The Avengers Movie, and Time vs. Space in DC and Marvel Comics

May 4, 2012Mike Konczal

Avengers is a fantastic movie.  You should see it.  The Thor and Captain America characters are far better than they were in their own movies, and Mark Ruffalo as Banner is the best we'll likely see (the Hulk steals every scene he is in).  Here's Alyssa Rosenberg's epic review, ‘The Avengers’ Brings Superhero Movies to Another Level.  In honor of the Avengers, let's do a comic book related post.

Avengers is a fantastic movie.  You should see it.  The Thor and Captain America characters are far better than they were in their own movies, and Mark Ruffalo as Banner is the best we'll likely see (the Hulk steals every scene he is in).  Here's Alyssa Rosenberg's epic review, ‘The Avengers’ Brings Superhero Movies to Another Level.  In honor of the Avengers, let's do a comic book related post.  No movie spoilers, except in the last paragraph, which will have a warning.

Specifically I want to examine the use of space and time in Marvel versus DC comics.  Recently DC rebooted their comic line.  All their titles stopped, and most were relaunched with an issue #1.  Continuity was thrown for a loop, with some issues starting at the beginning of their hero's career and others happening much later.  I stopped reading DC right before that, but my overall sense is that it is a mixed bag.

I was surprised by this move, as I always thought the deep time dimension to DC comics was what animated it and gave it a much different tone than Marvel comics, and this more or less threw that away.  To me, the dominant horizon for Marvel comics is space, as in location, and DC comics is time, as in history.  Marvel's comics were best read as unfolding across their Earth, in multiple locations, with the challenge as following how the different spaces overlapped and conflicted.  For DC, it was about mining the deep history and overlapping continuity, constantly in flux, to make sense of where the characters had come from and how they were engaging each other.

The two major, era-defining runs on Marvel were the Chris Claremont run on X-Men, and now Bendis' run on Avengers.  They both set the tone for how Marvel operated.  The thing I remember most about Claremont's X-Men, especially once the original characters spun off into X-Factor, is how the characters were always split up in different locations.  There was a team off in Australia. There was a group off in New Orleans doing other things. There were people at the mansion and in outer space and on the Moon.  Getting people in the same space - would they all make it to Muir Island to fight the Shadow King? - was always a source of dramatic tension.  But as a fan, keeping track of the continuity of who was where was always a task, and the geek fun was trying to keep a mental map to make sense of it as it unfolding each week.

Bendis' Avengers, especially after the Civil War storyline, works the same way.  You had to know which characters are underground, who is staying with what team, and who is chasing and fighting with whom.  Like the X-Men at their height, you really need to follow several titles to keep track of who is doing what where.  Their big events are all about this as well.  Most of Siege takes place across an afternoon of battle, and it is just a matter of getting all the characters in place for the action to take place.  Fear Itself requires Tony Stark to go to one place, and Thor to bump into the Hulk and the Thing, and then everyone to get to Asgard, and so on.

DC Comics never had that issue - instead they exist across time.  To really make sense of the stories, especially after Geoff Johns took over the world, you had to engage continuity across time.

I think it's safe to say that the Ron Marz run on Green Lantern, which turned Hal Jordan into the villian Parallax, introduced Kyle Raynor, then immediately put his girlfriend in a refridgerator and made it so Kyle's ring could impact the color yellow, is a low point in DC Comics history.  Johns not only rebooted Green Lantern, but turned it into a major comics achievement by fitting all those items into continuity.  While lesser writers would have ditched the old story, or other comic universes would ignore huge parts of it just to make it fit however they wanted (who is Xorn again?), part of the joy of the Green Lantern reboot was watching Johns make it all work together.  When you geek out with DC comics, the continuity to fixate on is going to be how the story exists throughout time.

The revamping of the comic universe that happened in DC around this time amplified this - creating the JSA (Justice Society of America) as a dual-generation comic alongside the Justice League.  Grant Morrison's run on Batman gloried in pulling up every arcane reference to old Batman stories. James Robinson's fantastic Starman run was all about nostalgia and the relationship between Golden Age and current day comics.  DC's big events follow this as well.  The Crisis events usually are about the various reworkings of the history - what universes are in, and what universes and stories are out.

(There are plenty of pieces of evidence against this division - Bendis' excellent Illuminati comics series, which is all about revisiting major events in the Marvel timeline, for instance.  And practically, DC's longer timeframe and its purchasing of numerous comic titles that had to be worked into continuity add to this, as well as the fact that the headline characters move at such speeds it is assumed they can get anywhere quickly.)

Why does this matter?  As the comic book audience ages, and as the fandom is done online (with the ability to discuss every esoteric detail of every comic and being available to all), there's a big advantage in going complicated for the comic book titles.  By having to read several titles, or having had to have read a deep backlog, it boosts sales. But it also creates a more complete universe, which is an excellent thing for the fans. I'm surprised DC tossed their advantage in this realm on a gimmick.

AVENGERS SPOILER:  Speaking of deep history, I can't believe they put Thanos in as the major baddie at the end.  After the midnight showing, several teenagers were trying to figure out who that was.  I can tell I'm old because I really wanted to go: "sit down, son. When I was your age, actually when I was younger than you, there was this comic called Infinite Gaunlet.  After the first issue came out, everyone scrambled to find the entire backstory, from Thanos Quest to all the Silver Surfer issues where he chases Thanos around (and the latter ones, including that one with the spiffy reflective cover). It was the greatest comic ever." In other words, the one bone they threw to fans in the closing credits was perfectly pitched to obsessive comics readers in their early 30s.  Well played.

