Monday, December 23, 2013

Centers for the Study of Inequality and Poverty Reduction

“Centers for the Study of Inequality and Poverty Reduction” (CSIPRs) are rapidly proliferating throughout America’s top private and public universities.

Most scholars in these centers point to the stagnation of median incomes while the share of income received by the top quintile, decile, 5%, 1%, 0.1%, and especially for the top 0.01%, has been steadily rising during the past 30 years.

An increasing number of prominent economists blame rising inequality for slow growth and lack of job creation in the advanced industrial economies.  Political scientists warn that rising inequality is increasing the likelihood of conflict within and between countries and regions.

Inequality can be measured in units of individuals, households, within and between communities, between urban/rural areas, between nations, and among global regions.  A frequently propounded solution is the transfer of wealth and income from “haves” to “lesser haves” and “have nots.”  Within communities and nations, this often takes the form of more progressive income taxes, higher wealth taxes, and higher taxes on capital income.  Foreign aid and other transfers from rich to poor countries are standard proposals to redress inequality among nations.

The consensus among professors in CSIPRs is that one solution lies in greater access to quality education.  A small number of elite universities enjoy large endowments and annual gifts which enable them to recruit the best (highly-paid) professors and students.  Meanwhile, the vast majority of community colleges, four-year colleges and universities, and massive state-financed universities are strapped for money.  State support is declining and many students cannot afford tuition increases.

To the best of my knowledge, no CSIPR in an elite institution has issued a policy paper recommending that some of its university’s endowment and annual gifts, and some of its faculty’s salaries and benefits, be transferred to less wealthy colleges that face the daunting task of educating the majority of America’s future work force.

CSIPRs recommend redistribution of income and wealth for all except for the centers and professors in them.

It is what it is.  Go figure.

Wednesday, December 11, 2013

Who Cares About the National Debt?

On January 31, 2009, a few days after President Obama moved into The White House, the U.S. National Debt amounted to $10.88 trillion.  Of this, marketable debt held by members of the public amounted to $5.75 trillion, non-marketable debt (largely held by the Social Security Trust Fund) was $4.88 trillion, together summing to $10.63 trillion.

On November 30, 2013, the comparable numbers were $11.79 trillion, $5.43 trillion, and $17.21 trillion, an increase of over $1 trillion a year in both marketable and total national debt.

President Obama and most Democrats believe that annual budget deficits since the financial crash of September 2008 have, if anything, been too small.  They would have preferred larger deficits than actually transpired to stimulate the economy.

Most Republicans prefer smaller deficits, balanced budgets, and ultimately paying down the national debt or at least substantially reducing it.

It’s easy to explain this difference.  It depends on who might have to pay the debt.

Voting by Race and Ethnicity

In the 2012 presidential election, 95% of African-Americans, 72% of non-White Hispanics, and 67% of single women (inclusive of single mothers) voted for President Obama.  In contrast, a majority of men and White married women voted for Republican candidate Romney.  (According to the 2010 Census, Whites were 72%, Hispanics 16%, and Blacks 13.3% of the population.)

How might the U.S. government go about paying increasing interest and paying down  principal on the rapidly rising national debt?  One recourse is a wealth tax, either a one-off measure or an annual levy.  Another option is higher tax rates on upper-income households.

Wealth by Race and Ethnicity

There is a large wealth gap between Whites, Blacks, and Hispanics.  In 2009, the median net worth of White households was $113,140; of Hispanics, $6,325; and of Blacks, $5,677.  The ratio of White-to-Black wealth was 19:1, and White-to-Hispanic 15:1.  A wealth tax would overwhelmingly be borne by Whites.  Only a small fraction of Blacks and Hispanics possess sufficient wealth to be subject to a wealth tax.

Income by Race and Ethnicity

There is also a large income gap between Whites, Blacks, and Hispanics.  White median income in 2009 was $62,545; of Blacks, $38,409; and of Hispanics, $39,730.  For family income exceeding $100,000, Whites were 27.0% of all White families; Blacks, 12.1% of all Black families, and Hispanics 12.4% of all Hispanic families.  For family incomes below $35,000, Blacks made up 55.3% of all Black families, Hispanics 46% of all Hispanic families, and Whites 33.8% of all White families.  Low-income Blacks and Hispanics are a much larger fraction of their respective communities than are low-income Whites.  An income-tax surcharge or increase in tax rates would largely affect White taxpayers.

