2016-04-15T18:35:36+00:00

Laniel on Krugman on Bernie

April 15, 2016/stevereads/Leave a comment

What annoys me about Krugman’s Bernie take is that he’s not even said, “Yeah, I’m a real supporter of single-payer health care, but Bernie is just going about it the wrong way. If he’d change x, y, and z, it would be a realistic plan.”

The positive approach to addressing Bernie would be to offer him constructive policy ideas. If Krugman felt like Democrats needed to be realist in their policy proposals, he’d try to work out realistic numbers for Bernie’s single-payer and college-education plans. But Krugman isn’t doing that. Instead he’s just pointing to every bit of anti-Bernie writing that comes his way, taking it as conclusive, and shutting down the debate there. Worse, Petulant Krugman is coming out, as when — in this latest column — he writes:

But never mind. As you know, I’m only saying these things because I’m a corporate whore and want a job with Hillary.

My problem with his anti-Bernie columns isn’t that I think he’s a corporate shill. My problems are twofold. First, his mind seems made up. And second, look through Krugman’s older blog posts for times when he’s mentioned single payer. Clearly he supports single payer. I assume he supports universal college education. Well then, why not push for those things? If he believes that Bernie is an unelectable, impractical candidate, and hence that he’s going to support Hillary, why not do what he can to bring Hillary more toward the left? Bernie has clearly pulled Hillary leftward; maybe now Bernie needs to be pulled in the direction of realism. Why isn’t Krugman acting as the agent of realism here? Instead he’s acted, since the beginning, as someone whose mind is made up against Bernie. I don’t get it.

(For the record: I voted for Hillary in the primary, but I’m still conflicted about that decision. I believe that any liberal who’s thought about this Democratic primary should also be conflicted. These are both strong candidates, both with obvious weaknesses, and I’d be happy with either of them in the White House.)

Krugman’s beef seems to be that Bernie’s campaign is irremediably flawed by the same sort of unreality that plagues the Republican candidates’ tax plans. (Krugman has also accused the Sanders campaign of having gone off the rails. I blame this on the ludicrous length of the election season, which eventually causes everyone to lose his mind. And again, I think Krugman is grasping at whatever straw he can find. Matt Taibbi responds appropriately.) But here’s a question: is reality in campaign proposals really all that important? The Obama campaign in 2008 advanced a health-insurance plan that lacked an individual mandate, which we know now — and which Hillary knew then — is unworkable because of adverse selection. What virtue does reality have here? The man got into office and fought for what he promised us he’d fight for. Does it matter that he couldn’t make the numbers work out during the campaign? I’m really not convinced by realism as a virtue during a campaign. When it comes time to produce an actual budget that gets scored by the CBO: yes, I want realism then. At that time, Bernie will have a staff whose full-time job is to put together a budget that makes sense. I hope he chooses appropriate staff. But during a campaign? What I want to know is that my guy is fighting for what I care about.

(To the extent that it’s unrealistic, people have criticized Bernie’s plans for costing more than he says. I am willing to pay a lot to get a Northern European social-insurance state here. That is, even if he were more realistic about what it costs, I’d still support him.)

And again: if realism in fact does matter, it seems to me that it’s Krugman’s job to point out what could make Bernie’s numbers more realistic. Does Krugman want single-payer in his lifetime? Does he want us to return to a world where we provide free world-class tax-financed college education? If not now, when? I’m not asking that question rhetorically; I assume that Krugman really believes that now is not the time for single-payer health care, that getting single-payer would require Congressional action, that Congressional action is not plausible, and that only a Clinton presidency which will achieve incremental reform through executive action will succeed in attaining anything. But clearly Krugman’s heart is with Bernie; so why doesn’t Krugman act that way?

And let’s address head-on that point about the need for Congressional action: yes, it’s true. But I think people have a static picture of U.S. government. They envision that Sanders will inherit a Republican majority in both houses of Congress and a conservative majority on the Supreme Court. But things change. Maybe the Trump candidacy will bring liberals to the polls. Maybe we’ll replace Scalia with a more-liberal justice; maybe Kennedy will leave the Court and be replaced by someone liberal. There’s a not-implausible political theory by which Sanders stands some chance of passing real progressive legislation. And in either case, I think Krugman is obliged to lay out his political theory. Because it seems pretty clear that Krugman made up his mind about Bernie well before former CEA chiefs declared Bernie’s budget unrealistic. So it seems to me that Krugman needs to declare what his actual problem is.

