Using Data To Make Policy

What’s
Wrong Today
:


Have you
ever heard of the Heckman
Equation
? Neither had the Wrongologist.


Dr. James Heckman is an
American economist and winner of the Nobel Prize for Economics in 2000. Heckman is a
professor of economics at the University of Chicago. His research shows that poor
families should have guaranteed access to education for their 3- and
4-year-olds.


Heckman says
he isn’t advocating socialism, it’s just the opposite: He is fixing a market
failure.


Unlike
our political elites and some of their captured economists, Heckman stresses using observable data in making public policy. His thesis is that
focused and individualized attention paid to the young children of poor families
can be a hard-nosed investment that pays off in lower social welfare costs,
decreased crime rates, and increased tax revenue.


The Heckman
Equation demonstrates the numbers that prove his point. According to Business
Week
, Heckman says:


We’re saving money
for everyone, including the taxpaying middle class and upper class. Right now
they’re supporting prisons, health, special education in schools. The benefit
is broadly shared…It’s
something that would
actually accrue to the whole country


Heckman’s
equation is based on two long-term studies, one begun in the 1960s in
Ypsilanti, MI, and another a decade later in Chapel Hill, NC. Both provided
free preschool to children from lower-income families. In the decades since,
researchers have followed those children, who are now adults.


  • At
    age 40, the subjects from the Ypsilanti study were far more likely than their
    peers to have graduated from high school and have jobs. They were more likely
    to own homes and less likely to have needed social services. The boys were more
    likely to have grown up to raise their own children and less likely ever to
    have been arrested.


  • Children
    from the program in Chapel Hill had higher test scores than their peers through
    adolescence and were more likely to have gone to college.


While both
studies are well-known to education researchers, Heckman and several co-authors
produced in 2010 what he called the “first rigorous cost-benefit study” of the
Ypsilanti program. The free instruction cost $17,759 per child per year in 2006
dollars (the year they began working with the data). Heckman set out to find
out what taxpayers got for that money. He calculated what the program had saved
the state and federal government in social welfare, what it had paid in
increased tax revenue from higher wages, and, most significantly, what it had
saved in police, court, and prison costs.


The initial investment provided what
Heckman calls a “return to society” at an annual rate of 7% to 10%. In dollar
terms, each dollar spent at age 4 is worth between $60 and $300 by age 65.


A lot of the return
on investment comes from crime reduction, but Heckman’s research
paper
indicates that early learning boosts lifetime earnings:


About
50% of the variance in inequality in lifetime earnings is determined by age 18.
In shaping adult outcomes, the family plays a powerful role that is not fully
appreciated in current policies around the world.


Heckman
also cites the Perry
preschool program
as an example that proves his points: Between 1962 and
1967, the Perry program offered preschool to a group of three- and
four-year-olds born in poverty. Interviewed
at age 40 in the mid-2000s, that group was significantly more likely to have
graduated from high school and to earn more than $20,000 a year.


So, when
Mr. Obama said in the 2014 State of the Union address:


Research
shows that one of the best investments we can make in a child’s life is
high-quality early education


He
was talking about Heckman. Last year, the White House acknowledged Heckman’s research
(along with the Perry preschool work) by including early education grants for
states in its budget proposal. On Dec. 13, congressional negotiators put $250
million for new early education funding into its omnibus spending bill.

According
to Business Week, some states
are way ahead of the Obama Administration. Fifteen governors, both Republicans and Democrats, included new money for early childhood education in their
budgets in 2013. In all, states are now spending $400 million more on pre-K
than before the economic downturn, so Heckman’s ideas are gaining ground.


Heckman’s data
show that the earlier a child gets help, the better the results through each
stage of education. Yet, younger parents are on the whole, more financially constrained
at that point than when their kids are older. So when they ought to be putting
their kids into early education programs, they don’t have the money or credit
to pay for it.


Economists
call this an imperfect market. Business Week quotes Heckman:


The accident of
birth is a huge, huge imperfection. A child’s life is not predetermined at age
3, or 5, or even 18. But each age provides an opportunity to give a child certain
skills that will make the next stage more productive


So, Dr.
Heckman is building a case for a soft-hearted investment in America’s
pre-schoolers. If you are a certain kind of politician, you will be able to smell
the socialism and redistribution. Sadly for them, Heckman’s work is backed by
data, not just the bias of Randian fundamentalism.


This
should be an idea that everyone in America can support, particularly since the
data show it works.

Facebooklinkedinrss

Sunday Cartoon Blogging – February 9, 2014

This weekend, think about the “financialization” of our democracy.
It’s not that difficult to understand. Our democracy has been weakened because our politicians
have surrendered themselves to the global 1%.



Money governs. That’s your inspiration
for today’s homily.



The margins for conducting political
dissent have disappeared. And trying to find middle ground to pass legislation
is nearly impossible. Politics has become just marketing. And most politicians
have become part of the financial system: They are political entrepreneurs selling
just to make a buck.
Willy Loman says in Death of a
Salesman
:



He don’t put a bolt to a nut, he don’t tell
you the law or give you medicine. He’s a man way out there in the blue, riding
on a smile and a shoeshine



Willy Loman discovers
there’s a problem:



…when they start not smiling back –
that’s an earthquake. And then you get yourself a couple of spots on your hat,
and you’re finished…



America is out there in the blue. It’s time for the earthquake.


