What Does It All Mean?

No, not 502 as in “deuce,” section 502 of the pre-1970s California Vehicle Code, if you’re old enough to remember that and unfortunate enough to have had any direct or indirect involvement with drunk driving.

This time it’s Initiative 502, on the Washington ballot, which asks Washington voters whether recreational use of marijuana for people over 21 should be legalized.fillfillfillfillfillfillfillfillfillfilll fillfill
An article in the current Time magazine reiterates many of the same issues we’ve been discussing at home. On the one hand, one line of thinking runs that passing the initiative, even though flawed, would be a significant and long overdue step forward and away from the obviously failed policies of criminalization and interdiction. The initiative of course includes controls and sets limits. With the state controlling production and distribution and gaining revenue from the industry, it would be analogous to the liquor industry.

On the other hand, some among the advocates of legalized marijuana oppose 502 because it so imprecisely defines who might or might not be under the influence of the drug, thereby, say some, giving law enforcement a new means they do not now have to harass or arrest marijuana smokers. Specifically, the initiative says that if you have 5 nanograms of THC in your blood you’re too stoned to drive legally, just as a .08 blood alcohol level defines when someone is too drunk to drive legally. The problem is that alcohol in the blood goes away in a matter of hours, but THC in the blood can remain for days.

In other words, you could smoke a joint at a party on Saturday and get a ride home afterward, then driving home from work on Tuesday, long after you would be in any way functionally affected by the joint you smoked on Saturday, get stopped and THC tested and come up as DUI.

So the more interesting question to come out of this is: When is it better to do what you can when you can to drag mainstream society kicking and screaming down the avenue of progress toward a change that is inevitable even if the first cut at the law contains imperfections, and when is it better to reject the imperfectly cast law despite the opportunity to make a progressive step, in favor of holding steady for the time being and recasting a better proposal that is not so open to abuse at the hands of less-than-objective officials?

A good wisecrack from Paul Krugman’s Oct 7 NY Times column, titled “Truth About Jobs”:

But the employment data [the recent BLS report indicating unemployment has fallen to 7.8%]  do suggest an economy that is slowly healing, an economy in which declining consumer debt burdens and a housing revival have finally put us on the road back to full employment.

And that’s the truth that the right can’t handle. The furor over Friday’s report revealed a political movement that is rooting for American failure, so obsessed with taking down Mr. Obama that good news for the nation’s long-suffering workers drives its members into a blind rage. It also revealed a movement that lives in an intellectual bubble, dealing with uncomfortable reality — whether that reality involves polls or economic data — not just by denying the facts, but by spinning wild conspiracy theories [referring to the assertion by Jack Welch, former General Electric CEO and a “BLS truther” (Krugman’s term) that the labor statistics must have been fabricated or manipulated to suit Democratic political ends].

Full text at http://www.nytimes.com/2012/10/08/opinion/krugman-truth-about-jobs.html?_r=1&partner=rss&emc=rss&wpisrc=nl_wonk.

Yep, I’m a liberal. Progressive, even. Deal with it.

I’m sorry, I can’t help it: when I come across something that clearly explains a key element of the political and economic mess our country is in, I have to pass it along. This one’s an article by Joseph Stiglitz titled “The Vicious Cycle of Economic Inequality,” from Politico.

Some of the choice bits (but read the whole article – it’s not long – to get the full logical flow and supporting detail):

America’s growing inequality is likely to play an important role in this election — and rightly so. Americans see that something is happening to our society: We have become increasingly divided. … The net result is disheartening: Most Americans are worse off today than they were 15 years ago.

Much of the top-most wealth instead comes because of successful “rent seeking.” Economists use the term “rents” for income derived from owning an asset, rather than from effort. “Rent seeking” refers to attempts to garner a larger share of the economic pie, rather than making the pie larger. …

Market forces do, of course, play a role in creating inequality. They have been particularly important in the hollowing out of the middle class. … Market forces…in the U.S. shape markets in ways that enrich the top — but don’t necessarily enhance growth and efficiency.

In all this, there is both hope and despair: Hope because the inequality in the U.S. is not inevitable. There are countries that, even with the same market forces at play, have managed to grow with less inequality. There are countries that have managed even to diminish the level of inequality. …

There is, however, also a sense of despair — because it will most likely be so hard to get these reforms passed. Just as our laws and regulations shape market forces to serve the interests of the top, our political system shapes our democracy so that it serves the same interests.

Our system would increasingly be better described as one dollar, one vote rather than one person, one vote — as the effects of campaign contributions, lobbying, revolving doors and disenfranchisement all take their toll.

