Responding to a comment on “tribal jammin'”

I received this vituperative comment:

1. What your graph fails to take into account is who is wealthy? Of the top 20% of wage earners, 73% of their kids fall out of that top 20%. Of the bottom 20% of wage earners, 60% climb out of that 20% and 60% of those climb at least two quintile. This means that 36% of the kids of the poor make it to at least middle class. And only 27% of the kids of the ultra wealthy stay there.

This means that your graph is flawed by the lack of what it shows.

2. The theft from the rich to give to the poor has NEVER worked. That is blatantly false. Every time tax rates have risen, the federal revenue has fallen and jobs have gone away in the long run. Tax cuts have always led to job growth, less poverty and more federal revenue.

3. Just who do you think that you that you would advocate theft from people who have worked and saved to get where they are? Taking from one citizen to give to another is unconstitutional, it is theft and it is wrong.

And do not think that this comes from greed. I give to charity a LOT. But that is not a role of government, it is against the law and it is radically immoral.

The graph is not mine, per se. It is “owned” by ConnectThe DotsUSA.com, and is based on U.S. Census data and the Congressional Budget Office.

As for social mobility in the U.S. (and as compared with other countries’), it’s less here than in Canada, the UK, and the Nordic countries. You can read the studies here and here. I’ve written about this here.

The evidence indicates that federal revenues were greater under higher tax rates. More on this in a moment.

I have previously posted this chart, what I called the “millionaire’s tax.” It was an attempt to answer the question, “How have changing tax rates affected the millionaire (in real dollars)?”

We’ll note that the IRS collected far more taxes from the millionaire in the 40s through the 80s than it does today. But what about total revenues? Here’s another chart previously posted that shows federal spending and revenues as a percentage of GDP over time.

Again, we’ll note that both spending and receipts were moving upwards, and nearly in parallel, from the end of the war to what I call ‘The Great Divergence,’ roughly coinciding with Reagan’s first term but continuing through successive administrations. We see that receipts lagged significantly behind expenditures, creating budget deficits and accumulating debts. (The source of these data are to be found on the Bureau of Economic Analysis website, NIPA table 1.1.5.)

It’s difficult to conclude from the data that lowering tax rates “have always led to job growth, less poverty and more federal revenue,” as the commenter avers. Tax rates were cut considerably during G.W. Bush’s terms, and they were cut even more under Reagan. So how have those cuts affected poverty and jobs?

The New York Times reported last fall that more people are living in poverty than in the last 50 years, or as long as the Census Bureau has tracked that datum. This despite nearly record-low tax rates.

What about jobs? Have lower taxes created higher employment? (You can view a chart here that shows jobs created and lost under Bush II and Obama.)

Previously, I posted the following chart, which shows the unemployment rate and the marginal tax rate.

We see that unemployment was generally lower when the marginal tax rate was at its highest. (Data from BEA and Bureau of Labor Statistics.)

As for the economy under varying marginal tax rates?

The economy was growing steadily during the 50s, 60s, and 70s, despite marginal tax rates well above 50 percent.

Regarding the issues of “theft” and unconstitutionality, that’s a debate worth having, but I don’t think that I could dissuade my commenter, who evidently holds fast to his beliefs. I would suggest, however, that the rich do not live in a vacuum. Their wealth required an entire economy, infrastructure, and a robust judicial branch to safeguard property. At least that’s what I hear from Bill Gates, both senior and junior.

Speaking of divided houses…

The Snohomish County PUD, upon whose board I sit, actively insinuates itself in the legislative process. We have two highly capable staff members and a professional consultant monitoring and often influencing bills for our customers’ benefit. During the legislative session, the commission receives regular updates on the progress of pertinent legislation. And this takes a while; there are literally dozens of bills under consideration in Olympia that affect the utility in one way or another.

We all know that Washington state, like many other states, faces severe financial challenges. With a stuttering economy generating lower revenues, the overwhelming task before the legislature is cutting this or that program, since there is virtually no chance that Olympia could obtain a super majority necessary to raise taxes. Thank you, Tim Eyman.

Yet, legislators are busy drafting one bill after another having little, if anything, to do with the major problem at hand—balancing the budget. Why is this so?

I blame the proliferation of bills on the system of committees and sub-committees, of which there are several in Olympia. Each committee chair must feel compelled to do something—often, I suspect, for no other reason than to justify the existence of his or her committee.

State legislatures, like Congress, are giant sorting machines. At the top are very large hoppers, into which anything is tossed, no matter how big or small, significant or trivial. These bills emanate from the committees, and each committee is viewed by its members, and especially its chair, as having nothing really to do with any other committee. Thus, there is no collective sense of the general will or the good of the whole. It’s all about my committee.

