politics of equality

You didn't build that.

The unedited version of President Obama's controversial comment on business and government is well worth reading. It makes clear an argument that I have made here before: everything we are able to do as individuals is founded on the existence of a broader society and the public goods we typically take for granted.

What didn't business owners build?

No one who owns a business built the roads that their employees, their goods, or their customers travel on.

No one who owns a business taught all of their employees or their customers to read or to write.

No one who owns a business created the legal system that makes it possible for them to negotiate valid, defensible contracts with others.

Amazon and Google do booming business via the internet, but without public investment in that crucial infrastructure, neither of their businesses would even be imaginable.

Lots of people who own businesses sacrificed and struggled to earn college degrees. But none of them did so at institutions they themselves built from scratch. None of them educated the faculty who taught their courses.

Anyone who built a business undoubtedly sacrificed much and worked very hard. But none of them did so alone, without any help from anyone else: parents, teachers, friends, neighbors, employers, co-workers, employees, and government.

Perhaps what needs more emphasis is the positive side of the pubic goods equation.

When we choose, as a society, to educate all of our children - regardless of their parents' ability to pay the full cost of that very valuable good - it is not only the children themselves or their parents who benefit. We all benefit when we live in a community of literate, numerate people who have had the experience of working together with others who may not be exactly like themselves.

When we choose, as a society, to create rules for general conduct and to enforce those rules not through acts of private vengeance but through public courts of law, we all benefit.

When we choose, as a society, to create large-scale infrastructure for transportation and communication, we all benefit.

When we choose, as a society, to control the spread of disease and to improve the health of our neighbors, we all benefit.

There are legitimate arguments to be had over how much or how little we should collectively invest in any particular public good. But to presume - either in rhetoric or in policy choices - that public goods can be categorically separated from the successful efforts of individuals is the height of folly. To say, as Ayn Rand does, that the world can be divided between heroic entrepreneurs and moochers is pernicious nonsense.

What Is the Middle Class? (part 2)

My last post showed the distribution of household income in the U.S. Here it is again: 

Actual Distribution of U.S. Household Income 2010

Now, consider what this chart might look like if household income followed something closer to a standard distribution:

Imaginary Distribution of U.S. Household Income

My guess is that this represents something much closer to what most of us are thinking about when we use the phrase "middle class." We imagine that there are a few poor people, a few rich people, and the majority of us somewhere in the middle. As the first chart shows, however, this is a fantasy.

Why isn't income distributed this way? As I have argued here before, the answer has to do with bargaining power. Those who own farms, factories, and businesses have more bargaining power than the people they employ. Business owners are able to use that power to keep wages low and profits high, thereby producing an income distribution chart with lots of low-wage workers clustered at the bottom and a small number of extremely wealthy people at the top.

 

What Is the Middle Class?

As the 2012 Presidential election picks up steam, we'll be hearing plenty of remarks about "middle class Americans." The reason for this is clear: an overwhelming majority of Americans self-identify as members of the middle class. A 2008 survey conducted by the Pew Research Center found that 53% of people in the United States call themselves middle class - but another 38% consider themselves to be either "upper-middle" or "lower-middle" class. That leaves only 8% self-identifying as "upper class" or "lower class" and 1% who didn't know what to call themselves.

How does this perception of class membership compare with the actual distribution of income? Using data from the 2010 census, I've charted income distribution for U.S. households here:

The chart breaks off at $250,000 because after that point, the Census Bureau begins aggregating income data into very large chunks. We do know, however, that about 1% of Americans have a household income above $350,000.

So, where is the middle? If we divide the population into two halves, the middle point (the median income) is about $51,000. As the income pyramid I've drawn up shows, however, the largest percentage of households are clustered toward the bottom - and it's a long, long way to the top.

What Do The 1% Do All Day?