The decline in our working environment never ends:

Politicians have trouble with CVS’ decision:

Political and dating advice: Don’t use Huck as your wingman:

Leno hurts job statistics:

Security is tight at the Sochi Olympics:


Facebooklinkedinrss

One in Six Men Still Out of Work

What’s
Wrong Today
:


Yesterday’s Wall Street Journal reported
on
how the backbone
of America’s labor force are out of work at unprecedented
levels. From the WSJ:


More than one in
six men ages 25 to 54, prime working years, don’t have jobs—a total of 10.4
million. Some are looking for jobs; many aren’t. Some had jobs that went
overseas or were lost to technology. Some refuse to uproot for work because
they are tied down by family needs or tethered to homes worth less than the mortgage.
Some rely on government benefits. Others depend on working spouses…


Having so
many men out of work is partly a symptom of a US economy that is slow to
recover from the worst recession in 75 years. It also shows how technology and
globalization are transforming jobs faster than many workers can possibly adapt.
More from the WSJ:


The trend has been
building for decades, according to government data. In the early 1970s, just 6%
of American men ages 25 to 54 were without jobs. By late 2007, it was 13%. In
2009, during the worst of the recession, nearly 20% didn’t have jobs


Although
the economy has improved and the official unemployment rate has fallen to 6.7%,
the numbers for working-age men are terrible: 17% of men 25-54 weren’t working in December. More than
two-thirds said they weren’t looking for work, so the government doesn’t label
them unemployed.


The
January report on the job market is due today.


For women,
the story is different. In the 1950s, only about a third of women ages 25 to 54
had jobs. That rose steadily until the 1990s, and then leveled off. At last tally,
about 70% are working; 30% are not.


The bleak
prospects for the long-term unemployed—40% of men looking for jobs say they
have been out of work six months or more—is alarming: The longer a person is
unemployed, according to a recent study, the harder it is to find a job. The good news is that there is an increase in resources for people to use when they are in this situation, such as the ability to download templates for free to use as resumes, and a rise in jobseeker facilities.


That
research is by Rand Ghayad, a visiting scholar at the Boston Federal Reserve
Bank, and William Dickens, a professor of economics at Northeastern University.
They analyzed Beveridge
curves
to see who the recovery is leaving behind. A Beveridge curve shows
the relationship between job openings and unemployment.


What
Ghayad and Dickens found is that the Beveridge curves are normal across all
ages, industries, and education levels, as long as you haven’t been out
of work for more than six months. In other words, it doesn’t matter
whether you’re young or old, blue-collar or white-collar, or a high school or
college grad: The only thing that matters is how long you’ve been out of
work.


Wage
stagnation is an issue as well. Since the early 1970s, the average
inflation-adjusted wage for high-school dropouts has fallen about 25%; for
high-school graduates with no college degree, it is down about 15%.


Simply
put, many of the available jobs don’t pay enough to get men to take them,
particularly if securing a job requires moving, long commutes or surrendering
government benefits. Economists say part of the problem is that men with few
marketable skills and little education can’t find work that pays enough to get
them off the couch.


Here are
some data compiled by the WSJ:



We
reported last
week
that a new Wal-Mart opened in DC and advertised that 400 people would
be hired. Over 20,000 people applied for those 400 jobs, making it harder
to get a job at Wal-Mart than to get into Harvard
. It doesn’t end
there. ERE
reports
:


Although it varies with the company and the
job, on average 250 resumes are received for each corporate job opening…In
addition, out of every 1000 people who view an online job posting, 100 people
will apply, 4 – 6 will be selected for an interview, 1 – 3 will be invited for
a final interview, 1 will be offered the job, and 80% of those who get a job
offer accept it


Sure the
Internet makes it vastly easier to apply for jobs than the old-fashioned
written submission, but, according to ERE, if you are late to finding an open
position on the web, your chances are slim because the first resume is received
within 200 seconds after a position is posted.


If you
post your resume online on a major job site like Monster so that a recruiter
can find it, you are facing stiff competition because 427,000 other
resumes are posted just on Monster each week.


It is clear that at least some unemployed men are on
trajectories that can’t be sustained. They are borrowing money and selling
assets and many are falling behind on payments.


The WSJ article makes it clear that the duration and severity of
unemployment among men in their peak earning years is causing both more
suffering than is readily apparent, and that this group is also likely to wind
up impoverished in their old age.


These men, who have self-identified as producers and
breadwinners, face a grim future in psychological as well as financial terms.


This is not an Obama problem, this is a societal problem, and the Senate’s failure to pass an extension of extended unemployment benefits yesterday doesn’t help. Our society needs to wake up to the
reality that once you’ve been out of work for six months, there’s little you
can do to find work, regardless of how strong the rest of your resume is.


After all, employers
hardly look at it: ERE indicates recruiters spend 6 seconds reviewing each resume that passes through the keyword screens.


The worst possible
outcome for all of us is if many men between 25 and 54 become unemployable. That has
major socio-cultural implications and it permanently reduces our productive
capacity.


