Recent Articles The American Prospect - articles by author en A Modest Proposal: The Universal Christmas Bonus <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p><span class="dropcap">L</span>ast year, Paul Ryan passed along this made up story:</p> <p style="margin-left:40px;">This reminds me of a story I heard from Eloise Anderson. She serves in the cabinet of my buddy Governor Scott Walker. She once met a young boy from a poor family. And every day at school, he would get a free lunch from a government program. But he told Eloise he didn’t want a free lunch. He wanted his own lunch—one in a brown-paper bag just like the other kids’. He wanted one, he said, because he knew a kid with a brown-paper bag had someone who cared for him.</p> <p>Insofar as the point of this story is to push against free lunches in school, it's obviously a rather craven sentiment. The opponents and critics of free school lunch are an odd bunch. They seem to think it's basically alright to send over 90 percent of children to these big welfare programs called public schools, but that feeding them while they are at these welfare schools is over the line. </p> <p>It's not hard to see what's going on: public school is so commonplace and nearly universal that it's no longer coded as the public program that it is, while school lunch is still associated with welfare for the poor. Naturally, conservatives tend to get worked up about the latter and not the former. <span class="pullquote-right">It's a toxic but ultimately understandable dynamic</span>.</p> <p>However, if we ignore this background dynamic, there is something worth salvaging out of this fictitious story that was made up and never happened. It is indeed dysfunctional and wrong that we have economic institutions that leave many parents with resources so inadequate that they cannot buy things for their children. Our needless deprivation of these parents leads to embarrassment and alienation for both the parents and their kids.</p> <p>One place where this occurs is at Christmas time when poor parents are unable to purchase the kinds of presents they'd like for their children.</p> <p>The problem with this system is the one Paul Ryan identifies in the story he pulled out of thin air. It doesn't allow the parent to go out and buy the presents they know their kid wants and then give it to them. This means both the parents and the kids are left unable to fully experience the joy and intimacy that such gift-giving creates.</p> <p>The obvious fix to this problem is to implement a Universal Christmas Bonus (UCB). Already, rich people who work at rich-people jobs often get Christmas bonuses. So what the Universal Christmas Bonus would do is provide this bonus to everyone. More specifically, everyone between the ages of 18 and 64 would receive a lump sum check around this time every year. The amount of the lump sum is negotiable. But, for instance, we could have a $300 Universal Christmas Bonus, which would have a fiscal cost of around $60 billion per year.</p> <p>With the $300 UCB, all parents would be empowered to provide gifts to their kids. The money and the nudging that the focus of the policy would provide could significantly reduce the number of poor parents who are so pinched that they cannot ensure Santa stops by their house. Non-parents could use the money to provide gifts to their friends and loved ones, or for other purposes.</p> </div></div></div> Wed, 03 Dec 2014 02:39:10 +0000 221331 at Matt Bruenig The Top 10 Percent of White Families Own Almost Everything <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>This article was originally published by <a href=""><strong>Demos.</strong></a></em></p> <p><span class="dropcap">T</span>he Federal Reserve released the <a href="">2013 Survey of Consumer Finances</a> on Thursday. The overall wealth distribution picture is grim and getting worse:</p> <p><img alt="" src="" style="font-size: 13.3333339691162px; line-height: 1.538em; width: 546px; height: 371px;" /></p> <p>The top 10 percent of families own 75.3 percent of the nation's wealth. The bottom half of families own 1.1 percent of it. The families squished in between those two groups own 24.6 percent of the national wealth.</p> <p>The present wealth distribution is more unequal than it was in 2010, the last year this survey was conducted. Specifically, the top 10 percent increased their share of the national wealth by 0.8 percentage points between 2010 and 2013. The bottom half and middle 40 percent saw their share of the national wealth fall by 0.1 and 0.7 percentage points respectively.</p> <p>These wealth figures bring to mind <a href="" target="_blank">a 1955 Red Scare era educational film</a>, which presses at one point:</p> <p>In order to have a proper appreciation of the American economic system, we must know how the national income is divided in America. In other words, we must examine the distribution of the great wealth produced through the operation of American capitalism.</p> <p><strong>Is the distribution widespread or is the wealth of America concentrated in the hands of the few, as the socialists and communists say?</strong></p> <p>Hmm.</p> <p><strong>Racial Wealth Gap</strong></p> <p>The overall distribution of wealth is troubling. So is the racial wealth distribution.</p> <p>Here is mean family wealth broken down by race:</p> <p><img alt="" src="" style="width: 542px; height: 371px;" /></p> <p>The mean white family has a net worth of $679,000. The mean hispanic family has a net worth of $112,000. The mean black family has a net worth of $95,000.</p> <p>Here is median family wealth broken down by race:</p> <p><img alt="" src="" style="width: 529px; height: 371px;" /></p> <p>The median white family has a net worth of $134,000. The median hispanic family has a net worth of $14,000. The median black family has a net worth of $11,000.</p> <p>Whites hold an extremely disproportionate amount of the national wealth. Whites are also the largest racial group. Consequently, whites own almost all of the wealth in the nation:</p> <p> </p> <p><img alt="" src="" style="width: 543px; height: 371px;" /></p> <p> </p> <p>White families hold 90 percent of the national wealth. Hispanic families hold 2.3 percent of the national wealth. Black families hold 2.6 percent of the national wealth. The remaining 5.1 percent of the national wealth is held by others (natives, Asians, Pacific Islanders, multi-racials, etc.).</p> <p>With few exceptions, whites own America.</p> <p><strong>#NotAllWhites</strong></p> <p>Just as wealth is heavily concentrated nationally, it is also heavily concentrated within racial groups, especially among whites.</p> <p> </p> <p>The bottom 32.1 percent of white families have an average net worth of $0.</p> <p>Here is the distributive breakdown of white wealth among whites:</p> <p> </p> <p><img alt="" src="" style="width: 534px; height: 371px;" /></p> <p> </p> <p>The top 10 percent of white families own 72.3 percent of all white wealth. The bottom half of white families own 2.2 percent of all white wealth. The remaining white families (those in the 50th to 90th percentiles) own the remaining 25.5 percent of white wealth.</p> <p><strong>This means that the top 10 percent of white families own 65.1 percent of all the wealth in the nation</strong>. The bottom half of white families own just 2 percent of the national wealth. And the white families in the 50th-90th percentile of white families own 22.9 percent of the national wealth.</p> <p> </p> <p>All white families have more wealth than their non-white counterparts, but it is really the upper half of whites—and especially the top 10 percent of whites—who own nearly everything.</p> <p> </p> </div></div></div> Mon, 08 Sep 2014 04:16:30 +0000 220874 at Matt Bruenig The Single Mother, Child Poverty Myth <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>I see it often claimed that the high rate of child poverty in the U.S. is a function of family composition. According to this view, the reason childhood poverty is so high is that there are too many unmarried parents and single mothers, and those kinds of families face higher rates of poverty. The usual upshot of this claim is that we can't really do much about high rates of childhood poverty, at least insofar as we can't force people to marry and cohabitate and such.</p> <p>One big problem with this claim is that family composition in the U.S. is not that much different from family composition in the famed low-poverty social democracies of Northern Europe, but they don't have anywhere near the rates of child poverty we have.</p> <p><img alt="" src="" /></p> <p><a href="">A number of studies</a> have tested this family composition theory using cross-country income data and found, again and again, that family composition differences account for very little of the child poverty differences between the US and other countries.</p> <p>Testing this hypothesis turns out to be really simple. The first thing you do is create a number of family categories. In <a href="">a 2008 study of this sort</a>, the family categories were: 1) married couple, 2) cohabitating couple, 3) single dad, 4) single mom, and 5) single mom with other adults in the household. The second thing you do is figure out what percentage of all the children live in each kind of family arrangement. The third thing you do is figure out the child poverty rate for each of the family categories (with poverty defined here as families with less than 50 percent of the median income). By multiplying the percentage of children living in each family category by each categories' child poverty rate (and then summing the results), you get the overall child poverty rate.</p> <p>From there, it is simple enough to just hold the child poverty rates for each family category constant and alter the distribution of children across family types. The following graph is what you get when you use this method to simulate what the U.S. childhood poverty rate would be if children were distributed across the five family categories in exactly the same proportion as children in Finland, Norway, and Sweden are (these being the three countries with the lowest childhood poverty rates):</p> <p><img alt="" src="" /></p> <p>Holding all else equal, if the family composition of the U.S. matched the family composition of Finland, the child poverty rate in the U.S. would fall from 22 percent to 21.6 percent. If the U.S. had Norway's family composition, the U.S. child poverty rate would increase from 22 percent to 22.9 percent. For Sweden's family composition, it'd increase all the way up to 25 percent. If anything, the family composition of the U.S. is keeping child poverty down somewhat relative to these countries.</p> <p>The percentage of children being brought up by single mothers (category four) does not differ tremendously between these countries:</p> <p><img alt="" src="" /></p> <p>What does differ tremendously though is how many of the children growing up in single mother homes are in poverty:</p> <p><img alt="" src="" /></p> <p>Why the poverty rates differ so much is not mysterious: it's almost entirely about transfers (i.e. welfare programs). You can see this by looking at the poverty rate of children in single parent homes prior to taxes and transfers compared to the same poverty rate after taxes and transfers:</p> <p><img alt="" src="" /></p> <p>High poverty rates for children in single mother families is a policy choice. In the U.S., we decide in favor of it. In the Nordic social democracies, they decide against it.