Joel E Lewis » Goverment

Battle of the Bulging Middle Class

Joel — Thu, 09 Sep 2010 16:50:48 +0000

The mainstream media is starting to spread the narrative about rising income inequality in America:

[In 1915]King was somewhat troubled to find that the richest 1 percent possessed about 15 percent of the nation’s income. (A more authoritative subsequent calculation puts the figure slightly higher, at about 18 percent.) This was the era in which the accumulated wealth of America’s richest families—the Rockefellers, the Vanderbilts, the Carnegies—helped prompt creation of the modern income tax, lest disparities in wealth turn the United States into a European-style aristocracy. The socialist movement was at its historic peak, a wave of anarchist bombings was terrorizing the nation’s industrialists, and President Woodrow Wilson’s attorney general, Alexander Palmer, would soon stage brutal raids on radicals of every stripe. In American history, there has never been a time when class warfare seemed more imminent… Today, the richest 1 percent account for 24 percent of the nation’s income.

Via Introducing the Great Divergence

One thing that amazes me about America is that almost everyone considers themselves middle class. Well at least everyone in the top half of the income distribution. To put some numbers to this discussion, median household income in the US in 2008 was $52,175 and 33% of households made between $35,000 and $74,999. That said, President Obama defines the middle class’s upper bound at $250,000/year (which excludes ~2% of households, which is not near the middle by any definition of middle I’ve ever heard). Obama comes off as reasonable compared to Walter Kiechel III, author of Lords of Strategy:

One can make a decent living as a senior partner at a major consulting firm – these days… upward of $3 million to $4 million a year – but as a few of the breed complain privately, it’s no way to become wealthy. [Emphasis added]

A decent living?! That’s roughly 70 times median income (for a household, let alone an individual earner)!!! As a country, we have lost all sense of proportion about what middle class means. It’s defined by a images from TV sitcoms rather than reality. I understand that people anchor their expectations based on their peer group, but this is ridiculous. The American middle class is ballooning bigger than American middle sections!

As I’ve started to look into business school I’ve also started to do a lot of soul searching about my career goals and lifestyle expectations. I recently decided on a bottom line income I want to be earning by the time I’m 30, which has been extremely helpful in focusing my goals. I think we need to do same sort of thing as a country by deciding on what we consider a “fair” middle class.

Like it or not, government policy is an exercise in social engineering. We decide who gets extra help and who pays for it. When we set our goals about health care, welfare, social security, taxes, and deficit reduction we make tough choices. Can we make good choices with an unreasonable definition of middle class/average? Won’t bloated definitions lead to unrealistic expectations and overly generous, expensive polices? Doesn’t that sound a lot like the situation we are in today?

In the postwar era when the U.S. economy exploded to global dominance unlike anything ever before seen, we could afford to make unreasonable choices and count on growth to fix our mistakes. As we enter an era of slower growth, we need our expectations to come down from the clouds and or decision making to be calculated and error free. The time of tough choices is upon us, what do you think is fair?

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A Rising Tide Lifts Earning and Spending

Joel — Wed, 07 Jul 2010 17:19:36 +0000

CBO’s bottom line is thus simple: tax revenues will rise faster than the economy even if Congress does nothing new. Indeed, revenues may rise faster than the economy even if Congress enacts substantial tax cuts. Our long-run fiscal dilemma exists because the scheduled growth in future spending is even larger than the scheduled growth in future revenues.

via Why Taxes Are Going Up « Donald Marron [emphasis added].

The problem isn’t raising more or spending less, it’s doing enough of both and living within our means. People says deficits don’t matter, but at some inestimable point, they do. It’s systemically safer to live within our means (bring our deficit spending and debt closer to zero,) than to approach that catastrophic, unknown number somewhere north of where we are now.

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Shooting Ourselves in the Foot

Joel — Sat, 29 May 2010 19:06:21 +0000

Matt Taibbi has another entertaining and informative article on financial reform:

The Sanders amendment, if it survives in conference, will lead to some delicious disclosures. Almost exactly a year ago, Sanders questioned Bernanke at a Senate-budget hearing, asking him to NAME the banks that had been bailed out by the Fed. Will you tell the American people to whom you lent 2.2 trillion of their dollars? Sanders demanded. After a little hemming and hawing, a bored-looking Bernanke – Time magazine s 2009 Person of the Year, by the way – bluntly said, No. It would be counterproductive, he explained, if clients and investors learned that these poor banks were broke enough to need a public handout. Bernanke s performance that day so rankled Sanders that he wrote up his amendment specifically to bring the Fed s goblin-in-chief to heel. The new law will force Bernanke to post the identity of loan recipients on the Fed s website for all to see.

via Politics – Latest News – Wall Street s War – RollingStone.com. [Emphasis added]

This isn’t the language of someone trying to make things better, it’s the language of an internet troll looking for cheap thrills. The only problem is, as satisfying as it would be to see all those “crooks”, “goblins”, and “vampire squids” squirm, it’ll hurt us more than it hurts them; the executives responsible already have years of paychecks, vacation homes, yachts, and whatever else tickled their fancy.

