The economics blogosphere as well as mainstream publications are alight with new researchfrom Raj Chetty, Nathaniel Hendren, Patrick Kline, Emmanuel Saez and Nicholas Turner on upward mobility. It’s a key topic, especially here at Demos, where we want an equal chance for all. I haven’t finished reading the paper and related commentary, which I plan to do over the weekend, so I don’t want to comment on it, other than to note a very important distinction between absolute mobility and relative mobility that may get lost in the fray.
Chetty, et. al., are looking at what is called “relative mobility.” Relative mobility measures how a child’s ranking in the income distribution compares to her parents’. If we use the old cliche of a ladder, it’s how far up, or down, the ladder you move compared to the quintile you were born into. If your parents were in the bottom quintile and you move into the second quintile, you have experienced relative mobility.
But what does that mean? Well, nothing really to you, unless you know what quintile you are born into and pay incredibly close attention to it. Relative mobility is a zero-sum game, if you move from the first quintile to the second, that means someone else has dropped downward. The numbers have to add up in the end. “Absolute mobility” measures something entirely different. It measures how your income compares with your parent’s income. So let’s say your parents make $10,000 a year and you are in the bottom quintile. If you stay in the bottom quintile, but make $20,000 a year, you’ve experienced absolute mobility.
Relative mobility is important, but the big question is absolute mobility. Imagine a society where relative mobility looks like this:
That is, no matter where you are born, you have a 20% chance of landing in any income bracket. But with an income distribution looks like this:
That society is perfectly mobile, but certainly one we don’t want to live in. To give everyone a decent shot at life means not just making sure they can move into another quintile, but that no matter what quintile they end up in, they can live a fulfilling life. Upward relative mobility for me means downward relative mobility for thee. Far better would be a society where all boats are rising together, rather than just a couple of yachts.
The story of the past forty years has been an increasing share of the national income going to the top one percent, and little “trickling down” to the bottom. Because of this increase in inequality, it matters far more where you are born into on the income ladder. That’s a problem.
Republicans have been having an intense debate about how to solve inequality. On one side, there is conservative pundit Charles Murray, who thinks the solution is for the rich to tell the poor how gross they are and how moral rich people are. On the other side are those like conservative columnist and author Ross Douthat, whobelieves it would be better to be really mean to poor people because there’s just no stigma to poverty anymore. Because solving inequality will inevitably entail redistribution, the Right so far is content with throwing out some vague talking points, rather than a real agenda.
Now they have one: make life really hard for single mothers.
Earlier this year, Utah Republican Senator Mike Lee proposed a tax credit for families with young children and tax preferences for married couples. Now, Fla. Republican Senator Marco Rubio has proposed not only making life easier for married couples,but making life harder for single mothers. In the Wall Street Journal, Ari Fleischer, former press secretary for George W. Bush, argues that, “Marriage inequality is a substantial reason why income inequality exists. For children, the problem begins the day they are born, and no government can redistribute enough money to fix it.”
Even ignoring the fact that one really easy way to encourage marriage would be to open it to millions of LGBT Americans currently denied it, the focus on marriage is a charade.
Conservatives who want to argue that a decline in marriage is causing inequality argue that poor people tend to be unmarried and that areas with more two-parent households tend to have more economic opportunity. Both of these statements are true. But it’s important to tease out the causal link. Does not getting married harm your economic prospects or do bad economic times put an undue strain on relationships? Is there another factor driving both developments?
Two researchers from the National Bureau of Economic Research — Melissa Schettini Kearney and Phillip B. Levine — findthat single motherhood is largely driven by poverty and inequality, not the other way around. They state in a report: “The combination of being poor and living in a more unequal (and less mobile) location, like the United States, leads young women to choose early, non-marital childbearing at elevated rates, potentially because of their lower expectations of future economic success.”
A report by the British Rowntree Foundation had a similar finding: “Young people born into families in the higher socio-economic classes spend a long time in education and career training, putting off marriage and childbearing until they are established as successful adults.” Women in the slow track, in contrast, face “a disjointed pattern of unemployment, low-paid work and training schemes, rather than an ordered, upward career trajectory.” This is largely due to “truncated education.”
Fleischer and Rubio also argue that marriage is harming upward mobility. In theAtlantic, W. Bradford Wilcox has adopted this meme, citing the work of Raj Chetty, Nathaniel Hendren, Patrick Kline and Emmanuel Saez. But his case leaves out something important. Hendren tells Salon that, “areas that had more two-parent households had higher rates of mobility, people born to married parents have lower rates of upward mobility in a place with fewer two-parent households. It’s something about the place that is driving the mobility in these places.”
So all Fleisher’s pontificating about how all the “have-nots” need to do is, “marry and give birth, in that order” comes to naught. A two-parent family living in a community full of single-parent households will still end up poor. The case is far from closed, but there is strong evidence that economic hardship is causing poor and working-class Americans to abandon marriage, rather than the other way around.
Even given this, while it’s worth helping families, we should also help single mothers and fathers, since they are in need of even more help. Instead, Rubio’s plan will actually exacerbate inequality by hurting single parents. If economic hardship is driving high divorce rates and teenage pregnancy, then creating more economic hardship is only going to make the problems worse.
Take my friend Sally (not her real name). She had a child with a man she thought was a stable partner. But Sally broke up with him when he became physically and emotionally abusive. She has a good job, but it’s still hard to make ends meet with kids: she has to pay for childcare, she’s limited in the jobs she can pursue because of her mortgage, and she isn’t getting much help.
Lee and Rubio will do nothing to help her. In fact, Rubio’s plan will make her life even worse, because the Earned Income Tax Credit will be even more skewed against her. Rubio’s plan actually gives Sally, and other women like her two options: court poverty or marry the man who is abusing you.
The plans fail even if you accept the premises of the Right. According to the conservative narrative,inequality has grown worse because America has increasingly divided into two groups. One group, the hard-working Americans, get a college education, get married and then have kids who go to college, get married and have kids. The other group is the lazy, feckless poor, who don’t go to college, have children out of wedlock and don’t get married. The data don’t support this narrative, but even if you accept it, the Republican proposals will only increase inequality. If the rich are married and the poor aren’t, then policies that help married couples and hurt unmarried workers will only worsen inequality.
A better way to fight inequality would be to support policies that help married and unmarried Americans. NY Democratic Senator Kirsten Gillibrand’s “opportunity agenda” would do exactly that. She advocates a broad swath of proposals including raising the minimum wage, creating a family leave system, funding universal pre-K, establishing a tax credit for childcare expenses and passing an equal pay law. These proposals will ameliorate inequality and will do far more to strengthen the family than a modest tax credit. Other liberal proposals include instituting a universal basic income, expanding the Earned Income Tax Credit and higher taxes on the wealthy.