Behind the scenes legislators, their aides, and myriad lobbyists engage in an endless exchange of back-scratching, pros and cons, and, occasionally, relevant and useful information. (That’s where the PUD comes in.) This process narrows the list—somewhat. The committee takes a vote. If the bill succeeds, it goes into another process, then another.

Only a small percentage of all those bills entering the hopper at a session’s beginning survive the process-gauntlet. Viewed graphically, the legislative process resembles a giant inverted pyramid, obscuring the sorting machinery.

The PUD board, thankfully, is too small to divide into committees. Therefore, we three commissioners work on every issue as a whole. And there aren’t’ that many issues. But each issue coming to the board’s attention, almost by definition, is significant. We listen. We talk. We vote. Simple, but very effective.

If this structure works well for a near-billion-dollar-a-year utility, imagine it applied to Olympia. I’ll explore this in a subsequent post.

Tribal jammin’

There’s little doubt that, in F. Scott Fitzgerald’s lingo, “the rich are different.” Indeed, today’s wealthy are so much different from the Rest of Us that they literally live in another world, a world occupied by more of the same, tending exclusively to their own, insulated from the vicissitudes of life threatening nearly everyone else. Since they control so much wealth, and because money equals political power, the fortunes and behaviors of the super rich are not likely to change, regardless of others’ needs or effects.

Referencing Charles Murray’s latest book (he of The Bell Curve notoriety), David Brooks suggests that the growing chasm that separates America’s castes is probably unhealthy. His cure?

I doubt Murray would agree, but we need a National Service Program. We need a program that would force members of the upper tribe and the lower tribe to live together, if only for a few years. We need a program in which people from both tribes work together to spread out the values, practices and institutions that lead to achievement.

If we could jam the tribes together, we’d have a better elite and a better mass.

What does this guy smoke? Is he channeling the Beatles’ “Come Together”? Kumbaya?

Yes, we are acutely segregated, and it wasn’t always so. Perhaps the national effort required to oppose the fascists and the Japanese had some influence on the post-war years, when there was less division. Besides, uniforms were class-neutral, though I suspect the wealthy were disproportionately represented in officers’ ranks. Emerging from that great conflict Americans must have felt a strong sense of unity, maybe even an understanding that, while most would not graduate to wealth, there were ample opportunities for self-improvement.

Then came the Great Divergence, the product of persistent efforts by institutional wealth. The rich would be taxed less and given free rein to exploit and enhance their own fortunes, which they did—big time.

Nor should we ignore the complexion of today’s military, populated by mostly poor and desperate men unable to find meaningful work at home. Whatever tribal mixing the military affords vanished with the advent of voluntary service.

But let’s ponder this commingling a bit further. Could socioeconomic divisions weaken by putting rich and poor in the same room?

The landmark case of Brown v. The Board of Education, which abolished “separate but equal,” gave birth to massive bussing of school children. Mixing the races in classrooms, it was thought, would gradually erode the saliency of color. Could an African-American have been elected president without these integration efforts, however racially divided we still are?

In his book Unhealthy Societies: The Afflictions of Inequality, British researcher Richard Wilkinson briefly chronicled what happened to the small Pennsylvania town of Roseto, Named after an Italian village, from whence its initial population emigrated, Roseto served as an object of sociological study. The town’s 1,600 inhabitants were surprisingly healthy, with low mortality and morbidity rates. Their positive metrics greatly surpassed those of nearby towns. Why?

Researchers observed that the town was remarkable for its “close family ties and cohesive community relationships.” Wilkinson quotes one study:

During the first five years of our study it was difficult to distinguish, on the basis of dress or behavior, the wealthy from the impecunious in Roseto. Living arrangements—houses and cars—were simple and strikingly similar. Despite the affluence of many, there was no atmosphere of “keeping up with the Joneses.”

Then in the 60s Roseto changed, and so did its inhabitants’ health. Again quoting from the same study Wilkinson writes:

The gradual abandonment of the old ways in Roseto…was evident in the emerging preoccupation with materialistic values that accompanied increased education and growing affluence…Their attraction to status symbols—expensive clothes, large automobiles, and elaborate new homes furnished on the advice of interior decorators—reflected the beginning [of the] breakdown of former egalitarian standards among Rosetans.

Thorstein Veblen called this behavior “conspicuous consumption”: ones’ wealth must be telegraphed. Thus, economic differences in Roseto, long rejected by its population, became palpable. Eventually everyone knew who was rich and who was poor and who was somewhere in between. (One hypothesis for the cause of the unraveling of social mores: television, which became abundant simultaneous with the emergence of conspicuous consumption.)

