The Crime of Poverty

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

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.

7M votes for Obamacare

April 5th, 2014

The Obamacare deadline has come and gone and guess what? 7M+ people signed up. Exactly what the CBO projected. That also means the CBO projection of $118B in deficit reduction gains credibility.

In spite of four years of Republican lies, fear, uncertainty, and doubt; people still signed up. In spite of self-inflicted wounds from a fumbled website launch; people still signed up. 7M people signed up even though 26 Republican states refused to expand Medicaid and Michigan signup just started. People need affordable healthcare.

Those opposed will continue to deny the facts in hopes that they can win another election, but the actions of 7M can’t be ignored. New Washington Post polls show ACA approval has rebounded. It is now 49% compared to 48% opposed. The fastest growing segment of that support? Self-described conservatives whose support rose from 17% to 39%.

The ACA does two basic things. It improves financial security through affordable medical insurance. It also transforms healthcare through a combination of reduced cost and increased value.

MANY previously uninsured people now have coverage because of ACA. Those include kids up to 26 and those living in states where Medicaid was expanded. Even those with canceled policies got new often better insurance – many through the same carriers and often for less net cost.

How are Republican’s reacting to those numbers? The New Republic’s Jonathan Cohn summarizes: “(Republicans) are doing what they almost always do when data confounds their previously held beliefs. They are challenging the statistics — primarily by suggesting that most of the people getting insurance already had coverage. Some, like Sen. John Barrasso of Wyoming, say the administration is ‘cook­ing the books.’ Others, like Sen. Ted Cruz, say that the number of people without insurance is actu­ally rising.”

As we’ve previously discussed, determining the number of uninsured is a challenge because the numbers have to come from a lot of different sources. Also even the definition is difficult because someone may be uninsured for a month as they transition from one policy to another. Best estimates, however, show the uninsured rate has dropped from an estimated 20.9 percent to 16.6 percent in the law’s first year — hardly the sudden revolution in American health care some dreamed of, but a creditable start.

There are certainly some whose premiums went up or didn’t have access to the same physicians or hospitals that they had before. Taxes on the wealthy also went up. While we don’t know the numbers yet, it is pretty good bet that those who have benefited will vastly outnumber those who didn’t. That may be why, according to fact-checkers, the Koch-funded Americans for Prosperity ads failed to document even one honest case of ACA harm. The most recent ad running here in Michigan continues that tradition.

Conservatives argue that the tradeoffs in the ACA are not worth it. House Republicans voted for repeals over 50 times. They even shut down the government. But they failed to pass even one alternative bill that comes close to ACA’s increased coverage. Rather than engage in tradeoff debate, conservatives cling to the fantasy that our healthcare system is the best in the world and those that can’t afford insurance should just use the emergency room. In fact, we do lead the world in the amount of money we spend on healthcare, but we are 35th in the results we get for that money. And ER care? It is 100x more expensive than a doctor’s office visit.

So where does that leave us?

Republicans will run against Obamacare again in 2014, but by November the outrage that conservatives feel may largely be old news to the rest of the electorate. By then another 2M people will have signed up through Medicaid in states like Michigan. They will join the 4.5M that have been enrolled by states that expanded Medicaid, and the 3M kids who are insured on their parents’ plans – all because of ACA.

Even if the Republicans take over the Senate in 2014, they won’t gain a veto proof majority. So the next opportunity to repeal this law will be in 2016 and will require that the Republicans either have veto proof majorities in the House and Senate, or win the White House and have functional majorities in the House and Senate. By 2017 the CBO projects that the laws benefits will extend to 36M people. It’s going to be A LOT harder to make the case to those folks that they should vote for someone who wants to take their insurance away.

“Wherever they go and whatever they do,” writes Ross Douthat in the New York Times, conservatives “will have to deal with the reality that Obamacare, thrice-buried, looks very much alive.”

Fairness and Liberty

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.

Perfect Snow

February 1st, 2014
Satellite photo of the Great Lakes on January 28. 2014

Satellite photo of the Great Lakes on January 28. 2014

It snowed in SE Michigan again today.

That is nothing new, particularly for those of us living the Midwest.