Economic inequality feeds into inequalities of political power, leading to still more economic inequality. The U.S. is headed down the path that so many dysfunctional societies have traveled — divided societies in which the rich and poor live in different worlds.

There is an alternative. But will our politics allow it? Will those at the top come to realize that a house divided against itself cannot stand — that this level of inequality is not in their enlightened self-interest?

Or will the vast majority of Americans finally realize that they have been sold a bill of goods — trickle-down economics has never worked and is especially not working today.

In other periods of our history, when inequalities and injustices grew to the breaking point, America changed course. The question is: Will we do so again?

OK, I’ll try to lay off this theme for a while. But a lack of evidence of change for the better suggests that there still aren’t enough people paying attention.

True, I am pretty hard over when it comes to Keynesian economics and think Paul Krugman, Joseph Stiglitz, and some others are right on. Downright funny, even, at times.

So now, check this out: a self-described “supply-side liberal,” Miles Kimball, at the University of Michigan, who on his blog Confessions of a Supply-Side Liberal argues cogently both that heavy taxation and over-regulation impede economic productivity and that redistribution of wealth offers, at least at present, benefits that outweigh the distortions it typically causes.

In other words, he believes that we should be stimulating the economy, but at both ends of the economic spectrum: continue to top-load the economy so the benefits trickle down, but also put some wealth in the hands of everyday folks and motivate them to spend it so demand increases and dollars circulate.

As his student Noah Smith explains in his own blog, Kimball thinks like a scientist, not a political creature, by first impartially analyzing the available evidence and then determining what to do with the conclusions. Not establishment, not contrarian, not politically categorizable – a supply-side liberal.

Some of Kimball’s posts get a little bit geeky, but he explains his points clearly and patiently so that even a macroeconomics-challenged babe in the woods like me can follow them. For example, in addition to “What is a Supply-Side Liberal?” try “Balance Sheet Monetary Policy: A Primer.”

Another telling-it-like-it-is article ya gotta read, this one from Nobel-laureate economist Joseph Stiglitz, that appeared this morning on the Project Syndicate web site: The Price of Inequality.

Some highlights:

“… Nowadays, these numbers show that the American dream is a myth. There is less equality of opportunity in the United States today than there is in Europe – or, indeed, in any advanced industrial country for which there are data.

This is one of the reasons that America has the highest level of inequality of any of the advanced countries – and its gap with the rest has been widening. In the “recovery” of 2009-2010, the top 1% of US income earners captured 93% of the income growth. Other inequality indicators – like wealth, health, and life expectancy – are as bad or even worse. The clear trend is one of concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.

… It might not be so bad if there were even a grain of truth to trickle-down economics – the quaint notion that everyone benefits from enriching those at the top. But most Americans today are worse off – with lower real (inflation-adjusted) incomes – than they were in 1997, a decade and a half ago. All of the benefits of growth have gone to the top.

Defenders of America’s inequality argue that the poor and those in the middle shouldn’t complain. While they may be getting a smaller share of the pie than they did in the past, the pie is growing so much, thanks to the contributions of the rich and superrich, that the size of their slice is actually larger. The evidence, again, flatly contradicts this. Indeed, America grew far faster in the decades after World War II, when it was growing together, than it has since 1980, when it began growing apart.

This shouldn’t come as a surprise, once one understands the sources of inequality. Rent-seeking distorts the economy. Market forces, of course, play a role, too, but markets are shaped by politics; and, in America, with its quasi-corrupt system of campaign finance and its revolving doors between government and industry, politics is shaped by money.

… But, most importantly, America’s inequality is undermining its values and identity. With inequality reaching such extremes, it is not surprising that its effects are manifest in every public decision, from the conduct of monetary policy to budgetary allocations. America has become a country not “with justice for all,” but rather with favoritism for the rich and justice for those who can afford it – so evident in the foreclosure crisis, in which the big banks believed that they were too big not only to fail, but also to be held accountable.”

Read the whole piece; it’s another clear exposition of what’s going on in our country right now.

Despite what Mann and Ornstein pointed out in their recent article (that Republicans have become ideologically extreme and are “unmoved by conventional understanding of facts, evidence and science”), what part of the economic and political landscape that Stiglitz sketches are people not understanding?

How can we as a population, an electorate, take seriously any political candidate at any level who supports the very policies and practices that have driven us as far into the ground as they have and that prevent our economic resurgence?

But we do. The sad evidence is in the headlines every day. I just don’t get it.

