will suffer the same bleak economic outlook that Japan has been struggling with the past decade. Combine that with the major demographic shifts in the electorate that were the foundation for Obama’s two Presidential victories and Republicans are facing a stark choice. Either embrace immigration reform or die as a relevant national party.

The Magic Thinking is that conservative Republicans can continue to be a force in the House because of gerrymandering and the lower voter turnouts during off year elections. As long as they can retain that majority, they don’t need the White House or the Senate. They can do this by suppressing the vote, preventing immigrants from becoming citizens, playing wedge politics with their base, and outspending the opposition.

The reality is that conservatives are simply going to run out angry white voters. When they do, it will be hell to pay for the tactics that they employed to hold onto the power that they had.

Abortion
The facts are the no one can say when life begins. We can recognize when something is living, but there is no agreement when something starts living.

The rest of the facts are that Roe V. Wade did not decide when life begins. It also had nothing to do with personhood. It was decided based on the rights of the mother. Her rights take precedence until the point in time that the fetus can survive independently. There is NOTHING that the current right to life movement can do to change that perspective short of a constitutional amendment.

Magic Thinking, however, suggests that the Justices make a bad decision. They simply didn’t have the facts that we have today. If we just get some different justices on the bench, the decision will get reversed. It’s not going to happen.

The politics of self interest call into immediate question why this issue continues to fester for decades after this decision was made. The people who benefit from this continued controversy are the advocacy groups (for both sides) and the politicians who are able to raise money by aligning themselves with one group or the other. It is not unlike divorce lawyers to make their money asserting the rights of their client, when they know full well that judges are loath to give one parent sole custody of the children, support an inequitable property split, limit child support, or these days provide alimony. If both parties in a divorce were told what the likely settlement would be, they would start to work out the details on their own rather than invest money in lawyers attempting to “win”. The same is true here. No one will win. It will instead be a trench war that will only stop when the next generation refuses to continue to fund special interest groups.

The Poor
Poverty is a complicated subject. The facts are that programs like Social Security and Medicaid have dramatically reduced poverty among the elderly. We already dug into the economic costs of poverty and the benefits to reducing it.

The Magic Thinking, however, is that poverty is the fault of the poor. They must have made a bad decision somewhere in their lives for them to end up in the position that they now find themselves. As a result, any attempt to help them escape poverty does nothing to resolve the more fundamental character weakness that got them in this condition to begin with.

Ayn Rand has written the “Bible” for this particular form of Magic Thinking. The challenge is that those who advocate this gospel of “personal responsibility” and “greed is good” are also dealing in belief rather than fact.

Conclusion
Magic Thinking masks the politics of personal interest. Those special interests are well versed in the tactics required to transform political points of view into beliefs. Once a political position becomes part of an individuals belief system, they are no longer open to a fact based discussion. Those who embrace these beliefs will only accept the facts that support their beliefs. They will reject the facts that call those beliefs into question. They will defend their positions using the stock arguments of Moral Intuitionism. Those include media bias, conspiracy theories, flawed polling, and junk science.

The result is an increasingly polarized electorate, gridlocked government, and crumbling economic and physical infrastructure. The only times that we are able to make any changes are during the first two years of any new administration when the majority party can actually pass parts of their agenda by imposing their will on the minority.

This is no way to run a country.

The Crime of Poverty

Sunday, April 27th, 2014

There was a rich man who dressed in purple garments and fine linen and dined sumptuously each day. And lying at his door was a poor man named Lazarus, covered with sores, who would gladly have eaten his fill of the scraps that fell from the rich man’s table. Dogs even used to come and lick his sores. When the poor man died, he was carried away by angels to the bosom of Abraham. The rich man also died and was buried, and from the netherworld, where he was in torment, he raised his eyes and saw Abraham far off and Lazarus at his side. Luke 16:19-23

There was a cost to income inequality even in Jesus time. This cautionary tale, however, seems to have been forgotten today, just as it was over 2000 years ago.

Income inequality is real and is larger now than in any other time in our industrialized history.

In practical terms, this is the result of government policies which favor the rich.

We’ve already discussed ways that income inequality can be reversed – primarily by reversing the government policies which caused its rise in the first place.

Let’s look for a moment at the other end of the spectrum – the real costs of poverty.

The direct result of concentrating more of the nation’s income in the hands of the wealthy is that less money is going into the hands of the poor.

Less money in the hands of the poor has caused an increase in crime, specifically homicides and robbery in poor neighborhoods. In the 2002 report entitled “Inequality and Violent Crime”, the World Bank says,

Income inequality … has a positive and significant effect on homicide rates … the results for robberies are similar to those for homicides.

AND

…when poverty falls … either because income growth rises or the distribution of income improves, then crimes rates tend to fall.

Seems a simple conclusion – poverty and crime are connected.

But the conservative response based on the “fairness” moral foundation, is that the poor are responsible for their own condition because of bad choices. If they break the law they should go to jail. The reality, however, is that our prisons are now overcrowded with people convicted mostly of non-violent minor drug crimes.

