Brief Musing on Work Disincentives

Working on something else and this drifted through my head.  A big problem with benefits in the US is that many of them have strict means testing which always creates strong work disincentives.  There's really no way to avoid this entirely.

But I do think there's a lesson here about how unequal the current system is in the US, as well as a logical fix to it.  I believe the maximum total reduction rate for benefits going to the poor (meaning combining the amount of income taxed away as well as the reduction in benefits) should not be able to exceed the top rate on high incomes.  So, with a current top marginal rate of 35% someone on TANF or SSI/SSDI should never see their benefits per extra dollar earned decrease at a rate greater than that less taxes.  This isn't the case now, especially when non-cash benefits, like Medicaid, are taken into account. 

If increasing the 35% rate to 38% rate is supposed to have work killing impacts on the well off, who tend to receive income increases in large chunks, what do you think the work killing influences are on people who get raises of pennies on the dollar on real tax rates much higher than 38%?  It's no wonder people drop out of the workforce when the gains to be had are so small.

And, of course, it's not like ending the benefits would help.  It's not really possible to live off a minimum wage job anymore, especially when high rates of employment fluctuation are taken into account for these workers, so anyone trying to get out of this jam will always either have to mooch off of friends and relatives or turn to less savory means of gaining income.  We just can't make things work at the level of spending we're willing to have.  There's a way out, but no one in our political system is willing to talk about it, or even talk about what our problems really are.

Best Q&A I've Seen on the S&P Downgrade

This is from Floyd Norris at the NY Times Economix blog:

Q.

So the U.S. debt is up partly because S.&P. was incompetent before the financial crisis. Is there any particular reason to assume they know what they are doing now?

A.

Next question.


I don't really have much to add that's relevant.  On something of a tangent, I have seen one or two comparisons with Hapsburg Spain's defaults.  There is some validity to this, the big reason behind the Spanish defaults is that the Spanish kings couldn't find a reliable method of taxation, powerful corporate (not modern legal corporations but rather things like guilds, magnates, and the church) interests were able to successfully block the king from obtaining revenues from the greater parts of his lands.  It is also notable, this turned out poorly for those powerful interests in the long run.  Those wealthy, untaxed elites didn't exactly end up as the vanguards for capitalism and suffered greatly when the broader society began to decay.  Unlike economics, in politics, everyone acting solely in their own self interest tends to make everyone much, much poorer.  They of course never realize this until it's too late, despite the many historical lessons this lesson can be drawn from.

Hey, but this time it's different.  Because, we're the elites, and not those other fools.

Of course, this is what those other fools said too.

Book Review: 3 Books on Poverty

I'm still experimenting with doing these, my reading ran a bit ahead of my writing this week.  So, I'll catch up with three short reviews.

First of is Wealth and Welfare States by Garfinkel, Rainwater, and Smeeding. It provided a good overview of the welfare state in comparative perspective.  There's a lot of data here, what will surprise some readers is that it counts education spending as a form of welfare.  This has become increasingly standard in this sort of study, it's really hard to think of good reasons why to treat it separately from more traditional welfare spending.

A few other interesting notes on the book.  First of all, it describes the US welfare state spending as unusually V shaped, both the poor and the rich get unusual amounts of redistribution.  This is largely through treating handouts like the mortgage interest deduction as a form of income subsidy, in the final analysis, there's no defensible reason not to treat it the same way as something like section 8.  They also review more recent work on social spending and growth, recent studies find social spending positively correlated with growth at existing spending levels in the developed world, while there's eventually a trade off between social spending and equality and growth, it hasn't been hit yet by any rich nation.

I should also mention that they add in mandated corporate spending in some parts of the book as welfare state policies.  This would include things like spending on health benefits in the US.  After all, if it's the government instituting these policies, there's no good reason to exclude them from calculations of total spending.  This is separated out and traditional calculations presented alongside.  There's also a good overview of the history of welfare state policies.  Also, since so many seem to have problems believing this, the welfare state grew up right alongside capitalism and the more capitalist a country got, the bigger it got.  I don't think this is accidental.

Definitely worth reading.

The second book is Charles Murray's  Losing Ground.  This book is the biggy in convincing people that welfare spending actually hurts poor people.  Reading it myself, I found it quite forced, and in parts peculiar.  The first thing that struck me is that all his trends try to use the 50s and early 60s as a baseline.  As we all know, the US had a number of unusual advantages during this time, we shouldn't have expected progress to continue on these lines.  It certainly shouldn't have stopped because of a small increase in social spending.  Also, he pins a lot of causation on programs that only impacted small numbers of people, it's hard to see how small changes in AFDC benefits could have impacted black men that much, it would seem more sensible to focus on the people actually receiving benefits.  I won't go into detail on the bizarre thought experiment.  The big problem with this book is that he seems to be using how he wants people to behave as a baseline, rather than how they actually do behave.  I don't really think they were acting any more like he wanted them to before 1965 than they were after, which makes the whole book seem fishy to me.  He has said elsewhere that he draws much of his inspiration from how people seemed to get along just fine in villages he worked in overseas.  The problem with this is that those villages never really change much, they're a dead end.  They don't survive capitalism.  But this is the whole problem with the kind of political program being pushed here.  It doesn't really seem to understand the market or how it impacts society.  There's a pretty clear causality between greater reliance on markets and the erosion of traditional bonds that make village life work.  This has been demonstrated many times.  Blaming government for this doesn't stand up to scrutiny.  Rather government responds after this erosion with social programs, not the other way around.  Imagining that capitalism can co-exist with the kind of interdependence found in a village is just wishful thinking.  These societies run on variations of clientelism, which is anathema to a market economy which relies on one-off interactions between strangers.  They're just not compatible.

