Paul Ryan inches toward a basic income

Rep. Paul Ryan unveiled the latest stage in his personal evolution on poverty and welfare Wednesday in a speech at the American Enterprise Institute. Like Sen. Marco Rubio, Ryan is part of a small Republican minority still trying to engage on substantive policy issues. Ryan is also like Rubio in that the pursuit is dragging him deeper and deeper into ideologically uncomfortable ground on which he is reluctant to plant a flag.

In his speech he endorsed the same extension of earned income tax credits that President Obama has been advocating without making overt reference to He Who Must Not Be Named. Ryan’s proposal is in some respects even more aggressive than Obama’s. Instead of providing the EITC subsidy in the annual tax return process, Ryan is endorsing Milton Friedman’s old idea of using the EITC as a monthly income floor. The proposal would only affect people who are working and would be relatively small, but this represents the first solid Republican minimum income plan to emerge since the Sixties.

Ryan’s approach to poverty relief offers the benefit of reducing the bureaucratic burden of our social welfare system. In an age of rising complexity, anything that streamlines government without sacrificing essential services should be welcome.

Its flaw is that it is too small to make a difference and only offers relief to people who have a job. That’s a bigger problem than it might sound like and it reflects an ideological misconception common all over the political spectrum.

Our economy is changing at a faster pace than ever, destroying an older category of entry-level jobs that used to be the gateway to a career. The disappearance of these jobs is feeding structural unemployment, which is driving down wages, but that’s not all.

New business models are emerging in this climate to feed off declining wages and rising unemployment. Those business models actually depend for their survival on government subsidies to working families in order to perpetuate a cycle of downward pressure on wages.

The idea that any job no matter how menial or dead-end is a gateway to independence is an almost universally accepted fallacy. No one actually believes it enough to try it on their own kids.

Affluent kids are not competing with each other for positions driving a forklift at Home Depot. They are, however, competing for unpaid internships. They are traveling. They are spending time at summer camps. They are taking the time they need to prepare for careers that might take them somewhere. They can do this because they have the money it takes to sustain these pursuits into their twenties.

Kids in nice neighborhoods might take a job to make some extra money, but their parents are working very hard to make sure that they never have to take a menial job to support themselves or their family. Why? Because taking a job too early will cut them off from opportunities to develop the complex skills and connections required to access to fulfilling careers. Research is starting to back them up, demonstrating that those who fall into these jobs tend to underperform economically for a lifetime.

For those who cannot afford these opportunities, new predatory business models await. The real winners from our assumption that a low-wage job is the cure for what ails the poor are companies like WalMart, McDonalds and Dollar General.

A solid majority of the families on food stamps are working. That statistic is the key to understanding what’s wrong with our approach to poverty, mobility, and the social safety net. The EITC, as currently structured, takes money from taxpayers to subsidize business models that depend on declining wages and desperate workers.

Our welfare system is evolving into a gigantic public subsidy to low-wage employers. WalMart employees alone cost taxpayers more than $6bn a year. McDonalds accounts for $1.2bn. Our belief that that poor people need a job more than they need anything else is leading us to block off avenues to improve their lives. Meanwhile we are spending tax money in an effort to keep them stuck in pointless jobs that will never lift them out of poverty.

For Ryan to embrace the idea of extending the EITC and converting it into a wage floor is a healthy step toward something that might someday matter. In the meantime it doubles down on a system that traps low income families in a cycle of futility while subsidizing business plans built on American desperation. Ryan’s sincere interests in improving opportunity for low income Americans and trimming our bloated bureaucracy are dragging, slowly and irrevocably toward the solution that would accomplish those goals. Let’s hope he someday makes peace with the idea of a minimum income.

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Posted in Economics, Welfare State

Immigration, wages and the future of ‘dirty jobs’

fishCrab fishing in Alaska can be a six-figure job. Workers in fish processing factories there earn solid middle class wages. Processing workers who work on a ship often get the opportunity to earn a share in the profits of the voyage, occasionally taking earnings much higher.

Fish processing at a catfish farm in Alabama seldom earns a worker more than minimum wage. The work is long, dangerous, and miserable. All across the south, agriculture and food processing are a big business, but hard work earns lousy money, abusive treatment, and minimal benefits.

We could end illegal immigration with a simple market solution – impose a premium on immigrant labor. The reason we are not going to adopt this simple solution becomes evident by comparing labor conditions in Alaska to the economics of work in the Deep South.

Debates over immigration often pivot on the belief that Americans are not willing to do dirty jobs. The reality is that Americans commonly perform harsh, dirty, dangerous work. They just insist on getting reasonable compensation and decent treatment. They are not sufficiently desperate and powerless to submit to the kind of abusive, semi-slave employment terms endured by illegal immigrant laborers.