 

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Job Numbers Friday: Looking to the Secondary Measures

May 4, 2012Mike Konczal

April's job numbers were disappointing, but they'd look even worse if we accounted for those who have dropped out of the job market.

Today featured a lackluster set of job numbers. Payroll employment was up 115,000 jobs in April, and the unemployment rate went down to 8.1 percent from 8.2 percent. Government jobs were down 15,000, including 5,200 state and local education workers.

April's job numbers were disappointing, but they'd look even worse if we accounted for those who have dropped out of the job market.

Today featured a lackluster set of job numbers. Payroll employment was up 115,000 jobs in April, and the unemployment rate went down to 8.1 percent from 8.2 percent. Government jobs were down 15,000, including 5,200 state and local education workers.

There are three ways of parsing the jobs numbers. One way is to focus on the jobs created -- where are they, what industries they're in, and how much wage growth and hourly gains there are. The second is to focus on unemployment -- who is unemployed, how long have they been unemployed, and what characteristics do they have? And the third is to look at secondary unemployment characteristics, the numbers that try to interrogate the boundaries between the unemployed and those "not in the labor force."  We'll spend some time in the next week talking about how to think of this third category.

For instance, is this even an interesting question? Matt Yglesias makes a case that it is overblown, arguing that it is really catching longer-term patterns and needs to be put in the context of the global economy. I agree in the sense that I think 8.1 percent unemployment is sufficient for serious reaction. But I think digging into this is important for both economic and political reasons. We'll start a reply with this post.

It is the case that the size of the labor force hasn't grown (as raw number of people, not a percentage) since the recession started. Though we don't know what the "true" size of the labor force should be at full employment, it should be a bigger number than it was in 2007. That's a problem, because conventional unemployment can't capture that.

And it is still true that the unemployed are more likely to drop out of the labor force than find a job. This is a brand-new phenomenon in the post-Great Depression economy.

Though the drop-out rate is within a longer historical range as a percentage of the unemployed (which is in the chart above), the number of unemployed people doubled during this recession. This channel is undertheorized in normal economics -- why would someone looking for a job decide to stop looking, given that they were willing to look at one point? For those concerned about the long-term costs to our economy of hysteresis, this is a problem. We aren't seeing an uptick in those moving from "not in the labor force" to unemployed, and thus no increase in unemployment, which we had wondered if we were going to see as the economy picked up.

Many of those who are "not in the labor force" want a job but are declining to actively search for them. This number went up in the recession and is hovering at a high rate:

This is the categorization of "want a job now," but "U-5" unemployment also captures some of these changes. That additional 1.5 to 2 million unemployed workers would give us a higher unemployment rate. It isn't increasing in the past year, but it isn't decreasing either.

An aging population should create decline in the employment-to-population (the percentage of people working) and labor force participation (the percentage of people working or looking for work) rates. How does this look when we just look at 25-54 year olds? Here is their labor force participation rate:

And their employment-to-population ratio:

There's a question as to what extent the recession is speeding up already occuring trends (retirements in an aging population, increased schooling, fewer men working) or has caused these trends to happen (or at least overshoot) as a result of being away from full employment. But retirement and schooling is less of an issue in the 25-54 year old range, and yet we see dramatic results here. Will these go back to their previous levels? Probably not. But I believe they'd go back at least a little at full employment. And that needs to be accounted for.

Mike Konczal is a Fellow at the Roosevelt Institute.

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More on the Case for the Public University as a Public Option

May 3, 2012Mike Konczal

Josh Barro has an editorial at the Daily, Making U. Pay, about the college affordability cost crisis.  Barro:

Josh Barro has an editorial at the Daily, Making U. Pay, about the college affordability cost crisis.  Barro:

What the University of Florida (along with every other American college and university) really needs is cost discipline...Colleges still need to employ a lot of highly skilled workers, and college costs are tied to their wages, which rise faster than inflation...colleges and universities have failed to mitigate this phenomenon. For example, over the last few decades, the typical public four-year college has seen a sharp expansion of its support and managerial staff — from 5.5 per 100 students in 1987 to 7.5 per 100 in 2007...

Unfortunately, consumers do not have the necessary incentives to impose cost discipline in the market. The perceived necessity of a college degree to find a middle-class job gives students few options but to pay up...State legislatures, too, should put pressure on public colleges and universities not to increase staffing relative to student populations, and to respond to budgetary strains with cost control instead of tuition hikes or reductions in enrollment...Colleges and universities should take greater advantage of technological advances that could finally improve productivity in the education sector, such as distance learning and video instruction...

These reforms, different though they are, have one aim in common: creating incentives for all actors in the market to make higher education not just cheaper, but more efficient. That may sound unromantic, but it’s necessary to maintain educational opportunity for all.

I agree with most of the piece.  Barro doesn't take his argument in this direction, but, with the risk of dragging Josh into a social democratic quicksand pit, it's useful to reframe this discussion as one of reclaiming a "public option" in higher education.  Much of the discussion on the technical efficiency of the public provisioning of merit goods focuses on scale and compulsion, which is relevant for higher education, but there's also advantages in cost control and baseline quality.  By holding down tuition, the public university can act as a check on runaway price inflation in the private university market.  Considerations about dynamic efficiency - improvements in quality - seem not as relevant here in the formal education market: private sector tuition is exploding as fast as public tuition.  If we are concerned that boosting demand through price subsidies is captured by incumbent suppliers, then boosting access through reducing tuition on public universities should negate those rents.

