Just to avoid confusion I’m using the phrase “middle class” to indicate middle income people. I’ve discussed class before here and that’s what most people mean when they say “class”.

It’s being suggested by any number of people including the various leaks of the president’s state of the union message and Lawrence Summers that more attention should be paid to the middle class. Fair enough. Who is the middle class?

According to the IRS just about 150 million 1040s, 1040-As and 1040-EZs will be filed this year. Basic statistics tells you that each income decile includes about 15 million people.

I would call the top 1% of income earners “the rich”. That’s everybody who earns about $350,000 per year or more. I would call everybody in the top 10% of income earners other than the top 1% upper middle class (~$120,000 to $350,000) and anybody who earns between about #35,000 and $120,000 middle class. So far, so good? I realize that people’s ideas of these things differ and some want to define middle income as people within one standard deviation plus or minus of median income which I don’t think represents the reality of life in the U. S.

That means that anybody from the fourth decile to the ninth decile is middle class, something like 90 million tax returns in all. Those tax returns probably represent something like 200 million people.

Now we get to the tough part. Who are they? According to the Census Bureau there are about 22 million local, state, and federal government employees and I would propose that they’re nearly all middle class as I’m using the term. When you translate that into tax returns and population, that’s something between 22 million and 60 million, a large proportion of the middle class.

Another couple of million are professionals, e.g. doctors, lawyers, etc.

Larry Sabato provides a little insight on the presidential campaign slogans of days gone by:

Wiith the dawn of the new year, the campaigns for president are moving into high gear, at least in private. Strategies are being fine-tuned, consultants and staff are being hired, donors are choosing sides. But no campaign ought to ignore the crucial element of a good slogan.
Oh, the superficiality of it all! That’s what the sophisticates say. Yet a well-chosen phrase can power a candidate if the words ring true and connect to the theme of the election. Slogans are simplistic and manufactured, but the best ones fire up the troops and live on in history.

Offhand I’m guessing that Sec. Clinton wouldn’t use my preferred slogan for her: “Vote for Hillary! At this point what difference does it make?” Dr. Sabato proposes “Let’s Make History Again!” which has a nicer ring to it.

Without looking can you identify the campaigns these slogans were used for:

Don’t change horses in midstream
Vote as you shot
Let well enough alone
He kept us out of war
We are turning the corner

Lincoln (and later FDR)
Grant
McKinley
Wilson
Hoover

You can reveal the answers by selecting and highlighting the blank space between the slogans and here. Or by reading Dr. Sabato’s post which includes these and others.

Hat tip: memeorandum

In his column today Robert Samuelson muses over the reasons for sluggish wage growth. He lists four different theories:

• Shadow unemployment
• Job insecurity
• Delayed pay cuts
• More competition and less protection

I think it’s probably all of the above with the emphasis on the first. However, I would also add that confidence in a continuing stream of low wage, unskilled workers not only places downward pressure on wages but changes the decisions that managers will make. They’re more likely to take approaches that will require more cheap labor over ones that will take some capital investment in equipment and a smaller amount of more expensive labor.

I also think that the number of people who’ve been holding down two or even three part time jobs rather than one full-time job tends to skew the unemployment figures. If they lose one of their three jobs, are they unemployed? Two?

This game of three-dimensional chess is making me dizzy. There are a number of contrasting, conflicting, and even mutually contradictory opinions about what’s going on with Al Qaeda and DAESH these days.

One view is that we are achieving our objective of containing both. Since that is not our objective, at least as stated by President Obama, and the only evidence of such containment are the reduction in DAESH’s momentum in Iraq and the Kurds’ re-taking of small amounts of territory (the role that U. S. bombing may have played in the Kurds’ accomplishments is unclear), that opinion does not seem to be rooted in fact.

Another view is that we are achieving our objective of degrading and destroying DAESH and that Al Qaeda is “on the run”. To my eye this view is even harder to support than the above. Further, it engages in a very bad habit of ours, using the wrong and, frequently, most favorable metric, e.g. sorties, fighters killed, as the gauge of victory. If that approach were a sound one, we won in Viet Nam.

The view that I’ve outlined previously is that we can reduce DAESH’s progress as long as we’re willing to maintain our air campaign. DAESH’s progrss in Syria brings that view into question. Even if this view is true I don’t see it as either a tactical or strategic victory. I see it as a tactical draw and a strategic defeat.

There’s another view emerging now, that there is a “New Year’s offensive” being launched. Some of the facts and interpretations that are being presented in support of this view are:

• The assassination of a Saudi general.
• The Charlie Hebdo murders
• The threats of further terror cell activity in Western Europe.
• The KSA’s oil offensive.
• The significant amount of territory in Syria that DAESH has gained.

