A Partisan Nonpartisan Blog: Cutting Through Confusion Since 2012
This piece by Matthew O'Brien is quite interesting. Don’t miss the graphs. See also my post “The Paul Ryan Tweets”, where (translating from Twitter abbreviations) I say that Paul Ryan is “wrong, wrong, wrong on monetary policy."
Update: Here is a more recent piece by Pedro Nicolaci da Costa about Paul Ryan’s monetary policy views.
Not surprisingly, a lot of our discussion ends up revolving around health care.
Update: Matt Yglesias, Stephen Bronars, Matt Stambaugh, Tyler Cowen, Modeled Behavior and Jason Becker joined the part of the debate about health care, and I flagged John Cochrane’s excellent suggestions about health insurance. Noah and I also flagged articles about Japan’s current situation, which gives a flavor of the future budget issues the U.S. faces.
In honor of Paul Ryan being chosen as Mitt Romney’s running mate–a big event no matter what your political leanings–here is a record of a Twitter discussion I had about Paul on July 27, some handicapping in the last few days of whether he would be Mitt’s pick, and my selection from the Twitter traffic about Paul today. The other participants are Noah Smith, Adam Sulewski, Matt Bruenig, Matt O'Brien, Mike Konczal, Casey Thormahlen, and indirectly, Howard Gleckman, Ezra Klein, Andrew Levine, Mike Sax, Jonathan Bernstein, Matt Williams, John Podhoretz, Betsey Stevenson, Josiah Neeley, Matt Stambaugh, Evan Soltas and Brad DeLong among others.
Don’t miss the discussions of long-run fiscal policy and health care. The video of Paul begging Congress to pass the bank bailout (TARP) that I link to at the end shows that he met an important test of seriousness. The bank bailouts are not popular now, but they were necessary in order to avoid a much worse economic outcome than the scathing economic outcome that we have actually had.
In my mini-bio at the sidebar, it says
Politically, Miles is an independent who grew up in an apolitical family. He holds many strong opinions—open to revision in response to cogent arguments—that do not line up neatly with either the Republican or Democratic Party.
In these Twitter discussions, you will see me considering and responding to arguments and coming out of the discussions in a different place than where I entered them–on several dimensions.
To untangle the different discussion threads, I had to depart from chronological order.
This is my answer to a TED talk by Nick Hanauer, “Rich people don’t create jobs.” In the context of his TED talk, “rich people” means “entrepreneurs.” You can see my 10 tweets here, as well as by clicking on the title of this post. Let me explain a little background on a couple of these tweets.
I am deeply concerned about the poor, because they are truly suffering, even with what safety net exists. Helping them is one of our highest ethical obligations. I am deeply concerned about the honest rich—not so much for themselves, though their welfare counts too—but because they provide goods and services that make our lives better, because they provide jobs, because they help ensure that we can get good returns for our retirement saving, and because we already depend on them so much for tax revenue. But for the middle-class, who count heavily because they make up the bulk of our society, I have a stern message. We are paying too high a price when we tax the middle class in order to give benefits to the middle-class—and taxing the rich to give benefits to the middle-class would only make things worse. The primary job of the government in relation to the middle-class has to be to help them help themselves, through education, through loans, through libertarian paternalism, and by stopping the dishonest rich from preying on the middle-class through deceit and chicanery.
6. Successful entrepreneurs create jobs in their own firms, but also typically destroy jobs in competing firms. That is part of how economic progress happens. We can block this competitive creation of new jobs and destruction of old jobs only at the cost of long-run stagnation. I doubt Nick Hanauer meant to argue for blocking progress in that way.
7. Outsourcing and offshoring also create jobs. People in other states or other countries getting jobs counts, too. They are human beings, just like us.
My older brother Chris has been reading my blog. He sent me an email disagreeing with some of what I said in my post “Will Mitt’s Mormonism Make Him a Supply-Side Liberal?” (and in these storified tweets) about Mitt Romney. I thought what he had to say was interesting, and asked him to give me a version that I could post, which he did.
Though Mitt is a hard person to really know, Chris certainly knows Mitt much better than I do. Chris was in the same Mormon congregation as Mitt for a while and interacted with Mitt in that context. (My own limited contact with Mitt occurred when I visited Chris and attended church with him.) In addition, Chris began serving as the ecclesiastical leader of a Mormon congregation in the Boston area not long after Mitt stepped down as head of all the Mormon congregations in the Boston area, and so had a good chance to hear about what Mitt’s church leadership style had been like.
Local Mormon Church leaders serve while keeping their day jobs–day jobs such as Mitt’s work at Bain Capital and Chris’s work as a tax lawyer and tax law professor. Like ecclesiastical leaders in other denominations, Mormon church leaders spend a significant amount of their time in a “social worker” role, talking to and helping people in trouble. I found what wikipedia had to say about Mitt’s service as head of the congregations in the Boston area illuminating, and consistent with what I have heard from friends in the area:
During his years in business, Romney held several specific positions in the local lay clergy, which generally consists of males over the age of 12.[13] Around 1977, he became a counselor to the president of the Boston Stake.[102] He served as bishop of the ward (ecclesiastical and administrative head of his congregation) at Belmont, Massachusetts, from 1981 to 1986.[103][104] As such, in addition to home teaching, he also formulated Sunday services and classes using LDS scriptures to guide the congregation.[105] He forged bonds with other religious institutions in the area when the Belmont meetinghouse was destroyed by a fire of suspicious origins in 1984; the congregation rotated its meetings to other houses of worship while it was rebuilt.[99][104]
From 1986 to 1994, he presided over the Boston Stake, which included more than a dozen wards in eastern Massachusetts with about 4,000 church members altogether.[68][105][106]He organized a team to handle financial and management issues, sought to counter anti-Mormon sentiments, and tried to solve social problems among poor Southeast Asian converts.[99][104] An unpaid position, his local church leadership often took 30 or more hours a week of his time,[105] and he became known for his tireless energy in the role.[68] He generally refrained from overnight business travel owing to his church responsibilities.[105]
He took a hands-on role in general matters, helping in maintenance efforts in- and outside homes, visiting the sick, and counseling troubled or burdened church members.[103][104][105] A number of local church members later credited him with turning their lives around or helping them through difficult times.[99][104][105] Some others were rankled by his leadership style and desired a more consensus-based approach.[104] Romney tried to balance the conservative dogma insisted upon by the church leadership in Utah with the desire of some Massachusetts members to have a more flexible application of doctrine.[68] He agreed with some modest requests from the liberal women’s group Exponent II for changes in the way the church dealt with women, but clashed with women whom he felt were departing too much from doctrine.[68] In particular, he counseled women not to have abortions except in the rare cases allowed by LDS doctrine, and also in accordance with church policy encouraged single women facing unplanned pregnancies to give up the baby for adoption.[68] Romney later said that the years spent as an LDS minister gave him direct exposure to people struggling in economically difficult circumstances, and empathy for those going through problematic family situations.[107]
I think a reasonable way to intepret this is as more evidence that Mitt is not, at his core, ideological.
It would be very easy for me to be wrong about Mitt. I know that my reading of the Mormon scriptures cited in “Will Mitt’s Mormonism Make Him a Supply-Side Liberal?” –prompted by brilliant church lessons from my other distant cousin, Tony Kimball, in the Boston area–made me more concerned about the poor than I would otherwise be. And my exposure to Mormon political culture predisposed me toward helping the poor in ways that make as little use of the heavy hand of government as possible. I am only guessing where Mitt is coming from.
I think Mitt’s Mormon background provides two other clues to understanding Mitt. First, the Boston area has several of the most liberal congregations in the Mormon Church. (I was an active Mormon when I was attending Harvard as an undergraduate and graduate student.) The kinds of moderate views that Mitt expressed on social issues in his early campaigns would not be unusual views for a highly educated Mormon in the Boston area.
Second, Mormonism has a strong emphasis on honesty in its training of children. I think this early training in honesty has helped make Mitt a bad liar. When he lies, it is often quite obvious. To me, the most dangerous liar is one who is good at it. Mitt is not that. The problem with Mitt’s untruths–in addition to what they say about his character–is that once they are ignored, we have relatively little to go on to figure out what kind of President of the United States he would be.