Dynamic efficency is very important when it comes to the online and future sectors of higher education.  However public options help here as well: having a strong baseline of quality is important for vetting the actual efficiency improvements of these new institutions.  Public options solve a certain type of informational problem.  If prices are lowered, it can be difficult for the government and citizens to tell if it is because market innovations have allowed for lower cost production or because they are providing services of a cheaper quality.  The private market is more incentivized to provide new benefit options and offer greater flexibility when they have to compete against a baseline product.  This creates the incentives mentioned above, but these incentives work more towards actual quality improvements instead of rent-seeking when they are competing against a public baseline.  We know for-profit schools are a bad deal because they statistically underperform public community colleges while having larger debt burdens.  Online education at California looks to have equally high drop-out rates. This was part of the important intellectual firepower over the debate on "vanilla products" that erupted during the early parts of Dodd-Frank, brought over to the education sector.

Tim Noah wondered to Matt Yglesias if we should impose cost controls on colleges; I think we should instead do what we know has worked - make sure a public option is available to all, and have a private market develop alongside it, filling in the efficiency gaps wherever they are.  I forgot to link to this, but Aaron Bady had a powerful defense of the California Master Plan, the mid-century public higher education model, when we did a bloggingheads a few weeks ago:

 

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A Majority of Those Who Claim EITC Are on it for Less Than Two Years

May 2, 2012Mike Konczal

Here's a datapoint I was surprised to learn. From a footnote by Bob Greenstein of CBPP, there's a paper titled 

Here's a datapoint I was surprised to learn. From a footnote by Bob Greenstein of CBPP, there's a paper titled Income Mobility and the Earned Income Tax Credit: Short-Term Safety Net or Long-Term Income Support, by Tim Dowd and John B. Horowitz.

Is the safety net a hammock?  And is the system fundamentally broken if some 40 percent of American don't pay an income tax? This is the brunt of the conservative attack on the welfare state.  As Paul Ryan notes, his plan will make sure the government doesn't "turn the safety net into a hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives." Ryan's plan is focused on cutting spending through the tax code.  Most tax code spending benefits the top 20 percent of Americans, with one exception - the set of refundable credits including the Earned Income Tax Credit (EITC).  Those mostly go to those in the bottom 40 percent of Americans.  If you have the concerns mentioned above, the EITC is the place you'd cut.

But does the EITC represent a "hammock," a permanent class of the poor living lives of "depenency and complacency"?  For one, EITC is connected to those who work, so one would think that it would be excluded from the assault on the welfare state.  But beyond that, it appears that those claiming EITC are people going in and out of working poverty with a surprising turnover frequency.  From the Dowd/Horowitz paper (my bold):

Sixty-one percent have spells of one or 2 years. However, at the same time, we find that 20 percent of EITC recipients starting a spell, conditional on observing the taxpayer in 1989, claim the credit 5 or more years. Therefore, for some taxpayers, the EITC acts as a temporary safety net during periods of either anticipated or unanticipated income or family structure shocks. But the EITC also acts as a long-term mechanism of providing assistance to taxpayers with children who are entrenched in the lowest- income brackets.

Indivar Dutta-Gupta at CBPP has more on the study, also noting that (my bold):

The EITC goes to working people — the overwhelming majority of them families with children — with incomes up to roughly $49,000.  Earlier unpublished research from Dowd and Horowitz found that EITC users pay much more in federal income taxes over time than they receive in EITC benefits.  Taxpayers who claimed the EITC at least once during the 18-year period from 1989 through 2006 paid several hundred billion dollars in net federal income tax over this period, after subtracting the EITC and any other refunds.

Dowd and Horowitz’s new study also found that EITC use is highest when children are youngest — which is also when parents’ wages are lowest.  (Working parents’ wages rise, on average, as their children grow up.)  This finding is particularly important given the importance of income for young children’s learning and the evidence that poverty in early childhood may reduce children’s earnings as adults.

Rather than a permanent class of non-taxpayers, EITC users do, in fact, pay more in federal taxes over time than they get in EITC benefits, which represents how many of them move in and out of working poverty over the course of several years.  The study finds that mobility is lower on the whole for this group, which makes a safety net even more of a necessary thing.  But perhaps we can cut with the hammock language, and focus on the metaphor of a trampoline, providing people much needed support when there's a sudden shock to the economy or their lives that drops their ability to provide for themselves, and also a mechanism that promotes the kind of risk-taking we want in our society.  The question is how to make that stronger.

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Will Ryan's Budget Take a Page From the 18th Century and End Progressive Taxation?

May 1, 2012Mike Konczal

Jonathan Chait has a great article on Paul Ryan in New York Magazine, which includes an important quote from anti-tax adovcate Grover Norquist: "We don’t need a president to tell us in what direction to go. We know what direction to go. We want the Ryan budget...

Jonathan Chait has a great article on Paul Ryan in New York Magazine, which includes an important quote from anti-tax adovcate Grover Norquist: "We don’t need a president to tell us in what direction to go. We know what direction to go. We want the Ryan budget... Pick a Republican with enough working digits to handle a pen to become president of the United States.” Earlier in the year Thomas Mann and Norman Ornstein walked readers of the Washington Monthly through what it would look like to have a Republican House, Senate, and president -- and the likelihood that they would pass the Ryan budget through reconciliation.

