Category Archives: American Politics

The Least Generation.

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A BA may not guarantee you a job, but not having a BA will guarantee that you don’t get a job.  Since the 2008 recession, the American economy has created 11.6 million new jobs.  Of  those new jobs, 99 percent went to people with at least some college and predominantly to people with a BA.[1]  A lot of those jobs probably were as managers, supervisors, and support staff.  Between 1983 and 2014, those job titles increased in number by 90 percent, while other occupations grew by only 40 percent.[2]

Since 1981, more than half of all BAs have been earned by women, rather than men.  Thirty-odd years of that trend has shifted the balance in the population at large.  Now, 29.9 percent of all men hold BAs, while 30.2 percent of all women hold BAs.  Obviously, at this rate the gap will become ever more stark.[3]

Back in 2005, about 40 percent of the graduate students studying science and mathematics in the United States came from foreign countries; in 2015, about 50 percent of the graduate students studying engineering came from outside the United States.[4]

According to the bipartisan commentator Juan Williams, the public schools have failed minority children.[5]  In 2015, 18 percent of black and 21 percent of Hispanic fourth-graders scored as “proficient” readers.  Among those aged 25-29 years, only 15 percent of Hispanics and 20 percent of blacks had BAs.  The Dallas sniper, Micah Johnson, had a high school GPA of 1.98.[6]  In turn, 2.00 is a “C” grade or “Average.”  At the same time, the Micah Johnson, graduated 430th out of a class of 453 seniors, in the bottom 5 percent of his class.  So, 95 percent of students in his class had a GPA of 2.00 or higher.  His GPA is emblematic of things that have gone wrong with American education.  A lot of grade inflation has taken place.  It looks like grades are almost entirely meaningless as an evaluation of work-ethic, knowledge, or intelligence.  Problematic kids get passed along by teachers.

However, two-thirds (68 percent) of Americans do not have a college degree.[7]  When the “Great Recession” hit in 2008, employment slumped.  Kinfolk said “Jed, improve your skills!” So, college enrollments jumped by 25 percent, from 2.4 million in Fall 2007 to 3 million in Fall 2009.  By Fall 2015, 52.9 percent of these students had graduated with either an AS or a BS.[8]  But why didn’t the others graduate?   Over a third (38 percent) of people with college loan debt didn’t graduate.  Almost half (45 percent) of people with college loan debt think that college wasn’t worth the price.[9]  Better than three-quarters (78 percent) of those who think that the game wasn’t worth the candle earn less than $50,000 a year and better than two-thirds (68 percent) are having trouble paying their debt.

You need a BA for success.  Women do college better than men.  Whites do college better than blacks or Hispanics.  Americans don’t do math, science, or engineering.  Money shouldn’t be a barrier to talent, such as it is.  It would be easy to join the pack and throw all this on the schools and on the teachers.  However, there is a lot of parental malpractice evident.

[1] “Noted,” The Week, 15 July 2016, p. 16.

[2] “The bottom line,” The Week, 15 July 2016, p. 31.

[3] “Noted,” The Week, 30 October 2015, p. 16.

[4] “Noted,” The Week, 15 July 2015, p. 18.

[5] Juan Williams, “The scandal of our failing public schools,” The Week, 15 July 2016, p. 12.

[6] Dan Frosch and Josh Dawsey, “Dallas Shooter Bought Weapons Legally,” WSJ, 12 July 2016.

[7] “Noted,” The Week, 15 July 2016, p. 16.

[8] “The bottom line,” The Week, 4 December 2015, p. 36.

[9] “Poll Watch,” The Week, 15 July 2016, p. 17.

Common Sense 1.

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In 2014, 32,675 people died in traffic accidents.[1]  In 2014, 11,593 people died in homicides, mostly from fire-arms.[2]  Obviously, what we need are common-sense car control laws.