This
problem is larger than any administration. Free trade policies pursued by
administrations of both parties have resulted in the loss of decent paying middle
class jobs, while automation and technological advances are also major factors.
It would be inaccurate to try to solely blame our elected officials for continued technological advancement, and the changes to the
structure of the economy that result.


But it is
horrible is that both political parties recognize the problem, but that only
one side seems energized to do anything about it.





Facebooklinkedinrss

Utah Shows How To End Homelessness

What’s
Wrong Today
:


The Great
Recession has caused continued hardship for many Americans. Yet a recent HUD report
found that homelessness is down. The report by HUD to Congress says homelessness
decreased by nearly 4% over the past year, and by 13% since 2007. The report
also states:


In January 2013, 610,042 People were
homeless on a given night. Most (65%) were living in emergency shelters or
transitional housing programs and 35% were living in unsheltered locations


But the
survey doesn’t actually measure homelessness.


Instead,
it looks at people who are in shelters or transitional housing and the number
of people who are outside on a single January night. Not included are those
doubled up or couch surfing because they can’t afford their own place. Neither
are people in hospitals, mental health or substance abuse centers, jails or
prisons with nowhere to go upon release.


The
problem isn’t just the narrow scope of the count; its methods are flawed. For
the count of people in shelters and transitional housing, service providers
report their numbers on the designated night. But they are just measuring
capacity. If the number goes down, this could mean either fewer homeless or
fewer beds for them.


The
“street” part of the count tries to count people in places “not meant for human
habitation,” such as streets, parks, alleys, subway tunnels, all-night movie
theaters, abandoned buildings, roofs, stairwells, caves, campgrounds and
vehicles.


Although HUD
sets the guidelines, communities have discretion in how they count. A few use
sophisticated statistical methods, but most simply organize volunteers to fan
out and make judgments about who is homeless, sometimes avoiding locations
where they feel unsafe. How even the best prepared volunteers can cover large parts
of town thoroughly in a few hours is anyone’s guess.


Local
policies can also affect the count. For example, cities are increasingly making
it a crime to sleep in public places. If the street count goes down, is it
because need is down or because there is greater cause to fear arrest, driving
people into hiding?


Similarly,
in some cities, families seeking shelter can be threatened with removal of
their children, so families living outside have extra incentive to avoid
detection.


Homelessness
persists. It is not a single night event.


Utah has come
up with an innovative way to solve homelessness. They give away homes. What
worse way could there be to combat homelessness in America than to provide the
homeless with a place to live?


From the Daily
Kos
:


The state is giving
away apartments, no strings attached. In 2005, Utah calculated the annual cost
of E.R. visits and jail stays for an average homeless person was $16,670, while
the cost of providing an apartment and social worker would be $11,000. Each
participant works with a caseworker to become self-sufficient, but if they
fail, they still get to keep their apartment…


 And
who is to blame for trying this experiment? That famous Chinese food lover and compassionate
conservative, former Republican Governor John Huntsman.


According
to Nationswell,
Utah has reduced its rate of chronic homelessness by 74% over the past eight
years, moving 2000 people off the street and putting the state on track to
eradicate homelessness altogether by 2015. It’s such a ridiculous proposition
that only Utah, that bastion of conservative values, could suggest and then
implement it.


Now, with
its growing success, the policy has a chance of spreading to other conservative
locales, like Wyoming.


According
to RealtyTrac,
in 2013, 14.2 million homes were vacant all year for some reason:


Nearly
11% of houses in America are empty, making them a potential haven for
criminals, as well as an eyesore for neighbors and a disaster for local
governments, which are losing their much-needed property tax base. Vacancies
have also lowered property values of surrounding properties in many communities


The
HUD report says there are 610,000 homeless in America, and we have 14.2 million
vacant homes. Utah shows us that the homelessness problem can be partially
solved with vacant housing stock. What would be wrong with giving it a try?


Earlier
this week, we wrote about Slumlord
Billionaire
s, Wall Street-backed investment companies that are buying up
vacant houses and renting them out.


Even
Wall Street can’t buy them all, or lease all of them back to their previous
owners. Ending homelessness requires closing the gap between the need for
housing and its availability. It requires enacting policies as Utah has done.


For I was
hungry and you gave me food, I was thirsty and you gave me drink, I was a
stranger and you welcomed me
,”


Who said that?

Facebooklinkedinrss

Republicans Want To Repeal Obscure Tax Law

Reuters reported last week that the Republican National Committee (RNC) approved a resolution that adds the repeal of an Obama administration law to its 2014 platform. The law is designed to crack down on offshore tax dodging.

The legislation that the Republicans are targeting is called the Foreign Account Tax Compliance Act (FATCA). What is FATCA? According to Wikipedia, FATCA requires US citizens, including individuals who live outside the US, to report their financial accounts held outside of the US, and requires foreign financial institutions to report to the IRS about their American clients.

Although FATCA was passed by Congress in 2010, it will go into effect on July 1, 2014. It requires foreign banks and investment funds to report to the IRS all assets they hold that exceed $50,000 belonging to US citizens – whether those citizens are living in America or abroad.

The genesis of the law was a 2010 tax-avoidance scandal involving a Swiss bank. One result of FACTA was that last August, Switzerland signed a separate treaty with the US, ending a longstanding tax dispute between the two countries, that gave the IRS unprecedented access to
Swiss accounts held by Americans and US green card holders
.