Degressive Taxation

One of the centerpieces of the Ryan budget's Path to Prosperity is tax reform. The tax overhaul will cut tax expenditures (without naming any) while also reducing the current set of six tax brackets to just two. One bracket will have a tax rate of 10 percent and the other will be 25 percent. Here's a question: should we think of these two rates as a special form of a flat tax? Would this budget be the end of progressive taxation in the United States?

There's an excellent 1908 book called Progressive Taxation in Theory and Practice (you can download a copy at that google books link). Written by Edwin Robert Anderson Seligman for the American Economic Association, it set out to catalogue every argument in history for and against progressive taxation as well as proportionate taxation (or what we'd now call a flat tax). While walking through all the arguments, he has to classify a set of arguments that aren't strictly either -- something he calls "degressive taxation."

Degressive taxation is where you have two tax rates: Below a certain income it is one rate, and above that income it is a second, higher rate. Typically it is a zero rate of taxation for income below the poverty line, and a flat, proportionate rate for income above that.

Arguments for degressive taxation were very common in 18th century Europe. The French political economist François Véron Duverger de Forbonnais argued in 1758 that "the object of taxation is the preservation of property; and property is nil if it does not afford subsistence. Hence, the physical subsistence of every family is a privileged part of all income. Only the surplus above this minimum can be assigned to the public for the support of government."  Zero taxes for incomes up until poverty, flat tax above poverty.

Dean Woodward put the argument even more strongly in 1768. "Before we begin to tax any income for the poor, we must deduct from it as much as is requisite to purchase for the possessor and his family the absolute necessaries of life.  No man can be bound to give to another what is essential to his own subsistence.  To this every man has the exclusive right on which the very claim of the poor is founded."

Even though it isn't a flat tax across the entirety of income, as there are two distinct tax brackets, none of these people viewed their project as one of progressive taxation. Lord Auckland, debating England's first income tax in 1799, exempted 60 pounds for taxation as the minimum of subsistence but rejected progressive taxation "because of the implied inference, that because a man possesses much, therefore more shall be taken from him than is proportionably taken from others." As Seligman noted, surveying the arguments, "in degression the ideal is proportional taxation, although a concession is made, through lower rates or exemptions or abatements, to the poorest classes who ought theoretically to pay the same rate but who are deemed to be unable to do so."

How Does The Ryan Plan Stack Up Against the 18th Century?

I think it is fair to characterize the Ryan plan as, in its ideal, a degressive taxation plan. A low rate for those with little and a flat tax for everyone else. There are a few things that complicate this picture. It isn't clear where the 10 percent bracket ends and the 25 percent bracket starts (the 25 percent bracket now runs from $35,351 - $85,650 for singles, so in theory the 10 percent could run from $0 to $35,350). As James Kwak and many others point out, the numbers don't work -- this would be a major tax cut for the rich and a major tax hike for the working and middle classes.

However, would people making poverty wages pay ten percent under the Ryan Plan, or zero percent? People working for poverty wages now don't often pay income taxes because of the Earned Income Tax Credit (EITC). But would Ryan look to cut the EITC tax break? As this fantastic New York Times chart shows, some sets of tax expenditures tilts to the 1% and some tilt to the bottom 40 percent:

Refundable tax credits, like the EITC, benefit the bottom 40 percent of Americans. The preferential treatment of capital gains and dividend income benefits the top 20 percent, especially the top 1%. Ryan is clear that he wants to give capital gains and dividends even better treatment. But will he look to cut the EITC, making those in poverty pay more? It's not clear from anything I can find. As Tim Noah writes, Eric Cantor looks pretty set on getting those who pay nothing in income tax to pay something, and cutting the EITC is the way to do that.

Looking further afield, Yuval Levin's big article "Beyond the Welfare State," the intellectual firepower (Committee on Social Thought-trained) justifying something like the Ryan Plan, mentions only three exemptions "worth keeping" after the conservative new dawn: "retirement savings (which are far preferable to universal cash benefits to retirees), a unified child tax credit (to encourage parenthood and to offset the mistreatment of parents in the tax code), and the charitable-giving deduction (since a reduction in government's role in social welfare must be met with an increase in the role of civil society, which should be encouraged)." Nothing specifically targeted for supplementing the incomes of those making poverty-level wages.

Which also means that at the turn of the 21st century, after centuries of economic growth, the conservatives in the United States are looking at tax policy potentially far more regressive at a conceptual level toward the poor than classical liberals in the mid 18th century. Forget so-called moderate Republicans of the Eisenhower-era; can we just get a handful of 18th century tax scholars in the Republican party?

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Is There a Good Case For Doubling Student Loan Interest Rates?

Apr 25, 2012Mike Konczal

Sarah Jaffe recently wrote a story about how yesterday was the estimated day student debt would hit $1 trillion dollars. President Obama has called for Congress to keep interest rates on subsidized student loans at 3.4 percent instead of letting them revert back to 6.8 percent as per the law passed in 2007.

Sarah Jaffe recently wrote a story about how yesterday was the estimated day student debt would hit $1 trillion dollars. President Obama has called for Congress to keep interest rates on subsidized student loans at 3.4 percent instead of letting them revert back to 6.8 percent as per the law passed in 2007. He has even started a twitter hastag for it, #dontdoublemyrate. It looks like Mitt Romney is also against letting the rate go up.