This was a longer introduction than I originally intended. Let me at long last give you what my big brother Chris has to say. Chris cautions that this is his personal opinion. Chris is not representing or speaking for any other person or organization. Chris:
I think you are wrong about Romney in certain respects. Even though I have no real knowledge of his personal beliefs, what I do know and surmise is somewhat different.
First, on the particular issue of care for the poor, I think the more likely view on his “heart of hearts” true belief is that he cares but believes strongly in a self-help and private help (family, church, private charity) approach with little or nothing from government. To the extent it matters, Mormon patterns and belief in the 20th century trended that way (as contrasted with a communitarian approach in the 19th century). I don’t believe Mormon views (culturally – one can debate the Book of Mormon approach) have ever been consonant with a strong government involvement. The exception might be in a theocratic structure, such as the intermountain West in the State of Deseret period (pre-Utah statehood).
Second, thinking of policy more broadly, I suggest the following breakout is helpful, considering the areas where a U.S. President might have some influence:
1. Domestic Economic
In this arena the president has very little control. Most of what gets done is by and through Congress. Romney might get more done (than Obama) because Republicans in Congress would be less obstructionist, but only if he were moving in the direction that the Republicans want. (Not to say that “getting more done” is an unequivocal good–if it means getting the wrong things done it can be a bad.) In short, whether or not his apparent policy statements in the Domestic Economic arena are his true belief or are pandering, and whether or not they make sense (in my opinion tax and spending is nonsense, so far), he would probably have to live with his statements. The likelihood is that his statements become reality whether (in his “heart of hearts”) he likes it or not.
2. Domestic Human Rights (immigration, gay rights, rights of corporations vs individuals, voting rights, reproductive and other issues affecting women in particular, etc.)
In this arena I think Romney means most of what he says. I suspect that the campaign has forced him to take a somewhat more extreme position than he really believes, but I read that as a matter of degree not direction. To the extent we’re looking for Mormon influences, the modern (21st century) church is a mixed story but the 20th century Mormon views and discourse, that have the most influence on Romney, would be consonant with what he’s saying. And personally, I disagree with just about everything he says and claims in this arena.
3. Foreign Policy and Defense
This is the arena where the president can really do something, and in many cases almost unilaterally. There is no reason to think that Romney’s history, experience or education has prepared him for foreign policy and defense. In this area Romney seems to be ill informed, lacks any subtlety, and arguably doesn’t even get the policy statements right for the neoconservative audience he is speaking too. Further, to the extent I can extract a policy view from his statements (sometimes substituting or updating country names) my guess is that he means what he says–perhaps a bit naive, but true belief. My own opinion is that those expressed views are not just wrong-headed but frightening in a person who is asking to be Commander in Chief.
I’m very negative on Romney, as you can see. I am positive about Obama, which is a different discussion. That is not anywhere close to a 100% endorsement–he has made a lot of mistakes, but he has also done a lot right. And I trust him particularly in the foreign policy and defense area, which is what I look to first in choosing a President. (In assessing the President’s performance, particularly in the domestic economic arena, I do adjust my expectations by (a) an allowance for an “anything to hurt Obama” obstructionist Republican House, and (b) my belief that the recent recession involves a step-change in housing prices and values, and in employment, the causes and pressures for which have a longer history but which we have experienced as sudden changes from which I do not expect a recovery but rather a new normal.)
I am flagging Daniel Kuehn’s post for this quotation from a paper by David Henderson:
“In his testimony before the commission, Mr. Westmoreland said he did not want to command an army of mercenaries. Mr. Friedman interrupted, "General, would you rather command an army of slaves?” Mr. Westmoreland replied, “I don’t like to hear our patriotic draftees referred to as slaves.” Mr. Friedman then retorted, “I don’t like to hear our patriotic volunteers referred to as mercenaries. If they are mercenaries, then I, sir, am a mercenary professor, and you, sir, are a mercenary general; we are served by mercenary physicians, we use a mercenary lawyer, and we get our meat from a mercenary butcher.”“
Power of the Market: The Pencil
Milton Friedman on the Basis of the Free Market (Consumer sovereignty)
Milton Friedman on Printing Money (A great deal at 29 seconds)
Milton Friedman on Public Education (Not about vouchers, but about the condescension behind public education.)
Persuasion vs. Coercion (The importance of giving people the chance to hear intellectually diverse viewpoints.)
Free Market Exchange (I love what Milton says in this video about the free development of language, English Common Law, and science.)
The Proper Role of Government (Legally formalizing ethical rules is different from other, more arbitrary legislation.)
Population and Ecology (Milton backs Pigou taxes on pollution.)
Market Failure (Milton recommends careful balancing between concerns of market failure and concerns of government failure.)
Milton Friedman Puts a Young Michael Moore in His Place (Not really Michael Moore–only “a Michael Moore” in the sense of someone like Michael Moore. Milton argues for a finite value of a human life and argues that enforcing laws against fraud is a legitimate purpose of government.)
Corporatism and Medicare (Debate between Milton and Michael Harrington)
Incentives for Immoral Behavior (Pay attention to what Milton says about the decline of corruption in England.)
Redistribution of Wealth (Milton: “As you grow up, you will discover that this is really a family society, and not an individual society.”)
In The Robin Hood Myth, Milton talks about his brother-in-law Aaron Director’s Law, saying:
Director’s Law is, that almost invariably, government programs benefit the middle income class, at the expense of the very poor and the very rich.
I take up my lance to tilt against the windmill of Director’s Law in my post “Rich, Poor and Middle Class.”
Note: There are many more videos of Milton out there. Of the ones I watched, I did some picking and choosing, based on a value per minute criterion. I tried to put the videos in a logical order.
Mark Thoma has a new post “Starving the Beast in Recessions” that links to his article in the Fiscal Times: “How GOP Lawmakers have the Fed Over a Barrel.” Mark’s post backs up the concern I expressed in “Preventing Recession-Fighting from Becoming a Political Football” that traditional stimulative fiscal policy–tax cuts or increases in goverment spending–entangles recession fighting in political disputes about the size and scope of government. In that post, I wrote:
By avoiding big changes in taxes or spending, I hope my Federal Lines of Credit proposal can help to depoliticize stabilization policy.
“Preventing Recession-Fighting from Becoming a Political Football” is a difficult post. For more accessible posts on Federal Lines of Credit, go to my second post “Getting a Bigger Bang for the Buck in Fiscal Policy” or to “My First Radio Interview on Federal Lines of Credit.” I plan to do a set of index posts for my sidebar giving links to all of my posts by topic area soon. At that point, the index post on “Short-Run Fiscal Policy” will link to all of my posts on Federal Lines of Credit.
Robert Pollock did this excellent interview with Charles Hill for the Wall Street Journal’s weekend edition. In this interview (which is all I know about Charles Hill) Charles is saying the kinds of things I wish I knew enough–and were articulate enough–about history and foreign policy to say. So this interview will give you a good idea of my foreign policy views.
By the way, I would be interested to know how many of you who try are unable to read this piece because of the Wall Street Journal’s paywall. Let me know in the comments if you are unable to access it. I don’t think I can do anything about it, but still I’d like to know if you have trouble.
I tweeted that this Wall Street Journal column by Charles Murray is a “must read.” I would be tempted to quote more, but let me devote my fair use exception to this passage giving Charles Murray’s view of the moral basis of Capitalism. This should be enough to motivate many of you to read the original column:
The U.S. was created to foster human flourishing. The means to that end was the exercise of liberty in the pursuit of happiness. Capitalism is the economic expression of liberty. The pursuit of happiness, with happiness defined in the classic sense of justified and lasting satisfaction with life as a whole, depends on economic liberty every bit as much as it depends on other kinds of freedom.
“Lasting and justified satisfaction with life as a whole” is produced by a relatively small set of important achievements that we can rightly attribute to our own actions. Arthur Brooks, my colleague at the American Enterprise Institute, has usefully labeled such achievements “earned success.” Earned success can arise from a successful marriage, children raised well, a valued place as a member of a community, or devotion to a faith. Earned success also arises from achievement in the economic realm, which is where capitalism comes in.
