I’ve already made my prediction about the election. I’d like to hear yours.
Make your predictions about the election here.
I’ve already made my prediction about the election. I’d like to hear yours.
Make your predictions about the election here.
As part of its series on the issues in this election, RealClearPolitics has turned its attention to income inequality. David Madland presents the progressive case while Ryan Streeter presents what I take to be the conservative case. While I think that my view of the problem is more consistent with Mr. Madland’s formulation:
Wages for the typical private-sector worker, adjusted for inflation, are still about where they were in the 1970s, even as the costs of core middle-class goods such as housing, healthcare, child care, and higher education have grown rapidly. Economic output per person has nearly doubled over the past four decades, but the vast majority of these gains have gone to those at the very top. In fact, the share of the nation’s income going to the top 1 percent is near-record levels, while the share received by the middle class — the middle 60 percent — is about the lowest ever since the government began tracking this data in the late 1960s. In 1973, the typical CEO of the top publicly traded companies made around $1.1 million, or about 22 times what the typical worker made. Today, the average CEO makes $15.5 million, or about 275 times what the typical worker makes.
I find his prescriptions wanting. They are:
Paradoxically, although I disagree with Mr. Streeter’s basic position:
Do we want to live in a society in which people profit when they have new ideas, products, and abilities that others are willing to pay for? If so, then we will also have economic inequality.
To most economists and ordinary Americans, inequality is the price we pay for an economy that rewards innovation, risk, and hard work. The topic has been a recurrent theme in our recent political discourse, however, because of two things: the outsized income of the nation’s top earners and the stagnation, or tepid growth, of middle-class incomes. The question is whether we think these two trends say something bad about America, and if so, what public policy can do about them.
I thought his proposals were more likely to be effective. They are:
My view is that our present trend on income inequality is incompatible with republican government. In other words although I have no problem with a small number of individuals earning very high incomes based on their own creativity and hard work let’s not imagine that every individual earning an enormous income is creative and hardworking. For every Bill Gates or Steve Jobs there are probably ten Angelo Mozilos.
I’m even less comfortable with a large inbred and isolated professional class dependent on tax dollars for incomes that are a many times multiple of the median income.
Rather than making the tax code more progressive why not make the tax system more progressive? In the final analysis it doesn’t make any difference what the top rate of taxation is. What matters is what the top income earners actually pay. The United States has among the most progressive tax codes of any OECD country while having one of the most regressive tax systems. There’s a simple strategy for accomplishing that: get rid of the payroll tax. That would also probably necessitate abandoning the fund accounting that has formed the heart of U. S. policy for the last 70 year.
Increasing the minimum wage isn’t a policy directed at the middle class. Practically definitionally it’s targeted at helping the poor. We’re presently in the midst of a great experiment on the effect of raising the minimum wage. We might want to see how that works out before sending it national. I suspect we’ll see some parts of the country in which the effects of a $15 minimum wage are benign and some parts in which it is damaging. That’s the beauty of a federal system. I suspect that a $15 minimum wage for Illinois would be damaging to Chicago and, indeed, for Illinois. We’re surrounded by states with lower minimum wages and most of Illinois’s larger cities are on its borders.
I wonder if it has occurred to Mr. Mayland that in the United States a higher rate of voter registration is positively correlated with the Gini coefficient (the most commonly used measure of income inequality)? I don’t have an explanation for that but it’s true.
Mr. Streeter’s suggestion that high schools start providing training leading to certification in skills that are in demand is so good it’s an outrage we’re not already doing it. It’s not perfect but it’s interesting. IMO the present emphasis on college education for all is misplaced—cargo cult thinking. Germany has had an apprenticeship program and it seems to be working there. It’s probably worth a try.
It is not true that “no one saw it coming”. There were, in fact, economists who predicted the financial crisis that led to the Great Recession and
1) cited an actual economic model in support of their argument, 2) pointed to the specific set of forces that really did lead to the crisis, and 3) got the timing right
but those economists were not followers of a mainstream school of economics thought so their findings fell on deaf ears. Those are the messages of John T. Harvey’s post at Forbes.
Unfortunately, a shortcoming of Dr. Harvey’s post is that he neglects to tell us who those economists were or how their views diverged from economic orthodoxy. It took a certain amount of detective work but I managed to figure it out.
