The House GOP Budget Ignores the Evidence That Combating Inequality is Good for Economic Growth

Mar 19, 2015Tim Price

The budget proposal put forth by House Republicans this week has been roundly criticized as yet another attempt to enact massive tax cuts that would redistribute money to the top at the expense of middle- and low-income families. Republicans contend these cuts would pay for themselves by producing rapid economic growth, which would create the proverbial rising tide that lifts all boats. But this is the GOP’s same old so-called trickle-down economics with a fresh coat of we-care-about-the-middle-class paint.

The budget proposal put forth by House Republicans this week has been roundly criticized as yet another attempt to enact massive tax cuts that would redistribute money to the top at the expense of middle- and low-income families. Republicans contend these cuts would pay for themselves by producing rapid economic growth, which would create the proverbial rising tide that lifts all boats. But this is the GOP’s same old so-called trickle-down economics with a fresh coat of we-care-about-the-middle-class paint. In reality, nonpartisan experts agree that policies that directly help low and middle-income families and reduce inequality are the real key to growth. Here are the facts:

  • Inequality is holding back economic growth. A Standard & Poor’s report found that extreme inequality in the U.S. is a drag on growth. Due to that rising inequality, S&P revised the 10-year growth forecast for the U.S. down from 2.8 percent to 2.5 percent annually.  
  • We don’t have to choose between equality and prosperity. Recent research thoroughly discredits Okun’s Law, the economic belief that there is a trade-off between equity and efficiency. In a 2014 report that analyzed historical data across multiple economies, the International Monetary Fund actually found that “the combined direct and indirect effects of redistribution – including the growth effects of lower inequality – are on average pro-growth.”  
  • Taxing the rich won’t hurt the economy. Wealthy interests often claim that taxing them will slow growth, but the same IMF report found that “the best available macroeconomic data do not support that conclusion.”

Despite Republicans’ desire to portray themselves as protectors of the free market and the middle class, even these market-oriented organizations recognize that progressive, middle-class-friendly tax policy is better for the overall economy. Roosevelt Institute Senior Fellow and Chief Economist Joseph Stiglitz has released a plan for reforming the tax code to promote equitable economic growth, and there will be more to come through the Roosevelt Institute’s Inequality Project as we continue to seek solutions to America’s growing inequality crisis.

Tim Price is Communications Manager for the Roosevelt Institute. Program Associate Eric Harris Bernstein contributed research to this post.

Click here to read the Roosevelt Institute | Campus Network's response to the Republican budget.

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The Sweet Briar Dilemma: Will Predatory Lending Take Down More Colleges?

Mar 16, 2015Alan Smith

After 114 years of educating young women in rural Virginia, Sweet Briar College recently announced that the 2015 academic year would be its last. It’s closing its doors, administrators say, because its model is no longer sustainable.

After 114 years of educating young women in rural Virginia, Sweet Briar College recently announced that the 2015 academic year would be its last. It’s closing its doors, administrators say, because its model is no longer sustainable.

There are plenty of people coming out of the woodwork to explain Sweet Briar's problems. Dr. James F. Jones, the school’s president, claims that there are simply not enough people who want to attend an all-women's rural liberal arts school (though application numbers and some pundits disagree); he blames the discount that the school was giving to low-income students for the institutional budget shortfall. Billionaire investor Mark Cuban says that Sweet Briar has fallen victim to the student loan bubble and that students are unwilling to commit the money to attend, which sounds a lot like the blame-the-homeowner narrative that came out of the 2008 financial crisis.  Others are wringing their hands that small colleges in general are doomed.   

These takes are varied and complex, but they are all missing an important point: that predatory banking practices and bad financial deals played an important and nearly invisible role in precipitating the school’s budget crisis.  

A quick look at Sweet Briar’s audited financial reports (easily available in public records) reveals enough confusing and obfuscating financial-speak to last a lifetime, but a few days of digging did manage to unearth a series of troubling things.  

A single swap on a bond issued in June 2008 cost Sweet Briar more then a million dollars in payments to Wachovia before the school exited the swap in September 2011. While it is unclear exactly why they chose 2011 to pay off the remainder of the bond early, they paid a $730,119 termination fee. For a school that was sorely strapped for cash, these fines and the fees that accrued around this deal (which are hard to definitively pick out from financial documents) couldn't have come at a worse time.  

Just how big a deal are these numbers? The school has a relatively small endowment even among small liberal arts colleges: currently valued at about $88 million, with less then a quarter of that total completely unrestricted and free to spend. But in 2014, the financial year that appears to have been the final straw for Sweet Briar, total operating revenues were $34.8 million and total operating expenditures were $35.4 million, which means that the deficit the school is running is actually smaller than the cost of any of the bad deals it’s gotten itself into with banks. 

All of this puts in a very stark light the fact that the early retirement of debt (in other words, the losses the school suffered on the overall value of the bonds it had taken out because it decided to pay them back early) cost the school over $9 million in 2011 and more than $13 million in 2012. Why did the school accrue these costs? We have no way of knowing if it was bad advice from bankers, negligent trustee members covering a mistake, or a well-intentioned plan that hit at the wrong time.  

What we can say, though, is that a million dollars here and a million dollars there adds up to real money that was desperately needed as Sweet Briar fought to stay afloat.  

We know that Wall Street collects higher fees on risky and complicated deals involving variable rate debt and hedging instruments, like the ones found in Sweet Briar's last few decades of financials, than from fixed rate debt deals. We know that they add on things like credit enhancements, further driving up the costs. We know that those higher fees mean that there is a clear financial incentive to sell schools, municipalities, and pension funds on these risky deals. And we know that it works in Wall Street's favor that someone like me can spend days digging into this stuff and still not be totally sure what the exact costs of these deals are.  

What we don't know is how all these things were allowed to happen at this particular school in this particular timeframe.  

Sweet Briar appears slated to close because it is a small organization without the resources to counter the huge information imbalance that has helped precipitate the financialization crisis. It is closing because it signed some terrible deals to get what must have felt like "needed" money at the time. You can see the reasons: a $14 million bond (with swaps) in 2001 for campus improvements. A $10 million bond in 2006 to pay off other bonds that had revealed their ugly side and were costing the school too much to be allowed to fully mature. But, as has so often been the case in everything from municipal finance to personal home loans, there was a problem in the small print. Like many other colleges, what appeared to be vital and even beneficial deals turned out to be nothing of the sort. Unlike many others, Sweet Briar was already close enough to the financial brink that these ongoing debts made the difference between staying open and closing its doors.  

There are, of course, other very real pressures on Sweet Briar. Lower enrollment numbers do really hurt a school, and there are real questions about how to keep small, rural liberal arts institutions competitive in a higher education economy. None of these issues, however, compare to the fees, fines, penalties, and other losses that are all over Sweet Briar’s books. 

