Tag Archives: Welfare State

Activists Prey On Corporate Pushovers

05 Sunday Jul 2020

Posted by in Corporatism, Identity Politics, Political Correctness

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I don’t think I’ve ever linked to anything on Captain Capitalism’s site. I know I’ve been tempted. The Captain is Aaron Clarey, a lively writer who is so politically incorrect he’s almost guaranteed to offend the faint of heart. His consulting company is known as Asshole Consulting because his gig, he says, is to be a truth-telling asshole so he can save you from yourself. I check his blog from time-to-time because he’s unabashedly pro-capitalist (not to be confused with corporatist!), he has interesting points of view, and well, he can be very entertaining.

Clarey wrote a piece a few days ago entitled “Corporate Donations to BLM vs. Government Spending on the Black Community“. Here are a few of his points:

    • Corporate gifts to Black Lives Matter and similar organizations dedicated to black causes are a mere pittance relative to the trillions of disproportionate benefits that have been paid by the government to aid blacks over the years. By “disproportionate” Clarey means the excess of those benefits above the black share of the population.
    • The disproportionate government benefits have been gloriously unproductive as a permanent solution to end black poverty. Clarey says, “… the multiple trillions of dollars [spent by government] has not closed the:

wage
health
income
savings
life expectancy

   gaps between black and white“

    • The comparatively tiny corporate donations “may enrich some black activists who sit on the boards of these non-profits, but it will not do one damn thing to tangibly improve the lives of black people in the US.”
    • Clarey then challenges “anybody of any political or racial stripe to be intellectually honest with themselves and acknowledge what this laughable joke of “corporate donations” are – Marketing. Placating. Danegeld. Virtue-signaling. These corporations do not care about black people, they care about themselves and are capitalizing off of a tragedy to profit.“

I’ve worked for some large corporations over the years and they all play these games: not only are shareholder resources dolled out to every special interest under the sun, who are now deemed “stakeholders”, but employees are constantly harangued because they just might have less than appropriate consciousness of these interests. Staff time is dedicated to training employees in “right-think”, and they are asked to bend and twist their objectives and job descriptions in order that they appear to revolve around those interests. It’s patently ridiculous. And now, some of these corporations have been cowed into withdrawing advertising dollars to sites that might offend those whom the corporations don’t wish to offend, or sites that might support the First Amendment rights of those whom their intimidators wish to silence. 

Clarey’s use of the term “Danegeld” is particularly interesting. He means that the primary interest of these corporations is in buying off potentially hostile forces. That‘s exactly what’s going on here! The cowardly upper management of these companies would be better off taking Rudyard Kipling’s advice on the matter (with apologies to my Danish friends):

“It is always a temptation to an armed and agile nation
To call upon a neighbour and to say: —
‘We invaded you last night–we are quite prepared to fight,
Unless you pay us cash to go away.‘

And that is called asking for Dane-geld,
And the people who ask it explain
That you’ve only to pay ’em the Dane-geld
And then you’ll get rid of the Dane!

It is always a temptation for a rich and lazy nation,
To puff and look important and to say: —
‘Though we know we should defeat you, we have not the time to meet you.
We will therefore pay you cash to go away.’

And that is called paying the Dane-geld;
But we’ve proved it again and again,
That if once you have paid him the Dane-geld
You never get rid of the Dane.

It is wrong to put temptation in the path of any nation,
For fear they should succumb and go astray;
So when you are requested to pay up or be molested,
You will find it better policy to say: —

‘We never pay any-one Dane-geld,
No matter how trifling the cost;
For the end of that game is oppression and shame,
And the nation that pays it is lost!'”

Equal *Mattering* Under Ethics, Law and Community

04 Saturday Jul 2020

Posted by in Identity Politics, racism, Uncategorized

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How many white lives is a single black life worth? It seems so easy to pin that down, but if you think it’s okay to say “black lives matter”, but not to say “all lives matter”, the implication is that one black life is worth more than one white life. Anyone who insists on that should take the following litmus test. 

A classic dilemma discussed by ethicists involves situations of mortal danger in which a life or lives might be sacrificed in order to save other lives. Variants of it come up again and again in the effort to tune software for autonomous vehicles. It’s also a simple tool for challenging assertions about the values of different lives, or whether different lives “matter”.

Suppose that two pedestrians step into the path of your vehicle. You can save them only by swerving, killing a single pedestrian standing at the curb. Most would agree the car should swerve, but the answer might change under certain circumstances. Forget about the argument that the two in your path weren’t careful, so they “deserve” die. We just don’t know what caused them to proceed, or what might have distracted them.

What if the two in your path are elderly, using walkers and dragging oxygen tanks, while the pedestrian at the curb is a healthy child. Does that matter? Do we weigh the sacrifice of many potential life-years as well as a higher quality of life? People might feel less certain about that choice.

Now let’s suppose that all three pedestrians are healthy, young adults. Does it matter that any of the pedestrians are black? The one on the the curb, or the two in your path? Of course not! The truly “colorblind” answer is to swerve regardless of race. You are an obvious racist if you think otherwise. The sacrifice of one white life is certainly worth saving two black lives; the sacrifice of one black life is certainly worth saving two white lives. Black lives and white lives matter equally. 

Our Constitution and ethical standards dictate that lives are equal, that we are equal before the law, that we that we have equal rights to speak, worship, and enjoy the fruits of our labors, including the unchallenged right to property we might acquire. Under the law, and in all of our social interactions, we must be accorded equal consideration regardless of extraneous characteristics such as race. All of us have the same promise of life and opportunities to pursue happiness, and to make of our lives what we can or will. However, none of this entitles us to equal happiness, romance, and material well being.

Now, detractors will say all that misses the point. The value of black lives has been discounted for centuries, they say, as evidenced in disparate treatment by police, prosecutors, juries, employers, neighbors, social clubs, and places of business. Of course it’s true that racism has a long history throughout the world, and at one time or other it has been turned against virtually every race or religion in existence. If you think in this day and age that racism doesn’t exist elsewhere, think again.