</p> <p>Of course, it's not just children in single mother households that have elevated poverty rates in the U.S. The U.S. has massively higher child poverty rates across all family types:</p> <p><img alt="" src="" /></p> <p>Given the overwhelming size of the category, there are actually more impoverished children in married families in the US than any other family category (at least in this 2000 dataset).</p> <p>Thus, high child poverty in the U.S. is not caused by some overwhelming crush of single mother parenting. The lowest of the low-poverty countries manage to get along in the world with similar levels of single mother parenting just fine. Morever, relatively high child poverty rates are the rule in every single family type in the U.S., not just some single mother phenomenon. We plunge more than 1 in 5 of our nation's children into poverty because we choose to. <a href="">It would be easy to dramatically cut that figure</a>, but we'd rather not.</p> </div></div></div> Mon, 14 Apr 2014 14:53:06 +0000 220113 at Matt Bruenig America's Class System Across The Life Cycle <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>I am not usually one for a long charticle, but occasionally it's worthwhile to step back and summarize what we know. Here, I tackle America's class system, across the life cycle.</p> <p><strong>1. Poverty Spikes Stress in Children</strong></p> <p><img alt="" src="" /></p> <p><img alt="" src="" /></p> <p>It <a href="">starts in the womb</a>. It <a href="">never lets up</a>.</p> <p><strong>2. Income Inequality Means Enrichment Inequality</strong></p> <p><img alt="" src="" /></p> <p>More money, more activities.</p> <p><strong>3. Rapid Schooling Divergence</strong></p> <p><img alt="" src="" /></p> <p><img alt="" src="" /></p> <p>Although there <a href="">is essentially no observed class-based difference</a> in the cognitive abilities of children in their first year of life, <a href="">that ends quickly</a>.</p> <p><strong>4. Logical Consequence of Divergence: Drop Outs</strong></p> <p><img alt="" src="" /></p> <p>Little to no enrichment activities, cognitive abilities stunted by poverty-related stress, and years of falling behind <a href="">does what you would think it does</a>.</p> <p><strong>5. Further Behind Than Ever Come College Time</strong></p> <p><img alt="" src="" /></p> <p><a href="">These figures</a> probably understate the severity of the gap as well because those on the low end who’d score the worst probably never bother to take the SAT anyways.</p> <p><strong>6. Traditional College Students: Rich Kids</strong></p> <p><img alt="" src="" /></p> <p>The richer your parents are, <a href="">the more likely you are to be in college at 19</a>.</p> <p><img alt="" src="" /></p> <p>There is severe inequality in who attends college and equally severe inequality in where those who do attend go.</p> <p><img alt="" src="" /></p> <p>This inequality is most severe at the top, <a href="">with the top 147 colleges having a rich-to-poor ratio of 25-to-1</a>.</p> <p><strong>7. Getting In Doesn’t Mean Finishing</strong></p> <p><img alt="" src="" /></p> <p>Fifty-four percent of rich kids get a four-year degree by age 25, six times the percentage of poor kids who do so.</p> <p><strong>8. Surprise: Poor Kids = Poor Adults</strong></p> <p><img alt="" src="" /></p> <p>Obviously there are exceptions, <a href="">but the overall trend is clear</a>: the richer your parents are, the richer you are.</p> <p><strong>9. Even The Strivers Don’t Do As Well</strong></p> <p><img alt="" src="" /></p> <p>Poor kids who push through all of the stuff above and get through to college are still less likely to wind up on top <a href="">than rich kids who never even got a college degree</a>. Rich kids <em>without </em>college are 2.5x more likely to wind up in the richest fifth than poor kids <em>with </em>college.</p> <p><strong>10. Inheritance Flows In</strong></p> <p><img alt="" src="" /></p> <p>If that wasn’t enough, rich adults get some extra help, usually mid-life, in the form of inheritance and other wealth transfers from their rich parents. The wealthiest 1 percent (in the SCF survey, which is less wealthy than the real 1 percent no doubt) <a href="">have inherited an average of $2.7 million</a>, 447 times more than the least wealthy group of adults.</p> <p><strong>11. An Adulthood of Serious Inequality</strong></p> <p>The fact that class is transmitted down generations might not be so bad if differences between classes were pretty minor. But they aren’t. We are a remarkably unequal country compared to those at similar levels of development.</p> <p><img alt="" src="" /></p> <p>Even after taxes, <a href="">the richest fifth captures nearly half the national income</a>, while the poorest fifth captures barely 6 percent of it.</p> <p><img alt="" src="" /></p> <p><a href="">The bottom half own basically nothing</a>, while the top 10 percent own nearly three-fourths of the things.</p> <p><strong>12. And Then You Die Early</strong></p> <p><img alt="" src="" /></p> <p><img alt="" src="" /></p> <p><a href="">First graph is men. Second graph is women</a>.</p> <p><strong>Conclusion</strong></p> <p>Class haunts people from womb to grave, limiting their ability to flourish and pursue the good life as they define it. Confronted with the reality of our society’s entrenched class system, our national politics in its present state offers three responses. The first response is to deny reality altogether, usually in favor of an anecdote or two. The second is to accept that it exists, but pretend there is nothing you can do about it because those on the bottom are inferior (see Murray, Ryan). And the last response is to note it exists and offer lukewarm solutions that nibble around the margins of the problem without ever doing anything that might actually even things out.</p> </div></div></div> Wed, 26 Mar 2014 14:10:45 +0000 220006 at Matt Bruenig Why Paul Ryan Is Wrong to Blame Black Culture for Poverty <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Watching Paul Ryan try to figure out the poverty question has been a fascinating spectacle. It began with his secret poverty tour, a tour so secretive that it was covered in the major national newspapers. The next event was the release of his big report on the condition of the welfare state, a report so riddled with inaccuracies that <a href="">even the economists he cites favorably claim he has misrepresented their work</a>. And now today, we are treated to a sneak peak at what all of <a href="">this political theater has led him to conclude about the causes of poverty</a>: black culture is making people lazy.</p> <p>Of course, he doesn't use "black," opting instead for its friendlier synonym "inner city":</p> <p>We have got this tailspin of culture, in our inner cities in particular, of men not working and just generations of men not even thinking about working or learning the value and the culture of work, and so there is a real culture problem here that has to be dealt with.</p> <p>As an initial matter, it is still kind of amazing that policymakers in America shuffle around looking for the answer to the poverty question. We discuss poverty reduction strategies as if we are navigating uncharted territory even though we already know from other countries how it's done: <a href="">transfer money to those at the bottom</a>.</p> <p>Beyond that, the racial degeneracy explanations of poverty in the U.S. are amazing in their own right. The rhetorical strategy is obviously intended to associate poverty with the black other and their inferiority as a means to make poverty reduction less politically attractive. We've been here before (see welfare queens). In fact, we have scarcely been anywhere else in the last half-century.</p> <p>This racist explanation of American poverty, as popular as it is, has some fatal flaws however. <a href="">In 2012</a>, there were 18.9 million whites with incomes below the official poverty line, compared to 10.9 million blacks. Because blacks make up a small fraction of the population, their postulated "inner city" culture cannot account for anywhere near most of the poverty in America. It just can't.</p> <p>Blacks do have higher poverty rates than whites, which is important to note. But <a href="">it is necessary to put that into historical perspective</a> if we are going to have the conversation Paul Ryan wants to have about causes:</p> <p><img alt="" src="" /></p> <p>Was it inferior black culture that had blacks at 55 percent poverty in 1959? What about their elevated rates in 1964, the year the Civil Rights Act passed? Surely even the right-wing agrees these days that elevated rates of black poverty were a function of American apartheid at some point. But when did the racism end? Did one day the racism end and then all of a sudden inferior black culture was born and held those poverty rates back from plummeting? Black poverty, like America more generally, has yet to recover from American apartheid. It being elevated is not some new phenomenon.</p> <p>In fact, if you index black and white poverty at 100 in 1959, when the Census trend line starts, you actually see black poverty rates are down relative to white poverty rates during the period in which the black cultural inferiority hypothesis Paul Ryan is gravitating towards becomes popular:</p> <p><img alt="" src="" /></p> <p>As of 2012, black poverty is down 50 percent from its 1959 starting point while white poverty is down just 30 percent. The swing in percentage points is even more dramatic, with black poverty down 27.9 points and white poverty down just 5.4 points. The historical trend data don't support Paul Ryan's racist theory of poverty, but they do support a racism theory of it.</p> <p>Ultimately, like I said at the top, all of these inquiries into the causes of poverty and its solutions are unserious. Paul Ryan was never going to reach a conclusion other than one that claimed poverty is a function of its victims being screwed up. Ryan and those like him are not looking to solve poverty, but to justify its existence.</p> </div></div></div> Thu, 13 Mar 2014 15:45:16 +0000 219924 at Matt Bruenig Our Enormous Retirement Subsidies for the Rich <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>In the State of the Union address, Obama revealed that he will be implementing <a href="">a myRA plan</a>, which is basically an Individual Retirement Account administered by the government. Savers will put the money in after-tax (like a Roth IRA), the accounts will be small (capped at $15,000), and the returns will be modest but guaranteed.</p> <p>David Callahan <a href="">had some preliminary coverage of the myRA idea</a> and retirement security in general yesterday. The <a href="">Economic Policy Institute also wrote on the plan</a>, largely panning it as being inadequate. Indeed, it is hard to see how such a small account is meant to accomplish much or what this is supposed to do for low-income people who simply do not have any real money to put aside.