Is Sweet Briar the canary in the coalmine? Banks are certainly making obscene profits on the backs of the swap deals in the UC system, at the University of Michigan, and at American University — and those are the places that we’ve found in our first month of looking. While those schools are solvent enough that these swaps are not pushing them to the brink of closing, they are exacerbating budget shortfalls and passing debt on to students through increased costs. These deals are also clearly making money for many school trustees whose day jobs happen to be with the giant banks. Here I find myself agreeing with Mark Cuban, at least in part: these trends are a part of a vicious cycle of borrowing that is wholly unsustainable, and will eventually lead to a crisis.  

This is why the Roosevelt Institute | Campus Network is working to track the ways in which financial institutions are extracting wealth from our colleges and universities, and make a clear case for demanding our money back. I hope that the storied institution of Sweet Briar can find a way to keep its doors open in 2016, but even if it fails, that failure should wake us up to predatory practices at colleges and universities around the country.   

Questions? Concerns? Interested in my math? Drop me a line.

Alan Smith is the Roosevelt Institute | Campus Network's Associate Director of Networked Initiatives.

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Interview with Eric Foner and his Reconstruction MOOC

Mar 11, 2015Mike Konczal

About a month ago, I interviewed the great historian Eric Foner about his Civil War and Reconstruction MOOC, the experience of teaching those time periods to students, and his work's relationship to the left now for The Nation. I forgot to post it here; I'm doing so now because the third and final part of the MOOC, The Unfinished Revolution: Reconstruction and After, 1865-1890, has just started and you can still sign up. (All the lectures will eventually end up on youtube. Here are links to the first class on the buildup to the Civil War and the second class on the Civil War itself.)

Foner is a great lecturer, and the lectures are his class, the final time he teaches it at Columbia, recorded and broken up into segments. It's especially awesome to get to sit in on Foner lecturing about Reconstruction, given that he wrote the book that still defines the period. I highly recommend checking it out.

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About a month ago, I interviewed the great historian Eric Foner about his Civil War and Reconstruction MOOC, the experience of teaching those time periods to students, and his work's relationship to the left now for The Nation. I forgot to post it here; I'm doing so now because the third and final part of the MOOC, The Unfinished Revolution: Reconstruction and After, 1865-1890, has just started and you can still sign up. (All the lectures will eventually end up on youtube. Here are links to the first class on the buildup to the Civil War and the second class on the Civil War itself.)

Foner is a great lecturer, and the lectures are his class, the final time he teaches it at Columbia, recorded and broken up into segments. It's especially awesome to get to sit in on Foner lecturing about Reconstruction, given that he wrote the book that still defines the period. I highly recommend checking it out.

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Is Expanding Medicaid an Essential Part of Reducing Mass Incarceration? An Interview with Harold Pollack

Mar 11, 2015Mike Konczal

Every policy lever available was pulled in order to create our system of mass incarceration over the past 40 years. Reformers will have to be equally clever and nimble in trying to challenge and dismantle this system. And one important lever that I hadn't thought much about in this context is the Affordable Care Act's (ACA, or Obamacare) expansion of Medicaid. This expansion is being blocked in 22 states, which is preventing 5.1 million Americans from getting health-care.

This came up in an excellent interview between Connor Kilpatrick and the political scientist and incarceration scholar Marie Gottschalk over at Jacobin. Commenting on the limits of the current wave of bipartisan support against incarceration, Gottschalk notes that "If you care about reentry and about keeping people out of prison in the first place, there’s no public policy that you should support more strongly now than Medicaid expansion. Medicaid expansion gives states huge infusions of federal money to expand mental health services, substance abuse treatment, and medical care for many of the people who are most likely to end up in prison. It also allows states and localities to shift a significant portion of their correctional health care costs to the federal tab." Similar concerns were raised by Elizabeth Stoker Bruenig at The New Republic.

I immediately got Gottschalk's new book Caught, the subject of the Jacobin interview, and though I just started the book I highly recommended it as a guide to where the prison state stands in 2015. But I wanted to know more about the relationship between Medicaid and deincarceration.

So I reached out to friend-of-the-blog Harold Pollack. Pollack is the Helen Ross Professor at the School of Social Service Administration at the University of Chicago. He is also Co-Director of The University of Chicago Crime Lab at the University of Chicago. He has published widely at the interface between poverty policy and public health, and he also writes for a wide variety of online and print publications. He is also a thoughtful scholar on health care and crime policy and how they interact in communities.

Mike Konczal: How important is the Medicaid expansion for deincarceration?

Harold Pollack: I’m convinced that Medicaid expansion is essential for this problem. It’s essential for two different purposes. First, individuals in this population need health services, and there needs to be a clear way that individuals can get access to services from qualified providers. The Medicaid expansion does that.

Secondly, the entire ecosystem of care requires proper financing. And for historical reasons, mental health and substance abuse services have been put into their own silos. They are not properly financed, except through a patchwork of safety net funding streams that don’t particularly work well. They have also been poorly-integrated with standard medical care.

Let’s talk about individuals first. In what ways could Medicaid benefit people who are or are likely to get caught up in the criminal justice system?

Think about who is not eligible for Medicaid before health reform. A low-income male who is not a veteran or a custodial parent, or who doesn’t qualify for Ryan-White HIV/AIDS benefits. They may have a serious substance abuse problem, but that wouldn’t qualify them for federal disability benefits. They, with the expansion, can get access to Medicaid simply because they are poor.

The criminal justice population is quite varied, but there are a couple of key areas in which Medicaid expansion would be especially beneficial for them. With the expansion, Medicaid can now cover basic outpatient substance abuse treatment. This is true for both Medicaid and private insurance after health reform. And ACA provides these services in a way that is much more integrated with people’s regular medical care.

One basic challenge with drug and alcohol treatment is that these services are in a separate system that people don’t want to use, and don’t use. With the Medicaid expansion, you can go to a neighborhood clinic and they can help you get Methadone or Suboxone. They can also get you the psychiatric care you need within the same umbrella of your regular care. So it is much more likely that people will use it.

There’s very good evidence that alcohol and illicit drug treatment reduces criminal offending. [Editor note: Both this study and this study, obtained via follow-up email, show treament reduces violent and property crime enough to far pass a cost-benefit test.] Both It partly reduces criminal offending by reducing the need to commit property crimes to get the substances. It also reduces offending by allowing people to be more functional, and thus more likely to stay employed. Especially in the case of alcohol, people getting their substance abuse under control makes it less likely that they’ll be intoxicated, and thus less likely to commit crimes or be victims of crime.

What about those with mental illness?

When it comes to those with serious mental illness, we end up using local jails to try and manage them. It’s important that they can get access to help and mental health treatment outside of the criminal justice itself. It’s ironic that when someone with psychiatric disorders is inside the jail, they do have access to some of these services. But those services are often unavailable or totally disconnected when they leave the jail.

