Conservative Morality In Action

Via Jared Bernstein, we learn about how the sequester has made us a stronger country:

At least two Indiana Head Start programs have resorted to a random drawing to determine which three-dozen preschool students will be removed from the education program for low-income families, a move officials said was necessary to limit the impact of mandatory across-the-board federal spending cuts…

Columbus resident Alice Miller told WTHR-TV that her 4-year-old son, Sage, was one of the children cut from the program. She spoke about how the program has helped her son advance academically and socially…“He loves school,” Miller said. “I don’t know how I’m going to tell him he’s not going back.”

To this, Bernstein responds, “If that doesn’t break your heart, you might want to get to the emergency room to see if it’s still there.”  I part company with him somewhat on this.  This story doesn’t make me heartbroken: it makes me angry.  I am sad for the little boy who now cannot go to school, which he loves.  But I am outraged at those who think that this bears any relationship to justice.  Sage Miller can’t go to school because Republicans think it is more important to protect the carried-interest loophole.  The supposedly religious Christians who think we need to bring God into public policy might want to review the story of Nathan the Prophet after they finish demonizing gays and lesbians.

It also outrages me as a taxpayer.  We are injuring these children, and that will injure our country in the future.  You don’t have to be a bleeding heart, or Nathan the Prophet, to object to this.  You just have to be a patriot.

 

Progress

What counted as fantastic luxury in 1944? A bathroom and a refrigerator.

George Orwell, writing in 1944:

No less than 20,000 English girls … married American soldiers and sailors … . Some of these girls are being educated for their life in a new country at the ‘Schools for Brides of U.S. Servicemen’ organized by the American Red Cross. Here they are taught practical details about American manners, customs and traditions—and also, perhaps, cured of the widespread illusion that every American owns a motor car and every American house contains a bathroom, a refrigerator and an electric washing-machine.

Imagine such luxury! Houses with bathrooms, and even refrigerators!

I can’t entirely agree with Scott Winship: people acclimate to living standards, so the growth rate matters as well as the absolute level. And stagnation makes the world look more zero-sum, which is likely to make politics difficult. (Since “loss aversion” makes any reduction especially painful.) Still, it’s worth remembering that, as Keynes predicted, the sheer urgency of the economic problem declines with absolute income, and absolute income has grown enormously.

Why Inequality Matters

Screen Shot 2013-02-01 at 2.08.03 PM

In his most recent post, Matthew Kahn describes me as someone who believes that people want to keep up with the Joneses.  But I’ve never felt comfortable with that way of characterizing people’s concerns about relative income, because of its apparent implication that inequality wouldn’t matter if only people could learn to ignore negative emotions like envy and jealousy. Yet relative income matters for a host of reasons that have nothing to do with such emotions.  That’s because our ability to achieve important life goals often depends strongly on how much we spend in relative terms.

If you’re applying for a job, for example, you’re advised to look good when you go for your interview. But looking good is an inescapably relative concept. If other applicants spend more on clothing, your best bet may be to spend more as well, even though your likelihood of a callback won’t rise if all spend more.  Yet if others spend more and you don’t, your odds will fall.

Similarly, the relative amount you spend on housing affects your ability to send your children to good schools, because a good school is also an inherently relative concept. In almost every local environment, the good schools tend to be those located in more expensive neighborhoods. To send your children to one, you must outbid others for the relatively expensive housing in the neighborhoods they serve.

Failure to recognize the instrumental role of relative spending explains why many fail to recognize that rising income inequality has imposed large economic costs on middle-income families. The problem stems from a multi-step process that Adam Seth Levine, Oege Dijk, and I have called expenditure cascades. The first step occurs when people at the top spend more, which they’ve been doing simply because they have so much more money. When they build bigger mansions, they shift the frame of reference that shapes demands for those with slightly lower incomes, who travel in overlapping social circles.  The near rich respond by building bigger houses as well, which shifts the frame of reference for others just below them, and so on, all the way down the income ladder.

This cascade is the most parsimonious explanation for the striking fact that the median new single-family house in the United States, which stood at 1,570 square feet in 1970, had grown to more than 2,300 square feet by 2007.  That growth cannot be explained by growth in the median wage or median family income, which changed by much smaller amounts during those years.

What changed dramatically was the context in which the median family’s housing choice was made.  Any family that failed to rent or purchase a house near the median of its local price distribution would have had to send its children to below-average schools.  So a family that was determined not to see its children fall behind had little choice but to keep pace with what similarly situated families were spending on housing.

