Are We at the End of the Welfare State?

Nov 21, 2012Mike Konczal

I have a piece at the American Prospect, The Great Society's Next Frontier, about potential futures for the welfare state. It attempts to answer the question over whether or not the passage of Obamacare means that the welfare state is now complete.

I have a piece at the American Prospect, The Great Society's Next Frontier, about potential futures for the welfare state. It attempts to answer the question over whether or not the passage of Obamacare means that the welfare state is now complete. If we take the project of American liberalism to be Keynesian economics, plus the mixed economy, plus social insurance, plus political liberalism, can we check the social insurance part as complete? I decided to ask several scholars of the welfare state what they see as potential steps in the decades ahead, and lay out their answers.

The "completed welfare state" usually means a few different things. One is that the major committments of social insurance are now determined, and it is just a matter how broadly or narrowly to construe those committments. That's many people's answer for the issue. Dylan Matthews gave a similar answer on bloggingheads recently, noting that things like universal pre-K will fall out of our obligations to provide universal K-12 schooling. Many of the changes experts in the piece proposed were extensions of already functioning programs, like the EITC or unemployment insurance or expanding K-12 schooling to a younger age.

Another is that the level of expenditure and revenue is set for the near future, so if social insurance is expanded it'll require a more fundamental change in what we are willing to pay for our government. And indeed many of the debates going forward will be about spending less than projected on health care through controlling costs, or changing how we fund things, such as taking the tax expenditures for 401(k)s and making them more progressive. There are many things that don't require changing the level of expenditure and revenue, such as raising the minimum wage (which compliments the EITC quite well). This is one reason we may see more of a focus on "predistribution" policy in the years ahead.

I wanted to add this point from Envisioning Real Utopias about a basic income, but also pertains to both the minimum wage and things like Demos' call for raising retail wages. In addition to reducing coercion as workers aren't separated from the means of subsistence, eliminating poverty without creating the major pathologies of means-tested anti-poverty transfers, recognizing the value of decommodified care-giving activities and subsidizing the social and cooperative market economies, a basic income also does the following:

Second, universal basic income is likely to generate greater egalitarianism within labor markets. If workers are more able to refuse employment, wages for unpleasant work are likely to increase relative to wages for highly enjoyable work. The wage structure in labor markets, therefore, will begin to reflect more systematically the relative disutility of different kinds of labor rather than simply the relative scarcity of different kinds of labor power. This, in turn, will generate an incentive structure for employers to seek technical and organizational innovations that eliminate unpleasant work. Technical change would therefore have not just a labor-saving bias, but a labor-humanizing bias.
This connection between cheap labor and technology change is a constant theme of Peter Frase, who mentioned the Prospect piece in a recent post.
 
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Children, Parents and Mass Incarceration

Nov 21, 2012Mike Konczal

After a round of discussion on family structure, Reihan Salam tweeted out "@reihan Important point about family stability and public policy: mass incarceration is a huge part of the problem." I've just read a book, Invisible Men: Mass Incarceration and the Myth of Black Progress, by the sociologist Becky Pettit, whi

After a round of discussion on family structure, Reihan Salam tweeted out "@reihan Important point about family stability and public policy: mass incarceration is a huge part of the problem." I've just read a book, Invisible Men: Mass Incarceration and the Myth of Black Progress, by the sociologist Becky Pettit, which addresses this. Let's get a few charts out.

Here's a chart of children with a parent behind bars:

That's a fivefold increase since 1980. But that's with a parent behind bars at any one moment. What about the percentage of children who will have had a parent behind bars at some point in their childhood?

24% of black children will have had a parent behind bars by age 17, an eightfold increase since 1980.

The interesting thesis of Invisible Men is that the government, through the means it uses to record, analyze and ultimately see the population it governs, systematically misses incarcerated people. This biases various policy debates, as researchers build their arguments off these records. This is particularly important for some serious ongoing debates, like gaps between blacks and whites in earnings or labor-force participation, or the high-school dropout rate. This missing population also means that a variety of research agendas, from political participation to family structure, are also lacking an analytical mechanism for understanding how the large increase in incarcerated populations are impacting the topics.

There aren't definitive answers for how incarceration changes family structure, though there is evidence that incarcerated fathers are less like to be cohabitating or marrying a year after their child's birth. And incarceration increases the liklihood of divorce. But we don't have full answers, in part because the incarcerated fall off the government's radar for data collection. Hopefully Pettit's book will draw attention to this gap in our knowledge, and help future researchers understand the subtle yet devestating consequences of the War on Drugs and other means of mass incaraceration for our country.
 