We don’t really know whether, or by how much, these services can be expected to reduce offending among this group. This remains a hypothesis that depends on how well we actually implement programs. Much will depend on how effectively we can implement Medicaid expansion.

How does this element of Medicaid deal with the traditional criticisms of the program?

Medicaid has many shortcomings. It doesn’t pay a market rate for important services. But for all of its faults, Medicaid recipients are grateful to have it. The satisfaction they have is quite high compared to traditional health insurance. Medicaid gives people access to the basic health care that they need to stay healthy and improve their lives. It is also genuinely designed for people who have no money, which is really important for these indigent populations. Medicaid is inferior to private insurance in terms of reimbursement to providers, but it’s better for really poor people than any private insurance I’ve seen, because it’s been road tested for a long time in meeting the needs of indigent people.

And as I mentioned, ACA is especially important, because the ACA includes very specific components in the area of mental health and substance use.

One thing I’ve noticed is that for all the talk about ending mandatory minimums, most of the real energy is about giving judges flexibility to ignore mandatory minimums. But that put a lot of pressure on keeping recidivism down, because judges, especially elected ones, won’t ignore long records.

Deincarceration requires the puzzle pieces to fit together to be sustainable and politically tenable. That requires that we deal with the real-life problems people face when they are released. It requires monitoring and people have access to services, both to improve their quality of life and to reduce the probabilities that they will reoffend.

If we just release people without support services, my fear is that it will not go well. Then it will ultimately generate political backlash. I’m very heartened that we are reducing the mandatory minimums, in particular for older offenders who tend to be less violent. It’s essential that we address the excessive sentencing. But we also have to do what we need to do to make this effective.

Even if judges can reduce sentencing, they are ultimately dependent on the available resources to help and monitor the people that come before them. And if judges don’t see those services, then they aren’t going to use their discretion to release many of these people as early as they might.

And if property crimes are being committed by people under criminal justice supervision, and they have a history of violent offending, then they are much more likely to be sent back with a pretty serious sanctions.

Tell me more about the second issue, how the ACA rationalizes the funding stream for these services.

We’ve had a messy system in the past, and we’ll ultimately rationalize it under Medicaid. Safety net providers for substance abuse and mental illness have always been paid for by a patchwork of public funding through obscure agencies and local governments. It has always been a huge challenge where access has been inadequate, with long waiting lines, and the services provided were often quite forbidding. Given this separate funding, it’s very difficult to integrate this in with people’s overall health care. When you have these silos of places to go, with one for mental health, another silo for substance abuse, and another for safety net health care, that person isn’t going to get the integrated care they really need. The ACA is trying to bring those things together.

Many of these issues will still be in play going forward, but it will be in the context of a coherent system that at-least addresses these issues within the context of broader health care.

Follow or contact the Rortybomb blog:
 
  

 

Every policy lever available was pulled in order to create our system of mass incarceration over the past 40 years. Reformers will have to be equally clever and nimble in trying to challenge and dismantle this system. And one important lever that I hadn't thought much about in this context is the Affordable Care Act's (ACA, or Obamacare) expansion of Medicaid. This expansion is being blocked in 22 states, which is preventing 5.1 million Americans from getting health-care.

This came up in an excellent interview between Connor Kilpatrick and the political scientist and incarceration scholar Marie Gottschalk over at Jacobin. Commenting on the limits of the current wave of bipartisan support against incarceration, Gottschalk notes that "If you care about reentry and about keeping people out of prison in the first place, there’s no public policy that you should support more strongly now than Medicaid expansion. Medicaid expansion gives states huge infusions of federal money to expand mental health services, substance abuse treatment, and medical care for many of the people who are most likely to end up in prison. It also allows states and localities to shift a significant portion of their correctional health care costs to the federal tab." Similar concerns were raised by Elizabeth Stoker Bruenig at The New Republic.

I immediately got Gottschalk's new book Caught, the subject of the Jacobin interview, and though I just started the book I highly recommended it as a guide to where the prison state stands in 2015. But I wanted to know more about the relationship between Medicaid and deincarceration.

So I reached out to friend-of-the-blog Harold Pollack. Pollack is the Helen Ross Professor at the School of Social Service Administration at the University of Chicago. He is also Co-Director of The University of Chicago Crime Lab at the University of Chicago. He has published widely at the interface between poverty policy and public health, and he also writes for a wide variety of online and print publications. He is also a thoughtful scholar on health care and crime policy and how they interact in communities.

Mike Konczal: How important is the Medicaid expansion for deincarceration?

Harold Pollack: I’m convinced that Medicaid expansion is essential for this problem. It’s essential for two different purposes. First, individuals in this population need health services, and there needs to be a clear way that individuals can get access to services from qualified providers. The Medicaid expansion does that.

Secondly, the entire ecosystem of care requires proper financing. And for historical reasons, mental health and substance abuse services have been put into their own silos. They are not properly financed, except through a patchwork of safety net funding streams that don’t particularly work well. They have also been poorly-integrated with standard medical care.

Let’s talk about individuals first. In what ways could Medicaid benefit people who are or are likely to get caught up in the criminal justice system?

Think about who is not eligible for Medicaid before health reform. A low-income male who is not a veteran or a custodial parent, or who doesn’t qualify for Ryan-White HIV/AIDS benefits. They may have a serious substance abuse problem, but that wouldn’t qualify them for federal disability benefits. They, with the expansion, can get access to Medicaid simply because they are poor.

The criminal justice population is quite varied, but there are a couple of key areas in which Medicaid expansion would be especially beneficial for them. With the expansion, Medicaid can now cover basic outpatient substance abuse treatment. This is true for both Medicaid and private insurance after health reform. And ACA provides these services in a way that is much more integrated with people’s regular medical care.

One basic challenge with drug and alcohol treatment is that these services are in a separate system that people don’t want to use, and don’t use. With the Medicaid expansion, you can go to a neighborhood clinic and they can help you get Methadone or Suboxone. They can also get you the psychiatric care you need within the same umbrella of your regular care. So it is much more likely that people will use it.

There’s very good evidence that alcohol and illicit drug treatment reduces criminal offending. [Editor note: Both this study and this study, obtained via follow-up email, show treament reduces violent and property crime enough to far pass a cost-benefit test.] Both It partly reduces criminal offending by reducing the need to commit property crimes to get the substances. It also reduces offending by allowing people to be more functional, and thus more likely to stay employed. Especially in the case of alcohol, people getting their substance abuse under control makes it less likely that they’ll be intoxicated, and thus less likely to commit crimes or be victims of crime.

What about those with mental illness?

When it comes to those with serious mental illness, we end up using local jails to try and manage them. It’s important that they can get access to help and mental health treatment outside of the criminal justice itself. It’s ironic that when someone with psychiatric disorders is inside the jail, they do have access to some of these services. But those services are often unavailable or totally disconnected when they leave the jail.

