Over at The New York Times Eduardo Porter makes an interesting point about the debate on income inequality, the size of government, etc.:
Over the last four decades the debate in Washington about poverty and inequality has been bogged down in a somewhat pointless, often surreal debate about the size of government and the amount spent on behalf of the poor.
Over that same period, the earnings of workers in the bottom half of the income pile have progressed little. American society has buckled under the strain.
The actual size of government? Measured by the taxes we pay, it was about 25 percent of our gross national product in 1970. It is still about 25 percent of our G.D.P. today. And the share of our wealth spent on the poor, apart from money devoted to the rising cost of health care, has not changed very much, either.
Other than that, Mrs. Lincoln, how did you like the play?
If we’re going to help the poor, that’s what we should do: help the poor. Helping the poor by paying physicians, hospitals, social workers, etc. more acts primarily to subsidize the incomes of physicians, people who work in hospitals (or owners of hospitals), social workers, etc. How do I know that? Outcomes. We’re spending enormously more in real terms for healthcare than we did 45 years ago.
We could try pushing up the general wage level but the regressive right and progressives (whatever that means) are strangley opposed to anything but more handouts.
What is the goal of “help the poor”?
To me, it seems like there are two goals. First, those “helping the poor” are trying to make as much money and gain as much power as possible. Second, those shouting loudest about “helping the poor” want the poor as far away from them as possible.
I could be wrong. It could just be a coincidence that people are getting rich and powerful, and it could just be a strange occurrence that the poor are never found anywhere except the sh*tholes.
The problem is not income inequality. It is wealth inequality. The poor lack the wealth of assets, and without assets to inflate with the money/credit supply, they will always be poor.
When money/credit is first created (borrowed into existence), it is in its purest form, but as it gets leveraged, it is “cut” with filler. Those with access to the first forms will be able to profit the most, and those at the end of the process will be in debt to the credit issuers. (drugs, dealers, and addicts)
There is no way for those with first access to not become increasingly wealthy. The only way to tie them down is to tie down the entire system, but if you tie down the entire system, you cannot get the growth needed. Chicago School Board needs 7% growth per year, but they cannot get that by tying Wall Street.
They need Wall Street cowboys to invest their money as recklessly as possible in order to get an average of 7% growth, but the Wall Street cowboys need the ability to leverage credit instruments at dangerously risky ratios to get the returns the Chicago School Board needs. The Wall Street cowboys need fiat money, fractional reserve lending, no Glass-Steagall, lax regulations, and the Fed pumping currency to keep the retired Chicago school teachers living large.
If all the Wall Street cowboys were sent to jail tomorrow, the Chicago School Board would be looking for new Wall Street investors, and they would not ask any questions as to how they would obtain the 7% annual growth. The western boots, leather chaps, 10 gallon hat, and spurs would not be questioned, and they would not question the income inequality of the new strangely dressed investors.
The point of this is that those who got ain’t letting go for the poor. If the Chicago school teachers need Wall Street more than Wall Street needs the Chicago school teachers, and there are not the only ones.
If you confiscate all the money and assets from the rich, next year you will have at most the same amount of money and assets unless you know how to increase them. Money, assets, jobs, and the economy do not grow by proclamation. In a system of fiat money and fractional reserve lending, it would be wise to understand the mechanism of expansion, and more importantly, who facilitates that expansion.
As I see it there are three legitimate objectives:
– you are satisfying a religious obligation (it’s the right thing to do)
– the society you want to live in is one in which people help the poor
– you want to reduce the likelihood of the poor rioting or otherwise threatening you or your lifestyle
I mean the outcome for the poor – higher yearly income, home ownership, maid service, gated community, better health care, private school, latest iPhone, etc.
How do we know if we are helping the poor. What is the metric? I would also like to know that about other areas, but I do not want to divert the thread.
I’m probably the wrong person to ask that question of. I’d be more interested in prioritizing. I think that poor rural blacks and Indians on reservations are the poorest of the poor and need more attention than they’re getting. After that poor rural whites.
Then some urban blacks. Most are probably just relatively poor which is an entirely different subject. I’m not sure we have the same moral obligation to the urban poor, who by any reasonable world standard are rich, that we do to, say, Indians on reservations but I guess my priorities are screwed up.
I want to know what we do, and how we know when we have succeeded or are succeeding. I would include our other Wars on (fill-in-the-blank).
Here is my take:
There will always be poor people. This is a mathematical certainty. The objective should be to help poor people move up, but it should also be realized that they will be replaced. The foremost goal should be to never have a multigenerational family living in the lowest sector.