“Encouraging marriage” is a disingenuous dodge. A small tax credit isn’t going to fix the fact that if middle-class incomes had risen equitably over the past three decades we’d all be making $19,000 more each year.
Here’s the dirty little secret. The Republican Party isn’t seriously worried about inequality or poverty or mobility or wage stagnation because addressing any of these issues will lead to the government intervening in markets. That’s okay if it’s to help rich people, but not to help poor people. As Gore Vidal noted, they want “socialism for the rich, capitalism for the poor.”
The Right would also like to stay away from inequality because the main genesis of the cavernous gap between the rich and poor is policies that they championed (deregulation, free trade, union-busting, halting the rise of the minimum wage). They want to destroy the few remaining New Deal programs that are hindering inequality from becoming worse. Talking about marriage keeps the institutions that are driving inequality intact and serves as a red herring that obfuscates the causes of inequality.
Over the weekend I read Lane Kenworthy’s Social Democratic America, a fantastic book that touches on a broad range of material in an academic, but brisk and readable fashion. It also has a fantastic bibliography for anyone who wants to dig deeper into the issues he discusses. Matt Bruenig has already touched on the general thesis, with which I have broad agreement. I want to dig into one objection that Kenworthy subtly misunderstands: how racial heterogenity could hamper social social democracy.
Throughout the book, Kenworthy dismisses the importance of racial homogeneity in the Nordic countries which he frequently cites as examples of successful social democracies. In his recent Foreign Affairs article he writes,
Some observers, even many on the left, worry about the applicability of Nordic-style policies — which have succeeded in the context of small, relatively homogeneous countries — to a large, diverse nation such as the United States. Yet moving toward social democracy in the United States would mostly mean asking the federal government to do more of what it already does. It would not require shifting to a qualitatively different social contract.
Before diving into the implications for the U.S., it’s worth noting that racial animosity is already threatening social democracy in Nordic countries. Reuters reports that,
Consensus around the post-war Nordic model of high taxes and generous welfare was long sustained by a homogenous society. But immigration, global competition and fear for jobs have put that ideal of equality based on civic trust under strain… Rising immigration has been coupled with economic troubles that have seen iconic Nordic companies such as Ericsson and Nokia shed jobs. Worries about the affordability of welfare have put the once taboo subject of immigration high on the agenda.
High immigration is threatening the principle of redistribution that is at the heart of the welfare state. Income inequalities in the Nordic countries are generally lower than elsewhere… but Matz Dahlberg, of Uppsala University, reckons that immigration is making people less willing to support redistribution.
All of this is worrying if you believe, as Kenworthy does, that social democracy is inevitable. Last week I noted how increasing inequality tears at the social fabric and causes a decline in support for universalistic welfare programs. But as the Nordic countries shows, there’s another factor at work, and our newest fellow Ian Haney Lopez has a book about it: dog-whistle politics. Lopez’s book is specific to America, and traces dog-whistle politics from Wallace, through Goldwater and Nixon to its apotheosis with Reagan. Lopez shows how racial prejudice undermines universalistic welfare programs. Here’s a short excerpt showing how the right, particularly Reagan, used racial prejudice to attack poverty:
Reagan also trumpeted his racial appeals in blasts against welfare cheats. On the stump, Reagan repeatedly invoked a story of a “Chicago welfare queen” with “eighty names, thirty addresses, [and] twelve Social Security cards [who] is collecting veteran’s benefits on four non-existing deceased husbands… Beyond propagating the stereotypical image of a lazy, larcenous black woman ripping off society’s generosity without remorse, Reagan also implied another stereotype, this one about whites: they were the workers, the taxpayers, the persons playing by the rules and struggling to make ends meet while brazen minorities partied with their hard-earned tax dollars.
Here we see the trick to undermining any universalistic program: creating an “us against them” narrative. The program thereby loses its universality and therefore its support. That being said, to a casual observer, and particularly a white one, this narrative may seem like a weak collection of anecdotes, rather than a trend. But as Republican political consultant Lee Atwater famously admitted,
You start out in 1954 by saying, “N-, n-, n-.” By 1968, you can’t say “n-” — that hurts you. Backfires. So you say stuff like forced busing, states’ rights and all that stuff. You’re getting so abstract now [that] you’re talking about cutting taxes, and all these things you’re talking about are totally economic things and a byproduct of them is [that] blacks get hurt worse than whites. And subconsciously maybe that is part of it. I’m not saying that. But I’m saying that if it is getting that abstract, and that coded, that we are doing away with the racial problem one way or the other. You follow me — because obviously sitting around saying, “We want to cut this,” is much more abstract than even the busing thing, and a hell of a lot more abstract than “N-, n-.”
He actually admitted that. But politicians and strategists don’t talk that way anymore (for the most part; see below). So the the second objection to this narrative is that it’s not nice to throw out the race card. “The Republicans aren’t racists,” we’re told, “so don’t bring it up.” And most aren’t. They are not “racist” in the vein of late-Wallace or Lott or Thurmond. Rather, they refuse to acknowledge the structural racism in our society. They don’t notice the fact that the mainstream media shows poor blacks when it talks about welfare cheats and poor whites when they talk about the “working poor.” They don’t know that all of those great New Deal programs were designed to keep out blacks.
I noted in my last post how our belief in a “just world,” causes us to impute negative qualities on the poor. Our history is not one that is particularly just. From exterminating the native population to enslaving another to colonization and neo-colonialism we have failed to uphold our values. But instead of critically examining our past and how it shapes our future, we make excuses. Frances Fox Piven explains how that works in a segregated society:
When a racial group is kept at the bottom of the labor system and excluded from its social and political and political institutes, the result may be to create, or at least to nourish, the racist popular culture that is then said to be the cause of labor market and political discrimination.
That is why this melding of race and poverty is one of the most sadly durable memes in U.S. politics. It croppedupnumeroustimesin the 2012 campaign, and has been expanded to include other out-groups, such as Hispanics (implications that “illegal immigrants” take from the welfare system). As Lopez told me in our interview, “Dog-whistle politics is not fundamentally about race. It’s fundamentally about attacking liberal government, attacking New Deal government, which is good for the country as a whole, but bad in the perception of some of the very rich.”
There is also empirical support for Lopez’s thesis. A 2005 study by Woojin Lee, John Roemer and Karine van der Straeten finds that, “the conservative economic agenda has been given new life because of racist and xenophobic views of polities.” In the UK, France, and Denmark they find a similar trend, but the effect is not as strong.
Kenworthy’s book is valuable, if for no other reason, it explodes an argument recently put forward by Kevin Williamson in The National Review that, “the fact is that as a practical matter we are running out of ways to spend money on the needy.” If Williamson truly believes this, Kenworthy will serve as an antidote. But creating social democracy will not be easy, nor should it be considered inevitable.