Earning a living for yourself and your family through your own efforts is the most elemental form of earned success. Successfully starting a business, no matter how small, is an act of creating something out of nothing that carries satisfactions far beyond those of the money it brings in. Finding work that not only pays the bills but that you enjoy is a crucially important resource for earned success.
Making a living, starting a business and finding work that you enjoy all depend on freedom to act in the economic realm. What government can do to help is establish the rule of law so that informed and voluntary trades can take place. More formally, government can vigorously enforce laws against the use of force, fraud and criminal collusion, and use tort law to hold people liable for harm they cause others.
Everything else the government does inherently restricts economic freedom to act in pursuit of earned success….
Note to copyright lawyers: In addition to the fact that I should (if ever so slightly) be raising the commercial value for Charles Murray’s column by posting this excerpt here, I would also argue that my blog as a whole is a transformative work, given how my posts play off of one another. It is not enough to judge whether a single post in isolation is a transformative work. The entire blog must be judged as a cohesive whole.
On the photos and other images I post on my blog, my main arguments would be
Note to my readers: I should say that the links underneath the images I put in my posts are my way of trying to provide compensation for my use of those photos. At this point, the links under the images I use are the only advertising I have on my blog (for which I receive nothing other than the benefit of using the image with a clear conscience). I am not in principle opposed to having other advertising, but would want a lot of control over the advertising to make sure it did not detract from the way my blog looks and the themes I focus on. For example, since I am a very satisfied user of the Pimsleur language-learning CD’s that I listen to while commuting, I wouldn’t mind a Pimsleur ad if I could put it low down on my sidebar and the transactions costs for me were low. (I’m in the middle of Spanish Level III, and looking forward to learning French after I finish Spanish Level IV.)
Adam Ozimek has a new post agreeing with my take on immigration in my post “You Didn’t Build That: American Edition.” He begins:
University of Michigan economist Miles Kimball has a novel and important and take on President Obama’s “You Didn’t Build That” statement and the ensuing debate.
What Adam adds is to the moral case that I make is to point out how small the costs to current citizens are of allowing additional immigration:
I think this is one of the most important and underemphasized ideas right now. I am constantly humbled at how fortunate any of us are to have been born here, and disappointed at how shamefully entitled we act towards this luck. The idea, for instance, that we should block millions from moving here and vastly bettering their lives because there may be a small statistical impact on some subset of us. On the basis of a 5% wage premium for high school dropouts (who we otherwise neglect in so many other ways) we’re going to exclude others from a privilege we did nothing to inherit? Just as egregious is excluding them because we refuse to either design a policy that allows low-skilled workers to enter and pay their on way (which they could!) or just let them enter and bear the minor cost like we do for low-income natives. (Of course we don’t exempt the high-skilled from paying more than their share, which they do).
It is hard to reconcile the selfish attitudes embodied in the kind of mindset that would lock someone out of this unbelievable American system for the sake protecting an unearned privilege, and for the sake of trying to capture every last ounce of luck for themselves…
And I interpret the following passage from Adam’s post as making the point that the cost to current citizens of allowing additional immigration is especially low, or nonexistent if one includes the dynamic benefits to the economy from immigration:
Ironically it is this open, free, and welcoming attitude we turn our backs on that in large part has made us a great and powerful nation. Where would we be if we pulled up the drawbridge in 1800? Or in 1900? This country would be a shadow of itself, and would’ve turned away many of the great Americans, or their parents or grandparents, who made us who we are.
I do not have the expertise to comment as knowledgeably as I would like on what the actual costs and benefits of immigration to current citizens are, so I very much hope that others in the economic blogosphere will continue to clarify these costs and benefits, so that misconceptions can be dispelled. But I also hope that in talking about the evidence about those costs and benefits that we don’t lose sight of the ethical point that those who desperately want to immigrate to the United States are human beings too, whose welfare counts just as much, ethically, as the welfare of citizens of the United States. Here is the comment I made to Adam’s post on the Modeled Behavior blog:
Thanks, Adam!
In my post, I didn’t emphasize how small the costs to current citizens are from immigration, because I wanted to make a full-throated moral argument that we should allow open immigration even if the costs to current citizens were relatively large: even substantial costs to current citizens could not possibly be anywhere close to the magnitude of the benefit to those allowed to immigrate. Also, I understand that there are many who will never be convinced that the costs of additional immigration to current citizens are modest.
But of course the fact that the costs to current citizens are relatively modest makes the case that much stronger. I have thought about what I would say if someone said to me “But you are a well-off professor, you aren’t the one who would bear the costs of additional immigration.” Given how many times greater the benefits to the immigrants are compared to the costs to current citizens (10, 100, or more times greater, I would think, for immigrants from very poor countries), I would say it was as if my challenger were saying “But it wouldn’t be your suit that would get wet if I jumped in to save the drowning man!"
In my post “Rich, Poor and Middle-Class” I made this statement on my own behalf, as a statement of what I believe Supply-Side Liberalism suggests as the right attitude in response to class warfare in the U.S. context:
I am deeply concerned about the poor, because they are truly suffering, even with what safety net exists. Helping them is one of our highest ethical obligations. I am deeply concerned about the honest rich—not so much for themselves, though their welfare counts too—but because they provide goods and services that make our lives better, because they provide jobs, because they help ensure that we can get good returns for our retirement saving, and because we already depend on them so much for tax revenue. But for the middle-class, who count heavily because they make up the bulk of our society, I have a stern message. We are paying too high a price when we tax the middle class in order to give benefits to the middle-class—and taxing the rich to give benefits to the middle-class would only make things worse. The primary job of the government in relation to the middle-class has to be to help them help themselves, through education, through loans, through libertarian paternalism, and by stopping the dishonest rich from preying on the middle-class through deceit and chicanery. (Miles Kimball, “Rich, Poor and Middle-Class.”)
The question for this post is whether Mitt Romney (the son of my grandmother Camilla Eyring Kimball’s first cousin George Romney) would agree with my statement in his heart of hearts. For now, I am going to give Mitt a pass on the parts of this Supply-Side Liberal statement on “Rich, Poor, and Middle-Class” that have to do with the rich and the middle-class to focus on what we can guess about his feelings about the poor. Here, I am going to make use of what is literally inside information. I know that until I was at least 37 years old, I believed in Mormonism with all of my heart. And I remember my thoughts and feelings then. (See my posts “UU Visions” and “Teleotheism and the Purpose of Life” for a little more of my spiritual autobiography since then.) This is a key to understanding Mitt, since everything I know about Mitt from any source suggests that he believes in Mormonism with all of his heart. (I would be interested in any evidence anyone has on this subject, as well as the related historical question of what John F. Kennedy believed in his heart of hearts in relation to Catholicism.) Inevitably, what follows will represent my own reading of Mormon scripture and Mormon belief and so will at least serve as a way of telling you about an important influence on my own views about our duty to take care of the poor.
Because Mitt has shown a willingness to pander to the electorate in the Republican primaries, saying things in this and his previous presidential campaign that seem at variance with what he has said in earlier campaigns for senator and governor, it is often hard to know what he really believes based on his statements. Therefore, I think it is extremely important to draw on a wide range of resources to try to reveal what might be in his heart. My belief that he believes in Mormonism with all of his heart (as I once did, but no longer do) is my interpretive key.
Mormons believe in the Bible (preferring to use the King James Version) and in three additional books of scripture that they consider the Word of God on a par with the Bible: The Book of Mormon, The Doctrine and Covenants, and The Pearl of Great Price. Searchable text of all of these can be found online here. Although at anything short of the level of high theology, Mormon doctrine on the atonement and saving power of Jesus Christ is totally standard Christian doctrine, Mormonism’s doctrines about the nature of God are so heretical according to the decisions of Christian councils such as the Nicene Creed that many Christians refuse to recognize Mormonism as Christian. The Mormon Church has countered the claim that it is not Christian by emphasizing the official name of the Church: The Church of Jesus Christ of Latter-day Saints and by adding the subtitle “Another Testament of Jesus Christ” to the Book of Mormon.