</p> <p>But before people start rattling off alternative account proposals that are much better, it behooves us to collectively recall just how much money the federal government is already devoting to subsidizing private retirement accounts. Those in policy circles tend to be aware of this stuff, but it largely escapes the glare of everyone else.</p> <p>Each year, the federal government puts tax expenditures towards a whole slew of retirement instruments including defined benefit plans, 401(k)s, Keogh plans, traditional IRAs, and Roth IRAs. <a href=";id=1192">The Joint Committee on Taxation projects</a> that in the five years between 2013 and 2017, spending on these subsidies will total over $700 billion. If we double that to do the 10-year budget thing everyone does for some reason, we wind up with $1.4 trillion of tax expenditures on just these subsidies.</p> <p>Who captures these subsidies? The rich of course. <a href="">According to the CBO</a>, the following is who soaked up the tax expenditures dedicated to net pension contributions and earnings in 2013.</p> <p><img alt="" src="" /></p> <p>The richest fifth pulled down 66 percent of them, while the poorest fifth pulled down just 2 percent of them. So the richest quintile receives 33 times more federal money for their retirement accounts than the poorest quintile. Even the fourth quintile (incomes in the 60th to 80th percentiles) only received 18 percent of these tax expenditures. So all income groups other than the top fifth receive less than a proportional share of this money.</p> <p>Needless to say, this system of retirement tax subsidies is totally ridiculous and is just another of the submerged ways that we funnel huge sums of money to the rich in this country. If we really want to pump up the retirement savings of the poor, one obvious way to start is to take the next decade's $1.4 trillion of retirement tax expenditures and distribute them in a different way than the manner detailed in the graph above.</p> </div></div></div> Thu, 30 Jan 2014 19:55:25 +0000 219635 at Matt Bruenig 1950s Capitalist Propaganda and Opportunistic Egalitarians <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>In yesterday's post, <a href="">I wrote about the broad history of inequality under capitalism</a>. In many countries that have undergone capitalist development, inequality has moved in three stages. First, inequality rapidly escalates. Second, the rise in inequality slows down and actually reverses. Third, inequality shoots up once again.</p> <p>Interestingly, when the United States was in stage two, some advocates of capitalism became very fond of egalitarian arguments. Whereas Marx predicted that capitalism would cause inequality to increase inexorably, the second stage seemed to show that wasn't true:</p> <p><img alt="" src="" style="width: 556px; height: 337px;" /></p> <p>As you can see, the market incomes of the bottom 90 percent (blue) actually grew faster than the market incomes of the top 10 percent (red) for quite some time, with the 1950s and 1960s being right on the crest of that trend. From this, Simon Kuznets, writing in the 1950s and 1960s, <a href="">developed a whole theory of two-stage capitalist development</a>, with the latter stage being a march towards egalitarianism. Although the rich continued to get richer, the poor got richer too and <em>at a faster pace</em>. Consequently, capitalism was supposed to generate an egalitarian order through this basic process (hat tip <a href="">Mike Konczal</a>):</p> <p><img alt="" src="" style="width: 540px; height: 749px;" /></p> <p>This equalizing was not just empirically observed; it was also utilized normatively to prove American capitalism was so great. Whereas, today, defenders of our system largely reject the importance of distribution and even call references to it class war and class envy, advocates during the period when greater equalization was coinciding with American capitalism trumpeted egalitarian distributions as extremely important and pointed out that this is precisely what we had and where we were heading.</p> <p>Of course, these were mostly opportunistic egalitarians, people who did not really care about equalizing distribution, but thought it worthwhile to pretend to so long as it could be mobilized to provide arguments for the system that they actually supported on other grounds. This 1955 propaganda film called<em> America's Distribution of Wealth</em> is the best example of this now-dead egalitarian defense of American capitalism:</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="//" width="420"></iframe></p> <p> </p> <p>In the video, the professor character first establishes that equitable distributions are essential to the justness of economic systems and then goes on to statistically demonstrate that the wealth and income of the country is widely dispersed. Here are some choice lines:</p> <blockquote><p style="margin-left: 40px;">In order to have a proper appreciation of the American economic system, we must know how the national income is divided in America. In other words, we must examine the distribution of the great wealth produced through the operation of American capitalism. <strong>Is the distribution widespread or is the wealth of America concentrated in the hands of the few, as the socialists and communists say?</strong></p> <p style="margin-left: 40px;">...</p> <p style="margin-left: 40px;">Basically, an economic system must fulfill two social needs of the population which it serves: first an adequate production of goods, and <strong>second an equitable distribution of those goods</strong>.</p> <p style="margin-left: 40px;">...</p> <p style="margin-left: 40px;">This brings us to the central question: the question of distribution. <strong>Are these economic benefits under American capitalism being extended to American wage or salary earners</strong> or would this big segment of the population be better off under socialism or communism?</p> <p style="margin-left: 40px;">...</p> <p style="margin-left: 40px;"><strong>If we keep [our system's] basic principles strong and vigorous in the years ahead, the opportunity of every American for a still-better living standard will certainly be enhanced.</strong> And perhaps even the disciplines of socialism and communism will come out of their shadowy pipe dreams and join us in our march of human progress.</p> </blockquote> <p>As we all should know by now, this march of human progress in the form of sharing in the prosperity of economic growth essentially stopped four decades ago, at least insofar as market distribution is concerned. In that period, <a href="">basically all income gains have flowed to the top 10 percent</a>. Middle class (median) incomes <a href="">became decoupled from productivity and entirely stagnated</a>.</p> <p>When it comes to wealth, it is, in fact, concentrated in the hands of the few "as the socialists and communists say." <a href="">According to Edward Wolff's widely-cited SCF calculations</a>, in 2010, the wealthiest 5 percent held 63 percent of the nation's wealth and wealthiest 20 percent held 89 percent of it. This means that the bottom 80 percent of the country held just 11 percent of its wealth. The story is worse for non-home wealth, with the bottom 80 percent holding just 4.6 percent of it.</p> <p>But notice that the opportunistic egalitarianism of capitalism's defenders has now disappeared. When we were in the middle of American capitalism's period of economic equalization, the system was explicitly justified on the basis that it generated "first an adequate production of goods, and second an equitable distribution of those goods." If we take seriously the egalitarian prong of that prior general theory of economic justice (and we should), we'd have to conclude that, as presently constructed, our system is a failure.</p> </div></div></div> Fri, 17 Jan 2014 15:48:06 +0000 219568 at Matt Bruenig Marriage and Poverty <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Oddly enough, there is a gang of Republicans who have recently taken <a href="">up the mantle of poverty</a>. With the exception of Mike Lee, who has proposed to increase the Child Tax Credit, none of the people in this gang has come out with anything remotely interesting or worthwhile. Gang member Marco Rubio recently stepped out of his study, revealing that he had determined the old conservative marriage arguments <a href="">are still the way to go</a>:</p> <p>The truth is, the greatest tool to lift children and families from poverty is one that decreases the probability of child poverty by 82 percent. But it isn’t a government spending program. It’s called marriage.</p> <p>I have three things to say. <strong>Piling poor people into houses together misses the point.</strong>Matt Yglesias has a good response to Rubio, in which he explains that this marriage point is <a href="">really about economies of scale and the way we measure poverty in this country</a>. In a one person family, the amount of money it takes to be above the official poverty line is around $11,500. But because it is assumed family members share resources, each additional family member increases the poverty line for that family by less than half that amount. So taking two single people with poverty incomes and putting them in a family together can cause them to come out of poverty even though their incomes have not changed. This so-called marriage solution is actually just a group living solution. If you can pile enough poverty-income people into one household, that household will eventually be counted as not impoverished. Sharing housing to save money is not a bad idea for those so inclined, but it totally misses the distributive point. If you really think about it, this is a solution to poverty that simply aims to have poor people consume less stuff. Distributive policy should respond to people's life preferences.The reality is that marriage rates have fallen pretty much everywhere in the OECD. In fact, the United States has the third highest crude marriage rate of any OECD country.  <img alt="" src="" /></p><p> </p> <p>Countries with lower marriage rates include Finland, Denmark, Sweden, Norway, and plenty of other countries with much lower poverty rates and inequality than the U.S. has. So it's obviously possible for low marriage and low poverty to coincide. Given this possibility, the appropriate role for policy here is to accommodate any secular shifts in preferences for marriage, not to use that shift as an excuse to make people suffer.</p> <p><strong>Economic insecurity and poverty makes marriage harder.</strong></p> <p>Determining why poor people choose to forego marriage can be difficult. However, one recent <a href="">ethnography of working class youth by Jennifer Silva</a> suggests economic insecurity and poverty are big factors.</p> <p>On first glance, it would seem like adding two poverty-income people to one household through a marriage would be a positive improvement. Indeed, that's what the economies of scale point above is getting at. But this ignores the risk that such an addition entails.