This view is outlined in this opinion piece in Newsweek and analyzed in more detail by John Robb.

According to this view all of the activities that have drawn the attention of the United States and Western Europe, including the Charlie Hebdo murders, the threats, and even the protracted engagements in Iraqi and Syrian Kurdistan are distrations, intended to divert U. S. and European attention away from the actual objective: Saudi Arabia. Saudis’ lowering the price of oil is a move that has the multiple effects of a) currying favor with U. S. consumers, b) reducing the threat from U. S. shale producers, c) reducing Iran’s revenues, and d) reducing the revenues of DAESH oil smugglers.

It’s hard for me to see how an attack on the KSA could be effected by DAESH outside of either fomenting terror cell activity in the kingdom or via Yemen. I’ll see if I can solicit Col. Lang’s opinion of that latter alternative. That DAESH is fomenting terror cell activity in the KSA is a matter of record. Can it really be extensive enough to bring the kingdom down?

An organized, determined attack against the KSA would certainly place us in a pickle. Would we rise to the Saudis’ defense, knowing that we could potentially be bombing Muslim holy sites? If the Saudi oil fields were placed under attack, the Arab Shi’ite population of the area would almost certainly appeal for and receive Iranian support. For more analysis of Saudi “human geography” see here. It would certainly be a mess.

I won’t pretend to know what’s actually going on. I’m just trying to bring the range of opinion to your attention and solicit additional views.

It is a sad commentary on our society that the highest honor we can bestow on an individual is to dedicate a mattress sale to him.

I see that Megan McArdle is saying the same things about higher education that I’ve been saying for the last couple of decades (and on this blog for more than a decade):

It’s completely true that there is a big wage premium for having a college degree — but it does not therefore follow that we will make everyone better off by trying to shove every American through post-secondary (aka tertiary) education. We may simply be setting up college as a substitute for a high school diploma: a signal to employers that you can read and write, and are able to turn in scheduled assignments within a reasonable time frame. And in the process, excluding people who aren’t college-educated from access to decent jobs.

She also includes some unkind words about the tooth fairy.

The part of this discussion that baffles me is why is it an article of faith that every kid should be forced into higher education (whether by hard power or soft power)?

I think that the proponents of higher education for all really ought to dig into the numbers and not just the income differential between physicians and lawyers who graduate from elite law schools and the rest of us poor slobs.

Speaking of income inequality and economists’ lack of practical experience, consider this post by Mark Thoma at Fiscal Times:

I fear this trust that market forces will eventually raise wages will lead to disappointment. Inequality has been increasing for over three decades, and during that time we have been at or near full employment many times. Yet, wages over this time period have been flat. As noted by the Economic Policy Institute, “Since 1979, the vast majority of American workers have seen their hourly wages stagnate or decline—even though decades of consistent gains in economy-wide productivity have provided ample room for wage growth.” The idea that market forces alone will increase wages sufficiently to offset increasing inequality is not supported by the evidence from these years. There’s more to the story than market forces.

I agree that there’s more to the story than labor policy. There’s monetary policy, trade policy, and immigration policy, too, to take into consideration.

Dr. Thoma outlines the market explanation for stagnant wages:

Before getting to “the rest of the story,” what is the market-based explanation for stagnating wages? The most popular explanation involves the forces of supply and demand combined with an assumption, supported by the evidence, that wages are downwardly rigid, i.e. wages rise much easier than they fall.

When a recession hits and the demand for labor falls significantly, there is substantial downward pressure on wages. But when wages are downwardly rigid, they stay constant instead of falling. When this happens, an improving economy will not cause wages to increase until the forces pushing wages downward are overcome.

As Mary Daly and Bart Hobijn say in a recent Economic Letter for the San Francisco Fed, “Despite considerable improvement in the labor market, growth in wages continues to be disappointing. One reason is that many firms were unable to reduce wages during the recession, and they must now work off a stockpile of pent-up wage cuts.”

Essentially, the demand for labor must increase relative to supply until the “pent-up wage cuts” are overcome. But demand is growing slowly, and the supply of labor is increasing as discouraged workers return to the labor force with improving economic conditions, so increases in wages could still be some time away.

and provides his own prescription:

Solving the problem of lack of bargaining power that puts workers at the mercy of the “decency” of those they negotiate with is not easy. The ability of traditional unions to negotiate over wages has been undercut by globalization, technology, and the threat of offshoring, though unions – to the extent they still exist – do retain some value as a source of political power.