Kenworthy’s proposals will require the government to take in more than 10 percent of GDP in increased revenues; not an easy task in the current political climate. The past two years have brought vicious attacks on some of the most important (and successful) parts of our weak social democracy, often in the guise of racially-charged language. It’s unlikely those will abate in the future. Nevertheless, Kenworthy shows that it can be done, if we just get the political will to do it.
Today 75 economists, including 7 Nobel Laureates signed a letter advocating for a higher minimum wage. They sum up what is now the consensus among economists: a modest boost to the minimum wage won’t have a significant effect on unemployment and may boost the local economy. But it strikes me that focuses on the “economics” of the minimum wage is relatively unimportant; it’s the moral question that matters.
If I go to the bank and ask for a loan to finance a the development of technology to turn kittens into car sealant, they won’t ask about the return on investment, they’ll call the police. Similarly, when we banned child labor we didn’t ask if that would reduce GDP. We banned child labor because we aren’t a society that lets children work in dangerous factories. We passed OSHA because we aren’t a society where workers have to worry about dying on the job.
We should raise the minimum wage because we aren’t a society where a full-time worker can’t feed her family. Even if raising the minimum wage caused unemployment (it doesn’t) it would still be the right thing to do. Work should have dignity, and dignity means being paid enough to live.
The minimum wage debate is a microcosm of this problem. Conservatives constantly lament the fact that our society is too materialistic and atomized but when it comes time to give up material pleasure for social gain they run. Is it not a tad materialistic to eschew regulation to save jobs? Isn’t it materialistic to pollute the environment for economic growth? Too often the left falls into the trap of allowing our moral case to be diluted with the economics argument.
We should certainly point out that the minimum wage won’t kill jobs and neither will regulation, but it’s important to remind people that simply increasing GDP isn’t actually a good goal. Robert F. Kennedy put it best when he said of efforts to increase GNP (an economic indicator similar to GDP that measures production based on ownership):
Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.
Are we proud to live in a country where full-time workers still struggle to eat? Then let’s raise the minimum wage.
The Affordable Care Act’s turbulent implementation has ruled the news cycle, but across the country states like Vermont are experimenting with their own plans.
Governor Peter Shumlin signed a revolutionary single-payer plan, Green Mountain Healthcare—the culmination of decades of work by progressive politicians in the state—into law in May 2011. The new system aims to guarantee universal insurance coverage, improve benefits for those who are currently underinsured, include universal dental care and vision care, and increase the Medicaid reimbursement rate to doctors in order to avoid cost-shifting.
In some ways, the system resembles the ACA, but the the most consequential difference is that Vermont’s law will end employer-provided insurance. “God didn’t create the fact that employers are responsible for healthcare for their employees,” says Bernie Sanders, the state’s stalwart socialist senator.
Yet that change has resulted in an echo of the problems Obamacare has faced in remaking the individual insurance market: Plenty of people aren’t happy about giving up existing insurance that they like.
Meanwhile, there are still major question marks about how Vermont will pay for the plan, whether it can achieve the projected savings, and what might happen when an American state tries to import a European-style insurance program. If the ambitious Green Mountain Healthcare is a success, its backers say it will serve as a model for the rest of the nation—especially if the ACA doesn’t achieve full coverage and help bring costs down. Then, they say, statehouses around the nation will look to Montpelier for guidance. But first Vermont has to figure out how the plan is going to work.
The program was designed by Harvard economist William Hsiao, who detailed the plain in a 2011 Health Affairsarticle. Hsiao projected the state would save 25.3 percent annually in total healthcare spending, lower household and employer healthcare spending, job growth, and higher economic output for the state. The savings would come from lower administrative expenses, reduced fraud and abuse, eliminating middlemen, malpractice reform, and governance improvements. These savings, about $4.6 billion over the first five years, would be plowed back into paying to cover the uninsured and expanding benefits and services leaving $2.3 billion in residual savings. The law also created the Green Mountain Care Board, an independent group charged with overseeing the law and ensuring quality. What the plan didn’t do is lay out how the state government would pay for its increased spending.
But Vermont has already deviated from Hsiao’s blueprint. The state’s new tort-reform law is not as expansive as he had envisioned. The state is still working through the best system to raise revenues, and Shumlin has appointed a tax expert to work on some plans. Cost-containment pilot projects to reform payment and delivery systems recommended by the Green Mountain Care Board are beginning to roll out. The state has yet to finalize its proposals for raising revenues to fund the program, which the legislature will consider in 2015 and contract out the administrative duties through a competitive bidding process closer to 2017 when the plan is ready to implement.
Complicating the revenue project, the plan’s cost is disputed. A University of Massachusetts study commissioned by the administration to determine the cost of the plan estimated Vermont would need to find $1.6 billion in new revenues to fund the plan in 2017. Though the state will end up paying much more, UMass’s study also estimated GMC would save $281 million between 2017 and 2019 by reducing administrative costs and slowing growth in costs. The new system would eliminate the myriad providers currently in the state, and instead enroll nearly all of Vermont’s citizens in GMC. The UMass study estimates that about 70,000 Vermonters, roughly 10 percent of the population, would continue to receive insurance from their employers, the Veterans Affairs Administration, or their federal government plan. GMC would supplement that insurance.
Under Vermont’s existing system, individuals and their employers pay $2.2 billion each year, which will be reduced to just $332 million. Even with $249 million in federal funds for Medicaid, that leaves a $1.6 billion shortfall that must be made up with increased government revenues. And that’s the more conservative estimate. A recent report by Avalere, a healthcare advisory company, commissioned by Vermont Partners for Health Care Reform, a confederation of hospital, insurance, and business groups, found the UMass study may have understated the cost of the plan and estimates the state will need between $1.9 and $2.2 billion in new revenues. The Avalere report uses different assumptions for administrative savings and payment rates, arguing that the UMass estimate—that GMC will pay 105 percent of Medicare rates—may be too low and would drive providers to leave the state.
“The good news about the Avalere report is even if you take their assumptions, it still shows that we can cover everyone, bring everyone up to a better on-average benefit level as what they have today and spend the same or less money,” says Robin Lunge, Vermont’s director of healthcare reform.
While the national individual health market is both viewed as inefficient by experts and wildly unpopular with most users, its overhaul has still caused uproar. That could be a bad omen for Vermont, which is upending the far more popular employer-sponsored healthcare system.
But one of the advantages of Vermont’s small population may be a tolerance for disruption. “Vermont is a small state, says Sara Solnick, chair of economics at the University of Vermont. “There are very few degrees of separation so people are more willing to do something for everyone’s good for the good of the state.”
Testing the Public’s Appetite for Change
Vermont’s plan is a bold experiment in whether the government can convince humans, naturally risk-averse, to drop their wariness about changes that might affect their access to healthcare.