As social cohesion gave way to ostentation, the townspeople’s mortality and morbidity rates inched upwards. They are now “normal.” Somewhat surprisingly, Wilkinson found that the decline in health was experienced by both rich and poor. His conclusion: inequality is bad for everyone’s health.

But short of a “National Service,” what can or should be done to staunch runaway inequality in America? How could we make the rich poorer and the poor richer?

Certainly tax rates could be modified by making them more progressive. (That would also increase government revenues, which reduces federal debt.) But to make the poor richer would require Congress to use the extra dollars extracted from the wealthy to directly benefit the poor and middle class. This has been tried and found to work. Just look at the 50s and 60s.

I suppose that cities could reduce or eliminate segregated zoning. In Everett, where I live, planners have carved out areas exclusive to multi-family housing. Casino Road, for example, has become a ghetto of the poor and near-poor. The New Urbanists speak of mixed-use planning, integrating disparate housing types, businesses, retail, restaurants, public transportation hubs, and recreational opportunities—preferably all within walking distance. Would such patterns of development yield the kind of tribal jamming of which Brooks speaks? Could Everett, say, ape the original Roseto? Or does size matter?

The most-likely-to-succeed option would be robust, across-the-board jobs-creation strategies. The U.S. was once a major manufacturing nation, and manufacturing—along with other blue-collar operations—employs people who lack college educations. My father worked most of his adult life at Standard Oil in Richmond, Calif., at jobs that did not require degrees beyond high school, though he was enrolled in college before Pearl Harbor. Nevertheless, he was still able to provide adequately for his family of five children and have money left over for a comfortable retirement. He was also a proud member of the Oil, Chemical, and Atomic Workers union.

Abraham Lincoln declared that a “house divided cannot stand” and that the U.S. could not be a nation half free and half slave. Can we long survive as a nation of extreme wealth and poverty, with a narrowing strand in-between?

The above suggested strategies are not mutually exclusive. Nor are they exhaustive. But something must be done.

Were it so

Journalism professor Thomas Edsall believes that the current version of the Republican Party, with its embrace of Christian fundamentalism, a nasty Tea Party, and, perhaps strangely, One-percenters, may not be long for America. Writing for the New York Times, Edsall says this following the Republican candidates’ up-and-down dance with the GOP faithful:

What does this political volatility say about the conservative movement and the Republican Party?

First, that although the Christian right is now in decline, it remains powerful, making up roughly 35 to 40 percent of the Republican primary electorate. But its preoccupations are less and less those of Americans taken as a whole. The Christian right might become increasingly marginalized and as the movement shifts to the periphery, it becomes more of a liability to the party than an asset.

Second, the Republican Party will, over time, struggle to develop a coherent moral stance that does not conflict with the leftward drift, both in values and behavior, of the electorate.

I was pleasantly surprised by this read, in particular the part about our nation’s “leftward drift.” For every gay-marriage measure adopted (and there aren’t all that many yet) there’s an Indiana becoming a right-to-work state, with Michigan legislators disappointed that their state wasn’t first, or a tougher anti-immigration law in Alabama, or legislation to disenfranchise voters.

But Edsall is the professor. He concludes:

The larger issue facing the Republican Party is how it will respond to political market forces, to the pressure of changes in public opinion. The party could open up beyond its core believers to accommodate old-school Republican moderates and hold on to its libertarians and still have decent size, strength and power.

But the country is going through a profound restructuring in moral and economic thinking and the danger for Republicans is that their current coalition might become obsolete. If the party doesn’t adapt, the alternative is that its power centers — the Christian right, anti-immigration forces, and proponents of policies that benefit the affluent at the expense of the less well-off — will refuse to adjust, in which case the party risks going the way of the Studebaker.

Were it so.

Morality: maybe it’s a matter of chemistry

Peter Singer, the oft-controversial philosopher, cites a growing body of research that suggests empathy may be influenced, if not determined, by our bodies’ biochemistry. Some got it, some don’t.

Yet, most of us, I suspect, at least feel a slight tug when encountered by someone asking us for “spare change,” typically for “the bus.” Since I literally have no coins in my pocket, I generally respond in the negative when approached by such poor souls. But it bothers me, especially pushing a full cart of groceries through the parking lot to my car. I’ve just spent more than I should on food and household sundries, but I don’t have a buck for a schmuck?