</p> <p>Suppose you are a single person making $9,000 a year and therefore live in poverty. Now suppose you meet someone else making $9,000 and you are considering marrying them. If you marry, the family income goes to $18,000 and is therefore above the poverty line. On a very superficial take, this seems like it would be a real improvement. But that is only if you assume your potential spouse will necessarily remain employed. If they lose their job, you will go from supporting one person with $9,000/yr to supporting two people with $9,000/yr. On the low-end of the labor market, precarity is common and so this is a real risk. <a href="">Silva's ethnography</a> found poor working class youth making precisely this kind of risk-adverse calculation when considering marriage.</p> <p>More generally, the point here is that low-income people, because of their economic situation, do not make attractive mates. There is simply too much risk and stress involved in getting married to a low-income spouse. Making low-income people more attractive mates for marriage will require improving their economic situation by providing them more income, more benefits, and providing them greater security against bad outcomes like job loss and wage declines. But these are precisely the left-wing programs those in the GOP (and the DNC for that matter) generally oppose.</p> <p><strong>Conclusion</strong></p> <p>The last thing to say on this point is that the marriage argument is really backwards in many ways. Marriage rates have been falling just generally across the world and the US. So you probably cannot blame the overall downward trend in the US on the increase in economic insecurity. However, when we are comparing the economic plight of who is and isn't married, it is entirely fair to say that the relationship largely runs in the opposite direction than people like Rubio suppose. Married people are less impoverished because people who are not impoverished are more likely to get married. Married people are less impoverished because <a href="">married couples with higher incomes are much less likely to get divorced</a>. With marriage, you have an institution that attracts and retains more economically secure and stable people, not an institution that creates them.</p> </div></div></div> Thu, 09 Jan 2014 19:26:48 +0000 219509 at Matt Bruenig A Specter Is Haunting Alaska—the Specter of Communism <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Jesse Myerson wrote a piece <a href="">about economic reform at <em>Rolling Stone</em></a>, which really set conservatives off. In particular, they were real keen on calling his proposed reforms communism.</p> <blockquote class="twitter-tweet" lang="en" xml:lang="en"><p>"Ever noticed how much landlords blow?" — a 63-year-old man, trying to sell communism to the youngsters. <a href=""></a></p> <p>— Radley Balko (@radleybalko) <a href="">January 4, 2014</a></p></blockquote> <blockquote class="twitter-tweet" lang="en" xml:lang="en"><p>"What birther crap is to lifting the lid off ugly right-wing Twitter, that communism piece was to lifting the lid off ugly left-wing Twitter."</p> <p>— Charles C. W. Cooke (@charlescwcooke) <a href="">January 5, 2014</a></p></blockquote> <p>Hoping to bring some sense to the discussion, I explained on Saturday that four of the five reforms Myerson advocated <a href="">already exist in America right now in one form or another</a>. Here I want to build on that with a special focus on Republican-controlled Alaska. Why Alaska? Because it already has two (and arguably three) of Myerson's proposals in place right now. It is, I guess, America's great communist province.</p> <p>In 1976, Republican Governor Jay Hammond started Alaska's sovereign wealth fund (SWF), which has come to be called the <a href="">Alaska Permanent Fund</a>. The way it works is Alaska has a big pile of money that it uses to buy up the means of production (sometimes called stocks and bonds). Those investments yield returns and revenue for the state. Right now, Alaska plows that revenue into its universal basic income (UBI) program, which is called the Permanent Fund Dividend. The way it works is the state sends a check to every single Alaskan each year. Last year, it was $900, but in better years, it has been as high as $2000. For a family of four, that's a $3,600 and $8,000 income boost respectively.</p> <p>The Alaska communist story gets more interesting than that though. The way Alaska builds the principal of the fund is in line with another of Myerson's proposals: take back the land. You see, the oil wealth in Alaska happened to reside underneath public land. Instead of doing the red-blooded American thing and just giving all of that natural wealth that nobody creates away to oil companies, Alaska held on to its ownership and collects royalties from the oil. Those royalties are plowed into its SWF. So what you have in Alaska is a state that is leveraging publicly-owned natural resources to build a SWF that pays out a UBI. Or as conservatives on twitter call it: a communist hellscape.</p> <p>How has communist Alaska fared you may be asking? Well, they have a 10 percent poverty rate, which is 33 percent lower than the nation as a whole. It has the <a href="">second lowest level of income inequality in the country</a>. It must be pretty cool to live there because half of the shows on TV are about it. It does not appear to be on the verge of collapse any time soon. And there are no, as far as we know, gulags or forced labor camps yet. So all in all, I'd say its adventures in communism have been pretty successful.</p> <p>But hey, if prominent conservatives like Erick Erickson and Charles Cooke think these kinds of things are intolerably horrible, they should step up to the plate. Erick Erickson should have a post on <em>Red State</em> about how Alaska needs to change. Charles Cooke should have one on the <em>National Review</em> website as well. I think Erickson especially could have some sway in fixing Alaska's communist ways. The state is Republican controlled and I imagine he knows how to contact its former governer, Sarah Palin. Together, they could really whip that state back into shape. Make it happen guys!</p> <p><strong>Serious Time</strong></p> <p>What's actually going on in Alaska is a kind of market socialism. The idea of creating a sovereign wealth fund that finances a universal basic income was <a href="">cooked up at least 80 years ago by market socialists</a>, most prominently <a href="">Oskar Lange</a>. It's a way to socialize the ownership of capital resources without centrally planning anything or otherwise disrupting normal market operations. It works fine and there is no reason you couldn't have a program like this in place in every state or one at the federal level.</p> </div></div></div> Mon, 06 Jan 2014 16:48:41 +0000 219480 at Matt Bruenig Inside the Lives of Fast Food Workers <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Strikes at fast food establishments are set to sweep the nation today as part of an organizing effort that has been under way for more than a year. We should all know by now what the main concern of striking workers is. They get paid very little and that makes for a really poor existence. Although <a href="">we have gotten some specific stories here and there</a>, few have actually undertaken to systematically describe what it is like to live this kind of life. A new book <a href="">just out by Jennifer Silva called <em>Coming up Short</em> takes on exactly this task</a>.</p> <p>In the book, Silva interviews 100 working class youth (20s to 30s) to get a snapshot of what it is like to come into adulthood under these kinds of conditions. Less concerned with reiterating well-documented material statistics, Silva probes the way this kind of life affects the workers' self-concept, their notions of individuality, their notions of life progress, and their relationships. What she finds out is absolutely wretched.</p> <p>To be a working class youth in a low-paid, precarious job like fast food is to live a life devoid of the kinds of progressive life markers that make up normative adulthood. There is rarely college attendance and even more rarely college completion. There is not the moment where you secure the stable job that can anchor life planning. There is not enough money or enough stability to buy a house. Partnering or marrying is too risky and otherwise unattractive given the realities and stresses of dual precarity. Child-bearing is hard to undertake in a way that won't be totally ruinous.</p> <p>Without these markers then, it is a life of arrested development and unimaginable stress and misery. The workers live in small duplexes, apartments, or trailer homes, occasionally doubled up with family. They often lose their jobs and, lacking a strong safety net, run up credit card debt to get by, which they then can never pay off. When they are in a job, they cling on tightly even when they might want to take a risk for advancement elsewhere because they cannot afford that risk. Those from poor, working class backgrounds who do manage to pull through college can find themselves right back where they started if they do not acquire the necessary social and cultural capital that actually allows an individual to convert credentials into better living.</p> <p>With a conventional adulthood out of reach, these youth must generate new narratives of adulthood. Adulthood in this context gets reconceived of as a process of overcoming and emotional self-management. These working class youth avidly read self-help books and soak up other bits of pop psychology, often self-diagnosing (as they cannot afford to visit a doctor) themselves with any number of psychological disorders, most commonly depression and anxiety. Adulthood then becomes imagined as the ability to manage these ailments and other emotional pain (e.g. pain originating from their often equally wreteched childhoods) and still make it through. Aduthood for those unlucky enough to draw this lot is about merely surviving through all the pain and overwhelming stress.</p> <p>Existing in this part of the labor market is really just that: existing. It is not just that the pay is low and that causes objective material hardship. It is also that living in this part of the labor market is hardly living at all. What is a life that does not progress? What is an adult life, in this society, where it is impossible to save money, impossible to partner, impossible to have and adequately support children, impossible to have a stable, anchoring job, and impossible to even secure a stable residency whether through buying a home or otherwise? What we do when we put people in this position is eliminate their access to the capabilities that form the very core of what we (and they) generally consider the good life to be.</p> <p>As these strikes unfold and all sorts of cynical commentary flies out of the mouths of those who can or will be able to access the very kind of life that these folks are denied, really consider what we are doing here as a society. A whole underclass of people is being produced that is systematically denied the kind of basic life course that most people value and that forms the content of almost all popular representations of adult living. Through precarity and material poverty, these individuals are being essentially closed off from living in our society. They are being cast off into a lonely life where there are no personal projects, no stable families, no strong relationships, no persistent household, and no real community; instead, there is just work and bare survival.