Tag Archives: income inequality

The missing issue in the 2016 campaign: America’s long slowdown

Summary: Here we explore an important root cause of the rising stress on the US political regime, which combines with other similar problems to create a situation exploitable by extreme political movements — of the sort we associate with lesser nations, not America. Unless we wake up and act, we might find America has become one of them.

Economic Growth is over

Why so much dissatisfaction today, so that both Democratic and Republican parties have rebellions (challenges to the parties’ power structure)? Polls show a pervasive loss of public confidence in America’s institutions (except, disturbingly, the policy and military), which contributes to the stress on the regime.

Also significant is the slowing rate of economic growth (a similar dynamic contributed to the rise of populism and progressivism during 1873-1932). To learn about this see the interactive graphs at the Regional Economic Analysis Project (REAP). Perhaps the most important metric for people is the annual growth of real per capita personal income during the Boomer’s years. Note that our memories do not well match the facts of the past.

  • 1960-69: 3.5% — The golden years,
  • 1970-79: 2.3% — The terrible 1970s,
  • 1980-98: 2.2% — The Reagan Revolution (tax cuts!),
  • 1990-99: 2.0% — The tech boom,
  • 2000-09: 1.2% — The Bush Jr. years (tax cuts!),
  • 2010-14: 1.4% — First half of the Obama years (partial reverse of Bush Jr. tax cuts).

The sad reality is slowing growth, decade after decade. We have tried various nostrums; none have worked. Worse, these are mean growth rates. Median growth would be lower (less affected by rising inequality) and better reflect results for average Americans

The distribution of this growth was, as always, uneven — but regional distribution is surprising. The economic stars by this metric were (in decreasing order) North Dakota, Mississippi, Arkansas, South Dakota, South Carolina, Virginia, Vermont, Tennessee, New Hampshire, North Carolina, and Louisiana. There is no obvious pattern. For example, South Dakota’s fortunes varied with North Dakota’s, strong in five of these six decades (not the 1980s) — despite it having little oil production.

Washington DC was #21. New York was #34. California was #47.

Continue reading

Our future will be Jupiter Ascending, unless we make it Star Trek

Summary: Will our future be like Star Trek or Jupiter Ascending? Star Trek shows us a world beyond scarcity where everybody benefits. In Jupiter Ascending the 1% takes the wealth produced by technology and uses it to rule us. We can choose to make Star Trek our future if we are willing to work for it, but now we’re condemning our children to live in Jupiter Ascending.  {First of two posts today.}

Jupiter Ascending

“No, I don’t share my wealth. Why do you ask?” From Jupiter Ascending.

Consider the increase in the West’s wealth since 1750 and the advancement in technology. Imagine similar progress for another 250 years, to the time of the original Star Trek TV series. Rick Webb describes that world in “The Economics of Star Trek: The Proto-Post Scarcity Economy“, a market economy whose productivity allows the government to easily provide a high basic income allowance to everybody.

The amount of welfare benefits available to all citizens is in excess of the needs of the citizens. … Citizens have no financial need to work, as their benefits are more than enough to provide a comfortable life, and there is, clearly, universal health care and education. The Federation has clearly taken the plunge to the other side of people’s fears about European socialist capitalism: yes, some people might not work. So What? Good for them. We think most still will.

Discussions about Star Trek often focus on what we do with the abundance of goods and services produced by their fantastic tech. It’s fun, like composing fantasy football teams or designing the ideal Prime Directive.

In our world the 1% shows us an alternative to Star Trek. The largest fraction of America’s increased income since 1970 has gone to the 1% — and even more to the .1%.  They could share the booty (nobody can consume a billion dollars in a lifetime), but prefer instead to amass wealth and power. Why would this change with the invention of robots and replicators? Continue current trends for a few centuries and you reach Jupiter Ascending — a world of servants and lords, where the rich own planets, live almost forever, and harvest the peons. A world like that of our past, as seen in Pride and Prejudice.

Continue reading

When marriage disappears: rising inequality as the threat to the family

Summary:  This post looks at the disintegration of the family, another example of America’s regression as we quietly surrendering generations of gains. The America we loved — relatively classless, with a big middle class, low inequality and high social mobility — dies a little every day. The evidence lies before us, obvious in the news and described by countless studies. But to see it would create pressure to take political action. Work, risk, expense! It’s not too late to reverse these trends, but time is not on our side.

When Marriage Disappears

When Marriage Disappears: The Retreat from Marriage in Middle America
The National Marriage Project, U of VA

Introduction

In middle America, marriage is in trouble. Among the affluent, marriage is stable and may even be getting stronger. Among the poor, marriage continues to be fragile and weak. But the most consequential marriage trend of our time concerns the broad center of our society, where marriage, that iconic middle-class institution, is foundering.