The United States has 25% of the world’s prisoners but only 5% of the world’s population. Incarceration rates over the last 20 years have risen while crime rates have dropped 40%. The direct taxpayer cost is $64B/year. The indirect costs are a generation of primarily minority men who are absent from their families and have difficulty finding work when they have served their time. That’s because, though drug use has no racial preference, 75% of the people in prison for non-violent drug offenses are black.

As a precursor to the rest of this discussion. It costs between $30K and $60K a year to house, feed, and guard each prisoner in our prison population. Roughly 50% of those released from prison will return within three years.

Criminologists have found that the single most effective tool to reduce recidivism is education. If we took the money that we are currently spending to keep non-violent offenders behind bars and spent it instead to provide support for them while they learned the skills necessary to secure a living-wage job, everyone benefits. Everyone, that is, except the corporations who profit from the prison industry.

The prison industry is only one example of the economic forces that are arrayed against the poor. The poor have no control over the economic bias that exists in this country. Their opportunity to change their circumstances is dramatically limited by violence, poor nutrition, poor schools, poor transportation, limited low wage jobs, single parent families, the high cost of child care, and all of the companies who have figured out how to profit from these conditions.

The conservative response is that we shouldn’t “reward” the poor for making bad decisions. Any attempt to level the playing field is regarded by many conservatives as “enabling” poverty rather than empowering the poor. The result is government programs “designed” to encourage work which actually punish the poor for having children. Support, for example, is tied to the number of children in the house rather than adults. But that support does not include the cost of child care and support is reduced by the amount of money earned. So many families find that when the costs of childcare are factored in, they can’t afford to work and also put food on the table. The supports are also not enough to allow one adult to work and the other to stay home with the children. The choice for many single mothers is to kick fathers, who may not be able to find a job because of past criminal records, out to support themselves while they stay home with the kids at least until they are old enough to go to school.

These programs could certainly be improved, But let’s look for just a moment at a more radical solution. What would it cost us as a country to simply eliminate poverty?

It is an intriguing idea. Just provide everyone sufficient support that they are no longer encumbered by the basic issues of survival in our society. Every adult, regardless of their background, is guaranteed a minimum stipend sufficient to support themselves.

In a September 2013 article for the American Prospect, Matt Bruenig stated:

Eradicating or dramatically cutting poverty is not the deeply complicated intractable problem people make it out to be. The dollars we are talking about are minuscule up against the size of our economy.

It would take only 1 percent of GDP, or a fourth of what we spend on defense every year, to lift every American below the poverty line up above it… In 2012, the number was $175.3 billion. That is how many dollars it would take to bring every person in the United States up to the poverty line.

What would happen if everyone in this country suddenly had enough to eat, had a safe place to live, and could afford to work and raise a family?

Violent crime rates would fall. That would save on what we currently invest in medical services, law enforcement, prison systems, and other civic support systems.

Corporations win because without poverty, Americans have more purchasing power. Democrats win because income inequality is credibly addressed. Republicans win due to a combination of reduced government costs and credible fiscal responsibility at all levels of income.

It is a simple, pay me now or pay me later, discussion. The challenge with this discussion, however, is that it touches the conservative moral foundation of “fairness”. Somebody getting something that they didn’t deserve.

Therein lies the fundamental challenge of our political age.

Conservatives believe that poverty in and of itself is a crime. Those who find themselves in poverty have no one but themselves to blame. The hardships associated with poverty are both a just punishment for bad choices as well as the disincentive that the poor need to change their circumstance.

If anyone doubts this, we need look no further than those who defended Mitt Romney after his famous “47%” speech.

In the rest of the Bible story, the rich man, now in eternal torment, begged Abraham that if he couldn’t be saved, at least warn his five brothers who still had time to mend their ways. Sending someone to them from beyond the grave would certainly do the trick.

He said, ‘Then I beg you, father, send him to my father’s house, for I have five brothers, so that he may warn them, lest they too come to this place of torment.’ Luke 16:27,28.

Abraham replied that Moses and the prophets HAVE been warning people.

Then Abraham said, ‘If they will not listen to Moses and the prophets, neither will they be persuaded if someone should rise from the dead.’ Luke 16:31

What we know now is that God did ALSO send someone who DID return from beyond the grave and DID provide the same warning.

Then shall they also answer him, saying, Lord, when saw we thee an hungered, or athirst, or a stranger, or naked, or sick, or in prison, and did not minister unto thee? Then shall he answer them, saying, Verily I say unto you, Inasmuch as ye did it not to one of the least of these, ye did it not to me. And these shall go away into everlasting punishment: but the righteous into life eternal. Matthew 25:44-46

And you know what? Abraham was right, the wealthy and the politicians and voters who support them have not listened to Jesus either.

The choice is really simple.

You can defend the position that poverty is the incentive that the poor need to alter their circumstances – but you do so at great peril to your own salvation.

OR

You can follow Jesus commands, embrace the poor, and generously tend to their needs. Great rewards have been promised those who follow this path.