Rethinking Social Policy by Christopher Jencks was an excellent, if dated, book.  It's a compilation of book reviews and a chapter of original research.  It covers affirmative action; the safety net; heredity, inequality, and crime; urban ghettos; the American underclass; and reforming welfare.  There's a wealth of excellent data here, Jencks often expresses his dislike of ideology and his preference for reliance on data.  Each chapter is excellent, it was the chapters on the safety net and welfare I focused on most however.  The chapter on the safety net was a review of Murray's book, he exposed the flaws in logic as well as data that went into it.  What I found particularly convincing was the break out of the groups that had actually received social spending and the impact on them, it was far different from Murray's contentions.  Jencks' take on Murray's thought experiment was also excellent, the original scenario was plain absurd.  It's still worth a read, though enough has changed that more up to date works would probably be more valuable.  If you don't have Jstor access however, I can't recommend any at this time.

[There is also a somewhat testy exchange between Jencks and Murray available at the New York Review of Books, if you're a subscriber, the entire essay is there as well]

Brief Thoughts on Moral Relativism

[I had originally decided not to post this after writing it, I'm unsure about how much I want this blog to venture into morality.  But after writing that last post, I think I do need to give a more complete example of what my moral view of the world is.]

So, after reading today's post on The Stone blog (also) I've got some brief thoughts to share.  First of all, it's a good post on why pure moral relativism doesn't work, which I don't think will surprise anyone that much.

That said, I don't know that I agree with the thought at the end, that there are still some hard more questions.  I think truly moral issues tend to be easy and clear, and completely impossible to live by.  For the hard stuff, we end up knee deep in cultural norms and are outside the realm of morality.

Let me explain my views a bit more.  I regard there being two distinct domains for what is traditionally called morality.  The first is what I agree in calling morality, those are moral precepts that are inherent in human nature, the result of either divine intervention or human evolution depending on your beliefs.  We can test for these things with cross-cultural comparison, these moral concepts will be found in all human cultures, and possibly some animal ones as well.

We end up with a pretty short list, basically, the principle of reciprocity, loyalty to "kin," and thou shalt not kill.

Everything else is culture, and culture tends to go through significant acrobatics to make it seem like taking intrinsically immoral actions are moral.  For most cultures there is some subset of actions where it becomes moral to kill, for instance, yet this seems to me to obviously be a violation of intrinsic morality because individuals are still deeply troubled by the act of killing, even when sanctioned by their culture, to me, this says there is a violation of a deeply set moral norm that trumps the acrobatics of culture seeking to justify it.

Of course, there is an intrinsic tension to this view, the principle of reciprocity and kin, the bonds that one feels to one's fellow man, can in certain cases mean that the only option available to fulfill these obligations is to kill (say in self-defense, defense of others, or the military).  In these cases it becomes impossible not to violate a moral norm.

Which is really the point of my system.  Morality should be an ideal that can't be reached in this world.  It's an ideal and an aspiration, not something that can be lived by in practice.  For it to retain its force, we have to be aware of when we fall short of its tenants.  In this sense, the cultural component of morality becomes very important, while this may not be a foundational intrinsic morality, we are bound to it through the principles of kin and reciprocity; it is necessary for society to function and for us to function within it.

But it is an important distinction to make, the cultural component of morality is ultimately to some degree relativistic, we can't judge among them and we are all equal when comparing our personal cultural moralities to each other.  But intrinsic morality is different, seeking to renounce all ties to other people and show no respect for their wants and needs or to commit heinous actions such as murder are of a different kind from violating understandings that are simply part of one culture and not intrinsic to all humanity.

My point here isn't to get into a complete moral system, just to point out that I think evidence can be applied to discerning the contents of some kind of base moral system and that a much broader realm of what is traditionally called morality* is more narrowly cultural normative (not that the two don't interact).  Of course, more has to be added in, when two intrinsic components of morality are in conflict, such as killing and reciprocity, then a moral decision becomes impossible and we are forced to make a decision based upon efficiency or expediency.  But I don't believe these factors are properly considered moral, killing, say, a mass murderer to defend someone is something I'd continue to regard as immoral but so would not killing the mass murderer.**  In this case, the decision has to be made upon amoral grounds, killing the mass murderer is certainly better for society, but this form of expediency moves into a cultural dimension and is outside of what I think of as morality.