Dirk Bezemer, the author cited by Dr. Harvey in his post, had a post of his own at the portal of the Center for Economic and Policy Research (CEPR), “‘No one saw this coming’ – or did they?”. As it turns out the economists who successfully predicted the crisis were proponents of something called the “flow of funds” macroeconomic model:
The model is solved by imposing macro accounting identities and adaptive expectations rather than individual optimisation. There is a steady state but not equilibrium. One advantage is that growth paths can be identified as unsustainable given the existing “bedrock†accounting relations. This allowed Godley and Wray in 2000 to conclude that “Goldilocks was doomed†– with a government surplus and current account deficit, US economic growth had to be predicated on ongoing and unsustainably high rates of private debt growth.
Here’s Dr. Bezemer’s summary of the flow of funds model:
In “Flow of Funds†models, liquidity generated in the financial sector flows to firms, households and the government as they borrow. This may facilitate fixed-capital investment and production, but it may also feed asset price inflation, consumption, and debt growth. Liquidity returns to the financial sector as financial investments or in payment of debt service and financial fees. Key features of “Flow of Funds†models are thus bank credit flows, since “evolving finance in the form of bank loans is required if production is to be financed …†(Godley, 1999:405). Also, there are explicit payment flows such as interest, “not quite the same as in the national accounts, where it is standard practice… to ignore interest payments, although they are an inevitable cost given that production takes time†(Godley, 1999:405).
If Carmelo Saleo’s assessment is correct, the flow of funds macroeconomic model may not be particularly helpful from a policy standpoint:
So maybe the bottom line is that the quantity theory of money is still a solid intellectual framework to think about monetary economics, and a good starting point to understand the general dynamics of money. But as a simple direct policy tool its best days might be already behind us (which, by the way, is no news to central bankers…).
Or, said another way, neither Neo-Classical, Keynesian, Neo-Keynesian, monetarist, nor the model that actually predicted the financial crisis provides any particular guidance.
Continuing RealClearPolitics’s series debating the issues in the present election, William G. Gale of Brookings’s strongest argument is when he’s sticking with the evidence. The Reagan tax cuts on personal income tax promoted a little economic growth and the Bush tax cuts promoted almost none at all:
But the record is clear that deficit-financed tax cuts on high-income households and businesses have failed to boost growth at the federal or state level in the U.S. (or in other countries). For example, when growth is (appropriately) measured from peak to peak of the business cycle, the vaunted Reagan tax cuts produced a period of only average growth. Indeed, research by Martin Feldstein, President Reagan’s former chief economist, and Douglas Elmendorf, the former Democrat-appointed Congressional Budget Office Director, concluded that the 1981 tax cuts had virtually no net impact on growth. Instead, the post-recession recovery of the early 1980s benefitted primarily from the Fed’s decision to reduce interest rates.
The 2001 and 2003 Bush tax cuts do not appear to have stimulated much growth, if any, despite cuts in tax rates on ordinary income, capital gains, dividends, and estates. Moreover, even that lackluster growth is generally attributed to the Fed’s expansionary monetary policy (and to a housing boom that unfortunately went bust and triggered the Great Recession of 2008–2009).
Unfortunately, the policies that he proposes for the next administration are largely faith-based. In summary he wants to
Although he casts those as being on behalf of the poor, the reality is that those two measures will result in
neither of which is likely to foster much growth. Total real spending on college faculties has been flat for decades even as spending on administrators has skyrocketed. And we’ve been paying healthcare providers ever more for most of the last half century with only very modest improvements in health. In healthcare, too, much of the additional spending goes to pay administrators rather than paying for care.
There are strategies other than cutting the personal income tax rates, the proceeds of which go overwhelmingly to the highest income earners, and the demand side trickle-down approach of spending on education and healthcare. For example, you could give money directly to the poor. Or you could cut the taxes paid disproportionately by the poor, e.g. payroll taxes.
The recent discovery, recounted here at Ars Technica, that the interior of Australia was inhabited by human beings as long as 50,000 years ago:
By analyzing layers of earth in the shelter, the scientists were able to construct a timeline of settlement in the space. They used carbon dating on nuggets of hearth charcoal and eggshells to discover that the shelter was first occupied about 50,000 years ago. They also used a dating technique called optically simulated luminescence (OSL) on buried grains of quartz. This technique determines when those quartz grains last saw sunlight and heat. Both techniques returned similar dates, adding to the researchers’ confidence in their findings.