Seeking vengeance doesn’t change the facts: “It would be counterproductive, [Bernanke] explained, if clients and investors learned that these poor banks were broke enough to need a public handout.” Matt is very entertaining, but also idiotic. It’s not the poor banks Bernanke’s worried about, it’s the government money he just gave them. At the time, people would have shorted those “poor companies” if they were identified as most in need of bail out. If, like Matt, we just wanted to watch the industry burn down, it would have been cheaper not to hand them our money we poured gasoline over them.

You may not like the bailout, but the fact is that it happened, and that the people running the show at the time made the very defensible judgment call that it was necessary. Let’s stop trying for juicy “reform” meant to unearth more entertaining fodder for edutainment authors, and actually focus on boring-looking, fixing things for the better reform.

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Why Europe Can’t Compete Globally

Joel — Sun, 23 May 2010 21:14:11 +0000

Because their is no Europe! It’s popular to compare each country in Europe to states in the US, and for all the similarities, there are a host of important differences. There are a host of different languages, legal systems, and borders. Workers can’t move as freely between countries as we can between states. Even the way the Euro Zone governs itself is decades behind.

The European Union functions a lot like the US would have if the South had won the civil war: Individual countries laws trump Euro Zone policy (State supremacy), national leaders are more powerful than Eurozone delegates (governors vs federal senators), and which geographical areas get the benefits of a policy is a bigger deal than the policy itself. To contrast:

The United States has rich and poor regions, but the 50 states are forced to run balanced budgets, and there is greater mobility within the nation, based on a shared language and culture [and lack of interstate immigration laws]. Major national policies, like President Obama’s health care plan, are not judged primarily in terms of which states win and lose; in fact the largely opposed “red states” get a lot of the benefits through higher Medicaid subsidies.

via Economic View – Greece May Not Be as Rich as It Looks – NYTimes.com.

Even within some European countries there is a constant struggle over centralization of power. In Spain, regional governments control 40% of central government spending, and are always fighting each other for bigger pieces of the federal pie. Living in the US, it is easy to forget just how well defined and relatively well functioning our federal system of government works compared to almost every other similar government out there.

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Clawback

Joel — Thu, 15 Apr 2010 22:52:55 +0000

Politicians and economists rail against business executives who profit off risky moves, collect big bonuses, and then leave the house to crumble on top of the next guy. One common solution is to have clawback provisions and other deffered compensation.

Reading this NYTimes article about how state governments are engaging in shady accounting to balance their budgets, and watching this ad about Murray Hill, the corporate candidate that pledges to bring corporate accounting to government, made me think about how politicians pull the same trick. They pay out money now, raid trust funds like pension plans and social security, all to spend now and let some other poor fool get stuck paying the check. In the meantime, the reap the power, prestige, and compensation. Maybe it’s time we deffered the compensation of elected officials and civil servants?

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Save Me From Myself

Joel — Wed, 14 Apr 2010 17:04:23 +0000

How far should we go to save people from themselves? From an atricle about UK alcoholism:

Politicians have proposed remedies ranging from minimum alcohol prices to bans on barroom promotions to wider use of shatterproof cups in places where broken pint glasses are frequently used as weapons.[Empahsis added]

via U.K. Reaches Its Limit on Binge Drinking – WSJ.com.

I think that this type of mandate is pointless – people tend to find a way to do what they want regardless of the social engineering government’s attempt. In Massachusetts, people buy liquor from out of state and switch alcohol consumption to the home (aka “pre-game”) to avoid high prices at the bar and in the state.

I don’t think government should protect people from their own stupidity – but it should protect people from the stupidity of others.

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Tom Friedman Agrees With Me and Volcker

Joel — Tue, 30 Mar 2010 19:23:56 +0000

Now Thomas Friedman joins the “our government is broken and our our political parties represent the crazies” bandwagon.

That is why I want my own Tea Party. I want a Tea Party of the radical center.