We have abundant mass transportation in many parts of the country.  Take SEPTA’s Regional Rail system as an example.  All this could be expanded to meet the needs of a greatly increased ridership.  The use of trains and buses would greatly reduce traffic jams on roads and highways.  This, in turn, would have many beneficial effects.  It would give Americans much more free time or work time that they would otherwise idle away stuck in some jam-up.  That, in turn, might reduce deaths from hypertension in addition to the many lives that are lost through traffic accidents.  Moreover, the walk home from the local train station would have other beneficial health effects.

It would reduce the amount of carbon burned, to the harm of the climate.  It would ease the congestion in parking places in cities.  Many parking garages could be converted to homeless shelters and many parking lots could become community gardens.  It would end the difficulties with getting snow-plows down city streets in winter.  It would end the quarrels over parking spots that one person had dug out and another had used in spite of the plastic lawn chair having been placed in the spot.  It would allow for much expanded bike-lanes in cities and suburbs (along with expanded sales of brightly-colored Spandex clothing).

Now, let me be clear, this would not mean an end to privately owned automobiles.  Legitimate motorists would still be able to obtain cars from Federally Licensed Car Dealers.  There would, of course, need to be a background check and a waiting period.  All this could be handled by an expanded Transportation Security Administration.  Automobiles are, after all, a form of transportation.

Moreover, very few people actually need an F-150 or a T-top Camaro with a scoop on the hood.  Yes, we live in a time of change that many people find disruptive.  Some people cling to their God and their gear-shifts.  However, both Smart cars and those little Italian thingees painted the color of urinals offer superb solutions to American driving needs.

In closing, I welcome a dialogue on these important issues.

[1] “Noted,” The Week, 15 July 2016, p. 16.

[2] See: http://www.statista.com/statistics/195331/number-of-murders-in-the-us-by-state/

The Crisis of 2008 and the Return of New Deal Economics.

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The “Great Recession” of the 2000s and since has inspired a certain interest in the “Great Depression” of the 1930s.[1]

The New Deal’s economic policies were grounded in historical precedents.  On the one hand, various forms of relief and public works projects put people to work, while the Agricultural Adjustment Act shored up the situation of farm-owners—at the expense of tenant farmers and share-croppers.  Like the Medieval three-field system, these policies put a floor under the economic collapse.  Thank God for that.

On the other hand, the New Deal tried to come to terms with the modern industrial corporation.[2]  This would be one engine of real recovery.  The Democrats along with some Republicans were divided on this subject.  For some, big business was inherently bad.  Businesses grew by swallowing up smaller firms; then they produced monopoly effects—higher prices, lower quality, a slowing of innovation.  This analysis was rooted in the “Populist” attack on railroads and other big corporations in the “Gilded Age.”  Subsequently, Democratic “Progressives” led by Woodrow Wilson had embraced a version of this policy.  They rejected big interest groups and wanted a strong national government to break-up or prevent their formation.  This strand of the New Deal pursued various anti-monopoly initiatives.

Others, however, accepted big interest groups (Big Labor as well as Big Business) and wanted a strong national government to hold the ring between them in the national interest.  This strand of thought pushed European-style “cartelization” to prevent the competitive price cutting that led to mass business failures, and downward pressure on both wages and demand; and promote efficiency through cooperation between big corporations and the government.  This strand sprang from the government directed economies of the First World War.  Allied with this strand of thought were intellectuals who had been deeply impressed by the Soviet “achievement” (although they sometimes shuddered at the human cost) and who favored “planning.”

The two strands struggled all through the New Deal.  Most often, anti-monopoly policy lost out because the efficiency and production advantages of big corporations far outweighed the gains from limiting the logical effects of competition.

Now the anti-trust arguments have reared their head again.[3]  Business concentration seems to be increasing.  Democrats focus on the real or imagined malign effects.  Bernie Sanders has called for the big banks to be broken up; Elizabeth Warren has called for an anti-trust assault on the big companies of Silicon Valley; and Hillary Clinton argues that big business uses its power “to raise prices, limit choices for consumers, lower wages for workers and hold-back competition from start-ups and small business.”