“At the national level we haven’t had that discussion because it’s politically impossible,” says Jonathan Gruber, an MIT economist who worked with Hsiao during the early stages of the initiative, and who also worked on the Affordable Care Act and Massachusetts’ universal-coverage plan. “I am a fan of experimentation. We learned a lot experimenting with one model in Massachusetts and I think we can learn a lot experimenting with another model in Vermont.”
While the bounds of the ACA were tightly circumscribed by political realities, Vermont—a state with a homogenous and reliably Democratic population—has more latitude. But even now, Gruber says the proposals are still protean: “There is no Vermont plan. There are Vermont ideas, but there is no Vermont plan.”
That has led to major challenges on several fronts: medical providers, businesses, and most of all the general public.
Darcie Johnston, a Republican political operative who runs Vermonters for Health Care Freedom, calls the GMC the largest tax increase in state history—even though taxes haven’t actually increased yet—and worries the cost-containment measures Hsiao and Shumlin counted on will fail and the savings will never materialize. She notes that the legislature failed to pass comprehensive tort reform (which accounted for 8 percent of the savings) and says she fears the plan will drive doctors to reduce care or even leave the state. Recent research suggests the fear may be unfounded. Doctors often threaten to opt out of Medicare, but few follow through. In Britain, where nearly all doctors and nurses are employed by the government, medical programs continue to attract students, even as other programs flounder.
But the state’s business community—including groups that support reform—worries about the tax increases that will fund the plan. Sanders argues the new system will actually be a major relief to businesses, which will see an increased tax burden but won’t have to spend vast sums to paying for their employees’ insurance and administer the benefits. The plan amounts to a cost-shift. What businesses once paid in premiums, they will now pay in taxes. Hsiao forecast that cost per employee would drop nearly $1,900, from $2,228 to $332.
The paradox of Vermont’s peculiar politics is that while perhaps only a small, homogeneous state could pass a plan like Green Mountain Care, there are also challenges a single state faces in implementing it that a nation would not. Single-payer can work at the national level, but what about Vermonters who work over state lines, or corporations based in other states doing business in Vermont?
For the plan’s defenders, the best counterexample is to the north. “Canada’s healthcare system began as province-by-province initiative as well,” Lunge notes. “It started at Saskatchewan before becoming a national initiative.”
And just as the Saskatchewan plan became a model for Canada, many in Vermont, including Sanders, hope the state’s plan will eventually become an example for other states. “Americans want to see a model that works,” the senator says. “If Vermont can be that model it will have a profound impact on discourse in this country.”
If Vermont can work through the legal, technical, and administrative complications, it will be easier for others to follow. Lunge told me legislators in other states have called to ask about the system. “There are a number of states that have expressed interest. They have said to me that if ‘you figure this out, that will give us an opportunity,’” she says.
Vermont Health Connect, the state’s insurance exchange, opened October 1 and faced problems similar to the federal government’s system. Since then, Vermont has managed to fix some of its flaws, though it has also criticized its contractor on the project. The launch is phased, so customers can currently choose a plan, but the payment function has not yet finished testing.
The late launch of the payment system, which has been decried by critics, may be a symbol of the administration’s willingness to work with small businesses and customers, who were unwilling to pay for health insurance they would receive in January in October. Either way, the next few months will be crucial, because all individuals and businesses with fewer than 50 employees have to obtain coverage through the exchange by March 31.
A Need for Reform, Nationwide
Vermont’s enigmatic political preferences have baffled political scientists for decades. The state voted Republican in every presidential election for over 100 years, the longest streak in history (1854 to 1963), and had no Democratic governors during that span. Now its home to the nation’s only socialist senator, and after Barack Obama’s home state of Hawaii, no state voted for the president by a larger margin.
Arthur Woolf, an associate professor of economics at the University of Vermont, says the state “is very much like a Social Democratic Western European country,” both economically (because of its equality and prosperity) and demographically (because of its homogeneous population). So perhaps it’s not surprising that the state is also the first to explore a Canadian-style single-payer system. Sanders says, “When I was mayor of Burlington in 1981 we had a commission, we had a lot of discussion, we had town meetings, we brought it people from Canada.” That attempt came to naught, but 30 years later, a Democratic House, Senate, and governor and strong popular support produced a perfect opportunity to pass a major reform. But of course Vermont’s unique political system might make it hard for other states to replicate its single-payer system.
Despite the setbacks for Green Mountain Care, the economic rationale for a single-payer system remains strong. The U.S. healthcare system is dreadfully inefficient and exists in its current condition largely because of path dependency, not its merits. In his seminal 1963 paper, “Uncertainty and the Welfare Economics of Medical Care,” Kenneth Arrow noted the features of the healthcare market that made laissez-faire untenable. The sector is rife with market failures—externalities, asymmetric information, time-inconsistent preferences, and principal-agent dilemmas. As Paul Krugman writes, “There are … no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work.”
A 2012 Institute of Medicine report finds that the U.S. healthcare system wastes$750 billion each year. A study published in the Journal of the American Medical Association found, “Among 34 OECD countries between 1990 and 2010, the U.S. rank for the age-standardized death rate changed from 18th to 27th, for the age-standardized YLL [Years of Potential Life Lost] rate from 23rd to 28th, for the age-standardized years lived with disability rate from 5th to 6th, for life expectancy at birth from 20th to 27th, and for healthy life expectancy from 14th to 26th.” OECD countries pay half of what the U.S. does, in per capita terms, for better outcomes and universal coverage.
If Vermont can slay the chimera of employer-based healthcare, governors across the nation will take notice. “The single-payer model is harder, it requires more change, but it also holds out more hope because it has the best opportunity to control costs and everyone wants to control costs,” Solnick says.
The U.S. healthcare system is in dire need of reform. In a 1928 in Vermont, Calvin Coolidge declared, “I love Vermont because of her hills and valleys, her scenery and invigorating climate, but most of all because of her indomitable people. They are a race of pioneers who have almost beggared themselves to serve others.”
So here’s the post that started it all. I post it here unedited, but again note that I think the syllogism is poorly written. “New Atheists” don’t impute all suffering to religion. But I think that they impute far more violence than is due. This saves them from the task of actually trying to understand the underlying socio-economic circumstances that engender the fundamentalism and violence.
Religion has once again become the “opiate of the people.” But this time, instead of seducing the proletariat into accepting its position in a capitalist society, it lulls atheists into believing that abolishing religion would bring about utopia.
It is rather disturbing trend in a country whose greatest reformer was a Reverend — Dick Gregory has said, “Ten thousand years from now, the only reason a history book will mention the United States is to note where Martin Luther King Jr. was born” — to believe that religion is the root of all evil. And yet this is what the “New Atheism” (an anti-theist movement led originally by Sam Harris, Richard Dawkins, Daniel Dennett and the late — and great — Christopher Hitchens) movement asserts.