Who makes up the top 1% of U.S. income earners? Sports stars? Government bureaucrats? Computer programmers? A recent study by Jon Bakija, Adam Cole, and Bradley Heim confirms some likely guesses and dispels some widely-held myths.

In 2005 (the most recent year for which income tax data was available) a breakdown of the 1% into occupational categories looked like this:

Executives and managers made up 30% of the top 1% of income earners - the largest single category - followed by medical professionals (14.2%) and those in finance (13.2%). Engineers and programmers accounted for only 4.2% of one-percenters, scientists 1.8%, media and sports stars 1.7%. Even the highest paid government workers (it takes just over $380,000 per year to break into the 1% income category (as this useful feature from the New York Times shows) made up only 1% of the 1%.

Of course, the ceiling of the top 1% income category is still a long way up from the floor. In 2011, the average income for the CEO of an S&P 500 company was $12.94 million or about 34x the entry level for 1% status.

What Will President _________ Do?

Like the book that shares its name, this blog is primarily devoted to questions surrounding economic equality. I've decided, however, to take a short detour from that agenda today in order to address an issue that continually presents itself in the popular media: the misrepresentation of the powers of the U.S. President.

Let's take a few examples from the ongoing 2012 Presidential campaign. With respect to that contest, April seems like it was years ago - but back then, candidate Mitt Romney repeatedly held President Obama responsible for rising gas prices. Today, average national gas prices have dropped $0.54 per gallon from their high in early April.

As of this afternoon, Romney had not yet issued a statement thanking the President for readjusting the gas price controls hidden under an ink blotter in the Oval Office's lower right-hand desk drawer.

Romney did, however, release a set of videos promising that during the first 100 days of his Presidency, he would begin repealing "Obamacare."

 

Check your copy of the U.S. Constitution carefully: Article II, detailing the powers of the Executive Branch, contains no provision for the President to repeal legislation. In order to repeal a federal law, both houses of Congress would need to give majority support to a bill, which the President could then sign. With a 2/3 majority, Congress could repeal a federal law without the President's support. But without the support of a majority in Congress, the President can neither make federal laws nor repeal them.

This point applies also to the so-called "Bush tax cuts." It is true that is 2001 and 2003, U.S. tax rates were lowered (a previous post shows the long-run downward trajectory of upper-income taxes). It is not true, however, that President Bush was solely responsible for those lowered tax rates. Time to check your Constitution again: U.S. Presidents have no independent powers over rates of taxation. Raising or lowering tax rates requires an act of Congress.

With respect to the lawmaking process, the President is a relatively weak player. The President cannot make law unilaterally. The President cannot force Congress to vote on a bill. Yet, Congress - with a 2/3 majority - can make law without the support of the President. In the Constitutional system of checks and balances, the balance of power is given to the House and the Senate - not to the President.

Who Gets the Most Government Benefits: Urban Democrats or Rural Republicans?

Today's Republican Party, fueled by the Tea Party movement's right-wing populism, rails against government benefits and those who receive them. New Jersey Governor Chris Christie, for example, warns that Social Security and Medicare will turn us into "a bunch of people sitting on a couch, waiting for their next government check." But who really receives the bulk of government benefits: urban districts represented by Democrats or rural districts represented by Republicans?

Using the New York Times' map of the county-level distribution of government benefits, I've compared Republican and Democratic districts in two states. Here is California's 9th District (including the cities of Oakland and Berkeley, represented in the House by Democrat Barbara Lee) compared with the 19th District (including the largely rural areas of Stanislaus, Fresno, and Madera counties, represented in the House by Republican Jeff Denham):

We find a similar story in Minnesota's 5th District (including the city of Minneapolis, represented in the House by Democrat Keith Ellison) and the 6th District (including the rural counties of Benton, Stearns, Sherburne, Wright, Anoka, and Washington, represented in the House by Republican Michelle Bachman): 

This is, of course, a small and unrepresentative sample - but more comprehensive studies (see, for example, Gray Richardson's work on this topic or the Center on Budget and Policy Priorities study) have shown that the pattern holds: the regions of the United States most inflamed by right-wing, anti-government populism benefit disproportionately from government programs and income transfers. To put it another way, Cadillac driving welfare queens are easily outnumbered by pickup truck driving welfare cowboys.