The figure at the top of this post (an updated version of one described in more detail here) shows how much more difficult keeping pace has become for the median family. Taking the implicit monthly cost of a house to be roughly one percent of its purchase price, it plots the number of hours each month the median earner would have needed to work to meet that cost during the last 60 years.  During the immediate postwar decades, when the income distribution was stable, the median burden of homeownership varied little, and was actually slightly lower in 1970 (41.5 monthly hours of work) than in 1950 (42.5 hours).  But as income inequality began rising sharply in the 1970s, the toil index rose in tandem. By 2010, the median worker had to work 82.9 hours a month—almost twice as many as in 1970—to put her family into a house of median price.

Housing is of course not the only expenditure that is sensitive to context.  Explosive income growth at the top has also spawned similar expenditure cascades for items such as clothing, gifts, birthday parties, and other celebrations to mark special occasions. In these domains as well, the median earner must now spend more than before or else endure significant adverse consequences of one kind or another.

Of course, Matthew Kahn would be correct to note that not all such spending has been purely wasteful.  Although the utility conferred by a diamond ring may depend largely on its relative size and quality, for example, even the lone resident of a desert island might take additional pleasure in the way an absolutely larger stone refracts the light. Yet surely much of the extra spending of recent years has been a relatively inefficient source of extra utility.  The average American wedding now costs almost $30,000, nearly twice as much as in 1990. Does anyone believe that the extra spending has made couples and their families any happier?

Higher outlays of this sort crowd out other forms of spending that would produce real improvements in the quality of life.  If houses grew less rapidly, for example, we could invest in mass transit systems that would yield shorter, less stressful, commutes that would free up more time to spend with friends and family.  Or we could support medical research and safety investments that would reduce premature death.  The list goes on.

Inequality apologists like to remind us that the poor now enjoy many conveniences that even the very rich didn’t enjoy earlier.  But saying that rising income inequality has imposed enormous costs on middle-income families is not the same as saying that such families were better off a century ago.  Absolute income also matters, and everyone is indeed better off in many ways because it is so much higher now than in the past.

Saying that inequality has been costly is also not the same as saying that the optimal amount of inequality is zero. Few people would work if everyone were guaranteed an equal share of the national income irrespective of effort, in which case we would all be poor in absolute terms.

Yet precisely because relative spending power is so important for instrumental reasons, even very small absolute income differentials are sufficient to stimulate high levels of effort. There is no credible evidence that national income would fall if income disparities were to shrink substantially from today’s levels, and there is actually considerable reason for believing that it would be higher.

Many of the substantial costs associated with high income disparities are thus completely gratuitous. When the wealthy all build bigger mansions and stage more elaborate parties, they succeed only in raising the bar that defines adequate.  The associated waste is all the more troubling because it would be easy to eliminate so much of it with some simple changes in tax policy.

An Interloper Offers Weekend Film Commentary: Les Miserables

Based on its vivid colors and exaggerated gestures, one is tempted to dismiss Academy Award Best Picture nominee Les Miserables as a cartoon. But cartoons have clarity of line and a sense of direction, not to mention momentum from frame to frame. This movie is more like the result of dropping the Sunday funnies in a mud-puddle: smeared with detritus and coming apart at the seams.

Start with the source. The musical itself, though much beloved by aficionados of Glee and Smash, takes Victor Hugo’s outraged critique of post-revolutionary France and turns it into a parade. While purporting to address the depredations and degradations of poverty, Cameron Mackintosh’s production was staged so elaborately that it depended on $150 tickets to keep it running. Thus there was the awkward matter of cheering gaunt poor people on the barricades from plush seats in the orchestra.

Happily even overpriced movies like this one cost only $10 or so to see, reducing the contradiction between medium and message. But director Tom Hooper (The King’s Speech) and his collaborators have replaced that one difficulty with a raft of their own: frying pan, meet fire.

Continue reading “An Interloper Offers Weekend Film Commentary: Les Miserables”

Something Mitt Romney Almost Got Right

Perhaps the most outrageous part of Romney’s deservedly-infamous speech to the $50,000-a-plate dinner was his assertion that he inherited nothing from his upbringing.  After all, he was only the son of the CEO of American Motors and then the Governor of Michigan, who went to one of the country’s best prep schools and then to Harvard (where, as Andy Sabl has reminded us, he made ends meet by selling stock): how in the world could anyone think that that gave him anything?  He might be as delusional as his running mate, which is saying a lot.