Of the three books of scripture that Mormonism has in addition to the Bible, The Book of Mormon is the most important, so I will begin with what it says. Speaking as a Unitarian-Universalist and an atheist (or more precisely teleotheist: see my post “Teleotheism and the Purpose of Life”), let me say that the Book of Mormon is a genuinely moving book, fully deserving of an honored place among the holy books of the world’s religions. In saying this I disagree strongly with Mark Twain, who called the Book of Mormon “chloroform in print.” As a Mormon missionary in the Tokyo North Mission from the Fall of 1979 through the Summer of 1981, after striking up conversations near subway stations and convincing some fraction of those I politely accosted to talk at greater length about religion, the main approach my missionary companion and I took (Mormon missionaries always work in pairs–or sometimes in triples, if the total number of them is odd) was to persuade those we were teaching to read The Book of Mormon and then pray about it, with the promise that God would tell them in their hearts that the book is true if they did. (Many people, including me, have had powerful subjective spiritual experiences when they do this.)
The Book of Mormon tells the story of an Israelite offshoot being shown by God how to build a seaworthy ocean-going ship and led by God around 600 B.C. to somewhere on the American continents (thought by most Mormon scholars to be in Central America and Mexico, so that they consider Olmec and Maya texts relevant for understandingThe Book of Mormon). In the narrative, because of their relative isolation, this Israelite offshoot was given very clear prophecies of the coming of Jesus Christ centuries later–not only to Palestine, but also, after Jesus’ resurrection, to their descendants in the American continents.
The Book of Mormon not only emphasizes a duty to take care of the poor in the strongest possible terms, it takes apart some common excuses for not taking care of the poor. I don’t need to comment much on the next two quotations because they are so clear:
But wo unto the rich, who are rich as to the things of the world. For because they are rich they despite the poor, and they persecute the meek, and their hearts are upon their treasures; wherefore, their treasure is their god. And behold, their treasure shall perish with them also. (2 Nephi 9:30)
And also, ye yourselves will succor those that stand in need of your succor; ye will administer of your substance unto him that standeth in need; and ye will not suffer that the beggar putteth up his petition to you in vain, and turn him out to perish.
Perhaps thou shalt say: The man has brought upon himself his misery; therefore I will stay my hand, and will not give unto him of my food, nor impart unto him of my substance that he may not suffer, for his punishments are just–But I say unto you, O man, whosoever doeth this the same hath great cause to repent; and except he repenteth of that which he hath done he perisheth forever, and hath no interest in the kingdom of God.
For behold, are we not all beggars? Do we not all depend upon the same Being, even God, for all the substance which we have, for both food and raiment, and for gold, and for silver, and for all the riches which we have of every kind? (Mosiah 4:16-19.)
The Book of Mormon not only lays out the duty to take care of the poor, it also stresses the the ideal of social and economic equality, the role of equality in helping to make society prosper, and the evil of inequality. Here is a time when things were good:
And when the priests left their labor to impart the word of God unto the people, the people also left their labors to hear the word of God. And when the priest had imparted unto them the word of God they all returned again diligently unto their labors; and the priest, not esteeming himself above his hearers, for the preacher was no better than the hearer, neither was the teacher any better than the learner; and thus they were all equal, and they did all labor, every man according to his strength.
And they did impart of their substance, every man according to that which he had, to the poor, and the needy, and the sick, and the afflicted; and they did not wear costly apparel, yet they were neat and comely.
And thus they did establish the affairs of the church; and thus they began to have continual peace again, notwithstanding all their persecutions. And now, because of the steadiness of the church they began to be exceedingly rich, having abundance of all things whatsoever they stood in need–an abundance of flocks and herds, and fatlings of every kind, and also abundance of grain, and of gold, and of silver, and of precious things, and abundance of silk and fine-twined linen, and all manner of good homely cloth. And thus in their prosperous circumstances, they did not send away any who were naked, or that were hungry, or that were athirst, or that were sick, or that had not been nourished; and they did not set their hearts upon riches; therefore they were liberal to all, both old and young, both bond and free, both male and female, whether out of the church or in the church, having no respect to persons as to those who stood in need.
And thus they did prosper and become far more wealthy than those who did not belong to their church. For those who did not belong to their church did indulge themselves in sorceries, and in idolatry or idleness, and in babblings, and in envyings and strife; wearing costly apparel; being lifted up in the pride of their own eyes; persecuting, lying, thieving, robbing, committing whoredoms, and murdering, and all manner of wickedness; nevertheless, the law was put in force upon all those who did transgress it, inasmuch as it was possible. (Alma 1:26-32)
And here is a time when things were bad:
And it came to pass in the commencement of the ninth year, Alma saw the wickedness of the church, and he saw also that the example of the church began to lead those who were unbelievers on from one piece of iniquity to another, thus bringing on the destruction of the people. Yea, he saw great inequality among the people, some lifting themselves up with their pride, despising others, turning their backs upon the needy and the naked and those who were hungry, and those who were athirst, and those who were sick and afflicted.
Now this was a cause for lamentations among the people, while others were abasing themselves, succoring those who stood in need of their succor, such as imparting their substance to the poor and the needy, feeding the hungry, and suffering all manner of afflictions, for Christ’s sake, who should come according to the spirit of prophecy; (Alma 4:11-13)
The Book of Mormon recounts how, after his resurrection, Jesus came in full miraculous power to teach people in the Americas. At that time, he chose 12 “disciples” who were the equivalent in the Americas of the 12 apostles in Eurasia and Africa. These 12 disciples set up an ideal society, in which all property was communally owned:
And it came to pass that the disciples whom Jesus had chosen began from that time forth to baptize and to teach as many as did come unto them; and as many as were baptized in the name of Jesus were filled with the Holy Ghost…. And they taught, and did minister one to another; and they had all things common among them, every man dealing justly, one with another. (3 Nephi 26:17,19)
In case the phrase “had all things common among them” (compare Acts 2:44 “And all that believed were together and had all things common;”), a few chapters later, it explains:
And they had all things common among them; therefore there were not rich and poor, bond and free, but they were all made free, and partakers of the heavenly gift. (4 Nephi 1:3)
In the 19th Century, the Mormons made an attempt at replicating this communal ownership of property. Here is an excerpt from a much longer section of The Doctrine and Covenants laying out details for this communal ownership of property, including an allusion to the sophisticated and subtle principle of a “stewardship” (temporarily assigned quasi-private property):
It is wisdom in me; therefore a commandment I give unto you, that ye shall organize yourselves and appoint every man his stewardship; That every man may give an account unto me of the stewardship which is appointed unto him. For it is expedient that I, the Lord, should make every man accountable, as a steward over earthly blessing, which I have made and prepared for my creatures. I, the Lord, stretched out the heavens, and built the earth, my very handiwork; and all things therein are mine. And it is my purpose to provide for my saints, for all things are mine. But it must needs be done in mine own way; and behold this is the way that I, the Lord, have decreed to provide for my saints, that the poor shall be exalted, in that the rich are made low. For the earth is full, and there is enough and to spare; yea I prepared all things, and have given unto the children of men to be agents unto themselves. Therefore, if any man shall take of the abundance which I have made, and impart not his portion, according to the law of my gospel, unto the poor and the needy, he shall, with the wicked, lift up his eyes in hell, being in torment. (Doctrine and Covenants 104:11-18)
19th Century Mormons ultimately were not able to make communal ownership work, although they did better than many other groups who tried. The Mormon Church retreated to the principle of tithing and a “Welfare Plan” to take care of the poor. Tithing, which is taken very seriously in the Mormon Church, means that Mormons pay 10% of their income to the Church. But the ideal of a society with full equality lives on. Mormons (and I) use the word “Zion” to signify an ideal society. This meaning of “Zion” is clear in this lovely passage from the last book of Mormon scripture I listed, The Pearl of Great Price:
And the Lord called his people Zion, because they were of one heart and one mind, and dwelt in righteousness; and there was no poor among them. (Moses 7:18)
What should be clear from all of these passages and this discussion is that for Mormon Republicans (and yes, there are Mormon Democrats)–even for very conservative Mormon Republicans–it is OK for the Mormon Church to do what it is not OK for the government to do: require that the rich give money that is then transferred to the poor, in cash and in kind. (I don’t think I am going too far in using the word “require” to talk about tithing, since unless someone declares to their Mormon bishop that they have paid 10% of their income to the Mormon Church, Mormons are not allowed to enter Mormon temples, even to see one of their children get married. Many marginal Mormons have paid tithing in a particular year simply to be able to attend the wedding of one of their children.) This is not a logical inconsistency. After all, in the Mormon view, a Church led by a modern Prophet who receives direct revelation from God can be expected to spend money collected from tithing better than an uninspired government can spend money collected from taxes.
