Friday, March 23, 2012

Class, Resentment, and Means Testing

Reading over Ryan's Budget and Inequality reports have led me to reflect on a rather large number of things. To break out one particular issue that is recurrent in these reports is Ryan's insistence on trying to limit our welfare state to only those that really need it.

This idea is laudable at first glace, but this falls into one of those policies that I contend are bad because they lead to the formation of economic class and class resentment.  I'll use myself as an example to explain.

When I decided that I wanted to get my Master's degree, I decided to change my whole life around to get it. I left Canada so I could move back in with my parents. I got a really boring job I hated and worked at it for a year to save. I went home for one summer to save more money.

I then decided to look into what programs were out there to help me pay for it. While I had saved and was working enough to get by it really involved me pinching pennies. I found that I qualified for enough subsidized loans that I could live decently while in school.

However, I also found out that there were some grants I didn't qualify for because I had been so responsible. If I hadn't saved for a year I would have had less income and qualified for some assistance as a result of that. If I hadn't moved home, but had instead got my own place (which would have been far preferable for any young 20 something), I would have received even more grants, but the very fact I lived at home qualified me as a dependent in the eyes of New York State and disqualified me for a great deal of assistance.

My initial reaction was a great deal of resentment. Here I was, doing everything right, but if I had done everything wrong I would have received all kinds of free money. How unfair everything seemed. Why is the state rewarding bozos who do everything wrong while responsible people like me have to work so hard and don't get anything?

Years later, what I've realized is that the state would have been wasting money on me. Rather obviously, I was going to get that degree no matter what. It would require more tax dollars to pay for a degree that I was going to get anyway.  However, for a poorer individual, who didn't have family to move in with and perhaps needed to go directly to school to get away from a crowd back home that was bad for them, that money mattered a great deal. The system is set up the way it is to try to help the marginal student that needed the help to get a degree, raise their human capital, and likely pay back far more then they received in benefits to society at large (not that it is set up very well to do this, but that is separate issue), while saving money by denying assistance to people who are already doing everything right without the help. So far, so good.

The problem, of course, is that resentment I felt. Not every student denied public assistance goes on and gets a political science degree and changes their political beliefs in response to having greater knowledge (when I went in to school I was a staunch conservative, I actually favored Giuliani for awhile, but as I read more and learned more about American politics (my history and foreign knowledge were better, but I was pretty pig ignorant and tribal when it came to American politics at that point in time) my political beliefs shifted a great deal, I always took pragmatism and empirical evidence seriously, and like the author of Do-Gooders, I associated that with Conservatives at the time). Many more are going to remember that resentment they felt when they looked for assistance and couldn't get it and let that influence their political beliefs and actions well beyond the brief point in time they needed it. They'll continue to feel like the government unfairly discriminates against them and in favor of losers unwilling to put in the work and make the sacrifices that they made to get where they are. They won't think through it to realize that what the programs are set up to do is to try and get people to get a degree who wouldn't normally do so, not to give a handout to someone that was going to do it anyway.

And this sort of emotional response is basically what people will have regarding virtually every means tested program. They'll encounter programs that don't work for people that tried to save, programs that won't help people that get injured or disabled and try to work anyway, and programs that don't work for people that work hard but can't seem to quite make ends meet. The programs will reward those that have thought ahead and tried to manipulate it (Medicaid look back and nursing home costs) rather than those that follow the rules in good faith and don't try to move money around to game the system. They'll be stuck with the roommate with a free ride whose a recovering drug addict, walking out of the disability office after being denied while seeing a smelly derelict get it, and praying not to get sick while they're without health insurance while seeing the destitute homeless man surrounded by paramedics because he passed out in a bus shelter.

This is an example of what I mean by how poorly designed programs create class. On a personal level, I've felt the resentment that right wing demagogues try to exploit. I'm not proud of it, but I see on a visceral level the kind of buttons they're trying to push, I have them too. I understand why our programs are the way they are, it saves money this way by not providing responsible people with incentives to do what they're going to do anyway and instead focusing on people who were dealt a bad hand or screwed up badly.

But this also means that anyone who has tried to do everything right will see an unresponsive system whenever they need it. They'll be forced to spend down their hard earned savings to get assistance, meaning that they'll often be trapped in poverty by the time they qualify. When assistance could have changed things they didn't get it, when they do get it they feel it is too late because they're already discouraged and without hope, they feel nothing but resentment at the government by this point.