Economic Resurrection

Saturday, April 19th, 2014

Easter is always a good time to contemplate rebirth. It is no accident that the Catholic Church chose to coopt the spring fertility celebrations with one that celebrates Jesus victory over death.

We have the same opportunity in this country.

We are struggling with some fundamental political differences between liberalism and conservatism. One of the most pervasive conservative ideas that Ronald Reagan popularized, is that government is too big and taxes inhibit economic progress. While that idea has propelled a political movement, it has proven to be a major economic failure. It has left our economy weaker and our government biased in favor of the wealthy.

We’ve built the case that income inequality exists and that it is bad for the economy. We’ve also attributed the historic proportions to which it has grown to government policies advocated by conservative Republicans starting with Ronald Reagan. Finally we’ve outline how this disparity produces a weaker less stable economy than one based on a robust middle class.

Even conservatives who are willing to accept all of the above facts, still respond fatalistically, “So what, that’s the way things are and you can’t change them.”

Here are some suggestions of how we can both narrow the income gap and improve the economy.

To get there we have to first identify two other facts which have acerbated the built-in bias toward the wealthy that became government policy 25 years ago.

Disruptive Technology
The accepted view is that disruptive changes in technology resulted in large job displacement. As a result, we now have a large mismatch between opportunities and skills. The reality is somewhat more nuanced, as Paul Krugman points out. When you look at the salary numbers for high skill tech jobs, they don’t reflect the sort of price pressure that one would normally expect if demand was outstripping supply. What we see instead is companies building the case for bringing in more foreign workers primarily from India and China. These workers are willing to work these jobs at lower wages which ends up holding down wages for the whole sector. So the reality is that technology is disruptive, but its major disruption is not that there aren’t enough qualified workers. It’s major disruption is that while productivity is increasing, the human contribution to overall output of our economy is decreasing. This has allowed companies to downsize their workforce which allows them to hold wages steady while increasing their profits. This results in a DECREASING share of profits going to working wages. Instead that money funds the outrageous growth in CEO salaries.

Globalization
Productivity gains through primarily robotics has made domestic manufacturing competitive with off shore low wage alternatives. So manufacturing is actually coming back to this country. But the reality is that we are now competing in a global market and must match the investments that our competitors in India and China are making in both education and infrastructure. That’s because our edge today in robotic manufacturing is not sustainable. Both education and infrastructure investments have suffered during this 25 year reign of government downsizing.

Income inequality makes these problems worse because the interests of the wealthy no longer align with the welfare of the nation.

Tax Wealth
This is the first and most obvious change that has to occur. Our problems began when the electorate was told that government was the problems and low taxes would revive the flagging American spirit. The only thing that low taxes did was increase the debt and create a new class of wealthy people.

We have to make education easier to obtain for everyone regardless of income. We have to make huge investments in our neglected crumbling infrastructure in order to remain globally competitive. We also have to continue to reform our healthcare system so that costs to care for our aging population don’t cripple our economy.

The first and most obvious way to do this is to increase taxes on those with the most disposable income.

Strengthen Unions
The reason that wages have stagnated for the middle class is that workers no longer have the power that they once did to bargain for a fair share of the profits corporations gained from their labor.

Hopefully the Reagan idea that free markets will fairly distribute economic rewards of productivity can finally be put to bed. One only needs to look at the huge gains that CEO’s have made at the expense of everyone else. Stronger unions will re-balance the huge advantages that corporations have gained over the last 25 years both in the marketplace and in politics.

Tax Bigness
Thanks to conservative judges sitting on the Supreme Court, anti-trust laws are no longer a protection against corporations becoming too big to fail. The numbers also prove that the biggest companies actually increase unemployment and reduce innovation. A tax that punishes companies from becoming too big would encourage companies break themselves up into smaller entities. Those smaller entities make our economy more robust and innovative.

Externalities
Externalities are those costs that companies pass on to the tax payer. When corporations pollute the air or water, generally tax payers foot the cleanup bill. We need a taxation system that fully burdens corporations and the wealthy for all of the costs that they create at the time that they create them. This includes carbon taxes for those companies that use fossil fuels. It includes infrastructure costs for those companies or wealthy individuals that choose to develop properties where there are no roads, sewers, or schools. It includes the environmental impacts of all extractive industries. It includes the costs that local economies suffer when large employers relocate. Changing the economics of how we deal with externalities will serve as a valuable foundation for addressing the serious costs of climate change mitigation.

Strengthen the Social Safety Net
This isn’t just putting more money into existing programs. It is recognizing the cost of low wage jobs. Today, low wage employers are subsidized by tax payers. That subsidy has to end. We already have examples of big box retailers, like Costco, who do pay a living wage and have no problem being competitive. Those who choose not to pay a living wage should at least be required to reimburse the government for the costs of making sure that their employees have enough to eat, can afford healthcare, and can afford a place to live.