</p> <p>That this goes on when it does not have to is morally intolerable. Our institutions should be remade so that this does not happen. We can, without a doubt, put in place different institutions that do not allow for this sort of thing to happen, but we <em>choose</em> not to. Every day when we wake up and decide to keep going with what we are doing, we are creating this human catastrophe anew.</p> <p>While we may one day decide to stop inflicting this suffering on our neighbors, those whose life it is daily wrecking cannot wait. They are left to organize where they are and with the power they have. For poor, precarious workers, that power is the ability to withhold labor and the ability to make a spectacle where they can publicly plead for the kind of income and stability that would allow them to live the dignified lives the middle and upper classes enjoy but deny to others. Anyone willing to take that kind of risk while facing the circumstances described above deserves our support.</p> </div></div></div> Thu, 05 Dec 2013 16:11:56 +0000 219372 at Matt Bruenig The Racial Wealth Gap <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>This Jon Jeter <a href="">piece about racial wealth inequality</a> seemed to be making the rounds a lot over the weekend. Jeter begins thusly:</p> <blockquote><p>For every dollar in assets owned by whites in the United States, blacks own less than a nickel, a racial divide that is wider than South Africa’s at any point during the apartheid era.</p> <p>The median net worth for black households is $4,955, or about 4.5 percent of whites’ median household wealth, which was $110,729 in 2010, according to Census data. Racial inequality in apartheid South Africa reached its zenith in 1970 when black households’ median net worth represented 6.8 percent of whites’, according to an analysis of government data by Sampie Terreblanche, professor emeritus of economics at Stellenbosch University.</p> </blockquote> <p>As someone who <a href="">keeps track of such things</a>, I was intrigued by the figures, but could not discern where they came from. The Census does not track wealth like this. The 2010 year suggests Jeter may actually <a href="">be referring to the Survey of Consumer Finances (SCF)</a>. But its figures differ from Jeter’s.</p> <p>I checked <a href="">Edward Wolff’s calculations from the 2010 SCF</a> (which differ from the official SCF numbers because Wolff doesn’t think it’s correct to count car value as wealth). In Wolff’s figures, you will find Jeter’s median black wealth figure of $4.9k, but the median white wealth figure is $97k, not the $110.7k figure Jeter provides. So the mystery remains.</p> <p>Seeing as I was on the prowl for the figures anyways, I decided I might as well just whip some up myself. Using the 2010 SCF microdata, including the judgments it makes about what constitutes net worth, I calculated the following.</p> <p>Black median wealth is 12 percent of white median wealth. Hispanic median wealth is 14.3 percent of white median wealth.</p> <p><img alt="" src="" /></p> <p>Black mean wealth is 15.1 percent of white mean wealth. Hispanic mean wealth is 21.6 percent of white mean wealth.</p> <p><img alt="" src="" /></p> <p>Whites collectively hold 88.4 percent of the nation’s wealth. Blacks collectively hold 2.7 percent of the nation’s wealth. Hispanics hold 4 percent of the nation’s wealth.</p> <p><img alt="" src="" /></p> <p>Of course, there are population differences between the groups. In this final graph I divide each race’s share of the overall wealth by its share of the overall population. If wealth were evenly distributed among racial groups, all the bars would line up at 1. Bars above 1 indicate that the racial group has a greater share of the nation’s wealth than its share of the population. Bars below 1 indicate the racial group has a lesser share of the nation’s wealth than its share of the population.</p> <p><img alt="" src="" /></p> <p>Whites’ share of the nation’s wealth is 31 percent greater than their share of the nation’s population. Blacks’ share of the nation’s wealth is 80 percent less than their share of the population. That is, to bring their share of the wealth in line with their share of the population, you’d need to increase black wealth five-fold. Hispanics’ share of the nation’s wealth is 72 percent less than their share of the population. To bring their share of the wealth in line with their share of the population, you’d need to increase it by 3.5x.</p> <p>So, obviously, wealth disparity is a huge racial justice issue. A lot is said of income–<a href="">so much so that some even wrongly conclude that blacks and whites in the same income groups are in basically the same circumstances</a>–but wealth is just as big an issue. In fact, as far as gaps go, wealth gaps between races and classes are much bigger than income gaps.</p> </div></div></div> Wed, 06 Nov 2013 19:32:44 +0000 219129 at Matt Bruenig Have Hope: Conservatives Rationalize Leftist Stuff They Like <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Last week, I <a href="">had a co-authored piece</a> in <em>The Atlantic</em> about using a universal basic income to cut the official poverty rate in half. The short of it is—<a href="">as I pointed out last month here at <em>Policy Shop</em></a>—providing an annual $2,920 cash grant to every American would cut official poverty in half overnight. Although completely viable as a real-life policy that you could implement successfully, such a plan is generally dismissed as out of the question in our current political climate.</p> <p>While this is more or less true, I have considerable hope of the long-term viability of such a program if we can ever manage to get it going. Even though we are a much more conservative nation than our global counterparts, it is not as if those conservative tendencies and principles are consistently applied. Instead, when a left-wing program gets immensely popular, conservatives drop their opposition to it and dream up conservative-sounding rhetoric to justify it.</p> <p>The best example of this comes to us from Alaska, a conservative state that already <a href="">has a kind of basic income program in place</a>. Called the Alaska Permanent Fund (APF), it is the most socialist government program in the country. I do not mean socialist in the Fox News sense of the word. The APF literally involves the state government in Alaska buying up productive capital assets—or as Marx termed it, “the means of production”—and then distributing out the investment income generated by those assets via an annual check sent to every Alaskan (or what the market socialists call a “<a href="">social dividend</a>“).</p> <p>How do conservatives rationalize this program? Gar Alperovitz has explained the conservative rhetorical justifications for it in a number of his books, but conservative Twitter <a href="">super-troll Frank Rojas explains it as well as Alperovitz does</a>: “The fund was started to prevent politicos from spending the new revenues on programs.” So you see, constructing a big socialist wealth fund and using it to send out free money to everyone each year is a conservative move because it takes the money out of the government’s hands!</p> <p>Of course, this is transparently ridiculous. If you wanted to keep the money out of the government’s hands, why was it collected as tax revenue in the first place? If you have the kinds of revenue surpluses that allow you to build out a big sovereign wealth fund, the conservative move is to cut taxes and not collect the revenue. Even now that we are past that point, why hold on to the wealth in the fund perpetually instead of liquidating it entirely and sending out a big one-time check to everyone? That is obviously the more conservative, small-government move than having the government permanently hold on to a big chunk of the means of production. The reason the APF persists is not mysterious. People like the free socialist money. To reconcile that with their dedication to their conservative identity, they just rebrand the whole thing in new conservative terms.</p> <p>The APF is hardly the only example in this genre of conservative backsliding. Social Security and Medicare, for instance, are massive welfare handout programs. We levy a sizable tax on those people currently in the workforce each year and, with that money, send out money and healthcare to the currently retired. It turns out people really love that stuff, and so conservatives have taken to pretending these are like savings programs where you “pay in” money and then get it out. But that’s a total nonsense joke. When you are working, the elderly “take” from you. And when you are elderly, you “take” from those coming up behind you. It’s a transfer program.</p> <p>On the Medicare front, we can all remember the famous Tea Party town hall where a gentleman declared that the government should keep their hands off his Medicare. This was reasonably mocked as ignorant, but it’s also hope-inspiring. The guy clearly liked his free government health care, and I doubt seriously that sitting him down and explaining how it works would make him want to get rid of it. Finally, as the <a href=""><em>New York Times</em> revealed last month</a>, there are die hard Tea Party supporters who are pro-shutdown and all the rest of it that, when you ask them what kind of health care system they’d like, accidentally and unknowingly describe a single-payer healthcare system. A single-payer system is, as most readers probably know, a much more left-wing health care system than Obamacare, which the Tea Partiers decry as socialist.</p> <p>The point here is that conservative blustering is not as ideologically serious as it might seem. Conservative folks certainly have conservative identities that they hold dear, but that doesn’t mean they will endlessly oppose leftist programs. It just means they will endlessly oppose “leftist” programs. If people really like a particular program (and who doesn’t like checks in the mail?), they’ll just rhetorically rationalize the program as being something more palatable to their nominally conservative political identities.</p> </div></div></div> Mon, 04 Nov 2013 15:23:28 +0000 219109 at Matt Bruenig Why Do Women Do Market Work? <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Super-misogynist Gavin McInnes of <em>Vice</em> fame <a href="">unleashed an odd hyper-masculinist performance on HuffPo Live last week</a>, complaining, among other things, about working women. McInnes apparently thinks feminism is to blame for women becoming unhappy corporate strivers, instead of domesticated homekeepers. In making these remarks, McInnes refers to women striving to be CEOs, which suggests that when he talks about working women, he has in mind upper-class, highly-educated women trying to move up the economic power ranks.</p> <p>In the reality of most women, working in the labor market is not a discretionary activity undertaken voluntarily for self-liberation purposes. Like men, women work because they have to work in order to survive. There is no option. This is most obviously true for single women, but it's also true for husband-wife families. In anticipation of a piece I am preparing with <a href="">Elizabeth Stoker</a> on this McInnes blow up, I calculated the following numbers. They all come from the <a href="">Census' latest ASEC microdata</a>, which covers 2012.