We don’t really know whether, or by how much, these services can be expected to reduce offending among this group. This remains a hypothesis that depends on how well we actually implement programs. Much will depend on how effectively we can implement Medicaid expansion.

How does this element of Medicaid deal with the traditional criticisms of the program?

Medicaid has many shortcomings. It doesn’t pay a market rate for important services. But for all of its faults, Medicaid recipients are grateful to have it. The satisfaction they have is quite high compared to traditional health insurance. Medicaid gives people access to the basic health care that they need to stay healthy and improve their lives. It is also genuinely designed for people who have no money, which is really important for these indigent populations. Medicaid is inferior to private insurance in terms of reimbursement to providers, but it’s better for really poor people than any private insurance I’ve seen, because it’s been road tested for a long time in meeting the needs of indigent people.

And as I mentioned, ACA is especially important, because the ACA includes very specific components in the area of mental health and substance use.

One thing I’ve noticed is that for all the talk about ending mandatory minimums, most of the real energy is about giving judges flexibility to ignore mandatory minimums. But that put a lot of pressure on keeping recidivism down, because judges, especially elected ones, won’t ignore long records.

Deincarceration requires the puzzle pieces to fit together to be sustainable and politically tenable. That requires that we deal with the real-life problems people face when they are released. It requires monitoring and people have access to services, both to improve their quality of life and to reduce the probabilities that they will reoffend.

If we just release people without support services, my fear is that it will not go well. Then it will ultimately generate political backlash. I’m very heartened that we are reducing the mandatory minimums, in particular for older offenders who tend to be less violent. It’s essential that we address the excessive sentencing. But we also have to do what we need to do to make this effective.

Even if judges can reduce sentencing, they are ultimately dependent on the available resources to help and monitor the people that come before them. And if judges don’t see those services, then they aren’t going to use their discretion to release many of these people as early as they might.

And if property crimes are being committed by people under criminal justice supervision, and they have a history of violent offending, then they are much more likely to be sent back with a pretty serious sanctions.

Tell me more about the second issue, how the ACA rationalizes the funding stream for these services.

We’ve had a messy system in the past, and we’ll ultimately rationalize it under Medicaid. Safety net providers for substance abuse and mental illness have always been paid for by a patchwork of public funding through obscure agencies and local governments. It has always been a huge challenge where access has been inadequate, with long waiting lines, and the services provided were often quite forbidding. Given this separate funding, it’s very difficult to integrate this in with people’s overall health care. When you have these silos of places to go, with one for mental health, another silo for substance abuse, and another for safety net health care, that person isn’t going to get the integrated care they really need. The ACA is trying to bring those things together.

Many of these issues will still be in play going forward, but it will be in the context of a coherent system that at-least addresses these issues within the context of broader health care.

Follow or contact the Rortybomb blog:
 
  

 

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The Ferguson Probe Reveals Entrenched Racial Bias in Policing

Mar 9, 2015Aman Banerji

The Justice Department’s probe of Ferguson has revealed a troubling pattern of discrimination in traffic stops, but the problem doesn’t begin or end there.

The Justice Department’s probe of Ferguson has revealed a troubling pattern of discrimination in traffic stops, but the problem doesn’t begin or end there.

The initial findings from the Justice Department’s probe of the Ferguson, Missouri police department reveal a pattern of racial discrimination that is both broader than Ferguson and deeply rooted. Among the most shocking statistics disclosed last week is that African Americans accounted for 93 percent of all arrests in Ferguson in the 2012–14 period, although they accounted for only 67 percent of the city’s population.

Vehicle or traffic stops, a routine feature of citizen-police confrontations, appear to be a prime example of racial police bias in action. The initial findings reveal that 85 percent of all people stopped and 90 percent of citations in the area were conducted against African Americans. During the 2012–14 period, Black drivers were twice as likely as white drivers to be searched during traffic stops, although they remained 26 percent less likely to be in possession of contraband.

In spite of former Missouri state representative Jeff Roorda’s statements, it’s difficult to deny the startlingly obvious racial bias such evidence suggests. However, this initial set of 2012-14 findings has focused on Ferguson from 2012-14, ignoring longer-term trends in racial policing of traffic stops across the State of Missouri. 

The Missouri Attorney General’s analysis of vehicle stop rates from 2000–13 in Missouri and in the St. Louis County area reveals this long-term pattern. The stop rate in St. Louis County increased more than 300 percent during this period across all ethnicities, with a disproportionate increase in Black communities. There was a 522 percent increase in stop rates for Blacks, while the corresponding figure for white motorists in St. Louis County was 284 percent. Similarly, the ratio of stops that led to arrests has also shown a racially disproportionate increase, moving from 1.2 percent in 2000 to 7.5 percent in 2013 for African Americans, while corresponding figures for Whites were 1.1 percent and 4 percent. Clearly, not only have the police in St. Louis County been pursuing an increased number of stops, but an ever greater portion of these have targeted the African American community.

The disparity index compares a racial group’s proportion of traffic stops to its proportion of the population aged 18 or older. A value of 1 indicates that a group is neither over- nor underrepresented in traffic stops. In other words, the higher the disparity index, the greater the racial profiling at traffic stops. An examination of the disparity index for vehicle stops in St. Louis County provides an even clearer picture.

During the entire 13-year period of examination, the disparity index for Blacks in the region has remained between 1.34 and 1.50, peaking at 1.50 in the year 2013. Meanwhile, for whites the disparity index has remained between 0.88 and 0.96 in the same period, falling from 0.94 in 2000 to 0.88 in 2013. In fact, no other single ethnicity has ever risen above the disparity index of 1 in the entire period, demonstrating that African Americans were the only ethnicity to be the victims of disproportionate traffic stops in the 2000–13 period. 

The Department of Justice’s findings and a slew of media coverage have focused on the Ferguson region and the county of St. Louis. Yet the trend of increasingly punitive and racially biased traffic stops demonstrated at the St. Louis County level is just as demonstrable for the state of Missouri as a whole.

At the state level, the Attorney General’s report reveals that stop rates have climbed 270 percent, rising 385 percent for African Americans and 252 percent for whites during the 2000–2013 period. The rate of arrest from such stops in 2013 also remains racially tinged: 7.7 percent and 4.2 percent for African Americans and whites respectively. Finally, while the statewide disparity index has remained between 0.98 and 0.95 for whites, it has steadily increased for African Americans, rising from 1.27 in 2000 to 1.59 in 2013 and reaching a peak of 1.63 in 2011. In fact, the disparity index for African Americans in Missouri was even higher than St. Louis County. Clearly, the county’s racially discriminatory vehicle stop practices are not an outlier in the state. Equally though, in a nation where both the regularity and nature of traffic stops bear marked racial disparities, the state of Missouri itself is far from an outlier in national police practices.