The point I am making is that the duty to take care of the poor is laid out in an unequivocal way in Mormon scripture–the question is only about the means. (1) Voluntary donations and volunteer work to help the poor are preferred, followed by (2) efforts organized by the Mormon Church (using all of the power it has to require things of committed Mormons), with (3) government action to help the poor as by far the least preferred means. But as a believing Mormon, Mitt knows God requires that the poor be taken care of somehow. This is very different from the attitude directly condemned by The Book of Mormon in the passage above: “The man has brought upon himself his misery; therefore I will stay my hand, and will not give unto him of my food, nor impart unto him of my substance that he may not suffer…” This Mormon ordering of the means of helping the poor from best to worst also seems to me an ordering from least distortionary to most distortionary:
So there is nothing wrong in principle with this ordering. The one concern I have is with the tendency to convince oneself that voluntary actions and actions induced by social pressure are in fact enough in situations where they are not.
Other Posts about Mitt:
“Corporations are People, My Friend”
Post about Barack:
“You Didn’t Build That: America Edition”
Other Posts about Religion
“Teleotheism and the Meaning of Life”(This one has philosophy, cosmology, evolutionary theory, and science fiction, as well as theology.)
Note: On Mitt’s genealogy, see this from Familypedia. I am named after our common ancestor: Miles Park Romney.
Reblogged from Mills Baker’s blog “meta is murder”:
“Suspending moral judgment is not the immorality of the novel; it is its morality. The morality that stands against the ineradicable human habit of judging instantly, ceaselessly, and everyone; of judging before, and in the absence of, understanding. From the viewpoint of the novel’s wisdom, that fervid readiness to judge is the most detestable stupidity, the most pernicious evil. Not that the novelist utterly denies that moral judgment is legitimate, but that he refuses it a place in the novel. If you like, you can accuse Panurge of cowardice; accuse Emma Bovary, accuse Rastignac—that’s your business; the novelist has nothing to do with it. Creating the imaginary terrain where moral judgment is suspended was a move of enormous significance: only there could novelistic characters develop—that is, individuals conceived not as a function of some preexistent truth, as examples of good or evil, or as representations of objective laws in conflict, but as autonomous beings grounded in their own morality, in their own laws. Western society habitually presents itself as the society of the rights of man, but before a man could have rights, he had to constitute himself as an individual, to consider himself such and to be considered such; that could not happen without the long experience of the European arts and particularly of the art of the novel, which teaches the reader to be curious about others and to try to comprehend truths that differ from his own. In this sense E. M. Cioran is right to call European society “the society of the novel” and to speak of Europeans as “the children of the novel.””—
Milan Kundera, Testaments Betrayed.
Before Barack said
Somebody invested in roads and bridges. If you’ve got a business–you didn’t build that. Somebody else made that happen.
with an intonation pattern that was a little confusing given his likely intent, he said this:
Somebody helped to create this unbelievable American system that we have that allowed you to thrive.
It is good to see that discussion of what Barack said has gone beyond “gotcha” to a discussion of deeper philosophical issues. Even Rush Limbaugh has turned philosopher, discussing the underlying issues that Barack raises. (Here is my review.)
I am moved by the statement
Somebody helped to create this unbelievable American system that we have.
Leaving aside the rest of Barack’s speech, there is an important message in this. Those of us alive now didn’t build this unbelievable American system from scratch. Those who have gone before us have handed down to us something precious. I think the right response to that gift is gratitude, a determination to do our part to preserve the wondrous aspects of that system, and a desire to share the benefits of this unbelievable American system with others.
When I say “share the benefits of this unbelievable American system with others,” I mean what I say. And it is something that far transcends the importance of our current debates about taxing and spending policy. It is churlish of us to shut others out from the benefits of this unbelievable American system. The framers of our Constitution and the others who did the most to put together this unbelievable American system had an open attitude toward immigration. And we know that as late as 1883, these words were engraved on a bronze plaque on the Statue of Liberty, where they can still be seen to this day:
The New Colossus
Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
“Keep, ancient lands, your storied pomp!” cries she
With silent lips. “Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”
Emma Lazarus, 1883
This is my policy on immigration, as I think it should be the policy of the United States Government and the policy of the People of the United States. We didn’t build this unbelievable American system, and it is not our private property. We don’t have a moral right to exclude other human beings–human beings like us–from the benefits of this unbelievable American system. As stewards of this unbelievable American system, we need to regulate the pace of arrival so that the system itself is not overwhelmed and destroyed, but unless this unbelievable American system itself is threatened, let us open our doors wide to others who have not had the good fortune to be born Americans.
In my book, the two truly wonderful things Barack has done on the domestic front are advancing gay rights (through ending “Don’t Ask, Don’t Tell” and more recently by rhetorical support for gay marriage rights) and advancing education reform through the brilliant work of Arne Duncan as his Secretary of Education. By dangling a few gigadollars worth of grant money in front of states, Arne has gotten states to fall all over themselves passing education reforms that I would have thought impossible in such a short time–often with buy-in from the teachers unions. I cheer on this effort and other efforts at education reform.
Although I am in favor of more school choice, including both charter schools and Milton Friedman’s still excellent idea of education vouchers, let me focus in on two aspects of education reform that can be fully implemented within regular public schools: increasing the total amount of schooling kids get in their K-12 years and making sure they are legally qualified to pursue a wide range of careers when they earn a high school diploma.
Sometimes the most important fact in a given area is one so obvious it might not even seem worth saying. I heard one such fact from a top researcher in education at an academic seminar at the University of Michigan’s Survey Research Center: the single most important variable in predicting whether a student will get a test question right is whether that topic was covered in class or not. Students don’t always remember what they were taught. But they never remember something they weren’t taught. More time in school means more things can be taught at least once, and the more important things can even be repeated a few times.
The secret recipe behind the “Knowledge is Power Program” or KIPP schools (which have been very successful even with highly disadvantaged kids) is this:
The KIPP schools also have highly motivated teachers, but that is a topic for another day.
So my first proposal for this post is to go to a 12-month school year, and to extend the school day until at least 5 PM (but with many extracurricular activities and sports being eligible to count as part of the school day, as they do in Japan). Research has shown poor kids and rich kids learn at a somewhat similar rate during the school year, but that poor kids forget a lot during the Summer, while rich kids retain more. So lengthening the school year is especially helpful for poor kids. Lengthening the school year and the school day also effectively provides year-round day care for poor parents who desperately need it. For rich families who are used to being able to go on a summer vacation, I would allow families to make proposals for family or individual activities with educational value that could substitute for some part of school in the summer, and grant permission for these substitutions for summer school relatively liberally for anything that research shows keeps kids academically sharp. The poor kids will think this is unfair, but they simply need the formal schooling more because their parents can’t afford other high-quality educational activities. So keeping them in school during the summer really is doing them a favor.
I won’t try to work out all the details of how the longer school day and school year would work, but I need to address one objection that will spring to many readers minds: extra costs. I don’t want to assume massive new infusions of money into schooling that might never be available. But I think it can be done without major additional costs. The school buildings are there anyway, year round, so the major expense to worry about is teacher salaries. Here I think we could start by having each teacher teach the same number of annual hours as they now do, but staggered throughout the year. (Over time, on a merit basis, some teachers could be allowed to work year round at a commensurately higher salary, to make up for normal attrition.) The margin that would give is that class sizes would go up. Except in Kindergarten, and maybe in 1st grade, higher class sizes have been shown by research to have only a small effect on learning–probably less than a tenth the effect on learning on the minus side that more total school hours for the kids would have on the plus side. We might need to knock out a few walls between classrooms to accommodate these larger class sizes, but it could be done. (Note that the total number of kids in school at any one time would be basically the same as now, so the kids would fit.) Even with these expedients, costs would go up some. For example, the lights would have to be kept on longer. But I think it should be manageable. And the fact that some of the rich kids wouldn’t be there in the summer would either help bring down class sizes for the poor kids then, or allow school districts to save on staffing during the summer.