As a country we should be able to guarantee that everyone has access to affordable healthcare. We should be able to provide high quality primary education regardless of income or location. Those who have the talent and interest in attending college should be able to do so without concern about how they are going to pay for it. Those who cannot support themselves should not be a burden on their families or their communities.

Social Wealth versus Personal Wealth
Social wealth are the investments that we as a country choose to make. They include things like public education, government sponsored research, mass transit, first responders, highways, dams, and parks. Libertarianism rejects these investments and suggests that the marketplace is a better arbiter of how money should be spent. But we have already seen that this model doesn’t work. Instead it divides the country into rich and poor. The rich have access to resources. The poor don’t.

Our country was built on the concept of democracy, not oligarchy. Unfortunately money has lately been allowed to warp government policy to benefit the rich at a staggering cost to the poor.

The pendulum has to swing back toward a larger sense of community.

Everyone should have an opportunity to get a world class education because that benefits the country. Talent is spread evenly across our population. Failing to give every citizen a chance to maximize their contribution to the country makes us a weaker country.

Everyone should have an opportunity to live in a safe community where they can enjoy life, liberty, and the pursuit of happiness. There is value to our economy for this too. Those who come from stable homes do better in school. Those who have a stable home are more productive employees. Stable communities increase in value and are able to support the sorts of local services that employ people.

Summary
None of these are new ideas.

All of these ideas are already in widespread use among our global competitors. As Tom Friedman points out in “The World is Flat”, China and India have made massive investments in education, particularly engineering. The results of those investments are obvious to anyone who works at a company that employs engineers. There are a lot of Chinese and Indians in the US work force.

If the United States wants to remain a competitive force in the global technical markets, it has to confront the realities of globalization.

Our 25 year experiment in “free market” capitalism has failed.

It is past time to rebalance our tax system and fund the investments that we need to make as a country that will keep us relevant and competitive in the future.

Next up, let’s focus on the other end of the spectrum – the poor. Figuring out how to reduce poverty will also narrow the income inequality gap, and at least from a financial perspective, it may be cheaper than you think.

Fairness and Liberty

Friday, March 7th, 2014

As promised, I’ve been researching the fundamental reasons why why conservatives and liberals view wealth and income inequality differently. These differences help explain how we got here. Hopefully, once we understand how we got here, we can have a thoughtful discussion about potential solutions. Much of this discussion builds on the ideas of Jonathan Haidt and his work in The Righteous Mind.

Recap

The level of income inequality in this country has reached historic proportions. Never in the history of the Republic has the gap between the rich and the poor been so broad. Even during the days of slavery, when the poor were very poor, the rich were not as rich as they are today. This isn’t an issue of poverty. The issue is that rich today are fabulously rich. Rich beyond the comprehension of the rest of the country.

There may be some dispute about why they became so rich, but the “how” is easy to document.

Government policies reduced top tax rates, made it easier to outsource manufacturing jobs to lower cost countries, and weakened unions. The recession started early for the poor and middle class. A shrinking job base eroded by outsourcing created an oversupply of labor. Too many workers for too few jobs kept wages stagnant for two decades. A simple case of supply exceeding demand demonstrated how little power the middle class and working poor had to alter their circumstances.

Increased productivity, low interest rates, and low labor costs created a new normal. Corporations generated record profits with essentially fixed labor costs. In the past, the income increases from these profits were spread across the whole worker spectrum. That came from labor being in short supply and unions ability to negotiate a more equitable share of corporate profits. Over the past two decades, all of those increases went to the top execs. At the same time, two decades of inflation ate away at the standard of living for the poor and middle class. The result was a huge transfer of wealth in the form of lost wages from the poor and middle class to the wealthy.

The result is a weak wealth-driven economy. The buying patterns of the rich are influenced by the stock market because that is where their discretionary income comes from. That makes the overall economy much more volatile. The goods and services that the wealthy purchase often make the suppliers of those services wealthy. That limits the flow of money from the wealthy to the middle class and poor.

How could we let that happen?

Why didn’t this create a populist uprising demanding a change?

Social Revolutions become Economic

The social revolution began with Ronald Reagan. He spoke to the socially conservative portion of the middle class. He leveraged the Loyalty, Authority, and Sanctity moral foundations that resonate with Conservatives, but are largely ignored by Liberals. These present themselves in areas like sexuality, drug use, religion, family life, and patriotism. He blamed liberals and government for an erosion in the moral foundation of the country. Then he went on to talk about “fairness” and “liberty”, and that’s where the economic discussion began.

Fairness

There are two kinds of fairness from a moral foundation perspective.

The first is Procedural Fairness. That’s a question of whether or not decisions being made by those in power are impartial and unbiased. Procedural Fairness in the context of our Democracy is characterized by the “rule of law”. Populist revolutions like the Tea Party and Occupy Wall Street spring up when people feel the game is rigged through things like crony capitalism.

Distributive Fairness is the question of whether everyone is getting his fair share. There are two ways to do this. Equality strives to give everyone the same share. Proportionality or Equity is where everyone gets the share that they have earned. Liberals support both equality and equity. Conservatives only care about equity. That’s why Reagan and Republicans after him were able to hold poverty programs and the social safety net up as examples of government excess. Even though liberals saw them as a way to help the poor out of poverty, conservatives only cared about proportional fairness. They are outraged by the concept that somebody might be getting something that they didn’t earn.