Kasich beats Clinton handily

April 13, 2016/stevereads/Leave a comment

If this is true, it’s further evidence for my claim that we need a different ballot, and need to dispense with the primary system altogether. If Kasich really could beat Clinton as lopsidedly as the article claims, then we have a voting system that is manifestly not designed to choose candidates whom the people would vote for.

The alternative is obvious: put all choices before all voters on a single ballot.

I wonder how many things that we ascribe to “polarization” — which seems like a large, intractable problem — could in fact be solved by a small-bore change in how our ballots look.

#France

April 6, 2016/stevereads/Leave a comment

From Gabriel Zucman’s The Hidden Wealth of Nations: The Scourge of Tax Havens, page 58:

The law, however, was not passed. Conservatives, who were in the majority in the Sénat, despised [finance minister Joseph] Caillaux — it was a hatred, moreover, that would push his wife, Henriette, in 1914 to assassinate the director of the right-wing newspaper Le Figaro following a final press campaign.

Somehow this reminds me of a bit in an article I think of a lot: a piece called “Bitter Brew”, about a man’s failed dream of starting a cute café:

Pastries, for instance, are a monetary black hole unless you bake them yourself. We started out by engaging a pedigreed gentleman baker with Le Bernardin on his résumé. Hercule, as I’ll call him, embodied every French stereotype in existence: He was jovial, enthusiastic, rude, snooty, manic-depressive, brilliant, and utterly unreliable. His croissants were buttery, flaky, not too big, and $1.25 wholesale. We sold them for $2 and threw away roughly 50 percent—in other words, we were making a negative quarter on each croissant. After a couple of months of this, we downgraded to a more Americanized version of the croissant (vast and pillowy). The new croissants ran 90 cents each and made us feel vaguely dirty. We sold them for the same $2.

Making citation-chasing easier with Kindles

April 1, 2016April 1, 2016/stevereads/Leave a comment

When I was reading The Case Against The Supreme Court, there were plenty of citations that I wanted to chase to their sources. Here, for instance, Erwin Chemerinsky quotes RBG:

“one-third of private sector employers have adopted specific rules prohibiting employees from discussing their wages with co-workers; only one in ten employers has adopted a pay openness policy.”

Turns out that’s a quote from Ledbetter v. Goodyear Tire & Rubber Co., Inc., within which RBG was quoting someone else. Great. So we find the cite within Ledbetter:

See also Bierman & Gely, “Love, Sex and Politics? Sure. Salary? No Way”: Workplace Social Norms and the Law, 25 Berkeley J. Emp. & Lab. L. 167, 168, 171 (2004) (one-third of private sector employers have adopted specific rules prohibiting employees from discussing their wages with co-workers; only one in ten employers has adopted a pay openness policy).

We go looking for “Love, Sex and Politics? Sure. Salary? No Way”, and we find it. Within there:

One-third of United States private sector employers have reinforced this norm by adopting specific rules prohibiting employees from discussing their wages with co-workers, rules known as pay secrecy/confidentiality (“PSC”) rules.⁴

Footnote 4 reads:

See More Employers Ducking Pay Confidentiality Issue: HRnext.com Survey Shows Many Employers View Issue as Hot Potato, available at http://www.hrnet.com (last visited Nov. 16, 2003) [hereinafter “HRnext Survey”]; Mary Williams Walsh, The Biggest Company Secret; Workers Challenge Employer Policies on Pay Confidentiality, N.Y. Times, July 28, 2000, at Cl.

The up-to-date link for the first cited article is this one. The ultimate source of the thing that Chemerinsky cites is this:

An online survey conducted in March 2001 at hr.blr.com found that a majority (51 percent) of HR managers report their companies have no policy about pay confidentiality. Some 36 percent have policies forbidding such discussion, and 15 percent have policies that say discussing pay with co-worker is permissible.

The Times article is this one; on a quick scan, it doesn’t say anything about salary-silence policies.

Some thoughts on this process:

Chasing even a single citation to its source is nontrivial. I was lucky here, in that all of the cited sources were created during the Internet age.
Had one of the citations led to a book, the odds would have been quite good that the book would not be available online. Amazon’s Search-Inside-the-Book feature is useful here. Google Books is sometimes useful. But both those sources often hide pages from you.
Kindles should allow some kind of privileged access to Search-Inside-the-Book it’s a citation from inside a Kindle book. I realize there are a million difficulties here. But it’s a thought.
When I finally did track down the ultimate source, it was not a good source: “An online survey concludes…” is not how you begin a persuasive sentence. If the ultimate sources of citations were always really easy to obtain — if, indeed, you could find the ultimate source just by hovering over the text you want to check — I wager that we’d get a lot fewer tenuous claims.
We could crowdsource this, if all else fails. I’d be glad to contribute this citation chain back into some database, à la the Kindle’s existing Public Notes feature. It wouldn’t work to submit footnote chains through the Kindle itself (interacting with the device is slow and aggravating for anything other than flipping pages), but it could be done through the iPad or a desktop browser.