(Permission pending from Project Syndicate, www.project-syndicate.org, to excerpt the Stiglitz article for this post.)

Never mind what Paul Krugman and a host of others have been saying about trickle-down economics (the theory that says tax breaks and other economic benefits should be conferred on businesses and the wealthy because they’re the ones who create jobs) and the approximately 30 years’ worth of evidence Krugman et al. have been presenting to show that it doesn’t work.

Maybe we really should continue to tax rich people less. After all, who else is able to invest in ways that create jobs? Consider these excerpts from a recent speech by Nick Hanauer, a very successful Seattle venture capitalist:

… I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is a “circle of life” like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me. 

… When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer.

Since 1980 the share of income for the richest Americans has more than tripled while effective tax rates have declined by close to 50%.  If it were true that lower tax rates and more wealth for the wealthy  would lead to more job creation, then today we would be drowning in jobs.  And yet unemployment and under-employment is at record highs.

… If the typical American family still got today the same share of income they earned in 1980, they would earn about 25% more and have an astounding $13,000 more a year. Where would the economy be if that were the case?

…We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Rather they are a consequence of an eco-systemic  feedback loop animated by middle-class consumers, and when they thrive, businesses grow and hire, and owners profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

In a capitalist economy, the true job creators are consumers, the middle class.  And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and the rich.

Hmm. What a concept: When consumers have more money they consume more, and producers produce more — which requires workers — to satisfy the demand. When consumers have less money demand drops, so producers naturally reduce production.

Since it’s clearly not being spent on consumers in the form of direct benefits, health care, and education and it’s clearly not reducing unemployment, where is all the money that is supposed to be trickling down ending up?  Hanauer seems to know, but let’s ask Mitt Romney or Paul Ryan or John Boehner  to see if any of those guys can explain what’s going on and why the government should persist in policies that demonstrably have negative effects on our economy and society as a whole.

Thanks to Jim Tankersley and his article “The Inequality Speech TED Won’t Show You,” which you can read in its entirety here.

Also see here  for the slides that accompanied Hanauer’s speech. Some of the slides are content free, but several provide economic data (sources cited) in graphical form to support what Hanauer says about income distribution.

A recent Washington Post article by Thomas E. Mann and Norman J. Ornstein came right out and said it: “The Republicans are the problem.” A few snippets:

“…[T]he core of the problem lies with the Republican Party. … The GOP has become an insurgent outlier in American politics. It is ideologically extreme; scornful of compromise; unmoved by conventional understanding of facts, evidence and science; and dismissive of the legitimacy of its political opposition.

“When one party moves this far from the mainstream, it makes it nearly impossible for the political system to deal constructively with the country’s challenges.

“It is clear that the center of gravity in the Republican Party has shifted sharply to the right. … Since the Clinton presidency, [the Democratic party] has hewed to the center-left on issues from welfare reform to fiscal policy. While the Democrats may have moved from their 40-yard line to their 25, the Republicans have gone from their 40 to somewhere behind their goal post. … Today, thanks to the GOP, compromise has gone out the window in Washington.

“Republicans often dismiss nonpartisan analyses of the nature of problems and the impact of policies when those assessments don’t fit their ideology. In the face of the deepest economic downturn since the Great Depression, the party’s leaders and their outside acolytes insisted on obeisance to a supply-side view of economic growth … while ignoring contrary considerations.

“Democrats are hardly blameless, and they have their own extreme wing and their own predilection for hardball politics. But these tendencies do not routinely veer outside the normal bounds of robust politics. If anything, under the presidencies of Clinton and Obama, the Democrats have become more of a status-quo party.

“If our democracy is to regain its health and vitality, the culture and ideological center of the Republican Party must change. In the short run, without a massive (and unlikely) across-the-board rejection of the GOP at the polls, that [our democracy’s regaining its health and vitality] will not happen. If anything, Washington’s ideological divide will probably grow after the 2012 elections.”

The article goes on to substantiate its assertions, explain how the rise of Republican extremism came to be, and discuss how the press fails to present a complete context to its audience. Read the entire article here .

When does the part come where we, the rank and file, the common people, the Great Unwashed, learn about cooperation and basic humanity and enlightened self interest and the common good?  And then immediately start tossing our so-called “leaders” out on their asses until they start governing accordingly?

(title taken from the Ray Charles song, “Them That Got”)

Update on income distribution in the United States, from a column titled “The Rich Get Even Richer” by Steven Rattner that appeared in the New York Times, March 25, 2012:

“In 2010, as the nation continued to recover from the recession, a dizzying 93 percent of the additional income created in the country that year, compared to 2009 — $288 billion — went to the top 1 percent of taxpayers, those with at least $352,000 in income. That delivered an average single-year pay increase of 11.6 percent to each of these households.