Slavery was a tragic reality in the U.S. until 155 years ago, but it was certainly not unique to the U.S. Jim Crow laws that prevented blacks from participating equally in many aspects of life were finally ended more than 50 years ago through a series of legislative actions and Supreme Court decisions. Slavery and Jim Crowism were the acts of long-dead ancestors of almost anyone living today. The presumption that all whites should assume guilt for some kind original sin against blacks is sheer nonsense, and one many of us will simply never accept.

Nevertheless, the legacy of degraded personhood under those long-defunct laws created a heavy burden for blacks in terms of upward mobility, and certainly vestiges of racism survive even today. However, we have adopted many standards and programs intended to rectify this unfortunate legacy, including the civil rights legislation of the 1960s and beyond, the Great Society programs of Lyndon Johnson, and many other enlargements of the social safety net since then. These programs have represented a massive redistribution of resources to the impoverished via education, housing, and direct transfers. One estimate put cumulative federal spending on anti-poverty programs alone at $13 trillion between 1963 and 2010. In addition, a variety of programs have been a source of preferential treatment for various minorities in an effort to ensure equal opportunities across many aspects of life.

The success of these programs is subject to great doubt (more on that below), and in fact the motives of Johnson and other proponents of this expansion in the role of government were perhaps less than pure. Nevertheless, the entirety of the package of civil rights and welfare state programs over the years was supported by most of the black community. In fact, one could say that these measures were hardly the actions of a racist society, at least in ostensible intent.

And yet we are told today that we do not sufficiently appreciate that black lives matter! There is no question that racism lives in the hearts and minds of certain individuals, but those individuals aren’t all white. More importantly, the blanket condemnation of whites as racist lacks any basis in reality.

When Black Lives Matter activists talk of “systemic racism”, you can translate as follows: blacks have not met with the ex post economic and social success to which these activists believe blacks are entitled. As it pertains to law enforcement, they mean that blacks are met with more violent police actions than blacks should suffer.

As to law enforcement, it is an awful thing that crime perpetrated by blacks, and particularly crime by blacks against blacks, is disproportionally heavy. As I argued recently, it is difficult to accept the hypothesis of systemic racism in law enforcement in the presence of rampant “systemic crime” in the black community. But crime, in turn, is tied closely to economic success, or the lack thereof.

Median black income has grown relative to median white income since 1970 (also see here). Unfortunately, many blacks have not shared in that growth and remain mired in poverty and on public aid. Sadly, many aid programs have pernicious effects because they impose extremely high marginal tax rates on earned income. The solution lays the groundwork for continued dependency. That qualifies as systemic racism, or at least classism.

Two well-known black economists, Thomas Sowell and Walter Williams, have both decried the welfare state’s destructive impact on the black family unit. That’s one reason why Williams calls white liberals the “worst enemy of black people“. (Also see what Williams has to say about expectations for black students, and about black crime.)

Ultimately, the uproar over racism alleged to be so widespread and “systemic” is divisive. It is an application of Marxist “conflict theory” lying at the very heart of identity politics. Such tribal philosophies creat huge obstacles to peaceful and productive coexistence among diverse peoples. Meanwhile, there’s a simple truth: a widespread consensus exists that all lives are of equal value, that all lives deserve respect and equal treatment under the law, that the goodwill of one’s fellows is a birthright, and that racism is fundamentally evil. If society is to provide fertile ground for the equal cultivation of all lives, it must reject the strictures and resentment bred by identity politics in favor of individual liberty, personal responsibility, and compassion for those unable to care for themselves.

Brave Cops and Foolish Subversives

25 Thursday Jun 2020

Posted by in Police Bias, racism

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It’s difficult to put oneself in the shoes of a cop, but it seems clear that many partisans lack an appreciation for the intensity and danger of police work, which is fundamentally about protecting the public from threats to life and property. Confrontation is an unavoidable part of the job, whether it involves a domestic disturbance, drunk and disorderly conduct, property crime, or a shooting. Situations are adversarial and officers often face significant mortal risk. These are very brave people.

It would be impossible to do a cop’s job without legal authorization and occasional use force, but it can be very hard to judge when that’s necessary. A cop’s beat can feel like a war zone. There’s not much time to think. Things happen fast. Bad things happen really fast. Calm is restored in the best of circumstances, but arrests may be necessary, and sometimes a situation escalates or is already so fraught that it ends in tragedy. Sound procedures help police do their jobs better, but outcomes are capricious, and it is all too easy to make harsh judgements about split-second decisions in hindsight. Like any other accused, when a police matter ends badly, the cop is entitled to due process. Depending on circumstances and evidence, that means cops deserve a fair margin of error in the conduct of their duties.

To take a recent example, the police shooting of Rayshard Brooks in Atlanta occurred after Brooks wrestled with officers when they attempted to put him in handcuffs. Brooks broke free and snatched one of their tasers. As he ran, an officer pursued him at fairly close range. Brooks turned and fired the taser at the officer, shooting too high as it turned out. But the officer returned fire within an instant, three shots, striking Brooks in the back twice. Was that justified or reckless? The videos shown on the networks are in slow motion, but decisions like that can’t be made in slow-mo. The taser might have struck and disabled the officer, or in rare circumstances even killed him. And some tasers fire more than once; if one or both officers were disabled, their guns were potentially up for grabs. Either way, the use of his firearm seems to have been within Georgia law and Atlanta Police Department guidelines. No one should pretend there was time for careful deliberation. However, none of that dissuaded the Fulton County DA from filing immediate murder charges in a politically charged atmosphere. That’s hardly due process.

Of course there are bad cops and racist cops, but they comprise a distinct minority. Certain reforms might help to keep them from abusing their power, get them off the force, or convict them, depending on the nature of the offense. Qualified immunity gives excessive cover to bad cops and has protected far too many from prosecution. It’s regrettable that Senate Republicans have refused to consider modifications to qualified immunity, but perhaps they are holding it back as a negotiating ploy. Monitoring the conduct of officers is obviously important, and anonymous peer review within departments would be an excellent mechanism for identifying problem officers. Some reform proposals would certainly reduce the likelihood that police actions will be unjust, regardless of individual attitudes: ending no-knock raids and decriminalizing drugs would be major steps forward on that front.