Banks in most tax havens are planning to abide by the new rules because of hefty fines (the IRS can withhold 30% of dividends and interest payments due to the banks from US accounts) since failure to comply with these regulations could seriously impact banks’ ability to do business in America. A successful indictment could bar the bank from the US marketplace. Because of that threat, FATCA is driving a rapid expansion of a network of bilateral, tax-related information-sharing agreements, negotiated by the US Treasury and its overseas counterparts amid heightened global concern about tax dodging.

So, do Republicans want to allow rich individuals and wealthy companies to continue to hold money in off-shore banks without subjecting these monies to federal taxes? Apparently,
and they also want to attract votes and funding from Americans living abroad. The US expatriate community is violently opposed to the law, and some have legitimate concerns about losing
their banking relationships in the foreign country where they live. Their banks are concerned that the costs of flagging the accounts of Americans and maintaining separate reporting formats for them may too high for the less-than-$50k accounts that the US is not interested in. In 2013, nearly 2,400 expatriates gave up their US citizenship or turned in their green cards, some at
least, in an effort to avoid US taxation.

Reuters quotes Solomon Yue, an RNC official from Oregon:

I see FATCA just like Obamacare…It will attract American overseas donors

So, Republicans are eager to use FATCA as a campaign and fundraising issue against the Democrats in the Congressional mid-term elections in November. Repeal seems unlikely, but another issue that raises the political temperature could help defeat Democrats.

The RNC has set up a petition site at MoveOn.org that has about 2200 signers, quite a few from overseas. They have also set up a Repeal FATCA site. Here is a quote from the disinformation available there:

All this supposedly is justified by FATCA’s claim to “recover” lost taxes of less than $1 billion per year – enough to run the government for about two hours. (In fact, the way the U.S. Treasury plans to enforce FATCA, it would probably lose more money than it would take in!)

The Republicans seem to be saying that we don’t need $1 billion if it causes increased tax payments. Politically, it seems strange that this issue should become a hot issue for the Republicans, who are taking a beating in the polls over their stand on income inequality.

On the other hand, US wealthy individuals (Mitt Romney) and corporations that are able to use tax havens and have been able to hide behind account secrecy, would be very happy to see Mr. Boehner take up a bill to repeal FATCA. Foreign banks, many of which contribute to US political campaigns would also like to see the bill repealed

No one is asking the rich to pay unfairly – they already get all kinds of tax breaks − but
to encourage tax evasion seems to be far beyond the Republican’s usual pale.

How about having the rich simply pay their fair share and watch the federal deficit which they
are so concerned about, fall, without requiring Americans to give up food stamp subsidies or funding for long term unemployment benefits? So next time you hear Republicans talking about cutting the deficit, ask them why they are for tax evasion as opposed to tax compliance.

Hopefully, someone will ask Mr. Boehner why repealing a law that will promote the harboring of hidden money and continued tax avoidance is in our best interest. We know it is a key loophole for Mr. Romney. So Mr. Speaker, please tell us again why repealing laws is more important that strengthening them? They were passed for a reason. Maybe you should start pushing for our laws and regulations to be followed, rather than repealed.

Many other countries are striving for better education, better healthcare, a more engaged attitude about our planet and environment, a willingness to regulate guns and business with an eye toward the best interests of the people.

Thanks to US conservatives, we’ve headed in almost the opposite direction.

For Republicans, as long as rich people don’t pay more, undermining our country is okay. There’s just no restraining Republicans if the restraint we need involves the rich. And if responsible politicians try, the conservatives cry, “government overreach” or “socialism.”

But that’s just a red herring, an excuse so that they can continue to pillage America
for all they can get.

Facebooklinkedinrss

Slumlord Billionaire

What’s
Wrong Today
:


Most
rental houses in the US are owned by individuals, or local businesses,
but a new breed has emerged: Wall Street-backed investment companies with
billions of dollars at their disposal, while having no problems trying to find insurance for landlords either. In
just the last two years, large investors have bought as many as 200,000
single-family houses and are now renting them out.


This incursion
by hedge funds and private equity groups into the American single-family home
rental market is unprecedented. Prior to the real estate meltdown in 2008, most
rental properties were owned by individuals or small real estate investment
companies. After the crash, many of those foreclosed houses have been purchased
by investors, but are these investors actual landlords with experience or do they have experienced landlords manage their properties for them? Many of these properties are rented out by those who have taken the time to read a great out of state real estate investing guide, and are fairly rented out, but many are handled in less favorable ways. Either way if billionaires are leasing properties out, there will be many leases they have to handle, which would be made much easier with a lease agreement template from associations like AAOA and more.


Three firms
? American Homes 4 Rent, Colony American and Invitation Homes ? have spent more
than $12 billion buying and renovating more than 75,000 homes in order to rent
them out. Now, American Homes 4 Rent is about to “Securitize” the leases it
holds. Remember Securitization? Securitization of the mortgages of single family homes was the
primary reason we had the economic crash in 2007, the crash that brought with
it such high unemployment, much of which is still with us today.