As I was out shoveling (again), I starting thinking about politics. Some may point to this winter as confirming scientists’ predictions of the consequences of climate change. Some instead may blame a vengeful deity who is punishing us for sensualism or abortion or contraception or same sex marriage or some other choice from a long list of perceived shortcomings.

While I tend to agree with scientists, I also enjoy reading the Bible. The quote that comes to mind is from Matthew. The edit is mine.

Ye have heard that it hath been said, Thou shalt love thy neighbour, and hate thine enemy. But I say unto you, Love your enemies, bless them that curse you, do good to them that hate you, and pray for them which despitefully use you, and persecute you; that ye may be the children of your Father which is in heaven: for he maketh his sun to rise on the evil and on the good, and sendeth rain (or snow) on the just and on the unjust.

The question this brought to my mind is why would God ignore the evil and punish the good by sending the snow to pile up on everyone?

Then it came to me.

He loves us – all of us.

Snow isn’t a punishment. It is a blessing.

It is a blessing that a generous God shares with all His creation. It doesn’t matter whether you are righteous, profligate, straight, gay, chaste, or promiscuous. The snow is going to pile up on your drive way and in front of your door and on your side walks. It’s going to make it difficult to drive, and dangerous to walk. Rich or poor, sober or drunk, you are going to have to pay attention and do something about it.

When temps are below zero and the wind is howling, our focus narrows to what has to be done. We stop worrying about whether or not somebody else is getting away with something. It is a waste of time looking for someone to blame. We are all in this together. We clear the steps so that the postman can deliver the mail. We clear the sidewalk and maybe our neighbors sidewalk too because the kids have to be able to get to school. We help get cars out of the drifts because our car may be the next one needing a push. We don’t care who is driving or what they may have done to get themselves in that situation. It’s too cold. There’s too much snow. We just push.

We are all cold.

We are all buried.

We are all blessed.

Then there’s the rest of the Matthew quote.

For if ye love them which love you, what reward have ye? do not even the publicans the same?

And if ye salute your brethren only, what do ye more than others? do not even the publicans so?

Be ye therefore perfect, even as your Father which is in heaven is perfect.

God loves us and expects us to be his perfect reflections. So He sends us beautiful white snow just to remind us how perfect we really are.

Economic Costs of Income Inequality

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

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

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.

Men (and Women) for Others

January 8th, 2014

First a little bit of disclosure. I graduated from an all-boys Jesuit prep school in Omaha called Creighton Prep. Among other things, they taught me to be a man for others.

This term represents the basic educational philosophy of the Catholic Jesuit order. What it means is that those who attend Jesuit schools are taught that love of God includes love for the poor. You can’t have one without the other. They are also taught that this love is best expressed in action rather than talk. That action is characterized by the term “Social Justice”. What that means is that Jesuit philosophy regards ANY system that oppresses the poor as unjust. That includes both political and economic oppression.

The term “Social Justice” was coined by Jesuit Priest Luigi Taparelli in the 1840’s. It refers to the ability people have to realize their potential in their particular country or society. In broader terms those who advocate for Social Justice are encouraging the creation of institutions which ensure fair distribution of wealth and equality of opportunity. Those institutions typically include education, health care, social security, labor rights, as well as a broader system of public services, progressive taxation, and regulation of markets.

Gross income inequality is an example of a condition which exists in a society which lacks Social Justice. Racial discrimination, political oppression, and religious persecution also occur in some societies which lack Social Justice.

This brings us around to the discussion of Pope Francis and Social Justice.

Pope Francis is a Jesuit. He is the first Jesuit to ever be elected Pope. This is a big deal in the politics of the Catholic Church. The basic reason is that the Jesuits, in simplest terms, are fearless take-no-prisoners warriors. They are beloved because of their willingness to go anywhere and do anything to advance the cause of Christ and the poor. Jesuits have typically recruited the best and brightest in Catholic clergy because of this “no hold barred” attitude. These sorts of people are also attracted to the Jesuit order because Jesuits believe in education and scholarship. They believe that you can better understand God through academic study of His creation. Since the Jesuits operate some of the best colleges in the world, those who go through the Jesuit system have access to the institutions which prepare them to be intellectual “shock troops”. This commitment to a fact-based life of action as well as a faith-based life of prayer regularly put the Jesuits at loggerheads with the Vatican. The most recent example of deep disagreement between Jesuits and the Vatican was the emergence of Jesuit Liberation Theology in Latin America in the ‘70’s.