This is why I have a big problem with Ryan's solutions. He likes to decry class-based thinking, but it seems to me the programs he prefers cause it, not fix it. The small government he wants appears to me custom designed to create dependency, while the larger government he blames for it seems able to create problems that won't have the kind of dependency producing problems that result from means testing. I understand the emotional appeal of what Ryan is suggesting, but reflecting on my own emotional responses and what I've learned about the actual impacts of government programs lead me to believe that Ryan's favored methods are the cause of, and not solution to, the problems he wants to deal with. Perversity is a favorite claims of reactionaries, but I believe the data points in the direction that their own favored policies are the ones with perverse effects, and I think emotional responses such as my own explain why this is.

Budget Committee Inequality Report: Relative Inequality vs. Well Being

I'm going go through the rest of this report section by section.

This section is mostly an attempt to change the conversation. The problem with inequality is that there is a feeling that people are becoming increasingly unable to compete with the elite. The problem is that the price of goods being bought is diverging. Ryan tries to make it sound like it is absolute gains that are the problem and that the diverging costs mitigate it. But the reason that people are feeling pressured is that it is becoming ever harder to buy a house that will get one's children into a good school system, to get kids engaged in enough activities to get into top schools (how many parents try to send their kids on study abroad to get into a good college? how many feel they can't compete because they can't afford to do this?), and that the uncertainty of retirement and health care means that it is impossible to take any risks, even if there is a chance they might pay off.

Ryan's attempt to change the conversation to absolute well being just shows how out of touch he is. Movements like Occupy Wall Street, and the general chatter that comes up on blogs and the news, are attempting to send a message to our lawmakers about social anxiety. The fact that the family now has a Playstation doesn't make up for the fact that they now feel they are locked out of competition for better social position. This doesn't show up in income quintiles, it impacts someone in the 91st percentile as much as it does someone in the 9th. The problem is that there is a feeling, a feeling backed up by much of the data, that it is increasingly hard for two people of equal abilities to compete with each other for limited spots, such as in college admissions or for good jobs.

How is a poorer family with a equally good test scores supposed to compete with another when the richer family can send their kid to learn French in France for a study abroad, their kid has to work at McDonalds while the richer kid can spend their time in volunteer work and unpaid internships, and the richer kid can get into better schools before university? However unequal things may have been in reality before, the trend towards looking at extracurricular activities, as opposed to standardized tests and grades, has given everyone an increasing sense that money plays a greater role in determining life chances than ever. How can the kid that has to work to help maintain his family hope to compete with someone that doesn't and can focus into getting into a good college? How can someone that has to work a second job to make ends meet find the time to go to college to get skills? How can someone with a family to support take the risk of giving up health insurance to start a business and become an entrepreneur?

These questions are why inequality matters, it has nothing to do with how many Xboxs a family now has. All of Ryan's discussion just shows he doesn't get it, the problem is that people feel locked out of the elite in a way they didn't 40 years ago, the divergence in costs between the goods purchased by lower income households and the goods purchased by upper income households is one of the causes of the increasing salience of inequality, not something that mitigates its problems.

The rest of the section doesn't deserve much discussion. No one is disputing that some portion of the increase in inequality is due to structural changes such as increased awards to skills and technology. These changes are global in nature. However, the change in inequality regarding the one percent and the rest is pretty much unique to America and the easiest explanations all involve political changes in our economic structure and an increasing ability of existing elites to exclude those that are not like them and don't buy into their self-serving ideology (more on this another time). It is the portion not explained by international trends which is of interest to those discussing inequality, not the part of it that is.

More on the Budget Committee's Report on Inequality

The release of Ryan's new budget plan has turned my attention again to his work. As I've said before, I find his statements ill-researched, divisive, and generally irresponsible. Ryan is constantly trying to frame things as a divide between two polarized camps, which I don't see as all. Most major policy issues involve several bills proposed in Congress, not two opposing visions. Aside from this, there are hundreds, if not thousands, of alternatives that never reached this level. To some degree this is standard partisan politics, but I'd like to suggest comparing Ryan's Path to Prosperity with the 2007 House Budget Committee's statement. They're not entirely comparable since the 2007 report is simply criticizing the President's budget proposal but they're on generally the same topic. They also show some surprising comparability, such as in criticism of deficits. I don't think the 2007 report is fair, but I think contrasting it with Ryan's shows the difference between typical partisan mudslinging and why I think Ryan goes over the top.