The brutal murder of George Floyd has brought much more radical calls for changes in policing — even defunding or dismantling entire departments. These are based on widespread assertions that police are biased against blacks and that unjust police violence is directed at blacks. There is conflicting evidence on that point, however. Harvard Professor Roland Fryer concludes that while there is no evidence of racial bias in the use of lethal force by police, there is some evidence of bias in the use of non-lethal force. Other facts make the latter conclusion seem dubious, however. Consider the patterns of criminal activity described at the last link by Barry Latzer, CUNY Professor of Criminal Justice:

“The latest police data collected by the FBI indicates that blacks comprised 58 percent of all murder arrests and 40 percent of those apprehended for all violent crimes. This disproportional involvement of African Americans in violent crime turns out to be the most significant factor of all in explaining the use of force against blacks by police.

It will be no surprise that violent criminals in the United States are commonly armed and dangerous. For assaults, for instance, 71 percent of arrested persons carried firearms. Among suspected murderers, 58 percent had guns, as did 42 percent of apprehended robbery suspects. This tally doesn’t include the knives or blunt instruments recovered from violent offenders, including over 48,000 cutting instruments possessed by those arrested for assault alone.”

Latzer cites a number of studies of lethal force by police. One of these studies found:

“… after controlling for numerous factors, that blacks were 27.4 percent less likely than non-Hispanic whites to be fatally shot by police.”

Other researchers have noted:

“… the absence of any correlation between the race of the officer and that of the victim. That is, after controlling for other factors, white police officers were no more likely than black officers to fatally shoot black civilians. In fact, the more black officers on a police force, the more African Americans were fatally shot.” 

Another finding by the same study:

“[O]fficer race, sex, or experience did not predict the race of a person fatally shot beyond relationships explained by county demographics. On the other hand, race-specific violent crime strongly predicted the race of a civilian fatally shot by police, explaining over 40% of the variance in civilian race. These results bolster claims to take into account violent crime rates when examining fatal police shootings.”

The most tragic aspect of all this is that the vast majority of black crime victims are victimized by other blacks. Here are 2018 statistics for homicides. While blacks account for about 13.5% of the U.S. population, black offenders accounted for nearly 45% of homicides in 2018, and black-on-black homicide accounted for nearly 40% of all homicides.

Crime in the black community, and its economic costs, are inflicted almost exclusively on other blacks. If there was ever a need for good policing, this is it. The reasons for disproportionate crime and violence in the black community are complex. The notion that there is “systemic racism” at play here might be correct, but again, the evidence suggests it is not the fault of police. The welfare state plays a major role, as Walter Williams has long asserted. There are many more children living without fathers in the black community, a product of misdirected social policy that awards greater benefits to single-parents households. High rates of male incarceration obviously compound this problem. Blame can also be ascribed to a dysfunctional system of public education, and our nation’s continuing insistent on prosecuting the War on Drugs is highly destructive.

The campaign against police is promoted by a number of leftist organizations, the most prominent of which are Black Lives Matter and Antifa. Other well-meaning leftists do not question the rhetoric of police racism, and they also tend to fall for the illusion of collectivist virtue. Don’t accept this bullshit! It won’t help blacks as a class. We’ve known for some time that BLM is a Marxist organization, as is Antifa. Lawrence Person quotes BLM co-founder Patrice Cullors: “We are trained Marxists.”

According to Alexandra Phillips:

“BLM happily self-identifies as a neo-Marxist movement with various far left objectives, including defunding the police (an evolution of the [Black] Panther position of public open-carry to control the police), to dismantling capitalism and the patriarchal system, disrupting the Western-prescribed nuclear family structure, seeking reparations from slavery to redistribute wealth and via various offshoot appeals, to raise money to bail black prisoners awaiting trial. The notion of seizing control of the apportionment of capital, dismantling the frameworks of society and neutralising and undermining law enforcement are not just Marxist, but anarchic.”

Identity politics provides a rich trove of grievance, guilt projection, and intimidation. But it won’t end there. They will use any and all means to subvert civil society in order to gain power, and there will be a high cost in terms of freedom, lives and human well being. These people are ruthless morons. One doesn’t have to look far to learn that the histories of Marxist revolution and attempts at governance are uniform in their failure and bloody mayhem.

Too many “nice people”, media, businesses, and other institutions are all too willing to accept BLM and Antifa propaganda unquestioningly, including their stupefying lies about disproportionate police violence against blacks. Yes, there are black victims of police brutality, and there are many white victims as well — criminal justice and police reform is not to be dismissed. Unfortunately, there is a large disproportion of violent crime committed by blacks against blacks. Many in the black community know all too well that good policing is desperately needed. Quite simply: no cops, no peace, no justice.

BS Bernie Blames Bezos

12 Wednesday Sep 2018

Posted by in Labor Markets, Living Wage, Price Mechanism, Welfare State

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Bernie Sanders keeps probing for ways to create a backdoor minimum income, and he’s eager to loot successful job creators and their customers in the process. Last month I wrote about the folly of his proposed legislation that would offer federal job guarantees to all. A new Sanders bill, introduced jointly with Rep. Ro Khanna (D – CA), is an equally bad idea called the Stop BEZOS Act, or the “Stop Bad Employers by Zeroing Out Subsidies Act”. It’s pretty obvious that the selection of the acronym preceded the naming of the bill. Imagine the fun his Senate staffers had with that! The logical flaws embedded in the title of the act are bad enough. The effort to garner attention by using the title to smear the name of a famous technology entrepreneur is sickening.

Jeff Bezos, of course, is the founder and CEO of Amazon, the online retailer, as well as the owner of the Washington Post. Amazon has been rewarded by consumers for its excellent service and aggressive pricing, and it is now valued at about $1 trillion. That makes Bezos a very wealthy man, and it is no coincidence that Sanders has chosen to make an example of him in an effort to inflame envy and classist passions.

While some details of the bill remain sketchy, firms with more than 500 workers would face a 100% tax on every dollar of federal benefits received by those employees. But the tax would apply only to “low-wage” employees, however that is defined, and not simply any employee receiving federal benefits. If the bill became law (and it won’t any time soon), it would require a costly federal administrative apparatus to coordinate between several agencies, including the IRS. Beyond the tax itself, the compliance costs for firms won’t be cheap, and it will create terrible incentives: if you own a business, you would have a strong incentive to avoid hiring workers with little experience or weak skills, or anyone you might deem likely to be a recipient of federal aid. If you have 499 employees, you’ll probably think hard about how to execute future growth plans. Nothing could do more to improve the return to investment in automation.