Why, then, do voters who depend on government benefits support candidates who promise to do away with them? There is an obvious appeal to thinking of oneself as an independent, "rugged individual." It is an ideological fantasy image with deep connections not only to American frontier culture, but to the more modern celebration of the business entrepreneur as cultural hero. The business-owning elite has a clear material interest in eliminating government income transfers such as unemployment insurance, Social Security, and Medicare: doing so would not only reduce their tax burden, it would put downward pressure on the wages they pay their employees. But many of those same employees are ideologically invested in the fantasy image of themselves as the sort of rugged individuals who have no need for government income transfers. The power of that ideological fantasy is striking: the parents who send their children to public schools are the voters who choose to lay off teachers rather than pay taxes; the workers who are barely able to afford private insurance are the voters who hate and fear a "government takeover" of health care.

It is difficult, though, to imagine a way through this contradiction without a political movement willing to craft for itself an appealing ideological image that is not simply another version of anti-government individualism. Freedom from the law, from government, is one type of freedom. But there is also freedom to go to school, freedom to go to the doctor, freedom to a secure job and a decent wage, freedom to a safe and comfortable home. Who is brave enough to admit that government benefits make us free?

CEO Pay Rises Again

What a great time to be a corporate CEO. As the Guardian reported today, CEO pay increased last year by 28%, while ordinary workers (after adjusting for inflation) got nothing. This year, CEO pay increased 15%, while ordinary workers got 0.3%. It appears that there is plenty of money in corporate coffers to give the already rich fatter pay packets, but still not enough to create jobs or raise workers' wages.

Why do I keep passing along these dismal figures? Yesterday was International Workers' Day.

In Oakland, at the rally called by the Occupy Movement, I saw a few people who looked like they had walked over from their offices, a few in union t-shirts - but far too few. The distribution of wealth in our country will not change until the balance of power between employers and employees changes. And that won't happen until more working people organize and make themselves into a political force to be reckoned with.

Austerity Doesn't Work

The story is the same in Britain, Spain, and now the United States: cutting government spending slows economic growth. The recovery from recession was already sluggish enough, due to the fact that we didn't invest enough in public-sector economic stimulus. Cutting government spending at a time like this is very much like shutting off the hydrant just as the fire department is beginning to get the fire buring down your house under control.

During a recession, privately owned businesses respond to a drop in consumer demand by reducing investment and hiring. Government is the one institution that can increase investment and employment without worrying about consumer demand. Government can create jobs without worrying about whether or not those jobs will result in profitable returns for the investor. Creating jobs, though, creates consumer demand - which encourages private businesses to increase investment and hiring.

History has already proven several times over that the way out of recession is to increase government investment. How many more times must we run the experiment before we start believing the results?

How to Make Political Change: An Open Letter to the Occupy Movement

Politics is the process through which people make conscious decisions about the conditions of social life. It involves competing interests, power over resources, and influence over those with decision-making power.

The process of making political change often appears both obvious and obscure. We know that a civil rights movement transformed the racial segregation of the United States. We know that a feminist movement transformed the legal, political, economic, and cultural status of women. Yet, in our historical consciousness, these great, world-altering movements often seem to have arisen out of nowhere. We are left with the vague feelings either that political change occurs spontaneously, as the natural reaction to a grievance, or that individual leaders are wholly responsible for the rise and success of movements. In fact, nothing could be further from the case.

Do you want to make political change? Here is how it is done:

1. Have an analysis of the situation you face, including both a critique of existing conditions and a proposed alternative. It is important to be able to articulate your proposed alternative clearly, even if all its details are not readily available.