Again just as a reminder. I’m not trying to make value judgements here (though I might later). Just stating the facts based on academic research regarding how liberals and conservatives look at the world.

Liberty

There are also two kinds of liberty, positive and negative.

Negative Liberty is the freedom to be left alone. It is the freedom from oppression or even interference in how you would like to live your life.

Positive Liberty is having the ability to change your own condition. Proponents of Positive Liberty suggest that it is government’s responsibility to remove all obstacles that prevent all their citizens from fulfilling their full potential.

History of Liberty and Fairness

With this background of how liberals and conservatives look at the subjects of Liberty and Fairness, we can finally tackle the question of “Why did we get here?”.

LBJ and the Civil Rights Act set the stage for Ronald Reagan and eventually the breathtaking growth of the wealthy. Reagan never supported the use of federal power to provide blacks with civil rights. He opposed the landmark Voting Rights Act of 1965. Reagan said in 1980 that the Voting Rights Act had been “humiliating to the South.”

The Civil Rights Act granted Negative Liberty to African Americans by removing oppressive laws that restricted their freedoms. But Johnson realized that just changing the law wasn’t enough. Using Distributive Fairness (equality) and Positive Liberty, LBJ committed Democrats to use the power federal government to pursue policies like the War on Poverty and Affirmative Action. Conservatives reacted strongly to what they perceived as Negative Liberty (oppressive laws) and lack of Proportionality (freeloaders and dependents).

Wealthy Rule

Reagan used this outrage to blame liberals and government for “rigging the game” to reward indolence (welfare queens) and discourage personal responsibility. He painted a picture which resonated with blue collar workers who had firsthand experience with affirmative action and were anxious about contraction from manufacturing jobs moving offshore.

Reagan promised Negative Liberty (smaller government) and Proportional Fairness (rewards for hard work). Blue collar workers frightened by changes in traditional manufacturing flocked to support him in hopes that what they saw as a rigged game would change. What they didn’t realize is that the game was already rigged, but not in the way that they thought.

What Reagan and Republicans delivered was a huge head fake for the working man. Republicans only talked about social reform. Their Culture War masked a set of policies that have been almost exclusively economic. Those economic policies created the current income gap.

Thomas Frank summarized this deception in his books, Pity the Billionaire and What’s the Matter with Kansas.

Vote to stop abortion; receive a rollback in capital gains taxes. Vote to make our country strong again; receive deindustrialization. Vote to screw those politically correct college professors; receive electricity deregulation. Vote to get government off our backs; receive conglomeration and monopoly everywhere from media to meatpacking. Vote to stand tall against terrorists; receive Social Security privatization. Vote to strike a blow against elitism; receive a social order in which wealth is more concentrated than ever before in our lifetimes, in which workers have been stripped of power and CEOs are rewarded in a manner beyond imagining.

What happened was that government did not get smaller. It got bigger and less procedurally fair. It isn’t that the government rigged the game. The WEALTHY rigged the game in their favor using elections to change government policy. Private money successfully purchased a government now largely devoted to preserving the system that only benefits the wealthy. Republicans were the traditional partners of the wealthy in this effort, but Democrats were clearly willing to go along with things like NAFTA.

The irony is that our economic system has now become LESS proportional. We no longer have a meritocracy. We have an oligarchy. Wealth is a function of the accident of birth rather than a reward for hard work. The poor and middle class no longer have equal access to the resources that will change their condition because of the collapse of public education and the purchasing patterns of the wealthy.

There used to be two institutions who could to balance the power of the wealthy – unions and the government. Because of government policies, unions are no longer the force they once were. Because of Republican policies and the influence of private money, government is deadlocked in a self-serving partisan feud. Those tactics threaten to turn us from a democratic system to a parliamentary one where only the party that has a congressional majority and occupies the white house can get anything done. That works fine for the wealthy because they don’t want to see the current economic system change. It is working great for them.

Next up what we can do about it.

Economic Costs of Income Inequality

Saturday, January 25th, 2014

As a quick summary, the huge gap between the rich and poor is a fairly recent phenomena driven by changes in government policy that started with Ronald Reagan. We are now in uncharted territory. We have never had the level of income inequality that we are currently experiencing. There has been a huge transfer of wealth from poor and middle class families with no end in sight. Poor and middle class wages over the past 15 years have gone down while the wages of the wealthy have increased.

I will do my best to stay away from discussions of morality in this post and focus on how this affects our economy.

Narrow Spending Base

A majority of economists surveyed by the AP in December felt the current level of income inequality was unhealthy.

“What you want is a broader spending base,” said Scott Brown, chief economist at Raymond James, a financial advisory firm. “You want more people spending money.”