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What Are Conservatives Getting Wrong About the Economy? (Douthat Reply Edition)

Nov 19, 2012Mike Konczal

Ross Douthat argues in his recent New York Times editorial, The Liberal Gloat, that the coalition that elected President Obama was "created by social disintegration and unified by economic fear." Douthat argues that "single life is generally more insecure and chaotic than married life, and single life with children." The implicit argument is that marriage is an important part of handling the economic fears of the business cycle, and if there were more married couples there'd be

Ross Douthat argues in his recent New York Times editorial, The Liberal Gloat, that the coalition that elected President Obama was "created by social disintegration and unified by economic fear." Douthat argues that "single life is generally more insecure and chaotic than married life, and single life with children." The implicit argument is that marriage is an important part of handling the economic fears of the business cycle, and if there were more married couples there'd be less call for economic policy. Krugman notes that "insecurity is on the rise for everyone, driven by changes in the economy" and that "[y]our church and your traditional marriage won’t guarantee the value of your 401(k)."

For fun, how well has the income of couples with children held up in the Great Recession when compared to single households with children? Let's look at the Federal Reserve's recent Survey of Consumer Finance. This comes out every three years, with the last version covering 2010. Here's net income for single households with a child versus couple households ("families in which the family head was either married or living with a partner") with a child:

In the Great Recession, single households with a child lost 2.3 percent of their income, while couple households with a child lost 9.4 percent of their income. Now obviously having $67K is better than having $29K. And the 2.3 percent loss of income for people with less could sting a lot harder than the 9.4 percent loss for those with more.

But what is important to emphasize is that having a couple raising kids, whatever its other virtues, is not a good form of insurance against the business cycle. The Great Recession has hit married households with larger drops in income. This is probably driven by having two people working in the household, which, as Senator (!) Elizabeth Warren emphasized years ago, doubles the chance that someone might lose their job. So even if the number of children being raised in single households dropped suddenly, that's no replacement for an aggressively liberal, Keynesian welfare-state approach to driving the macroeconomy to full employment.

This isn't just conservatives, as education-obsessed centrists and liberals have a blind-spot here as well. I recently wrote a piece for The American Prospect about young people graduating into the recession. The focus was how the average college graduate is likely to have a permanent loss to their income, compared to the more temporary income loss for those who attend elite colleges or don't go to college at all. I mentioned it in passing at the end, but this technically means that the college premium, especially at the margins, drops in a recession. Therefore getting more education is a poor form of insurance from the business cycle compared to, once again, Keynesian welfare-state full employment.

Paradigm Down

I have no interest in seeing a resurgent conservative movement in this country. One reason I was worried about Romney winning the 2012 election and passing the Ryan Plan in January 2013 and Lochnerizing the Supreme Court is because an animal is most dangerous when it is dying and knows it. But it might be helpful for those on the right to get an outsider's perspective.

Douthat argues that conservatives focused too much on those getting "gifts" and other free-loader metaphors. But the most sustained conservative economic arguments of the Great Recession have been reviving the liquidationist, Mellonite approach to the business cycle. I think that's one important reason Romney and conservatives were unable to put real pressure to President Obama's vulnerability on the economy. They believe the recession is purging the weakness in the economy, doing healthy work, and to the extent the recovery is sluggish it is the fault of activist government and policy attempting to address unemployment.

The House GOP, in particular, has pushed the Mellon-wing, calling for austerity to promote growth, while also pulling back on monetary policy to stimulate the economy. Understanding the "47 percent" and "free stuff" comments benefit from the context of conservative arguments that government policy is the primary reason that unemployment remains high, as all the free stuff allows the unemployed to stay on vacation. If conservatives want to build a new economic paradigm that works for working people, they should probably have some idea on getting unemployment down sometime in the next decade.

Another important conservative focus is running everything the government does through private hands. The conservative movement is not about small government, it is about privatized government. From Bush and Ryan's attempts to privatize Social Security, to turning Medicare into a Groupon, to bringing private industry into the military, every step involves introducing market agents into government processes and pushing market risk to individuals. This continued under Mitt Romney's big policy ideas. He had an idea for taking our system of unemployment insurance and turning it into a system of private unemployment savings accounts. He wanted to fix higher education costs by expanding the for-profit industry, which would "hold down the cost of education," even though they are far more expensive than their non-profit equivalents.

The conservative idea that citizens don't have enough undiversifiable exposure to the risks of the new economy - long-term unemployment, low wages, risks of a large drop in income, globalization, automation etc. - is not one that is going to work going forward. The economic voters Douthat wants to win over see the cronyism of funneling money through private agents, and they think of the market with far more dread and anxiety than entrepreneurial glee. Though they may be ambivalent about more liberal solutions, they certainly don't like the perpetual conservative project of making all of government's functions look more and more like their empty 401(k)s. That might be another place to start for conservatives who want to rebuild their economic ideas.

