Mort Zuckerman’s Solutions

Over the last few days I hope I have cast at least a little doubt on the effectiveness of infrastructure spending and education spending in revitalizing the U. S. economy. That, at long last, brings me around to a recent op-ed by Mort Zuckerman.

The entire thing calls for a fisking but rather than doing that I’ll just summarize his solutions to our societal woes: more immigration, more infrastructure spending, and more spending on education.

Will more immigration really solve our problems? It depends but I don’t think that a recent Pew survey on immigrants supports the claim. Note, in particular, the tables by region of origin and educational attainment and by region of origin and income. Short form: at least 90% of Mexican immigrants are earning below median income and fewer than half have a high school education.

Living in an American city like New York, Los Angeles, or Chicago is expensive. Based on the proposed $70.1 billion dollar Chicago budget and its 2.7 million inhabitants, Chicago costs about $25,000 per resident. That actually understates it a bit. It doesn’t include, for example, the cost of maintaining emergency rooms in non-public hospitals. Since emergency rooms are primary care for a lot of people, however that increases the cost of healthcare should be included in the cost of maintaining Chicago.

Said another way, anybody in Chicago who earns less than $25,000 which includes more than half of all Mexican immigrants, in effect consumes more than he or she produces. Yes, that’s an over-simplification. We’re trying to formulate policy not produce a financial report.

The reality of immigration is that its benefits accrue preponderantly to the highest income earners in the U. S. (Mort Zuckerman) and its costs are borne by lower income earners in the form of lower wages, greater competition for scarce jobs, and higher costs, generally.

Education spending has skyrocketed over the last twenty years. In real terms we’re spending a multiple of what we did twenty years ago, much of the additional spending on increased administrative costs. I look forward to somebody making the case that increased educational administrative spending is just what our economy needs to grow and prosper. That’s the net effect. If you favor more educational spending that is in fact what you mean. Everybody’s in favor of better education. It’s a lot harder to make a case for paying more for the lousy educational system we have.

I’ve already dealt with infrastructure spending so I won’t repeat my argument here other than to say that I don’t believe that building a 222nd bridge across the Mississippi will create a sudden cornucopia of benefits.

In my view what we really need is to get much more value for our spending than we are. We need smarter immigration policy, smarter education spending, and smarter infrastructure spending. Based on the policies I’m seeing proposed in all three areas it looks to me more like doing the same thing over and over again and expecting different results.

Smarter policies require painful trade-offs and hardnosed decisions. Incumbent politicans are punished for making painful trade-offs and hardnosed decisions and rewarded for spending more and promising the moon. Which path do you think they’ll take?

31 comments… add one

  • jan

    “In my view what we really need is to get much more value for our spending than we are. We need smarter immigration policy, smarter education spending, and smarter infrastructure spending..”

    “More value for our spending”……what a novel ideal! It seems to me that when more people are in charge of their own money they tend to manage and husband these resources better. When it’s other people’s money, like as is the case of government spending, oh well….just raise taxes.

    “Smarter policies require painful trade-offs and hardnosed decisions. Incumbent politicans are punished for making painful trade-offs and hardnosed decisions and rewarded for spending more and promising the moon. Which path do you think they’ll take?”

    That’s the parody of 2012 election, as we will just be duplicating what we had the last 4 years! Whoopee!

  • PD Shaw

    I think your numbers on the cost of immigration are sound. Here’s a more methodical approach from the Heritage Foundation:

    In FY 2004, the average low skill immigrant household received $30,160 in direct benefits, means-tested benefits, education, and population-based services from all levels of government. By contrast, low-skill immigrant households paid only $10,573 in taxes in FY 2004. A household’s net fiscal deficit equals the cost of benefits and services received minus taxes paid. The average low-skill household had a fiscal deficit of $19,588 (expenditures of $30,160 minus $10,573 in taxes).

    It seems like our policy should be to avoid low skill immigration, though its less clear to me how to do it. Libertarians would just open an auction, while others would prefer for the government to have an industrial policy that targets certain skills. Both have downsides as well, but are preferable to low-skilled workers.