That’s because discretionary spending by the wealthy tracks the stock market. When the market is up, they spend. When the market is down they don’t. This makes consumer spending much more volatile than it has been in decades past. This volatility leads to slower economic growth because businesses are less willing to invest as demand increases for fear that the demand spike is only temporary.

“The broader the improvement, the more likely it will be sustained,” said Michael Niemira, chief economist at the International Council of Shopping Centers.

Scott Brown agrees that the current levels of income inequality are slowing economic growth, “there’s not much denial of that … and you’re starting to see some research saying, yes, it does slow the economy.”

Warped Economy

It isn’t only that the spending base has narrowed.

The way that the wealthy spend their money is different from the way that middle and lower classes consume. That difference tends to increase the concentration of wealth at the top of the income range rather than spread it throughout the whole economy.

Here’s how that works.

Because the wealthy have already satisfied their basic needs, they spend their discretionary income on goods whose value stems from the talent of other top earners. Let me say that again in a slightly different way. The wealthy spend their discretionary income on goods and services that only they can afford. The producers of those goods and services are able to charge a premium for their services because they produce the best of whatever it is that differentiates them for everyone else. As a result, these “best of breed” producers also become wealthy.

Here’s how the NYT describes it.

Wealthy people don’t choose just any architects, artists, lawyers, plastic surgeons, heart specialists or cosmetic dentists. They seek out the best, and the most expensive, practitioners in each category. The information revolution has greatly increased their ability to find those practitioners and transact with them. So as the rich get richer, the talented people they patronize get richer, too. Their spending, in turn, increases the incomes of other elite practitioners, and so on.

Technology has also made the best performers far richer than they could have been even a decade ago. That’s because the best musicians, athletes, and artists can now reach audiences of virtually unlimited size. Artisans can ship their products anywhere in the world. Which allows them to dominate their markets in ways never imagined possible.

Education markets are warped because the wealthy can afford the tutors, camps, travel, and exclusive prep schools that provide their children a distinct advantage in the competition for slots at the world’s best colleges and universities. Hunter Prep School in NYC was created to provide a public alternative to private prep schools for NYC children. In the 70’s the demographics of Hunter pretty much reflected the demographics of NYC. Now almost 80% of the Hunter students are children of alums. Their parents DID succeed because their Hunter education got them into Ivy League schools which turned into lucrative jobs on Wall Street. They were able to send their children to exclusive elementary schools and after school programs to prepare them for the Hunter entrance exam. It’s a perfectly understandable response, but that response is effectively destroying the meritocracy on which Hunter was originally based. In its place is an oligarchy, which is what Hunter was supposed to weaken.

Finally income inequality is warping the political process. The wealthy have more access to legislators than the middle class or the poor. The 2012 Republican Primary is a great example. Two of the three candidates in the final run for the nomination (Santorum and Gingrich) received virtually all of their funding from just one person. Gingrich from Sheldon Adelson. Santorum from Foster Friess. Not surprisingly, Gingrich’s platform reflected Adelson’s strong support for Isreal. Santorum’s platform reflected Friess’ conservative Christian views.

Summary

Income inequality is real.

It has accelerated over the past 30 years to the point that the wealthy represent the only group enjoying an increasing income share. Everyone else is financing that increase with their own decreasing shares.

Concentrating so much purchasing power in the hands of such a small number of people weakens our economy and slows economic growth.

It warps the consumer economy by creating a feedback loop where the rich only spend their money with organizations and individuals who are also rich. This isn’t necessarily the overt intent of the rich, but it is the practical outcome of their rigging the system for their own benefit.

It warps our educational system by limiting access to the best schools to those who parents can afford to send them to the best elementary and prep schools. The wealthy aren’t any smarter than anyone else. They are just way better educated, financed, and connected.

It warps our political process by making the votes of the wealthy more valuable that the votes of everyone else. Those votes have supported a system of lower taxes and reduced regulation which became the foundation for their success.

Next up, a brief analysis of how moral foundations also warp our view of the rich. Then a discussion of the economic value of a more level playing field and then finally what government can do to encourage a more level playing field.

When Ideology Confronts Personal Reality

Friday, January 17th, 2014

Increasing Healthcare Costs

I was getting my hair cut the other day. The guy doing the work owns the salon. He was complaining that his bill for healthcare insurance almost doubled from last year. He purchases his insurance through a well-respected local insurance broker. He has conservative verging on libertarian political views, so his immediate reaction was to blame the Affordable Care Act in general and President Obama in particular.

He was also upset at what he felt was poor service form his broker. They met in November and the broker couldn’t provide any detailed information about what it would cost for him and his wife to renew their policy. The next thing he knew, he received a bill in the mail in late December that he had to pay immediately if he wanted to continue his coverage.

I asked him some questions about the nature of his previous coverage. From his description, the silver plans might work just fine for him. I asked if he had gone to healthcare.gov to check out other options. He was surprised that you could do that sort of comparison shopping without creating an account. I assured him that he could and that he could also probably cancel his existing plan if he found something better. We agreed to check back in a couple of weeks.

