Mitt Romney Says the Thing That Is

Mitt Romney says more income inequality is “worse.” He probably doesn’t mean it, but his saying so is a BFD.

I notice that progressive bloggers and Tweeters are pointing and laughing at poor little Mitt Romney for his sudden outburst of populism. But it seems to me that, as pleasant as laughter is, what’s really called for is a smile of grim satisfaction. He has told the truth – albeit probably insincerely – and there’s every reason to hope that he and his party will come to regret it.

It is among the core Blue-Team beliefs  that the current level of income inequality is unjust, inefficient, and socially destructive, and that public policy should attempt to reduce the degree of inequality.

The Red team – up until today – has believed, or at least said, that market-driven inequality reflects natural differences in economic contribution and is therefore just, while taking from “producers” and “job creators” and giving to the “47%” is unjust, and that the great inequality of outcome maintains incentives and thus contributes to efficiency. They love to criticize redistributive policies as “class warfare” and emphasize the importance of making the pie bigger rather than carving it up more equally, along with (formal) equality of opportunity rather than equality of result.

So when Mitt Romney describes rising levels of disparity – the rich getting richer while the number of poor people increases – as “income inequality getting worse,” he is making a major rhetorical concession to the good-guy side.

Of course he doesn’t really believe it, but hypocrisy is the tribute vice pays to virtue. Once the GOP concedes the claim that, from where we stand now, more equality would be an improvement, I don’t think it’s hard for the Democrats to win the argument about whose policies would do better at moving money from the rich to the middle class and the poor.

Wherein the Nonprofiteer Does a Literature Review and Endorses an Increased Minimum Wage

Over on The Nonprofiteer, I demonstrate my recovery from the Chicago School of economics by reviewing arguments for (and even one against) an increase in the minimum wage. Not sophisticated but (I hope) clear.

The Affluenza Defense


Ethan Couch

Ethan Couch, a Houston 16-year-old, was given probation after having killed four people and grievously injured another in a drunken driving crash. (NYT account here.) At trial, a psychologist offered what’s subsequently been called the “affluenza defense,” suggesting that Couch should not be held fully accountable, since his upbringing in an extremely affluent family had made it difficult for him to develop the normal sense of responsibility for his actions.  The judge in the case rejected the prosecution’s call for a 20-year sentence in favor of probation and a stint at an expensive California rehab facility. Although teenagers responsible for vehicular deaths often escape prison terms, the decision provoked widespread outrage about how the legal system unjustly favors the wealthy.

The outrage provoked by the judges’s decision was totally justified, but the psychologist’s testimony about the effects of growing up in affluent circumstances was also essentially correct. That last fact should not have played any significant role in the sentencing process, but it’s highly relevant for broader questions of social and economic policy.

An emerging body of psychological research shows that people in relatively advantaged positions do indeed feel entitled to behave in many ways that would be considered off limits for ordinary people.  If you have a few minutes, watch this clip of Paul Solman’s interviews with some of the psychologists who’ve done this troubling work. There’s a reasonably solid foundation, then, for believing that someone who grew up in Ethan Couch’s circumstances would tend to have a diminished sense of responsibility for his actions.

But it would be a mistake, I believe, for the justice system to treat him differently for that reason. The longstanding debate on free-will offers hints about how we might think about this issue.  Children at birth differ enormously in ways that affect their adult behavior, often dramatically. Those who exhibit diminished capacity for self-control as small children, for example, are substantially more likely than others to commit crimes as adults. So in some meaningful sense, people born with such deficiencies are less responsible for their crimes.  The same reasoning would logically apply to psychological tendencies shaped by environmental factors.  People who were poorly brought up and misbehave as adults really are less culpable than people who were raised well yet misbehave in similar ways.

But except in extreme cases, society has wisely decided that our justice system should largely ignore such differences.  The logic is that without a reasonable prospect of being punished for crimes, many more people would commit them. Even though some people are clearly more tempted than others by criminal opportunities, diminished moral inhibition is accepted as a mitigating factor only in the case of extremely mentally ill or handicapped individuals.

It’s an imperfect solution, to be sure.  But the alternative would be social chaos.  Ethan Couch’s upbringing may well have made him less able to embrace the idea that bad conduct could produce bad consequences.  But few of us would want to live in a society in which that fact exempted him from responsibility for harming others, because a society like that would have so much more crime and disorder. Warren Buffett and countless other rich people have demonstrated that it is possible to raise morally responsible children even in families with almost limitless wealth.  Society has no interest in sending a message that wealthy parents no longer need take that obligation seriously.

But rejecting the notion that affluenza exempts people from their responsibility to obey the law does not require us to reject evidence that extreme income inequality often promotes socially harmful behavior. That’s not a reason for lenient sentences, but it’s yet another reason to favor policies that would slow the current rapid growth in income inequality.

Wage subsidies

Unlike most people called “conservative,” Reihan Salam actually cares enough about income inequality to propose actual policies to shrink it..

Reihan Salam is often identified as a “conservative,” but for my money anyone thinking hard about how to reduce income inequality is playing for the Blue Team. Wage subsidies – variations on, and expansions of, the Earned Income Tax Credit – seem like an excellent idea.

One question is whether any actual Republican elected official would support such a thing. GOP resistance to extending Medicaid to the working poor, and GOP enthusiasm for cutting Food Stamps, provide discouraging signals.

A second question is whether, or when, libertarians who care about inequality decide to start calling themselves liberals and voting Democratic.

Charitable giving, radical utilitarianism and democracy

Over on The Nonprofiteer, I grapple with the justification for philanthropy which fails (as mine does) to increase Disability-Adjusted Life Years in the developing world. Not entirely satisfied with my arguments and would welcome any and all assistance.