But in that speech he did say one thing that is undeniably true (even if he said it to make an absurd point):

Frankly, I was born with a silver spoon, which is the greatest gift you can have: which is to get born in America.

Absolutely true.  In today’s world, a child’s life chances are pervasively determined by which country she is born in.  Being born in the United States or the rich countries of Europe is tantamount to winning life’s lottery compared to the rest of the world.  Martha Nussbaum a few years ago noted that

A child born in Sweden today has a life expectancy at birth of 79.7 years. A child born in Sierra Leone has a life expectancy at birth of 38.9 years. In the USA, GDP per capita is US$34 142; in Sierra Leone, GDP per capita is US$490. Adult literacy rates in the top 20 nations are around 99%; in Sierra Leone, the literacy rate is 36%. In 26 nations, the adult literacy rate is under 50%.

Suzy Khimm got the numbers last year while reporting on the Occupy Movement’s claim to be the “99%.”  True, but only in the United States:

Those at the 34th percentile of income in the United States are at the 90th percentile globally, and those at the 50th percentile in the United States are at the 93rd percentile globally. Even the very poorest Americans — those at the 2nd percentile of income in the United States — are at the 62nd percentile globally.

And this adjusts for relative price levels.  Recently the United Nations Development Programme estimated that hunger and malnutrition affect more than 900 million people worldwide — the overwhelmiing majority of them in the Global South.

Note, of course, that using Romney’s words in this way shows the absurdity of his message.  Romney was attempting to make the Social Darwinist claim that the distribution of wealth is a function of virtue.  In fact, it is anything but: it is essentially a function of luck. 

If anything, the Republican Party is doing its best to clamp down on any attempts to change that: the egregious farm bill written by the House GOP leadership increases farm subsidies and removes the small measure of food aid reform contained in the last farm bill.  If the “deficit chickenhawks” in the Republican Party get their way, the majority of your food aid tax dollars will continue to go to wealthy US agribusiness and shipping interests, essentially serving as a way to dump food into the Global South and undermine local agriculture.

None of this, of course, should be taken as a reason to stop fighting against inequality in the United States.  But inequalities between countries have grown exponentially in the last hundred years: they are now simply too massive to be ignored.  US aid policies need to be the next frontier of a vigorous progressivism.

Poor little rich girl neglects to mention the stock portfolio that paid for the tuna fish

Ann Romney’s convention speech: doubling down on the absurd premise that living frugally on vast inherited wealth counts as struggle.

I couldn’t believe it when I heard that Ann Romney’s convention speech doubled down on a gaffe from her past: the claim that she and Mitt had very little money when they were going to college:

We were very young. Both still in college. There were many reasons to delay marriage, and you know? We just didn’t care. We got married and moved into a basement apartment. We walked to class together, shared the housekeeping, and ate a lot of pasta and tuna fish. Our desk was a door propped up on sawhorses. Our dining room table was a fold down ironing board in the kitchen. Those were very special days.

As Mitt might say, she’s got to be gosh-darned kidding me. As I blogged a few months ago, the way she and Mitt paid for their pasta and tuna fish, and the desk that was a door, was by SELLING STOCK, given to them by his family, that on a conservative calculation was worth in current money almost FOUR HUNDRED THOUSAND DOLLARS [Update: or at least two hundred thousand; see below]. The only difference between the disastrous interview that helped lose Mitt his first election and the convention speech was that the story contained in the latter conveniently left out the huge nest egg. But the nest egg matters more than a little. Its presence guaranteed that this family’s early life would be the antonym of struggling.

Reminding viewers of the facts ought to be the press’ job. But it’s not doing it. The reports I’ve seen—including the New York Times—have made no mention of Ann and Mitt’s vast gifted wealth (and the much vaster wealth that they could of course have drawn on if in trouble). A speech eagerly reported as humanizing and successful actually had a fabricated reality at its center. Self-styled journalists who are letting Ann get away with this ought to be deeply ashamed of their alleged selves.

Worse: I doubt that Ann realizes that her tale of struggle is a fabrication. She probably really believes that living relatively frugally on a huge stock portfolio counts as economic struggle and anxiety about one’s prospects. No wonder she and her husband are so insouciant about slashing programs to benefit the poor. If I thought that’s what poverty was, I’d slash aid to me too.