These findings represent the entrenched nature of racially biased police stops. The case for stronger and more regular federal oversight of St. Louis’s policing practices could not be stronger. This local effort, however, must be complemented by a broader state-level response. Strengthening police-community relations, building police departments that more closely match the ethnic demographics of their constituents, and developing a more holistic set of safety measures beyond policing are all vital steps toward charting a less punitive and biased form of policing in St. Louis, Missouri, and beyond. 

Aman Banerji is the Roosevelt Institute | Campus Network's Community Manager.

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Ending New York's Traffic Jam: Campus Network Testimony to NY City Council

Mar 6, 2015Brit Byrd

On March 5, 2015, Campus Network Senior Fellow Brit Byrd testified before the New York City Council on the topic of vehicular traffic congestion and potential policy solutions. His written testimony is reproduced below.

Good afternoon. My name is Brit Byrd. I am the Senior Fellow for Economic Development for the Roosevelt Institute | Campus Network and a student at Columbia University.

On March 5, 2015, Campus Network Senior Fellow Brit Byrd testified before the New York City Council on the topic of vehicular traffic congestion and potential policy solutions. His written testimony is reproduced below.

Good afternoon. My name is Brit Byrd. I am the Senior Fellow for Economic Development for the Roosevelt Institute | Campus Network and a student at Columbia University.

The Roosevelt Institute | Campus Network is the nation’s largest student-driven policy organization, with more than 120 university campuses in 38 states, involving thousands of young people nationwide. In my capacity as a Senior Fellow, I have examined the economics and urban planning implications of New York City’s on-street parking spaces. I appreciate this opportunity to share some of my research and policy suggestions, which I elaborate on in depth in the attached white paper. That paper was also presented to members of the National Economic Policy Council at the White House last December.

Vehicular traffic congestion presents a serious and ongoing challenge in the City of New York. Most recently, the city’s “Vision Zero” program has highlighted the tragic human cost of reckless and haphazard traffic. This is sadly only one facet of a diverse and widespread problem, spanning concerns about public health, environmental emissions, losses in economic productivity, and responsible urbanism. The economic cost alone is staggering. The Partnership for New York City estimated that as much as $1.9 billion is lost annually due to inventory, logistical, and personnel costs of traffic congestion, and up to $4.6 billion is lost as unrealized business revenue.

The city has not been blind to this problem, and has pursued solutions at the state level and to a more limited extent within its own departments. But the city hasn’t fully taken advantage of one of the largest tools at its disposal: the management of on-street parking spaces. De-incentivizing vehicular traffic within the dense, transit-rich parts of our city is a straightforward task in that raising the cost of a car trip results in fewer car trips. Efforts at enacting a congestion pricing plan in 2008 and the current Park SMART NYC program reflect an awareness of this policy tool. But parking policies that use the same mechanisms have been almost entirely overlooked, even though they represent an ideal opportunity for the city to raise the effective cost of driving while operating entirely within its own powers.

City-administered on-street parking spaces are currently highly undervalued. Current rates vary from $1–$5 across the city, while pricing for an hour of parking in a private off-street garage suggests the market rate is closer to $15–$30. As noted in my white paper, there is extensive research showing that parking prices in cities with transit alternatives, such as New York City, respond remarkably well to classic principles of supply and demand: raise the price of parking and demand will decrease. Conversely, lower prices encourage a higher demand. This is especially pertinent when on-street metered parking is so much less expensive than off-street parking. In one study of six different urban sites, roughly one-third of traffic congestion consisted of people avoiding off-street market prices by circling around an area searching for cheap on-street parking.[1]

Parking spaces represent an enormous quantity of public land that is in effect rented out by the city, but the current management scheme heavily subsidizes the use of this space for a relatively small portion of New Yorkers. Only 22.7 percent of New Yorkers commute to work alone in a vehicle, and only 46 percent of households own a vehicle.[2]

Today I am here to urge the City Council to pursue two policies that would help reduce traffic congestion, discontinue subsidizing car ownership, and raise revenue.

  1. Introduce a residential parking permit system for on-street parking spaces on residential side streets.
  2. Devote a small number of on-street parking spaces for the exclusive use of car-sharing vehicles.

Both of these policies would raise additional revenue for the city, which I further advocate should be allocated to capital budgets for City Council districts that employ participatory budgeting.

Proposal #1 -- A Residential Parking Permit (RPP) System

The vast majority of on-street parking in the city is on residential side streets is completely free. In 2013, research found that “free and available on-street parking increased private car ownership by 8.8 percent for households with off-street parking in the New York City region.”[3] Simply put, this free parking represents an indirect subsidy of personal car ownership and induces additional traffic congestion. Moreover, the free use of residential on-street parking represents a complete concession of a valuable public resource to a small portion of citizens.

In place of free parking on these residential side streets, New York City should implement a residential parking permit (RPP) to set a more appropriate price for the public space being rented. This would also eliminate the existing informal subsidy for personal car ownership and reduce traffic congestion and other vehicle-related negative externalities. In contrast to metered parking, an RPP scheme operates by charging residents a monthly or yearly charge to park within a given zone.                                         

An RPP system benefits drivers by making it easier to find a parking spot available close to their front door and simplifying alternate-side parking. Perhaps for these reasons, there is evidence that New York City drivers are already prepared for RPP. Urban planning researchers Zhan Guo and Simon McDonnell found in 2013 that 52 percent of NYC drivers in the outer boroughs and upper Manhattan were already willing to pay for a residential permit, with a median volunteered price of $408 a year.[4]

Proposal #2 -- On-street parking spaces for car-sharing vehicles

Car-sharing services are already known and popular to many New Yorkers. For a relatively small yearly subscription fee and an hourly usage rate, subscribers can rent a car for the occasional trip, such as moving, trips outside of the city, or trips to big box retailers. The service is an ideal complement to an RPP system, since many car owners in New York City use their cars largely for these kinds of trips. Additionally, the service offers an affordable alternative for those not willing to pay the high entry costs of purchasing, insuring, and fueling a car.

As it stands, car-sharing services mostly partner with private garages or other private institutions, limiting their coverage and public knowledge of the service. Devoting public on-street parking space to car-sharing infrastructure both complements the goals of RPP pricing and provides a distinct public service within itself. Research shows that car-sharing programs encourage similar policy goals as increasing parking rates, and can even encourage drivers to forgo personal ownership altogether in favor of car-sharing. Hoboken, New Jersey implemented a “Corner Cars” program, in which on-street parking spaces were rented to car-sharing services; 3,000 participants say they have given up their personal cars due to the sharing program,[5] and each car-sharing car is estimated to have replaced 17 private vehicles.[6]

Directing a Portion of Revenues toward Participatory Budgeting

In addition to helping to reduce congestion, both of these policies would also produce new revenues: RPP through the lease of permits, and car-sharing through yearly leases of individual spaces in responsible public-private contracts. The revenue raised by this rent has a more direct connection to the physical landscape and infrastructure than other municipal revenues, such as property or sales taxes.