Still more astonishing was the extent to which the super rich got rich faster than the merely rich. In 2010, 37 percent of these additional earnings went to just the top 0.01 percent, … about 15,000 households with average incomes of $23.8 million. These fortunate few saw their incomes rise by 21.5 percent.

The bottom 99 percent received a microscopic $80 increase in pay per person in 2010, after adjusting for inflation. The top 1 percent, whose average income is $1,019,089, had an 11.6 percent increase in income.

This new data, derived by the French economists Thomas Piketty and Emmanuel Saez from American tax returns, also suggests that those at the top were more likely to earn than inherit their riches. That’s not completely surprising: the rapid growth of new American industries — from technology to financial services — has increased the need for highly educated and skilled workers. At the same time, old industries like manufacturing are employing fewer blue-collar workers.

The result? Pay for college graduates has risen by 15.7 percent over the past 32 years (after adjustment for inflation) while the income of a worker without a high school diploma has plummeted by 25.7 percent over the same period.

Government has also played a role, particularly the George W. Bush tax cuts, which, among other things, gave the wealthy a 15 percent tax on capital gains and dividends. …

As a result, the top 1 percent has done progressively better in each economic recovery of the past two decades. In the Clinton era expansion, 45 percent of the total income gains went to the top 11 percent; in the Bush recovery, the figure was 65 percent; now it is 93 percent.

Just as the causes of the growing inequality are becoming better known, so have the contours of solving the problem: better education and training, a fairer tax system, more aid programs for the disadvantaged to encourage the social mobility needed for them escape the bottom rung, and so on. …”

To see the full article, go to http://www.nytimes.com/2012/03/26/opinion/the-rich-get-even-richer.html?src=un&feedurl=http%3A%2F%2Fjson8.nytimes.com%2Fpages%2Fopinion%2Findex.jsonp

Is anyone besides me upset by these numbers?

• “According to the Congressional Budget Office, between 1979 and 2007 incomes of the top 1% of Americans grew by an average of 275%. During the same time period, the 60% of Americans in the middle of the income scale saw their income rise by 40%.

• Since 1979 the average pre-tax income for the bottom 90% of households has decreased by $900, while that of the top 1% increased by over $700,000, as federal taxation became less progressive. From 1992-2007 the top 400 income earners in the U.S. saw their income increase 392% and their average tax rate reduced by 37%. In 2009, the average income of the top 1% was $960,000 with a minimum income of $343,927.

• In 2007 the richest 1% of the American population owned 34.6% of the country’s total wealth, and the next 19% owned 50.5%. Thus, the top 20% of Americans owned 85% of the country’s wealth and the bottom 80% of the population owned 15%.

• Financial inequality was greater than inequality in total wealth, with the top 1% of the population owning 42.7%, the next 19% of Americans owning 50.3%, and the bottom 80% owning 7%. However, after the Great Recession which started in 2007, the share of total wealth owned by the top 1% of the population grew from 34.6% to 37.1%, and that owned by the top 20% of Americans grew from 85% to 87.7%.

• The Great Recession also caused a drop of 36.1% in median household wealth but a drop of only 11.1% for the top 1%, further widening the gap between the 1% and the 99%.”

From Wikipedia (http://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States). See the Wikipedia article for citations to the sources of the above facts. I subdivided the text into bullet items for better readability.

And as Paul Krugman recently wrote:

“The recent Congressional Budget Office report on inequality didn’t look inside the top 1 percent, but an earlier report, which only went up to 2005, did. According to that report, between 1979 and 2005 the inflation-adjusted, after-tax income of Americans in the middle of the income distribution rose 21 percent. The equivalent number for the richest 0.1 percent rose 400 percent.”

Excerpted from Paul Krugman´s 24 Nov NY Times op-ed column “We Are the 99.9%” http://www.nytimes.com/2011/11/25/opinion/we-are-the-99-9.html?src=me&ref=general

For some more Big Fun, do your own digging around to learn about the personal wealth of some of our senators, congressmen, and congresswomen and their voting records.

I didn’t see President Obama’s speech tonight, in which he outlined his plan to goose our recession-bound economy. Reportedly he gave a dynamic, forceful, energetic speech. So maybe I was wrong in my previous post about the administration’s softness so far in the face of a lot of damaging hardball. I hope so.