The fundamental error in the “New Atheist” dogma is one of logic. The basic premise is something like this:
1. The cause of all human suffering is irrationality
2. Religion is irrational
3. Religion is the cause of all human suffering
The “New Atheist” argument gives religion far, far too much credit for its ability to mold institutions and shape politics, committing the classic logical error of post hoc ergo propter hoc — mistaking a cause for its effect.
During the first Gulf War, Christopher Hitchens famously schooled Charlton Heston, asking him to name the countries surrounding Iraq, the place he was so eager to invade. A flummoxed Heston sputtered, naming a few random Middle Eastern countries (including, rather humorously, the island nation of Cyprus).
But then Hitchens decided that, in fact, bombing children was no longer so abhorrent, because these wars were no longer neocolonial wars dictated by economics and geopolitics but rather a final Armageddon between the forces of rationality and the forces of religion. The fact that the force of rationality and civilization was lead by a cabal of religious extremists was of no concern for Hitchens. To co-opt Steven Weinberg, “Good men will naturally oppose bad wars and bad will naturally support them. To make a good man support a bad war, for that, you need an irrational fear of religion.”
Somehow the man who denounced Kissinger’s war crimes now supported Bush’s — both wars, of course, supported by the scantest of logic. The man who so eloquently chronicled the corruption of the Clinton administration became the shill of his successor.
At that point [during the Gulf War], Hitchens, still the left-wing radical, opposed he conflict against Saddam Hussein. By contrast, George W Bush’s 2003 invasion of Iraq couldn’t come soon enough for him. The great catalyst for change was, of course, 9/11. Appalled by what he saw as the left’s self-flagellation over the terrorist attacks, and the argument that America had brought the disaster on itself, Hitchens became arguably the most eloquent advocate in Washington of the need to overthrow Saddam Hussein. He quit The Nation, made friends with the likes of Paul Wolfowitz and, in foreign policy at least, was indistinguishable from the neocons… The fact that the terrorist attacks were carried out by Islamic extremists also sealed – if sealing were needed – Hitchens’ belief that religion, and the “absolute certainty” of its followers was nothing but trouble.
For something so dreadfully asinine to be written about a man as well-traveled and well-read would be almost obscene if it were not true. But after 9/11, Hitchens stopped seeing the world in terms of geopolitics but rather saw it, like the Neocons in the Bush administration, as a war between the good Christian West and the evil Muslim Middle East.
Religion has a tendency to reflect political and economic realities. Hitchens, in fact, has made ample use of this Marxist analysis, questioning religious experts whether it was Constantine or the truth of Christ’s words that were largely responsible for its breakneck spread. Constantine was, and his proclivities shaped the church. The doctrine of the Trinity was not decided exclusively by decades of intense debate; the whimsy of Constantine and political maneuvering between by Arius and Athanasius had a significant influence on the outcome.
But if Hitchens is right, as he is, then why not take the observation to its logical conclusion? Is not the best explanation for the Thirty Years’ War more likely political than religious? Might it be better to see jihad as a response to Western colonialism and the upending of Islamic society, rather than the product of religious extremism? The goal of the “New Atheists” is to eliminate centuries of history that Europeans are happy to erase, and render the current conflict as one of reason versus faith rather than what is, exploiter and exploited.
For vast numbers of Middle Easterners, Western-style economic methods brought poverty, Western-style political institutions brought tyranny, even Western-style warfare brought defeat. It is hardly surprising that so many were willing to listen to voices telling them that the old Islamic ways were best and that their only salvation was to throw aside the pagan innovations of the reformers and return to the True Path that God had prescribed for his people.
I have to wonder if Hitchens, Dawkins and Harris truly believe that eliminating religion will also make the Islamic world forget about centuries of colonization and deprivation. Without religion, will everyone living in Pakistan shrug off drone strikes and get on with their lives? If religion motivated 9/11, what motivated Bill Clinton to bomb the Al-Shifa pharmaceutical factory and leave millions of Sudanese people without access to medicine?
Liberals who once believed that the key to understanding hate and violence is deprivation now have embraced the idea that religion is the culprit. Religion is both a personal search for truth as well as a communal attempt to discern where we fit in the order of things. It can also motivate acts of social justice and injustice, but broad popular movements of the sort generally indicate a manipulation of religion, rather than studied reflections on religious doctrine. Shall we blame Jesus, who advocated “turning the other cheek,” for Scott Philip Roeder, or more plausibly his schizophrenia?
Of course, I’m entirely aware of the problems in modern American Christianity. I havewritten an essay excoriating what I see as the false Christianity. But any critique of religion that can be made from the outside (by atheists) can be made more persuasively from within religion. For instance, it would hardly be the theologian’s job to point out that, according toThe Economist, “Too many of the findings that fill the academic ether are the result of shoddy experiments or poor analysis. A rule of thumb among biotechnology venture-capitalists is that half of published research cannot be replicated.” I’m sure scientists are well aware of the problem and working to rectify it. Similarly, within the church there are modernizers and reformers working to quash the Church’s excesses, no Hitchens, Dawkins or Harris needed. Terry Eagleton writes,
Card-carrying rationalists like Dawkins, who is the nearest thing to a professional atheist we have had since Bertrand Russell, are in one sense the least well-equipped to understand what they castigate, since they don’t believe there is anything there to be understood, or at least anything worth understanding. This is why they invariably come up with vulgar caricatures of religious faith that would make a first-year theology student wince. The more they detest religion, the more ill-informed their criticisms of it tend to be. If they were asked to pass judgment on phenomenology or the geopolitics of South Asia, they would no doubt bone up on the question as assiduously as they could. When it comes to theology, however, any shoddy old travesty will pass muster.
The impulse to destroy religion will ultimately fail. Religion is little different from Continental philosophy or literature (which may explain the hatred of Lacan and Derrida among Analytic philosophers). It is an attempt to explain the deprivations of being human and what it means to live a good life. Banish Christ and Muhammad and you may end up with religions surrounding the works of Zizek and Sloterdijk (there is already a Journal of Zizek Studies, maybe soon a seminary?). Humans will always try to find meaning and purpose in their lives, and science will never be able to tell them what it is. This, ultimately is the meaning of religion, and “secular religions” like philosophy and literature are little different in this sense than theology. Certainly German philosophy was distorted by madmen just as Christianity has been in the past, but atheists fool themselves if they try to differentiate the two.
As a poorly-practicing Christian who reads enough science to be functional at dinner parties, I would like to suggest a truce — one originally proposed by the Catholic church and promoted by the eminent Stephen J. Gould. Science, the study of the natural world, and religion, the inquiry into the meaning of life (or metaphysics, more broadly) constitute non-overlapping magisteria. Neither can invalidate the theories of the other, if such theories are properly within their realm. Any theologian or scientist who steps out of their realm to speculate upon the other is free to do so, but must do so with an adequate understanding of the other’s realm.