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Keep Calm and Get Excited About the Rolling Jubilee

Nov 15, 2012Mike Konczal

Occupy has created a Strike Debt wing, which has a new project: a Rolling Jubilee. There will be a livestream of the Debt Jubilee fundraiser tonight, starting at 8pm ET, that you can access from their webpage. It features Janeane Garofalo, Jeff Mangum from Neutral Milk Hotel, Lee Ranaldo of Sonic Youth, Lizz Winstead, and many more. You should check it out.

Occupy has created a Strike Debt wing, which has a new project: a Rolling Jubilee. There will be a livestream of the Debt Jubilee fundraiser tonight, starting at 8pm ET, that you can access from their webpage. It features Janeane Garofalo, Jeff Mangum from Neutral Milk Hotel, Lee Ranaldo of Sonic Youth, Lizz Winstead, and many more. You should check it out.

To give you a sense why I find this new project fascinating, I'll quickly review three random projects I've been working on recently, all of which are related to this new project.

The first is on what bankruptcy law professor Ronald Mann refers to as the "sweat box" model of consumer debt and bankruptcy. Mann argues that the 2005 bankruptcy amendments benefit creditors "by slowing the time of inevitable filings by the deeply distressed and allowing issuers to earn greater revenues from those individuals" and functions as a windfall for creditors because it "enable[s] issuers to profit from debt servicing revenues paid by distressed borrowers who are not yet in bankruptcy." More broadly, the distressed debt markets allow debt collectors the right to make huge profits by "sweating" debtors through assessing fees, raising rates, and inflating the debts owed while debtors struggle to pay the debts back over long periods of time. At the distressed end, debts aren't about recovering what is owed or making sure loans that aren't being paid turn into good debts that have reliable payments, but instead about the option to harrass small payments indefinitely. Debt collectors don't want these loans to work. (The same distorted incentives might be in play with those who have missed a mortgage payment.)

Another is focused on student debt, particularly about how the collapse of public higher education has been a planned political project. Rather than student debt levels being the result of individual greed or cost inflation driven by productivity levels, they result from a specific project to shift costs for public education onto the individual that has been consciously planned. This is part of a larger project to dismantle the access and mobility inherent in the centuries-old public higher education system in this country.

The final one is arguing that one explanation for why our recovery is so slow has to do with a debt overhang. Rather than forcing the losses of our housing bubble onto creditors, we've left them to stagnate, dragging down aggregate demand. Or we've solved it through foreclosures, which have huge costs for communities and municipalities. The financial sector itself understands that these loans aren't worth much and are fighting among itself over who will eat the losses, but this knowledge hasn't spread to homeowners or the country at large.

Rolling Jubilee

Explaining these issues and how they connect is difficult, but it is now easier with Strike Debt and its Rolling Jubilee project. What is the Rolling Jubilee? "Banks sell debt for pennies on the dollar on a shadowy speculative market of debt buyers who then turn around and try to collect the full amount from debtors. The Rolling Jubilee intervenes by buying debt, keeping it out of the hands of collectors, and then abolishing it."

The project relentlessly emphasizes the social conditions for the creation of debt: "We believe people should not go into debt for basic necessities like education, healthcare and housing." Debt in our country evolves in a system of institutions where publicly provided goods are missing or being dismantled in real-time, with private systems designed to benefit the few replacing them, and that is something that can be resisted. And the Jubilee also emphasizes that these specific debts that they are buying no longer reflect something that's owed, as they were written to zero on a balance sheet a long time ago. These are debts whose real value consists of a harrassment option to try and collect more than the pennies on the dollar that they were bought for.

Strike Debt can only purchase so much debt. What can it do going forward? There's the obvious ability to use this to highlight how bad debts actually play out in our country and expose the ins-and-outs of this system.

I'd personally like people to make the connection between random groups of people doing this and the government doing this itself through eminent domain. Right now southern California, for instance, is a battlefield between municipalities looking to prevent destructive foreclosures and the financial industry, which is looking to do a capital strike. Other cities are turning to eminent domain to buy mortgage debt at its real value, write it down, and save their communities. It would be great for them to say, "Hey, if cultural studies icon Andrew Ross and some Occupy kids are capable of doing this, certainly we, with our legal powers of eminent domain and power to tax, could do the same!"

And I'm already hearing about people proposing a form of "debt-holder activism" akin to the idea of shareholder activism: exposing wrong-doing, suing debt traders for selling debt without proper documentation, etc. It might be far-fetched, but it is worth exploring.

Critiques

There are reasonable criticisms of this project. But I'll start with some that I don't find convincing.