Is there any good arguments for letting interest rates on student loans double? I've been trying to find some, so let's take a tour through the right-wing.

Douglas Holtz-Eakin essentially punts at National Review Online, saying that it is a distraction. "Americans would be better able to afford college if their budgets were less pressured by gasoline, food, and health-insurance premiums."  Umm, sure, I guess, though the rate matters quite a bit to those who will be impacted by it. What does that have to do with what the rate should be?

"Artificially" Low Rates?

Heritage quotes Eakins and adds a fun "None of this is to say that the federal government should be doing more to bail out students. It shouldn’t... But the current debate’s origins are in separate legislation passed in 2007 whereby the federal government set interest rates on student loans artificially low." Bailouts! Yes, bailouts.

Are rates "artifically low," thus bailing out student debtors? Right now, the United States can borrow for 10 years at real, or inflation-adjusted, interest rates that are negative. The 30-year conventional mortgage rate is the lowest its been in over 40 years. The market is using ultra-low interest rates to beg anyone who can make productive use of capital to borrow it  Educating our young citizens in universities that are the envy of the world certainly seems like a productive use of capital. So how is not jacking up interest rates when 10 year government debt yields are at ultra-low 2 percent rates the equivalent of paying AIG creditors at par during the financial bailouts?

The implication is that they are below market rates. "Below-market" here is a troublesome phrase, as the private market for student loans is incomplete, prone to collapse, thin, and exists either through previous credit guarentees or a reworking of the various rules that govern debt in this country. This constitutes the government stepping up to do the things that the private market won't. As Keynes said, "The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all."

Cost to Taxpayers

Cato tries harder to make a case if you can cut through a tangled web of metaphors about being "good parents" to kids. Neal McCluskey argues, "Finally, there’s the cost to taxpayers."

I like how he doesn't mention that this actually runs a profit for taxpayers. From the Department of Education student loan overview (R-10): "For Direct Loans, the overall weighted average subsidy rate was estimated to be -13.91 percent in FY 2011; that is, the overall program on average was projected to earn about 13.91 percent on each dollar of loans made, thereby providing savings to the Federal Government.” Unless you start making up discount rates, these loans make a profit for taxpayers.

As Alan White notes, according to the "Congressional Budget Office, $37 billion will flow IN to Treasury from student loans made this fiscal year at the 3.4% rate (on a net present value basis and net of about $1.5 billion to administer them.) " If anything, we should make rates lower than 3.4 percent.

Lavishing Cheap Credit

Cato continues by arguing, "the reality is that policymakers have been lavishing cheap money on students for decades...all the cheap aid has enabled colleges to raise their prices at breakneck speeds, rendering the aid largely self-defeating and college pricing insane."

For aid to be "self-defeating," you'd have to imagine a completely inelastic, fixed supply of higher education, which I hope isn't Cato's argument against keeping current rates. But maybe the author's on to something. If you look at, say, the maximum amount of Pell Grants, do they rise in proportion with increases in tuition? Ummm, no:

As Demos notes in its 10 points on how student debt is blocking mobility, "In 1980, 39 percent of federal financial aid to undergraduates was in the form of loans, and 55 percent was awarded in grants. By 2008, this had shifted to 64 percent of the funds awarded as loans and only 26 percent as grants. Moreover, today’s maximum Pell Grant covers just over a third of the costs of attending a public 4-year university, down from over two-thirds in 1980."

Meanwhile, during the same time period, numerous legal restrictions have been put on student debt and protections have been stripped away, which means that the major government changes to student debt involve the it making it a harder, not easier, form of debt to manage. Nondischargeability went from five years to seven years in 1990, until it was revoked permanently in 1998 (when the statute of limitations was also removed). That was extended to for-profit student loans in 2005. Social Security became eligible for student loan collections in 1996. The argument that student debt became "lavish" during the past 20 years requires some additional work.

And though some of the lower rates are captured by increased tuition because of inelastic supply -- an argument that is equivalent to saying that free, "public option" public universities would thus contain runaway costs -- current tuition movements look like they are being driven more by states cutting support for public universities during the Great Recession. As the CBPP notes, at least 43 states cut services to public higher education. That's what is going to drive serious tuition increases in the next few years.

(Digging into some of this research, the lack of decent empirical work linking increased aid to tuition increases is startling given how much movement conservatives rely on such an argument.)

There Are Better Subsidies

Friend-of-the-blog Josh Barro at Forbes has the another set of arguments against blocking rate increases. First Josh argues that we need to think of a low rate as a subsidy: "A below-market interest rate for Stafford Loans is just another subsidy mechanism—essentially, you can think of the present value of the interest savings as a partial subsidy of a student’s tuition payments." Josh also notes that "Instead of extending the policy of holding Stafford Loan interest rates very low, why not let rates go back up and redirect the cost of the subsidy into an expansion of Pell Grants and refundable tuition tax credits?"

Sure, but right now these loans are profitable. As noted above, we spent the last 20 years stripping out protections from these loans to guarantee a high recovery rate. There's no decent market rate to compare this to, given how thin and incomplete the private lending market is in this space. So why not fund it closer to where the government can borrow, adding in a small spread for administration and to cover losses?
 