In the Mississippi Delta, employers have ready access to a pool of politically powerless illegal migrants willing to endure almost any form of abuse. Employers in Alaska have relatively little access to desperate foreign labor. Until recently, they were able to use a limited supply of “student workers” on J-1 visas. That sham was shut down by the Administration as part of the wider crackdown on immigration abuses. Getting from Latin America to Alaska means crossing three international boundaries and thousands of miles. Alaska is not a realistic option for mass illegal immigration.

To further complicate the picture for employers in Alaska, permanent residents there also benefit from a modest minimum income derived from their share of the state’s massive oil and gas revenues. People there have enough power over their own lives to resist enduring terrible treatment and exploitation. Ask them to do a dirty job and they may do it, but they will insist on getting paid.

The situation in Alaska has an impact on consumers. How much does catfish cost at the grocery store? How much will you pay for king crab or Alaskan salmon? We can and should fix our problem with illegal labor. We should realize, though, that ending this problem will mean changing the shape of our economy in important ways that will cost us money. Finding a reasonable solution requires us to recognize the true scope of the effort.

Across vast segments of the economy, the availability of exploitable illegal immigrant labor is a fundamental assumption of many business models. These laborers are reviled, tormented, and harassed. Ugly cynics build successful political careers stirring up hostility against them. Their children are locked out of access to education and basic community resources wherever possible. They are kept poor, powerless and – most importantly of all – available.

No solution to this problem is waiting on the border. “Border security” is a cynical ploy, a way to score political points without having to change anything. America’s illegal immigration problem is just like its drug problem. It has nothing to do with security or law enforcement and everything to do with economics and demand.

The solution is simple, immediate, and final. Change the economic incentives and the problem becomes an opportunity. Open access for people to come here and work, but make their labor relatively expensive. It is a simple solution, easy to implement, and it would work.

Politicians are not even considering this approach because solving the problem of illegal immigration would upset powerful interests all over our economic system. The kind of simple, minimum-wage based solution that would end the problem of illegal immigration would also radically shift the balance of power in our economy. Imagine how our lives would change if dirty, dangerous, miserable jobs commanded the wages it would take to hire American workers?

Ending the flow of semi-slave labor into our dirtiest, most miserable industries will impose some hefty costs on consumers in the short run that will probably flatten out or drop in time. Along the way, that shift will open new opportunities in higher-wage careers and revive the fortunes of our disappearing working class.

In the short run, some products might disappear completely from stores. Many mass growers might stop planting strawberries or other fruits and vegetables altogether. Apples, blueberries, oranges and other foods might become much more expensive. A large number of restaurants would see their business models become immediately unsustainable and close. Labor shortages for work like roofing, janitorial services and other labor that is currently very cheap would have serious effects on consumers.

What might emerge in the wake of this shift are different business models for food processing, agriculture, construction and restaurants that pay workers much more than in the past while employing fewer people. There would probably be many more restaurants in which you clear your own table while a traditional high-end restaurant experience might become far less common. Smaller scale urban farms might find themselves facing much more favorable economics as the mass farming of certain crops dependent on underpaid labor disappears. Home building and maintenance would require new innovations to remain affordable.

Workers who perform dirty, dangerous, difficult work not easily automated would probably begin earning much higher incomes and enjoy a great deal more power over their own lives. Some products would cost more. Some products would disappear. Some new types of work and new innovations would emerge that we cannot readily anticipate. Ordinary Americans who struggle to earn a living today would make a lot more money. In short, we could move on to face new, better problems.

We could accomplish all of this by harnessing market forces to work their magic. Mandate a higher minimum wage across the board, an even higher wage for non-citizen labor, and place easy, enhanced wage enforcement power in the hands of the workers themselves, legal or illegal. Such measures would, for the most part, price illegal workers out of the job market and make labor exploitation too risky for the market to bear. Illegal labor would still exist around the extreme margins but it would cease to be a mass phenomenon.

Don’t expect to see anyone proposing this approach anytime soon. Decisively shifting power toward workers would change the relative power and rights of low income, low skilled workers all over our economy.

Preventing Mexicans from coming to America is a policy that appeals to Tea Party fanatics. Giving workers, regardless of where they come from, more power over their own economic futures absolutely does not. That’s why Rick Perry is posing in front of machine guns instead of proposing solutions that would end illegal immigration.

Real solutions are available that would bring substantial benefits to accompany their costs. If we are ready to pay $1 per strawberry or buy them from a local grower only available in season, we could have a very different labor market and a very different, more prosperous country. Demogoguery is cheap. Solutions are expensive.