This makes Warratyi the oldest evidence of human occupation in the arid Australian interior, long believed too hostile for ancient people who had few tools. But these findings make it clear that the ancestors of Australia’s indigenous people were, in fact, seasoned explorers who could survive in difficult conditions.
should remind us that the modern “Age of Exploration” which took place from about 1400 to some time in the last century was actually a period of rediscovery and that by the time Europeans got around to looking for them human beings had been living everywhere but the most remote and inhospitable places in the world from the highest mountains to the densest swamps or the most barren deserts. That includes Antarctica the “Antarctic convergence”, the environs of Antactica, where there have been permanent or semi-permanent residents for the last 250 years.
Columbus, Vasco da Gama, and Captain Cook all expected to find people everywhere they went. What astonished them was when they found places that weren’t already inhabited.
I have corrected the above to replace “Antactica” with “Antarctic convergence”.
I sometimes think that there are as many explanations for why healthcare costs are as high as they are in the United States as there are explainers. Somehow each and every explanation rocks the hobbyhorse of the person doing the explaining.
That’s what I thought when I read this post from primary care physician Andy Lazris at RealClearHealth:
The Institute of Medicine estimates that in 2009 alone Americans spent $750 billion in unnecessary care. Atul Gawande’s article, Overkill, reveals that 25-42 percent of patients receive care that is either ineffective or harmful. Virtually all of this low-value care occurs in the hospital or is specialist derived. A cardiologist can open an artery with a stent whenever she decides it is appropriate, generating a large profit and satisfying a patient who often feels his life has been saved. But studies show otherwise; stents often lead to more harm than good. Bloomberg News estimates that the cost of unnecessary stents alone is $2.4 billion a year, and patients receiving stents often have worse outcomes than had they been treated more conservatively. This is true of many high-paying procedures performed by specialists, including spinal injections, meniscal repairs, and kyphoplasty for compression fractures. In regions of the country in which there are higher proportions of specialists than primary care doctors, outcomes are consistently worse, cost is higher, and hospital rates escalate.
Hospitals similarly deliver low value care at high cost. As a doctor who takes care of the elderly, I often have no choice but to hospitalize patients who want to stay home and who I know would have much better outcomes at home. The rules of insurance simply do not allow for reasonable home care. Studies consistently demonstrate that for many illnesses home-care is safer and far less expensive than the hospital for the elderly population, and it is what most elderly patients prefer. A recent study showed that 50 percent of elderly leave the hospital more disabled than when they came in and 25 percent suffer actual harm at a whopping cost of $4.4 billion a year.
He continues in that vein.
You know? He might be right. I just don’t know. What I do know is that we’re spending a lot on healthcare, not getting nearly enough value for our money, the rate of increase in healthcare spending is unsustainable, and spending on healthcare insurance is sapping investment from other sectors of the economy that’s needed to put more people to work.
Make of that what you will.
I strongly recommend that you read this op-ed at Reuters from Foreign Policy columnist James Bamford. The gist of it is that motive and opportunity aren’t enough to assign blame for the hack of the Democratic National Committee. Here’s a snippet:
The problem with attempting to draw a straight line from the Kremlin to the Clinton campaign is the number of variables that get in the way. For one, there is little doubt about Russian cyber fingerprints in various U.S. campaign activities. Moscow, like Washington, has long spied on such matters. The United States, for example, inserted malware in the recent Mexican election campaign. The question isn’t whether Russia spied on the U.S. presidential election, it’s whether it released the election emails.
Then there’s the role of Guccifer 2.0, the person or persons supplying WikiLeaks and other organizations with many of the pilfered emails. Is this a Russian agent? A free agent? A cybercriminal? A combination, or some other entity? No one knows.
There is also the problem of groupthink that led to the war in Iraq. For example, just as the National Security Agency, the Central Intelligence Agency and the rest of the intelligence establishment are convinced Putin is behind the attacks, they also believed it was a slam-dunk that Saddam Hussein had a trove of weapons of mass destruction.
It might have been the Russians. It might have been any of a dozen other organizations or groups. There just isn’t enough evidence to make a conclusive determination.