Is Amazon really a “bad” employer? That’s what the title of the Sanders bill says. In fact, the company has been accused of harsh labor practices in its fulfillment centers. Life for corporate managers is said to be no picnic, and labor turnover at Amazon is high. Nonetheless, the wages it pays attract plenty of applicants. Unskilled labor does not command a high wage, and that is no fault of an employer willing to provide them with work and experience. Yet the bill would punish those employers, as well as employers having part-time workers drawing federal aid.

An absence of punishment can hardly be described as a “subsidy”, as the bill’s title suggests. But that is exactly how leftists think, at least when they do the punishing. In this respect, the bill’s title is an assault on logic and a misuse of language. It would also represent a violation of constitutional principles like property rights and freedom of contract.

The idea of taxing employers to recoup any public aid received by their workers is intended to affect a de facto “living wage”. However, one benefit of an independent social safety net, as opposed to a living wage tied to that net, is that the former largely preserves the operation of labor markets, despite creating some nasty labor-supply incentives. Wage rates that approximate the value of worker productivity allow efficient matching of jobs with workers having the requisite skills, even if the skills are relatively low-grade. Those wages also minimize distortions in the economics of production within firms and across different industries. Furthermore, prices faced by buyers should reflect the real resource costs associated with demands for various goods. They should not be inflated by political decisions about the level of federal welfare benefits. Quite simply, preserving labor market efficiency enhances the ability of the economy to allocate resources to the uses for which they are most highly-valued.

There are independent questions about whether the structure and level of benefits provided by the welfare state are appropriate. Those are matters of legitimate policy debate, and those benefits must be funded by taxpayers, but they should be funded in the least distortionary way possible. Bernie Sanders imagines that the burden of those taxes can simply be imposed on large employers with no further consequences, but he is badly mistaken. Consumers will shoulder a significant part of that burden under his latest scheme. And, of course, Sanders’ beef with Bezos is a cynical political ploy. It amounts to cheap scapegoating intended to promote another one of Sanders’ bad policy ideas.

Mobility, Safety Nets & Sticky Webs

23 Thursday Jun 2016

Posted by in Big Government, Welfare State

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We’re unlikely to reduce the share of the U.S. population living in economic dependency under the current policy regime. So many aspects of tax law, regulation and aid programs are designed as if to perpetuate or perhaps even worsen the situation. I’ve discussed this topic before on Sacred Cow Chips in “Degrees of Poverty and the Social Safety Trap“, and “Minority Politics and the Redistributionist Honey Trap“.

Many supporters of aggressive anti-poverty efforts take umbrage at any suggestion that government aid might discourage the poor from engaging in productive activities. They imagine an implication that the poor are “lazy”, perfidious or otherwise undeserving of assistance. Whether that is a misunderstanding or merely rhetorical bite-back, the fact is that it is rational to respond to incentives and there is no shame in doing so. Unfortunately, many assistance programs contain incentive traps or income “cliffs” that discourage work effort. This applies to food stamps, rent subsidies, Obamacare subsidies, and many more of the 120+ federal aid programs and other state and local programs.

Here’s a new example from a research abstract posted at Marginal Revolution: The Medicaid expansion had very negative effects on labor force participation. The funding for Medicaid expansion at the state level was authorized by the Affordable Care Act (ACA) — aka Obamacare, but only about half the states went along with it. From the abstract:

“I find a significant negative relationship between Medicaid expansion and labor force participation, in which expanding Medicaid is associated with 1.5 to 3 percentage point drop in labor force participation.“

The direction of impact is hardly unique, and as Tyler Cowen notes at the link:

“Work is good for most people, and it is even better for their future selves, and their future children too.“

The negative impact of Obamacare is more massive than the estimate above might suggest. Veronique de Rugy at Reason.com discusses how “Federal Programs Keep People Poor“. While most of her article is about the negative impact of high marginal tax rates on the employment prospects of the poor, she also recalls an ugly CBO estimate of the ACA’s impact:

“In 2014, the Congressional Budget Office—Congress’ official fiscal scorekeeper—revised its original estimate to report that because of the law, by 2024 the equivalent of 2.5 million Americans who were otherwise willing and able to work will have exited the labor force.“

There are several different channels through which the negative effects of the ACA operate: Small employers are incented to limit their hiring and the hours of employees, and federal subsidies (and sometimes state benefits) are available to individuals only so long as they remain below certain income thresholds. Again, this is typical of many government aid programs (the Earned Income Tax Credit (EITC) being an exception). More from de Rugy:

“When the government takes away a person’s benefits as his income goes up, it has the same effect as a direct tax. And remember, when you tax something, you usually get less of it. That means these programs can actually hinder income mobility: In order to continue receiving their government cash, individuals are forced to limit the amount they earn. Thus, they have an incentive not to try to climb the income ladder by putting in extra hours or signing up for job training and educational programs.“

Mises Wire recently carried a reprint of an essay by the great Henry Hazlitt, “How To Cure Poverty“. The gist of Hazlitt’s argument is that government largess simply cannot create wealth for society, but only diminish it. The mere process of redistributing the current “pie” consumes resources, but that is minor compared to the future reduction in the size of the pie brought on by the terrible incentives inherent in income taxation and many government benefit programs:

“The problem of curing poverty is difficult and two-sided. It is to mitigate the penalties of misfortune and failure without undermining the incentives to effort and success. … The way to cure poverty is … through … the adoption of a system of private property, freer trade, free markets, and free enterprise. It was largely because we adopted this system more fully than any other country that we became the most productive and hence the richest nation on the face of the globe. Through this system more has been done to wipe out poverty in the last two centuries than in all previous history.“

Harvard professors Edward Glaeser and Andrei Schleifer have written about “The Curley Effect: The Economics of Shaping the Electorate“, which posits that redistributive policies that are harmful to constituents can be rewarding to politicians. The paper deals with policies that encourage emigration of affluent voters away from cities, but which nevertheless reward politicians by increasing the proportion of their political base in the remaining constituency. It seems to apply very well to many major cities in the U.S. However, it certainly applies more broadly, across states and nations, when affluent people and their capital are mobile while the less affluent are not, especially when benefits are at stake. It’s no secret that promises of benefits are often attractive to voters in the short run, even if they are harmful and unsustainable in the long run.