</p> <p>In 2012, there were around 59 million husband-wife families. In around 36 million of those families (or 60 percent), the wives earned money last year. The wives in the remaining 23 million husband-wife families (or 40 percent) did not.</p> <p><img alt="" src="" /></p> <p>Focusing on those 36 million husband-wife families with working wives, I wanted to see what their financial state would be like if the wife did no market work and had no earnings. This is the result.</p> <p><img alt="" src="" /></p> <p>This is the same graph, but done in terms of percents of families, not raw numbers.</p> <p><img alt="" src="" /></p> <p>So, of the 36 million husband-wife families in which the wife does market work, 54 percent (far right red bar) would be below 2x the poverty line if the wife didn't do so. It's not uncommon to describe those below 2x the poverty line as being in or near poverty. So under that convention, 54 percent of husband-wife families in which the wife works would be in or near poverty with just the husband's earnings. Thus, like I said at the top, most women (even those in husband-wife situations) don't have the option to not work. To carry on like they do is to pretend most women are the affluent, professional women the chattering class loves to focus on.</p> <p>To be clear, I am not trying to get into this discussion of whether women should or shouldn't do market labor, as that's not really for me to say. I am just saying that the whole discussion is incoherent from the beginning because it assumes that for the great majority of women, there is even such a choice. Or more realisticially, it is a discussion that simply ignores the plight of the majority of women, which is doubtlessly a reflection of the sort of people who get to participate in public sphere debates.</p> </div></div></div> Mon, 28 Oct 2013 15:51:01 +0000 219047 at Matt Bruenig Sorry, John Stuart Mill Was Not a Libertarian <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Libertarianism as it exists in the United States is basically a mid-20th century American philosophy, at least in origin. Owing perhaps to a combination of bad introductory classes and an urge for a longer historical pedigree, libertarians often like to pretend that great canonical thinkers prior to that time were also libertarians. But as that is an obvious anachronism, it turns out to be untrue. There are some lesser knowns here and there along the trail who might come close, but basically none of the big old philosophical names can rightly be associated with this mid-20th century libertarianism.</p> <p>Previously, <a href="">I pointed out John Locke’s anti-libertarian transgressions</a>, in which he observed and prescribed a solution to the intense coercion of labor contracts made between those with very unequal bargaining strength, contracts he analogized to slavery. To suggest Locke was not a mid-20 century American libertarian was so infuriating that <a href="">some rather amusing, but ultimately incompetent, push back followed</a>.</p> <p>It’s not just Locke in whom the libertarians have misplaced their admiration. Presumably because he wrote the book <em>On Liberty</em> (the only book of his seemingly taught in political philosophy courses), I’ve run into more libertarians than I can count who think John Stuart Mill was one of them. While Mill clearly was a fan of what we might call personal liberty, he realized economic matters were not so easily disposed of by appeals to personal liberty. In fact, in his <em>Principles of Political Economy</em>, Mill comes out in favor of what we would now call a market socialist system.</p> <p>Here is one choice quote from Book V of <em>Principles of Political Economy</em>, in which Mill explains the inherently social nature of wealth distribution and economic institutions in general:</p> <blockquote><p>The Distribution of wealth … is a matter of human institution solely. The things once there, mankind, individually or collectively, can do with them as they like. They can place them at the disposal of whomsoever they please, and on whatever terms. Further, in the social state, in every state except total solitude, any disposal whatever of them can only take place by the consent of society, or rather of those who dispose of its active force [i.e. government]. Even what a person has produced by his individual toil, unaided by any one, he cannot keep, unless by the permission of society. Not only can society take it from him, but individuals could and would take it from him, if society only remained passive; if it did not either interfere <em>en masse</em>, or employ and pay people [i.e. police] for the purpose of preventing him from being disturbed in the possession. The distribution of wealth, therefore, depends on the laws and customs of society. The rules by which it is determined are what the opinions and feelings of the ruling portion of the community make them, and are very different in different ages and countries; and might still be more different, if mankind so chose.</p> </blockquote> <p>For Mill, who gets what is a social decision. The only thing that causes anyone to ever have entitlement over pieces of the world are the laws and institutions of society. It is police violence in concert with legal rules that actually demarcate what belongs to whom, and there is no demanded-by-the-universe way of orienting those institutions. Also, it's clear that curtailments of liberty are at the very heart of all economic institutions, laissez-faire ones just as much as socialist ones.</p> <p>Sadly, there is no real mainstream liberal discourse in favor of this obviously correct view. When the most radical sentiment coming from the liberal mainstream is Elizabeth Warren pointing out that some high-income folks ignore the extent to which public investment is a factor in the production that generates their high incomes, it is no real mystery why, in this intellectual vacuum, previously discredited theories of property rights maximalism (discredited in the sense that they are clearly liberty-infringing) seem to some like a smart philosophical move.</p> </div></div></div> Thu, 24 Oct 2013 15:37:02 +0000 219022 at Matt Bruenig Heroism is a Symptom of Political Dysfunction <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Enron billionaire John Arnold took a break on Tuesday from his <a href="">long-standing project</a> of taking away the pensions of public employees in order to <a href="">provide $10 million to keep Head Start programs running during the government shutdown</a>. This is perhaps one of the more depressing spectacles so far to come out of the shutdown mess. The early education of poor kids in America now partially swings on the whims of a man with way more money than he deserves to have in the first place.</p> <p>This development reminded me of a <a href="">Corey Robin post from April of last year</a>. In it, Robin attacks the media gushing that followed Cory Booker rescuing a neighbor from a burning house. His point is that Booker’s rescue — and indeed many of Booker’s antics — are things that normally should be done automatically by a well-functioning and well-funded set of government services. That Booker even has the opportunity to do something like rescue someone from a burning building is a sign of institutional failure in fire services.</p> <p>Certain kinds of everyday heroism will always be important and unavoidable, but the goal of a set of social institutions should be to destroy as many opportunities for heroism as possible. Heroism is only possible where some kind of tragedy is imminent. But a good social system snuffs out avoidable tragedies before they even have a chance of approaching imminence. In many cases therefore, the existence of heroism is actually a deeply troubling symptom of overall political dysfunction. It should not be met with adoration, but with horror and concern.</p> <p>This Head Start case is the best example I’ve seen so far in this genre of troubling heroism. It should never be the case that poor kids are on the cusp of not getting important early childhood education intervention. If keeping them from that education is a bad thing that shouldn’t happen, we should make sure it never happens. The institutions should be designed so that the kids automatically get the service, no matter what the charitable whims of private billionaires happen to be.</p> <p>Perversely, when institutional dysfunction increases, the chances for heroic intervention also increases. But with a media trained to lap up the heroism as unalloyed good, we will be treated to doses of heartwarming sentiments, not the more appropriate mouth-gaping awe at a social system in decline.</p> </div></div></div> Thu, 10 Oct 2013 15:25:07 +0000 218932 at Matt Bruenig How the Left Sees Liberty <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Generally, I like to talk about liberty the way that libertarians do. I primarily do that because liberty, as discussed by libertarians, actually makes private property ownership an injustice. Because few people ever bother to think about that, adopting libertarian notions of liberty in my interactions with people of that persuasion is a never-ending well of hilarity. “What do you mean unilaterally grabbing up pieces of the scarce world without the consent of others (whose previously-existing access you steal away) and then violently attacking people who don’t go along with your fiat claims of ownership is aggression?” they say, “that’s just homesteading followed by self-defense!” And on it goes.</p> <p>The problem with the libertarian and right-wing notions of liberty is not just that they implode; it’s that there is a more plausible notion of liberty offered up by the left-wing that is only really achievable through leftist political economy. Under this, liberty is achieved when individuals have their economic well-being so strongly secured that they can pursue their personal projects without worrying themselves about the potential of falling into utter destitution. True liberty requires, <a href="">as FDR famously noted</a>, freedom from want.</p> <p>You can see an excellent case study of this superior take on liberty in <a href="">Katie J.M. Baker’s piece in the latest issue of <em>Dissent</em></a>. In it, Baker details the utter frustration faced by a famous “pick-up artist” (read misogynist loser) who tried and failed to ply his seduction techniques in Denmark. To explain his failures in Denmark, this pick-up artist “concludes that the typical fetching Nordic lady doesn’t need a man ‘because the government will take care of her and her cats, whether she is successful at dating or not.’”