The New Deal analogy suggests that there is something to be said on the other side.  The New Deal’s first effort at “cartelization,” the National Recovery Administration (NRA) ended because the Supreme Court ruled against it in 1935, not because it had (yet) failed.  Later, with American entry into the Second World War, the New Deal abandoned its anti-business stance to get the massive increase in production needed for victory.  Both production and working-class incomes rose sharply.  That settled that question.  From then on, American liberalism rejected both government planning and attacks on monopoly.  Until now.

[1] See Amity Schlaes, The Forgotten Man, and Paul Krugman, The Return of Depression Economics and the Crisis of 2008, as examples.

[2] Ellis Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (1966).

[3] Eduardo Porter, “With Competition in Tatters, The Rip of Inequality Widens,” NYT, 13 July 2016.

Assault Rifle.

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Rates of gun ownership in the United States have fallen sharply since the 1970s, from 50 percent of households to 30 percent of households.[1]  However, ownership of “assault-style weapons” has increased dramatically.

An “assault rifle” is a military weapon that is shorter and lighter than a traditional military rifle; and has a “selective fire” capability.[2]  The latter term means that it can fire on “automatic” (pull the trigger once and then hold on until all the ammunition is gone); “burst” (fire 2-3 rounds each time the trigger is pulled); and semi-automatic (fires and then loads one round each time the trigger is pulled).  In most cases, private ownership of automatic weapons like assault weapons was banned by the National Firearms Act of 1934.[3]

The weapon that is commonly referred to in the media as an “assault weapon” or “assault rifle” actually is an “assault-style weapon.”  These are solely semi-automatic versions of the “selective fire” assault weapons used by the military.  They look the same, but they don’t do the same.  Neither gun control advocates nor journalists care about the distinction.  Maybe they’re right.

Generally speaking, “assault-style weapons” make little contribution to America’s high homicide rate.  In 2014, 3 percent of homicide victims were killed with any kind of rifle.  On the other hand, the weapons have been used in several spectacular mass shootings in recent years.  The killers at Sandy Hook, Aurora, San Bernardino, Orlando, and Dallas all used “assault-style weapons.”

“Assault-style weapons” have long been a bete noire of gun control advocates.   In 1994 Congress passed a ten year ban on the sale of 19 different variants of “assault weapons.”  Mass shootings increased slightly during the period of the ban.  Congress did not renew the ban when it expired in 2004.  Mass shootings increased slightly after the ending of the ban.

The most popular “assault style weapon” in the United States is the AR-15 or one of its many knock-offs.[4]  (There are more than 8 million AR-15s in private possession in the United States.)  The AR-15 is the semi-automatic version of the fully automatic M-16 rifle used by the Army and the Marine Corps.  The weapons are light, rugged, carefully machined, and easily personalized.  They’re a lot of fun to shoot.  It is also likely that gun owners want them just because control advocates want to ban them.

This impulse appeared in the huge increase in sales of “assault-style weapons” after the Sandy Hook massacre in 2012.  President Barack Obama urged Congress to re-instate the expired ban on “assault-style weapons.”   Gun-owners flocked to buy the weapons before Congress acted.  They needn’t have worried.

While most Americans move—ponderously in the eyes of enlightened opinion here and abroad—away from gun ownership, a minority of Americans embrace more extreme forms of gun ownership.  It is trite, but true, to see two cultures struggling to assert their views.  America has a long history of the majority trampling on minorities; and of minorities finding ways to survive.  It might be better to treat guns like smoking: “education” rather than coercion.

[1] The Sixties and Seventies were more menacing times to live through than they appear in gauzy hindsight.  The men of the “Greatest Generation” had some experience with handling firearms and didn’t have an attack of the vapors in the presence of firearms.  The rural areas hadn’t emptied out yet.

[2] Generally, these weapons have a much shorter range than traditional rifles.  The effective range of an AR-15 is less than 500 yards, while the effective range of the M1903 Springfield used in the First World War is 1,000 yards.

[3] “Why assault weapons are so popular,” The Week, 15 July 2016, p. 11.

