Monthly Archives: June 2013

“Middle-Out” Econmomics

A column be E. J. Dionne steered me to the web site of the Democracy Journal where I found a symposium of articles on how to correct the economic system so as to grow the middle class, not the top one percent. They contrast middle-out economics as an alternative to the trickle-down theory which is embedded in most of our political discourse. Here’s their summary of the symposium.

At first blush, the claim that politicians need to take the needs of the middle class more seriously might seem like pushing on an open door. After all, every stump speech has lines about “saving the middle class” or “helping Main Street, not Wall Street.” But the actions of elected officials have seldom matched the rhetoric. Vice President Biden is fond of saying, “Show me your budget, and I’ll tell you what you value.” By those terms, not to mention the tax code, we have for decades valued corporations and the wealthy as the engines of growth, as job creators, and as most worthy of assistance. The results are familiar: moribund income growth for low- and middle-income Americans and soaring income inequality.

The point of this symposium is not merely to say that we need economic policies that help the middle class. That’s boring and obvious. The point is to make what we call “middle-out” economics the operating progressive theory of economic growth: That is, we must promote middle-out economics not just as a nice-sounding idea, but as the direct alternative to trickle-down economics. Where conservatives say investing in the top 1 percent drives growth, we say that investing in the broad middle does it. And then, having established the theory, we spell out some specific policies that put flesh on the bone.

The symposium opens with three pieces that provide the theoretical framework. First, Eric Liu and Nick Hanauer, co-authors of The Gardens of Democracy and The True Patriot, explain why trickle-down economics is still the average citizen’s idea of how the economy works, and they show how a new picture of an economy driven by a robust middle class should be presented. Neera Tanden, president and CEO of the Center for American Progress (CAP), lays out the data on trickle-down’s failure over the past 40 years. Eric Beinhocker, the executive director of the Institute for New Economic Thinking at the Oxford Martin School, argues that an economy that’s driven from the middle out represents a truer form of capitalism than one that relies on wealth trickling from the top down.

To start off the second half of the symposium, which focuses on specific policy prescriptions, Heather Boushey, the chief economist at CAP, argues that family and child care policy is central to the middle-out vision. Bruce Bartlett, former adviser to Ronald Reagan and a frequent contributor to The New York Times’s Economix blog, identifies the recent diversion of income from labor to capital as one cause of our economy’s troubles and identifies steps to reverse this trend. John Schmitt of the Center for Economic and Policy Research explains how a large minimum-wage increase would help not just the poor but also the middle class.

Mona Sutphen, former adviser to President Obama, sees middle-skill jobs as the key to a balanced economy. David Rolf of SEIU looks at what the ongoing transformation of labor and the workforce has done to the middle class, and what innovative worker organizations might look like. Ethan Pollack of the Economic Policy Institute calls for a renewed commitment to a clean economy as essential to a middle-out future. Finally, Third Way’s Ed Gerwin takes on trade policy, arguing that a combination of exports to China’s middle class plus more rigorous enforcement can yield benefits to America’s middle class.

Reversing more than three decades of top-down economic thinking won’t happen just by nominating the right candidate or winning the next election cycle. The false assumptions of trickle-down economics have burrowed too deeply into the collective consciousness for that quick a fix. But this process is absolutely necessary if America is going to return to stable, middle-out growth.

Gerrymandering or Geography?

There’s a very interesting article by Nate Silver in the NY Times today. With lots of data, as usual, he addresses the issue of gerrymandering, which is often cited as the reason that the Republicans can hold a majority in the House even though they lose the popular vote overall.

Silver’s conclusion is that gerrymandering by Republicans plays only a minor role (about seven seats in the 2010 election.) The primary reason is the effect of the non-uniformity in the geographical distribution of minority voters. He notes that in 2012 Obama won by more than 50% of the vote (as in a 75%/25% split or better) in 44 districts while Romney won by that much or more in only 8. Republican voters are not uniformly distributed either but more so than Democrats.