Much of the extra schooling time from the longer school day and longer school year would go toward learning the basics better–reading, writing, math–and maybe getting a little extra cultural background that will help students enjoy a wider range of things in their lives. But I want to claim some of the extra time to make sure that the kids are legally qualified to do a wide range of jobs when they finish school. One of the most important drifts of political economy at the state level in the United States has been toward requiring licenses for more and more jobs. Here is what Morris Kleiner and Alan Krueger say in their 2008 National Bureau of Economic Research Working Paper “The Prevalence and Effect of Occupational Licensing”:
We find that in 2006, 29 percent of the workforce was required to hold an occupational license from a government agency … Our multivariate estimates suggest that licensing has about the same quantitative impact on wages as do unions–that is about 15 percent …
Many economists and other observers feel that occupational licensing has gone too far. Here is an interesting Wall Street Journal article:
Dick Carpenter and Lisa Knepper WSJ “Do Barbers Really Need a License?”
And here is an article from what I think is a Libertarian website (“The Library of Economics and Liberty”):
S David Young, “Occupational Licensing”
Others argue that health and safety and basic competence really do require training even for many jobs that sound easy, such as cutting hair or cutting nails.
What I want to do is to restrain the tendency to go overboard on occupational licensing while allowing genuinely necessary competencies to be transmitted by requiring states to ensure that their schools high school tracks that would make it reasonably possible to be meet the legal qualifications for any of at least 60% of all licensed occupations, with each student able to be qualified with his or her high school diploma for at least 10% of all licensed occupations. Then the graduates might actually be able to get a job. This requirement for getting the Federal education grant could be met by any combination of reducing licensing requirements and increasing effective training that each state chose. I am sure that states would game the rule, so that the overall effect would be less than what this sounds on the surface, but it would be better than the way things are now, where students graduating from high school are kept out of many of the more desirable occupations by occupational licensing restrictions.
Many schools these days have a program that allows more ambitious students to earn an Associate’s degree (equivalent to two years of college) before their time in publicly-funded high school education runs out. For them, I would add the requirement that states make it possible for ambitious students doing the equivalent of an Associate’s degree to be licensed for any of 50% of medical care jobs. (Being a doctor would still require much, much more training. Note: “any” is not the same as “all.” They would have to do some choosing.) This would not only help these students get jobs, it would help us as a nation to be able to afford the medical care that we want.
Note that any reduction in occupational licensing restrictions increases the value of having readily available and accurate quality ratings for services as well as goods. To be honest, in my personal experience, which I think will match that of most of my readers, I have seldom been satisfied with services from the bottom half of those in any occupation. But the stratification into different quality levels should be handled by the market as much as possible (and by government fiat as little as possible), with continually improved web-based ratings mechanisms. High school graduates need entry-level jobs, even though it is hard to be really good at anything at first before accumulating experience, especially for those who would not have been able to get jobs at all without the changes I am advocating.
Let me end by explaining my title. In his recent post “What it to be done now, Jeff Sachs appears to miss the point by a substantial margin,” Brad DeLong lays out his short-run Keynesian program for the economy, and says this about Jeff Sachs’s column:
When I started Jeff’s column, I thought it was going to be an exercise in hippie-punching, along the lines of: “Simplistic Keynesian remedies will not solve our problems. See, I am a Very Serious Person. What will solve our problems is X.” And X would turn out to be simplistic Keynesian remedies plus some magic ingredient Y. That might have been useful. It would have been a call for simplistic Keynesian policies plus magic ingredient Y.
As I discussed in my immediately previous post “Preventing Recession-Fighting from Becoming a Political Football” I am all for more aggregate demand right now, as long as it is achieved in ways that don’t ultimately add too much to the national debt, but what Brad DeLong’s words sparked in me was a desire to come up with “magic ingredient Y” for long run growth and improvement in the economy. Thinking that there might be many magic ingredients that can help in the long run–hopefully more than there are letters in the alphabet, I am going to start off with numbers. Hence, “Magic Ingredient 1: More K-12 School.”
Mike Konczal has a recent post “Four Issues with Miles Kimball’s ‘Federal Lines of Credit’ Proposal," announced by this tweet:
Mike’s tweet is the only way I can get a working link to his post. This link may work at some point in the future. Here is Mike’s description of my proposal:
What’s the idea? Under normal fiscal stimulus policy in a recession, we often send people checks so that they’ll spend money and boost aggregate demand. Let’s say we are going to, as a result of this current recession, send everyone $200. Kimball writes, "What if instead of giving each taxpayer a $200 tax rebate, each taxpayer is mailed a government-issued credit card with a $2,000 line of credit?” What’s the advantage here, especially over, say, giving people $2,000? “[B]ecause taxpayers have to pay back whatever they borrow in their monthly withholding taxes, the cost to the government in the end—and therefore the ultimate addition to the national debt—should be smaller. Since the main thing holding back the size of fiscal stimulus in our current situation has been concerns about adding to the national debt, getting more stimulus per dollar added to the national debt is getting more bang for the buck.”
Mike has some praise and four Roman numerals worth of objections. I promised a detailed answer. Other than the comment threads after each post, this is only the second time I have had a serious online criticism of one of my posts, and I will try to accomplish the same sort of thing I tried to accomplish in my answer to the first serious criticism I received from Stephen Williamson: to answer the criticism point by point while at the same time making some important points worth making even aside from this dustup with Mike. The main point I want to make uses the phrases “fiscal policy” and "stabilization policy,“ which can be given the following rough-and-ready definition:
Fiscal policy: government policy on taxing and spending
Stabilization policy: loosely, recession-fighting (in times of recession) and inflation-fighting (in times of boom).
More precise definitions of stabilization policy inevitably involve the details of exactly what should be done and when, which are sometimes under dispute; this definition will serve for now. Here is the main point I want to make in this post:
Long-run fiscal policy is unavoidably political, since it involves the tradeoff between the benefits of redistribution and the benefits of low tax rates, but stabilization policy can and should be kept relatively apolitical. The politicization of stabilization policy in the last few years is an unfortunate, and fundamentally unnecessary, turn of events.
By avoiding big changes in taxes or spending, I hope my Federal Lines of Credit proposal can help to depoliticize stabilization policy.
The reason a discussion of the politicization of stabilization policy belongs in a reply to Mike Konczal is that my simple summary of his objections to my Federal Lines of Credit proposal of government-issued credit cards to stimulate the economy is that my proposal does not do enough to redistribute toward the poor. Now my views on redistribution are no secret. As I said in my first post, "What is a Supply-Side Liberal,” redistribution is good. In my post “Rich, Poor and Middle-Class,” I made a stronger statement, focusing on helping the poor, which is the important part of redistribution:
I am deeply concerned about the poor, because they are truly suffering, even with what safety net exists. Helping them is one of our highest ethical obligations.
The other type of redistribution, which is more controversial (because the redistributive benefit is smaller and the economic efficiency cost is higher) is taxing the rich in order to help the middle class. Given the fact that redistribution needs to be financed by taxes or by deficit spending, Republicans and Democrats differ substantially on how much redistribution they think should be done of either type. As a result, the political fights over long-run taxing and spending policy are often bitter. My fervent hope is to find ways to avoid having the the blood that is spilled over long-run taxing and spending policy from infecting short-run stabilization policy, which by rights should be less controversial especially in a recession, since recessions are bad for almost everyone. It is a little harder to say that inflation is bad for almost everyone, since inflation benefits debtors at the expense of creditors, but few people on either side of the political divide advocate high inflation as a way to wipe out debts, and most of the other effects of inflation higher than a few percent per year are bad for everyone.
What has made stabilization policy a political football in the last few years is the fact that the Federal Reserve is maxed out on its favorite recession-fighting tool of lowering short-term interest rates. Because currency effectively earns an interest rate of zero, no one is willing to lend money at an interest rate much below zero, so zero is about as low as the Fed can go. In my answer to the first serious criticism I received from Stephen Williamson, I argue that the Fed can still do a lot more to stimulate the economy even when the nominal interest rate is already down to zero, but the Fed has been reluctant to use unfamiliar tools to the full extent possible. And the size of the necessary changes to the Fed’s balance sheet are enough to scare many people (in a way that I argue is unwarranted in my third, and to this date, most-viewed post “Balance Sheet Monetary Policy.”) Indeed, the Fed has become a political target not only because of its sadly necessary role in saving the economy by bailing out big banks, but also because even the Fed’s half-measures have involved big enough changes in the Fed’s balance sheet to scare many people.