Two wrong ways to do endnotes

April 1, 2016April 6, 2016/stevereads/Leave a comment

These endnotes, which are bog-standard ones, could be better: The only waypoints they leave for the reader are chapter headings. So if I’m in the middle of reading chapter 5, for instance, I first have to figure out which chapter I’m in (not always easy — in many books this requires you to flip back a good many pages); then I need to flip to the start of the endnotes for that chapter; then I need to flip forward to the endnote that I actually want to look up.
The correct way to do endnotes in printed books is to have “Footnotes to pages A-B” at the top of each page of footnotes. It’s much faster to navigate.
Kindle books, and particularly Kindle books’ footnotes, were clearly designed first in print and then hastily ported over to e-books. The footnotes to Robert Gordon’s book, for instance, just say “Smith (1998)”. It would be mildly annoying to look up Smith (1998) in a paper book; in a Kindle book, it’s annoying enough that no one is going to do it. First, getting to the bibliography is often nontrivial, and then getting within the bibliography to the particular work you’re looking for involves (as it did with Gordon’s book) endless swiping. Then getting back to where you were reading is tedious.
The correct thing to do here is obvious, once you acknowledge that the cost of a marginal character in a Kindle book is essentially zero: don’t even bother with the classic “footnote pointing to a bibliography” citation form. For that matter, don’t bother with ‘ibid.’ or any of the other holdovers from a time when you needed to save on space. Rather than “Smith (1998)”, include the full cite every time: “Smith, Robert A. Blah blah blah blah. Page 93”. If you absolutely must use the old citation method, can’t you at least provide a hyperlink from “Smith (1998)” to the exact spot in the bibliography? But there’s really no reason to accept old formats for new media. I expect the only reason the old style persists is that publishing workflows can’t produce separate e-books and physical books. But that needs to change; the media are different.

I acknowledge that I’m one of very few people who even bother with the footnotes and endnotes, so this isn’t exactly a market that publishers are going to throw their best people at satisfying. Still, there are right ways to do notes, and there are wrong ways, and publishers do it wrong much more often than they do it right.

Robert J. Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War

March 31, 2016/stevereads/1 Comment

Sort of an old-tymey painting of Men At Work on a construction project -- bending rebar, pounding steel beams, etc.

This book didn’t need to be written. Having chosen to write it, it needed extensive chopping at the hands of an editor, which it didn’t get. Having been published, it need not be read. Gordon has been writing about this topic for decades, so I can only assume that he’s published the meat of this book in various papers. My advice, should you find yourself interested in reading this book, would be to seek out some of those earlier papers and run away from the book with all deliberate speed.

Gordon is famous as a technological pessimist, arguing that the productivity gains of the mid-twentieth century are not coming again. Since we live in a pessimistic era, I wager that he’s gotten more traction now than he might otherwise have; but he has good reasons for his argument. It’s essentially one argument: most of the major leaps in innovation can only happen once. We nearly eliminated infant mortality. We brought clean water to nearly everyone’s home. We cleaned up cities by building sewage systems, and by replacing horses with automobiles. We were, in fact, so successful in eliminating infectious disease that Americans are now much more likely to die of chronic disease. We electrified virtually the entire country. We connected everyone with a network of high-quality interstate highways. We built first the railroad, then the telegraph, then the telephone.

Compared to this, the last quarter century doesn’t look all that interesting. What we have we got? The Internet is amazing, yes. We have somewhat larger televisions (movies and television were both pre-1950 inventions). Smartphones are remarkable. We dream of self-driving cars. We dream of nanotechnology. We dream of gene therapy. It’s hard to imagine, though, that any inventions on the horizon can compare to those “one time only” inventions that Gordon mentions. Progress in certain areas of public health seemingly can’t go anywhere else: once we’ve driven infant mortality to zero, we’re done. What’s the life-expectancy dream? Do we think we’ll ever be able to get the average human to live to 100 years? 120? And after you’ve electrified the whole country and gotten everyone on the Internet, is bringing average broadband speeds up to 10 megabits per second really a game-changer? So Gordon’s point is intuitively pretty clear. It would take some argument, of course, but the overarching thesis seems legit.