Say what? I write often about innovation in energy and education. But I’ve come to realize that none of these innovations will emerge at scale until we get the most important innovation of all — political innovation that will empower independents and centrists, which describes a lot of the country.

Larry Diamond, a Stanford University democracy expert, put it best: “If you don’t get governance right, it is very hard to get anything else right that government needs to deal with. We have to rethink in some basic ways how our political institutions work, because they are increasingly incapable of delivering effective solutions any longer.”

via Op-Ed Columnist – A Tea Party Without Nuts – NYTimes.com.

It’s starting to get a little crowded here, but I don’t mind the company.

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This Ones For All The Ladies

Joel — Mon, 29 Mar 2010 23:43:22 +0000

The anti-fun pro political correctness and using political power for enjoyment crowd strikes again:

[Gainesville] is getting ready to put the kibosh on ladies’ night specials and will be notifying the 115 bars and restaurants in the city limits in the next few days that they will no longer be able to give discounts based on gender.

via Ladies’ nights no longer allowed to curb alcohol abuse and discrimination | Gainesville.com.

Fortunately, there is an easy solution. Dress night, where everyone wearing a dress drinks free. Yes, there will doubtless be men who boldy dress up for free drinks, but that really only adds to the fun and the spectacle. Meanwhile, you will be attracting ladies dressed to impress, and a mass of men not wearing dresses will follow.

Tell your bar owning friends!

ps. If one of them runs with the idea, can I get some credit (eg. Joel’s Dress for Success Night)?

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Sad But True

Joel — Sun, 28 Mar 2010 18:41:01 +0000

A historical parallel to the current level of division and outrage over health care:

“To find a prototype for the overheated reaction to the health care bill, you have to look a year before Medicare, to the Civil Rights Act of 1964. Both laws passed by similar majorities in Congress; the Civil Rights Act received even more votes in the Senate (73) than Medicare (70). But it was only the civil rights bill that made some Americans run off the rails. That’s because it was the one that signaled an inexorable and immutable change in the very identity of America, not just its governance.

The apocalyptic predictions then, like those about health care now, were all framed in constitutional pieties, of course. Barry Goldwater, running for president in ’64, drew on the counsel of two young legal allies, William Rehnquist and Robert Bork, to characterize the bill as a “threat to the very essence of our basic system” and a “usurpation” of states’ rights that “would force you to admit drunks, a known murderer or an insane person into your place of business.” Richard Russell, the segregationist Democratic senator from Georgia, said the bill “would destroy the free enterprise system.” David Lawrence, a widely syndicated conservative columnist, bemoaned the establishment of “a federal dictatorship.” Meanwhile, three civil rights workers were murdered in Philadelphia, Miss.

That a tsunami of anger is gathering today is illogical, given that what the right calls “Obamacare” is less provocative than either the Civil Rights Act of 1964 or Medicare, an epic entitlement that actually did precipitate a government takeover of a sizable chunk of American health care. But the explanation is plain: the health care bill is not the main source of this anger and never has been. It’s merely a handy excuse. The real source of the over-the-top rage of 2010 is the same kind of national existential reordering that roiled America in 1964.”

via Op-Ed Columnist – The Rage Is Not About Health Care – NYTimes.com.

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High Time For A Change

Joel — Fri, 26 Mar 2010 16:55:41 +0000

Some ideas make you wonder what the creator was smoking when they came up with it. With this one, we pretty much know:

On Wednesday, the California secretary of state certified a November vote on a ballot measure that would legalize, tax and regulate marijuana, a plan that advocates say could raise $1.4 billion and save precious law enforcement and prison resources.

via Legal-Marijuana Advocates Focus on a New Green – NYTimes.com.

It’s not often an idea comes about that will give the state a new revenue source, make many consumers/voters happier, make many consumers safer, and cut the states costs (through law enforcement and prison spending) all at once.

The only people who really lose from legalizing marijuana, are drug cartels, and parents in fictional small towns in the west – the kind of people who came up with the following argument:

Opponents, however, scoff at the notion that legalizing marijuana could somehow help with the state’s woes. They tick off a list of social ills — including tardiness and absenteeism in the workplace — that such an act would contribute to.

As opposed to alcohol, which has never made anyone late to work, and championship sports, which has never led anyone to skip work.

Regardless of what you personally think of pot, the objective fact is that our current laws don’t prevent anyone from getting it, cost a lot to implement, and put money in the hands of really bad, violent people. Legalization acknowledges the ineffectiveness, cuts the violent criminals out, encourages business growth and employment, and brings a percent of the resulting economic growth into desperately shrinking government coffers.

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