[4] The patent expired, so more than 280 manufacturers crowded into the market to compete with Colt.

Both Black and Blue Lives Matter.

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This is ill-timed, so it is probably ill-considered.  Probably mealy-mouthed as well.

Generally, crime rates in America are down markedly from two decades ago.  (This is not true if you live in Chicago.)  The drop has not entirely been explained.  One explanation, advanced by the police is that aggressive street policing (e.g. “stop-and-frisk”) has taken criminals off the street, deterred many others, and stopped a downward spiral of civic demoralization.[1]

Effective or not, the policy had unhappy consequences that were not, but could have been, anticipated.   First, African-Americans are victims of crime at much higher rates than are whites.  Since we live in a still-segregated society, this means that most crime is intra-racial, rather than inter-racial.  African-Americans are disproportionately both victims and victimizers.  Concentrating policing on high-crime areas inevitably assumed a character that could easily be construed as “racist.”

Second, the vast majority of people living in high-crime areas are not criminals.  As a result, “stop-and-frisk” involves stopping and frisking lots of innocent people in order to catch a few guilty ones.  All those innocent people have every right to feel that they are being harassed merely because they fit some demographic profile.  Not much effort seems to have been committed to trying to ease this feeling, if it even would be possible.

Third, policing appears to be a “coarse art,” instead of a “fine art.”  Ordinary fallible and flawed human beings have to figure out how to carry out the strategies defined by their superiors.  Often they have to carry out these policies while in contact with difficult, non-compliant people.  Moreover, America is awash in firearms.  Far too often, these interactions end in violent death.   Often, but not always, the circumstances are gray rather than black and white.  Afterwards, prosecutors, judges, and juries are more inclined than not to reject condemning the police.  Politicians pile-on, affirming that the laws are applied in a discriminatory way, or voicing platitudes, or asserting an unquestioning integral defense of police conduct.

If you stay at this policy long enough, you’re going to anger an awful lot of people.  It’s like building up the “fuel” for a forest fire.  All that is required for a conflagration is a lightning strike or a series of them.

Trayvon Martin.  Michael Brown.  Eric Garner.  Laquan McDonald.  Walter Scott.  Freddy Gray.  All were lightning strikes that set off a conflagration.  On the one hand, the “Black Lives Matter” protest movement sprang up.  On the other hand, American views on the state of race relations shifted from optimistic to pessimistic.  Recently, Baltimore prosecutors have suffered a series of stinging defeats in the effort to prosecute police officers in the arresting-to-death of Freddy Gray.  Then, police in Minnesota and Louisiana shot to death two black men in what should have been minor incidents.  More lightning strikes.

Protests erupted in many cities.  In Dallas, a black sniper used the occasion of one such peaceful protest to kill five police officers.

It has been difficult to hold an intelligent conversation about these matters.  For one thing, the subject is both complex and painful.  For another, it coincides with other complex and painful controversies.  The white populist revolts in both major parties.  The mass shootings and terrorist attacks.  Are these issues inter-related, with a common solution, or is it just our bad luck that they arose at the same time?

[1] See Barry Friedman, “Thin Blue Lines,” NYT Book Review, 3 July 2016.  Friedman reviews Heather Mac Donald, The War on Cops:, and Malcolm Sparrow, Handcuffed.

Climate of Fear XXI.

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Used to be, presidential candidates could just say “I stand for the principles of the Whig Party” and let it go at that.[1]  Now, a presidential election campaign requires candidates to lay out their plans for examination by voters.[2]

Hillary Clinton has begun to do so.  One key area is climate change.  Here she seeks to reach beyond the goals set by the Obama administration.  President Obama believed that emissions had to be reduced, so he ordered the EPA to use the Clean Air Act to issue regulations that would compel vehicles and power plants to cut emissions by 25-28 percent below the 2005 level by 2025, and by 80 percent by 2050.