This time,
the securities – if you can call them that – are backed by rental payments on
single-family homes that are, hopefully,
rented out, and will, hopefully,
stay rented out.


According
to the New
York Times
, the
latest company to test the frontier in securitization is American Homes 4 Rent
(AMH). The company talked to
prospective investors at a conference in Las Vegas last week about selling
securities tied to $500 million of debt. Apparently, the bonds will be underwritten in March by Goldman, Sachs.


The idea is to
package the leases signed by the home renters into a security backed by the
stream of rental payments to be paid by those renters, and sell the security to
investment groups and individuals. The private equity giant Blackstone Group,
backer of Invitation Homes, sold the first single-family rental securitization
of its kind last fall, a $479 million bond, attracting six times as many
investors as the private equity firm could accept.


Rental lease securitization
could provide a pick-me-up to Wall Street’s mortgage-backed business. Bankers
estimate that single family-rental bond deals could total as much as $7 billion
this year and eventually grow to about $20 billion a year. From Bloomberg:


“This
could be a $15 billion or $20 billion-plus-a-year kind of an asset class,” Ryan
Stark, a director who runs mortgage finance at Deutsche Bank AG, said at a
conference in Las
Vegas
last week. The Frankfurt-based lender led the debut $479 million
offering for Blackstone, which was tied to 3,207 homes


For landlords like
American Homes 4 Rent, securitizing debt would provide them with more leverage
to buy more homes. It would also increase their profits by lowering their
borrowing costs. And with securitization, landlords could put as
little as 25% of equity into their properties, while borrowing the rest. Credit
lines from banks typically require 40% equity.


In many
markets where these mega-landlords bought vacant single-family homes, like
Phoenix or Las Vegas, prices have jumped 25% or more in just one year. But
these price gains may be ephemeral. If (when) home prices drop to where they
were a year or two earlier, and if occupancy isn’t high enough to service the
debt, these securities could turn into toxic waste.


The next
step will be to move down-market and offer this kind of securitization to all single family rental
investors, including mom-and-pop investors, and other small and
large investors. Cerberus Capital and Blackstone are already working on
offering similar programs to them.


In the
end, these rentals could all be packaged together, sliced into different tranches,
and sold indirectly to unsuspecting pension fund participants. Just like in
2007. All based on the unreliable income streams from rentals.


The impact
of this vulture capital buying program has been showing up in the housing numbers
for months. Purchases by first-time
home buyers
? the crux of the housing market ? dropped to just 27% of all purchases in December 2013, from 30% in
December 2012, and from the 30-year average of 40%
.


It is the
lowest recorded in the data series going back to 2008. First-time buyers
have been pushed out by higher home prices, higher mortgage rates, and a flood
of cash buyers
(in Florida, 62.5% of all buyers) many of whom are
investors.


If
you were around in 2008, you know the drill: The bonds will be AAA rated by the
rating agencies that are compensated by Goldman and the other underwriters. The
bonds will be sold to those seeking high yield without commensurately high
risk. The deal documents will not be read. Goldman salespeople will travel
around the globe finding suckers to buy the paper and get big commissions. The
investment banks will short the bonds in the interest of risk management. American
Homes 4 Rent executives will pocket incredible bonuses, move their primary
residences to a tax haven state like Florida or Nevada, and be retired from the
business before you know it.


Any
predictions on how this turns out?


How
nice that Wall Street is now buying back homes they first financed then turned
into worthless Mortgage Backed Securities (MBS). Now they are buying them back
and renting them back to same folks they foreclosed upon.


The
saying in real estate used to be: “You
can’t get hurt if you own the dirt”
. One reasonable conclusion is that fewer
Americans will ever own the dirt.


Capitalism
must be refined and modified, or we will continue to see fewer owners and more
who will be renters from cradle to grave.

Facebooklinkedinrss

Blog Amnesty Day

Today is the day when bloggers are asked to
promote less-well-known sites they like within their networks.

Here is the Wrongologist’s list:



Foreign Affairs:


al-Monitor
– Go-to site for Middle East politics


Arms Control Wonk
– Analysis of arms control issues

Back Channel
– Go-to site for Iran & the international community. Part of al-Monitor


Moon of Alabama
– Alternative viewpoints on foreign affairs



Fun and Lifestyle:


Bob Lefsetz  – Bob specializes in music and marketing


Andy Borowitz
Comedian writes Onion-style political headlines


Political
Carnival
– Mostly humor, some political analysis


Jack Cluth
– Snarky political comment



Politics:


Political
Moneyline
– Stay on top of money-raising by politicians


George
Washington’s Blog
– Fact-based rants on issues of the day


Ed
Kilgore (Political Animal)
– All day blogging on DC politics



Health:


Incidental
Economist
  – MD’s who specialize
in the economics of health care delivery


Economics:


Calculated
Risk
– Great analysis of economic stats of the day by Bill McBride


Economic Populist
– Thorough analysis of economic news


New Economic
Perspectives
– Commentary on political economy and economics


Off The Charts
Blog
– Commentary on political economy



NSA and Surveillance:


Empty Wheel – Indispensable
site for NSA and surveillance issues



Perhaps we should also have a “Guillotine Day” as well. What
blog needs to be unceremoniously cut off?


What small blogs do you recommend? Let us know the comments
section.

