Category Archives: Econ & Money

We Are Getting Owned

According to Oxfam’s Working for the Few: Political capture and economic inequality, 85 of the world’s richest people own the same amount of wealth as the bottom half of the world’s population.

Expand the focus to the richest 1%, and Oxfam reports they have about $110 trillion in wealth (46% of the total) which is 65 times the $1.7 trillion (about 0.7% of the total) held by the bottom half of the population.

Makes you feel that “The Owner” is not just a Neal Asher dystopian fantasy.

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Pricing Public Colleges

Brad had a gloomy moment:

The old social democratic belief that America should have the best universal free public education system in the world was a principal source of America’s relative prosperity and economic leadership for a century. Now that the political coalition that supported that belief is gone, America will be a much less exceptional place.

I am quite frequently a pessimist, but this is one area where I don’t think we should give in so easily. The US had a strong comparative advantage for post-secondary education due to several factors:

  1. the First Amendment, critical to the atmosphere of free inquiry in which scholarship and studying thrive;
  2. liberal immigration laws that brought the world’s talent to teach and learn;
  3. decentralized control of education, which created intellectual and prestige-oriented competition between campuses and states;
  4. a public-private mix, which further contributed to variety — and provided an outlet for religious-themed education while reducing attempts to impose religious orthodoxy on the majority of campuses;
  5. a national consensus that higher education matters,
    • as a matter of national security (post-Sputnik)
    • as part of the social contract with veterans (the GI Bill)
    • as one of the primary means of personal advancement in the post-Horatio Alger world

    and that higher education was thus worth paying for as a public good rather than billing for it as a private good.

None of these factors other than the last part of the last one were in any way ‘social democratic’. And most are still in place. The two that are hurting are fixable.

An easy fix would be the immigration prong. Post-9/11 we’ve tightened the rules for academics and even more for students in ways that not only do damage to recruiting but make the experience of coming the US unpleasant. This in turn has greatly straightened strengthened foreign academic competitors — it’s only a small exaggeration to say that our mistreatment of foreign students is the core of the UK’s academic financing strategy.

As for the US financing, it seems to me that the national security arguments are as strong as they ever were even without the Cold War — stronger if one considers the economic consequences of education for the workforce and for national wealth. Similarly, education remains a key aspect of income outcomes. If we are pricing poor people out of college, or saddling them with huge debt, we’re locking in inequality across generations. I think there are signs that the social consensus is moving ponderously towards confronting inequality. Raising the minimum wage will be round one; education expenses could be round two.

Because he chooses to cast the issue as ‘social democratic’ (bad framing?) Brad sees an equality problem with lowering tuition in the public post-secondary sector:

Given that the average taxpayer of California is considerably poorer than the average Berkeley graduate, that upward transfer to the relatively rich leaves a bad taste in the mouth.

The second argument is that for every student who would go to current Berkeley, the taxpayers of California would have to pony up $48,000 that they would not be able to spend on what they want.

Given that the average taxpayer of California is considerably poorer than the average Berkeley graduate, that upward transfer to the relatively rich leaves a really really bad taste in the mouth.

In my view, these arguments against are overwhelming: there is no valid argument for transforming UC Berkeley as it currently exists into Free Berkeley.

Even on this field, I am not persuaded that these are overwhelming arguments. Part of what the taxpayers of California want is to live in an opportunity society, not one with fixed (and perhaps angry) social classes. Another part of what the taxpayers of California want, or at least ought to want, is to live in a society that benefits from the public good of having educated voters making decisions. A third part of what the taxpayers of California want is to live in a country that is economically competitive on the world stage — which in our case increasingly means services and knowledge workers. Plus, although this more Brad’s department than mine, there is surely a multiplier from education that increases everyone’s wealth; my instinct is that this compares well to the opportunity cost of the sort of job available to a high school graduate.

This is a brew of self-interest from which a turn against expensive public education back towards free or low-priced public colleges ought to be possible. Another part of the story will undoubtedly be cost control, with fewer fancy food courts and trophy gyms. But if we can bend the cost curve on health care, we can do it on education.

(Note that the argument above is, if anything, against interest – I work in a private institution that can only be hurt if the price of public education goes down. On the other hand, I think the arguments above apply primarily to undergraduate education, and least well to professional schools; then again, in a university everyone to some extent shares the same pot.)

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Why the Budget Deal is Awful, in One Chart

budget

(from DownWithTyranny!)