Here’s another thought on another subject. We often complain about the Senate, where 40% of the members can stop action through the filibuster. There’s no filibuster in the House, but with the “Hastert Rule” (requiring a majority of Republicans to favor legislation before it can be brought to a vote) only 26% of the members can block passage. It’s even worse than the Senate.

Secrecy

There’s a lot of talk about secrecy now as people begin to realize what’s been happening in government since 9/11/2001. I was once part of that world. When I finally left college in 1956 I began a long career in the defense systems divisions of Bell Laboratories.

I worked on a number of different projects for the Army, Navy, Air Force and CIA and that required many security clearances. (I remember once when I only had a secret clearance I wrote a memorandum that someone thought should be top secret and so I was not allowed to keep a copy.) In addition to the military designation (confidential, secret, and top secret) the Dept of Energy had several levels, with the equivalent of top secret being the Q clearance. At one time or another I had all of these and we were often told by friends or neighbors that they had been visited by security people asking questions about me. (Once one came to the door of a neighbor’s house wile my wife was there.) On= another occasion I had to take a polygraph test to get a clearance.

Even top secret wasn’t enough. Many special projects were designated as special compartmented information or special access programs and only those specially cleared for them could have access to information. These were often called code word programs from the code word name designating them. Thus at one time the information about the U2 program and the intelligence data it acquired was called Top Secret Talent.

I remember once seeing a picture in the NY Times of LBJ and McGeorge Bundy outside the White House. Bundy had under his arm a report designated TS with four code names, open to the first page. The first first paragraph was readable, but fortunately it was only confidential.

One thing seldom mentioned is that the secret world has a special fascination that is somewhat exciting and even a little addictive. There are things you know that most people don’t, making you somewhat special. This is particularly true in the intelligence areas. If you followed the TV series West Wing you may remember scenes when the President was in his crisis center with his military advisers as they planned some secret strike against an enemy. This was the real stuff and other problems paled in comparison.

I think there is no question that our presidents and their advisers are unduly influenced by the excitement and solemn aura of the secret military and intelligence world. (The exception may have been JFK after the Bay of Pigs fiasco.) I think it’s one of the reasons why we persist in the belief that the military can solve our problems.

The plight of the rich

Excerpt from The Metropolitan Diary in the New York Times:

Metropolitan Diary June 7, 2013, 8:30 am

Dear Diary:

Cast: Three high schoolers and me, sitting across from them on the crosstown bus.

Time: 3:30 p.m. A Friday.

High schooler No. 1, in the middle of a conversation about the coming weekend and their respective country houses: “I always feel like a stupid rich kid saying we have a place in the Hamptons, you know?”

No. 2. “I never say ‘the Hamptons.’ I just say we go to Long Island. ‘The Hamptons’ sounds, you know…”

No. 3. “I LOVE saying ‘the Hamptons’! That way people don’t think we’re so rich. Only renters say ‘the Hamptons.’”

On not getting out

Today’s paper notes the latest in a series of terrorist bombings in Iraq, “the latest in a wave of sectarian violence that has erupted across the country in recent months.”

The US have no significant military forces in Iraq and so we cannot easily be brought back into a role in this violence. We wanted to have a residual force there but the Iraq government refused, thankfully. Now reflect on the fact that, although most believe our role in Afghanistan will cease after 2014, in fact we plan to maintain significant forces there in a non-combat role for as much as ten years. As usual the supposed reason is to provide training for Afgahn forces. (Who trained the Taliban?)

The probability that there will be violence there as bad or worse than in Iraq is high and as is the probability that our troops will be sucked into the violence. The military wants to maintain bases in Moslem countries to make it easier for us to intervene there and this is a point of view supported by people of both parties who believe the US must police the world. We don’t have that responsibility and recent history shows we are not capable of doing so. We never learn.

More on inequality

Income inequality continues to get attention. In this morning’s Times both David Brooks and Paul Krugman took it on. My own favorite statistic on the problem is that the five heirs of Sam Walton have a combined wealth equal to that of the least wealthy 40% of the US population. (Yesterday the Ohio legislature voted to end the inheritance tax.)