  • It seems like our policy should be to avoid low skill immigration, though its less clear to me how to do it.

    The shortest description would be to take everything that’s in the president’s and the Gang of 8’s proposals for immigration reform and do the opposite.

    Enforcement first, abandon family reunification as a basic principle of policy, no path to citizenship for illegals, etc.

    The irony of this is that I’m not opposed to immigration as such. I just think we’ve already got plenty of unemployed native-born unskilled workers without importing more. I could be harsher about it: I think our present policy is de facto racism.

  • jan

    “The shortest description would be to take everything that’s in the president’s and the Gang of 8′s proposals for immigration reform and do the opposite.”

    I think the framework of the joint congressional proposals have merit. However, proposals are not bills. And, when you put the language into an actual piece of legislation that is where the devil and the details solidify and become clearer.

    Marco Rubio, at least seems adament about enforcement, and the varification of such, being the first step forward into a process of ‘earned legal status.’ If this is not done then it is a no-starter for him.

    However, the rather disjointed bits and pieces I’ve heard, seem to both reach out to illegal (undocumented) people, as well as put forth a rather stringent route, necessitating full cooperation, full exposure of whose here, pulling social services until legal, addressing both skilled and unskilled workers, creating a steady but lengthy process to finally becoming a citizen. It also addresses reforming the current immigration process (which is erratic and sloppy), and does not appear to diminish the efforts of those who are already legally in the immigration system, by putting newbies ahead of them.

  • Education spending has skyrocketed over the last twenty years. In real terms we’re spending a multiple of what we did twenty years ago, much of the additional spending on increased administrative costs.

    Gammon’s Law. Even if we did spend more on education it is highly doubtful it would lead to more or better education, but more education administration.

    Which path do you think they’ll take?

    Which is why the prospects for rational/reasonable policy are very dim, if not just zero. It is also why I find Michael’s claims about being a grown-up laughable.

    All of our policies are just wrong. Our tax policy, our spending, our approach to education (more administration, less actual education), our approach to health care (more administration, less actual health care), our foreign policy (e.g. having lots of boots on the ground in Afghanistan which is costing us lots of money we simply don’t have), our approach to programs like Social Security. Our financial regulation. It is all boneheaded, kludged and fubarred. A precocious undergraduate in economics could come up with better polices for taxes and much of our spending. Switching over to say a consumption tax (or a flat tax with a sizable deduction that has similar effects as a consumption tax), means testing some of our transfer programs, etc. It wouldn’t bring about nirvana or even a single unicorn, but it would be small steps in the right direction.

    But all of that is “risky” from a politician’s view point. It means running the very risk of not being re-elected and…well we can’t have that! Why where would we be if our various Congressmen and Senators weren’t there to tell us how to get by?

  • I think the framework of the joint congressional proposals have merit.

    I think the fundamental way they’re approaching the issue is wrong, jan. What we should be doing is defining objectives, figuring out what milestones are necessary to achieve the objectives, and benefits, e.g. DREAM Act provisions, should be tied to progress on the milestones.

    What’s happening instead is that activists are rallying around slogans and elected officials are saluting the slogans regardless of what will actually be accomplished.

  • Steve V., one thing that baffles me about libertarians’ views on immigration is how destructive to libertarian objectives their preferred policies would be. The history and experience of immigration suggests that the prospective immigrants of today would be socially conservative, more tolerant of authoritarian government than the native-born population, and have higher expectations about the services that government would provide. Doesn’t sound like it would produce a more libertarian society here.

  • Doesn’t sound like it would produce a more libertarian society here.

    My view is it is a product of ignorance. Ignorant people are more likely to hold anti-market views than the less ignorant.

    It is also ironic that such people also want to come to the U.S. because of its robust market economy, but would advocated policies that would reduce if not ultimately eliminate the market economy….like I said, ignorance.