Pell grants should be considered in their own right. But this is a specific conversation about what the government should charge when it is acting as a lender to young people, collecting the spread between the rate it can borrow and what students will pay. If that spread is very high because capital markets want the government to borrow, that doesn't strike me as an excuse for the government to squeeze borrowers more and use the extra profit it makes at 6.8 percent to do something different. Even if it is a good idea to raise Pell Grants, that doesn't change the nature of how low interest rates are right now, and how the government should approach the rates it sets for students in a way that is fair.
 
So what's left as far as arguments go?

 

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A Year of Ben Bernanke Press Conferences

Apr 25, 2012Mike Konczal

A year ago, in April of 2011, Ben Bernanke gave his first press conference.  I wrote it up for the American Prospect here.  Looking back, I had flagged that more of the questions asked Bernanke whether he was doing too much, rather than too little, to stimulate the economy.  I noted:

A year ago, in April of 2011, Ben Bernanke gave his first press conference.  I wrote it up for the American Prospect here.  Looking back, I had flagged that more of the questions asked Bernanke whether he was doing too much, rather than too little, to stimulate the economy.  I noted:

the press conference, roughly nine questions worried about inflation, a weak dollar, the country's S&P rating, oil prices, and whether the government can fashion an appropriate response to the financial crisis or long-term unemployment at all. These all reflect the worry that government is doing too much instead of too little. Meanwhile, there were only two questions asking why the Federal Reserve wasn't doing more to lower unemployment. When Binyamin Appelbaum asked, "Is it in the Fed's power to reduce the rate of unemployment more quickly? How would you do that? Why are you not doing it?" it was almost out of place.

That wasn't the case today.  The questions were much harder and more frequently about why Bernanke wasn't doing more to get the economy going.  They took for granted, as the first questioner pointed out, that "unemployment is still high, the economy is slowing, inflation is subdued" and Bernanke and the FOMC is, to their critics, "still being too cautious."  I count, on a quick scan, five questions related to the idea that the Federal Reserve has the ability to do more and is choosing not to do it, with only two more related to concerns of inflation hawks or a "bond bubble."

There's a lot of reasons for this: the wasted year of 2011 for the economy, the continued low interest rates of the United States even after a ratings downgrade, growing fears of a permanent decrease in the labor force participation rate and hysteresis, and more.  But part of this change is the result of the economics blogosphere pushing the debate about monetary policy at the zero-lower bound into the mainstream of financial and economics journalism.  The econoblogsphere should be proud of itself, and I will try to do more to advance this important conversation to whatever extent I can.

A year ago I held an event for the Roosevelt Institute on the Future of the Federal Reserve.  It was the same day as the Bernanke press conference, and as such we asked each of the participants to ask Bernanke a question, and we put them online.  Matt Yglesias' question was:  "I would ask him about his own paper on self-induced paralysis in Japan and what he has changed his mind about since then."  This change from Ben Bernanke the professor who called for aggressive monetary action to the Ben Bernanke we see now must have been on the minds of all the reporters in the room, as it is the subject of a great Krugman New York Times Magazine article this upcoming weekend.  The question finally got asked by Binyamin Appelbaum, who, as we note above, asked the hardest question about the Fed not doing enough a year ago at the first conference.  Bernanke's full answer:

Binyamin Appelbaum: Unemployment is too high and you said you expect it to remain too high for years to come, inflation is under control and you expect it to remain under control. You said you have additional tools available for you to use, but you're not using them right now. Under these circumstances, it's really hard for a lot of people to understand why you are not using those tools right now. Could you address that? And specifically, could you  address whether your current views are inconsistent with the views on that subject you held as an academic.
 
Ben Bernanke: Yeah, let me tackle that second part first. So there's this, uh, view circulating that the views I expressed about 15 years ago on the Bank of Japan are somehow inconsistent with our current policies. That is absolutely incorrect. My views and our policies today are completely consistent with the views that I held at that time. I made two points at that time. To the Bank of Japan, the first was that I believe a determined central bank could, and should, work to eliminate deflation, that it's falling prices. The second point that I made was that, um, when short-term interest rates hit zero, the tools of a central bank are no longer, are not exhausted there, are still other things that, um, that the central bank can do to create additional accommodation.
 
Now looking at the current situation in the United States, we are not in deflation. When deflation became a significant risk in late 2010 or at least a moderate risk in late 2010, we used additional balance sheet tools to return inflation close to the 2% target. Likewise, we've been aggressive and creative in using nonfederal funds rate centered tools to achieve additional accommodation for the U.S. economy. So the, the very critical difference between the Japanese situation 15 years ago and the U.S. situation today is that, Japan was in deflation and clearly, when you're in deflation and in recession, then both sides of your mandate, so to speak, are demanding additional deflation. 
 
Why don't we do more? I would reiterate, we're doing a great deal of policies extraordinarily accommodative. You know all the things we've done to try to provide support to the economy. I guess the, uh, the question is, um, does it make sense to actively seek a higher inflation rate in order to, uh, achieve a slightly increased pace of reduction in the unemployment rate? The view of the committee is that that would be very, uh, uh, reckless. We have, uh, we, the Federal Reserve, have spent 30 years building up credibility for low and stable inflation, which has proved extremely valuable, in that we've been able to take strong accommodative actions in the last four or five years to support the economy without leading to a, [indiscernible] expectations or destabilization of inflation. To risk that asset, for, what I think would be quite tentative and, uh, perhaps doubtful gains, on the real side would be an unwise thing to do.
Watch the video - Bernanke gets really agitated answering this question.  That's the argument to deal with.  I need to think this through more, but on its face it seems like they think they need to maintain their credability in order to keep rates at or below their target.  There's no tradeoff here - the credibility at best has allowed Bernanke to fight off opportunistic disinflation from becoming a goal (which may, in fact, be a victory).  
 