There is no question that the economy now delivers disproportionate income to a very tiny fraction of the population. The smaller the segment examined the more disproportionate it gets. However the discussion of why this has occurred over the last thirty years is less satisfactory. Krugman today suggests the increasing effects of technology in replacing people with machines, both mechanical and digital. Others suggest, for the US, the effects of globalization. Others such social factors as the promotion of monetary success as the only worthy goal, or even the tendency of late-marrying successful professionals to marry each other.

Many have suggested the the important role of the moneyed class’s success in dominating the political scene. Jacob Hacker and Paul Pierson in their book, “Winner-Take-All Politics,” have done the best job of analyzing this and I strongly recommend their book. However we don’t really have a good overview of the whole problem which balances both the political and the economic factors.

The fact remains, however, that until we do we won’t really know how to fix an economic system that seems to be a antithetical to a strong and prosperous middle class in the US. Some things seem to be indicated however. One is to look to the over prosperous for tax revenue. Some recent studies indicate a maximum upper bracket tax rate of 70% could maximize revenue without killing the goose. American history would seem to support that.

The other side of the problem, how to move some of the economy’s benefits to the main stream population, is not obvious. Although the Earned Income Tax Credit has been very successful and has been safe so far from conservative attack, I suspect that such direct equalization of income is not going to be satisfactory to the American people.

Another approach is what I would call an expanded infrastructure program that includes not only the the usual types such as roads, bridges, etc. but other forms of support for public interest projects.

We already do this by such programs as our public libraries and our public education system. The public benefit is clear, they are programs that can benefit all, and they can significantly reduce the impact of limited income. We could extend the same principles more broadly. Greatly increased support for higher education, either through existing state schools or by grants, could be a major factor in increasing opportunity to all. Heavy subsidization of mass transit could also be effective. Perhaps we should think of our health care system as part of the infrastructure. By ensuring that everyone has access to reasonable health care without regard to income we accomplish a real leveling.

Where does the money for all this come from? Certainly not only by “soaking the rich.” To a significant degree it could come from a defense budget that made real sense. Beyond that it requires a growing economy and I suggest that GDP doesn’t care how it is generated. The programs I have mentioned above generate GDP and economic growth.

Perhaps we should have a real debate over how much of our economy should be devoted to consumer consumption, and how much to basic infrastructure, education, public transit, and health care. Is our highest aim really to have the latest digital gadget in everyone’s hands?

Quote of the day: His virtue was that he said what he thought, his vice that what he thought didn’t amount to much. – Peter Ustinov

More music

The Youtube link below has been discontinued. Here is an alternate. 7/14/13

I stumbled on this music in a record shop in the 1950’s. (Does anyone remember when you would go to a record shop and browse for selections that you played in a little booth?) It introduced me to the voice of Kathleen Ferrier, who I suspect is unknown to most today.

She was an English contralto in the forties and fifties. an amateur who was discovered while a telephone operator. She became famous, especially in England, but died prematurely in 1953. More on her here. Here’s what Bruno Walter said about her: “The greatest thing in music in my life has been to have known Kathleen Ferrier and Gustav Mahler—in that order.”

The Schumann lieder here is beautiful but I suspect the view of woman’s life in the poem it is based on might not receive modern approval. There’s lots more Ferrier on Youtube.

From William Pfaff

As you know by now I am very partial to the political comments of William Pfaff and use my blog to spread them further when they especially interest me. So here’s a recent one.

William Pfaff — June 5, 2013
The Missing Beginning and End of the Obama Speech

Paris — The remarkable May 23 address by President Barack Obama was primarily an effort to establish the legality of actions taken by himself and his administration, notably the targeted drone killings, to settle his conscience, so to say, in his continuing prosecution of what George W. Bush named the global war against terror.

The speech lacked a beginning, establishing the cause and nature of this “war,” and a conclusion that offered an intellectually serious and politically realistic plan for bringing the affair to an end. These would have required the President to address truths about the origins and possible escape from the labyrinth of frustration and good and bad intentions and initiatives that make up this involvement of the United States in the affairs of Islamic society.

