Another relatively short blog today – it is holidays after all. There was an article in the New York Times (December 23, 2013) – Inequality for Dummies – by regular Op Ed columnist Bill Keller, who clearly thinks he represents the pragmatic, reasonable progressive “centre-left” as distinct from the “left-left” who have their heads in the sand and apparently are content to mouth of slogans to make themselves feel better but which do nothing to address reality or advance the progressive cause. My version of the topic is inverted. I usually think the “centre-left”, which used to be the centre-right or even further out to the right before neo-liberalism shifted the central point sharply so that it made Genghis Khan look downright reasonable, are gutless wonders who pretend to be progressives if it allows them to extra personal rents (rewards) and/or gain position of power in non-conservative political parties. I typically see the “centre-left” as part of the problem not part of the solution. So I read on.
His topic, not unsurprisingly given the title is income inequality and he seems to think this is a topic that exposes the “left-left” types for who they are – out of touch populists who are:
… indulging a “‘we can have it all’ fantasy.”
He was quoting Allyson Schwartz, a Democratic candidate for Pennsylvania governor and board member of the so-called “centrist think-tank” Third Way, who launched an internicine attack on US Senator Elizabeth Warren and New York City Mayor-elect Bill de Blasio – who are “left-left” types according to Keller.
The “we can have it all” attack was over the Elizabeth Warren’s “plans to expand Social Security benefits and delay Medicare reforms” (Source)
The article that got all this going was published by the Wall Street Journal (December 2, 2013) – Cowan and Kessler: Economic Populism Is a Dead End for Democrats.
It was written by the Third Way leaders and attacked “left-wing populists”. The “we can have it all fantasy” was represented in this way:
If we force the wealthy to pay higher taxes (there are 300,000 tax filers who earn more than $1 million), close a few corporate tax loopholes, and break up some big banks then—presto!—we can pay for, and even expand, existing entitlements. Meanwhile, we can invest more deeply in K-12 education, infrastructure, health research, clean energy and more.
The Third Way representatives then told us that the left-wing populists were in denial when it came to the reality that the:
… payouts to seniors have exceeded payroll taxes collected from workers. This imbalance widens inexorably until it devours the entire Social Security Trust Fund in 2031, according to the Congressional Budget Office. At that point, benefits would have to be slashed by about 23%.
This inexorability (I love it when mindless conservatives use the word “inexorable” – it is a clue they know nothing) apparently leads to an “undebatable solvency crisis”. Phew.
The attack then focused on health care and the populist position was characterised as being “(e)ven more reckless” because it refused “to address the coming Medicare crisis” – which is?
Oh, that as the population ages health care spending will rise and “this disparity will be completely unaffordable”.
Who are these Third Way guys? Their homePage carries the banner “fresh thinking”, which made me laugh.
Their About Us page tells us:
Third Way represents Americans in the “vital center” — those who believe in pragmatic solutions and principled compromise, but who too often are ignored in Washington.
Our mission is to advance moderate policy and political ideas. Our agenda includes: a series of grand economic bargains, a new approach to the climate crisis, progress on social issues like immigration reform, marriage for gay couples, tighter gun safety laws, and a credible alternative to neoconservative security policy.
So the “vital centre” is when you consider their analysis a bastion of economic ignorance that perpetuates neo-liberal free market thinking by promoting the fraud that the currency-issuer can run out of money and that health care and aged care are financial issues rather than real issues.
The Third Way in Britain, which is where the term and approach emerged was just as bad. The Third Way is No Way.
But I guess if they are the “centre” I just fell off the continuum – to the left, in case you are wondering.
These Third Way idiots and that is the only term that suits – and I know it is the season to be charitable – are holding back the progressive movement and standing beside the hard-core conservatives who use the myths about government financial constraints to advance their own agenda.
The Third Way are then fighting on a field that is stacked against any progressive reforms from the start.
Of-course, there is no solvency crisis for the US social security system or the health care system. That is not to say that it cannot be improved to better use the real resources that underpin it.
This is not to excuse Elizabeth Warren and her supporters. The meagre fact that they outline how they will “fund” their proposals tells you that they are also locked into the government financial constraint paradigm. They just want the rich to pay more tax so that the poor can get some more government transfers.
While it might be reasonable to deprive high income earners of more pre-tax income and reduce their purchasing power, there is no necessary connection with doing that and giving more post-tax income to the lower income cohorts. That is the mistake the “left-left” often make.
Of-course, the Third Way executives are not capable of seeing that so blinded are they by neo-liberalism.
The New York Times’ Bill Keller also cannot see it either, which makes his attack on the “left-left” look ridiculous.
He rightly acknowledges that:
… economic inequality is manifestly real, growing and dangerous. The gulf between the penthouse and the projects is obscenely wide.
In the US Congressional Budget Office publication – The Distribution of Household Income and Federal Taxes, 2010 – which was released in December 2013, the CBO find that:
… real mean household money income rose by 0.2 percent in both 2011 and 2012 … there was a decline in household income for all groups other than households in the top quintile. Consequently, income as measured in the CPS became more unequal, with the share of income going to households in the top quintile rising by 0.7 percentage points. That shift mostly occurred in 2011; the distribu- tion of income was little changed from 2011 to 2012.
Nations with rising income inequality grow more slowly and have higher need for public infrastructure.
Bill Keller also is correct when is says that immobility is a major issue associated with inequality:
It’s not just that we have too many poor people, but that they are stranded in poverty with long odds against getting out. The rich (and their children) stay rich, the poor (and their children) stay poor.