The fact that the Catholic Church has finally embraced a philosophy that as little as 50 years ago they condemned as radical is truly breath taking. It also speaks to the Catholic Church’s recognition that they need to be leading the charge for Social Justice.

In the finest tradition of the Jesuits, Pope Francis “walks the talk” and as a result is a fearless man on a mission. It is no accident that this man chose the patron saint of the poor, St. Francis as his namesake. In Brazil he visited the poorest most dangerous sections of Rio on foot by himself almost daily. He took public transportation rather than a chauffeured car. He lived in a modest apartment a short walk from the grand Cathedral rather than in the opulent archdiocese residence next to it. He has continued that policy in Rome where he lives in a simple guest house rather than the opulent papal palace.

His economic message regarding the poor is also simple, direct, and undeniable. It’s based on what Jesus told the righteous man in Matthew 25. If we care about our own salvation, we should welcome the stranger, clothe the naked, visit the sick and imprisoned, feed the hungry, and provide water to the thirsty. We are supposed to do these things without reservation or concern about need, worthiness, or consequence. God will take care of that.

He criticized “trickle down” economics as an ““opinion, which has never been confirmed by the facts, [that] expresses a crude and naïve trust in the goodness of those wielding economic power.” He also criticized the “idolatry of money” and unbridled capitalism as “a new tyranny.” As far as the benefits that supposedly were going to accrue to the poor from de-regulation and free markets, Pope Francis observed that the poor are “still waiting”.

Clearly this populist message flies in the face of anti-spending, anti-big government conservative Republicans who appear more concerned about fraud than hunger and dependency than poverty.

Here’s how some of representatives of conservatism responded to Pope Francis’ call for generosity and compassion.

Rush Limbaugh said the Pope’s comments were “pure Marxism”.

Fox News’ Adam Shaw called him the “Catholic Church’s Obama.”

Worst of all, Sarah Palin called him a “liberal”.

Others took another common conservative tack. People that disagree with them must either be confused, ill informed, or the victim of some liberal media distortion.

Rep. Peter King, a devout Catholic, said of the Pope’s use of the term “trickle-down” that a “liberal speechwriter stuck it in.”

Sen. Pat Toomey, who is also Catholic, said “It’s easy to draw I think what could be mistaken, superficial conclusions from some of the things that he said. I think he’s a wonderful leader for the church.”

Finally, Paul Ryan, also a devout Catholic simply suggested that Pope is confused. “The guy is from Argentina, they haven’t had real capitalism in Argentina,” Ryan said. “They have crony capitalism in Argentina. They don’t have a true free enterprise system.”

The Pope isn’t confused, misinterpreted, uneducated, or being manipulated by his speech writers.

One example is his response to being accused of being a Marxist. Pope Francis said, “The Marxist ideology is wrong, but I have met many Marxists in my life who are good people, so I don’t feel offended.”

The Pope is simply commenting on the facts. We are now three decades into a failed experiment in this country with unregulated capitalism. The results shouldn’t surprise anyone. There has been a massive transfer of wealth from the poor and middle class to the wealthy.

In the future, I’ll discuss some of the underlying moral structures which support these points of view. We’ll also examine the economic consequences of some of these choices.

Functionally Irrational

December 17th, 2013

Before we dig into the respective political positions on unemployment, let’s revisit this concept of moral intuitionism.

This is the condition experienced when people confront something that they consider objectionable from an emotional point of view. Their primitive emotional brain passes judgment and then hands that decision off to the rational brain. The rational brain then constructs a logical argument to defend what otherwise was an emotional decision.

Here’s an example drawn from social psychologist Johnathan Haidt’s book “Righteous Mind”.

The person conducting the experiment places a paper in front of the subject. The paper says, “I the undersigned, agree to sell my soul to the individual designated as the buyer for the sum of (blank) dollars.” Next to the paper is a crisp $100 bill. The question is will you sign it?

For those who say no, the person conducting the experiment adds several additional clauses. One says that this agreement is strictly for experimental purposes and is not binding in any theological sense. Will you sign now?