They were left out by the President because they are politically unacceptable, or unsayable, in the United States today. They would require recognition that this tangled and largely unsuccessful American engagement in the Middle East and Central Asia is a result of what now are generally recognized as wholly unrealistic American notions of national exception and unique mission in world affairs.

It’s a result of the strategic interest of Washington in controlling access to Middle Eastern oil, the United Nations’ creation in 1947 of a Jewish National home in Mandate Palestine with foreseeable consequences in Arab society and politics, and the normal impulse of the Pentagon to apply indiscriminate power to the solution of such problems as are put before it.

The second unspeakable truth is that any end to the United States’ painful and immensely costly and destructive adventures in the Middle East, Asia, and increasingly in Africa, would require a complete American military withdrawal from Muslim countries.

This would be interpreted by conservative Republicans, liberal interventionists, and probably by an overwhelmingly part of the American foreign policy community, as an unacceptable moral and strategic “defeat,” although in essential respects it would not differ from the defeat accepted by the Nixon administration in Vietnam in 1975.

That led to Viet Minh conquest of Southern Vietnam and national unification under a Communist government in 1976, peace in Vietnam if not in Cambodia, and within a decade the beginning of economic reforms in Vietnam, normalized relations with the United States in 1995, and Vietnam’s membership in the Association of Southeast Asian Nations that year, and a trade agreement with the European Union.

President Obama’s announced policy of post-2014 withdrawal of a large part of the American troops now in Afghanistan has already provoked charges of “defeat” in Congress, and in some circles a demand for Mr. Obama’s impeachment. Because of Israel’s natural interest in as extended and aggressive as possible an American deployment in the Muslim world, and Israel’s influence in Washington, it is hard to imagine a deliberate American military withdrawal from that region, short of unexpected military catastrophe in Afghanistan or Pakistan, or a war with Iran than ended badly — or in a negotiated settlement that made American withdrawal necessary. These seem unlikely, although not impossible.

Absent a policy of total military withdrawal on terms that allow the atmosphere of violence to dissipate, the Obama administration appears condemned to indefinitely continue the present vain and provocative campaigns against individuals and jihadist groups in the Middle East and Central and West Asia, by drone or otherwise, who thereby will be provided continuing reason to carry out their own operations against the American military and political presence in Islamic countries, as well as inside the United States and such American allies as persevere.

The President’s address was intended to clarify and confirm the legality and morality of what he is doing in what now has become his war. It is not a constitutionally declared war, and until now has rested upon the flimsy and increasingly irrelevant legal foundation provided by the September 14, 2001 Congressional joint resolution (known as the AUMF) authorizing the use of military force in response to the attacks on September 11, 2001.

This was taken by the George W. Bush administration and the Obama administrations to include assassination, seizure and, in the Bush case, torture of individuals in contravention of international law, unconstitutional imprisonment without due legal process, military actions in violation of other nations’ sovereignty and American treaty obligation, and other actions violating American or international law.

It includes the inhuman Guantanamo prison, its now routine torture-by-force-feeding of protesting prisoners, disallowed trial and justice because they were tortured in the past, contaminating evidence, or blocked from release, repatriation or trial justice for reasons of despicable congressional politicking and vindictiveness. This situation of profound injustice, as the president warned, currently seems likely to become the legacy we leave to a coming generation, that of a nation that incarcerates in apparent perpetuity people charged with no crime, held in an offshore prison, further torture applied to them to prevent them from ending their own suffering.

The President’s conclusions set forth a series of “democratization” projects and foreign aid development proposals of a kind that have consistently proven incapable of producing that cultural conversion to contented democracies the President expects — with “modernized economies, upgraded education and encouraged entrepreneurship,” creating “reservoirs of goodwill that marginalize extremists.”

That, he said, is “our strategy,” a strategy of empty idealism and actual revenge upon an ungrateful world, its final product broken lives.

© Copyright 2013 by Tribune Media Services International. All Rights Reserved.

Back online (again)

I’ve neglected this blog for the last month but would like to start up again. (Not sure anyone noticed.) Recovery from the knee operation continues very satisfactorily. The problem was some side effects that led me into a series of sessions with urologists. That’s seems to be behind me now and I plan to get back to blogging.