2. Develop organizations with resources and decision-making processes. Individual leadership can sometimes be tremendously effective. Far more effective and reliable, though, than a great individual leader is an organization that develops the skills of many capable, trusted activists.

3. Develop ideology - the core values, but also the imagery and forms of identity that define a movement. The more an ideology differs from a community's existing stock of background beliefs and assumptions, the more difficult it will be for that ideology to take hold. One time-tested technique is to reinterpret an old ideology in a new way, as in the civil rights movement's reinterpretation of biblical stories and gospel songs.

4. Engage in actions that educate the public, persuade those on the fence, outrage those who are silent, unify those who are with you, divide those who are against you, and shift power in your favor.

5. Be in it for the long-run. Political change sometimes seems to come in a lightning flash. But behind the scenes will always be found the slow, patient work of decades. Slavoj Žižek, commenting on the Occupy Movement puts it very well: "The protesters should fall in love with hard and patient work – they are the beginning, not the end."

For a brief, utopian moment in 2011, some began to speak as though the Occupy actions would grow indefinitely; that they would prefigure a new form of society. Others (especially those of us with prior experience on picket lines, blockades, and sit-ins) knew that eventually these actions would end: their momentum would fade, the police would drive them out, the necessities of everyday life would reassert themselves. This is not a sign of failure. Political actions come and go. Political change is something different. It requires not just the fleeting spark of a protest action, but the durable presence of organization, ideology, and a clear alternative.

Health Care and the Individual Mandate

In 2010, the U.S. took a grudging half-step toward a fundamental feature of modern social infrastructure, taken for granted in every other highly developed country: health insurance coverage for all citizens. That grudging half-step - the Affordable Care Act or "Obamacare" to its detractors - is now the target of a legal challenge being heard by the Supreme Court. The central issue in the case (brought to court by a coalition of Republican Party state governments) concerns the Affordable Care Act's individual mandate: a requirement that all Americans purchase health insurance. Under the law, those with low incomes would receive a subsidy covering the cost of their insurance. Insurance companies would not be allowed to deny coverage to people because of pre-existing health conditions. But everyone would be required to have health insurance, just as (under various state laws) every driver is required to have auto insurance.

Why did the Affordable Care Act include an individual mandate? The basic reason is the nature of insurance itself. At any given time, most members of an insurance pool will be healthy, a few will be sick or injured. If the pool is large enough, there will be enough people contributing to cover the costs when someone needs care. But if people wait to purchase insurance until they get sick (and the insurance companies can't deny them coverage because of a pre-existing condition) there won't be enough money in the pool to make the system work. We would then be forced back to a system in which individuals would have to pay all the costs of their health care by themselves or insurance companies would be allowed to deny coverage to anyone they chose. The number of Americans without health insurance (44 million) and the number of personal bankruptcies caused by health care costs (62%) should indicate that neither of these are acceptable options.

What isn't being discussed at the moment is that the battle over an individual health insurance mandate could have been avoided altogether. The Affordable Care Act included an individual mandate only because it attempted to ensure that all Americans had health insurance coverage without threatening the economic power of the health insurance industry. Had we created a system of comprehensive public health insurance (like the systems in Canada, France, or the UK) the complicated, cobbled-together, Rube Goldberg mechanism of insurance exchanges and subsidies and individual mandates enforced by penalty fees would have been completely unnecessary. But creating a comprehensive public health insurance system (essentially Medicare for all) would have meant putting the health insurance industry largely out of business. And in 2010, insurance companies and HMOs spent more than $202 million lobbying members of Congress to make sure their business wouldn't be threatened. 

The question of health care is now being debated as a question of freedom - described mainly as the freedom not to purchase health insurance. But because we have chosen, yet again, to cower in fear of the insurance industry, we risk forgetting about the other side of freedom: the freedom we gain as individuals when we are healthy and well - and able to remain so without taking on a crushing load of debt.