Racial and ethnic differences overlap education levels, full-time work status, and  marital status.  Whites are better educated, disproportionately work full-time, and are more likely to be married, all of which are strongly correlated with wealth and income.  (Asian-Americans are omitted from these comparisons because they constitute a much smaller fraction of the U.S. population, and because they are divided into many nationalities–Chinese, Filipino, Indian, Vietnamese, Korean, Japanese, and 12 smaller nationalities of East- and Southeast Asians–which vary in income and wealth (e.g., Chinese-Americans vs. Laotian-Americans).

To summarize, Republican voters will largely pay any wealth and/or additional income taxes that are levied to pay interest and principal on the national debt.  Democrat voters will pay little.  It should come as no surprise, then, that President Obama and most Democrats in Congress care little about large deficits and the expanding national debt as their constituents will bear little of the additional tax burden.

Sources: Income data from U.S. Census Bureau, Statistical Abstract of the United States: 2012, Tables 690, 696; Wealth data from U.S. Census Bureau, Survey of Income and Program Participation: August 2010.

Monday, November 18, 2013

Earth, Air, Fire, Water: The Four States of Matter in Modern Robes

“Many philosophies and world views have a set of classical elements believed to reflect the simplest essential parts and principles of which anything consists or upon which the constitution and fundamental powers of anything are based. Most frequently, classical elements, dating from pre-Socratic Greece, refer to ancient beliefs inspired by natural observation of the phases of matter; with the classical elements: earth is equivalent to solid, water is equivalent to liquid, air is equivalent to gas, and fire is equivalent to plasma.”  (From Wikipedia)

Search the websites of most colleges and universities in the United States and you will discover five fundamental principles that suffuse academic life, and which permeate every aspect of American culture.

The ordering of the five may change over time, but the list is universal, as if it was inscribed on a third stone tablet numbering the 11th through 15th commandments.

1.   Equality.  This requires poverty reduction, growth with equity, redistribution of income, and ever-increasing taxes on the rich and wealthy.

2.  Sustainability.  This requires stopping global warming that is causing climate change.  Man-made greenhouse-gas emissions must be reduced and should be taxed to save the planet.    Renewable energy sources, such as wind, solar, and biomass, must replace fossil fuels, regardless of cost.

3.  Diversity.  No matter how many words have been written demonstrating that statistical disparities do not imply discrimination (e.g., Thomas Sowell’s 17 books and countless articles), diversity must be expanded until underrepresented groups achieve or exceed proportional parity in every walk of life.

4.  Democracy.  The attempt to impose Western-style democracy, especially in the Middle East, has cost several trillion  dollars and more than a million lives and casualties.  Nevertheless, universities press ahead promoting democracy around the globe.

5.  Sensitivity.  Neither students nor scholars dare utter words that are considered insensitive to offended groups.  Criticism of Barack Obama’s policies is met with charges of racism.  Defense of traditional families and Christianity is called sexist and homophobic.  If you can’t say it, it’s only a matter of time till you dare not think it.  Linda: You’re Absolutely fantastic.

Student tour guides at universities used to tell prospective students that “At our university we teach you how to think, not what to think.”  Now they tell them “Welcome to your Brave New World.

Tuesday, October 29, 2013

America Needs Comprehensive

1.  Immigration Reform
2.  Tax Reform
3.  Entitlements Reform
4.  Energy and Environmental Reform
5.  Education Reform
6.  Welfare Reform
7.  Financial Reform
8.  Housing and Urban Reform
9.  International Trade Reform
10.  Regulatory Reform
11.  Agricultural Subsidy Reform
12.  Governance Reform
13.  Campaign finance Reform
14.  Congressional Ethics Reform
15.  Postal Reform
16.  And others (fill in as desired)

America has several thousand stand-alone think tanks and several thousand university centers and institutes that research these issues and recommend policies to improve outcomes.  Progress has been made in a few areas, but, on net, most of these problem areas have grown worse despite trillions of dollars and millions of research hours spent seeking improvement.