Then they also add that once the agreement is signed and the money paid, the signer can have the agreement back. They can keep the money and do whatever they want with the agreement. Will you sign now?

Do you have a dollar amount that would change your mind?

What about if the agreement includes a similar amount of money donated to the signer’s church? Would you sign then?

There are some (roughly 17%) who simply refuse under all circumstances. That’s because their emotional brain has already decided that this is wrong and under no circumstances are they going to participate. It doesn’t matter what anyone else says.

We are dealing with a similar circumstance in the Republican Party with regard to long term unemployment insurance.

Before some reader suggests that I only pick on conservatives, yes it is true that EVERYONE has some sort of social taboo that can trigger an attack of moral intuition. Conservatives, however, appear more susceptible than liberals because conservatives care more about rules while liberals care more about people.

The challenge in today’s political climate is that we have to make sound financial decisions to deal with issues like debt, unemployment, and economic growth. Because of moral intuition, conservative Republicans continue to find themselves on the wrong side of the data when it comes to their emotional responses to these issues.

Unemployment insurance is just one example. Republicans believe that unemployment insurance INCREASES unemployment because it removes the incentive to go find a job.

In their defense, there is some research that suggests during times of high EMPLOYMENT, unemployment insurance does increase the unemployment rate slightly.

Unfortunately that’s not the case right now.

There are still three times more people looking for work than there are available jobs.

As researchers at the Federal Reserve Bank of San Francisco recently concluded, “Our estimates suggest that extending unemployment insurance benefits in weak labor markets has virtually no effect on the rate of job finding.”

But let’s go ahead, just like with the soul-selling experiment, and discuss some of the other reasons Republican rational brains have come up with to support this emotional position.

There is the free market argument. That one suggests that intensifying the competition for the available jobs will drive down the cost of labor. Driving down the cost of labor will encourage businesses to hire more, which will result in a virtuous economic recovery.

The problem is that in at least this economy, growth is driven by consumption. If we drive down the cost of labor, that affects both the employed as well as the unemployed. When wages stagnate, consumption stagnates, and growth slows. That’s because businesses don’t hire because labor costs are low. They hire because demand for their goods exceeds their ability to supply those goods/services.

The only groups who benefit in this scenario of flat demand and decreasing labor costs are businesses, their investors, and their CEO’s. That’s because they are able to cut costs, demand higher productivity, and keep the profits for themselves.

The economic truth is that long term unemployment benefits act as an economic stimulus. They keep people in their homes, keep families together, and pump money into the consumer economy. Unemployment benefits PRESERVE jobs by propping up consumption during times of economic downturn. Moody’s estimates that every dollar of unemployment benefits delivers $1.55 dollars in economic benefit. Cutting $25B in benefits results in an estimated $39B economic loss. Next year when another 3.9M unemployed will qualify for long term unemployment benefits that are no longer there, the economic loss will be closer to $100B. The CBO recently estimated that extending the benefits through the end of 2014 would increase GBP by .2% and DECREASE unemployment by the same amount. In other words, long term unemployment benefits CREATE jobs.

The problem is that when you mention unemployment benefits to a conservative Republican, their moral intuition goes directly to the scenario of the government paying people NOT to work. That leads to the moral outrage of conservatives over any form of government assistance because it creates a culture of dependency.

It doesn’t matter that statistics show that of the 4.1M long term unemployed, only 1.3M are still receiving benefits. So for those 2.8M unemployed who have already lost benefits, that loss doesn’t appear to have made any difference in their ability to find a job.

Also 20% of the long term unemployed had at least a bachelor’s degree and 40% had household incomes between $30K and $75K. These are clearly not people whose previous history suggests dependency. What it does suggest is that the longer you are unemployed, the harder it is to re-enter the workforce.

From a political perspective, we then find ourselves in the position where moral intuitionism can’t be argued. The facts honestly don’t matter. All that matters is that we as a country refrain from doing whatever set of things causes the moral intuition of a conservative to fire off. That’s what is important in today’s politics. That’s the political challenge that we face as a country. How can a democracy function effectively when 30% of the voters are fundamentally irrational?

Merry Christmas