Besides monetary policy, the traditional remedies in stabilization policy have to do with taxing and spending. In particular, the traditional remedies for a recession other than monetary stimulus are tax cuts and spending increases. It is easy to see the problem. Since taxes and spending are also the center of the political debate about long-run policy, any use of taxes or spending to fight recessions arouses justifiable suspicion that the other side will use recession-fighting as an excuse to advance its long-run agenda: for Republicans, lowering taxes in the long run, for Democrats, increasing the amount of redistribution in the long run.
By contrast, since monetary policy does not touch on what in recent history are the core political debates about taxing and spending, for at least the 30 years from mid 1988 to mid 2008 (when the financial crisis and the Great Recession threw things for a loop) political controversies over monetary policy have been relatively esoteric–not the sorts of things that move the average voter in either party.
In crafting my Federal Lines of Credit proposal, one of my key objectives was to find a new way of fighting recessions that, like monetary policy in normal times, would be fully acceptable to both political parties. The U.S. economy and the world economy are in trouble, and it is important that politics not get in the way of what needs to be done. So I am pleased to have Mike Konczal say of my proposal “This has gotten interest across the political spectrum.” The proposal itself is described in my second post “Getting the Biggest Bang for the Buck in Fiscal Policy,” and my recent post “Bill Greider on Federal Lines of Credit: 'A New Way to Recharge the Economy’” is a good way to catch up on the discussion about Federal Lines of Credit since then.
Now let me turn to Mike’s four issues:
I. Isn’t deleveraging the issue? Is this a solution looking for a problem? From the policy description, you’d think that a big is credit access holding the economy in check.
But taking a look at the latest Federal Reserve credit market growth by sector, you can see that credit demand has collapsed in this recession.
I actually think that credit access has gone down. For example it is a lot harder getting home-equity lines of credit these days than it used to be, even for those whose houses are worth a lot more than their mortgages. But Mike is right that many people are scared enough about the economy that they are trying to pay down their credit card debt. The key point here is that what makes sense from an individual point of view in time of recession–reducing household spending–makes things worse for all of us by reducing the amount of business that firms get and therefore how many workers feel they can hire. So to help out the macroeconomic situation, we want people to lean toward spending more than they otherwise would. Giving every taxpayer access to a federal line of credit at a reasonable interest rate and reasonable terms (say 6%, paid off over 10 years) would cause at least some people to spend more, which is what we want in order to stimulate the economy.
II. This policy is like giving a Rorschach test to a vigilante. No, not that vigilante. I mean the bond vigilantes.
Mike’s point here is that, although in the long-run, people will have to pay back the money they borrowed from the government on their Federal Lines of Credit, the government is out the money in the meantime, and this might add to the official deficit and national debt numbers. So if the folks in the bond market are not smart enough to look past the surface of the deficit and national debt numbers, they might cause long-term interest rates to go up. Here, my answer is simple: the folks in the bond markets are very, very smart. They know the difference between the government being out money forever (as it would be if it used a tax rebate) and the government making loans that will be repaid, say, 90% of the time. As evidence that the “bond vigilantes” look at more than the official debt to GDP ratios, take a look at this list of debt to GDP ratios. (I am using the International Monetary Fund’s numbers from this table, rounded off to the nearest percent. If there are more recent numbers, I am confident they will show the same thing.) Here are the examples that make my point:
Spain: 69%
Germany: 82%
United States: 103%
Japan: 230%
It is right to worry about the future, but currently, Spain is in trouble with the bond vigilantes, while the world is eager to lend money to Germany, the United States and Japan. (See my post “What to Do When the World Desperately Wants to Lend Us Money” about what this eagerness of the world to lend to the U.S. means for U.S. policy from a wonkish point of view that ignores political difficulties.) The reason Spain is in trouble with the bond vigilantes is that the Spanish government is seen to be on the hook for the much of the debts of Spanish banks; this bank debt that may become Spanish government debt sometime in the future does not show up in the official debt to GDP figures, but the bond vigilantes know all about it. On the other end, one reason that the bond vigilantes are still willing to lend money to Japan at low interest rates is that they know Japanese households do a lot of saving and don’t like to put their money abroad, so a lot of that saving makes its ways into Japanese government bonds, either directly or indirectly.
III. This policy will involve trying to get blood from a turnip. I very much distrust it when economists waive away bankruptcy protection. Especially for experimental, controversial debts that have never been tried in known human history.
As the paper admits, this is a machine for generating adverse selection, as the people most likely to use it are people whose credit access is cut due to the recession. High-risk users will likely transfer their balances from higher rate credit cards to their FOLC (either explicitly or implicitly over time if barred) - transferring a nice chunk of credit risk from the financial industry to taxpayers.
It’s also not clear what happens a few years later when consumers start to pay off the FOLC. Could that trigger another recession, especially if the creditor (the United States) doesn’t increase spending to compensate?
The issue isn’t whether or not the government will be able to collect these debts at some point. It has a long time-horizon, the ability to jail debtors and use bail to pay debts, the ability to seize income, old-age pensions and a wide variety of income, and the more general ability to deploy its monopoly on violence. The question is whether this will be smoother, easier, and more predictable than just collecting the money in taxes. We have a really smooth system for collecting taxes, one at least as good as whatever debt collection agencies are out there. If that is the case, there’s no reason to believe that this will satisfy the bond vigilantes or bring down our debt-to-GDP ratio in a more satisfactory way.
Mike actually raises several issues here. Let me be clear that I am not proposing jailing debtors! I am imagining something like the current system we have for student loans directly from the Federal government. These loans cannot be wiped away by bankruptcy, but no one is jailing former students who can’t pay what they owe on their student loans. When I supposed above that (including interest–I am thinking in present values) only 90% of the money would be repaid, the other 10% is money that the government ultimately gives up on trying to collect because some people can’t pay. To avoid any possible abuses, I think it would be a good idea to specify in the law authorizing Federal Lines of Credit that people’s debts under the program could never be sold to an outside collection agency: only official government employees would be allowed to make collection efforts. Worry about a political firestorm would prevent the government from doing the kinds of things the private collection agencies sometimes do. Almost all repayment would be through payroll deduction from people who are drawing a paycheck, with perhaps some repayment through small deductions from government transfers people receive when those government transfers are above a minimum level.
Is an expected loan-loss rate of 10% too much? Then it is easy to modify the program to reduce the loan-loss rate without reducing its effectiveness in recession-fighting by allowing those with higher incomes to borrow more and restricting the size of the lines of credit for those with lower incomes. For those worried about issues with Federal Lines of Credit like those Mike is raising, I strongly recommend reading my relatively accessible academic paper on the proposal: “Getting the Biggest Bang for the Buck in Fiscal Policy.” But now I am going to give you fair warning about what “relatively accessible” means by quoting the somewhat recondite way that I make this point in the paper:
One of the main factors in the level of de facto loan losses would be the extent to which the size of the lines of credit goes up with income. Despite the reduction in additional aggregate demand per headline size of the program that might be occasioned by conditioning on income, de facto loan losses would probably decline by a greater proportion, meaning that conditioning on income might improve the ratio of extra consumption to budgetary cost. Certainly, having the line of credit go up with income might reduce the level of implicit redistribution, which is a consideration I will not try to address here.
To translate, if we give rich taxpayers bigger lines of credit than poor taxpayers, we will probably get even more bang-for-the-buck from the program–in the sense that there will be more stimulus for each dollar ultimately added to the national debt after most repayment has happened.