His main analytical tool to demonstrate the slowdown of American productivity growth is Total Factor Productivity, which seems to also be known as Solow’s Residual, after the Nobel-laureate economist Robert Merton Solow. It’s known as the “residual” because it’s what’s left over when you try to explain output by counting labor (that is, humans) and capital (that is, machines) as inputs. First you count all the machines going into GDP; then you count all the people; then you assume that output is x% labor and y% machines. Whatever you haven’t explained is TFP.

TFP seems to capture “making the best use of the resources you have.” If people learn how to use, let’s say, computers better, then the Solow residual goes up if the quantity of computers remains fixed. I imagine that the same is true of labor: if you use a given quantity of labor better, the Solow residual rises; hence to the extent that living in cities makes people more productive (a fairly well-established economic result, as I understand from Ed Glaeser), the Solow residual rises for a given quantity of labor.

For all the analytical importance that he places on Total Factor Productivity, Gordon spends shockingly little time explaining it; I feel like I spent more time explaining it in the preceding paragraphs than he did in his extremely long book. He asks us to take it for granted that TFP is the appropriate way to measure innovation. Maybe it is, but he doesn’t argue that sufficiently.

That’s the deeper problem: I don’t really know whom his book is aimed at. At least 70% of it is a grindingly detailed walk through American consumer history, much of which illustrates that we mismeasure various economic statistics — as when he notes that the Consumer Price Index may not realize that Wal-Mart exists. Hence the CPI may not count the significantly cheaper goods that people buy there. Or, citing William Nordhaus, Gordon writes that “the value of increasing life expectancy in the first half of the twentieth century roughly doubles the growth rate of the standard measure of consumption expenditures”.

These are interesting measurement problems; if Gordon were aiming at an audience that he expected to have some economic curiosity and some quantitative skill, he would focus on these problems. Instead, before he’s spent much time on any one of these issues, he’s off and running with more trivia — as when he spends the time to tell us that

There was still room for a critical masterpiece such as The Godfather to spur millions of Marlon Brando impersonations and for Star Wars to burst onto the scene and become a cultural icon and box office success, to this day trailing only Gone with the Wind in inflation-adjusted domestic gross revenue.

I still have no idea why that’s there. And I don’t know what I’m supposed to conclude from Gordon’s observation that

So rapidly were new versions of WordPerfect released that by 1992, only a decade into the PC era, it reached version 6.0.

Firefox these days increases its version number by 12 every time it corrects a typo. What does that prove?

Gordon has interesting things to say, and he has trivial things to say, and he systematically buries the interesting things beneath the trivial things. In one of his many asides, he writes that “The patent office was fair, respected, impartial, and not subject to bribes or corruption”. Well, that’s great, and that’s interesting. How did the Patent Office get there? It seems much more relevant to American economic history that we have an incorruptible bureaucracy than that our word processors have high version numbers. Or when Gordon writes that “Running water had been achieved by the Romans, but it took political will and financial investment to bring it to every urban dwelling place,” he’s certainly correct; politics is important. It’s far more important than Francis Ford Coppola’s masterwork, as much as I love Coppola. Yet he spends no time at all on the politics. (Here’s the place to recommend that you read Francis Fukuyama’s Origins of Political Order, whose whole point is to understand how countries ever come to have stable governments with functioning, efficient bureaucracies.)

Of course a book like this is obliged to end with a chapter explaining how we can get out of this mess, if at all. Gordon doesn’t seem to think we can. We have demographic problems, with an aging population. Our debt is mounting. Etc. What I find odd is that Gordon never actually explains why we should care. If productivity growth is slowing because certain things can only happen once, then … well, they’ve happened, so why aren’t we happy about that? Give yourself a pat on the back, humanity: you invented penicillin. That’s only going to happen once, so be proud of it.

Gordon does seem to appreciate that we may today be suffering from an excessively robust standard of living. When the U.S. is as obese as it is, the problem might well be that we have too much stuff; the entire advertising industry exists to convince us that we need to shove more of that stuff in our faces. As far as I can tell, though, Gordon doesn’t go down a Galbraith-like road of considering post-scarcity economics. He just seems to take it for granted that productivity growth is good, and that a slowdown in productivity growth is bad.

He then goes beyond a mere slowdown in growth: toward the end of the book, Gordon says that “America’s children will almost certainly not be as well educated, healthy, or wealthy as their parents.” This seems to imply that GDP will not only grow more slowly than it has, but that it will actually decline. The book doesn’t really provide support for this.