The welfare state appears to have helped to sustain many of the poor at an improved standard of living after accounting for benefits, or it has prevented them from falling into “deep poverty”. However, it hasn’t succeeded in lifting the poor out of dependency on the state. Pre-benefit poverty rates are about the same as they were the late 1960s. In addition, Christopher Jencks observes that the “Very Poor” have in fact become poorer. That’s discussed in his review of “$2.00 a Day: Living on Almost Nothing in America” by Kathryn Edin and Luke Shaefer. Jencks presents statistics showing that those in the lowest two percentiles of the income distribution have suffered a fairly sharp decline in income since 1999. Many of these extremely poor individuals do not avail themselves of benefits for which they could qualify. In addition, the EITC requires earned income. A job loss is a wage loss and, if it goes on, a loss of EITC benefits. Unfortunately, work requirements are more difficult to meet in the presence of wage floors and other distortions imposed by heavy-handed regulation.

A guaranteed national income has become a hot topic recently. Michael Tanner weighs in on “The Pros and Cons…” of such a program. There are many things to like about the idea inasmuch as it could sweep away many of the wasteful programs piled upon each other over the years. It is possible to construct a sliding-scale guarantee that would retain positive incentives for all, as Milton Friedman demonstrated years ago with his negative income tax concept. However, as Tanner points out, there are many details to work out, and the benefits of the switch would depend upon the incentive structure built into the guarantee. As a political plaything, it could still be dangerous to the health of the economy and an impediment to income mobility. Don Boudreaux has registered objections to a guaranteed income, one of which is based on strengthening the wrongheaded argument that we derive all rights from government. Even more interesting is David Henderson’s take on a basic income guarantee. He finds that the budgetary impact of a $10,000 guarantee would equate to a 30% increase in government spending, and that assumes that it replaces all other assistance programs! Henderson also discusses the public choice aspects of income guarantees, as well as moral objections, and he concludes that there are strong reasons to reject the idea on libertarian grounds.

The economy is riddled with too many subsidies, penalties and bad incentives that distort the behavior of various groups. The well-to-do often benefit from subsidies that are every bit as distortionary as those inherent in many public assistance programs. They should all be swept away to restore a dynamic economy with the potential to lift even more out of poverty. There could be a role for a guaranteed income on the grounds that it is better than what we’ve got. But we should recall the words of Hazlitt, who reminded us that we’ve come so far on the strength of property rights, private initiative, and free trade. Left unfettered, those things can take us much farther than the ugly pairing of beneficence and coercion of the government behemoth.

 

Evil Force Multiplication

15 Tuesday Mar 2016

Posted by in Liberty, Socialism, Tyranny

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big-govt compassion

Following up on “Socialism Is Concentrated Power“, check out “Because government is a force multiplier for evil, a vote for the small government candidate is a vote for good” from the Bookworm Room. I’m four days late making my 2nd anniversary post on Sacred Cow Chips, so this is it. I’ll try to keep it brief so I can get it out before bedtime on a school night.

I don’t agree with everything in Bookworm’s analysis, but I certainly agree with the general thrust:

“The problem with government is that, as it grows, no matter the original good intentions behind it, it invariably becomes a force multiplier for evil. Thus, once government power passes a certain point, government becomes the equivalent of a bull in a china shop, with its every motion causing massive damage. Incidentally, the china in that shop is always you — the individual.“

Bookworm discusses two major forms of force multiplication of evil by the state: money and death. Governments are incredible graft machines and resource wastrels. More tragically, the many genocidal acts over the course of history would not have been possible without government as the machine of authority and “legitimization”. Fear of the government’s police power may ultimately spur normal people to participate in “banal” acts of unspeakable evil. And here, Bookworm points out a few ironies about the “nice” people who root for state control:

“A compassionate government will talk itself into euthanizing people who, because they are very old or sick, use up more than their fair share of medical care. This has already happened under England’s National Health Service, which kills off old, sick people, and whose ‘ethicists’ advocate even more killings (out of ‘compassion’ of course).

A compassionate government dedicated to efficiency will convince itself that individuals or organizations that stand in the way of efficiency must be controlled and, if they won’t be controlled, must be destroyed. After all, without mandated efficiency, people will suffer.

A compassionate government dedicated to “fairness” (usually thought of in economic terms), will quickly conclude that it’s entirely unfair that one distinct group or another is wealthier or healthier than the rest. That group must be brought to heel and, failing that, destroyed.

A compassionate government dedicated to national purity will naturally have to kill the impure within its borders and, once that’s done, it would be even more compassionate to extend that purity throughout the world.

Even the most murderous theocracies will argue that compassion guides them. Their tortures, executions, and Holy Wars are meant to bring people closer to God, which is the highest form of human existence. Isn’t that a nice, compassionate thing to do?“

Bookworm offers praise to the genius of the U.S. founding fathers in crafting governing principles designed to limit government power. And Bookworm recognizes Senator Ted Cruz as the only major party candidate to consistently stand for small government and constitutional principles. I’m not all in on this endorsement, as Cruz has taken stands and aligned himself with individuals not supportive of civil liberties such as gay marriage. However, in many important ways, Cruz recognizes the danger of government power. Bookworm might have mentioned Gary Johnson, the likely Libertarian Party nominee, as the most consistent critic of big government among the names likely to appear on presidential ballots in the fall.

Some might object to Bookworm’s discussion of the many failed experiments with government domination of society by noting that he never mentions the alleged success of European social democracies, particularly the Nordic states. Sweden and Denmark are the most cited examples. However, Europe is not an economic success story, with median incomes comparable to states with the lowest incomes in the U.S. Moreover, the “Nordic Nirvana” is something of a myth. In “How Laissez-Faire Made Sweden Rich“, Johan Norberg gives a detailed history of Sweden’s political and economic evolution:

“It was not socialist policies that turned Sweden into one of the world’s richest countries. When Sweden got rich, it had one of the most open and deregulated economies in the world, and taxes were lower than in the United States and most other western countries. The Social Democrats kept most of those policies intact until the 1970s, when they thought that those excellent foundations—unprecedented wealth, a strong work ethic, an educated work force, world-class exports industries, and a relatively honest bureaucracy—were so stable that the government could tax and spend and build a generous cradle-to-grave welfare state on them.