Religion (either secular or theological) does not poison all of society and science should not be feared, but rather embraced. Both can bring humanity to new heights of empathy, imagination and progress. To quote the greatest American reformer, “Science investigates; religion interprets. Science gives man knowledge, which is power; religion gives man wisdom, which is control. Science deals mainly with facts; religion deals mainly with values. The two are not rivals.”
“New Atheists” believe that religion threatens progress and breeds conflict and that were religion eliminated, we would begin to solve the world’s problems. But abolishing religion is not only unfeasible, it would ultimately leave us no closer to truth, love or peace. Rather, we need to embrace the deep philosophical and spiritual questions that arise from our shared existence and work toward a world without deprivation. That will require empathy and multiculturalism, not demagoguery.
It’s one of the oldest right-wing claims: “Excessive” regulation will harm job creators and kill the economy. But is it based on sound economics?
One new study, which examines this particular argument, finds it absurd on its face. Taylor Lincoln, who authored the report for Public Citizen, tells Salon the goal was to “point out hypocrisy and contradictions and the chasms between rhetoric and reality.” To that end, the report cites one Heritage Foundation study which asserted that a more efficient regulatory system could create 9.6 million jobs. The problem, as Washington Post columnist Steven Pearlstein noted: “there are only 7 million unemployed Americans.”
Heritage isn’t the only one making this argument. A Phoenix Foundation study claimed that, “a 5 percent reduction in the federal regulatory budget would yield 5.9 million new jobs over five years.” But the Public Citizen report points out that this leads to a ludicrous conclusion: “a 16 percent decrease (a figure the authors chose to parallel the amount by which they say federal spending had exceeded revenue since 2000) would result in the creation of 18.8 million new jobs over five years. In contrast, there are only about 11.3 million unemployed Americans.”
Dr. Thomas McGarity, a University of Texas professor who has studied regulation for decades, finds the right-wing argument wanting. As to whether cutting regulation could increase economic growth, he tells Salon, “it’s a silly argument. The impact of regulation, particularly in this era when it’s so darn hard to write a regulation, is nothing compared to what the Fed does each meeting.” His most recent book, Freedom to Harm, details how a decade-long assault on regulation threatens workers and the environment.
In fact, the OMB estimates that regulations provide huge economic benefits. They find that major regulations benefit the economy between $193 billion and $800 billion a year at a cost of $57 to $84 billion. McGarity confirms this, telling Salon, “The thing that is most troubling to me is, when the right-wing think-tanks or the government estimates the cost of regulation, they never go back and see how much it did cost. The few retrospective studies that have been done have shown uniformly that the cost estimates have been higher, much higher than the actual cost of the regulation. The reason is that once the regulations are in place companies are able to adapt to them very quickly.”
The irony is that Republicans always hail the ability of businesses to innovate and adapt, but their anti-regulatory stance is premised on the idea the businesses cannot adapt to new regulation.
Both McGarity and Lincoln noted that Nixon, Ford and H.W. Bush were all very pro-regulation. McGarity tells Salon that “there used to be strong environmentally conscious Republicans in the House and Senate, [but] you can’t point to one Republican now who is a strong environmental advocate.” Lincoln says the anti-regulatory impulse is tied to the economy. When the economy is strong, businesses quickly adapt to regulation, but in hard times, regulation appears as a scapegoat for the weak economy. Both feared that the Republican party is now ruled largely by business interests unconcerned with the common good.
But it’s not just right-wing think tanks and demagogues claiming that cutting regulation will somehow magically create jobs. The Economist claimed this year: “But red tape in America is no laughing matter. The problem is not the rules that are self-evidently absurd. It is the ones that sound reasonable on their own but impose a huge burden collectively.” The article concludes that regulation may “crush the life out of America’s economy.”
In the New York Times earlier this month, Tyler Cowen wrote:
We don’t really know the total regulatory burden in our economy today, in part because there are too many rules and side effects to add up all the costs. Nonetheless, we are continually increasing the obstacles to doing business. America has lost the robust productivity growth of much of the postwar era, and the share of start-ups in the economy has been falling each decade since the 1980s. Although overregulation is hardly the only culprit, it is very likely contributing to the problem.
When arguing to gut America’s regulatory regime, one doesn’t need data or statistics, just a general feeling that regulation is probably harming economic growth.
Opponents of regulation often suggest that regulations create uncertainty and therefore stymie growth, but in truth they do the opposite. To understand why, imagine a world without regulation, one in which railroad track gauges are divergent, food and drugs are released without trials and buildings are built on a whim. Americans who visit countries with a weak governance are often surprised to find that the stairs aren’t of equal height. By establishing a minimum standard for environmental degradation, customer safety and worker treatment, regulation can change entire industries.
The auto industry is a quintessential example. Today’s advertisements focus on fuel efficiency and safety, and we take air bags and seat belts for granted, but cars were once death traps. Lincoln explains, “Their market research showed that adding seat belts didn’t help and they’re not seeing profit it it, they’re not seeing dollar signs.” All of that began to change with Ralph Nader’s famous “Unsafe at Any Speed.” Customers didn’t know that cars could be safer and more fuel-efficient until the government began enforcing the regulations. Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.”
Consumers are naturally conservative and they are heavily influenced by advertising. George McGovern, echoing the arguments of J. K. Galbraith, said that advertising can “brainwash the consumer” because “no one was ever born with the taste for huge automobiles.” Companies were stuck on producing slick fancy cars, not safe cars. Regulation upended the industry and entirely changed the way that customers and society viewed the car: not a luxury toy, but a utilitarian mode of transportation. This changed the way customers thought about safety and companies thought about advertising.
The report shows how regulations we now take for granted — catalytic converters, unleaded gasoline, fuel efficiency standards, worker safety protection, minimum wages, environmental protections — were once denounced by industry shills as “job killing” or “economy strangling.” Industry experts predicted that worker safety regulations would destroy jobs and tank industries. The day before the bills would pass they would shout Cassandra-like warnings and hold up Mayan calendars. But the next day the air was cleaner, workers were safer and the economy chugged along.
Even Tom Donohue, the President of the U.S. Chamber of Commerce, is forced to concede, “I think we need a strong public sector. We have about a $1.7 trillion a year regulatory bill. Seventy-five, 80 percent of that is very useful. You’ve got to have air traffic control. You’ve got to have food safety.”
Today, the same absurd claims once raised about now banal regulations are being tossed about again. Already industry experts have predicted 12.9 million job losses from Dodd-Frank, the Affordable Care Act and Obama’s GHG regulation proposals. Lincoln’s goal is simple: “We are trying to lay down a record of what they’re saying now, because they are going to be wrong again.”