According to many economists, a carbon tax would be highly effective in reducing emissions.  Indeed, the goals for 2050 and perhaps even those for 2025 can’t be reached without a carbon tax.  It would drive up the price of carbon fuels above the price of alternative fuels, creating a market demand for those alternative fuels.  This, in turn, would shift the terms for solar and wind energy while stimulating a demand for mass transportation.

However, it would hit hard on ordinary consumers by raising gas and electricity prices.  So, Ford F-150s, “Mommy vans,” and air conditioning would all become prohibitively expensive.[3]  Such voters would become angry, angry hippos and—in an act of false consciousness[4]—vote Republican.  Clinton has rigorously avoided proposing a carbon tax.

Conceding that the Democrats are unlikely to win control of both houses of Congress (perhaps not even one), she envisions acting on climate change without legislation.  Clinton believes that “meeting the climate challenge is too important to wait for climate deniers in Congress to pass comprehensive climate legislation.”[5]  She would use the Clean Air Act to issue regulations that would reduce emissions by airlines, oil refineries, gas wells, and cement plants.

What might such action accomplish?  She hopes to raise the number of solar panels from about 70,000 today to 500 million by 2020.  She wants to spend $60 billion on mass-transit and energy-efficient buildings.  Experts believe that the Obama Administration already has done just about everything that administrative regulations can achieve, even if the courts allow all of them to remain in effect.  Taken all together, her energy proposals will cut greenhouse gas emissions by 80 percent of the 2005 level by 2050.  That is, the same mark as that set by the Obama administration.  Furthermore, a Clinton administration would need to get at least $60 billion in appropriations through Congress.  This seems equally unlikely to be achieved.

Nevertheless, Clinton has won some support from the environmental community, which sees the danger of climate change as more pressing than any other danger.  “We know that [a carbon tax] is not politically realistic.  And we need to be realistic about what we can get,” said Scott Hennessey, vice president of the solar power company SolarCity.[6]

The real issue is the American unwillingness to be taxed, rather than “climate deniers.”

[1] See: https://www.youtube.com/watch?v=UAjwAuHHQJs

[2] Voters in long-established democracies realize that their own candidates are just writing a wish list, but they believe that the other candidate means to try for integral fulfillment of his/her agenda.

[3] Actually, they already are in environmental terms.  It’s just that on one wants to tell people the truth.

[4] See: https://en.wikipedia.org/wiki/False_consciousness

[5] Clinton’s campaign chairman John Podesta, quoted in Coral Davenport, “Clinton’s Climate Change Plan Avoids Mention of a Carbon Tax,” NYT, 3 July 2016.

[6] Which spent a measly $200,000 on the Podesta Group lobbying firm in 2015.  See: http://www.opensecrets.org/lobby/firmsum.php?id=D000022193&year=2014%20Campaign%20Contributions  This was not mentioned in the NYT article.  See n. 5 above.

Campaign Issues 2016 3.

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Hind-sight is 20/20; foresight is not.  The basis of the Affordable Care Act (ACA) lay in a plan to require many younger, healthier, and lower income people to pay premiums that would subsidize the health-care costs of older, sicker, and wealthier people.[1]  Even so, support for the ACA has grown with the passage of time.  In 2013, less than a third (32 percent) approved of the ACA, while 61 percent disapproved.    By July 2015, 47 percent approved, 44 percent disapproved, and only 9 percent “didn’t know.”  Opponents of the ACA have been the big losers here, bleeding away almost a third of their numbers to either supporters or to “don’t know.”[2]

Before the Affordable Care Act (ACA) went into effect, 17.1 percent of Americans had no health insurance.  By 2013, the share without health insurance had fallen to 13.3 percent; in 2014, 10.4 percent of Americans had no health insurance.[3]  By Spring 2015, that number had fallen to 11.9 percent, a reduction of 5.2 percent.[4]  (This seems like a lot of hassle just to reduce the number of uninsured by one-third. )  In March 2015, the Congressional Budget Office (CBO) predicted that 21 million people would have signed up for coverage by state exchanges under the ACA by late 2015. This would be a pretty extraordinary jump: only 9 million people were registered in late 2014.  By late October 2015, only an additional million people had enrolled.