  • PD Shaw

    “My view is it is a product of ignorance. Ignorant people are more likely to hold anti-market views than the less ignorant.”

    Man, you sound like a progressive. People don’t believe the same things you believe because they’re not as smart as you. No wonder you got tired of OTB.

  • Drew

    “Man, you sound like a progressive. People don’t believe the same things you believe because they’re not as smart as you. No wonder you got tired of OTB.”

    There are absolute standards, PD. In today’s world someone who believes in a perpetual motion machine has standing. I call them idiots. I get called judgmental about that. I call them idiots.

    IMHO we have gone far, far, too far down the line of considering empirically ridiculous views worthy just because we want to be “inclusive,” “progressive” or “open minded.”

    I say we have no balls at all anymore.

  • PD Shaw

    Drew, I assume the unstated libertarian objection to Dave’s immigration argument (that low-skilled immigrants are net drains on the public teat) is that its not the immigrants fault, but the public’s fault for having such a social safety net. We’re not getting rid of the social safety net. We’re not going to be educating immigrants to be libertarians, but we will certainly have progressives educating immigrants to how they are heirs of white oppression.

  • People don’t believe the same things you believe because they’re not as smart as you.

    Ignorance isn’t the same thing as not being smart. It is about having information. They know the U.S. is rich. They just don’t seem to know one reason is because we rely extensively on markets. As Dave said, in regards to allocating resources, the issue of market vs. not the market is settled. All that is left are issues of how much regulation.

    Here is a non-controversial example:

    I am ignorant of astronomy. That fact does not mean I am stupid. I could be stupid, but ignorance of astronomy is at best a (very) weak indicator that I am stupid.

    You are smart PD, this you should know.

  • TL;DR reply to PD….

    You are too smart to post so stupidly. :p

  • Icepick

    Short form: at least 90% of Mexican immigrants are earning below median income and fewer than half have a high school education.

    What, you don’t think they’ll be a bunch of Feynmans after they go through the LAUSD?

  • Icepick

    Marco Rubio, at least seems adament about enforcement, and the varification of such, being the first step forward into a process of ‘earned legal status.’ If this is not done then it is a no-starter for him.

    Rubio is just another establishment republican pol. He’s for amnesty but knows he can’t call it that. He won’t oppose any amnesty bill unless the voters revolt as they did the last time the Republicans wanted amnesty.

  • steve

    On education, by your own cited source, the costs of elementary and secondary schooling has stayed fairly stable for the last 40 years. It is the costs of post-secondary education which have risen dramatically. I think govt policy gets some blame for that, but think a large portion, if not a majority is because it is consumer driven. Especially at top tier schools. We have a lot more people chasing the same number of slots at those schools. Besides having more parents pushing to get their kids in those schools, this starts at the pre-school level, you have a lot more kids from overseas competing for those positions. The schools seem to have figured out that increased spending on admin (and building) gets them more students. This effect has trickled down to second and third tier schools.

    “Enforcement first”

    I thought border enforcement was first on both lists, or are you thinking employer enforcement?

    Steve

  • I thought border enforcement was first on both lists, or are you thinking employer enforcement?

    I think that employer enforcement is the only effective kind.

  • PD Shaw

    Steve V, defining your terms, offering analogies and flattering me are lawyer’s tricks I’m immune to. ;) With all due respect, I don’t buy the analogy to astronomy. Astronomy is a science. Sure, some/many social conservatives hold views that are unscientific, like the age of the earth, but they almost have no relevance to anybody but themselves. People coming from other countries have different views about the role of the government, that’s not scientific, that’s a preference and it is persistent.

  • My view is it is a product of ignorance.

    I think there are a couple of other possibilities that you might consider: preference and habit. There are a lot of smart, very well-informed people (even some Nobel prizewinning economists) who prefer a larger, more activist government. It can’t just be shrugged off to ignorance.

    Another possibility is that it’s just what they’re used to. Or affiliational reasons, which is a closely related notion. Or that it makes them feel good about themselves.