Doug Henwood, for instance, believes that this is generated by activists' uncritical populism, or the anarchist anthrology of David Graeber's Debt, or the reification of Bowles-Simpson's debt talk. But this is putting the carriage before the horse. A little over a year ago, I wrote some code that went through the We are the 99% Tumblr and parsed it for clues about what was motivating the people submitting their stories. And even I was shocked at how much student debt, medical debt, and debt overall were factors in those people's misery. It is how they identify the challenges they face, and this was equally so at Occupy sites.

It's fun to imagine people writing hostile comments on that 99% tumblr saying that all these people's misery is not useful to the cause because it focuses on the sphere of circulation instead of the sphere of production. But this is what is behind young people's suffering and it is an important project to address it as such. Linking it to a larger project of broad-based propserity is the work of others, and I believe the Strike Debt people are trying to do so.

Henwood also argues that Strike Debt can't buy in sufficiently large amount to buy up all the debt. That's true, but hardly the goal. He also brings up the idea that bankruptcy is a universal solvent here and should be emphasized over other projects. I disagree. To go back to Ronald Mann's "sweat-box" theory of bankrutpcy, the fees, waiting period, and other charges involved in post-2005 bankruptcy means that the legal DNA of bankruptcy code, while very useful, amplifies these problems. You can see it in the academic research that finds a spike in bankruptcy filings after people get tax rebates, because they finally have the resources to declare bankruptcy. You also see it in this random We Are the 99% tumblr entry, which notes, "I have been trying for the last 4 years to save $2000 to file bankruptcy for $5000-$10000 medical debt. It still hasn’t happened."

There are other worries that I find to be more important.

First, it's a big problem that it isn't clear yet whether those whose debt will be forgiven are stuck with a tax bill. Blogs are going back and forth on this issue, though the IRS should have given a comment already. That there aren't, say, tax attorneys Occupy can direct people to is a problem. It's funny that, given Marcel Mauss' influence on David Graeber and many in Occupy, the tax issue might hinge on being able to legally define what a "gift" is.

Another worry is whether or not this will build a community of people committed to the cause going forward. According to a Strike Debt spokesperson, when they forgive debts they send certified mail containing the Debt Resistor's Operation Manual and a notice explaining what the Debt Jubilee is. Contrast it with foreclosure activism,  where there is a lot of work that goes into building up the person in their community and making sure the person has the strength and the resources to both fight and contribute back. I've debated whether or not this is an actual problem, but it is certainly not sufficient to keep me from being excited. The people contributing are more energized than I had expected to see, which means you many see a community of people vested on the donation end as well.

The last issue is debt itself. As Jacob Hacker and Nathaniel Loewentheil argued in the Boston Review forum on debt, "[B]y focusing so much on debt...the challenge of reform appears both smaller and larger than it really is. Smaller because providing write-downs for households with underwater mortgages, while valuable, would not be enough...[yet a debt focus sets] sights higher than necessary... [W]e do not have to change people’s conception of debt or personal responsibility... [A] broad coalition will be based more on effective organizing than on consciousness-raising or cultural change around debt."

I think in the long-run Hacker is right, which is why I'm happy that the Strike Debt coalition has worked to link its concerns back to larger ones of public health care, free education, and a more robust safety net. Weaving these concerns with broader ones is precisely the work that needs to be done.

Last year, Suresh Naidu sent me the following chart, which is an evolution of different tactics during the civil rights movement, 1955-1962, charted by frequency of occurrences:

This chart is taken from Tactical Innovation and the Pace of Insurgency by the sociologist Doug McAdam. Tactists will come and go. What is necessary to keep in mind are the goals and the spirit of experimentation. I hope you check out the telethon tonight and follow the Strike Debt news to see if this is a wave of experiments worth following in the months ahead.

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Dagan and Teles on the Conservative Movement Against Mass Incarceration

Nov 13, 2012Mike Konczal

David Dagan and Steven M. Teles have a great, 5K+ word story about changing movement conservative attitudes against prisons in the recent issue of the Washington Monthly. I've worried that the changing narrative about conservatives and prisons have mostly been about minor cosmetic changes.

David Dagan and Steven M. Teles have a great, 5K+ word story about changing movement conservative attitudes against prisons in the recent issue of the Washington Monthly. I've worried that the changing narrative about conservatives and prisons have mostly been about minor cosmetic changes. Having completed their project of incapacitation through mass incarceration, conservatives can tinker at the edge, especially to bring in favored groups like charity workers or government privatizers. This article gives some hope, implying that the changes are real, very serious about both the conditions of prisons and after prison, but also the policies that lead to too many people being locked up for too long. And these reforms are likely to build upon themselves going forward.