They couldn’t. At least not without costs. Because that welfare state began to erode the conditions that had made the model viable in the first place. And the fourth richest country became the 14th richest within three decades.“

Fortunately, for more than 70 years, Western Europe has avoided the kind of dire, genocidal consequences that often flow from a dominant state, but Europe has stagnated economically. Hazards await them as a growing and increasingly diverse population competes for diminished economic gains; government control is a dead-weight on their prospects. I hope we can avoid that fate in the U.S., though we’re already far down the road. Like the Bookworm says, vote for small government!

 

 

Pawning Growth For Redistribution

15 Monday Feb 2016

Posted by in Equality, Redistribution

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The following is no mystery: if you want prosperity, steer clear of policies that inhibit production and physical investment. This too: if you want to lift people out of poverty and dependency, don’t promote policies that discourage hiring and work incentives. Yet those are exactly the implications of policies repeatedly advocated by so-called redistributionists. The ignorance flows, in large part, from a distraction, a mere byproduct of economic life that has no direct relation to economic welfare, but upon which followers of Bernie Sanders are absolutely transfixed: income and wealth inequality. Attempts to manipulate the degree of inequality via steeply progressive taxes, transfers and market intervention is a suckers game of short-termism. It ultimately reduces the value of the economy’s capital stock, chases away productive activity, destroys jobs, and leaves us all poorer.

Absolute income growth is a better goal, and encouraging production is the best way to raise incomes in the long-run. Unless envy is your thing, income inequality is largely irrelevant as a policy goal. In “Why and How We Care About Inequality“, John Cochrane emphasizes that inequality may be a symptom of other problems, or perhaps no problem at all. His point is that treating a symptom won’t fix the underlying problem:

“A segment of America is stuck in widespread single motherhood … terrible early-child experiences, awful education, substance abuse, and criminality. 70% of male black high school dropouts will end up in prison, hence essentially unemployable and poor marriage prospects. Less than half are even looking for legal work.

This is a social and economic disaster. And it has nothing to do with whether hedge fund managers fly private or commercial. It is immune to floods of Government cash, and, as Casey Mulligan reminded us, Government programs are arguably as much of the problem as the solution. So are drug laws….“

The writers of the center-left Third Way blog give some details on income growth that might disappoint some progressives. They agree that the emphasis on redistribution is misplaced. Solving economic problems requires a different approach:

“From 1980 to 2010, income gains (after taxes and government transfers are included) favored the wealthy but were still spread across all income brackets: a 53% increase for the bottom quintile; a 41% increase for the next two; a 49% increase for the 4th; and a 90% increase for the richest fifth. Thus, while income inequality may offend our sense of justice, its actual impact on the middle class may be small.

With a singular focus on income inequality, the left’s main solutions are greater re-distribution and a re-writing of the rules to ‘un-rig’ the system. But, however well motivated, some of the biggest ideas into which they are directing their energy do not remotely address the underlying ‘Kodak’ conundrum—how do Americans find their place in a rapidly changing world? In fact, some would actually make the task of increasing shared prosperity significantly harder.“

The hubbub over inequality and redistribution is fueled by misconceptions. One is that the rich face low tax burdens, often lower than the middle class, a mistaken notion that Alan D. Viard debunks using 2013 data from a report from the Congressional Budget Office. The CBO report accounts for double taxation of dividends and capital gains at the corporate level and at the personal level (though capital gains are taxed to individuals now, while the anticipated corporate income is taxed later). The CBO study also accounts for employers’ share of payroll taxes (because it reduces labor income) so as to avoid exaggerating the tax system’s progressivity. Before accounting for federal benefits, which offset the tax burden, the middle 20% of income earners paid an average tax rate of less than 15%, while “the 1%” paid more than 29%. However, after correcting for federal benefits, the middle quintile paid a negative average tax rate, while the top 1% still paid almost 29%. That is a steeply graduated impact.

Rising income inequality in the U.S. is more a matter of changes in household structure than in the distribution of rewards. This conclusion is based on the fact that income inequality has risen steadily over the past 50 years for households, but there has been no change in inequality across individuals. An increasing number of single-person households, primarily women over the age of 65, accounts for rising inequality at the household level. The greedy corporate CEOs of the “occupier” imagination are really not to blame for this trend, though I won’t defend corporate rent-seeking activities intended to insulate themselves from competition.

Measures of income inequality hide another important fact: one’s position in the income distribution is not static. Chelsea German notes that Americans have a high degree of economic mobility. According to a Cornell study, only 6% of individuals in the top 1% in a given year remain there in the following year. German adds that over half of income earners in the U.S. find themselves in the top 10% for at least one year of their working lives.

There are several reasons why redistributionist policies fail to meet objectives and instead reduce opportunities for the presumed beneficiaries to prosper. Dan Mitchell covers several of these issues, citing work on: the rational response of upper-income taxpayers to  punitive taxes; the insufficiency of funding an expanded welfare state by merely taxing “the rich”; the diversion of most anti-poverty funds to service providers (rather than directly to the poor); the meager valuation of benefits from recipients of Medicaid, and the fact that the program lacks any favorable impact on mortality and health measures. Mitchell features the “First Theorem of Government” in a sidebar:

“Above all else, the public sector is a racket for the enrichment of insiders, cronies, bureaucrats and interest groups.“

A few years back, the great Thomas Sowell explained “The Fallacy of Redistribution” thusly:

“You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth — and that future wealth is less likely to be produced when people see that it is going to be confiscated.“

That future wealth can and should be enjoyed across the income spectrum, but punitive taxes destroy productive capital and jobs.