</p> <p>Although a somewhat narrow example, its insights are profound and general. When individuals have their economic well-being secured, they do not have to put up with mistreatment from those whose private economic support their life might otherwise depend on. Freed from the specter of want, women do not have to tolerate abusive would-be spouses, workers do not have to tolerate abusive bosses, and people of color do not have to tolerate racial subjugation. When protected against the possibility of economic retaliation, people can speak more freely, associate more freely, and practice their faith more freely. In short, having their livelihoods publicly secured gives people much more genuine liberty to do what they’d like. And that’s what really seems to matter when we talk about liberty, not some property rights formalism.</p> <p>Of course, you don’t have to take my word for this. Although libertarians oddly like to claim him as their own, even John Locke — famed philosopher of property rights — understood the liberty problems posed by economic coercion. He wrote this in his First Treatise:</p> <blockquote><p>"And a man can no more justly make use of another’s necessity to force him to become his vassal by withholding that relief God required him to afford to the wants of his brother, than he that has more strength can seize upon a weaker, master him to his obedience, and, with a dagger at his throat, offer him death or slavery."</p> </blockquote> <p>Some of the labels are a bit antique, but the point is clear as day. Locke realizes that employers can take advantage of the landless, the poor, those with few options and force them into a kind of slavery. He doesn’t mean actual slavery of course; rather, he means subjugation, bringing someone under your control because they are in desperate need and will do whatever you say in order to get a paycheck.</p> <p>Locke’s method of blowing up the liberty-destroying coercion made possible by want is the leftist method. He demands that the needy be given relief from that need in order that they not be made to choose between “death or slavery.” This is what leftists of all stripes demand, it is what Nordic states have delivered, and it is what the achievement of genuine liberty in the U.S. will require.</p> </div></div></div> Wed, 02 Oct 2013 16:13:54 +0000 218870 at Matt Bruenig Inequality Is a Function of Political Power <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p><a href="">Scott Sumner</a> has become famous in the internet world and elsewhere as <a href="">monetarism’s</a> most capable defender. Sumner has a lot of things to say, but one is illustrative for my purposes here. Sumner argues that advocates of fiscal stimulus often make the mistake in their arguments of assuming away monetary policy as static or accommodating. His point is that you can’t do that because the efficacy of fiscal policy always depends on what monetary policy is doing in the background.</p> <p>This same basic point also needs to be driven home for those who want to talk about how this or that thing will affect the distribution of income in society. <a href="">Matt Yglesias’ review of Tyler Cowen’s new book</a> gives us an excellent jumping off point for what I mean. In his book, Cowen apparently argues that coming technological changes will have certain negative effects on median incomes. Yglesias rightly points out (as does Cowen) that this outcome will only come if we fail to implement certain policies that will cause income to be distributed in some other, more desirable way.</p> <p>When we talk about how economic changes, technological swings, and even education will affect the distribution of income in society, we always sort of assume away our government’s distributive policy as if it will or must remain static. But that’s not true at all. At any time we can change the huge set of policies that direct the distribution of income in society to something else.</p> <p>The last few decades of median income stagnation didn’t have to happen. Even if you say it was caused by international competition or technological change or whatever else, the point is that if we had put a different set of distributive institutions into place, we could have avoided the maldistribution of income that we have seen. It is not like the median incomes stagnated because the economy as a whole stagnated. Quite the contrary: the economy is much larger on a per capita basis now than it used to be. If we had wanted to make sure median incomes continued to rise, we could have done that. We would have just needed different distribution policy.</p> <p>Importantly, this observation about the centrality of distribution policy cuts both ways. Suppose you have thought of some way to create a more equal distribution of income within the distributive institutions we currently have. <a href="">Education stuff is usually touted as doing this.</a> There is no guarantee that once you’ve done what you need to do to make this income equalizing happen that the distributive institutions wont just change and rob you of your victory. The rich elites, provided they have enough power, can just change the distributive rules to make sure the money keeps flowing their way. Don’t think it can happen? <a href="">Read a Dean Baker book</a>.</p> <p>This is why I am always harping on distribution policy as the way to handle inequality and poverty. In a rich country like ours, a favorable distribution policy is almost all that matters. If we want a more equal distribution of income, we can make it happen by changing some policy. If we want to make sure technological change doesn’t create more inequality, we can make that happen by changing some policy. If we want to make things way more unequal than they already are, we can also make that happen by changing some policy.</p> <p>Distributive policy is not omnipotent obviously. There are real constraints in the world, namely how much stuff there is to go around. The way you design your distributive policy will also have some effect on how much stuff is produced in the first place. But within those confines, distributive policy is the thing that matters. It is both necessary and sufficient for equitable income distribution. Nothing else is either.</p> <p>Once you understand what I am saying, you realize that the old leftist cliche is right: who gets what is purely a matter of political power. If the rich elites continue to run the show, it doesn’t matter what you do. The distribution will continue to favor them and income stagnation and inequality will never be whipped. Even if you make some strides against those things within the existing set of economic rules, they can use their power to change those rules to preserve the distribution they like. What ultimately matters for inequality is who has the power to control the levers of distribution management and what result they are aiming to produce. Everything else — technology, education, competition, and so on — is completely secondary.</p> </div></div></div> Fri, 27 Sep 2013 14:31:50 +0000 218832 at Matt Bruenig How Much Money Would It Take to Eliminate Poverty In America? <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Last week, <a href="">the Census Bureau put out its annual income and poverty figures for 2012</a>. The big news on the poverty front is that the percentage of Americans living in poverty is unchanged at 15 percent, which amounts to 46.5 million Americans. More than one in five kids under the age of 18 are in poverty, and nearly one in four kids under the age of six are impoverished as well. These are numbers we’ve all become accustomed to, but they can still shock the conscience if you make an effort to let them soak in again.</p> <p>The sheer scale of poverty in the U.S. is so massive that it can seem as if eliminating or dramatically reducing it would be nearly impossible. After all, 46 million people is a lot of people. But in reality, if we stick to the official poverty line, the amount of money standing in the way of poverty eradication is much lower than people realize.</p> <p>In its annual poverty report, the Census Bureau includes a table that few take note of which actually details by how much families are below the poverty line. A little multiplication and addition later, and the magic number pops out. In 2012, the number was $175.3 billion. That is how many dollars it would take to bring every person in the United States up to the poverty line. In 2012, that number <a href="">was just 1.08 percent of the nation’s gross domestic product (GDP)</a>, which is to say the overall size of the economy.</p> <p>To be sure, you probably don’t want to run a program that hunts out every family below the poverty line and brings them right up to it. Such a program would effectively involve imposing a 100 percent marginal tax rate for all income made below the poverty line. But, things like strategically expanding the Child Tax Credit, the Earned Income Tax Credit, SNAP, and related programs could make enormous strides toward poverty reduction. Implementing a mild basic income and a negative income tax would also help a great deal. The policy solutions for dramatically cutting poverty exist, they are used by countries elsewhere, and they could be used here, if we chose to do so.</p> <p>It might be helpful to put the $175.3 billion magic number in perspective. In 2012, this number was just one-fourth of the <a href="">$700 billion the federal government spent on the military</a>. When you start hunting through the <a href=";id=4503">submerged spending we do through the tax code</a>, it takes you no time to find enough tax expenditures geared toward the affluent to get to that number as well. The utterly ridiculous tax expenditures directed toward the disproportionately affluent class of people called homeowners—mortgage interest deduction, property tax deduction, exclusion of capital gains on residences—by themselves sum to $115.3 billion in 2012. Throw in the $117.3 billion in tax expenditures used to subsidize employer-based health care (also a disproportionate sop to the rich), and you’ve already eclipsed the magic number.</p> <p>Eradicating or dramatically cutting poverty is not the deeply complicated intractable problem people make it out to be. The dollars we are talking about are minuscule up against the size of our economy. We have poverty because we choose to have it. We choose to design our distributive institutions in ways that generate poverty when we could design them in ways that don’t. Its continued existence is totally indefensible and our nation’s biggest shame.</p> </div></div></div> Tue, 24 Sep 2013 16:07:12 +0000 218798 at Matt Bruenig Libertarianism's Battle With History <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>Economic libertarianism’s most amusing failing is philosophical. In particular, the non-aggression form of libertarianism so popular among the Paul clan and their followers <a href="">quite straightforwardly generates the conclusion that all private property is unjust theft</a>. Internal contradictions abound in libertarianism, but that is surely the most problematic one. As much as I enjoy the philosophical arguments, experience tells me others prefer an approach that seem less like game-playing.</p> <p>If you are that kind of person, then you are in luck. Karl Polanyi wrote <em><a href="">The Great Transformation</a></em> in 1944 to provide a more meaty historical and sociological takedown of the libertarian approach to the market economy.