Before you start the Dagan/Teles paper, here's a quick reading guide summarizing some worries one might have about the conservative anti-prison project.

- The obvious one is that this is primarily about getting the large amount of money that flows through criminal justice into private hands. This isn't just private ownership of prisons expanding (though If you look at the 10 states in the U.S. that rely the most on private prisons, they incarcerate a percentage of their population in privately owned facilities roughly equivalent to what Europe does in all its facilities). It's things like ALEC's project of privatizing parole.

- Another worry is that this is less focused on reducing mass incarceration than finding more policy for the proper management of incarcerated people. Laissez-faire classical liberals have always been fascinated by the efficient management of people behind bars. People often encounter the idea of laissez-faire Jeremy Bentham's panopticon prison through Michel Foucault's use of it as a metaphor for modernity, but Bentham was being a policy wonk when he was writing about it. He wrote the equivalent of 19th century white papers proposing an all-seeing prison with titles like "Proposal for a New and Less Expensive mode of Employing and Reforming Convicts." His arguments for it were all focused on good public policy, like "morals reformed, health preserved, industry invigorated, instruction diffused, public burthens lightened, economy seated as it were upon a rock, the gordian knot of the poor-laws not cut but untied -- all by a simple idea in architecture?" If he was writing about the panopticon today, you could imagine Bentham arguing that an all-seeing prison would bend the incarceration cost curve during an interview with Dylan Matthews on Wonkblog.

Which is a long way of saying that conservatives often like reforms that try to deal with the chaos and waste of mass incarceration instead of dealing with why our prison system is the largest in the world. They want prison charities to provide aid to those who have become despondent from being locked up, or prison markets designed to teach job skills to those who have been removed from the labor markets. Note that you could just lock up fewer people rather than finding clever ways to try and use more government to solve problems that the government is creating. We are locking up too many people, for too long, for the wrong reasons. Finding better ways to manage the people locked up, while often a praiseworthy goal, might be a distraction.

- Another worry is anti-federalism. The recent attempt by Jim Webb to create a comission dedicated to widespread criminal justice reform failed in the Senate. Republicans killed it because "allowing a federal commission to examine state and local criminal justice systems would encroach on states' rights." The 2012 GOP platform, which many people found encouraging on the issue of incarceration, had a strong focus on the "over-federalization of offenses" and called on Congress to "reconsider the extent to which it has federalized offenses traditionally handled on the State or local level." Though this is important, a lot of changes need to happen at the state and local level too.

- The last worry is the straightjacketing of judges. This is the wave of policy that has created the conditions where, as William Stuntz wrote, "criminal law does not function as law. Rather, the law defines a menu of options for police officers and prosecutors to use as they see fit." Do conservative reformers get worried about the militarization of the police? The courtroom becoming a factory of plea bargains determined by prosecutors?

As I said earlier, the Dagan/Teles piece gives me hope that these won't be major stumbling blocks. But I'd love to read your thoughts in comments.

One thing I would like to see addressed in the future is an answer to this: "By and large, however, it is conservative institutions who now pay the most attention to criminal justice." Why aren't liberal institutions? The failure of liberal groups to prioritize this issue was one of the provocative parts of Michelle Alexander's The New Jim Crow, and the question still needs an answer.

 

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Live at Boston Review with a Forum on Debt Relief

Nov 13, 2012Mike Konczal

I'm live with a forum on debt relief at Boston Review. Here's my lead essay, along with responses from Jacob S. Hacker and Nathaniel Loewentheil, Dean Baker, Tamara Draut, Robert Hockett, Barbara Fried, Mark Calabria and more. My piece summarizes much of the work done at this blog over the past several years, especially focused on balance-sheet recessions, bankruptcy, implications of "you didn't build that," and the battle between debtors and creditors. The respones afterwards were very informative. (Plus, Fried is the author of one of my favorite books, so I was really psyched to see her participate.) I hope you check it out!

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I'm live with a forum on debt relief at Boston Review. Here's my lead essay, along with responses from Jacob S. Hacker and Nathaniel Loewentheil, Dean Baker, Tamara Draut, Robert Hockett, Barbara Fried, Mark Calabria and more. My piece summarizes much of the work done at this blog over the past several years, especially focused on balance-sheet recessions, bankruptcy, implications of "you didn't build that," and the battle between debtors and creditors. The respones afterwards were very informative. (Plus, Fried is the author of one of my favorite books, so I was really psyched to see her participate.) I hope you check it out!