As Councilmembers doubtlessly know from their commutes between City Hall and their district offices, transportation is more than just a line item in our budget, but rather a fundamental part of the daily quality of life for all New Yorkers. Smart transportation policy tackling traffic congestion could have a profound, rippling effect upon the way in which New Yorkers work, study, relax, and feel a connection to their communities. Directing a portion of these new revenues to Participatory Budgeting, a process in which citizens deliberate and vote on capital investments, will both strengthen our infrastructure and citizens’ connection to the processes that enable its funding and maintenance.

Introducing residential parking permits, and public car-sharing spaces represents a step toward a better New York City for all of its citizens. But here too there is also a policy byproduct that is greater than the sum of its parts. Connecting the ubiquitous public resource of parking spots with the more arcane and less accessible processes of municipal budgeting makes government less invisible to the citizen on the street.

Thank you and we look forward to working with you.

 


[1] Shoup, Donald C. The High Cost of Free Parking. Chicago: Planners Press, American Planning Association, (2005)

[2] U.S Bureau of the Census. 2008-2012 American Community Survey Estimates. Census Bureau. Available: http:// factfinder2.census.gov/faces/nav/jsf/pages/community_facts.xhtml

[3] Guo, Zhan. "Residential Street Parking and Car Ownership." Journal of the American Planning Association 79, no. 1 (2013): 32-48.

[4] Guo, Zhan, and Simon McDonnell. "Curb Parking Pricing for Local Residents: An Exploration in New York City Based on Willingness to Pay." Transport Policy, (2013), 186-98.

[5] Shoup, Donald. "Informal Parking Markets: Turning Problems into Solutions." In The Informal American City: Beyond Taco Trucks to Day Labor, 277-294. Cambridge, Mass.: MIT Press, (2014).

[6] Osgood, Andrea. "On-Street Parking Spaces for Shared Cars." ACCESS Magazine 1, no. 36 (2010).

 

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New Score: Liberal Nihilism over Wages

Mar 6, 2015Mike Konczal

I have a new Score column up: Why Are Liberals Resigned to Low Wages? It deals with the three key political institutions that are responsible for wages remaining low, both over the past generation and in the Great Recession. It also tries to understand "liberal nihilism", or the weird glee that results when wages aren't seen as also having an institutional component to them, and thus are no longer a political challenge.

I hope you check it out!

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I have a new Score column up: Why Are Liberals Resigned to Low Wages? It deals with the three key political institutions that are responsible for wages remaining low, both over the past generation and in the Great Recession. It also tries to understand "liberal nihilism", or the weird glee that results when wages aren't seen as also having an institutional component to them, and thus are no longer a political challenge.

I hope you check it out!

Follow or contact the Rortybomb blog:
 
  

 

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Obamacare's Nine Lives

Mar 5, 2015Richard Kirsch

If Obamacare survives yesterday’s Supreme Court challenge, it will really be the cat with nine lives.

The death of what became the Affordable Care Act has been predicted regularly ever since President Obama’s election in 2008. Right after Obama’s election, I got a wave of calls from reporters, each highly skeptical that the President-elect would really try to get health care passed. When you consider the relentless attacks and near-death experiences ever since, the reporters’ skepticism was understandable.

If Obamacare survives yesterday’s Supreme Court challenge, it will really be the cat with nine lives.

The death of what became the Affordable Care Act has been predicted regularly ever since President Obama’s election in 2008. Right after Obama’s election, I got a wave of calls from reporters, each highly skeptical that the President-elect would really try to get health care passed. When you consider the relentless attacks and near-death experiences ever since, the reporters’ skepticism was understandable.

So when I found myself with a fresh wave of anxiety before the Supreme Court heard oral arguments yesterday on the latest assault on the law, I decided to list all the times that the survival of what became the Affordable Care Act was up in the air. And when I then counted them, it turned out that they number eight. So if Obamacare survives this last, desperate challenge at the Supreme Court, it really will have nine lives. Here they are, in chronological order:

1. The Great Recession: After Obama’s election a chorus of pundits predicted that the new President would have to give up his promise of health care reform because of the economic crisis. Instead, the President worked to get the economic stimulus passed, while paving the ground for health reform moving. Just a few weeks after the stimulus became law, the President went on a national tour to push for action on health care. 

2. Tea Party August: The tea party movement came to national attention, with loud, vitriolic attacks on health care at congressional town meetings held by Democrats in August 2009. Republicans gleefully predicted they had killed the bill. But by the second half of August supporters of health reform had rallied at dozens of town hall meetings, usually turning out more activists than the tea partiers. The press didn’t give the same attention to meetings that were not marked by raucous demonstrations. But Democratic members of Congress were sent back to Congress knowing they had support in their home districts to move ahead.

3. Scott Brown’s Election: The surprise election of Republican Scott Brown to the U.S. Senate in January 2010, on a platform opposing health care, looked like it might kill the bill. But having voted to pass the legislation in both houses, Democrats were not going to turn back. President Obama rallied the public by finally attacking the practices of health insurance companies and even without a filibuster proof majority in the Senate, the Patient Protection and Affordable Care Act became law.

4. The Supreme Court Challenge: Immediately after the ACA’s passage, opponents launched a legal attack, which – shocking most legal scholars – was taken seriously by the courts. And by the time the Supreme Court heard the challenge, the odds were that the Court would gut the key provision of the law that enabled insurance to be affordable to individuals. But Chief Justice Roberts saved the day  – and much of the Court’s credibility.

5. The 2012 Election: If the Senate had gone Republican in 2012 – as was widely predicted – and Mitt Romney been elected, Obamacare would have been repealed. Instead, the ACA emerged with a new electoral mandate.

6. Government Shutdown and Congressional Repeals: I hesitated to put the 50 or so Republican votes to repeal the law, culminating in the government shutdown in the fall of 2013, on the list, only because of President Obama’s veto pen. But even if the ACA always had the presidential veto as armor, the barrage of repeal missiles has got to be counted. Texas Senator Ted Cruz led the government shut down before health insurance enrollment opened up because, as he said, “no major entitlement has ever been implemented and then unwound.”

7. Healthcare.gov: And then, with the disastrous launch of the website to enroll people in health care, Ted Cruz appeared to have gotten his wish fulfilled. The ACA might not be legally dead, but much of it was functionally comatose. Then the administration resuscitated the website, and millions were enrolled and started benefitting from the coverage. It looked like, As Cruz feared, the ACA was here to stay.

8. Supreme Court Redux: That is until the Supreme Court agreed to hear a desperate, last minute challenge to ACA’s for millions of newly enrolled people in the King v. Burwell case. Could this be like one of those movies where the soldier survives the war, only to be killed by a bullet on his way home, fired by an enemy that hadn’t heard the war was over?