Before getting to his budget proposal, I'm going to finish going through his paper on inequality. This brings out more clearly some major issues that I think evidence for his proposals is severely lacking and where his policies would be ruinous. For a refresher the previous posts on Ryan's report are linked below:
Part 1
Part 2
Part 3
Part 4

Friday, March 16, 2012

Comprehension Checking the Fact Checker

As I've been reading the Washington Post more I've come to rather dislike their fact checker. It often seems deliberately obtuse. What set me off to write about it is the combination of their post on oil with Charles Krauthammer's rather daft screed against Obama's oil policy.

First, the Fact Checker. It claims that Obama's use of the fact that we have 2% of the proven oil reserves but consume 20% of the oil is a non sequitur. Against the specific argument being made by his opponents, that the US should approve more oil and gas drilling to lower the price of oil, I don't see how this is a non sequitur.

First of all, we simply don't have large enough reserves to lower the global price of oil. Second of all, we consume so much that even if we did ban exports to try to force domestic prices to diverge from international we simply consume too much to do this in a sustained fashion.

Now, if you think the argument he's arguing against is a non sequitur itself then I'll grant this is a non sequitur as well.

But that's not the approach the Post takes, it tries to spin things so that Obama's argument seems independent of the GOP message that Obama is trying to rebut; this approach seems to me far more of a non sequitur if your purported purpose is fact checking (and after reading many of these I'm beginning to consider taking a more systematic look at the fact checker, they are so frequently deliberately obtuse regarding the obvious intent of messages that I'm tempted to look for a consistent bias but so far I've been too lazy to be motivated to do this in a consistent and defensible manner). It goes into a bunch of gobbledygook about new oil discoveries and technology. However, oil discoveries have been slowing since 1965, new oil discoveries have been very slow indeed in mature oil producers like the United States. Oil discoveries have been slowing decade by decade and are at a relative crawl over the past two decades. Since the 1980s oil discoveries have become slower than total production, and this trend is accelerating.

The Fact Checker then spends a considerable amount of time on discussing non-traditional oil resources such as oil shale and shale oil (yes, these are two very different things). It is true that hydraulic fracturing was a major technical advance that significantly expanded our oil reserves, however, that is not the norm for technical advances (and even then, this added less than 1 year's consumption of oil reserves, though far more natural gas). Usually, technical advances are driven by price, as oil becomes more expensive technical hurdles are quickly overcome to access more expensive oil. This is important because the reserves that the Fact Checker spends so much time on are all reserves that are not counted because extracting them is too expensive at current prices.

It is a complete non sequitur to mention these reserves when the article is nominally trying to claim that " But in the context of higher gas prices — which is how the president often uses these figures now — it just is not logical to compare consumption to 'proven oil reserves.' This is a lowball figure that does not begin to describe the oil known to be within the U.S. borders." While it is true that the US has much larger oil reserves with other estimation methods, proven oil reserves are precisely the correct ones to use in the context of high oil prices. The reserves not included are almost all reserves accessible only at much higher oil prices.

Tuesday, March 13, 2012

Class and the Republican Primaries

I am, fascinated, for lack of a better word, with the hostility I am seeing in many news reports on Santorum when compared to Romney in my usual news sources (currently primarily the Economist and the Washington Post).

The major issue I have in mind is the tendency to dismiss Santorum's appeal as based on social issues while Romney is all about the economy.

The thing is I'm not sure this comparison can be so tightly drawn.  Both seem to share a belief that success is primarily the result of individual effort and merit and that the market is the best way to reward hard work and ability. Both seem to share a scepticism that government can improve upon market outcomes and share a belief that government interference leads to inequality, unfair outcomes, and rewarding the undeserving at the expense of the deserving.  Both feel that the influence of the Federal government has involved a transition away from a traditional American emphasis on individualism and hard work.

These beliefs ultimately involve an interaction of social and economic beliefs.  They also lead to some shared policy preferences, primarily towards low taxes and economic regulations. Both seem to share a belief that lower taxes on employers will help businesses create more jobs.

But here the class* based differences of their supporters begin to appear. Romney reflects his support base in primarily focusing on high earners, low taxes is meant to support rather than punish merit and create incentives to grow and invest.

Santorum takes a different tack, and this reflects his support base. Santorum is aiming his tax cuts primarily at supporting families, his tax breaks largely reflect a fairly common belief that individuals don't need government help and that if they just had a little more money they could afford health care, help their kids in school more, and be under less stress generally.

I could go on down the list of policies, but that would make for too long of a post.  Generally, however, I believe both Romney and Santorum display virtually identical assumptions. Where they differ is in the class based expressions of both philosophies.  Romney displays the beliefs of people who have done fairly well in the current institutional setup, they've prospered, but they could prosper more and believe that this would benefit everyone else as well, they taxes they are paying are worsening, not bettering, other individual's life chances.