Posted in Econ & Money | 3 Comments

Hoovernomics Explains the Economy

This one chart tells you much of what you need to know about the fiscal side of the US economy: we’re dealing with a recession/depression Herbert Hoover style — by cutting government spending just when we would have needed a strong counter-cyclical push from government.

121213krugman1-blog480

What’s good about this chart, lifted from Krugman, is that it aggregates federal, state, and local spending; everyone’s cutting.

Something to consider as you look at the ugly budget deal coming out of Congress — the one that doesn’t extend unemployment benefits and, as far as I can tell, doesn’t fix the recent vicious cuts to food stamps either. (Please correct me if I’m wrong about that.)

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Governing With Crazy People

Josh Marshall despairs: Broken Windows, Broken States

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Nepotism and the 1%

Shorter Alex Pareene (Salon): Nepotism, it’s worse than you think. (Spotted via John Quiggin, Cronyism and the global city (again).)

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Democracy in Action (Missouri Edition)

ProPublica’s The Payday Playbook: How High Cost Lenders Fight to Stay Legal is a little different from what they teach in high school civics classes.

As the Rev. Susan McCann stood outside a public library in Springfield, Mo., last year, she did her best to persuade passers-by to sign an initiative to ban high-cost payday loans. But it was difficult to keep her composure, she remembers. A man was shouting in her face.

He and several others had been paid to try to prevent people from signing. “Every time I tried to speak to somebody,” she recalls, “they would scream, ‘Liar! Liar! Liar! Don’t listen to her!’”

Such confrontations, repeated across the state, exposed something that rarely comes into view so vividly: the high-cost lending industry’s ferocious effort to stay legal and stay in business.

The problem was the legislature. During the 2010 election cycle alone, payday lenders contributed $371,000 to lawmakers and political committees, according to a report by the nonpartisan and nonprofit Public Campaign, which focuses on campaign reform. The lenders hired high-profile lobbyists, and Still became accustomed to their visits. But they hardly needed to worry about the House Financial Institutions Committee, through which a reform bill would need to pass. One of the lawmakers leading the committee, Don Wells, owned a payday loan store, Kwik Kash. He could not be reached for comment.

Eventually, after two years of frustration, Still and others were ready to try another route. “Absolutely, it was going to have to take a vote of the people,” she said. “The legislature had been bought and paid for.”

A coalition of faith groups, community organizations and labor unions decided to put forward the ballot initiative to cap rates at 36 percent. The main hurdle was collecting the required total of a little more than 95,000 signatures.

Someone raised $2.8 million to fight the initiative. We don’t get know exactly who:

Missourians for Equal Credit Opportunity (MECO), appeared. Although it was devoted to defeating the payday measure, the group kept its backers secret. The sole donor was another organization, Missourians for Responsible Government, headed by a conservative consultant, Patrick Tuohey. Because Missourians for Responsible Government is organized under the 501(c)(4) section of the tax code, it does not have to report its donors.

They sent deceptive threatening lawyers letters to the pastors and others running the petition drive.

And as if that wasn’t enough, they created fake initiatives to confuse people:

A Republican lobbyist submitted what appears to have been a decoy initiative to the Missouri Secretary of State that, to the casual reader, closely resembled the original measure to cap loans at 36 percent. It proposed to cap loans at 14 percent, but stated that the limit would be void if the borrower signed a contract to pay a higher rate — in other words, it wouldn’t change anything. A second initiative submitted by the same lobbyist, Jewell Patek, would have made any measure to cap loan interest rates unlawful. Patek declined to comment.

MECO spent at least $800,000 pushing the rival initiatives with its own crew of signature gatherers, according to the group’s state filings. It was an effective tactic, said Gerth, of the St. Louis congregations group. People became confused about which was the “real” petition or assumed they had signed the 36 percent cap petition when they had not, he and others who worked on the effort said.

They hired people to physically block access to petition gatherers.

Here’s the really sad part: it worked. The petition’s supporters gathered
118,000 valid signatures, about 23,000 more than needed.

But the state’s rules required that they collect signatures from at least 5 percent of voters in six of the state’s nine congressional districts. They had met that threshold in five districts — but in the First District, which includes North St. Louis, they were 270 signatures short.

Democracy in action.

They’re going to try again next year.

Posted in Econ & Money, Politics: The Party of Sleaze | 2 Comments