For the last few decades, the retreat from marriage has been regarded largely as a problem afflicting the poor. But today, it is spreading into the solid middle of the middle class. …

Race, Class, and Marriage

Forty-five years ago, Daniel Patrick Moynihan drew the nation’s attention to the growing racial divide in American family life with the release of his report, “The Negro Family: The Case for National Action.” Moynihan later noted that his report had just captured the first tremors of “the earthquake that shuddered through the American family” over the course of the last half century.

Moynihan was right. This can be seen in Figure S1, which tracks trends in the percentage of working-age adults (25–60) who are in intact marriages, by race and educational attainment. While it is true that the nation’s retreat from marriage started first among African Americans, it is also evident that the retreat from marriage has now clearly moved into the precincts of black and white Middle America.

Specifically, in both the 1970s and the 2000s, blacks in all educational groupings were less likely to be in intact marriage than were their white peers. For both groups, marriage trends were not clearly and consistently stratified by education in the 1970s. However, by the 2000s, they are clearly stratified, such that the most-educated whites and blacks are also the most likely to be in intact marriages, and the least-educated whites and blacks are also the least likely to be in intact marriages.

This report is too rich in insights to summarize. The message and graphs are clear; it’s easy to read. I strongly recommend reading it. Here’s one graph I found especially compelling.

Continue reading

Three visions of our future after the robot revolution

Summary: During the past 2 years the robot revolution has come into view, and all but Right-wingers living in fantasy-land have begun to realize it might (like the previous ones) produce large-scale social disruption and suffering. But to prepare for these changes we must first image what kind of world they’ll create. Here we look at three visions about what lies ahead for us.  {1st of 2 posts today.}

“We did not come to fear the future. We came here to shape it.”
— Barack Obama’s speech to Congress, 9 September  2009.

Dark futures

 

Contents

  1. The center-left sees the problem
    ……and offers mild solutions.
  2. Realistic analysis and prescriptions.
  3. Visions of dark futures.
  4. For More Information.

 

(1)  The center-left sees the problem and offers mild solutions

Slowly, people have come to see the coming robot revolution (aka, a new industrial revolution), even economists. The Left has adopted this issue, as they have climate change, as a means to enact long-sought changes in the US economy. Like climate change, their solutions are far too small for the problem described.

(a) A World Without Work” by Derek Thompson in The Atlantic, July/Aug 2015 — “For centuries, experts have predicted that machines would make workers obsolete. That moment may finally be arriving. Could that be a good thing?” Typical of The Atlantic. Long, meandering, confused mish-mash of issues. Never confronts the core issue of how people will earn money to live. Lots of nonsense about people living by selling crafts to each other.

(b) The Future of Work in the Age of the Machine” by Melissa S. Kearney, Brad Hershbein, and David Boddy at the Hamilton Project, February 2015. See the slides and transcript from the seminar they held for academics and businesspeople. Their prescription is aggressive application of conventional methods…

The Project’s economic strategy reflects a judgment that long-term prosperity is best achieved by fostering economic growth and broad participation in that growth, by enhancing individual economic security, and by embracing a role for effective government in making needed public investments.

(c) The future of work in the second machine age is up to us” by Marshall Steinbaum at the Washington Center for Equitable Growth, 23 February 2015 — They show that the robot revolution has not yet appeared in the macroeconomic statistics. But it’s coming. Their conclusions are the standard center-left recipe, like those of the Hamilton Project…

Continue reading

We worry about rule-breaking by the underclass, not the upper class

Summary: The daily press gives us lurid tales of the underclass breaking social norms, but seldom does so about the more serious lost professionalism that helps the upper class. Before we tinker with American society to reverse our rising inequality, we should understand the processes that created this problem. I believe we not only don’t understand the causes, we don’t even clearly see the deep changes in American society during the past few decades — during the Boomers’ years. This is another post about our poor vision of America.  {1st of 2 posts today.}

Our Broken Society

Content

  1. Breaking social norms.
  2. Loss of professionalism.
  3. Rise of self-interest in other occupations.
  4. Conclusions.
  5. For More Information.

(1)  Breaking social norms

We talk a lot about underclass break society’s behavioral norms. In his 1986 book Beyond Entitlement Lawrence Mead (Prof Pol Sci, NY U) taught us to fear their increasingly “dysfunctional” behavior: criminality, drug use, promiscuity, out-of-wedlock births, excessive rates of divorce, etc. Sadly we seldom notice the breaking of norms occurring just as strongly in the upper classes — with greater effect on our social cohesion and level of inequality.

(2)  Loss of professionalism. Broken professions.