The news reports of the oral arguments yesterday were encouraging, particularly Justice Kennedy’s raising of a constitutional issue with the plaintiff’s case. And there are a host of other legal reasons to believe that the lawsuit is groundless. But then it did get this far. The opponents have been relentless. They haven’t gotten the message that the war is lost.

In June, we’ll find out if the ACA is the cat with nine lives. Easy to laugh at, if not for the fact that the actual lives of millions of people who rely on the law for life-saving health care are at stake. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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America's Tax Code Is Broken, But the Rubio-Lee Plan Won't Fix It

Mar 4, 2015Eric Harris Bernstein

"We believe that America’s best days are still ahead. But we also recognize that restoring the shared prosperity that comes from a strong economy requires reforming the most antiquated and dysfunctional government policies, beginning with the federal tax system."

-Senators Marco Rubio and Mike Lee 

Finally, something we can all agree on. 

"We believe that America’s best days are still ahead. But we also recognize that restoring the shared prosperity that comes from a strong economy requires reforming the most antiquated and dysfunctional government policies, beginning with the federal tax system."

-Senators Marco Rubio and Mike Lee 

Finally, something we can all agree on. 

In their joint op-ed in this morning's Wall Street Journal, the two Republican senators proposed a new tax plan and argued that our current federal tax structure is broken, its problems "rooted in the same fundamental unfairness and inequity of a government that picks winners and losers."

Again, we here at the Roosevelt Institute welcome this realization. For too long, our tax code has helped the few at the expense of the many. Unfortunately, an analysis of their proposed solutions shows that the senators have come out on the wrong side of this argument. 

First, they propose lowering the top corporate tax rate to 25 percent. This would be a step worth discussing if not for the fact that, with offshore tax havens and a wealth of other tax benefits, America's largest corporations currently pay an effective rate of just 12.6 percent. In the words of Roosevelt Institute Chief Economist Joseph Stiglitz, it would seem that the problem is not double taxation, but no taxation.

The senators then argue that, in order to incentivize investment, they would make all capital expenditures 100 percent tax-deductible, suggesting that taxes have squeezed corporations out of the investment business. But if this is the case, then how do we explain the $2 trillion currently being held abroad by America's largest corporations? And what about the enormous sums that companies like Apple and Home Depot are spending on buybacks to enrich investors? 

In fact, new research from Roosevelt Institute Fellow J.W. Mason shows us that the link between corporate cash flow and productive investment has been all but severed since the shareholder revolution of the 1980s. Shareholders now pocket an increasingly large portion of corporate earnings and borrowing that would have once gone to capital investments, job creation, or raising workers’ pay. Given these facts, as well as the current level of historically high profts, it is clear that corporate investment is not suffering from lack of funding, and that more spending on corporate welfare is the wrong way to go.

Lee and Rubio suggest that corporate taxes drive American industries abroad. This is absolutely true: Corporations want to benefit from American security, infrastructure, and human capital, but they don't want to pay their share to maintain those invaluable assets, so they shelter themselves in tax havens like Ireland. The problem, from our point of view, is not, as Rubio and Lee suggest, that the tax code taxes corporations (indeed, that is what a tax code exists to do); the problem is that it allows wealthy corporations to avoid those taxes. 

We need policies that will ensure corporations contribute like the rest of us, not ones that will commit more public money to private enterprise. 

The senators state that their plan is guided by the principles of fairness, freedom, and growth. This raises the question: In whose mind is it fair to spend hundreds of billions of dollars on wealthy corporations, while Americans drive on pothole-pocked roads and send their children to overcrowded schools to learn from underpaid teachers?

For the individual income tax, Rubio and Lee propose reducing the number of brackets to two -- one at 15 percent and one at 35 percent. Even though they have been greatly reduced since the 1980s, lowering rates for middle-income earners is worth discussing. The far more significant part of this proposal, however, is the 11 percent tax break for top income earners, which would further reduce the amount of public funds available for things like roads and schools, and which would further tip our economic balance toward the wealthy.

The senators would likely argue that this tax break will stimulate productive spending, but trickle-down economics did not work under Reagan and will not work now.

Toward the end of their op-ed, the authors posit a series of pro-family tax reforms, like tax credits for children and tax breaks for couples filing jointly. These policies are rooted in a belief that families with married parents are more economically stable and productive than single-parent families. Again, this may be a point worth debating, but these miniscule incentives are scarcely more than lip service to the American middle class, which this plan largely forsakes in favor of more tax cuts for large corporations and the wealthy. 

More generally, Rubio and Lee frame their entire plan as a benefit to average Americans, but do this while glossing over policies that will only continue our current trend of supporting the wealthy at the expense of the country as a whole. The Stiglitz tax reform plan, on the other hand, offers a blueprint for a tax code that would bolster the middle class while driving growth and opportunity. 

Now that we’ve all agreed on the problem, we should look to solutions that economists tell us actually work.

Eric Harris Bernstein is a Program Associate at the Roosevelt Institute.

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What are the Robots Doing? Rebalancing our Inequality Intellectual Portfolio

Mar 4, 2015Mike Konczal

A blog post responding to a blog post responding to a blog post. Who says the blogosphere is dead?

Recently I wrote about Larry Summers demolishing an argument about robots and our weak recovery on a panel. Jim Tankersley called up Summers to further discuss the topic, and put his interview online as a response meant to correct and expand on my post. But I don’t think we disagree here, and if anything Summers’ interview shows how much the consensus has changed.

Before we continue, I should clarify what we are talking about. When people talk about “the robots,” they are really telling one of three stories:

1. Technology has played an important role in the economic malaise of the past 35 years, broadly defined as a mix of stagnating median wages, increased inequality, and weakening labor-force participation.

2. The Great Recession has led to such a weak and lackluster recovery in large part because of technology. In one version of this story, technology is simply taking all the jobs that would normally be found in a recovery. As the AP put it, “Five years after the start of the Great Recession, the toll is terrifyingly clear: Millions of middle-class jobs have been lost... They're being obliterated by technology.” (President Obama himself often mentioned this story throughout the dark period when unemployment was much higher.)

Another, more popular, version is that workers simply don’t have the skills required for a high-technology labor force. A representative quote from the Atlanta Fed President Dennis Lockhart in 2010: “the skills people have don't match the jobs available. Coming out of this recession there may be a more or less permanent change in the composition of jobs.”

3. We are moving to a post-work economy, one where robots substitute for human labor in massive numbers and fundamentally change society. Here’s an example. We may or may not be seeing the first hints of such a change now, depending on the story.

The story I said Summers (as well as David Autor) demolished is the second. There’s no evidence that we are having a technology renaissance right now, or that technology has contributed in a major way to the weak recovery, or that a skills gap or other educational factor is holding back employment, or that highly skilled workers are having a great time in the labor market. The arguments against this story from the original post are pretty damning, and Summers either reiterates them or doesn’t walk them back in the Washington Post column. (Let’s leave the third story to science fiction speculation for now, noting that the second story getting demolished means it isn't happening now, and that it's hard to imagine robot innovation when labor is so cheap and abundant.)