What he fails to address is how have unions functioned to increase wages? I would submit that unions have been most effective in tight labor markets and have mostly been able to increase wages by imposing barriers to entry and creating an artificially tighter labor market.

In other words, would a revitalized organized labor increase wages or would it further reduce employment? I don’t believe you can maintain a slack labor market and increase wages at the same time.

To those who believe that unions operate some other way, I suggest you look at the experience of the UAW over the period of the last 30 years.

I have implicitly been asked a number of my questions in response to my post on our failure to contain DAESH (generally refered to these days by President Obama as ISIL) so I’ll answer them here.

How could you possibly think that we were attempting to contain DAESH in Syria?

I might have received that impression from President Obama:

It’s time to go after ISIS in Iraq and Syria, President Barack Obama said Wednesday night in a nationally televised address intended to sell stepped-up military efforts to a war-weary public.

Announcing a broad campaign against the Sunni jihadists who have rampaged from Syria across northern Iraq, Obama announced an escalated U.S. military role as part of a strategy that includes building an international coalition to support Iraqi ground forces and perhaps troops from other allies.

U.S. airstrikes have been hitting the jihadists in Iraq. Those strikes will be expanded to ISIS targets in Syria, Obama said.

“I have made it clear that we will hunt down terrorists who threaten our country, wherever they are,” he said. “That means I will not hesitate to take action against ISIL in Syria, as well as Iraq. This is a core principle of my presidency: if you threaten America, you will find no safe haven.”

How can you deny that our efforts in Iraq are not proceeding extremely well? We haven’t lost a single American soldier. And ISIS hasn’t marched into Baghdad.

We haven’t lost an American soldier yet. Here’s what Pat Lang, who has forgotten more about the Middle East than most of the supporters of our policy there will ever know, has to say about that:

What matters in January, 2015 is the simple truth that Iraq as it was is no more. IS holds the north and west of the country with the exception of what has become a de facto country in the Kurdish “Autonomous” Region. The Shia Arabs hold the south from their part of Baghdad all the way down to Basra. They are likely to retain control of that territory for the simple reason that the Shia Iranians will not let it be taken from them.

In the midst of this new reality, the United States clings to the fantasy of a re-united Iraq. IMO this is a dangerous fantasy, and one which will continue to cost us a great deal of money. More importantly the fantasy has lured us into a position in which we are spreading small groups of our soldiers across parts of Iraq in which Baghdad government control can onlt be described as tenuous. If we continue to do that some of these soldiers, our soldiers, are going to be captured, killed or maimed in circumstances in which we will be powerless to help them.

to which I would add that such success as we’ve achieved requires us to continue to spend a half billion dollars a month on the effort in perpetuity. Just as in law there is a rule against perpetuities so there is in foreign affairs. Nothing continues forever. Our interest in what used to be Iraq will wane. That of the takfiri won’t.

But George Bush screwed the pooch by invading Iraq. Obama is just trying to clean up after him.

I opposed the invasion of Iraq. President Obama is the one who wanted the job of president and part of the job is cleaning up after the messes left by your predecessors. One of my many criticisms of the Bush Administration’s strategic vision was that it was stupid, delusional even. My criticism of the Obama Administration’s strategic vision is that I don’t think it has one. If it has one, please explain it to me and how the tactics that have been adopted implement that vision.

At Christian Science Monitor Husna Haq takes note of two books critiquing the findings 2014’s rock star economist Thomas Piketty:

“He cherry-picks, the data sometimes don’t match the sources that he cites, and he changes the data to make the charts look better without accurately documenting it,” Mr. Hassett said of Piketty’s research.

But while Hassett has said that so many things are off in the book that it affects the book’s conclusion, Piketty is standing by his research.

I think Piketty’s critics are spitting into the wind. His supporters don’t support him because his methods are solid but because they like his conclusions and prescription.

Speaking as someone who’s unlikely to read Dr. Piketty’s book and based solely on media reports I think that both the support and opposition fall into the “where you sit is where you stand” category. I think that his central claim (the relationship between capital and income) is wrong, the claims of issues of income inequality are right, and his policy prescription is wrong.

I also think that he suffers from a problem common to economists: lack of practical experience, particularly in Dr. Piketty’s case of practical experience with the United States. Government in the United States just doesn’t function the way it does in Europe, we don’t expect it to, and we don’t trust it (or at least some of us don’t). While I’m prepared to believe that France, Germany, or the UK can redistribute their way to greater income equality, I don’t believe that would work out in the U. S. where redistributing from the rich and the poor to the upper middle class represents a best case scenario. More common is redistributing from the poor, the middle, and one group of the rich to a different group of the rich, which hardly promotes greater equality. It just re-arranges the deck chairs.