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Posted in Economics, Immigration

A market solution for illegal immigration

We could dry up the flow of illegal immigrants into America fairly quickly, without drama, mass deportation, or Governors posing in front of machine guns, merely by changing the economics of the matter. There are easy market solutions that would dampen the demand for illegal labor overnight while slashing our enforcement costs.

We aren’t going to implement them.

Illegal immigration would cease to be a meaningful political problem if we took simple steps to make the hiring of legal or illegal immigrants much more expensive. The reason we will not be implementing such a plan is that we don’t really care that much about illegal immigration, not enough to write a check to end it.

Serious, intelligent immigration reform would offer hefty benefits along with the hefty price tag. A freer immigration system, greater access to a talented global labor pool, and the reduced burden on schools and hospitals in marginal areas would be just a few of the advantages. In the short run though, the cost of ending the era of cheap semi-slave labor would be a shock to the system, radically increasing the cost of some items like a restaurant dinner or a carton of strawberries, while other goods and services might disappear from the market more or less permanently.

Here’s what a practical solution might look like.

- Raise the minimum wage to $10. In economic terms, the presence of a mass pool of exploitable illegal immigrant workers has more or less the same effect as a mass of exploitable domestic labor. When labor prices sag, innovation stagnates and aggregate demand stagnates with it. Our illegal worker problem is to a very large extent a cheap labor problem.

- Set a higher minimum wage for green card holders, say, $12.50. Why should the wage be higher for migrants than for citizens? First, to eliminate the incentives to exploit foreign labor. Migrant labor isn’t merely cheap, it is also weak. At comparable prices many employers would still prefer illegal migrants because they are too desperate to resist terrible working conditions. A wage premium will dampen the urge to lure vulnerable and exploitable workers from abroad.

Won’t contractors and companies simply ignore the rules, leading to a larger black market? Not if the enforcement incentives are set intelligently.

- Enforcement is where this plan gets its relevance. Give workers, even illegal workers, the right to sue an employer in state court to enforce the higher wage, including triple damages and attorney’s fees. Illegal or migrant laborers may be generally reluctant to get near a courtroom. That’s why illegals who have a pending wage suit prior to initiation of deportation proceedings can stay deportation until the suit is completed. Attorney’s fee awards mean that there will be a pool of lawyers ready to serve this community.

- Employers found liable for more than $50,000 in back wages over a one year period can be subject to criminal prosecution and the loss of their corporate status – in other words, responsible individuals within the corporation can be subject to personal liability. The use of fraudulent documents by the worker in question would be a defense. These enforcement provisions would only apply to offenses committed after the law was passed.

- Optionally, some similar provision could apply to higher-earning green-card holders. Perhaps an across-the-board 5% income-premium for green card workers based on a comparison to similar job titles in the same company. These provisions are probably less important at the higher end of the wage scale as those workers are usually better positioned to represent their own interests, but such a provision might make it politically easier to loosen immigration rules.

- Make it relatively easy to obtain a work visa with a biometric ID at a US Consulate. Charge a significant, but not punitive annual fee for the visa, perhaps $500. Instead of admitting 140,000 new work visas each year as we do now, raise that number to at least 2m, if not more. Let the market decide who stays. How much enforcement and new infrastructure could we develop from $1bn a year in visa fees?

- Open access to annual work visas to immigrants already present illegally in the US if they pay a substantial fine, perhaps $3,000, and have no arrest history. Yes, “amnesty.”

- Create an option for green card holders who have been here for a significant length of time, perhaps five years, to transition onto a track toward full citizenship.

The key to this approach is the way it would handle enforcement. Everyone who uses “cheap” migrant labor would not only have to watch the horizon for ICE agents, they would also be subject to an expensive, potentially ruinous lawsuit from every worker they deal with. Immigration enforcement would become every business’s business.

Would there be a flood of new lawsuits? Probably not. Illegals are generally reluctant to get involved in court cases. However, there wouldn’t need to be a lot of lawsuits to radically change the way many businesses operate. Merely by changing the balance of power between workers and the people who hire them we would make the crime of hiring an illegal worker too expensive to commit. The risk of enforcement actions could not be easily mitigated.

Won’t millions of impoverished people from all over the world flood into America to soak up the largesse of our welfare system? Er, no. That’s one of the most bizarre fantasies afflicting America’s immigration reform debate.