The great thing about a market economy is that it forces sellers of any good to find a price that is high enough for them to make a profit and low enough to attract customers.  The first years of the ACA have seen insurers searching for that sweet spot.[5]  One big problem is that many people remain outside the insurance market, regardless of the individual mandate.  The newly-insured have turned out to be sick people, rather than a broad range of the population.  Costs for insurance companies have gone up more than have income from premiums.  As a result, health insurance premiums rose by 5 percent for 2016.  Now, major insurance companies are seeking an average 10 percent increase in premiums for 2017.[6]  (The desired rates for Washington, DC and New York City are 16 percent.)  At some point, the insurance companies will find the right price.  Where is that price?  Will premiums continue to rise after 2017?  It’s difficult to say.  Why do uninsured people not enroll?  Young, healthy, and less-well-off people seem to be staging a libertarian revolt against the mandate that everyone have health insurance.

The ACA is a substantial extension of the entitlements safety-net for the benefit of poor people at the expense of not-so-poor people.  The federal government subsidizes to varying degrees many of the insurance premiums.  This means that higher premiums will increase federal spending on health care.  At some point, even in America, taxes are going to have to go up to pay for spending or spending is going to have to come down to what the country is willing to pay.[7]  However, people with higher incomes who buy insurance on the market-place lose the subsidies, so they are going to feel the sticker shock.  If it comes to higher taxes, Democrats are going to favor preserving the entitlement by taxing the one-percent, while Republicans are going to favor sending the ACA in front of a “death-panel.”

[1] This sounds like a Republican plot, but Republicans had no voice in the ACA.  This is all Democrats.

[2] “Poll Watch,” The Week, 10 July 2015, p. 17.

[3] “Noted,” The Week, misplaced the exact reference.  Sorry.

[4] “Noted,” The Week, 24 April, 2015, p. 16.

[5] Reed Abelson and Margot Sanger-Katz, “Obamacare Premiums Are Rising, Not a Little,” NYT, 16 June 2016.

[6] These sorts of developments have been predicted by Republican critics from the beginning.  Some of them have predicted that it will end in a “death spiral” as rising premiums force people out of the market.   Democrats derided this as partisan fear-mongering.

[7] I realize that this is a disturbing new way of looking at things.

Campaign Issues 2016 2.

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Republicans say that the “War on Poverty” has been lost.[1]  Democrats say that it hasn’t been won, yet.  According to the New York Times, the conservative stereotype of poor people is that they’re criminals or they’re lazy.[2]  According to conservatives, the conservative stereotype of poor people is that they’re intelligent and entrepreneurial, but that liberals have created a set of incentives to dependency.  Is there any indication of who is more nearly correct?

According to the Census Bureau,[3] in 2011, there were 76 million families.  Of these, 55.5 million consisted of married couples, and 20.5 million consisted of Other families.  Among those Other families, 5.4 million were male-headed and 15.1 million were female headed.  So, 73 percent were married couples and 27 percent were Other families.  Among Other families, 73.6 percent were female-headed households and 26.4 percent were male-headed households.

White, non-Hispanics accounted for 52 million of the households.  Of these, 41.5 million consisted of married couples and, 10.5 million consisted of Other families.  Among those Other families, 3 million were male-headed and 7.5 million were female-headed.  So, 80 percent were married couples and 20 percent were Other families.  Among Other families, 71 percent were female-headed households and 29 percent were male-headed households.

African-Americans accounted for 8.7 million of the households.  Of these, 3.8 million consisted of married couples and 4.9 million consisted of Other families.  Among those Other families, 800,000 were male-headed and 4.1 million were female-headed.  So, 43 percent were married couples and 56 percent were Other families.  Among Other families, 83 percent were female-headed and 17 percent were female-headed.