Santorum is expressing the same beliefs but from a different perspective.  Working class individuals agree that merit should be rewarded but are troubled by the fact that they are having difficulty paying for health insurance, affording a house where their kids have access to good school, and feel a lack of financial security.  They feel that something has changed in America and that these changes are at least partially the fault of the government and bad incentives.

These two perspectives lead to very different policy prescriptions. In the sources I read, I see a lot of sneering from better off conservatives at the beliefs of the less well-off Santorum supporters.  They tend to give little credence to the views expressed by Santorum.  I find this somewhat surprising, after all, if a working class individual shares beliefs such as the idea that hard work is rewarded, that market outcomes are just and efficient, that government prevents incentives from functioning leading to social dislocation, and that the market works in the interest of everyone why shouldn't they focus on the individual level social issues that conservatives claim determine outcomes? If the poor are poor because they make bad choices, and government intervention leads to more of these bad choices causing taxes to be raised which means they can no longer afford things like health care because they're over taxed why would the working class voter not focus on social issues? Since the social factors that Democrats focus on are anathema to these voters, what has to have changed over the past 30 years that has resulted in families who worked hard having difficulty affording health insurance, getting their kids into good school systems, and attaining financial security has to be the social issues.

So why is it stupid, bigoted, and short-sighted for these voters to focus on these issues? Educated and rich conservatives are talking all the time about how it's the poor's own fault for not making better choices and how it's not government's job to intervene. It makes perfect sense for the working class to focus on what has changed that has resulted in people allegedly making these poor choices rather than having as great of a focus on business friendly polices as encouraged by Romney. Sure, they share this agenda too, but while business friendly policies are salient to the wealthier, to the working class it is the moral issues that are more directly salient for their economic and social woes. They need to resolve the problems of the family and of preventing these people from making the bad choices that are leading to social and economic decline far more than they need increased incentives at the top, for them, the salient problem is the decline in their own neighborhoods, not capital mobility.

Overall, watching the primary debates and reading the coverage has made me entirely cynical about the American right. In speeches, on blogs, and in campaign press releases they stress their ideas about individual responsibility and culture in order to oppose any policy that would seek to address the social forces or other aggregate pressures that so many researchers and analysts identify as the cause of our problems. Yet, when someone seeks to follow through to the logical conclusion of these beliefs, that the changes in America and our economic problems ultimately have individual causes based on morality and changes in family and social structure, the people putting these views forward are ridiculed and mocked.

In the end, I see nothing but self-justifying elitism. The views expressed serve to justify the self-worth of the powerful, their exalted position in society, and the idea that what is best for them is best for the country. They do nothing but confirm that those at the top are in fact the best, that they deserve what they have, and that those that don't have don't deserve. If they were honest about these views, they'd support the idea that something has to have caused the shift in values that has led to less economic mobility and other symptoms of our economic malaise and that change, beyond lower tax rates, is necessary to deal with it. Instead, men like Santorum are mocked for suggesting that the roots of our problems are in fact social and religious and with family structure, despite these very issues being frequently cited as why inequality is justifiable and why high tax rates punish people for success. As soon as something is tried to be done to fix the lower rungs of society, rather than promote the self-aggrandizement of the top, those that earlier said virtually identical things to justify the inequality all of a sudden are found mocking these views. Frankly, I think it's transparent and it disgusts me.

Of course, I don't share these conservative assumptions and believe that changes in the US are due to shifts in social forces that have to be dealt with through an aggregate, rather than individual, perspective. But I can't help but notice the inconsistency in that arguments that are used to justify opposition to social programs, taxation, and heightened inequality are mocked by the very same people that make them when someone proposes to actually do something about the individual level factors that are supposedly causing our decline. Something has changed, so is it the individual level factors Santorum is talking about, or is it systemic factors that can't be grasped with a purely individual level explanation and analysis? Be consistent.

* To make sure I'm clear, I don't believe in class as an intrinsic property of the market system or of individual relation to the means of production. I do believe that class attitudes can result from poorly instituted policies and from concentrations of power and inequality that are possible under certain economic equilibriums. However, class can be largely eliminated through better policies that don't discriminate based on income level or favor certain types of income that are skewed towards particular ends of the income distribution (this is one of the main reasons I don't like the different capital gains rate, whatever its economic justifications differential treatment of different income sources appears to me to have been a strong determinant in the formation of class attitudes, the long run social cost of maintaining the differential treatment seems to me to be greater than the economic benefits).