One day I was on my walk when a fellow approached me on the sidewalk. He said that he had Type II diabetes, his blood sugar was low, and could I give him a little “change” so that he could put some food in his belly? I told him, in truth, that I had no change, on the assumption that change means coins. I continued walking, but felt really awful about my refusal. So, after a block or so, I grabbed a dollar out of my wallet, intending to reverse course and hand over the money to the reportedly suffering pedestrian. However, I couldn’t find him. I felt relieved that I had changed my mind, but uncomfortable that the guy might go into diabetic shock or whatnot. It occurs to me that I may have had the change of heart because I, too, am Type II diabetic—officially, at any rate.

Since I live in an urban setting, chance encounters with beggars (the official term, according to the dictionary) are frequent. And each occasion gives me pause. It seems hollow to rationalize my refusals by appealing to the change-equals-coin calculus. Yet, should I remove my wallet from my pocket, would it be ripped from my hands? I’ve never found out.

Singer has frequently employed a scenario to make his utilitarian arguments. It involves walking past a shallow pool into which a small child has fallen. Since there is no obvious harm to us by jumping in to effect a rescue, we should do so, right? Singer ups the ante a bit when he further assumes that you’re wearing an expensive suit that would surely be ruined by the water. What now? Do you still make the splash to save the child?

Most of us, I dare say, would surely say yes to the simpler example, and probably yes to the second, no doubt because this is only a thought experiment of sorts; we’re not actually having to make the choice in reality. Singer goes on to argue that saving the child with low risk to ourselves is morally equivalent to saving an African child from starvation. We could donate a small amount of our money to reputable charities (those with a proven track record of getting money to their intended recipients) that could save one if not many lives. That we don’t do the latter suggests that there is something about proximity: actually observing a threatened child induces us to sacrifice, however slight.

Singer wants to consider how or why we differ when placed in the same or similar circumstances. Why would some of us jump in and others not?

Researchers there took two rats who shared a cage and trapped one of them in a tube that could be opened only from the outside. The free rat usually tried to open the door, eventually succeeding. Even when the free rats could eat up all of a quantity of chocolate before freeing the trapped rat, they mostly preferred to free their cage-mate. The experimenters interpret their findings as demonstrating empathy in rats. But if that is the case, they have also demonstrated that individual rats vary, for only 23 of 30 rats freed their trapped companions.

The causes of the difference in their behavior must lie in the rats themselves. It seems plausible that humans, like rats, are spread along a continuum of readiness to help others. There has been considerable research on abnormal people, like psychopaths, but we need to know more about relatively stable differences (perhaps rooted in our genes) in the great majority of people as well.

Suppose that what distinguishes our moral response is a particular biochemical makeup. Singer:

If continuing brain research does in fact show biochemical differences between the brains of those who help others and the brains of those who do not, could this lead to a “morality pill” — a drug that makes us more likely to help?

Now let’s take this a bit further. Those of you who are regular readers of this site have been exposed to my tirades against present-day Republicans. I’ve accused them of lacking empathy, or even sympathy. My logic could be flawed, but it seems to me that if one is empathetic, one would support policies more consistent with those at work in social democracies. We would prefer that no one suffer unnecessarily, especially through no fault of their own.

Well, there are lots of people among us who lack a job and health insurance. They may even lack shelter and sufficient food. They could be the people we encounter on the streets asking for “spare change.”

I submit that we would be a better, healthier society without the miserable extremes of wealth and poverty. Yet, we don’t seem to have enough people with the right genes to make that a reality.

But I would prefer to live in a country that took care of its own, as The Boss intones. So, researchers, make haste to create that pill. Better yet, we can put the chemicals in the water for all to drink.

After you. No, after you. Such a nice, pleasant world it would be.

Hamelin at the piano

We may recall a line from the movie The Natural. The character played by Barbara Hershey asks “Roy Hobbs”: “Are you the best that ever was?” He responds with a golly-shucks affirmative, whereupon Hershey shoots him, abruptly cutting short his career.

Last Saturday night I sought pleasure, not from baseball but from music. To wit, I joined a full house at Benaroya Hall to hear a pianist who may be “the best that ever was.”

Marc-André Hamelin played Chopin’s Second Concerto. “Played” hardly does Hamelin justice. Let me offer a few observations.

I have witnessed live performances of pianists. Invariably, they appear to be anxious, if not nervous. After arranging themselves in front of the piano, they typically press their palms against their trousers, and often rub them against the fabric as if to wipe off perspiration.

Not Hamelin.

He verily glides on stage, gently seats himself on the padded stool (no makeshift chair modified by his father, à la Glenn Gould), raises it a bit with a few turns of the nob, then sits quietly with his hands folded in his lap. There is no hint of nervousness or sweat. This man is cool, calm, and collected.