So the book is a hot mess. I’m given to understand that many great books are great because they had great editors slicing away patiently in the background. Gordon’s editor could have made this book much shorter, much more focused, and much more concerned with fundamentals than with trivialities. But then it would be a much different book.

Peacetime hopelessness and Bernie

March 29, 2016/stevereads/Leave a comment

I don’t have time to expand on this idea as fully as I’d like, but just some quick notes:

During World War II, the federal government managed the U.S. economy to an unprecedented extent, including price and wage controls, and (I just learned) limits on the production of durable goods. The durable-goods limits were so intense that the spread of television was delayed until the war ended.
After the war, millions of Americans were able to go to college through the G.I. Bill.
Clearly, when we want to make something happen, we can make it happen.
It’s equally clear that we only believe we can achieve the impossible during wartime.
I’ve seen no reason for this belief.
It may be the case that World War II was singular and irreplicable. But I’ve not seen this argued. We have every reason to believe that if the country needed to gear up for total war, it could do so. All economic slack would be removed and the unemployment rate would effectively drop to zero.
It seems clear that society has reached a point in its development where macroeconomic outcomes are all a choice. We choose to tolerate involuntary unemployment. We choose not to use the government as an employer of last resort. We choose not to build good mass transit, choose not to house the homeless, choose not to feed the hungry.
American economic ideology is stuck in an earlier mindset, wherein these are not choices. If we don’t feed the hungry, it’s because we can’t afford it, and/or because of the moral failings of the hungry.
People probably believe this ideology sincerely. It just happens that this ideology is convenient for those who don’t want to feed the hungry.
The chink in the armor for those who support this ideology is the nearly instantaneous availability of cash whenever war calls for it. War is a choice we make available to ourselves; improving our society is not.
The Sanders campaign has been attacked for the unreality of its economic plans. I’ve not investigated very deeply, but if Sanders’s plans are unrealistic, they’re probably unrealistic in not saying all of the above: that the money is available, and we spend it on wars without hesitation, and that we just need to turn our society’s focus from the violent destruction of life to the improvement of life. Sanders’s presentation (“millionaires and billionaires”) has been narrow and monotonous, and hasn’t really approached the full scope of what’s available to a modern society. If we wanted a Manhattan Project to give every child a college education, we could do it. If it were a Manhattan Project for bombs, we could do it. There’s no reason to believe that a Manhattan Project for college is more difficult.
The argument against Sanders is essentially an argument for hopelessness.
I don’t mean that in a disparaging way, actually. Who knows: it may in fact be hopeless to dream of achieving Sanders-like outcomes. But what makes it hopeless is not a fact about reality or a fact about economics, but rather a fact about politics.
So if you’re going to argue against the Sanders campaign, don’t argue it on the basis of economic reality or fiscal plausibility. Argue it on the basis of political reality. Because that’s the only real ground on which this opposition stands.
If political reality stands between us and Sanders-like outcomes, and if we desire those outcomes, then it seems that the top question on everyone’s mind ought to be how to change political outcomes.
By “changing political outcomes” I mean something like “making the results of our collective decisionmaking match the results of our collective desires.” If we, as a society, would prefer to have a tax-financed system of public universities that leave our students debt-free, but our political system doesn’t make that outcome feasible, then there’s something wrong with the way that our policy desires are translated into political outcomes.
Which candidate is more likely to change political outcomes? The typical argument for Hillary is that we’re never going to change political outcomes if a Republican is elected, and that Hillary is the only electable one. The typical argument for Bernie and against Hillary is that Hillary wouldn’t do the right things if elected — that she’s too comfortable with the system as it is — and that she’d aim in the direction of the right policies without fundamentally changing the political structure. The argument against Bernie here is that he would be one man among many, and that his noble intentions would be crushed by the system. Bernie’s argument for himself is that his election would signal a political revolution; this would mean that the very organization of political life had changed.
There’s a certain fashionable pessimism these days: our children will live worse lives than ours, globalization is destroying the American economy, and we need to settle for smaller dreams. These are all choices. If we, as a society, decide that we deserve better, and we choose to not achieve better, we are making a moral choice rather than succumbing to economic necessity.

Behavioral economics and retirement savings

March 26, 2016March 28, 2016/stevereads/4 Comments

This NYT article about using behavioral nudges to get people to save more is fine, so far as it goes. But it’s another example of policies which go through an outrageous amount of complexity to encourage people to do the right thing, instead of doing the right thing for them.