Meanwhile if the Bernanke wants to maintain credibility the best way to do it isn't by keeping the economy in a permanent quasi-recession but instead annoucing an NGDP target or announcing what he wants and what he is willing to tolerate to get it - say 3% inflation until unemployment is below 7%, like Chicago Fed President Charles Evans has suggested.
 
Important other notes: In response to a question about the dropping labor force participation, Bernanke noted that the rate was dropping because they are "no longer getting increased participation from women... society ages and also, for other reasons, male participation has been declining over time."  However a lot of it "represent cyclical factors, much of it is young people, for example, who presumably are not out of the labor force indefinitely, but given the, uh, weak job market, they are going to school or doing something else, rather than, than working."  As such "the unemployment rate may not fall as quickly going forward," because when the economy picks up "many of these folks are going to come back into the labor force looking for work."
 
Bernanke notes that in the absense of a zero lower bound the interest rate would be negative but that they've done other things to counteract this.  "We, we see monetary policy as being approximately in the right place at this point. Based on the analysis that we've been doing of the economy and the outlook."
 
All in all, the media has gotten a lot better pushing the Federal Reserve to account for its role in the weak economy over the past year.  Let's take victories where we can get them.
 

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The "Buffett Should Volunteer to Pay More Taxes" Canard

Apr 25, 2012Mike Konczal

The Buffett Rule is all about fairness in tax law. So why do its opponents keep talking about charity?

The Buffett Rule is all about fairness in tax law. So why do its opponents keep talking about charity?

Adam Ozimek jumps in on the "should Warren Buffett just donate money to the government?" conversation here, with "Should people who want higher taxes donate to the government?" He builds off of Matt Zwolinski, who asks "if Buffett really believes that he ought to be paying more taxes, then what’s stopping him?" Will Wilkinson brings up that this requires us to discuss collective actions and "the rationality of complying with a rule that (1) you support, but (2) will only have its desired effect if general compliance with the rule is high, and (3) you suspect general compliance will not be high." All these discussions pivot off the idea that the government provides charity, and if Warren Buffett wants the government to provide more charity, why does he do his charity through private means?

Wilkinson has an important point, but they are all approaching the debate with the assumption that Warren Buffett wants the government to spend an additional dollar. I don't see Warren Buffett saying that, and it isn't even required for him to call for higher taxes on himself and similar earners to make his famous argument. The crucial comparsion in Buffett's discussion isn't Buffett's rates now versus the rates he'd pay in a social democratic country, but the rate that he pays versus the rate his secretary pays. Warren Buffett could want the government cut in half and for his tax rate to go up. He could want a government so small it could drown in a bathtub yet find it unfair that he pays a lower tax rate than his secretary.

This means the central discussion isn't about the government collecting more and providing more, but the two central principles of fairness in taxation: vertical equity – those with more pay more – and horizontal equity, where people who are the same should be taxed the same. (Whether these are necessarily two principles of equity or one is a debate for another day.) It isn't necessary for Buffett's argument that the government should do more, or even that it should do what it does now, so suggesting he donate to charity doesn't carry weight. His argument is that the way taxes are collected now violates general principles of equity and fairness.

Zwolinski argues that since people don't donate to the government, "(3)Therefore, they don't believe that giving money to government is a good way to help others... It is therefore (from 3) odd for people to press for increased rates of taxation on the grounds that increased taxes will allow the government to help people." But even if Warren Buffett didn't care about helping others and believed that the only purpose of government is to turn his property claims on his vast wealth into property rights, and provide the costly night watchman apparatus required to do so, he could believe that vertical equity in the taxation required to raise those funds is still a requirement of tax fairness.

(Indeed, why does Zwolinski use "charity" as an example? Why not private police? The United States has had more private security guards than public police officers for some time. If someone thinks there should be more police, why not donate that money to the government rather than hire a private guard? Would following his logic provide proof that most people are anarcho-capitalists who want privatized systems of policing and adjudication? Zwolinski might need to change his webpage if that's the case. It is likely other factors are in play.)

Unless you believe that United States taxation should be based on a head tax -- where everyone pays the same exact dollar amount regardless of wealth or income -- you probably believe in vertical equity. (As Jeremy Bentham said, "a capitation tax is bad; because a man has a head, it does not follow that he has anything else.") That could be proportionate taxation, progressive taxation, a kind of progressive taxation where wages up to the poverty line are tax-free with proporationate taxation on income above that, and more. We don't even have to assume progressive taxation for Buffett to say he should be taxed more -- his objection is that he pays a lower proportionate rate.

Beyond vertical equity, if someone made the same amount of money through labor that Buffett and Romney make through capital, the laborer would pay a much higher tax rate, violating our sense of horizontal equity. These are the crucial issues that the Buffett Rule is trying to address, issues that come even before what is the proper scope of government.

Mike Konczal is a Fellow at the Roosevelt Institute.