Facebooklinkedinrss

Inequality: The Idea That Democrats Dare Not Speak


What’s Wrong Today:



Mr. Obama stuck his toe into the political waters about inequality at the SOTU address on Tuesday. For some perspective on income inequality, Igor Volsky at Think Progress reports that: (emphasis by the Wrongologist)




From 1979 to 2007, the top 1% of families experienced a 278% increase in their real after-tax income, while families in the middle 60% saw an increase of less than 40%. During this period, many blue collar jobs become automated by advances in technology, American workers started competing against cheaper overseas labor, and the number of workers represented by unions dropped from 20% in 1983 to 11% today. As the earnings of lower and middle income Americans stalled, however, CEOs…began paying some of the lowest tax rates in the country’s history




Stanford University
reports on America’s global ranking in income inequality: (emphasis by the Wrongologist)




The US ranks third among all the advanced economies in the amount of income inequality. The top 1% of Americans control nearly a quarter of all the country’s income, the highest share controlled by the top 1% since 1928



The Wrongologist has written previously about inequality
here and here.




Mr. Obama has been reluctant to talk about income inequality. In the New Yorker’s long
piece about President Obama by David Remnick, there was an illuminating quote: (emphasis by the Wrongologist)


 



In 2011, at an annual dinner he holds at the White House with American historians, he asked the group to help him find a language in which he could address the problem of growing inequality without being accused of class warfare




Democrats are afraid of saying anything that can be construed as class warfare, which seems to be the sole property of conservative pundits. Democrats are afraid that they will be portrayed as socialists or worse. The fantasy is that Democrats and progressives can’t even mention inequality and the solutions to inequality.




Even Mr. Romney in 2012 attacked Mr. Obama about “redistribution” of wealth whenever increased taxes on the 1% were raised during the campaign. Yet, last week one billionaire, Tom Perkins, the founder of the fabulously successful venture capital firm Kleiner Perkins, tripped over his own dough when he wrote a letter to the
Wall Street Journal: (emphasis by the Wrongologist)




I perceive a rising tide of hatred of the successful 1%. There is outraged public reaction to the Google buses carrying technology workers from the city to the peninsula high-tech companies which employ them… This is a very dangerous drift in our American thinking. Kristallnacht was unthinkable in 1930; is its descendant “progressive” radicalism unthinkable now?




Kristallnacht?? His comments were treated with both criticism and snark, so he took to
Bloomberg TV to amplify his thinking: (emphasis by the Wrongologist)




I don’t feel personally threatened, but I think a very important part of America, the creative 1%, are threatened…I think rich as a class are threatened by higher taxes and higher regulation




Alternate read: The rich are different. They have class interests, they know it, and they act on them. But you progressives can’t or we will attack you.




Perkins transgressed the unwritten law: You never talk about class in America, because that would be “class warfare.” You especially can’t do it in the SOTU if you’re a two-term “progressive” Democratic President who is exquisitely attuned to the rules of what can and can’t be said.




Lambert Strether
tells us: (brackets and emphasis by the Wrongologist)




Our elected officials listen to their [the 1%] opinions…their jobs depend on not recognizing…how stupid [their opinions] are. It is impossible to get elected president without the backing of a cadre of multimillionaires. It is nearly impossible to get elected to the US Senate without a couple in your corner



Strether goes on to say:


 



…multimillionaires and billionaires fund every effective political interest group in the country, from gun rights to gay rights groups. What makes the wealthy persecution fantasy so risible is that our political class is responsive almost solely to the priorities and views of the rich



The “we are a classless society” fantasy serves a purpose: It prevents Congress from actually acting to address economic inequality. As long as the rich perceive even ineffectual social opprobrium as an existential threat, politicians will be afraid to advance any actual agenda that might hint at redistribution.


If a study last March by political scientists Benjamin Page, Larry Bartels, and Jason Seawright at Northwestern University is any indication, the rich have little interest in solving America’s inequality problem. According to the report—which surveyed a sampling of the richest 1% of Americans—the wealthy are almost categorically opposed to efforts to reduce inequality and improve material conditions for working- and middle-class people.


Some findings:



  • 40% support an increase to the minimum wage

  • 32% support universal health insurance

  • 30% support expanded worker training programs

  • 13% support an expansion of the Earned Income Tax Credit

  • 8% support a government jobs program for the unemployed

By contrast, the general public is much more supportive of all of these positions. What the rich do support, however, are policies that would shift burdens to individuals, or introduce some nebulous “competition” into the commons. That includes charter schools (90% support), vouchers (55%), Social Security privatization (55%), and merit pay for teachers (93%).


The Daily Beast editorialized:



If this agenda looks familiar, it’s because it’s basically identical to the one pushed by “centrist” deficit hawks in Washington, who have devoted themselves to the consensus positions of business and other economic elites


Never in modern times have taxes on the rich been so low, subsidies so large, legal forbearance so complete, regulations so meaningless, and the state so fully at the beck and call of the rich. Our entire government is oriented around making the rich richer and protecting them from consequences of their actions.


Even though there has not been a better time to be rich in more than a century, it is NOW that the rich complain about taxes and regulation and a hostile business environment.