There are a lot of potholes on the way to a happy retirement. First is to save enough. Second is to save in appropriately diversified vehicles (e.g., index funds). Third is to choose a mix of assets that’s appropriate for your particular stage of life — e.g., more stocks when you’re young, and more bonds when you near retirement. Fourth is to not outlive your savings; the way to do this would be to buy an annuity, but the annuity market (as I understand it) is not as well developed as the rest of the retirement-savings industry.

So then we (as a society) compile all of this knowledge about financial best practices, then try to convince people to use it, then outsource preparations for retirement to employers, then encourage employers to nudge their employees into doing the right thing. Not only is this ineffective; it’s infuriating and exhausting.

Until fairly recently, we tried another outsourcing approach: encourage employers to provide pensions (“defined-benefit retirement plans,” in the jargon, as opposed to “defined contribution” plans like 401(k)s). Pensions required employers to set aside money today for their employees’ retirement, but this of course presents a problem: what if the employer goes out of business before paying out those retirement benefits? To address this possibility, we built a regulatory infrastructure to try to regulate these pensions. If all else failed, we created a government agency as a backstop.

Somehow the straightforward approach of just providing strong retirement benefits to all Americans, then paying for those benefits with progressive taxes, hasn’t yet taken hold. In the U.S., “inflation-protected retirement annuity with survivor benefits, paid for through taxes” is pronounced “Social Security.” Social Security is expected to be part of a three-legged stool, the other two legs of which are pensions (nowadays IRAs and 401(k)s) and private savings. Those other two legs are increasingly weak: the overall national private saving rate has been declining for decades, and briefly went negative in 2005. That savings rate already includes 401(k) and IRA contributions, so one of the legs of that stool is practically nonexistent. As for the 401(k) leg: only 66% of private employers even offer retirement benefits, and only about 3/4 of the people who have access to them use them. I can’t find statistics on how much people contribute to such plans, but the amount must be less than the low overall savings rate. [1]

In this light, behavioral workplace nudges to get people to save more seem like a last-gasp rearguard effort. If we, as a society, believe that saving for retirement is important, why don’t we, as a society, reflect this belief in our policies? The standard nudgey answer is “libertarian paternalism”: set appropriate defaults on retirement savings, and allow people to override those defaults if they wish. It seems pretty clear that libertarian paternalism doesn’t work. Libertarian paternalism seems like nothing so much as resignation in the face of a hostile political climate; it resembles the early Obama administration, hoping against all evidence that the GOP would take half a loaf. “Conservatives and liberals disagree on a lot of things,” I imagine libertarian paternalists saying, “but surely they’ll agree on market-friendly solutions like behavioral nudges.”

Even if these nudges worked, Social Security would still be better. First, there are enormous economies of scale from administering Social Security centrally rather than outsourcing pension management to millions of employers. Second, those employers can’t be expected to be any good at choosing retirement options for their employees. My employer makes software; it doesn’t make retirement funds. Why would we expect my employer to be any good at offering 401(k)s? Why would it want to offer 401(k)s? It wants to make software and it wants to lure talented employees with high salaries; all else is noise.

Social Security isn’t perfect. It’s not progressively taxed, for one thing: it’s a flat tax, and you don’t contribute on any dollars you earn above $118,500. It’s regressive on what’s paid in, but progressive in what’s paid out: higher earners can expect to get back a smaller fraction of what they paid into Social Security than lower earners do. And it only pays out $1,335 per month on average, which still amounts to 39% of elderly people’s income. So it needs to be more generous and more progressive. But it’s a start, and the infrastructure is already in place. Removing the taxable maximum would be a hard-fought battle, but would be comparatively easy to implement once we’d made the decision to do so.

I like to imagine a thought experiment. Back in 1970, I imagine someone told my parents (who weren’t yet parents) that in 50 years they would be nearly four times as wealthy as they were back then. My imaginary interlocutor would then ask my parents what to do with that windfall. They might have felt perfectly well off with the income they were earning back then, so the thought of quadrupling it might have seemed outrageous. Maybe they should set some of it aside for retirement? Set aside even more of it and allow themselves to retire early? How about setting aside some of it to provide the world’s best universities, for free? There’d be a long list of choices they could make. They could choose to buy a larger house, though maybe they’d look around at the house they have and think, “No, this is a fine size house; we’ll choose to spend our money on other things” (unlike Americans as a whole, whose homes are 42% larger at the median than they were in 1973).