  • Piercello

    Dave, when somebody declares “we need more spending on education,” I always want to ask them “what constitutes an educated person?” I’d be curious to hear your definitions, which seem to me to be a prerequisite for smarter spending.

  • Steve V, defining your terms, offering analogies and flattering me are lawyer’s tricks I’m immune to. ;) With all due respect, I don’t buy the analogy to astronomy. Astronomy is a science. Sure, some/many social conservatives hold views that are unscientific, like the age of the earth, but they almost have no relevance to anybody but themselves. People coming from other countries have different views about the role of the government, that’s not scientific, that’s a preference and it is persistent.

    Wow…right over your head.

    Let me try this:

    Ignorant does not equal stupid. Thus, your first reply was based on a false premise.

    As for this specific part,

    People coming from other countries have different views about the role of the government, that’s not scientific, that’s a preference and it is persistent.

    Well, no duh. By the way, grass is green and water is wet. Thank you for pointing out the obvious. The thing I was pointing out is the why for the above.

    Why would somebody from another country think there should be more government in the U.S. than there is.

    Dave,

    There are a lot of smart, very well-informed people (even some Nobel prizewinning economists) who prefer a larger, more activist government. It can’t just be shrugged off to ignorance.

    Sure, being well informed isn’t going to keep one from coming to boneheaded conclusions like the market is a bad thing (in general). I wold also argue the preference is dependent in part on information (for example, if you inform me of an adverse quality of a product that I did not know–i.e. I was ignorant of–my preference ordering might very well change). As for habit, I’d argue that is a case of ignorance.

    Nobel prize winning economists are unusual in that they have led privileged lives for most of their lives (e.g., Krugman, Tobin, Solow, etc.). They are all millionaires and work at places were the work environment is probably one of the best in the world. In short, for some of them their experiences with the real world are…limited.

    In the case of Krugman I prefer to think the guy is just nuts. The reason I go with that is it is the most charitable. You read some of his earlier stuff you see a guy who is reasonable and rational. Makes good arguments. His article about free trade and workers in other countries was very good. His article on the simplicity of economic models, very good. His latter work…WTF?!?! So either he is a mendacious twat or he is schizophrenic. Another example of Krugman’s craziness.

    To take another example, Tobin, you see a guy who had a pretty nice life for the most part. He went to school on a scholarship for undergrad. Started graduate school, worked for the government, spent some time in the Navy during WWII but then the rest of his life was in academia. He also studied economics during the time when Samuelson had his most influence. And Samuelson had this vision of making economics like physics…the only problem with that view is economics is never ever going to be like physics. I’d argue biology might be a better “hard science” to look towards (i.e. people can adapt their “strategies” and thus the concept of evolution might have more relevance than Le Chatelier’s principle–which you can find in economics text books like Silberburg’s). So Tobin is what I’d call an “engineer-economist” one of the economists who believe if we just do X, then Y will obtain and things will be swell and it can give rise to a more activist government. Problem is people look at X, alter their own decisions and you end up with Z or even L instead of Y.

    So was Tobin stupid? No. Was he ignorant? In general, no. Was he ignorant of things like evolutionary economics? Maybe (probably). Maybe he decided it didn’t have much to offer back then (Schumpeter and Boulding were probably the only guys who were thinking along those lines and it would have been a rather heterodox position back in the 50s and 60s). Still, Tobin would argue for a market based economy in the end. The only issue then is how much regulation.

    Another possibility is that it’s just what they’re used to. Or affiliational reasons, which is a closely related notion. Or that it makes them feel good about themselves.

    Aren’t these cases of ignorance?

  • sam

    “the only problem with that view is economics is never ever going to be like physics. ”

    You’ve changed a bit since your Deinonychus days, haven’t you? I recall being pummeled with equations when I visited the site. Still liked it for the passion, though.

  • Drew

    “In the case of Krugman I prefer to think the guy is just nuts.”

    Heh. Charitable. I believe there is evil out there.