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Three Election Thoughts: The Failed All-In Repeal Strategy, Warren, and Three-Strikes

Nov 7, 2012Mike Konczal

The Consequences of the Conservative All-In Repeal Strategy: The attacks on Nate Silver have been fun to watch, but David Frum took the most heat for calling how this would all play out back in 2010. I really hope his Waterloo post, which made the case, will be on the radar of academics studying this era decades from now. Frum:

The Consequences of the Conservative All-In Repeal Strategy: The attacks on Nate Silver have been fun to watch, but David Frum took the most heat for calling how this would all play out back in 2010. I really hope his Waterloo post, which made the case, will be on the radar of academics studying this era decades from now. Frum:

Conservatives and Republicans today suffered their most crushing legislative defeat since the 1960s. It’s hard to exaggerate the magnitude of the disaster...Legislative majorities come and go. This healthcare bill is forever. A win in November is very poor compensation for this debacle now...No illusions please: This bill will not be repealed. Even if Republicans scored a 1994 style landslide in November, how many votes could we muster to re-open the “doughnut hole” and charge seniors more for prescription drugs? How many votes to re-allow insurers to rescind policies when they discover a pre-existing condition? How many votes to banish 25 year olds from their parents’ insurance coverage? And even if the votes were there – would President Obama sign such a repeal?

What's interesting to me is how the conservative movement followed an "all-in repeal" strategy since summer 2010. The think tanks didn't prioritize the parts of Obamacare and Dodd-Frank that they wanted to see removed and replaced with something else, and political agents didn't try to force changes in exchange for concessions on other priorities.

It was almost as if they didn't accept that the laws were the actual laws of the land. The major conservative think tanks all focused on either the unconstitutionality of the bills, hoping the Supreme Court would save them (this goes for Dodd-Frank as well), or wrote only in terms of repeal. During the primaries, every Republican presidential candidate promised to repeal Dodd-Frank and repeal Obamacare, and almost nobody said anything about what would go in their places. Romney famously was vague about how he'd replace Dodd-Frank and Obamacare. As such, there's been no signaling or mobilization on priorities for how conservatives should try to change these laws.

Part of this is a function of how the movement has been mobilizing itself. If Obamacare is an Ayn Rand horror story of socialists nationalizing the health-care industry, well, 10 percent less socialist horror is still a nightmare. If Eric Cantor went and, say, offered Obama a debt ceiling raise or a second stimulus in exchange for putting the CFPB's budget under Congress's control or pulling back parts of Obamacare, he'd likely have his head ripped off by the base. This also might be because the conservative movement is out of ideas, something that has become painfully obvious in its responses to the Great Recession.

But either way, Obamacare and Dodd-Frank will be here for a generation now.

More Reasons to Celebrate Elizabeth Warren: Besides all the other reasons to be happy about Elizabeth Warren winning her Senate seat, there are two additional policy reasons to consider. Conservatives and lobbyists are focused on removing the CFPB's funding, single directorship, and sole focus on consumer financial protection. Republicans have explicitly stated that they'll block any director until these changes are made. Warren, who came up with the idea for the agency and fought for its creation, will understand how important the mission and the legal structure for how the agency is funded and organized are, and fight for that as well.

Another important financial reform issue is that people are still nervous about how resolution authority, or the FDIC forcing a major financial firm to fail, will work in practice. Warren is one of the major experts on bankruptcy law -- she's the third most cited scholar on bankruptcy law in the country -- and also would like to see Too Big To Fail ended, so I believe she can work productively with FDIC to implement a resolution regime best capable of handling the problem.

California Overwhlemingly Votes to Ease Three-Strikes Law, Other States Legalize Marijuana18 years after it was first passed, California looks to ease its three-strike law by a 20-point margin. When people study how the United States differs from the rest of the world in terms of incarceration policy and how we manage to have a significantly higher prison population than other countries, mandatory penalties for those who have a prior (recidivists) is a major driver.

As the University of San Francisco School of Law’s Center for Law and Global Justice wrote in their report, “Cruel and Unusual: U.S. Sentencing Practices in a Global Context,” all of the major policy differences between the United States and other countries -- "life without the possibility of parole, 'three strikes' laws, consecutive sentences, mandatory minimums, juvenile justice laws, dual sovereignty, and non-retroactive application of ameliorative law" -- are all anti-rehabilitation policies.

Let's go to the section of that report on three-strikes laws:

The most infamous example of a stringent habitual offender law is California’s three strikes law, which provides a sentence of 25 years to life for anyone convicted of a felony who has committed two prior serious or violent offenses. While the public pushes for “the worst of the worst” to be taken off the streets, the reality is that most third strike convictions are for non-violent felonies: fifty-four percent of third strike commitments under California’s three strikes law were for drug, property, and other non-violent crimes...

Virtually all of the countries surveyed for this report provided some type of increased penalty for recidivists. What distinguishes the United States from the rest of the world, however, is the lack of judicial discretion in sentencing schemes aimed at recidivists and the length of sentences that result...This leaves only 21% of countries, including the United States, that require a mandatory increased punishment for an offender with prior convictions.