[Update, 8/30/12, 11:15 a.m. EDT: given the debate from the comments below, I’m willing to amend the conservative estimate of Ann and Mitt’s stock wealth in college from $400,000 to $200,000 in today’s dollars–though it could have been much more. That was still enough to see them comfortably through several years of modest living, and to place them at something like the top one percent of students or young families. And it was of course backed up by so much wealth on both sides of the family in case of true need that, unlike everyone else in their alleged situation, they had absolutely no need to worry about economic reverses or health problems.]

Tyler Cowen is right.

Inequality of all kinds takes years off the lives of those on the bottom. So the argument for equality of access to health care – “you shouldn’t die of being poor” – actually supports a much broader program of redistribution.

Since inequality shortens the lives of people on the bottom, the idea that health care should be equalized, leaving the rest of the distribution of income, wealth, and status unchanged, lacks a coherent basis.

But doesn’t that suggest reduced inequality as a policy goal?

Footnote Actually, it’s reasonable to think that health care is less positionally consumed than other goods. There are strong reasons for me to want my suit to be nicer than yours, my car flashier, and my house bigger and fancier. But I don’t want my visit to the dentist to hurt less than yours: I just want it to hurt as little as possible. So in medical care – unlike housing – it’s possible to accomplish a genuine Pareto improvement: to make someone better off without making anyone else worse off. That constitutes an efficiency argument for allocating resources toward health care and away from more competitively consumed goods.

But Cowen’s other point remains: since relative income and status influence life expectancy, the same argument that supports equality of access to health care – that you shouldn’t die of being poor – actually supports equality across the board.

And of course that’s the source of the basic dishonesty of the entire debate over ACA. The difference between the Heritage plan and Obamacare is about $200 billion a year worth of downward income redistribution. But neither side wants to make that point: progressives because white middle- and even working-class voters have been taught to regard “redistribution” as meaning taking from them to give to those below them and darker than they are, and conservatives because they’d rather argue about “liberty” than admit that they’re waging class warfare from above.

Progressive policies are good for rich folks

You don’t have to be an altruist to earn like an Episcopalian and vote like a Puerto Rican; you just need to understand that, at the margin, a dollar spent on public goods gives you, personally, more benefit than a dollar spent on private consumption.

No doubt Keith (citing Jonathan Haidt) is right to say that poor people who are victims of Republican downward class warfare and who vote Republican anyway because they think Republicans agree with them on “values” questions aren’t necessarily acting irrationally. As as Weber pointed out a long time ago, “ideal interests” are just as genuine as material interests.

I don’t think it’s irrational for me to vote according to my beliefs about what would make a better world, independent of the effects of specific policies on my individual situation; why should I think it’s irrational for other people to behave the same way?

Of course, there’s a different question hidden here; the progressives asking “What’s the matter with Kansas?” mostly think that some of the “values” Red voters are voting for – expressing their prejudices against blacks and Latinos, a sexual-purity fetish, opposition to women’s personal and economic independence, and hostility to scientific inquiry – are themselves irrational. But “People shouldn’t believe that” does not imply either “People don’t believe that” or “People who believe that are acting strangely if they act on those beliefs.”

Where I disagree with Keith is on the flip side of the question. He thinks Warren Buffet and other Blue-team rich folks are favoring their ideal interests over their material interests just as much as the Red-voting poor and working-class folks. I disagree: they’re voting (consciously or not) for what’s good for them and their families.
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Barack Obama as Huey Long and other matters

Arguing economic populism (and other stuff) on bloggingheads with Glenn Loury

I didn’t hit my marks as well as I would have liked in this bloggingheads with Glenn Loury. At one point I was reduced to sputtering. We still had an interesting broad-ranging argument around whether Democrats threaten the republic by launching Huey-Long-style populist attacks on Mitt Romney over Bain Capital, whether Dan Savage threatens civility by being too mean to religious social conservatives, whether Mitt Romney comports himself as the upperclass twit of the year.

Ross Douthat on saving the working class

I’m grateful to Ross Douthat for his shout-out to Frank Zimring’s work, and mine, on reducing crime and incarceration, but it seems to me that no amount of fiddling at the edges will substitute for a substantial set of tax, spending, and transfer policies that can reverse the growth in income inequality. One of the important differences between the poor (or near-poor) and the rest of us is that they have less money.