Like Odysseus tied to the mast, every decision that my parents made in their mid-twenties would bind them in their working years and on into retirement, and the binding would be handled through the tax code. Would they lament the money that never made it to their wallets, but rather was spent on social goods? Rather than after-tax paychecks that were on their way to quadrupling, they’d get free university educations for their children, and they’d have enough money to retire comfortably. A lot of the arms races that we fight with our neighbors would never have been fought: rather than build a larger house simply because that’s what everyone around us does, and because we must keep up with the Joneses, the tax code would disarm everyone at once. To the extent that we build larger homes out of an arms-race mentality, rather than because any individual person wants a larger home, this multilateral disarmament would help everyone.

Of course this story isn’t complete. For one thing, real per-capita disposable personal income doesn’t capture the story of rising income inequality over the last 30-40 years; the story of American growth hasn’t been a story of rising tides lifting all boats. A more accurate measure might be median household income, which has barely budged since the early 80s. This may, in fact, strengthen my story. Which do we prefer, as a society: quadrupling our income, but putting most of that extra income into a few hands, or sharing it more broadly and investing in our future through strong public universities, public-health spending, and basic research that helps everyone?

The story of increasing wealth may also be missing a key component: health care. Maybe our parents would have loved to have set aside money to build for the future, but they didn’t have that choice: much of what would have gone into their pockets as increased wages went, instead, into health-care costs borne by their employers. First, I have my doubts that this was actually a problem: the real disposable personal income number already factors in the health-care CPI. And second, the fact of rising health-care costs in the U.S. results, at least in part, from our fragmented system of care. That is, rising health-care costs have been very much a social choice. Imagine again that our parents, bound like Ulysses, were asked in the early 70s to make a choice: organize medical spending in a deliberate way (à la the VA medical system, or à la Medicare), or continue with the chaotic and spectacularly inefficient way we’ve organized it.

Barney Frank is supposed to have said that “government…is simply the name we give to the things we choose to do together.” Let’s get back to thinking of things we can do better together, as a society. Social Security is a good start, but it’s just a start.

[1] – I don’t know whether home equity is counted in the NIPA definition of savings. Even if it is, I’m a little confused about how owners’ equity is counted. How could equity be cut in half and then return to trend? In any case, equity per capita only hit a peak of about $45,000, so it alone won’t rescue Americans’ savings rates. And we can’t compare savings rates to equity amounts; that’s comparing a flow to a stock. The relevant comparison would be either the rate of change in equity to the rate of change in savings, or the total amount of savings to the total amount of equity. I can’t figure out a quick way to do the former; the latter doesn’t seem particularly valuable.

Removing some veto points

March 23, 2016/stevereads/Leave a comment

Andrew Prokop’s piece about how a contested GOP convention could work is maybe the millionth data point from this endless election that convinces me of the need for a simpler election. Here’s how the election should work:

You show up at the polling place. (Note that you’re only going to go to the polling place once in this process.)
You face a long list of candidates. This year it’d contain Martin O’Malley, Bernie Sanders, Hillary Clinton, Donald Trump, Ted Cruz, Rick Santorum, etc., etc., etc.
You rank-order your preferences. Or maybe you’d have a certain number of points you could allocate. Me, I’d put Hillary or Bernie at #1 and #2, or (depending on the day) the reverse. O’Malley would be up there, too. None of the GOP candidates would get any of my points.
Tally up the candidates who got the most points. If anyone gets a clear majority of points, or of first-rank votes, that person wins. Otherwise we start considering second-place candidates; whoever gets more first- or second-place votes than the others wins.

None of this nonsense where you first have to do well in a couple randomly selected states (Iowa and New Hampshire) to drive “momentum”. None of the nonsense where the people who even bother to vote in primaries are the most politically engaged, so that a party’s choice of its nominee is driven by its most rabid members. None of the nonsense where people who are obviously never going to be the nominee (like John Kasich) stay in so that they can deny the frontrunner a majority of the delegates at the convention. None of the nonsense where people fear voting for Bernie or Nader because they worry about being a ‘spoiler’: under the sort of system I’m describing, you could have voted for Nader as your first choice in 2000; once he got a single- or low-double-digit percentage of the vote, the ranked-preference voting scheme would consider all the second-choice candidates. Since nearly everyone who voted for Nader as #1 would vote for Gore as #2, Gore would have won.

When this insane election is over, I hope the winner will help America by pushing for a sane ballot.