Just out of curiosity, I checked the site too. I found that the MOST expensive plan listed there from his current insurance company was $200 less a month than the bill that he received. I found silver plans from other companies could REDUCE what he paid LAST YEAR by as much as $300/month.

It will be interesting to see what he thinks about the Obamacare the next time I see him and who he feels is to blame now for the sticker shock he experienced in December.

Long Term Unemployment Insurance

As we’ve been discussing in previous posts, Republicans are opposed to extending long term unemployment benefits because they feel that those benefits reduce the incentive of the unemployed to find a job. They believe that those who are unemployed CHOSE to collect their benefits rather than look for another job. They argue that eliminating those benefits will be just the encouragement that the unemployed need to get back to work.

Republicans have been under a lot of pressure from Democrats who don’t share their beliefs and feel that cutting off benefits is both cruel and bad economic policy. Republicans said they would consider passing an extension if the Senate could find a way to pay for it. Senate Democrats did find a way to pay for it, but Republicans didn’t like it. So now I guess the Republicans are saying that they would consider passing an extension if the Democrats could find a way to pay for it that caused the Democrats some pain. The result is another impasse with more people every week finding themselves without any benefits. Not surprisingly, some of those people are Republicans.

Here are a couple of quotes.

The standoff infuriates people such as Lita Ness, who lost her job as a civilian contractor at Peterson Air Force Base in August 2012 and just received her final check from the unemployment office.

“I’m registered as a Republican, but if they continue to use this not extending our (aid) I’m probably changing to Democrat,” Ness, 58, said as she took a break from a computer training class at the Pikes Peak Workforce Center. “People in our district who vote `No’ on this, I’m not going to support them.”

And

Others feel that after having contributed to society, they are now being abandoned by the government. “I paid my taxes. I’ve helped people my whole life,” said Barbara Greene, 59, who lost her job as a medical secretary in a hospital last year and expects her jobless benefits to end in March, “and now they’re just throwing me to the side.”

The spokesman for Republican Rep. Doug Lamborn who represents that district said, “It’s $6 billion, doesn’t do anything to create jobs. House Republicans remain focused on creating jobs and improving the economy.” It is easy for him to say this because he HAS a job. His constituents who are losing their benefits don’t share his belief that money spent on unemployment benefits is wasted on the unemployed.

The unemployed know this claim isn’t true. So do economists. The data that I quoted in an earlier post shows that unemployment insurance actually DOES create jobs. That’s because the benefits are spent immediately on goods and services. That spending flows into the hands of grocers, landlords, gas station owners, and other retailers. Every dollar of unemployment insurance generates $1.55 dollars of benefit to the local economy where that dollar is spent. No other private or government program is as efficient.

Rep Lamborn may still be re-elected to represent Colorado Springs in November, but fewer people are going to vote for him because they are beginning to realize that his ideology (smaller government and lower taxes) is not delivering the prosperity for middle class folks that he told them it would.

Climate Change

Three interesting studies came out recently with regard to climate change.

In the first, researchers found that opposition to the concept of climate change varied based on the weather. The hotter it was, the more support there was for the concept of human driven climate change. The colder it was, the more opposition to the concept. This has to do with the discovery that when it is hot, our memory reminds us of all of the other times we’ve experienced heat. Same thing when it’s cold.

What climate scientists predict, however, is that climate change will drive more extreme weather. Here in the upper Midwest that means MORE precipitation particularly in the winter and particularly at night.

But clearly that didn’t stop climate change deniers like Donald Trump who proved the studies point by tweeting, “We are experiencing the coldest weather in more than two decades-most people never remember anything like this. GLOBAL WARMING anyone?”

The reality, however, is that climate change is threatening Donald Trump’s home in NYC, his Casino’s in Altantic City, and his golf courses in Florida.

A second study documents the dramatic rise of sea levels on the east coast. They rose eight inches over the past 130 years. They are projected to rise another eight inches in the next 35 years. By 2100 that eight inches will become 36-39 inches.

Hurricane Sandy had a peak storm surge of 14 feet and caused $65B in damage. As the sea levels rise, less powerful hurricanes will cause similar damage more frequently.

Rising sea levels have already inundated barrier islands which protect the mainland from storm damage. An additional three feet of sea level change will eliminate most of the barrier islands on the east coast including Hatteras.

We are already seeing the financial consequences of this creeping disaster. Those with property in the expanding flood zone can’t get 30 year mortgages. Flood insurance has already going up dramatically and in some areas is no longer available from private sources. The federal flood insurance program is $24B in the red. Some Republicans, in an interesting turnabout, are demanding that the government DO MORE to protect commercial and residential interests in their districts.

The reaction in states like NC is to simply deny these changes. In 2012, the state legislature passed a bill banning state agencies from reporting sea-level data. Two weeks after that bill passed, a study from the US Geological survey documented that sea levels along the coast line from Cape Hatteras to Boston were rising at four times the global rate. You may have guessed by now that since 1980, NC leads the world in disappearing shoreline.

