Thoma on Capitalism, Inequality, Social Insurance, and Growth

From Mark Thoma writing in the Fiscal Times,

"Why is rising inequality a matter that our social insurance system should address? The idea behind insurance is to spread the costs of harmful events we cannot control across a large number of people. With fire insurance, for example, participants pool their money into a large sum, and the unlucky few that experience fires draw from the pool of money to cover their losses. In the end there is a redistribution of income from the winners who escape a fire to the unfortunate who don’t, but it would be wrong to view this as a net cost to the winners. The insurance premiums buy protection from fire – a benefit – and presumably the benefit exceeds the cost of the insurance.   

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At some point, one I believe we’ve passed already, the benefits of inequality in terms of incentives are surpassed by the costs. As Joseph Stiglitz argues, “Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset – its people – is not being fully used. Many at the bottom, or even in the middle, are not living up to their potential, because the rich, needing few public services and worried that a strong government might redistribute income, use their political influence to cut taxes and curtail government spending. This leads to underinvestment in infrastructure, education, and technology, impeding the engines of growth.”"

Mobility or Higher Standards?

James Surowiecki would have us consider derailing the focus on mobility before it gets full steam and instead think about a general higher standard of living.

"More important, in any capitalist society most people are bound to be part of the middle and working classes; public policy should focus on raising their standard of living, instead of raising their chances of getting rich. What made the U.S. economy so remarkable for most of the twentieth century was the fact that, even if working people never moved into a different class, over time they saw their standard of living rise sharply. ... Raising living standards for ordinary workers is hard: you need to either get wages growing or talk about things that scare politicians, like “redistribution” and “taxes.” But making it easier for some Americans to move up the economic ladder is no great triumph if most can barely hold on."

It's a strong point, one which Paul Krugman then takes up and restates more snappily with,

"if you want a society in which everyone has a decent life, you need to construct a society in which everyone has a decent life — not a society in which everyone has a small but equal chance of living the lifestyle of the rich and famous. ... Since anyone could find himself or herself downwardly mobile, social mobility arguably actually strengthens the case for a strong safety net."

Mobility isn't all it's cracked up to be. It has downs with it's ups. Unlike an overall higher standard of living.

The American way is a melting pot or at least a mixing bowl, not a sieve.

The American way is a melting pot or at least a mixing bowl, not a sieve.

We may preserve elements rather than fusing into a homogeneous mass, but we mix. It's how we come up with our best, by exchanging ideas and forging something new.

This isn't the first time folks have fought against the melting pot. But those who fight it are just as wrong now as they were before. We gain much from being a harmonious mixture of different ingredients that stand together. Baking soda is great in a cookie; not so good on its own.

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See also Paul Brandeis Raushenbush's "'Sincerely Held Religious Beliefs' and the Fraying of America" regarding "discriminatory and deeply un-American" legislation in Arizona.

College Versus Trade School: At What Cost These Technical Skills Come?

They're missing something, those like Robert Reich who would argue that we should worry less about four-year college and rally behind trade and technical schools as a low-cost alternative. Many of us who've been in the position of interviewer or boss are looking for someone with the critical thinking, creativity, and understanding fostered by general education in the humanities and basic sciences. It may be possible for a great candidate from a tech school to have that critical thinking on their own without that general education, but it's less likely.

Further, there's value beyond the directly vocational in the general education that comes with a bachelor's degree. More knowledge in the humanities and basic science makes for better citizens, a more informed electorate, and an all around improved society. While some very few attain such knowledge through self-study, on the whole we're more likely to get that from widespread college education. It truly is a public good and good for the general public.

Full college may not be for everyone. Trade and technical schools serve well to train workers who are not prepared for college. But if we confuse their playing a useful part with somehow replacing the benefits of expanded college graduation, we risk the reduction of potential for whole generations.

Shutdown: Since When Does Losing Give One A Mandate?

In a republic such as ours, while the interests of the minority are supposed to be protected from extreme trampling, the minority is not supposed to rule outright. The Republican Party holds a minority position. They have dominance over but one chamber of Congress. They lost the Presidential election. Although they officially retained the House majority, they got fewer total votes in the elections for the House than Democrats did (which hints at their having retained that technical majority only by way of gerrymandering).

As such, nobody should expect the GOP to be getting their fondest desires in a big way, re-writing standing law to eliminate major legal accomplishments of the other party. The GOP lost in 2012! They LOST! One does not lose an election season and come out of that loss with a mandate for one's platform ... the platform that lost ... the platform that the electorate by and large rejected.

Yet despite that loss, they've managed to push significant reductions in spending, overwhelming the voices of economists pointing out that reduced government spending is the last thing our economy needs right now. And the Democrats, whether just seeking to get something done or perhaps also not listening to economists, have compromised quite frequently. Much to the displeasure of the Democrat's base. Those who're writing apologetics for the Republican Party today had to work very hard to spin this one as anything other than the GOP overreach that it was.

"Getting Close to the Debt Ceiling is Bad Enough"

Turns Out They Weren't All That Concerned With Academic Support

From Jonathan Chait's, "The Arguments of the Great Recession Are Over. Hooray.":

"Academic support for that position has almost entirely collapsed. I don’t even see many conservative intellectuals defending it in columns. And yet the Republican Party marches on, opposing any effort to lift short-term austerity policies that economists almost all believe are holding back the recovery. It’s as if the head of the austerity monster has been sliced off, but the body lurches forward regardless."

Why should this come as any surprise? We're talking about the party that has set itself forward as opposed to the "reality-based community". What use have they for we who "believe that solutions emerge from ... judicious study of discernible reality" when our reality conflicts with their ideology?