Illegal immigrants are not entitled to welfare. Illegal immigrations feed themselves and their families by working, taking whatever jobs they can get no matter how dangerous, dirty, or demeaning. They struggle to get access to schools. According to well-known Communist agitator Sen. Marco Rubio, even legal migrants with immigration status are locked out of access to most of our social welfare benefits. Immigrants admitted under this program should have access to health insurance coverage, but none of the rest of the social safety net.

This approach could effectively end our immigration “problem” in its present form without a border fence, thousands of new border patrol agents, or any other border security measures. It would generate new revenue from visa fees while easing the strain on schools and public hospitals in border areas.

We will not adopt this approach because we do not want to pay the price. It turns out that shutting off the tide of cheap, desperate labor is much more expensive than the political alternative – border security theater and anti-migrant hysteria. Better to have them here, cleaning our restaurants and our kitchens while we publicly revile them then pay the price a post-illegal migrant economy.

What would that price be? It would effect nearly every household in America, forcing us to begin paying the actual, legitimate costs of hundreds of common goods and services rather than shifting those costs on the backs of people fleeing the developing world. More on that to come.

Posted in Uncategorized

Which immigration problem do we want to solve?

Finally, a leader with the courage to protect you from children.

Finally, a leader with the courage to protect you from children.

Answers are only helpful if you know the question. That’s the problem with our efforts to build a sane, reasonable immigration scheme. Markets could provide us with solutions to our immigration challenges, but not until we decide exactly what problem we want those markets to solve.

Is the mere presence of a large number of migrants from Latin America a problem, or are we trying to address the broader problem of illegal immigration? The reason we haven’t settled on an immigration reform scheme that we still aren’t being honest about our priorities.

There are good reasons why illegal immigration should be discouraged. Having a large pool of people who exist beyond the reach of basic legal protections – essentially outside of the social contract – is harmful. Even if it created no economic costs, and in reality illegal immigration probably benefits us far more economically than anyone wants to admit, there are social and moral consequences to this situation that we should not be willing to bear.

That said, when we debate immigration issues it can be difficult to separate authentic problems from cultural biases. Chicago, for example, has a very large population of illegal migrants from Latin America. It also has many from Poland. Guess which population gets the most attention from law enforcement and the public?

When someone says that we should address our immigration problems by first “securing the border” they tipping their hand. It’s gentle way of saying that their main concern is not whether people can come here but who is coming.

We have the most militarized, secured border in the free world. The West has seen nothing that compares to it since the Berlin Wall collapsed. We don’t need a single additional customs agent to address illegal immigration. In fact, with a decent proposal we could send a lot of them home. The solution to the problem of a massive illegal workforce neither starts nor ends at the border.

Securing our physical border in the context of the immigration debate means stopping people from coming here. It means that the problem we are trying to solve is not illegal immigration, but Latin American immigration. If that’s our problem then we are in trouble.

The East Germans had their hands full guarding 800 miles of border stretching across well-settled, easily guarded territory. Our border with Mexico stretches across more than 2000 miles of hell and we are not a monolithic totalitarian state. We want to be able to trade across that border. We want trucks and trains passing through on a consistent basis loaded down with mangoes and strawberries and Volkswagens and computers.

Our campaign to stop illegal immigration so far costs about $25,000 per detainee. That cost will go significantly higher as we seek to achieve even tighter enforcement. The size of the border patrol has increased by more than 500% since 2003. All the while, immigration traffic across our Mexican border has been falling. Estimates of the cost of increased border security range between $28-40bn, a little more than half of what we spend on the entire food stamp program.

That doesn’t begin to account for the billions in lost economic output incurred by the unnecessary delays at border crossings. A universal forced deportation scheme being pressed by the far right would cost roughly $250bn, just shy of what we spend on Medicaid. “Border security” is an extremely expensive solution in search of a problem.

There is no small irony in the fact that the same people moaning about government spending, liberty, and Federal power happily embrace the exploding economic and political cost of a militarized border. It’s almost as if their concerns about government spending were little more than rhetorical cover for some other, deeper concern. What might that be?

On the bright side, if our real concern is the impact of illegal immigration then we have some very powerful options. Many, if not all of the problems presented by mass illegal immigration would be eliminated or at least mitigated if these people had legally protected status and the accompanying responsibilities. We could potentially reform our immigration system to open realistic, practical options for people to immigrate here by choice.

It is virtually impossible to immigrate legally to the US now without existing family ties and even then it is an extremely complex, lengthy and expensive process. Practically none of the Latin American migrants we see in the news have any realistic option for immigrating through official channels.

If we made that kind of immigration possible in numbers more in line with actual demand we could address many of the problems that rise from illegal immigration. Market mechanisms could help cope with some of the problems of mass migration.