I will confess that the only reason I didn’t make this kind of dependence of the size of the line of credit on income the benchmark version of the proposal is that I wanted to sneak in a little income redistribution into the program. But if next year we have a Republican Congress and a Republican President (now trading at a 30% probability on Intrade), stimulating the economy is important enough that it is still a very good thing to do the Federal Line of Credit program with less redistribution than I had in the benchmark version of the proposal, which gives the same-size line of credit to each taxpayer. On the other hand, if next year we have a Democratic Congress and a Democratic President (now trading at a 7.5% probability on Intrade), stimulating the economy is important enough that it is still a very good thing to do the Federal Line of Credit program with lines of credit of the same size not only for every taxpayer but also for non taxpaying adults and to let the debts be extinguished in bankruptcy. Federal Lines of Credit would still give us more bang-for-the-buck than other types of fiscal stimulus that a Democratic Congress and Democratic President might turn to, and regardless of what happens politically, the United States government does have to worry about the bond vigilantes down the road whenever it adds to the national debt in a long-run way. In what I consider the most likely case of divided government, where out of the presidency, the Senate and the House of Representatives, each party holds at least one (now trading at a 62.5% probability on Intrade if one includes the 4.5% probability of “other,” which presumably covers the case when the control of one house of congress depends on how the few independents vote), something in between–perhaps not too far from my benchmark proposal–seems to me what would be politically feasible.
In the passage I quoted from Mike labeled as his issue III, he also worries about whether the repayment of the loans would cause a recession later on. I have thought that stretching out repayment over 10 years would be enough to avoid this problem, but I view this an issue for the experts. If, as I prefer (see my post “Bill Greider on Federal Lines of Credit: 'A New Way to Recharge the Economy’”), the Federal Reserve determines many of the details of the Federal Lines of Credit Program, I trust the staff of the Federal Reserve Board and the Federal Reserve Banks to come up with a better answer on the appropriate length of time for loan repayment than either Mike or I could.
Finally, we come to Mike’s fourth and last issue, which motivated my discussion above about the value of separating long-run fiscal issues from short-run stabilization policy, so that recession-fighting doesn’t become a political football. What Mike writes to explain his fourth issue is long enough that I will intersperse some comments along the way. From here on, everything in block quotes reproduces Mike’s words.
IV.Since we’ve very quickly gotten to the idea that we’ll need to jettison legal protections under bankruptcy for this plan to work, it is important to emphasize that this policy is the opposite of social insurance.
As I said above, I am not advocating jailing debtors. I don’t see the fact that student loans are not expunged in bankruptcy as a massive social injustice that causes huge problems; if it is, it would meant that it is a travesty that the Obama administration is only proposing having private student loans wiped away by bankruptcy while leaving public student loans from the government untouched by bankruptcy. I am sure some people think that, and would not be surprised if that is Mike’s view, but I don’t think the average voter would take that view, nor do I criticize the Obama administration for not being willing to go far enough and have all student loans expunged in bankruptcy.
I don’t see a macroeconomic difference between the government borrowing 3 percent of GDP and giving it away and collecting it through taxes later versus the government borrowing 3 percent of GDP, loaning it to individuals, and collecting it later through debt collectors except in the efficiency and the distribution.
This passage is well-designed to underemphasize the fact that the way in which, say, “3 percent of GDP” is given away is redistributive. Indeed, to the extent that asking everyone to pay the same amount is regressive, giving everyone the same amount as in my benchmark proposal has to count as anti-regressive. There is no question that giving away 3 percent of GDP and collecting it later through progressive taxes would bemore redistributive. Overall, my program is fairly neutral as far as redistribution goes, though as I confessed, I snuck a little redistribution into my benchmark proposal because those with higher incomes would likely repay a bigger fraction of the borrowed money than those with higher incomes.
The distributional consequences of this proposal aren’t addressed, but they are quite radical. Normally taxes in this country are progressive. Some people call for a flat tax. This proposal would be the equivalent of the most regressive taxation, a head tax. And it also undermines the whole idea of social insurance.
Mike seems to be claiming that the Federal Lines of Credit program overall is regressive. I just don’t see this. Is the government’s student loan program regressive? Just because a program could be made more redistributive than it is, does not mean that on the whole it is regressive.
Let’s assume the poorest would be the people most likely to use this to boost or maintain their spending. I think that’s largely fair - certainly the top 10 percent are less likely to use this (they’ll prefer to use high-end credit cards that give them money back). This means that as the bottom 50 percent of Americans borrow and pay it off themselves, they would bear all the burden for macroeconomic stability through fiscal policy. Given that the top 1 percent captured 93 percent of the income growth in the first year of this recovery, that’s a pretty major transfer of wealth. One nice thing about tax policy, especially progressive tax policy, is that those who benefit the most from the economy provide more of the resources. This would be the opposite of that, especially in the context of a “"relatively-quickly-phased-in austerity program.”
Let me say quickly that my mention of “austerity” was in the European context, where paying what the bond market demands without a full-scale bailout from a reluctant Germany requires austerity. I made no mention of “austerity” for the U.S., nor do I think “austerity” will be necessary for the U.S., if we follow the kinds of proposals I recommend.
Going back up to the top of this block quote from Mike, again, saying that the bottom 50 percent of Americans “would bear all the burden for macroeconomic stability” ignores the fact that they were able to borrow and use the money when they really needed it during hard economic times. The only way in which this could be a burden is if loaning money on relatively favorable terms (again, say at 6% for 10 years) is an unkind temptation to people who have trouble stopping themselves from spending more now than they should. I worried about this, which is why I proposed that, by the time the next recession rolls around, we have National Rainy Day Accounts set up that allow people to spend in recessions or during documentable personal financial emergencies money that they have saved up previously. Now requiring someone to save money for later emergencies they might face, and encouraging them to spend some of that money in a national emergency such as a future recession may indeed be a burden. But it is hard for me to see how both proposals–letting people borrow on favorable terms from Federal Lines of Credit and requiring people to save in National Rainy Day Accounts–can be a burden. The only way that allowing people to borrow on favorable terms can be a burden is if they have trouble saving as much as they should, in which case setting up a structure to help them save will help them out. And Mike agrees that “There’s a lot to like about the proposal [Federal Lines of Credit], particularly how it could be used after a recession is over to provide high-quality government services to the under-banked or those who find financial services yet another way in which it is expensive to be poor …" On a more negative note, Mike continues as follows in the text of his fourth issue:
Efficiency is also relevant - as the economy grows, the debt-to-GDP ratio declines, making the debt easier to bear. The most likely borrowers under FOLC [sic], the bottom 50 percent, have seen stagnant or declining wages overall, especially in recessions. A growing economy would keep their wages from falling in the medium term, but this is still a problematic issue - their income is not more likely to grow to balance out the payment burdens than if we did this at a national level, like normal tax policy.
The policy also ignores social insurance’s role in macroeconomic stability, and that’s insurance against low incomes. Making sure incomes don’t fall below a certain threshold when times are tough makes good macroeconomic sense and also happens to be quite humane. This is not that. As friend-of-the-blog JW Mason said, when discussing this proposal, the FOLC [sic] is like "if your fire insurance simply consisted of a right to borrow money to rebuild your house if it burned down.”
Here again, I take Mike’s point that it would be easy to do more redistribution than the modest amount of redistribution in the Federal Lines of Credit proposal as I lay it out. But I view redistribution as the province of long-run fiscal policy (in the broadest sense). Trying to use recession-fighting as a way to also do more redistribution is a recipe for making recession-fighting a political football. If recession-fighting becomes a political football, as it has to an unfortunate extent in the last few years, the recession (or the long tail of unemployment that follows what are officially called “recessions”) wins. And bad economic times are especially hard on those at the bottom of the income distribution. So they can least afford to have recession-fighting become a political football. My hope is that Federal Lines of Credit will make it possible to stimulate the economy when necessary in a way that avoids major changes in taxing and spending that would set off alarms for one or another of the two warring parties in the political debate.
Richard Freeman, author of What Do Unions Do?
I love Adam Ozimek’s post “How to Improve Working Conditions” It encapsulates very well what I think Adam and I both learned from the work of Harvard Professor Richard Freeman–especially his influential book What Do Unions Do? Richard Freeman says that unions have two effects:
Number 2 is the “worker voice” that Adam praises.
The simple bottom line on unions is this:
Raising wages or benefits and so making it harder for people to get jobs, bad. Making life better for workers in common-sense ways, good.
We can have the good, worker voice, without the bad, a worker-imposed employment tax that reduces employment and output, by adopting Adam’s proposal of encouraging worker associations as opposed to traditional unions. Workers need an organization that can speak for them. But they don’t need traditional unions that hurt the economy by grabbing for a bigger share in the short run.