For fun, what are those other countries that also have three-strike like laws?

Not the best company. Remember, these laws were designed to limit the power of judges and increase the power of prosecutors, a core part of the conservative assault on liberalism in the space of incarceration policy. This is a major change, likely to impact many other states for the better.

Meanwhile, Colorado and Washington voted to legalized and regulate marijuana use. As of right now, Attorney General Eric Holder has not publicly stated if the Feds will try to interfere with these new laws, like they threatened to do to California's proposal (which failed to pass). President Obama and Holder have a real opportunity to let states experiment with ending the failed War on Drugs as we know it, or an opportunity to keep a moral crime going indefinitely by federal preemption. Nicole Flatow has an excellent overview of the legal issues at Think Progress.

 

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Election Day Non-Election Links

Nov 6, 2012Mike Konczal

Today is election day. Here's what I wrote about the stakes for Dodd-Frank and the election earlier this year at the Washington Monthly, with a quick update here.

Here are some non-election links for you to check out in between obsessively refreshing all your favorite election sites:

Today is election day. Here's what I wrote about the stakes for Dodd-Frank and the election earlier this year at the Washington Monthly, with a quick update here.

Here are some non-election links for you to check out in between obsessively refreshing all your favorite election sites:

Molly Knefel on contrasting her experiences teaching young black children under intense police scrunity with her brother, John, being arrested at an Occupy event.

Sarah Jaffe on Occupy's afterlife in building community power in places devastated by Hurricane Sandy.

Ben Adler on a 2010 MoMA exhibit on combating rising sea levels, revisiting what was discussed after having gone through Sandy. Also Matt Yglesias on using the Dutch as an example to save New York from future floodings.

N+1 Election Preview. Ok, one election link. N+1 has a crew of fantastic writers, and it is great to get the take of intelligent people who don't cover/write about this stuff for a living.

Jeremy Kessler on Justice Kennedy and civil liberties versus libertarianism. I'm going to do more with this shortly, but I really like the way he poses the problem of how do civil libertarians deal with the issue of public power. I (and many others) were caught off guard by the ACLU, etc. endorsed of Citizens United; Kesller approaches this issue through the Kennedy dissent on Obamacare.

I covered the new unemployment numbers at The American Prospect last week.

I went out looking for economics based arguments for anti-gouging laws. Three I found: Cheap Talk's Jeffrey C. Ely argues here that efficiency can be outweighed by excessive producer surplus, Andrew Bossie uses an island model here, and Jason Thomas here on tumblr makes additional points.

I started a tumblr, and may keep it going. (I enjoyed having tumblr search my gmail for friends with tumblrs and seeing how many people started one about 18 months ago, posted 3 things, and then forgot about it.) Feel free to "ask me anything," especially if you need an election break, and I'll be happy to respond on the tumblr.

Oh and one last time, the Herman Cain ad where his chief of staff, Mark Block, talks about the campaign and then has a smoke (and ends with Cain's smile). The Tea Party anthem, I Am America, gets stuck in my head immediately.

See you on the other side....

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Mitt Romney, Reactionary Keynesian

Nov 6, 2012Mike Konczal

I meant to develop this into a larger work on the Right and economic stimulus but it never happened, and with the election today favoring President Obama, it is likely I won't get a chance. So here's part of it for the blog.

I meant to develop this into a larger work on the Right and economic stimulus but it never happened, and with the election today favoring President Obama, it is likely I won't get a chance. So here's part of it for the blog.

In December 2008 Mitt Romney wrote "A Republican Stimulus Plan" at the National Review, announcing "this is surely the time for economic stimulus." What should be in a Republican stimulus plan? First up, tax cuts. Tax cuts for capital income and corporations, and tax cuts overalls. But tax cuts aren't sufficient to the task, and some sort of direct spending will be required. However, since most infrastructure takes too long to get off the ground, "[s]pending to refurbish and modernize our military equipment is urgently needed, and it has a more immediate impact on the economy."

In 2008 Mitt Romney wanted to stimulate the economy with tax cuts and military spending. It's worth noting that two of the central planks in Mitt Romney's currently underdeveloped economic policy are a series of tax cuts and a dramatic $2 trillion dollar increase in military spending. But don't call it stimulus! Mitt's National Defense Plan wants to "modernize and replace the aging inventories of the Air Force, Army, and Marines," as in the stimulus plan, but this is now to address "Obama's failure" in foreign policy.