Is this a cynical, self-aware ploy to press their advantage? Or are we getting a glimpse of the narcissistic pathology that underlies the thinking of so many members of the ultra-rich?


Now that the middle class has largely been destroyed, we have the poor, the working class and the investment class. There are fewer people to contribute revenues to the government that is continuing to provide massive support to the investment class.


So, the ultra-rich’s idea is to let the working class and the poor twist in the wind, the roads deteriorate and the schools fall to ruin.


But they say, we gotta keep funding the military and keep militarizing local police in case the lower classes get the idea that this way of governing is unfair.

Facebooklinkedinrss

Republicans to Obama’s SOTU: STFU

What’s
Wrong Today
:


Like
many, the Wrongologist watched the SOTU last night. You can read the text of
Mr. Obama’s speech here.
There will be millions of words written today about the SOTU, so let’s focus a
bit on the GOP response and what it tells us about the loyal opposition. Cathy McMorris
Rogers (R-WA), gave the rebuttal. You can read the text of her speech here
and learn more about her votes in the House here.
She is now the 4th ranking person in the House Republican
leadership.


Let’s
unpack her talk:


“Republicans have plans, big
plans! But they are not gummint plans. Never any icky gummint plans.
They are Republican plans. Big Republican plans!


(Sadly she had no time to explain any detail of any Big Plans.)


She did have time to fill the air with adjectives about how you will feel, how warm and happy and yummy in your tummy you will feel.


About yourself, and about America.


And after the Republican’s Big Plans have succeeded in solving every
problem and wiping every tear from your eyes, there will be no more crying or
pain, when the old order has passed away.


Amen.”


OK,
that was snarky. Let’s look at a few actual quotes from her talk:


So tonight I’d like to share a more hopeful
Republican vision, one that empowers you, not the government. It’s one that
champions free markets and trusts people to make their own decisions, not a government
that decides for you


Republicans
want you to be empowered to make your own decisions. This is a Republican theme
that appears in every one of their proposed solutions to any problem, real or
perceived. It disregards the fact that
those below the poverty line, those who are long-term unemployed, the poor
elderly, and those with food insecurity or job insecurity
HAVE FEW OR
NO OPTIONS.


Their
choice is between paying rent or buying medicine this month, between taking the
bus or walking to the store, between phone service and internet service.


Ms.
McMorris Rogers, like all Republicans, are in an idealized, out-of-touch place
where everyone is middle class, and that they have at least some savings that
gives them the choice between staying in the dead-end job they have, and going
to school to improve themselves.


Speaking
of choices, she continued:


Republicans believe health care choices
should be yours, not the government’s


Another
Republican idea that glosses over the real facts of health care. Before the ACA
most healthcare was tied to the employer’s group plan. So, if you lost your
job, you lost your healthcare, except for a small minority of insured’s who had
individual plans that were job-independent. So how much choice would Republicans
have offered to the unemployed or those who couldn’t afford health care, or
were denied insurance due to a pre-existing condition? She voted to end Medicare,
and supported and voted for the sequester, which slashed $86 million from
family planning and reproductive health care for poor women. 


Where
is your “choice” in that?  


It seems that
Republicans and Ms. McMorris Rogers in particular, are all about choice, except
for women’s issues. She is the mother of a special needs child who voted
against, and then voted to defund Obamacare 42 times. Apparently, she
believes Americans don’t deserve the coverage she has as a member of the US
House.


In
eight years, just one bill that she has authored has passed. And it was
the renaming of the airport control tower in Spokane, WA. 


That’s
her common sense record.


Fox News said Ms.
McMorris Rogers championed personal
responsibility
in her response, another Republican meme that somehow
absolves them from helping the disadvantaged in America. More from the rebuttal:


I came to Congress to help empower people,
not politicians; to grow the working middle class, not the government; and to
ensure that everyone in this country can find a job. Because a job is so much
more than a paycheck: It gives us purpose, dignity and the foundation to build
a future


Republicans
are not alone in using juxtaposition, laying out their good idea vs. the bad
idea of the opposition, but it is time
that Republicans gave us real plans that address the real problems of the
disadvantaged. We do not need more of the “then a miracle will happen”
posing by Republicans.


Their
strategy is to play to the fears of the average person in their home district, that
someone they see as undeserving could get something from the government, like health
care or food stamps or unemployment compensation. They play to the mindset of
these particular voters: That they prefer to be robbed by the rich, mocked by
their own candidates, and encouraged that their racism is secretly shared by
their leaders.


Showing
their own brand of personal responsibility, Republicans sat on their hands at
some interesting points of the SOTU speech. From Mr. Obama:


Because of this law, no American can ever
again be dropped or denied coverage for a preexisting condition like asthma,
back pain, or cancer. No woman can ever be charged more just because she’s a
woman


Democrats
cheered. Republicans sat in stony silence. House Speaker John Boehner grimaced
on the podium behind Mr. Obama. When the president spoke about voting rights:


Citizenship means standing up for
everyone’s right to vote…


No
Republican applause. What is it that Republicans don’t like? Voting, or citizenship?
Republicans rose from their seats to applaud preventing a terrorist attack on
the homeland; the military; and winning gold medals at the Olympics.


Now,
that’s backbone!