What’s the worst case scenario? I think that would be blaming the Russians if the Russians weren’t responsible. Not only will that further alienate the Russians but it will take attention away from the actual culprits.
The real solution might be to tighten up on security but to do that they’d need to start taking advice from someone who actually knew what they were doing and wasn’t a politician. Mustn’t have that.
The editors of the Wall Street Journal, citing Turkish President Recep Tayyip Erdogan’s crackdown on journalists, stop just short of calling for Turkey’s immediate ouster from NATO:
The Obama Administration has been mostly quiet throughout this crackdown and continues to entertain Ankara’s request to extradite Pennsylvania-based Muslim cleric Fetullah Gulen, the coup’s supposed mastermind. Turkey is a member of NATO and both the U.S. and the European Union believe they need Ankara to fight Islamic State in Syria and curb the flow of refugees to Europe.
Maybe so. But that does not relieve the West from the obligation of denouncing Mr. Erdogan’s repression. Mr. Gulen should not be extradited so long as he cannot expect a fair trial in Turkey. And Turkey should not remain a member of NATO if Mr. Erdogan continues on his increasingly lawless path.
That would make an interesting discussion topic. Is there some minimum set of characteristics for a country to be a viable member of NATO?
We know that NATO is not limited to liberal democracies. Both Greece and Turkey were military dictatorships when they were admitted in 1952, in fact if not formally.
We know that maintaining the 2% of GDP suggested military spending isn’t a requirement, either. Only a handful of NATO’s present members do so and Germany hasn’t done so since the collapse of the Soviet Union.
We know that making a positive contribution to collective security isn’t a requirement. If it had been we would have stopped adding new members after admitting Germany in 1955.
Are there any disqualifications for NATO membership? There’s at least one—you can’t be Russia. That idea has been floated from time to time (most recently by Bernie Sanders) and always rejected out-of-hand.
Is being Islamist a disqualification for NATO membership? And why?
Hillary Clinton will be elected president with no fewer than 272 electoral votes. Trump may get as many as 266. She may lose the popular vote.
Democrats will capture Senate seats in Illinois, Pennsylvania, and Wisconsin for a total of 51 seats, giving them a narrow majority.
The Republican majority in the House will shrink a bit but they’ll still hold the majority there.
The Chicago Cubs have won the World Series:
Finally.
The most epic drought in sports history is over, and the Cubs are world champions.
After 108 years of waiting, the Cubs won the 2016 World Series with a wild 8-7, 10-inning Game 7 victory over the Indians on Wednesday night at Progressive Field. The triumph completed their climb back from a 3-1 Series deficit to claim their first championship since 1908.
A roller-coaster of emotions spilled out in a game that lasted almost five hours, featuring some wacky plays, a blown four-run lead, a 17-minute rain delay and some 10th inning heroics that sealed the deal.
Some sportscasters have been calling last night’s game “the greatest game in the history of the World Series”. It was certainly exciting and a cliff hanger.
However, what stays with me was something from yesterday’s game—when Chicago shortstop Addison Russell hit a home run with the bases loaded:
Chicago Cubs shortstop Addison Russell may not have the reputation as a power hitter that some of his teammates may enjoy, but he did something on Tuesday night that none of his teammates can say that they’ve done.
In the third inning of Game 6 of the World Series, Russell stepped up to the plate with the bases loaded and one out against new Indians pitcher Dan Otero. On a 2-0 pitch, Russell unloaded on a swing and drilled a grand slam over the center field wall to give the Cubs a 7-0 lead.With the grand slam, Russell became the first player to hit one in a World Series game in over a decade. Chicago baseball fans will certainly remember the last player to achieve the feat, as it was Chicago White Sox first baseman Paul Konerko, who hit a grand slam during Game 2 of the 2005 Fall Classic.
Russell also drove Anthony Rizzo and Ben Zobrist home in the first inning, giving him a total of 6 RBI in Game 6 – tied for the most in a single game in World Series history.And at just 22 years old, he’s now the youngest player to hit a grand slam in a World Series game since Hall of Famer Mickey Mantle accomplished the feat in 1953.
You can imagine him as a kid dreaming of that moment. And it came true.
And that’s the way last night’s victory must have seemed for generations of Cub fans. Something they’ve dreamed of for their entire lives has finally come true.