However, Summers does argue for the first story as well, the one in which technology has played a role in the malaise of the past 30 years. As he tells the Post, “In the 1960s, about 1 in 20 men between the age of 25 and 54 was not working. Today, the number is more like 1 in 6 or 1 in 7. So we have seen some troubling long-term trends, and they appear to be continuing trends.” Summers also notes, “to say that technology is important is not to say that technology is the only important factor, or even that it is the dominant factor.” He mentioned this as the conference as well; Brad DeLong and Marshall Steinbaum noted it in their posts.

Intellectual Portfolio Rebalancing

When we think of the economic malaise of the past 30 years, we should probably think of it as a combination of technology, globalization, sociology, and public policy. Tankersley wants to emphasize technology as a piece of this story, and I agree it should be there.

But here’s what I find interesting. Whenever we have a portfolio of ideas, some ideas get more weight than others. And what strikes me about this conversation is how much technology and skills have been deemphasized relative to other stories since the Great Recession, especially those of public policy.

This is a pretty quick and important change. Almost ten years ago, Greg Mankiw could write, "Policy choices [...] have not been the main causes of increasing inequality. At least that is the consensus, as I understand it, of the professional labor economists who study the issue.” Brad Delong also said in 2006 that he “can't see the mechanism by which changes in government policies bring about such huge swings in pre-tax income distribution.” Skill-biased technical change (SBTC) and technology were assumed to cover the entire inequality story.

That consensus is weaker now than it was then. Certainly the argument for SBTC, while always shaky, has taken a hit. You can see it with Summers himself in the Washington Post, where he notes that “changing patterns of education is unlikely to have much to do with a rising share of the top 1 percent, which is probably the most important inequality phenomenon.”

Meanwhile, more and more inequality research is focused on institutional factors, ranging from marginal tax rates to the minimum wage to the inefficiency and growth of the financial sector to deunionization.  And as the Mankiw quote hints, 10 years ago you’d be less likely to hear, as Summers says at the Washington Post, that a “combination of softer labor markets and the growing importance of economic rents” are an essential part of inequality spoken with the same confidence as you see here. I read that as a major change of the consensus.

This is a major rebalancing of our intellectual portfolio of inequality stories, a change that I think is opening up a much more rich and accurate description of what has happened. I hope the research and conversation continues this way.

Follow or contact the Rortybomb blog:
 
  

 

A blog post responding to a blog post responding to a blog post. Who says the blogosphere is dead?

Recently I wrote about Larry Summers demolishing an argument about robots and our weak recovery on a panel. Jim Tankersley called up Summers to further discuss the topic, and put his interview online as a response meant to correct and expand on my post. But I don’t think we disagree here, and if anything Summers’ interview shows how much the consensus has changed.

Before we continue, I should clarify what we are talking about. When people talk about “the robots,” they are really telling one of three stories:

1. Technology has played an important role in the economic malaise of the past 35 years, broadly defined as a mix of stagnating median wages, increased inequality, and weakening labor-force participation.

2. The Great Recession has led to such a weak and lackluster recovery in large part because of technology. In one version of this story, technology is simply taking all the jobs that would normally be found in a recovery. As the AP put it, “Five years after the start of the Great Recession, the toll is terrifyingly clear: Millions of middle-class jobs have been lost... They're being obliterated by technology.” (President Obama himself often mentioned this story throughout the dark period when unemployment was much higher.)

Another, more popular, version is that workers simply don’t have the skills required for a high-technology labor force. A representative quote from the Atlanta Fed President Dennis Lockhart in 2010: “the skills people have don't match the jobs available. Coming out of this recession there may be a more or less permanent change in the composition of jobs.”

3. We are moving to a post-work economy, one where robots substitute for human labor in massive numbers and fundamentally change society. Here’s an example. We may or may not be seeing the first hints of such a change now, depending on the story.

The story I said Summers (as well as David Autor) demolished is the second. There’s no evidence that we are having a technology renaissance right now, or that technology has contributed in a major way to the weak recovery, or that a skills gap or other educational factor is holding back employment, or that highly skilled workers are having a great time in the labor market. The arguments against this story from the original post are pretty damning, and Summers either reiterates them or doesn’t walk them back in the Washington Post column. (Let’s leave the third story to science fiction speculation for now, noting that the second story getting demolished means it isn't happening now, and that it's hard to imagine robot innovation when labor is so cheap and abundant.)

However, Summers does argue for the first story as well, the one in which technology has played a role in the malaise of the past 30 years. As he tells the Post, “In the 1960s, about 1 in 20 men between the age of 25 and 54 was not working. Today, the number is more like 1 in 6 or 1 in 7. So we have seen some troubling long-term trends, and they appear to be continuing trends.” Summers also notes, “to say that technology is important is not to say that technology is the only important factor, or even that it is the dominant factor.” He mentioned this as the conference as well; Brad DeLong and Marshall Steinbaum noted it in their posts.

Intellectual Portfolio Rebalancing

When we think of the economic malaise of the past 30 years, we should probably think of it as a combination of technology, globalization, sociology, and public policy. Tankersley wants to emphasize technology as a piece of this story, and I agree it should be there.

But here’s what I find interesting. Whenever we have a portfolio of ideas, some ideas get more weight than others. And what strikes me about this conversation is how much technology and skills have been deemphasized relative to other stories since the Great Recession, especially those of public policy.

This is a pretty quick and important change. Almost ten years ago, Greg Mankiw could write, "Policy choices [...] have not been the main causes of increasing inequality. At least that is the consensus, as I understand it, of the professional labor economists who study the issue.” Brad Delong also said in 2006 that he “can't see the mechanism by which changes in government policies bring about such huge swings in pre-tax income distribution.” Skill-biased technical change (SBTC) and technology were assumed to cover the entire inequality story.

That consensus is weaker now than it was then. Certainly the argument for SBTC, while always shaky, has taken a hit. You can see it with Summers himself in the Washington Post, where he notes that “changing patterns of education is unlikely to have much to do with a rising share of the top 1 percent, which is probably the most important inequality phenomenon.”

Meanwhile, more and more inequality research is focused on institutional factors, ranging from marginal tax rates to the minimum wage to the inefficiency and growth of the financial sector to deunionization.  And as the Mankiw quote hints, 10 years ago you’d be less likely to hear, as Summers says at the Washington Post, that a “combination of softer labor markets and the growing importance of economic rents” are an essential part of inequality spoken with the same confidence as you see here. I read that as a major change of the consensus.

This is a major rebalancing of our intellectual portfolio of inequality stories, a change that I think is opening up a much more rich and accurate description of what has happened. I hope the research and conversation continues this way.

Follow or contact the Rortybomb blog:
 
  

 

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