A great truth about poverty comes from Angela Ranchidi of the American Enterprise Institute: low wages are not at the root of poverty; it’s a lack of jobs. She quotes a Gallup report on this point, relative to the working-age poor in 2014:

“Census data show that, 61.7% did not work at all and another 26.6% worked less than full-time for the entire year. Only 11.7% of poor working-age adults worked full-time for the entire year in 2014. Low wages are not the primary cause of poverty; low work rates are. And if Gallup is correct, the full-time work rate may already be peaking.“

More than 88.3% of the working-age poor were either unemployed or underemployed! And here’s the kicker: redistributionists clamor for policies that would place an even higher floor on wage rates, yet the floor already in place has succeeded in compromising the ability of low-skilled workers to find full-time work.

Cochrane sums up the inequality debate by noting the obvious political motives of progressive redistributionists:

“Finally, why is “inequality” so strongly on the political agenda right now? Here I am not referring to academics. … All of economics has been studying various poverty traps for a generation…. 

[The] answer seems pretty clear. Because [the politicians and pundits] don’t want to talk about Obamacare, Dodd-Frank, bailouts, debt, the stimulus, the rotten cronyism of energy policy, denial of education to poor and minorities, the abject failure of their policies to help poor and middle class people, and especially sclerotic growth. Restarting a centuries-old fight about “inequality” and “tax the rich,” class envy resurrected from a Huey Long speech in the 1930s, is like throwing a puppy into a third grade math class that isn’t going well. You know you will make it to the bell.

That observation, together with the obvious incoherence of ideas the political inequality writers bring us leads me to a happy thought that this too will pass, and once a new set of talking points emerges we can go on to something else.“

Universal Pre-K Dumb-Down

30 Friday Oct 2015

Posted by in Education, Welfare State

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Can the middle class be sold on federal pre-kindergarten dependency? Is pre-K always beneficial to children? All children? One of many issues agitating the “government-must-do-something” crowd is universal pre-kindergarten. It’s a favorite topic of the Socialist-Democrat Bernie Sanders and, more recently, it became a campaign promise from the Democrat-Socialist Hillary Clinton. It’s typical of the freebies these two presidential candidates are compelled to promise their base. While federal funding of universal pre-K is often billed as way to assist low-income working families, the subsidies proposed are not well-targeted: Clinton’s proposal calls for pre-K subsidies for middle-class families as well. A “Pre-School For All” proposal by President Obama in 2013 required $75 billion in funding. These kinds of broad-based transfer payments aren’t cheap.

In addition to the expense, it’s not clear that pre-K schooling is beneficial to all children. In Vox, Ezra Klein describes a recent study on the efficacy of a pre-K program in Tennessee (hat tip: John Crawford). The selection of children for the pre-K and control groups was randomized by virtue of a “lottery” for admission in regions experiencing excess demand. Here is Klein’s description of the results:

“At the end of pre-K, the results look pretty much as you would expect: Teachers rates [sic] the children who went through pre-K as ‘being better prepared for kindergarten work, as having better behaviors related to learning in the classroom and as having more positive peer relations.’

The problem is those results dissipate by the end of kindergarten — by then, the group that attended pre-K is no better off than the group that didn’t — and then begin to reverse by the end of first grade. By the end of second grade, the children who attended the pre-K program are scoring lower on both behavioral and academic measures than the children who didn’t.“

Klein cites two other “high-quality” studies (one by Head Start) that are consistent with the findings in Tennessee. He also notes some weaknesses of earlier studies suggesting that pre-K provides developmental benefits.

Some prominent advocates of pre-K insist that there are long-term benefits that the recent studies fail to capture. If so, it is hard to square that belief with such negative results after three years. I suspect that there are significant developmental rewards for children who spend their days with family members or even family friends, and I am skeptical that improved socialization can be gained from full-time attendance at a public facility. Perhaps some children benefit, but clearly not all.

None of this is to suggest that low-income parents would not benefit economically from additional subsidies for early education. To the extent that the parents are able to earn more income, the entire household will benefit and perhaps even society will benefit. But this is a social safety net issue at its base, not a broad-based social need. Ideally, one’s prospects for income should have a strong bearing on fertility decisions. Individual families should not expect others to bear the costs. And as for the safety net, let’s face it, great parts of it would be unnecessary in the absence of the negative work and family incentives inherent in many transfer programs. Neutralizing the costs of raising children compounds the bad incentives.

Like so many other statist misadventures, the populist appeal of universal pre-K is a desire for a freebie at the expense of others. The politicians Sanders, Clinton and Obama understand that, and they recognize it as another pillar of support for the great federal highway of cradle-to-grave serfdom.

Government Supplies a Cliff; Would you Jump?

14 Friday Aug 2015

Posted by in Big Government, Welfare State

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People respond to incentives. That does not, in and of itself, make some people “energetic” and others “lazy”. To the contrary, it really means they are responsive and capable of calculating rewards. Critics of the welfare state are sometimes accused of labeling welfare recipients as “lazy”, which is absurd and a cop-out response to serious questions about the size, effectiveness, and even the fairness of means-tested benefits. The structure of welfare benefits in the U.S. often penalizes work effort and market earnings. That being the case, who can blame a recipient for minimizing work effort? From their perspective, that is what society wants them to do. Note that this has nothing to do with the provision of a social safety net for those who are unable to help themselves.

The welfare incentive phenomenon is explored by Zero Hedge under the Fight Club nom de guerre Tyler Durden in “When Work Is Punished: The Ongoing Tragedy Of America’s Welfare State“:

“At issue is the so-called “welfare cliff” beyond which families will literally become poorer the higher their wages, as the drop off in entitlements more than offsets the increase in earnings.“

The cliff looks different in different states and even differs by county. The chart at the top of this post is for Pennsylvania, from the state’s Secretary of Public Welfare, though I saw it on this post from LiberalForum. (Go to the link if the image is not clear). The Zero Hedge post linked above includes a dramatic illustration for Cook County in Illinois. Not many welfare recipients participate in all of the programs shown in the charts, but the point is that many of the programs create nasty incentives that tend to “trap” families at low income levels. Often, these workers and their families would be better off in the long-run if they were to suffer the consequences of the cliff in order to gain more work experience. Unfortunately, few have the resources to ride out a period of lower total income precipitated by the cliff. Another obvious implication is that increases in the minimum wage would actually harm some families by pushing them over the cliff.