The biggest problem with mass immigration is the way it would depress wages at the low end of the labor market. Over time immigration is an economic bonanza, but it has to be understood in much the same context as a capital investment. Immigration does not produce a massive social return on day one. It takes time for new migrants to become established. Some of them, as in any speculative venture, will fail. Opening the floodgates to mass migration of people with little or no modern work skills might produce fantastic returns over time – after all that’s how we built this country. The near term costs could be very painful, though.

What if we could structure labor market incentives in a way that encouraged the outcomes we want while pricing away the outcomes we do not want? Maybe, if we tuned down the rhetoric just slightly, we could build an immigration law structure that made it relatively easy to come to America if you are skilled and prepared to contribute now. Maybe we could also keep the door open for lower skilled labor, but require them meet a higher standard of productivity. Maybe we could make the crime of hiring an illegal migrant or abusing a green card holder, too dangerous for anyone to risk – without having to impose a draconian regulatory scheme.

Best of all, the most powerful mechanisms could come from markets and private action rather than a bigger government. But that would depend on building an intelligent structure. More to come.

Once you know what problem you want to solve, the solutions become clearer.

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Posted in Economics, Immigration

Texas Republicans apologize to illegal immigrants

Hiding in the 40-page wasteland of paranoia and conspiracy theories that the Texas Republican Party published as its platform is a strange gem. On page 38, wedged between a recitation of Republican delusions about Benghazi and newly draconian language on immigration sits this:

The Republican Party of Texas endorses and supports the Proposed Congressional Apology to the Chinese Americans for governmental actions that denied equal rights to and adversely harmed the Chinese in America.

How that immigration “apology tour” plank made it into the platform one can only guess. Clearly, the platform itself is less a statement of the party’s core proposals than a collection of sweepings from the convention floor. There were bound to be some anomalies. That said, this little ignored provision may be surprisingly timely, even prescient.

The last time we updated our immigration scheme Reagan was in the White House. Nearly half the world, including Nicaragua, was controlled by Communists. Guatemala and El Salvador were battling Communist guerrillas. You still needed a border stamp to cross any European national boundary. We lived in a world in which both capital and labor faced serious constraints when they attempted to travel the world.

The Immigration Reform and Control Act of 1986 was a good idea, but it was largely a failure. The Act sought to limit the incentives to illegal immigration, impose an appropriate set of punishments on those who had flouted immigration laws, and along with those punishments, establish a path to legitimacy for those who deserved it, described as “amnesty.”

It did not make any attempt to create credible paths for legal immigration, a step desperately needed then and even more critical now. More importantly, the only really effective component of the Act was the path to citizenship. Efforts to create meaningful deterrents to hiring illegal workers were watered down beyond enforceability. Criminal penalties on employers could only be imposed under standards impossible to prove. As a result, the Act functioned as nothing more than a one-time amnesty, deferring our immigration policy challenges.

Beneath all the paranoid rancor over illegal immigration from Latin America sits an uncomfortable fact – there is no organized method of legal immigration to the US. Unless you have family here or you can get an increasingly precious corporate sponsorship, you are not coming to America without breaking the law. That is a problem and that problem is not close to being addressed.

The 1986 reforms did not even attempt to create any paths to legitimate immigration. It was an issue too contentious to address. We are still living under a bizarre, racist and ultimately pointless regimen of immigration quotas first devised as an anti-immigration tactic in the 1920’s. In 1990 we raised the cap on annual legal immigration to a whopping 700,000. That’s it. A nation of more than 330,000,000 million people with the most dynamic economy on the planet permits fewer than a million people to immigrate here legally every year.

We need immigrants. Immigration is fuel for a dynamic economy. We need doctors, scientists and computer programmers, but that’s not all. Skilled immigration will not meet all our needs.

We need the kind of people willing to trek across a desert to make a better life for their families. No one started their life as a doctor or scientist. This country was not built on boutique immigration. It was built by tough, sometimes desperate people who would work hard in pursuit of a dream. We will do ourselves a terrible disservice trying to cherry-pick immigrants.

To benefit from immigration we need a system that extends legal protection to migrants and accepts enough of them to meet our economic demands. Without access to the protections and accountability that comes from legal, documented status, immigrants undermine our labor markets and strain public services. With the right levels of accountability and without nativist efforts to hold down numbers, a freer system of documented immigration could bring massive economic improvements.

How many immigrants can we absorb each year? Ask yourself how many new businesses and taxpayers we can absorb. How much economic growth can we absorb? The logical flaw is embedded in the question itself. The assumption that immigration is somehow dangerous and destabilizing is one of the most maddening falsehoods that still lingers in our political ecosystem.