Married couples are much less common among African-Americans (43 percent) than among White non-Hispanics (80 percent) or the national average (73 percent).  Other families are much more common among African-Americans (56 percent) than among White non-Hispanics (20 percent) or the national average (27 percent).  Female-headed households are somewhat more common among African-Americans (83 percent) than among White non-Hispanics (71 percent) or the national average (73.6 percent).  African-Americans account for 27.1 percent of the female-headed households, while African-Americans account for about 14 percent of the population.

Current anti-poverty programs include food stamps, housing subsidies, and various tax-credits like the earned-income tax credit and the child tax credit.  People can obtain these benefits provided that they remain poor.  Raise your income and lose the benefits.

Back in 1965, Daniel Moynihan published The Negro Family: The Case for Action.[4]  He concluded that “The steady expansion of welfare programs   can be taken as a measure of the steady disintegration of the Negro family structure over the past generation in the United States.”  In short, Uncle Sam displaced black fathers.  While there is a lot to criticize here, it is also possible to argue that part of poverty is volitional: don’t have kids outside of marriage; stay in school and don’t disrupt class, then go to a community college; get a job, even if it is a crummy one; then trade-up to better jobs.  This issue will not be discussed in the 2016 election.

[1] Oddly, they never say that about the “War on Drugs.”  https://www.youtube.com/watch?v=j3SysxG6yoE  It can be argued that the War on Drugs and the War on Cancer were Republican distractions or alternatives to the War on Poverty.

[2] David M. Herszenhorn, “Antipoverty Plan Skimps on Details and History,” NYT, 15 June 2016.

[3] See: https://www.census.gov/prod/2013pubs/p20-570.pdf

[4] See: https://en.wikipedia.org/wiki/The_Negro_Family:_The_Case_For_National_Action.

Campaign Issues 2016 1.

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Currently, Social Security faces two fundamental problems.[1]  One fundamental problem is that Social Security is based on a “pay-as-you-go” model: withholding taxes from people who are working pay for the retirement of people who are no longer working.  Fine.  If there are a lot of people working and a smaller number not working, then the system functions smoothly.  What if the number of people working declines relative to the number of those who are not working?  That’s more of a problem.  Taxes on those still working will have to rise to pay for those no longer working.  That is the situation in which Americans find themselves as the “Baby Boom” generation passes out of the work force and into the work-for-me force.

This problem has been around for a long time and people in authority have been trying to devise a solution for a long time.   In 1983 a bi-partisan commission investigated solutions.  Congress followed the commission’s recommendations by raising taxes and extending the age of full eligibility. That fixed the problem for a while, but—of course–“I’m back!”  In a report of 2015, the trustees reported that the Social Security trust fund will go broke in 2034, with the Social Security Administration able to pay less than 79 cents on the dollar of benefits.  In 2011-2012, President Barack Obama sketched a budget compromise agreement in which Social Security would be continually eroded by inflation.  The Republicans weren’t buying this idea.  Another solution, which could be combined with de-coupling Social Security benefits from the inflation index, would be to raise the cap on with-holding taxes.  Currently, only income below about $134,000 a year is subject to with-holding.  Raising that ceiling would generate a lot of revenue.  Taken together, these proposals probably offer a manageable means to solve the Social Security problem for the immediate future.

A second fundamental problem is that Social Security was never designed to be a full retirement pension.  It was meant to provide a basic income for retirees, who were expected to save from current income to pay for the bulk of their future retirement needs.  However, many members of the “Baby Boom” did not do any significant saving for their retirement.

Now, under the influence of the Bernie Sanders campaign, the Democrats have come out for expanding Social Security to make its benefits more generous.  Hillary Clinton has pledged to increase benefits for widows and for those who stop working to be care providers for children or sick family members; to resist reduction of cost-of-living increases; and to resist increasing the age for full eligibility.  She would pay for these increased benefits through higher taxes on the wealthy.  Still, even these proposals don’t go as far as the left wing of the party wants.  President Obama has remarked that “a lot of Americans don’t have retirement savings [and] fewer people have pensions they can really count on.”  How to make up for this lifetime lack of thrift?

Current proposals include increasing the benefits for all recipients while providing additional benefits for the uncertain number of the “most vulnerable”; and/or increasing cost-of-living adjustments to include medical costs.