Welfare cliffs differ by the recipients’ family structure (one- versus two-parent households, number of children) and do not apply to every welfare program. For example, the Earned Income Tax Credit (EITC) is very well-behaved in the sense that additional work and/or wage income flows through as a net gain the household. While most welfare programs involve a benefits cliff, incentives are undermined even before that point. A flattening in the level of total income as earned income rises indicates that the recipient faces an increasing marginal tax rate. The chart above shows that total income is relatively flat over a range of earned income below the income at which they’d encounter the cliff. This flat range starts at an earned income of $15,000 to $20,000 and extends up to the severe cliff at almost $30,000.

Zero Hedge quotes a report from the Illinois Policy Institute:

“We realize that this is a painful topic in a country in which the issue of welfare benefits and cutting (or not) the spending side of the fiscal cliff have become the two most sensitive social topics. Alas, none of that changes the matrix of incentives for Americans who find themselves facing a comparable dilemma: either remain on the left side of minimum US wage and rely on benefits, or move to the right side at far greater personal investment of work, and energy, and… have the same (or much lower) disposable income at the end of the day.“

Another interesting take on this issue is offered by Dan Mitchell, who cites a recent National Bureau of Economic Research (NBER) paper, which finds:

“…the decline in desire to work since the mid-90s lowered the unemployment rate by about 0.5 ppt and the participation rate by 1.75 ppt. This is a large effect…“

The findings suggest that the welfare reforms of the 1990s actually had positive effects on work effort, though even the EITC creates some incentive problems for second earners. Worst of all is the incentive impact of expanded disability benefits, which have undone some of the gains from reform. Newer programs like Mortgage Assistance and now, Obamacare, have added to the work disincentives. Mitchell cites other research that reinforce these conclusions.

The welfare cliff harms economic efficiency by distorting the offer price of labor, by increasing costs to taxpayers, and by reducing the availability of productive resources. It is grossly unfair because it consigns its intended beneficiaries to a life of dependency. What a waste! Here is Mitchell’s prescription:

“Regarding the broader issue of redistribution and dependency, I argue that federalism is the best approach, both because states will face competitive pressure to avoid excessively generous benefits and because states will learn from each other about the best ways to help the truly needy while minimizing the negative impact of handouts on incentives for productive behavior.“

A side effect of negative welfare incentives is that they increase the relative benefits of participating in illegal income-earning activity. The “War on Drugs” exacerbates this effect by driving up drug prices. Of course, this activity is untaxed, and because it is unreported, it does not push the recipient toward the benefits cliff. This is another example of different government policies working at cross purposes, which is all too common.

Government and Perpetual Poverty

07 Thursday May 2015

Posted by in Welfare State

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The welfare state has 1) reduced measured poverty, but it has 2) failed to provide sufficient opportunity and economic mobility. In “Two Premises on Poverty and Culture“, Ross Douthat writes that it should be easy for Left and Right to agree on these points. #1 is a fairly well-established empirical fact, while #2 leaves plenty of room to debate what went wrong and how to fix it. The Left might well call for more resources to be plowed into the effort; the right believes that the welfare state has fostered dependency and subverted social institutions. The best that can be said is that the modern welfare state leaves the poor “running in place”, but that concedes far too much to programs rife with disincentives for legal, market work effort. I wrote about this topic just over a month ago, in “Poverty Maintenance Is Not a Win“. While Douthat’s short essay sought common ground upon which Right and Left can debate reforms, he notes that anti-poverty programs:

“... raise incomes but also increase dependency, encourage idleness, crowd out the basic institutions of civil society, and so on through the libertarian critique.“

This is not to diminish the waste inherent in other areas of government largess, such as corporate subsidies, defense spending, and over-regulation. Virtually any government program can be called out on waste and unintended consequences. Tonight, however, we’re featuring the dismal results of the welfare state. Thomas Sowell, a well-known African American economist, is uncompromising in his condemnation of the welfare state in connection with recent protests by blacks against perceived injustices in “The Inconvenient Truth about Ghetto Communities“:

“Anyone who is serious about evidence need only compare black communities as they evolved in the first 100 years after slavery with black communities as they evolved in the first 50 years after the explosive growth of the welfare state, beginning in the 1960s. …

We are told that such riots are a result of black poverty and white racism. But in fact — for those who still have some respect for facts — black poverty was far worse, and white racism was far worse, prior to 1960. But violent crime within black ghettos was far less.

There is no doubt that the behavioral dysfunctions induced by welfare state incentives have been compounded by the war on drugs. Like all prohibitions, it offers black market “opportunities” to the poor and unskilled while promoting violence and a high risk of arrest and imprisonment, contributing to the destruction of families and communities. But the welfare state itself effectively subsidizes the drug-war pathway to perdition:

You cannot take any people, of any color, and exempt them from the requirements of civilization — including work, behavioral standards, personal responsibility, and all the other basic things that the clever intelligentsia disdain — without ruinous consequences to them and to society at large.

Non-judgmental subsidies of counterproductive lifestyles are treating people as if they were livestock, to be fed and tended by others in a welfare state — and yet expecting them to develop as human beings have developed when facing the challenges of life themselves.“

The usual trope promoted by the Left is that more resources are required to end the cycle of dependency. That is dubious in light of the dramatic increases in U.S. welfare spending over the past 50 years. Those increases have been fairly steady, yet significant decreases in the incidence of poverty came to an end before 1970:

“Today, government spends 16 times more, adjusting for inflation, on means-tested welfare or anti-poverty programs than it did when the War on Poverty started. But as welfare spending soared, the decline in poverty came to a grinding halt.“

Finally, here is a little object lesson in the way Leftists typically misperceive facts surrounding the actual allocation of budgetary resources and the concomitant results. On April 28th, Jon Stewart said:

“If we are spending a trillion dollars to rebuild Afghanistan’s schools, we can’t, you know, put a little taste Baltimore’s way. It’s crazy.“

Alex Tabarrok castigates Stewart for this gross misrepresentation of the foreign aid budget and the complete distortion of the facts surrounding school funding in Baltimore. Actually, per-student funding for the Baltimore city public schools is over 26% greater (a difference of more than $3,500 per year) than for the schools in Fairfax County, VA. The latter is considered one of the best school districts in the country. The funding of Baltimore schools is dominated by state contributions, but federal funding there exceeds local funding.