*As my readers know, I put a very high premium on evidence and believe it should be used whenever possible.  I do think in this case there are constants to human behavior that can be looked at, making it unnecessary to leave this in the realm of pure philosophy.

**I also believe that to the extent that outcomes can be known that it is important to consider action and inaction as equal.  While this goes against some people's intuitions I don't really see a good reason to treat the two as distinct, again to the extent that consequences can be known.  As a separate issue, I do think this imposes a moral burden on the individual to increase their knowledge and thus their ability to predict consequences, negative consequences of actions with other intended outcomes continue to bear a degree of moral culpability, though to a lesser extent than actions with known outcomes.  Not knowing doesn't necessarily provide any additional moral leeway, since if an individual could have been reasonably expected to have opportunities to learn better they are culpable for the consequences of their actions at the level of having chosen not to learn that which they could have learned.

Why Mixing Moral Absolutism and Politics Terrifies Me

[I should add that I don't believe there is anything that makes religion more or less prone to this than any other moral system.  We see non-religious systems as far back as the Hellenistic era which can be just as absolutist as any religious doctrine, we see in modern times atheistic moral systems that are far more absolutist than any religious system.  I've talked to, and read, religious philosophers who emphasize doubt and uncertainty, it is possible to be Christian, or anything else, and not believe that any sort of moral absolutism is possible.  This shows up a lot in enlightenment (I recommend Christianity The First Three Thousand Years for a good luck at how much change this religion has undergone) thinking.  In my opinion, moral absolutism is inherently hubristic, irreligious, and immoral.  I regard it as the very antithesis of living life in a civilized manner in the modern world.]

A discussion in the comments section over at the Democracy in America blog veered into a listing of the basic tenants of modern American Conservatism.  I think these are actually a fairly accurate statement of the principles driving those who strongly identify as Conservative in the US.  One* of these tenants scares the shit** out of me though.  That is the principle of moral absolutism, that what is immoral is immoral everywhere all the time.

What disturbs me about this is two things.  First of all, this principle guides every pre-modern society and is a significant part of their legitimacy.  I believe that perhaps the biggest advance contributed by the American Constitution was to redefine legitimacy in purely procedural terms and to abandon the notion of deriving from some sort of ultimate divine law.***  The biggest shift, I think, is how it is explained in the Federalist Paper  Madison 10, the status of man leads inevitably to faction through our, "zeal for different opinions concerning religion, concerning government, and many other points," and this is to be countered by "the extent and proper structure of the Union, therefore, we behold a republican remedy for the diseases most incident to republican government."  He also explicitly states that "we well know that neither moral nor religious motives can be relied on as an adequate control.****"  This is a clear refutation of the beliefs of earlier societies, that adherence to a moral standard was a necessary and sufficient way to good government.  Rather than relying on moral beliefs, in Madison's terms morality has simply dropped out and become another source of faction (reading opinions on religion loosely), this is to be controlled by procedural and not moral terms.  The notion of moral absolutism threatens to walk back one of the chief triumphs of the American Republic, the replacement of moral norms by procedural ones.

An Example of How the Media's Focus on Balance Warps Perceptions

Nate Silver deserves a drubbing for this one.  The important thing to note about the debt ceiling debate is that it has been from the start about how fully the Republican's agenda would be fulfilled in return for raising it.  So when I see something like this:

Perhaps, on a 100-point scale where 0 represents a total victory for Democrats (say a debt ceiling increase with no strings attached) and 100 represents a total victory for Republicans (perhaps the passage of “cut, cap and balance”), Mr. Boehner’s original bill would be scored at about a 70 and Mr. Reid’s at a 50.

I get angry.

Let's be honest about what a truly neutral scale would look like.  0 should be a bill that fulfills a number of Democratic priorities (say an increase on taxes on the wealthy to help close the debt and a hefty dose of fiscal stimulus to raise GDP growth thus cutting the deficit long term) and 100 should be a bill like that mentioned by Mr. Silver.  In this case, 50 would be raising the debt ceiling with no strings attached, no one gets their priorities met, which is more or less what usually happens.

Putting a scale where 0 is defined solely in non-ideological technocratic terms, raising the debt ceiling, and 100 is full partisan terms (with full Democratic ideological priorities apparently at -100) seems to me completely deceptive, since the -100 definition isn't even mentioned.  The framing here makes it look like simply raising the debt ceiling is an extreme partisan position and the current compromise fairly centrist, which it isn't at all.  This defines politics in completely relativistic terms, whatever one sides position on an issue, even if it involves substantial compromise and a complete abandonment of that side's ideological priorities, is defined as the extremist partisan position.  This is downright silly.  A scale of 0 to 100 can't be defined by wherever the parties are on any particular issue, it has to be defined in terms of each party's ideological priorities.  To do otherwise is to substantially distort partisan issues.

On the broader issue about whether this will help/hurt Republicans/Democrats, I'm agnostic.  I just think we should talk about these things in consistent terms rather than letting political opportunists move the goal posts whenever they want to.

Should You Pay Tax on Amazon

Yes.