Won’t immigrants “take” American jobs? We set a fixed annual quota on the number of people we will accept as immigrants each year, but there is no fixed number of jobs in our economy. Jobs are created by ambitious people, many of whom create their own work. Republicans tend to be remarkably optimistic about the power of markets to regulate themselves until the subject pivots to immigration.

If we had a system that made it very difficult to hire illegal migrants and made it very easy for ambitious people to come here, why wouldn’t markets decide the right level of immigration? The answers people give to this question can tell an interesting, sometimes dark story.

We cannot muster the political willpower to build a sensible, pro-immigration legal framework because our talk about American principles too often outruns our faith in them. In their platform, Texas Republicans are finally ready to apologize to the Chinese for the ways we punished their efforts to come here and help make us rich and powerful. The same document seeks to impose a similar regime on Latin American migrants, driven by the same delusions, catering to the same racist fears.

What will the 2080 Texas Republican Party platform say about Rick Perry’s trip to the border? Lo siento, amigos.

We do not have to wait for history to judge us. We could decide to do something now.

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Posted in Immigration

Are we richer than we think?

Where have you read this before:

The physical economy is anemic, struggling, biased toward inflation, and shrinking in many developed countries. Almost everything we do in the physical economy is paid for with money. We use dollars to measure most of the activity. If more dollars are spent or earned, we conclude that the economy is growing.

The virtual economy is robust, biased toward deflation, and growing at staggering rates, everywhere. A lot of the services provided to us in the virtual economy are free. If we paid dollars for those services, they would be counted as part of the GDP and would add to economic growth. But we don’t so they are not counted.

Using the virtual economy in place of the physical economy enables consumers to save lots of money. For example, consumers can substitute Google News for their newspaper. The cost of a USA Today subscription is $275. His earnings will look the same, but he has more money at his disposal and more or less the same consumption. Essentially, he is earning more, but neither his income nor GDP will show it.

Bill Davidow, in an article at The Atlantic, has touched one of the fundamental problems complicating our efforts to adapt to a post-Cold War world. Our metrics don’t work.

The vast, accelerating revolution in information technology has produced improvements in our lifestyles which, while impressive, are also radically deflationary. When millions of people shift to buying cheaper ebooks instead of traditional print books they create exciting new markets with new opportunities for authors to bypass literary gatekeepers and reach a new audience. They also create a giant hole in economic output by traditional measures.

As I’ve pointed out before, a new car bought this year typically costs slightly less in inflation-adjusted terms than it did thirty years ago. That vehicle has a slew of features from safety measures to a Bluetooth phone connection that didn’t even exist back then, but that lower price results in a drop in measured output. We can expect to see a similar dynamic in healthcare as higher rates of insurance coverage begin driving down medical costs. We are experiencing a revolution in the economic value available to everyone, sometimes free, that shows up in our economic metrics as declining output.

Economists have been mulling this problem for a while, but it will be tough to fix it. Economics as a discipline has biases built into its foundations that feed this distorted understanding of value. Until we devise an alternative, GDP will be yet another example of the ways that Economics is failing us.

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Posted in Economics

Surprise: Slashing Governing Income Slashes Government Income

It wasn’t so long ago that Republicans were genuinely the party of fiscal responsibility. Ronald Reagan, who presumably now occupies a throne at the right hand of The Lord, raised taxes eleven times over the course of his Presidency.

Why did he do something so foul? Because his original tax cutting plan generated the highest budget deficits the nation had ever seen in peacetime. Back then that sort of thing really upset Republicans.

The same dynamic has played out over and over again, yet Republicans continue to tell themselves that tax cuts make the sky rain money. Kansas is the latest and most celebrated example, though Texas residents have their own story to tell.

Kansas Republican Sam Brownback was elected Governor in the 2010 Tea Party wave. He immediately set to work “fixing” a state that had actually weathered the economic collapse fairly well. On the principle that taxes make Baby Jesus cry, Brownback, facing the specter of a remarkably large budget surplus, passed the largest tax cut in the state’s history. He boldly predicted a new era of economic growth and “fiscal responsibility.”

It turns out that when you slash government revenues, the result is a dramatic reduction in government revenues, something no one could have anticipated. The state is now running hundreds of millions of dollars in deficits, and will soon exhaust the surpluses built up in the dark era when the Communistic Democrats held the Governor’s office, despite the consequences of the economic collapse.

But the economy must be booming, right? Well, no. Job growth in Kansas has lagged behind the rest of the country while education and other key government services have been slashed. More interesting though is the general trend. The tax cuts, at least so far, seem to have no effect at all on general economic activity. That’s interesting and important.