It
is a strange kamikaze mission they seem to be on, a party of discredited memes
that are unmoored from common sense, fairness, kindness and generosity.


They
came across exactly as they are.


In
the words of former Arizona Cardinals Coach Dennis Green’s rant: “They
are who we thought they were.”

 

Facebooklinkedinrss

John McCain: It’s Always About Him

What’s
Wrong Today
:


On
Friday last week, the BBC broadcast a live TV debate about the US and
whether it has lost its way internationally. The debate was held in Davos,
Switzerland at the World Economic Forum, where hundreds of business and
political leaders spent the week discussing the world’s most pressing issues. And
networking.


The
BBC-organized debate asked the question: Has America lost touch with the world?


The
panelists included Sen. John McCain (R-AZ), Russian parliament member Alexey
Pushkov, Chairman of Russia’s State Duma Committee for International Affairs and
Saudi prince Turki Al-Faisal, former Ambassador to the US and former head of
Saudi Arabia’s Intelligence Agency, and former US Rep. Jane Harman (D-CA), who
is now President and CEO of the Woodrow Wilson
International Center for Scholars
.


They
debated America’s role in the world in 2014 and whether the US is losing
credibility, influence and power on the international scene. The debate lasts 55 minutes. You can find it here.


Mr. McCain
says in a BBC
video clip
(at 1:48): (emphasis by the Wrongologist)


We all know what happened in Syria. We were winning
and then, of course, 5,000 Hezbollah came in…


“We”? It
was only “we” in McCain World.


McCain takes his CIA and Israeli Intelligence briefings
and believes all of it: Democracy loving young people were (are) being massacred
by the twisted dictator, and we were winning until the Hezbollah showed up!


Mr. McCain also took
Mr. Obama to task, for refusing to take stronger action against Mr. Assad for
using chemical weapons. His comments drew support from Prince Turki, who
has criticized the US
for the same thing:


There
was no consultation on the stopping of [air] strikes that were going to take
place…It causes a loss of confidence


To Sen. McCain, the US’
main problem was that it is not active
enough on the world stage
. He says that makes America’s allies feel
they can no longer depend on the US, and it leaves room for others to fill the
void. Fill the void?
Isn’t that what we tried to do in Iraq? How did that work out?


McCain droned on:


I
travel all around the world and I hear unanimously that the United States is
withdrawing and that the United States’ influence is on the wane and that bad
things are going to happen, and they are happening


The use of
force by the US in the Middle East has not made anything better. It has created
more enemies for the US and has not led to any type of self determination.


McCain’s
BBC comments led Secretary of State John Kerry, also at Davos, to spend 37
minutes of his speaking time enumerating the many ways in which the US was
deeply engaged around the world, from trying to solve the crisis in Syria to
pushing for a settlement between Israelis and Palestinians, and negotiating
with Iran about its nuclear program.


So, we
have another in the long list of occasions where McCain undermines the efforts
of the US in its international negotiating position, this time in the Syrian
Peace negotiations. Back to the debate, Mr. McCain said his “friend” John
Kerry had a lot of work to do “as long as we have a president who does not
believe in American Exceptionalism”.


That comment brought
a retort from Mr. Pushkov, saying that the comment was “racist”. Even Ms. Harman
distanced herself from the concept of American Exceptionalism, saying that she
disagreed with Mr. McCain. Harman
said the US should be looked at differently in a post-Cold War world, as an
“indispensable partner” rather than the sole superpower.


But McCain also needs to
mend fences at home.


Arizona Republicans passed a resolution
to censure Mr. McCain for what they characterize as a liberal record that has
been “disastrous and harmful”
to
the state and nation. Apparently, they are angry that McCain supports
immigration reform and failed to support the government shutdown. They fail to give
him a free pass just because he advocates
war
in every
situation
in most countries on
Earth.


It used to be that if
you believed in American Exceptionalism and thought that the use of America’s military
force was always a good thing, then Republicans would willingly stamp your
candidate dance card.


But now, you have to
bring much more (or less), in order to stay in the club. You have to be a
defender of the “Christian nation” philosophy. You have to believe
that women are inherently inferior and must be directed and controlled by the
hand of a man. You have to believe that dark skinned persons are a threat to
the nation’s health and security.
You have to believe
that anyone who does not succeed in life is a lazy moocher who wants everything
handed to them. You have to believe that the wealthy have attained their status
because they are better human beings. You have to believe that there is
absolutely no role for government beyond fighting wars and protecting the
elites. You have to believe that, above all else, an individual has the
pre-eminent right to own any firearm manufactured, and that they have the right to use their own personal discretion to
decide if an armed rebellion is necessary in the US.  


You see the pattern
here. The basic tenet of George Bush’s “you’re either with us or against
us” philosophy has morphed into a Frankenstein’s monster that is consuming
the GOP and our political debate.  


How ironic that this
is happening to Mr. McCain, who, as leader of the “undermine Obama’s international
position” team, along with his fellow-travelers
Lindsey Graham and Joe Lieberman get more mindshare and face time from the media than anyone
else.


That should be enough
for the Tea Party and the most conservative Republicans, but it is not.


John McCain is simply
the latest in their cross-hairs. In his case, it’s good to see it!


Its time he stood
down from politics.

Facebooklinkedinrss