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Article on Mass Incarceration at Jacobin

Apr 25, 2012Mike Konczal

The Spring 2012 issue of Jacobin is now online.  It has a lot of great content in it; make sure to check out Megan Erickson's addition to the "unschooling" debate that goes back and forth in parts of the internet.

The Spring 2012 issue of Jacobin is now online.  It has a lot of great content in it; make sure to check out Megan Erickson's addition to the "unschooling" debate that goes back and forth in parts of the internet.

I have a piece - Against Law, For Order - on ideology, governmentality and "policy" in an era of mass incarceration.  It's about how criminal laws informs our markets and government policy.  Bits and pieces of it have appeared in this blog, but here it is in one place.  The piece ends up reviewing a lot of recent books on policing, with special attention to Bernard Harcourt's work on neoliberalism and policing, as well as Jonathan Simon's work on "governing through crime" - how policy is reworked to use the language and techniques of policing.  I hope you check it out!

I wrote it a while ago so I didn't get to reference two of the big events in policing and incarceration that happened recently, but I think they fit into the framework I try to build.  The killing of Trayvon Martin by George Zimmerman appears to be, in large part, about Zimmerman believing Martin didn't belong in the neighborhood he lived in.  Maintaining order, seperating insiders from outsiders, and who gets to make those calls and what consequences they have is a central part of the neoconservative vision of policing I outline.

Meanwhile the 5-4 Supreme Court decision in Florence v. Board of Chosen Freeholders of the County of Burlington held that "Jail strip searches do not require reasonable suspicion, at least so long as the arrestee is being admitted into the general jail population."  Reading Justice Kennedy's logic, it looks like that since people put into a prison population could be dangers to themselves, guards and other prisoners, the guards have the ability to institute whatever techniques they believe are necessary.  Kennedy looks uninterested or unwilling to second guess the prison system.  Which means that people within the criminal justice system exist in a sphere of total government control and competency, a way of thinking I link back to the neoliberal vision of governance.

Sadly I couldn't find a way to link in one of the more interesting pieces I've read recently, one I'm still grappling with, Kate Redburn's Hate on Me at New Inquiry.  It's about the GLBTQ groups - including The Sylvia Rivera Law Project, FIERCE, Queers for Economic Justice, the Peter Cicchino Youth Project, and the Audre Lorde Project - who oppose New York State's "Gender Expression Non-Discrimination Act," which "would make violence against gender-nonconforming people a hate crime."

This is governing through crime - the best way to react to the social problems of violence and hate aimed at the GLBTQ community is to increase the policing and incarceration of those who do the violence.  Mandatory minimums, which translates into higher guilty pleas, which translates to more bodies in jail.  These groups oppose this because the police themselves are part of the problems they face, not part of the solution.  As Redburn argues, "Hate crimes legislation not only doesn’t change institutional bias; it further empowers this broken system by increasing law enforcement’s ability to arrest and imprison."  I find the challenges posed here important to understand as we all try to find a way to have a governance project built outside the logic of mass incareceration.

 

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Virginia Foxx's Comment and the Intergenerational Problem of the Public University

Apr 20, 2012Mike Konczal

Scott Keyes at Think Progress notes the following comment from Rep. Virginia Foxx (R-NC), who chairs the House subcommittee on higher education:

Scott Keyes at Think Progress notes the following comment from Rep. Virginia Foxx (R-NC), who chairs the House subcommittee on higher education:

FOXX: I went through school, I worked my way through, it took me seven years, I never borrowed a dime of money. He borrowed a little bit because we both were totally on our own when we went to college, totally. [...] I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that. We live in an opportunity society and people are forgetting that. I remind folks all the time that the Declaration of Independence says “life, liberty, and the pursuit of happiness.” You don’t have it dumped in your lap.

A major problem with our leaders is that they are approaching what is happening in the public university through a mental model of a world that no longer exists.

EdwardMurray at DailyKos notes "Virginia Foxx went to the University of North Carolina-Chapel Hill in 1968. According to the National Center for Education Statistics, in 1968, the average yearly cost for tuition, room, and board for a public university was $1,245 which, in today’s words, is one thousand two hundred and forty-five dollars for a year’s worth of college. For today’s average college student, that dollar amount is roughly equivalent to the cost of a textbook and a garbage bag."  Quick and the Ed has notes "Representative Foxx would have paid $279 for the academic year—about $2,140 today. That’s about equivalent to what students pay right now at community colleges, not public four-year institutions—especially not public flagships."  Rebuild the Dream has a petition going on the matter.

Beyond the fact that it was much cheaper, how does University of North Carolina-Chapel Hill's tutition look on a chart?  Digging into UNC-Chapel Hill's Office of Institutional Research and Assessment website, which has online collections of several previously published yearly reports (data from here, here, here and here), we can construct the following graph.  Some years, especially earlier ones, are missing. Data is adjusted for inflation:

 

As you can see, tuition is roughly around $2,000 a year for most of the 20th century after the Great Depression.  Starting in the late 1990s and early 2000s it skyrockets.  It shows no sign of slowing down, either.  This is a political choice, based on what we want the university to do and how we want to provide it as a country.  There was a political consesus that made sure Virginia Foxx had college available as a publicly-provided good - her "opportunity society" is a world of high quality "public options" available to those who can use them - and now there is a new set of active choices to have students at UNC-Chapel Hill graduate with debt.  Foxx should know better than to ascribe it as a simple morality play.  If she doesn't know this, which is possible, that's a major problem.

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