Despite all the hullabaloo about places like Texas and Kansas that have been attacking government, the biggest economic drivers in recent years have been places like New York City and the San Francisco Bay Area. They led the way in the recovery of real estate prices and they are leading the way in wealth, job growth and general economic activity just like they did before the crash. Needless to say, these are high tax, high-regulation regions.

The net of it seems to be that marginal tax rates do not actually matter much in terms of economic growth. People don’t locate their business in San Francisco because they love being micro-regulated any more than place their business in Lubbock for the freedom. Economic decision-making is more complex than that.

Governments that want to create an environment friendly for business need a long term balance between effective, limited regulation, infrastructure, education, education, education, and education. Kansas’ experiment in tax cutting is unlikely to move the economic needle one way or the other.

So who is to blame for the collapse in government revenues that has resulted from slashing government revenues? The same force that causes floods, earthquakes, unintended pregnancy, the rising popularity of soccer, and declining church attendance – Obama. Gov. Brownback blamed the state’s lagging economy and collapsing tax revenues on the far right’s default excuse for everything. I’m not making this up, here’s what he said:

What we are seeing today is the effect of tax increases implemented by the Obama administration that resulted in lower income tax payments and a depressed business environment

‘Natch! Obama is clearly to blame for everything that has happened to our country except for a record bull market in stocks, four straight years of employment growth, declining budget deficits, a new real estate boom, declining health care costs, and the radical drop in the number of uninsured.

Our last reasonably competent President was a Republican who described supply-side theory as “Voodoo Economics.” It turns out that Art Laffer was wrong and George H.W. Bush was right. Laffer has continued to be wrong over and over again, disastrously, with no negative consequences. Why do people keep listening to this crap?

First of all, it just sounds so good. More importantly though, since the Dixiecrats bedded down at the center of the Republican Party, no one actually cares anymore about making government work. Truth be told, there are very few idiots who actually believe Arthur Laffer’s ridiculous theories, it’s just that no one on the right cares that they are false.

Back in 1981 when we first rolled out Laffer to justify a tax cut, the top marginal rate was over 70% and the country was being strangled in government regulation. Within a couple of years after that tax restructuring, Reagan was already looking for ways to shore up government revenues and repair the widening deficits he had created.

Republicans in that era were not trying to re-fight the Civil War. They wanted to change the balance between government and individual power, but they did not genuinely view government as an enemy. Those days are long gone and the goals over the conservative movement have evolved. Neo-Confederates couldn’t care less whether tax cuts pay for themselves. Central government is the enemy in any of its potential forms. Whatever weakens government is a good idea.

So you can be sure that the Kansas fiscal disaster, just like the similar disaster a few years ago in Texas, will be re-branded by the right as a Kansas miracle. When your only goal is a crippled government, the bar is pretty low and the facts don’t matter. Just one more indication among many that these are not your grandfather’s Republicans.

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Posted in Economics, Taxes, Tea Party

The story of our era in a single image

jihad

Some Tea Party idiot posted a picture of herself on Twitter with gun, Bible and flag in celebration of Hobby Lobby’s victory for liberty. Then ‘something amazing happened.’

Can’t figure out who actually produced this pitch-perfect meme, but when a historian someday writes the definitive history of America in the first quarter of the 21st Century, this will appear on the cover.

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Posted in Religion, Tea Party

Freedom Riders

freedom

“If these children were from Canada, we would not be having this interview”

A busload of desperate refugee children were being transferred this week from overcrowded facilities in South Texas to a location in California. They were greeted by a white mob blocking the road to the processing center. Morons chanting “impeach Obama” forced the buses to turn away.

Welcome to the arms of America.

Jeb Bush was right when he spoke about immigration reform this spring. It has probably ended his political career. Let’s review the sane, rational, measured comments that probably disqualified him for the Republican nomination:

“But the way I look at this — and I’m going to say this, and it’ll be on tape and so be it. The way I look at this is someone who comes to our country because they couldn’t come legally, they come to our country because their families — the dad who loved their children — was worried that their children didn’t have food on the table. And they wanted to make sure their family was intact, and they crossed the border because they had no other means to work to be able to provide for their family. Yes, they broke the law, but it’s not a felony. It’s an act of love. It’s an act of commitment to your family. I honestly think that that is a different kind of crime that there should be a price paid, but it shouldn’t rile people up that people are actually coming to this country to provide for their families.”

The racists who have hijacked our immigration policy like to claim that they embrace immigration so long as it done “legally” through the “proper channels.” This infuriating lie is the cousin of the deceptive rhetoric used in the gun control debate about “enforcing existing gun laws.”