</p> <p>The first thing to note is that free market capitalism hasn’t always been around. If you listen to libertarians long enough, you may get the sense that laissez-faire capitalism is the natural and default way of the world. But in fact, it's a newcomer in the historical scene. All of known human existence and economic production prior to a few hundred years ago was organized quite differently.</p> <p>Thus, all societies that have moved into market economic systems have necessarily undergone massive transformation. How do transformations come about? The state, in concert with specific private interests, crams change down everyone’s throats. For instance, in Britain, you have the <a href="">famous transferral of common land into private hands</a> as the jumping off point. Such a revolutionary transformation of society does not happen organically, but by force and government planning.</p> <p>In the case of market capitalism, the transformation is an especially traumatic affair. In most other systems, Polanyi argues, it is clear that economic systems are subordinate to society. Society—including families, norms, traditions, and all the rest—requires economic production to reproduce itself and thrive, and production is therefore organized towards that end. But with market capitalism—especially the sort libertarians are so fond of—the economic system takes on a life of its own that is, at times, detached and disembedded from the overall social system.</p> <p>As Polanyi puts it:</p> <blockquote><p>True, no society can exist without a system of some kind which ensures order in the production and distribution of goods. But that does not imply the existence of separate economic institutions; normally, the economic order is merely a function of the social order. Neither under tribal nor under feudal nor under mercantile conditions was there, as we saw, a separate economic system in society. Nineteenth-century society, in which economic activity was isolated, and imputed a distinctive economic motive, was a singular departure.</p> </blockquote> <p>But as much as market fanatics tried, they never could succeed in casting the economy as something separate from or above social order. Instead, what we saw (and what we see in developing countries today) is a constant rhythm of a <em>double movement</em>. In the first move, market mechanisms expand into new areas of social life, and in the second move, people fight to check this movement insofar as it is utterly ruinous to the functioning of a human society.</p> <p>Labor is perhaps the best example of this phenomenon. The idea of a labor market where you sell labor itself as a commodity to an employer is an utterly novel fiction of market capitalism. And this market transformation has massive social implications. As Polanyi writes:</p> <blockquote><p>Labor is the technical term used for human beings, insofar as they are not employers but employed; it follows that henceforth the organization of labor would change concurrently with the organization of the free market system. But as the organization of labor is only another word for the forms of life of the common people, this means that the development of the market system would be accompanied by a change in the organization of society itself.</p> </blockquote> <p>What does this corresponding social change look like initially? Utter horror:</p> <blockquote><p>Dumped into the the bleak slough of misery, the immigrant peasant, or even the former yeoman or copyholder, was soon transformed into a nondescript animal of the mire. It was not that he was paid too little, or even that he labored too long—though both happened often to excess—but that he was now existing under physical conditions which denied the human shape of life.</p> </blockquote> <p>Polanyi continues later:</p> <blockquote><p>What [Robert Owen] observed was true of town and village laborers alike, namely, that “they are at present in a situation infinitely more degraded and miserable than they were before the introduction of those manufactories, upon the success of which their bare subsistence now depends.” [...] [Owen] Grasped the fact that what appeared primarily as an economic problem was essentially a social one. In economic terms the worker was certainly exploited: he did not get in exchange that which was his due. But important though this was, it was far from all. In spite of exploitation, he might have been financially better off than before. But a principle quite unfavorable to individual and general happiness was wreaking havoc with his social environment, his neighborhood, his standing in the community, his craft; in a word, with those relationships to nature and man in which his economic existence was formerly embedded. The industrial revolution was causing a social dislocation of stupendous proportions, and the problem of poverty was merely the economic aspect of this event.</p> </blockquote> <p>Applying this analysis to labor, we can see one problem with making human labor a commodity to be offered up on the market is that, unlike real commodities, human beings have social interests, communities, families, personal projects, and so on. Ultimately, the commodification of labor winds up running against the kind of social existence human beings want to live. Something has to give, and since society will not ultimately stand for its own annihilation, the creeping expansion of free market tendencies is met with the countermovement of society to keep the economic system properly subordinated.</p> <p>For labor issues, this countermovement takes the form of unions, economic regulations, state economic development, welfare programs, social insurance, and everything else libertarians hate. If there is any demonstrated natural tendency of market development, it is that the countermovements to keep the “satanic mill” of capitalism at least somewhat under social control always happen, no matter the country. Although libertarians present such countermovements as corruptions of the naturally-existing market, they are actually efforts to prevent the market from corrupting the naturally-existing society. Libertarians hell bent on dismantling our long history of successful countermovements against disastrous encroachments of unfettered markets are fighting against both good policy sense and the basic dynamics of actually-existing social development.</p> </div></div></div> Tue, 03 Sep 2013 16:19:14 +0000 218638 at Matt Bruenig Middle-Class Blacks and Whites Have Vastly Different Fortunes <div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"> <p>With the passing of the 50th anniversary of the March on Washington, commentators have been assessing the status of blacks in society. Matt Yglesias <a href="">has a post</a> about the black-white income gap, and how it has not budged in 40 years. Brad Plumer <a href="">has a post at Wonkblog</a> that features ten charts showing the persistence of the black-white economic gap, including rates of unemployment, poverty, and so on.</p> <p>The statistics provided in these posts—and indeed most statistics provided on this question—compare all blacks against all whites. This kind of comparison is worth making for certain purposes, but it also has its limitations. By itself, such group-level comparisons lend themselves to the hasty conclusion that the difference between the economic situations of blacks and whites is mainly that blacks are more concentrated on the low end of the economic ladder.</p> <p>When you've concluded that the black-white disparity is primarily an issue of black over-representation on the bottom and white over-representation on the top, it becomes easy to say that this disparity is ultimately just about class. This was <a href="">essentially the take of Heather Long two days ago in the <em>Guardian</em></a>. In her article, Long writes at one point:</p> <p>But when you look at the data, the most pernicious problem in society today is the haves and have nots. Race plays a factor, but middle class blacks live fairly similar lives to middle class whites. Middle class blacks and whites work together. Their children have playdates and go to same prep schools and colleges. What you are far less likely to see is a lower income children of any race mixing with a middle or upper income child.</p> <p>I don't mean to attack Long here. Her article is actually quite good overall, but she is mistaken on the point she is getting at in the above quote. Middle class blacks and whites are not in similar economic situations. In fact, up and down the entire income ladder, blacks are in far worse shape than their white peers. The black-white gap is not just about differential racial concentration among economic classes; rather, <em>it manifests itself within every single economic class</em>.</p> <p>The best way to see this is to look at wealth broken down by race and income. And for that, we turn to our trusty friend, the <a href="">2010 Survey of Consumer Finances microdata</a>:</p> <p><img alt="" src="" /></p> <p>As you can see, black families have much less wealth than white families, even when you compare blacks and whites within the same income groups. The above graph can be hard to make out on the bottom end, so here is another representing the data in a different way:</p> <p><img alt="" src="" /></p> <p>In this graph, we see black and hispanic wealth represented as a percentage of the white wealth in a given income group. So for instance, the bar farthest to the left says that black families in the poorest 20 percent of families have a median wealth that is just 19.7 percent of the median wealth of white families in the poorest 20 percent. Black families in the 60th to 79th percentile of income come the closest to their white peers, but even they have median wealth holdings that are just 53.9 percent of whites in that group. If you average all the income groups together, you find that, when you control for family income, black median wealth is less than 1/3rd of white median wealth.</p> <p>Why is this the case? There are many factors, but one in particular looms large. It turns out that three centuries of enslavement followed by another bonus century of explicit racial apartheid was hell on black wealth accumulation. Wealth accumulation opportunities haven't exactly been evenly distributed in the last half century either. Because wealth is the sort of thing you transmit across generations and down family lines (e.g. through inheritance, gifts, and so on), racial wealth disparities remain quite massive.</p> <p>This wealth disparity means that a middle class black family is not in basically the same position as a middle class white family. Relative to a white middle class family, a middle class black family has a reduced ability to endure negative economic shocks, has much less retirement security, and cannot spend as much boosting their kids' economic futures (e.g. by paying for their college or a down payment on their first house).</p> <p>The upshot here is that attending merely to class issues wont solve our still very pervasive racial disparities, though it could make strides in that direction. A steep, progressive inheritance tax would help to close the black-white wealth gap. If the proceeds of such a tax were funneled into a <a href="">full-fledged sovereign wealth fund</a> that pays out social dividends, we may even end up killing two birds with one stone.</p> </div></div></div> Fri, 30 Aug 2013 14:49:29 +0000 218622 at Matt Bruenig