Public school funding: perhaps the public could help out?

I hold forth on/as the Nonprofiteer on the idiocy of our debating who should pay for public schools, and the extreme idiocy of our thinking it swell that the cradle of a democratic society should be controlled by individuals whom nobody elected.

Financial stress reduces effective IQ

This is a huge finding.

This seems like a breakthrough study, and Sandhil Mullainathan’s name on the paper guarantees that it’s methodologically as tight as it could be. Note that one of the two studies is an experiment, while the other is a before-and-after on a fixed set of subjects,* eliminating any question about which way the causal arrow points.

Mullainathan comments that the 13-point measured IQ gap between Indian peasants under pre-harvest financial stress and the same people with a post-harvest cushion is about the same drop you’d get after missing a night’s sleep. It’s also about the same as the measured black-white IQ gap in the U.S.; in addition to having lower incomes, African-Americans also have much lower wealth (even controlling for income) and thus face much greater financial stress.

Kelly is right: The poor are different from the rest of us primarily because they have less money, and providing money, while not the full solution, is an essential piece.

*[Updated to correct an error spotted by Keith in comments.]

Poverty, Meet Cash Transfers

In my guise as The Nonprofiteer, I suggest that the solution to poverty might be money.

dorothea lange depression era photographs 13

Alert the media.  No, really.

On Blaming Black Leadership

This fine piece in In These Times  reminds us how instrumental Federal policies on homeownership and road construction were in killing Detroit, and gives the lie to those who want to blame the city’s bankruptcy on corrupt leadership–specifically, corrupt Black leadership.

Certainly there were, and are, Black leaders whose personal weaknesses interfere with the progress of the entities they seek to lead; but the pattern of blaming Black leaders comes from the same bag of racist tricks as the suggestion that the President isn’t really an American because he has black skin.

Detroit is not struggling because its leaders, or its people, are Black.  Its troubles lie at the door of white legislators who made abandoning cities a winning proposition for white families, and white regulators who contributed to the same flight, and white car company executives who decided they owed nothing back to the city of their birth.

To claim otherwise is simply to blame the victim.

 

 

What Detroit means

The first thing I thought about Detroit is that the state’s appointment of a receiver demonstrated the Republican governor’s profound indifference to the democratic process of a Democratic city, not to mention a white governor’s profound indifference to a black city.   This may be true, but it’s also true that Detroit’s finances are such a catastrophe that, like New York in the 1970s, it seems to need an outsider to get its house in order. It helps that the trustee is African-American, though not very much: even temporary government without the consent of the governed should cause us alarm.

The second thing I thought about Detroit is that selling off the collection of the Detroit Institute of Art, which the trustee estimates would be sufficient to retire all of the city’s debt, is the best of a number of bad options. Museums nationwide are hyperventilating at the prospect, but they also think it’s sensible to keep on hand huge numbers of items that no one ever sees.  I don’t quarrel with the need to have a deep collection for research purposes, but I also don’t see why it’s considered bad form verging on unethical to sell the parts of the collection you’re not using in public to sustain the parts of the collection you ARE using in public, and at the same time not coincidentally making the sold pieces available to the public, albeit in a different location.

If there had been a Great Fire of Detroit, and the whole city destroyed, no one would argue that recreating the city’s art collection should take priority over food and shelter for the city’s people.  The years of financial mismanagement have incinerated Detroit just as surely as a physical fire; why shouldn’t we pay more attention to basic needs than to cultural institutions?

And isn’t the whole function of assets to provide financial security when income doesn’t suffice? Again, I wonder about the racial composition of those who champion the inviolability of the collection as against the racial composition of those who think it might be necessary to dispose of it. The state’s Attorney General has opined that the city may not sell them because they’re held in trust for the citizens.  But “The United States shall guarantee to every State in this Union a Republican Form of Government,” and I don’t notice anyone’s raising a ruckus about the loss of that part of our patrimony.

The third thing I thought about Detroit is that the bondholders’ interests are being given absolute priority over the interests of current and former employees, whose pensions are at stake. This is the case in Illinois as well, where at least some portion of the pension “crisis” could be solved by refinancing the debt and stretching out repayment but where that solution is not even considered because the bondholders don’t like it. I understand the value of the municipal bond market to cities’ ability to expand infrastructure but municipal bond investors are investors and should be prepared to accept some pain when they toss their dollars into what’s obviously a money pit.

And the fourth thing I thought about Detroit is that it’s Americans’ closest analogue to what’s casually referred to as “the European debt crisis,”  throughout which salvaging the Euro has meant satisfying bondholders at the expense of people who’d like to work or collect their pensions.   Very few commentators seem aware that the real crisis is one of self-government (or its destruction), or that the Germans have managed to do through economics what they couldn’t do through war, that is, run Europe.  When externally-imposed austerity hit Greece, all I could remember was the bumper sticker from the era of the junta: “Greece: Democracy born 508 BC, died 1967 AD.”  Or, this time around, “reborn 1974, killed again 2011 or -12 A.D.”  As the saying goes, same s**t, different day.

Back to Detroit: if I were trustee, I’d sell off DIA’s assets in a heartbeat and use the proceeds to protect employee pensions. If there was anything left for the bondholders, fine; if not, too bad: it’s the pensioners who paid their share and are entitled to what they were promised. Even after years of trashing public employee unions (brought to you by the Heritage Foundation and other fronts for wealthy people who don’t like to pay taxes or see working people make reasonable money), there must be some court somewhere willing to recognize that the obligation of contracts shall not be impaired.

Of course, I would never be chosen trustee, but that’s not the point. The point is, my solution is what would happen if Detroit were still governed by its people. Detroit: Democracy died 2013 A.D.