Let’s remember a few details from the real world. For refugees, which is the status that many of these children will qualify for, this is the legal way. They are fleeing. Based on US and international law, they are being processed legally. When their status is determined, the law will determine how they are dealt with.

And for prospective immigrants to the US who are not refugees, there is no legal way. That’s the dumb reality behind the racist lies about immigration. That’s why so many people are working so hard to change the shape of our immigration laws in the face of resistance motivated by paranoia and deception.

There is no practical, workable way for people who do not have family in the US to immigrate here. Period. We have millions of illegal immigrants in the US because we have provided no realistic method to come here legally and no realistic means to punish those who exploit illegal migrants.

For almost a decade we have been tantalizingly close to ending this stupid, cruel, and utterly unnecessary standoff. Each time we get close, panicked mobs manage to shut the process down. Our first step, they say, has to be “securing the border.”

Unfortunately, “securing the border” in immigration rhetoric means “stopping brown people from coming here.” Have you tried to cross the border lately? We already have the most heavily militarized border of any free country on Earth not at war.

That’s why we can’t actually adopt sensible changes that would make our border crossings more orderly and stop the kind of senseless misery that our current legal limbo inspires. No law that would let people come here from Latin America legally will satisfy the racist fears of the mobs blocking those buses. They will pay any economic or moral price to protect what little remains of their cultural supremacy.

More sophisticated immigration reform opponents have cited the need to avoid attracting the “wrong kind” of immigrants. After all, those poor huddled masses don’t fund Internet startups. We want engineers and doctors.

That’s true, it’s legitimate, and that goal can be accomplished with a reasonable policy, but it’s also important to remember some things about those “less desirable” immigrants. That’s who we are. My ancestors didn’t come here because America craved their mad skills. With vanishingly few exceptions, neither did yours.

People with good jobs, solid skills, and lots of money living in stable successful countries very rarely become immigrants. Being a nation of immigrants means being a haven for people who are fleeing from crazy, screwed-up situations. It means welcoming people in desperate straits who have the grit, determination and relentless drive to make things better for their families. And guess what, a few dozen racist idiots are not going to stop people like that. We want people like that. We, as Americans, ARE people like that.

The folks standing in front of those buses are going to fail. That’s one of the more comforting realities about America. Whether next week or in a few years, America is going to adopt an immigration scheme that will embrace Latin American migrants and give them a path to citizenship. The economic and cultural incentives are too massive to ignore and the dangers are fantasy-based.

The political physics behind this are inevitable. All the remains to be seen is how long it will take and who will benefit. This 4th of July let’s celebrate the birthday of America, “The Mother of Exiles.”

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
“Keep ancient lands, your storied pomp!” cries she
With silent lips. “Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”

 

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Posted in Immigration

The best reply to Coates’ reparations article

A lot has been written about Ta-Nehisi Coates’ article in The Atlantic on reparations, but there haven’t been many coherent critiques. Coates made criticism pretty difficult first of all by producing what may be the best magazine length work on race in America that anyone has ever written. But he also introduced a sort of rhetorical sleight of hand that made it difficult to respond to his central thesis.

Coates didn’t get bogged down endorsing any potential program of reparations. He merely laid out the moral case. Most critiques have foundered by taking his bait, focusing on the practical impossibility of delivering reparations and missing the real power of Coates argument. Along the way, almost everyone who tried to take him on fell into some version of the “it wasn’t so bad” trap.

When in trouble, look to a nerd.

Economist Noah Smith, who also writes for The Atlantic, has been one of Coates’ more pointed critics for some time. In a short piece he takes much of the punch out of Coates’ thesis without wasting energy trying to diminish the power of Coates’ case. Smith focuses on the flaws of reparations on a moral rather than a practical level.

Smith argues that the pursuit of reparations is itself a kind of energy-wasting trap. He gives several reasons, but the 3rd carries the most punch:

Reason 3: Because good things can never make up for bad things 100%. I think this is just how human psychology works. If your parents beat you and then buy you ice cream and apologize then no matter how much ice cream they buy you, or how much they apologize, there will always be that memory of them beating you.

The danger of reparations is in its focus on the past. There is no justice or restoration in the past. A past denied carries a festering sore into the present. What was done must be dealt with. By the same token though, picking at the scab doesn’t help. At some point there must be a determination to conquer the past by building a brighter future.

From Smith

Over the years, I’ve come to realize this: Escape is the only true revenge. If African Americans can live good lives, and can be fully incorporated into the fabric of American society and American institutions, then the bad guys lost.

And that’s got to be good enough. Or else nothing will be.

Well said.

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Posted in Civil Rights
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