Imagine a world where Republican politicians understood economics. In 2008, Obama is elected to the Presidency and proposes a $2 trillion dollar stimulus program. This creates a deficit, but it’s not a problem because Bush hadn’t cut taxes, so the government has been running surpluses for 8 years. States happily take the money to invest in education, infrastructure and services. Hundreds of billions of dollars fund green jobs and worker-retraining programs keep down the numbers of long-term unemployed. The minimum wage is $10 and pegged to inflation, the EITC is expanded. The economy turns around slowly, but an active Fed keeps interest rates low, focusing with laser precision on unemployment.
It may seem like these two worlds won’t matter much in five years. Certainly deficits will be higher in the second, GDP lower, workers less safe, but eventually, the economy will bounce back. A new paper by Dave Reifschneider, William L. Wascher and David Wilcox argues the opposite: the prolonged downturn following the “Great Recession” has likely caused long-term economic damage. The paper is primarily about the implications for monetary policy, since it’s written by three members of the Federal Reserve Board, but the most important point is that the recession has done permanent damage to the economy.
In economic jargon, what the economists describe is “hysteresis,” which first came from a1986 paper by Oliver Blanchard and Lawrence Summers entitled, “Hysteresis and the European Unemployment Problem,” in which the authors argue that large demand contractions can have long-term effects on unemployment and economic growth. Policymakers should intervene to prop up demand to limit long-term damage to the supply side of the economy. As Gavyn Davis notes in the Financial Times, the implication is that, “In a reversal of Say’s Law, and also a reversal of most US macro-economic thinking since Friedman, demand creates its own supply.”
So what are the implications of the Great Recession and our poor response to it? The authors write that, “potential GDP is currently about 7 percent below the trajectory it appeared to be on prior to 2007.” Even if we were to be hitting our full potential (we aren’t) GDP would still be 7 percent lower than had their not been a recession. CBO estimates that potential GDP for 2014 is $15 trillion. So if the authors are correct, that means our potential GDP is about $1 trillion lower than it would be without the Great Recession. That’s a lot of money.
When economists talk about unemployment, they often talk about a “natural rate” of unemployment, the level of unemployment that will exist, even when the economy is humming along. Hysteresis argues that a long-run depression of aggregate demand can increase the natural rate of unemployment. The authors believe this has indeed occurred in the wake of the recession, and the natural rate of unemployment may be between .5 percent and 1.5 percent higher than otherwise. That is, even when the economy gets rolling again, unemployment will still be higher and growth lower than if we had intervened sooner and more gusto.
Earlier this year, Summers and Bradford Delong argued in a bombshell paper that since a bad economy means low interest rates, slack employment, and the possibility of hysteresis a stimulus bill could actually be self-financing. They are careful to curb their argument (something their opponents rarely do), arguing that this only occurs in a deep recession. But this recession should certainly count. Had we intervened quickly, we could have new bridges, trained workers and a green economy. Instead, we have a deteriorating infrastructure, a dejected and poorly trained workforce and an aging capital stock. That is hysteresis.
Reigschneider, et al, confirm that inflation-mania and deficit-hawking are doing long-term damage to the economy. Yet the Economist argues that if anything, inflation is too low. As Paul Krugman notes:
I can, in a way, understand refusing to believe in global warming — that’s a noisy process, with lots of local variation, and the overall measures are devised by pointy-headed intellectuals who probably vote Democratic. I can even more easily understand refusing to believe in evolution. But the failure of predicted inflation to materialize is happening in real time, right in front of our eyes; people who kept believing in inflation just around the corner lost a lot of money. Yet the denial remains total.
The Republican ignorance of economics appears to be far more dangerous than previously believed.
Congress will likely hammer out some sort of deal, which Republicans will love and Democrats will be forced to swallow, but it’s worth considering whether we view education in entirely the wrong way here in America.
In Britain, where my girlfriend lives, students don’t begin paying off their loans until they find stable employment, and the cost is in proportion to their earnings. Australia similarly ties the cost of paying off the loan to the income of the graduate. In Denmark, education is considered a right by the people and an investment by the government, and is therefore free. Some students are even offered a stipend by the government to defray costs. Norway has a similar system of higher education, in Sweden, students pay only a small fee. In America, the university is considered a commodity, one that can easily purchased by the wealthy, but not the poor. These represent a fundamentally different cultural attitude: elsewhere, education is a public good, an investment or a right, in the U.S., it’s a privilege reserved for wealthy elites.
The OECD measures the difference in test scores between children from a high socioeconomic background and a low socioeconomic background. In the U.S., the difference is 112 points. In Denmark, by contrast, it’s s of 93 points, in Finland, it’s 62 points, in Canada 65, Norway, 77. Unequal primary education, combined with the high cost of college mean that while the U.S. has remained relatively high among college attainment rates (although it is falling), attainment rates for minorities are abysmal.
That’s how the U.S. can have both one of the best education systems and one of the worst education systems in the world: wealthy students have access to top-notch preschools, test prep, summer camps and summers schools and then a high-end university education, while poor students get left in the dust.
Public funding for tertiary (university) education and pre-school education in America is far below that of other OECD countries. (Grey represents public funding, light blue represents household funding, and dark blue represents other private expenditures). In many countries, the government funds tertiary education almost entirely, but the average for public funding is about 70%. In the U.S. public funding amounts to only 40% of a student’s college education, with another 40% paid out of pocket.
But it’s not just funding that’s different: poor children and rich children are taught differently. Whereas the children of wealthy and middle-class parents are allowed free intellectual inquiry with teachers open to questions, the education of poor children is bureaucratized and dull. Jonathan Kozol described a program called “Success for All” (a curriculum designed for inner-city students) in Shame of a Nation,
[When the school adopted SFA] a martial regimen which teachers spoke of as “a reign of terror,” which included “silent lunch” and, for certain periods of time, even “silent recess,”had been instituted at the school. Children who, on occasion, fell into the natural rambunctiousness of students of their age were denied their recess altogether and compelled instead to remain indoors sitting cross-legged on the floor while other children had a chance to go outside. A fifth-grade teacher told me that her class, a nice group of children who were generally well behaved, was punished for one episode of misbehavior by the loss of recess for more than two months. In order to allow more time for drilling children for their literacy tests, music, art, natural science, and, in some respects most damaging, the social sciences were virtually abandoned at the school.
The problem with education is that for poor children, we’ve tried to make it capitalistic: ruthless, competitive, privatized. We’ve tried to fatten the cows by weighing them. And the result is obvious: a rigid class structure. Remember Waiting for Superman? The few black children who make it into the super-duper education system must leave their family to live in a small boarding house and study nearly every waking hour. Should we be surprised that wealthy students are prepared for higher education, inquiry and investigation, while poor students are prepared for technical high schools and then a minimum wage job.