Erwin Chemerinsky, The Case Against the Supreme Court

March 19, 2016March 19, 2016/stevereads/Leave a comment

The basic question that begins this book (and apparently begins Chemerinsky’s classes at UC-Irvine) is: why even bother with a Supreme Court to begin with? What role does the Court fill? Chemerinsky’s answer: courts protect the powerless, who would otherwise have no advocates within a majoritarian legislative system. The Court has failed, then, if it has failed to protect the rights of powerless minorities. Chemerinsky shows, through example after heartbreaking example, that the Court has consistently, through its two-plus centuries of existence, sided with the powerful against the powerless. It has done this even when its hand has not been forced. Often it has done this in egregious ways — as when Oliver Wendell Holmes, upholding the right of the state to forcibly sterilize its citizens, wrote that “Three generations of imbeciles are enough.”

The book is divided into three eras. First there’s the period when we all know that the Court was the voice of the powerful against the powerless, spanning Dred Scott to Lochner. Next is the era that would be the most obvious counterexample to Chemerinsky’s thesis, namely the Warren Court that did so much to expand civil rights in the 1950s and 1960s. Chemerinsky shows that the Warren Court could have done much more than it did: it took a full decade to follow up on enforcing its own decision in Brown v. Board of Education, by which time the composition of the country had swung back in the direction of the Nixon counterrevolution. By the middle of the 1970s it essentially halted the progress of school desegregation, ruling that segregation was only unconstitutional if that was the explicit goal of the law; de facto segregation was allowed.

Throughout, Chemerinsky emphasizes that the law itself does not restrain the court; its errors are unforced, and they all point in the same direction, namely toward comforting the comfortable and afflicting the afflicted — as when he writes that the Court’s reading of equal protection is “simultaneously cramped when racial minorities attempt to use it to challenge discrimination and expansive when whites use it to object to affirmative action.”

Chemerinsky’s command of the law is, of course, quite a lot deeper than mine; he’s the author of a leading text on Constitutional law. So I hesitate to question his assertions about what’s “obviously” legally true or false. His description of the Morrison case, though, striking down portions of the Violence Against Women Act as an unconstitutional overreach, was not convincing. Chemerinsky writes that VAWA was justified by Congress’s interstate-commerce power, because “Congress found that gender-motivated violence costs the American economy billions of dollars a year and is a substantial constraint on freedom of travel by women throughout the country.” That may well be true; but, looking at the law from the outside in, this feels like the sort of justification that could be attached to any and every law. What, exactly, wouldn’t the commerce clause make constitutional, by this argument? Likewise for the famous commerce-clause in U.S. v. Lopez. Again, I’m not asserting that Chemerinsky is wrong, or that these laws are obviously unconstitutional; it’s just a legal argument that Chemerinsky needs to spend more time justifying to a non-legal audience.

And if the legal arguments in his favor are as obvious as Chemerinsky makes them out to be, then his statement late in the book that “rarely, if ever, does the Court hear a case in which there are not reasonable arguments on each side” is a bit hard to believe.

That said, most of the examples that Chemerinsky cites — and he cites example after example, with the steady, relentless energy of a metronome — do seem absurd, as when he notes that “If you are injured by a generic prescription drug — even horribly injured — you cannot sue the maker of the drug.” (See the New York Times on this case, namely Mutual Pharmaceutical v. Bartlett. Chemerinsky argues persuasively that this decision was a horrifying perversion of Congress’s intent when it passed the Hatch-Waxman Act.

So what is to be done? If the Court can be counted on to always reflect the interests of the powerful, then why bother with the Court? Chemerinsky says that there’s a strain of legal thought which advocates removing judicial review (i.e., the Court’s power to declare legislation unconstitutional) altogether. Chemerinsky won’t go that far because, for many otherwise powerless people, it’s either the Court or nothing. Removing judicial review wouldn’t help the powerless; it could only hard them. Chemerinsky’s preferred solutions include term limits for Justices, so that Justices nominated decades earlier don’t leave the Court trailing decades behind the society it inhabits. Of course, this is no guarantee that the Court will thereby become more progressive: term limits taking effect during the Nixon or Reagan administrations would have unwound some of the victories of the Warren Court.

His other solutions include the Court’s communicating more clearly with the public, for instance by broadcasting oral arguments as they happen, and by understanding the various audiences (other lawyers, academics, the general public) who read its decisions. Maybe most importantly, Chemerinsky wants the public to correct its mistaken understanding of how the Court works, and he wants nominees to stop playing the games they play during their confirmation hearings: judges are not like baseball umpires. They do not merely interpret the law; they create the law, in cases where reasonable people can disagree on what the law is. Chemerinsky believes that if people had a correct understanding of how the law is made, they would understand that protecting the powerless is a choice — a choice that the Court has, regrettably often, failed to make.