  • I’d be curious to hear your definitions, which seem to me to be a prerequisite for smarter spending.

    That’s a tough question, Piercello. Possibly material for another post. However, more to the point I wonder what Mort Zuckerman’s definition of an educated person might be? Or Presidents Clinton, Bush, or Obama’s.

  • Jimbino

    I could use an ill-educated monolingual Mexican immigrant to great effect at my home in Texas. I actually do.

    The problem is that, for every able-bodied, potty-trained, ready-to-work new immigrant, you end up getting to support his indolent pregnant wife, two kids and eventually his and her parents besides. The fault lies with our “family reunification” immigration policy that favors green cards for family members over those for single, childfree, literate, multi-lingual STEM and other valuable males.

    We need to abolish the “family” preferences that are starkly discriminating against singles, gays, unmarried couples, and the smart, literate and well-educated immigrant.

  • Icepick

    I saw that CNN had a story on “What’s behind the bull market?” Curious as to what they’d print, I read the story. Here’s the key paragraph:

    What’s behind the rally

    There are a number of factors at play, including signs of improvement in Europe and sustained growth in China. But analysts say the Federal Reserve’s stimulus moves have been the main driver.

    While wondering which Europe they’re looking at, I found myself stunned that they would actually admit that Fed pumping has driven the stock market. I am shocked to find actual reporting in that establishment!

    Another bit of actual reporting:

    In a counter-intuitive twist, the weak GDP report could end up boosting stocks in the short term, since many investors believe it will lead to more Fed stimulus, said Krosby.

    Now where’s Michael to tell me that millions out of work doesn’t matter because the stock market doing well PROVES that Obama is the greatest economic President ever?

  • The Fed “stimulus” is doing just what it’s intended to do: it’s inflating financial assets. So far there hasn’t been a great deal of spillover into the real economy as we can tell by the relatively low rate of inflation. Basically, the things that are going up in price now are the goods and services that are controlled by cartels. And the things that rich people buy since it’s among the highest income earners that the spillover is most apparent.

    The mistake that even the very smartest seem to me to be making right now is assuming that movement from the financial economy to the real economy must be gradual. That’s almost completely contradicted by history which tells us “slow going up, fast going down”.

  • jan

    “I think the fundamental way they’re approaching the issue is wrong, jan. .

    While immigration has been on the back burner for decades, Dave, it doesn’t seem to ever clear the thicket of bi-partisan understanding in clearly addressing what to do about it. The latest efforts, IMO, are politically-motivated attempts to assuage all the rough edges that illegal immigration has brought up in this country.

    However, I do think the initial framework of ideas has “merit.” Having said this, though, I might add that putting all these conditions into a complex, multi-layered plan is riskier than legislating perimeters individually, waiting for them to meet certain preset conditions (such as varified border containment), and only then expanding the scope further towards perfecting the process to create a preconceived outcome.

    Not too long ago Rubio favored a flurry of small bills, not the big comprehensive plan. Now, he appears to have joined the chorus of politicos in going for the full-throttled plan. Perhaps this is because everyone wants to curry the Hispanic, and now Asian vote. Consequently, both parties are caught up in a rhetorical competition of verbally leap-frogging over each other to get there first.

    As this unfolds and greater detail is given, I hope to have a fuller comprehension, myself, of what is really on the table.

  • You’ve changed a bit since your Deinonychus days, haven’t you? I recall being pummeled with equations when I visited the site. Still liked it for the passion, though.

    Heh, yeah a bit. And just for the record, modern day biology can still have equations….so the math loving econ folks don’t have to give up their mathematical tool box…just adapt it. Gads, I’m funny. :p

    The thing is though, if you take a more evolution based approach (or even a behavioral approach) then policy becomes much more tricky. You really need to start thinking in terms of games, IMO. If you change your actions, then the other players will also change their actions as well. Currently, that second part is not a factor. I think Lucas started to realize this with his critique of standard macro economic models.

  • You think I’m a crank, Steve V. But I spent 5 months sorting corporate shit out.

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