Then he begins playing. Oh, what magnificent playing. No matter how difficult the passage or complicated the fingering, Hamelin has full command of this musical instrument, from which he coaxes magnificent sounds. Perfectly in sync with the Seattle Symphony and its new conductor, Ludovic Morlot, Hamelin lets his audience focus on the music, so much confidence does he instill in the listener; we’re never left to worry about wrong notes or jerky transitions.

The audience expressed its appreciation by according Hamelin with three standing ovations of exuberant applause. He extended the favor by playing an encore, a Liszt transcription of a Chopin piece. (I can’t recall the title.) The orchestra members sat in rapt delight, as if the, too, were in the presence of greatness.

Bravo!, Monsieur Hamelin

 

Austerity and the output gap

In a previous post I wrote about our “problem,” namely that GDP has yet to return to its pre-recession growth rate. I included this chart showing the difference (in billions of real dollars) between the prior trend and where we are today.

To be sure, for the last quarter of 2011 real GDP had inched past the pre-recession peak, but only barely. And one could argue that the trajectory of current GDP growth is roughly the same as it was before the collapse of the housing bubble. But trend lines can deceive. There is much pain and misery embedded in the output gap, which had surpassed $16 trillion from the last quarter of 2007 to the last quarter of 2011.

The average gap for these quarters was $1.3 trillion, suggesting that a federal stimulus package should have been at least that much, and most, if not all, of that should have been in the form of spending to build and fix things so as to put people back to work, especially in the construction sector, which was hit hardest by the bubble’s collapse. Yet, I am not sanguine about Congress even coming close to passing appropriate legislation.

The reason for such resistance is mostly ideology and politics. Of the former, conservatives believe that government is at best a necessary evil, and works well only when skinny. But politics during this election year trumps everything, with both sides knowing full well that the state of the economy matters most in determining who controls the White House.

In Europe, it appears to be ideology that reigns, as Paul Krugman avers in his column today. The Eurozone is in trouble, facing a likely recession. Krugman:

And it’s a failure, in particular, of the austerity doctrine that has dominated elite policy discussion both in Europe and, to a large extent, in the United States for the past two years.

Krugman has repeatedly condemned what can be construed as willful ignorance on the part of policy elites, especially, and his chosen profession of economics. He returns to this motif:

Haven’t we learned a lot about economic management over the last 80 years? Yes, we have — but in Britain and elsewhere, the policy elite decided to throw that hard-won knowledge out the window, and rely on ideologically convenient wishful thinking instead.

Krugman points his woeful finger at several individuals. He singles out British prime minister David Cameron, whom he quotes: “Those who argue that dealing with our deficit and promoting growth are somehow alternatives are wrong. You cannot put off the first in order to promote the second.” Britain’s economy has been in a slump longer than the Great Depression. Krugman suggests that the government’s cutting the budget prolonged rather than shortened the economic doldrums.

The Princeton professor has been particularly outraged by the sayings and doings of  Jean-Claude Trichet, the former president of the European Central Bank:

“I firmly believe,” declared Jean-Claude Trichet — at the time the president of the European Central Bank, and a strong advocate of the doctrine of expansionary austerity — “that in the current circumstances confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”

Both Trichet and Cameron have been startlingly wrong. Worse, they have wielded the power to effect their beliefs. Trichet raised interest rates, arguing that doing so was necessary to the well-being of the Eurozone.

Krugman places no faith in the “confidence fairies” syndrome. While it’s evidently true that business leaders lack confidence in the state of the economy, the reasons have little to do with government account balances. Rather, they are reacting to aggregate demand constraint. Krugman:

Such invocations of the confidence fairy were never plausible; researchers at the International Monetary Fund and elsewhere quickly debunked the supposed evidence that spending cuts create jobs. Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas.

Among the Very Serious People, a favored sardonic expression of Krugman, he cites David Broder, often judged the “dean” of political pundits. He’s certainly been around long enough to compete for that title.

Thus in October 2010 David Broder, who virtually embodied conventional wisdom, praised Mr. Cameron for his boldness, and in particular for “brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.” He then called on President Obama to “do a Cameron” and pursue “a radical rollback of the welfare state now.”

To his credit, Obama did not “do a Cameron.” But his stimulus package was far too meager to offset the output gap, and he is surely being denied a second bite of the fiscal apple.

We are experiencing the most toxic mix of Scrooge-like ideology and naked political posturing. I’m talking about the Republicans, of course, who are content to throw the economy under a bus, rather than do what’s right to halt the lingering misery of so many millions.