Analysis by the US Congressional Research Service – The U.S. Income Distribution and Mobility: Trends and International Comparisons – published November 29, 2012 found that:
… the U.S. income distribution appears to be among the most unequal of all major industrialized countries and the United States appears to be among the nations experiencing the greatest increases in measures of income dispersion … The extent to which countries undertake policies that affect their income distributions may reflect national differences in perceptions about the degree of income mobility. In the United States, a longstanding argument against redistributionary policies has been that each person has an equal opportunity to move up the income ladder … Empirical analyses estimate that the United States is a comparatively immobile society, that is, where one starts in the income distribution influences where one ends up to a greater degree than in several advanced economies. Children raised in families at the bottom of the U.S. income distribution are estimated to be especially less likely to ascend the income ladder as adults.
The American Dream? Doesn’t exist in reality. The US is a highly stratified society that has strong barriers to upward mobility that keep the poor poor and the rich rich.
Then the attack on the left-left begins. Bill Keller says that:
The left-left sees economic inequality as mainly a problem of distribution — the accumulation of vast wealth that never really trickles down from on high. Their prescription is to tax the 1 percent and close corporate loopholes, using the new revenues to subsidize the needs of the poor and middle class. They would string the safety net higher: expand Social Security, hold Medicare inviolate, extend unemployment insurance, protect food stamps, create more low-income housing. They would raise the minimum wage.
This apparently violates the necessity not to make the rich poor but to make the poor rich. Success should not be punished according to Keller.
Which tells you a lot about how he measures success.
Certainly the “left-left” are misguided into believing that there is only finite financial resources that have to be redistributed to reduce inequality.
The alternative is that the US government could just increase spending targetted to the lower income quintiles and leave the tax structure unchanged. As I noted above, the decisions about tax depend on who the government wants to deprive of purchasing power and the necessity to do the same (that is, how close to full employment the economy is).
The US economy has stacks of idle capacity so increasing net public spending will bring real resources back into productive use rather than straining the price level. That doesn’t mean I support leaving the tax structure as it is. But I would consider that question quite differently from the aims of improving the fortunes of the poor.
Further, I would also declare most speculative financial activity to be illegal (given it is unproductive and destabilising) and that, alone, would put a major dent in the incomes of the uber-rich in the US and force them to get a real job.
Why isn’t that advanced by the “left-left”?
Bill Keller thinks the “left-left” is simplistic and the “centre-left” has a better appreciation of how complicated all this is.
He claims the “centre-left” appreciate that you need to have growth to improve mobility. He claims that the “left-left” do not address this issue properly.
First, he says:
The populists favor putting more money in the hands of the bottom and middle, who will then spend us back to economic vigor. This is classic Keynesian thinking, largely vindicated by history. But the center-left points out that our economy is already 70 percent dependent on domestic consumers, way more than other developed countries.
Which doesn’t take into account the need to be “competitiveness” that helps trade deals. To be more productive, Keller opines, the US government has to “shrink long-term deficits and streamline regulations”.
Phew. I just fell further off the continuum.
If the US government wants to improve productivity it has to invest further in public education and force the financial markets to channel funds into real capacity building rather than slicing and dicing derivatives. Banning most of the latter activity would be a good start.
In the meantime, it should (about) double its federal deficit and target public employment and infrastructure building.
Further, worrying about trade is a waste of time. If the US can continue to run external deficits then its citizens win (overall) while the exporting nations deprive their citizens of access to real resources.
Second, Bill Keller says that in relation to “entitlement”:
The left-left seems to believe that government investments — roads and bridges, clean energy, education, etc. — and more-generous safety-net benefits can all be had by milking the rich and cutting military spending. Most centrists would raise taxes some and cut defense spending some, but they say that unless we also curb the growth of entitlements, the stampede of baby boomers into Social Security and Medicare will crowd out everything else.
The crowding out will only come if the US runs out of real resources that can be deployed to service the needs of the older citizens.
Increasing benefits to the poor might put a strain on real resources in the future (although I doubt it) which means that other cohorts will have to be deprived. But this has nothing to do with the capacity of the US government to purchase what real resources are available.
Bill Keller seems not to understand that (nor the Third Way idiots by the way).
Third, Bill Keller says that:
And a third difference between the near left and the far left is the question of making government more efficient. This is not so much a policy dispute as a mind-set. In education, health care, Social Security and other areas, the center seems more receptive to reforms intended to get decent results at lower costs. Further left, reform is seen as a euphemism for taking stuff away, and often resisted.
There is no doubt that government should use real resources effectively. We don’t want things wasted. But that doesn’t require corporatisation, privatisation or running down of entitlements.
In the health care system, I sense there is a major attack needed on the pharmaceutical and health insurance companies, not to mention the elite medical specialists etc.
These groups extract massive rents from the system, which by definition of a rent means that they would supply their goods and services in the same way for much lower incomes than they get.
It is obvious that the US health case system is massive rorted by these groups without any major difference in health care outcomes.
Indeed, if you read the – U.S. Health System Scorecards – published by The Commonwealth Fund, you learn that the US system scores poorly in areas such as infant mortality, coordination of chronic care, life expectancy, and avoiding preventable mortality and morbidity. These failings are distributed disproportionately towards the lower income groups.
Progressives should stop worrying about how the US government can “pay” for more equitable health care and instead advance policies that disenfranchise the rent earners – that means, take on the establishment – which, after all, is a truly progressive thing to do in most eras.
Most of this dispute in US democratic politics spreads more widely. It also is based on the fact that the “centre-left” is nothing like a reasonable depiction of centrist positions. They represent positions that the right-wing used to advance especially in economic matters.
They perpetuate the neo-liberal myths about government financial capacity and then demonise positions that used to be centrist. Further, the new left still refuse to embrace a truly progressive view of the monetary system.
They remain locked into believing that currency-issuing governments have financial constraints. Until they jettison that mythology they will remain populist but ineffective.
That is enough for today!
(c) Copyright 2013 Bill Mitchell. All Rights Reserved.