Same thing is going on in Virginia where the legislature budgeted money to study the problem, but only after all references to sea-level rise and climate change had been removed. In towns like Norfolk — where neighborhoods are already flooding repeatedly even in the absence of storms, and where some homes have become unsaleable — people are starting to pay attention.

“In the last couple or three years, there’s really been a change,” said William A. Stiles Jr., head of Wetlands Watch, a Norfolk environmental group. “What you get now is people saying, ‘I’m tired of driving through salt water on my way to work, and I need some solutions.’ ”

In the third study, an Iowa state poll of farmers added a question last year about whether or not farmers believed that climate change was real and human caused. Clearly this is a group that is politically conservative, deeply religious, and highly dependent on weather patterns for their living. Last year 67.7% answered yes. This year that jumped to 74.3%

Conclusion

We are finally seeing what happens when political positions arrived at through emotional decisions based on moral choices confronts undeniable reality.

Obamacare DOES save people money regardless of whether you are a liberal, a conservative, or a libertarian. The only difference is that it is difficult for conservatives and libertarians to accept that fact.

The unemployed AND the economy benefit from assistance. During times of economic downturn when job seekers outnumber jobs, unemployment benefits do not increase the unemployment rate. Putting money into the hands of the unemployed actually REDUCES the unemployment rate. Unemployment benefits help everyone regardless of whether you are a liberal, a conservative, or a libertarian. The difference is that it becomes increasing difficult for conservatives to claim that the long term unemployed have only themselves to blame, when they themselves join the expanding ranks of the long term unemployed.

Increasing sea levels is a fact. The sea doesn’t care if you are a liberal, a conservative, or a libertarian. The people who do care are those who finance and insure property. Their actions speak volumes about whether or not climate change is real. Property values in the affected zones are dropping. Banks are unwilling to make new long term loans. Insurance companies are raising rates, or canceling policies. Conservative evangelical Iowa farmers are including climate change predictions in their agricultural and livestock planning. Conservatives and libertarians are having to come to grips with the reality that ideology cannot hold back the tide or make it rain no matter how hard you try.

Income Inequality Facts

Monday, January 13th, 2014

I’ve been looking for a way into this whole discussion of income inequality.

The challenge, based on what I’ve already discussed regarding liberal and conservative moral foundations, is that it can’t be solely a fact-based discussion.

That’s because the fundamental reason why there is the largest gap between the rich and poor in our history is BECAUSE conservatives believe in the concept of a Utopian Free Market. More importantly, they believe that it is the solution to ANY economic or political challenge we face in this country.

Too many people unemployed? Cut long term unemployment benefits and the unemployed will be forced to find a job or starve. This satisfies the moral “cheating” outrage conservative feel when it seems somebody is getting something they don’t deserve. Conservatives feel comfortable eliminating unemployment benefits because they believe that the Utopian Free Market will automatically create jobs because supply will drive down wages. Everyone who wants a job will be able to find one in this system. The only reason why people are unemployed is because they are lazy or stupid, in which case it’s their own fault if they starve.

But I’m putting the cart before the horse. There will be plenty of time to examine the emotional arguments about things like this.

The first thing we need to establish are the facts about economic inequality. Then we can discuss the causes and remedies.

The facts are best displayed in these graphs. They show how income was distributed between rich and poor from when we first started to collect income tax in 1917 up through the latest data available in this study, 2008. All of this data comes from a study done by Cal Berkeley economist, Emmanual Saaz.

These graphs are wonderful snap shots from an interactive graph posted by the Economic Policy Institute. Feel free to go there yourself and move the start and end points to see how income over that period was distributed.

The math on the first graph looks OK. Income gains over 90 years are basically split between the top 10% and the bottom 90%. That means that the top 10% got 5x more money than their demographics would command.

income-inequality-1917-2008

But the graph itself isn’t flat. If you look at the flat part of the graph from 1917 – 1981, the top 10% got only 31% of the income growth over that period of time. 69% of that growth went to the bottom 90%. That distribution was pretty consistent over that whole period. After 1981, this began to change dramatically.

income-inequality-1917-1981

From 1981 to 2008 the top 10% got 96% of the income gains generated by the economy. The bottom 90% got 4%.

income-inequality-1981-2008

Now here’s the real story, and it only tracks to 2008. The last six years it has only accelerated.

From 1997 – 2008 ALL of the income growth went to the top 10%. The incomes of everyone else DECLINED.

income-inequality-1997-2008

What is so important about 1981? That’s when Ronald Reagan and “voodoo” economics showed up. That’s when this whole unregulated low tax conservative economic experiment started. 30 years later, we are witness to the outcome. A massive transfer of capital from the middle class and the poor to the wealthy.

Middle class wages have been more or less flat for 45 years, but costs continue to go up. The result is that all except the top 10% are becoming poorer even though they are working hard and playing by the rules.

There are likely a whole list of causes besides the economic theories typified by de-regulation, low taxes on the rich, and erosion of labor rights. The issue is not cause, at this point, but simply the fact that this condition exists.

Next up, the economic perils of income inequality.