These people should not be encouraged to purchase homes because they need to be able to move to where there are jobs. Mobility is one goal for the poor, and moving vouchers and supplies would help. They need help with down payments for moving expenses, and other startup costs, and the government could help with these.
Public transportation, public health care (clinics), and child care would be necessary, and these would probably need to be subsidized. The police would also need to be increased to insure that the criminal element did not follow, and there would need to be a no tolerance policy.
The jobs are where the middle class live, and the poor need to live there. If the liberals want to help the poor, they should help them move into their communities.
The metric is the number of days/weeks/months/years per capita people are in poverty. You could also have something about how long they stayed out of poverty.
“They need Wall Street cowboys to invest their money as recklessly as possible in order to get an average of 7% growth, but the Wall Street cowboys need the ability to leverage credit instruments at dangerously risky ratios to get the returns the Chicago School Board needs.”
Not really. Pension managers need to push asset allocations to be more aggressive towards alternatives, for which there is still probably room for most pension managers. How prudent that is and how close you can get to 7% is a debatable question but allocations to alternatives could probably be increased for many by 50% without breaching fiduciary duty. Certainly by 25%. But it involves none of the recklessness cited.
A hot debate could be had about the other end of the spectrum, “safe” short term fixed income allocations, when weighing real return vs liquidity/redemption considerations. How about a little fire, a Scarecrow?
I think Dave’s observation is more on point. Typical household budgets are now totally dominated by directly subsidized or in some way preferred economic activities: housing, health care and education.
There’s a fourth reason to tackle poverty: reduction in the associated social dysfunctions of crime, domestic violence, alcohol and drug abuse, suicide and mental illness, all of which impose costs on society. These are the most important metrics although relative income levels themselves cannot be ignored.
I don’t think the evidence that all of those things are tied to poverty is particularly strong. I know that domestic violence is present at all income levels. While convictions for crimes related to drug and alcohol abuse is related to poverty, the actual abuse doesn’t seem to be. The suicide rate is actually positively correlated with income.
This week 7 or 8% annual return is so easy even grandma can do it.
The underfunded pension funds is a non-issue. It is just more nonsense put out by hate mongering Republicans. Note too, these are the same people who said business would tank with Dodd-Frank, and business is so bad that it is practically booming. What is a confounded Republican to do.
I see that the point went right over your head, Tasty. Unfortunate. Go read the first five chapters of any investment textbook on the market.
I think he was being sarcastic, Guarneri.
We could try pushing up the general wage level but the regressive right and progressives (whatever that means) are strangley opposed to anything but more handouts.
That’s because both sides want war of all against all, Ben. The regressive right because they either figure they’ve got all the guns (that would be the leaders), or they’re too fucking stupid to realize they’re being used (that would be the bulk of Republican voters). The leaders of the progressives (and a fair chunk of the progressive technocratic class) want it because they think they can use it to install an all-powerful government, of which they, of course, will be the lords and masters. Most Democratic voters are, like most Republican voters, too stupid to realize they’re nothing but tools.
Both sides are sowing the wind. We’ll see if they reap what they sow.
…
Incidentally, I maintain the best way to get wages to rise would be to stop importing excess workers. (Other policies would need to be changed, but we’ll start with the obvious.) Naturally, you can’t vote for a party that wants to restrict immigration. You can’t even vote for a minor party that wants to restrict immigration unless you go to really obscure lengths, as both the Greens and the Libertarians believe that borders should be dissolved and that citizenship should be rendered completely irrelevant.
Dave, here are linka to two recent papers finding a link between suicide and unemployment: http://epub.wu.ac.at/4116/
http://www.bmj.com/content/347/bmj.f5239
Here is the UK Audit Commision’s report finding rising substance abuse in recessions:
http://www.audit-commission.gov.uk/SiteCollectionDocuments/AuditCommissionReports/NationalStudies/whenitcomestothecrunch12aug2009REP.pdf
A paper finding domestic abuse rises with economic distress:
http://crcw.princeton.edu/workingpapers/WP14-04-FF.pdf
There’s much more out there finding positive correlations between unemployment, recessions, poverty and rising social dysfunction.
Triple Dot,
I would, as part of the legislation establishing a work guarantee, strongly restricting immigration with other countries unless the institute their own work guarantees at a wage equivalent or superior to our own. For countries adopting similar policies we can allow open movement, as their poor citizens will no longer be incentivized to migrate in search of greater incomes. They can participate in our program and we can participate in theirs.
People might still immigrate for other reasons, Ben: better wages, better work conditions, a better political environment, & so on.
So long as mass immigration can’t depress the wage level I see no reason to prevent it. Moving to get away from violence or because you’d like to be part of a given society seem good reasons.