Like the word “gentleman”, the meaning of “professional” has eroded away to a bland sense of well-behaved. Managing conflicts of interests was a major factor distinguishing professionals from other trained people. For example, doctors, accountants, and attorneys balanced their clients’ interests vs. theirs as business people vs. those of society. Attorneys were expected to act as “officers of the court”. In an epidemic doctors were expected to place the public’s health above that of the patient’s and their own. Accountants were to maintain the integrity of the financial reporting system that guides the money flows of our society.

These standards were often honored in the breach — America was never Heaven — but during my lifetime they have collapsed. What’s happened in medicine and law clearly shows the problem and the result.

In the early 1980’s doctors realized they the controlled America’s health care checkbook, and could leap from affluent to wealth by “optimizing” their practice: bringing in-house diagnostic and out-patient services and then over-utilizing them, taking de facto bribes from drug and medical device companies, and in a hundred other ways. Conferences and articles gave step-by-step instructions, and their incomes rose — varying widely by specialty, skyrocketing for the most aggressive doctors (see this paper, and a later one).

Only slowly did the pushback arrive, the current push to disenfranchise them — turning decision-making over to the HMO’s, enmeshing doctors in paperwork, authorizing less-trained technicians to do aspects of their work, and eventually automating much of their work.

Continue reading

Be Proud America! as we watch our babies die

Summary: We’ll hear much about American exceptionalism from candidates for President during the next 17 months. Here’s a tangible example — the greater fraction of infants that die in America than in our peers. We know how to fix it; we have the money. We lack only the will. Be proud, America!  {1st of 2 posts today.}

Some insights into the factors affecting infant mortality, showing how badly we’re doing.

NBER: infant mortality, Jan 2015

From the January NBER Bulletin on Aging and Health story about this study:

The U.S. infant mortality rate (IMR) compares unfavorably to that of other developed countries, ranking 51st in the world in 2013. In the U.S., there are nearly 7 infant deaths during the first year of life per 1000 live births, roughly twice the rate in Scandinavian countries. The U.S. IMR is similar to that of Croatia, despite a three-fold difference in GDP per capita.

What explains the U.S.’s relatively high IMR? This is the subject of a new NBER working paper … To quantify the importance of these potential sources of the U.S. IMR disadvantage, the authors combine natality micro-data from the U.S. with similar data from Finland and Austria. These countries provide a useful comparison because Finland has one of the lowest IMRs in the world and Austria has an IMR similar to much of continental Europe.

…  In short, worse conditions at birth and a higher post-neonatal mortality rate are both important contributors to the U.S.’s higher IMR.

Finally, the authors explore how the U.S. IMR disadvantage varies by racial and education group. They find that the U.S.’s higher post-neonatal mortality rate is driven almost entirely by excess mortality among individuals of lower socioeconomic status. As the authors note, “infants born to white, college-educated, married women in the U.S. have mortality rates that are essentially indistinguishable from a similar advantaged demographic in Austria and Finland.”
Continue reading

Will we be better off ruled by the 1%?

Summary: This post asks if the project to reform America is not just futile but misguided. Yesterday’s post explained how American’s political system has become dysfunctional from the conflict for control between the upper middle class (the professional and managerial classes I call the “outer party”) and the 1% and its allies (especially the wealthy and leadership classes I call the “inner party”). Today we follow this reasoning to its surprising but logical conclusions. Leave your reaction in the comments. {1st of 2 posts today.}

“Most importantly, I no longer believe that freedom and democracy are compatible. … The fate of our world may depend on the effort of a single person who builds or propagates the machinery of freedom that makes the world safe for capitalism.”

— Peter Thiel (Silicon Valley billionaire) in “The Education of a Libertarian“, CATO Unbound, 13 April 2009. You’ll seldom here the voice of the 1% more clearly.

We are the future

(1)  What happens if the 1% wins?

The great challenge of the 1% will be maintaining social cohesion under their rule. We must feel that their rule is legitimate even if runs against our interests. Medieval kings did this with the support of the Church, convincing the people of the divine right of kings.

I suspect they will rely on two pillars of popular support. The social conservatives are the equivalent of the European right-wing parties’ “throne and altar” alliance, who give their support in exchange for mostly symbolic support. Libertarians provide a second pillar, who will cheer as the 1% strip mine America and social mobility declines from its already low level — and give their support to the 1% in exchange for almost nothing.

Life will continue under their rule, with few changes. It will be more difficult and insecure for us; it will be more fun for the 1% (i.e., they’ll have more power). We of the outer party will still read the news, cheering our tribe and booing the others — staying well-informed, although eventually we’ll no longer remember why we bother.

They will eliminate much of the regulations on people’s behavior, for good or ill, because they don’t care what the masses do. Their rule could be stable for a long term.

Continue reading