Is it any wonder that the American dream is dying? Economists like Miles Corak have discovered that upward mobility is now lower in America than a host of other European countries, among them, Denmark, Sweden, Canada, France, Germany, Norway and Finland. Is it, as George Carlin claimed, “called the American dream because you have to be asleep to believe it?” Could this be because of the extraordinary cost of college education in the U.S.?
What can we do? Lowering student loans below the rate paid by the big banks who destroyed the economy and the lives of millions Americans would be a good first step. But it’s also a band-aid. Much like Nixon and Reagan ignored the plight of the power by launching a War on Drugs, Conservatives have obscured the true cost of poverty by advocating school choice union-busting. When I read of proposals to fix schools by privatizing them, I’m reminded of Slajov Zizek’s words,
It is not without irony to note how ideologists who once mocked this critical defense of socialism as illusory, and insisted that one should lay the blame on the very idea itself, now widely resort to the same line of defense: for it is not capitalism as such which is bankrupt, only its distorted realization.
We need government funded day care and mandatory maternity leave. We need to make our society more equal. Richard G. Wilkinson and Kate Pickett have found that more equal societies have higher education scores. We need to integrate our schools, which are more race and class-segregated now than in the 1970s. New research shows that the U.S. cities that have the most upward mobility have high spending per pupil and low rates of racial segregation. That will mean more busing programs and measures to actively integrate schools. Interestingly, some European countries have moved towards the more capitalistic model of education we have here in America. The result, “educational choice tends to intensify class segregation through the effects of different preferences and information costs.” If we want to really improve schools we have to strike at what is causing some of them to fail: poverty, prison and segregation.
We need to treat education as both an investment in the economy and in informed, intelligent and active citizens. Remember that the biggest boom in American innovation came after WWII, when millions of Veterans attended college under the GI bill. Remember that the American dream, as enshrined by James Truslow Adams, was a place where, “each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”
Many, like Charles Murray, believe that these policies are overly romantic, that education should be a commodity and the best education should be saved for the super-bright. He thinks poor students are failing because, well, they just aren’t as smart as rich kids, not because they haven’t had the same opportunities.
I disagree. As Stephen Jay Gould once noted, “I am, somehow, less interested in the weight and convolutions of Einstein’s brain than in the near certainty that people of equal talent have lived and died in cotton fields and sweatshops.” Could the next Einstein by dissuaded from college because of our flawed education system?
America is the land of the “American Dream,” where, according to James Truslow Adams, “Each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”
And yet, recent research shows that social mobility is not a vibrant as a Horatio Alger novel implies. There are two ways to measure social mobility. The first is to see how children compare to their parents, and the second is to see how individuals fare over time. On both counts, the United States is rather dismal. The chart below comes from a 2008 Brookings Institution study and shows inter-generational mobility. It shows the percentage of sons who remained in the same income bracket as their father. I re-created the chart with just the bottom quintile, and the result is depressing: some 40% of children with a poor father remain poor, while only 8% will make it to the highest income bracket. In Sweden, the corresponding numbers are 26% and 11%.
American also fails to facilitate lifetime mobility. The following chart is compiled from Treasury Department data comparing tax returns from 1996 and 2005. The color of the bar corresponds to the individual’s earnings in 1996. So those who were in the highest quintile in 1996 (purple bar) make up a whopping 70% of those in the highest bracket in 2005. Those in the lowest bracket in 1996 (blue bar) make up a dismal 5% of those in the highest bracket in 2005.
Treasury Department, 2007
Economists measure what is called “inter-generational elasticity,” essentially, how sticky earnings are. Inter-generational elasticity measures how much of each dollar earned by a father is passed on to his son. If a society has high mobility, a child’s earnings will be determined on their own merits, rather than their father’s. So a high IGE score means low social mobility. Unsurprisingly, the United States has a high IGE score, as seen below in a chart made from data compiled by Miles Corak.
America’s IGE has increased from .297 in 1950 to .545 in 2000, indicating that social mobility has decreased dramatically. Various economists, including Corak, Dan Andrews, and Alan Kreuger have noted the uncanny correlation between inequality and social mobility, and both historically in the United States and internationally the correlation has held up solidly. But why? The most important factor in social mobility is education, and the United States has been educating not only poorly, but unequally, for the last few decades.
A 2011 study for the National Bureau of Economic Research by Martha J. Bailey and Susan M. Dynarski finds that between 1979 and 1997, “the gap in the college-entry rate between the bottom- and top-income quartiles increased from 39 to 51 percentage points.” This shift is largely due to poverty, not cognitive ability. The authors write, “Even among those who had the same measured cognitive skills as teenagers, inequality in college entry and completion across income groups is greater today than it was two decades ago.” Read that twice. Between roughly 1980 and 2000, the gap between poor students going to college and rich students increased by 10 percentage points. Worse, that gap held for students with the same cognitive ability.
The National Center for Education Statistics confirms the trend. A 2003 study examined how many students who graduated eighth grade in 1988 had a bachelor’s degree by 2000. What it discovered is that among students with the highest cognitive ability but the poorest parents, 29% of students had a bachelor’s degree. Among students with the lowest cognitive ability but the richest parents, 30% had a bachelor’s. If you want a college degree, you are better off being born rich and dumb than poor and smart. A report by the Century Foundation, aptly titled “Left Behind,” finds, “Seventy-four percent of students at the nation’s top 146 colleges come from the richest socioeconomic quartile and just 3% come from the poorest quartile. Put differently, one is 25 times as likely to run into a rich student as a poor student at the nation’s top 146 colleges.”
Much of the college gap occurs because of events earlier in life: Poor children have little access to preschool, poor mothers cannot take time off work, the United States does not guarantee paid leave, and a 2011 Department of Education report confirmed that poor school districts receive less federal funding than rich ones. It appears the American Dream may well be just that – a dream. Until we improve our education system, it will remain that way.
In many ways, I think these types of statistics are responsible for a lot of the “millennial apathy” that we youth catching so much flack for. We were promised meritocracy and we got nepotism. Look at the evidence. In Hollywood you have the Arquettes, Sheens, Douglases, Coppolas, Baldwins, Afflecks, Gyllenhaals, Goldie Hawn-Kate Hudson, Aaron Spelling-Tori Spelling, and Colin Hanks. IMDB has a list here. In politics you have Liz Cheney who benefited immensely from her father’s dictatorial penchant for appointing loyal advisers to accrue more power. She scored a State Department job that was specially created just for her! How lucky! Her husband also got a nice little bonus from his father-in-law, a job as chief counsel for Office of Management and Budget. Then you have the Adams family, Bush family, Kennedy clan, Ulysses S. Grant handing out patronage to his relatives, the Roosevelts, the Gores, and the Clintons, just to name a few.
It’s called the “American Dream,” George Carlin once said, “because you have to be asleep to believe it.” Sad but true.