Several questions arise out of these problems.  First, which “Baby Boomers” did not save and why did they not save?  Moral recriminations are going to be a part of this debate.  Second, what are these proposals likely to cost?  Third, how large a share of the well-off will have to be taxed more heavily?  Just the “1 percent” or the “5 percent” or anyone who did manage to save?  Fourth, do Americans want to transition Social Security from the current partial pension system to a full-blown national retirement system?   What would a long-term system require?

[1] Robert Pear, “Driven by Campaign Populism, Democrats Unite on Social Security Plan,” NYT, 19 June 2016.

The Rise and Decline of Nations.

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Back in the day–as young people used to say before they moved on to some other expression up with which I have not caught—I was going to be an economic historian. I came across a book by Mancur (Man-Kur or Man-Sur, depending on who your listening to) Olson.[1]  It’s a remarkable book, although—like many another remarkable book—long forgotten.

At the core of the book is a puzzle.  Germany and Japan lost the Second World War big time, while the United States won big time.  So how come the post-war German and Japanese economies were so dynamic, while the American economy slowed down?

Olson’s answer is one that will be obvious to sailors.[2]  You leave the boat in salt-water and it will pick up barnacles.  It also will be obvious to heart surgeons.  You have too many double bacon cheeseburgers with the twisty fries covered in BBQ sauce and your arteries will get clogged with sludge.  In either metaphor, the system gets loaded with stuff that slows down its operation.

What, in economic terms, are these barnacles/sludge?  They are the various interest groups that grow up around an established way of doing things: unions, government regulators, tax collectors, and business monopolies and cartels.  They grow up with—well, slightly behind– any new industry.  They figure out how the system works.  They figure out how to work the system.  They’re opposed to change because they know how to work the existing system.[3]  They fight over shares of the existing pie, rather than over how to expand the pie.  Eventually, the contending groups reach agreement on how to divvy-up the pie.  These agreements Olson labels “distributional coalitions.”  They are the “masters of the crossroads.”[4]

The thing is that the Second World War destroyed all these “distributional coalitions”—the barnacles, the sludge, the interest groups, the barriers to new technology and new relationships–in Germany and Japan.  War “emergencies” caused the German and Japanese governments to break down established relationships from the pre-war era.  Then the American and British occupations banned many regime-associated groups.  In contrast, the victor nations institutionalized their own “distributional coalitions.”  American and British unions foreswore strikes, while lots of leading businessmen took “dollar-a-year” jobs with the government.[5]  Subsequently, many interest groups dug-in to established positions.  So, Germany and Japan were able to achieve rapid economic growth, while the United States merely chugged along and Britain soon fell behind the countries against which it had fought from the first day of the Second World War to the last.

In a sense, then, catastrophic defeat in war serves as a kind of social and economic angioplasty.[6]  Obviously, Olson was talking only about already advanced industrial economies.  I doubt that anyone expects Iraq to be the next “economic miracle.”

Trite observation though it is, the same analysis might be applied to any organization.  For example, colleges facing severe competition either ruthlessly adapt or wither.

[1] Mancur Olson, The Rise and Fall of Nations: Economic Growth, Stagflation, and Social Rigidities (Yale UP, 1984).

[2] Nevertheless, will all the non-sailors please spare me the abusive remarks about me wearing pink—“salmon” in the imagination of my brother-in-law—pants, blue Polo shirts, and Topsiders?  Please?

[3] Big Carbon—coal and oil—has a lot more drag with the gummint than does Not-So-Big Renewables.

[4] See: https://en.wikipedia.org/wiki/Papa_Legba  See also: Madison Smartt Bell, All Souls’ Rising (1995); Master of the Crossroads (2000); and The Stone That the Builder Refused (2004).

[5] See, for example, Alan Brinkley, The End of Reform: New Deal Liberalism in Recession and War  (1995). 

[6] Curiously, this is how mainstream economists saw a business-cycle recession before the Great Depression.