Mitt Romney's tax plan is meant to offset tax cuts by cutting tax expenditures. But the tax plan currently looks like an unassembled game of Mousetrap where you know several of the pieces are missing. It could work, but it isn't clear how it would. But even if Mitt Romney did offset his tax cuts by cutting expenditures, those expenditure cuts would likely be put into place over a period of years, years where the deficit would balloon further. (The Ryan Plan also balloons the deficit in the short term dramatically.) This would still work as stimulus.

So Keynesianism through tax cuts and the military. The military stuff really does add to what John Kenneth Galbraith referred to as "a new and reactionary form of Keynesianism with which to contend" where "Tax reduction would then become a substitute for increased outlays on urgent social needs." Or as Michael Harrington wrote, in a 1966 Encounter article titled "Reactionary Keynesianism," "in the United States it is quite possible to envisage a conservative Keynesian policy which substitutes tax cuts for social investments, increases the maldistribution of income (the rich and the corporations gain more from tax cuts than the workers and the poor) and maintains a prosperity as that term would be defined by business."

Liberals like to point out the contradiction of Republicans attacking economic stimulus while arguing that defense cuts will tank the economy, and they are right to do that. But I'm still having difficulty thinking through where the distributional impact of various ways of managing the economy, the type of society it builds, connects into the political ideology. I imagine we'll have more opportunities to see this in the aftermath of the election.

 

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Guest Post: Heather Boushey on Inequality and Growth

Nov 6, 2012Mike Konczal

Mike here: Special guest post by Heather Boushey of the Center for American Progress, responding to a recent citation of her work with Adam Hersh on inequality and growth (work we discussed here). The launch of this post was delayed on my end as a result of Sandy-induced work/email chaos.

Mike here: Special guest post by Heather Boushey of the Center for American Progress, responding to a recent citation of her work with Adam Hersh on inequality and growth (work we discussed here). The launch of this post was delayed on my end as a result of Sandy-induced work/email chaos. Hope you check it out, as well as their excellent report that is discussed within.

Inequality does appear to affect economic growth

by Heather Boushey

It is now a well-known fact that the United States has the highest levels of inequality among developed countries. Increasingly, the economics profession is questioning how this affects our economy, not only in terms of what it means for those at the bottom of the income distribution, but in terms of how high inequality affects economic growth and stability.

The New York Times recently published a thoughtful piece on the relationship of rising U.S. inequality to long-term economic growth. In the wake of that article, they published a Room for Debate online forum on this topic and Scott Winship, a scholar a the Brooking’s Institution was among those participating. Mr. Winship cites our report on the topic to discuss what he argues is inadequate evidence linking inequality and growth.

We are grateful that Mr. Winship acknowledges CAP's central role in this debate, but grossly mischaracterizes our conclusions. The quote he pulled from our report gives the false impression that our research supports the conclusionthat inequality is not a problem for economic growth.

Our argument is that we need to look specifically at the channels through which inequality affects economic growth, specifically in the U.S. context. For example, there is evidence that documents how the rich don’t spend as much of their income as the non-rich. If inequality keeps rising and the rich pull in a larger and larger share of national income, this stunts demand, the lifeblood of the economy.

Another mechanism is through entrepreneurship, which is often portrayed as the dynamic force in a capitalist economy. Yet, most entrepreneurs come from the middle class. The middle class provides both the economic security and access to education and credit that entrepreneursneed.

If inequality is due to the top pulling far away from the rest of the economy,which creates a very wealthy elite, this is often associated with a well-known economic phenomenon of “rent-seeking.” The wealthy will tend to use their outsized resources to garner a bigger piece of the pie, rather than on investments that will increase productivity and make the whole pie bigger. And, there is growing evidence that this is exactly what is happening to our economy, threatening long-term growth. For example, economists have been finding that as money has flowed into the financial sector, that industry has increasingly used its resources to promote policies that benefit itself only.

In opposition to Mr. Winship’s claim, the preponderance of evidence does supports the conclusion that inequality can hamper economic growth. We conducted a thorough review of the literature and in the quote he took, we were highlighting methodological limitations in a specific class of empirical studies. We also pointed out that cross-country panel data studies look at reduced form equations for growth and we argue that we should be thinking instead about a structural model.

Others have found our report to be data-driven. Jim Tankersley, journalist with the National Journal encouraged his readers to consume the report “in its entirety,” describing is as a “The bulk of Boushey and Hersh's sources aren't partisan in any way - just detailed, data-driven analysis from top economists.” This blog called it “the best up-to-date arguments that progressives discussing inequality should understand inside out.” And in a lengthy discussion on the subject last month by Jared Bernstein, former chief economist to the vice president, our work was used to frame a summary of the latest research on this topic. 

We are typically pleased to have our research cited in the paper of record, the New York Times. However, it is no fun to have our work grossly misrepresented.

 

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