In some cases, progress has been rolled back (e.g., President George H. W. Bush signed legislation in 1991 that undid President Reagan’s 1986 Tax Reform.)  President Clinton signed comprehensive welfare legislation, but more people receive transfer payments than ever before.  And so.

Perhaps money and research have prevented problems from becoming worse, but this counterfactual cannot be tested.  Perhaps think tanks work at cross-purposes with each other.  Perhaps sound policy ideas are no match for vested interests and beneficiaries of government programs, however costly and unsuccessful.

Not a pretty picture.

What is needed is something new, not more of the same.  Perhaps digital disruption will find its way into politics and overturn or replace current modes of behavior.  Otherwise, it will continue to be “same old, same old.”  More money and time spent spinning wheels!

Monday, March 18, 2013

Sunday, March 17, 2013

Europe Failed to Learn from Chairman Mao Zedong

"A Single Spark [confiscating Cypriot deposits] Can Start a Prairie Fire."

Thursday, March 7, 2013

President Obama's Drones

Are the equivalent of the old English Star Chamber, which was abolished by The Habeas Corpus Act 1640 enacted by Parliament.

Friday, February 1, 2013

Eliminating Gender Imbalances in One Year in Science, Technology, Engineering, and Mathematics


The share of females in mathematics and statistics was 43.1%, in physical sciences and science technologies, 40.2%; computer and information sciences, 17.6%; and engineering, 17.6%.  In absolute numbers, male degrees in STEM fields outnumbered female by 96,203, with the largest gap of 61,083 in engineering.

Where can 96,203 female students interested and qualified to earn degrees in STEM be found?  Easy, in Asia.  U.S. universities with departments in STEM can invite interested female students in leading universities in China, Korea, Hong Kong, Singapore, Taiwan, and India to apply for admission.  Offering tuition waivers with part-time work for room and board should enable 96,203 females to gain entrance into STEM departments in U.S. universities next fall.

The likely immigration reform legislation will grant holders of graduate degrees "green cards" to work and live in the U.S.  The diligent study habits of Asian females should enable most of them to earn STEM Ph.D. degrees and thus repay the U.S. with their productive skills.

This approach is far easier and quicker than trying to persuade 96,203 more U.S. resident females to earn STEM degrees.  And, if the number of places expands to accommodate increased female enrollment without reducing enrollment of qualified males, the U.S. will receive the benefits of an additional 95,000-100,000 high-tech graduates every year.

(HT:  Mark J. Perry)

Saturday, January 12, 2013

Tallying Up the Costs of U.S. Military Operations in Iraq and Afghanistan

President Obama has indicated that U.S. active combat operations in Afghanistan will end in 2013, joining the cessation in Iraq.  This is a good time to weigh the costs of the two wars launched by President George W. Bush in Iraq in 2003 and Afghanistan in 2001 with what has been achieved.

The Brookings Institution has published a monthly index of statistics for Iraq and Afghanistan.  Here are the costs in lives, wounded, and money:

Iraq:

U.S. fatalities March 2003 to December 2011:  4487  (hostile 3526, non-hostile 961)
U.S. wounded:  31,000+
U.S. Government Budget Authority (DOD, DOS, VA):  $823.2 billion

Afghanistan:

U.S. fatalities  October 2001 to December 2012:  2160  (hostile 1741, non-hostile 176)
U.S. wounded:  18,109
U.S. Government budget authority (DOD, DOS, VA):  $557.1 billion

VA budget represents annual authority that does not take into account subsequent long-term care.

What are the consequences of U.S. military operations?

Iraq:

The overthrow of Saddam Hussein has replaced Sunni domination  of a unified Iraq with a Shia political majority that is increasingly in conflict with the Sunni minority.  The Kurds, for their part, want an autonomous, preferably independent, homeland of their own.  Over half of the 1.4 million Christians residing in Iraq in 2003 are estimated to have left the country.  Iraq has not evolved into a stable, peaceful, multicultural democratic country.

Afghanistan:

The overthrow of the Taliban has resulted in an uncertain future in which Afghanistan President Hamid Kazai and U.S. President Barack Obama have agreed that the Afghan government should enter into peace talks with the Taliban.  Some analysts fear that the Taliban will be able to overthrow the Karzai government and resume power once the remaining U.S. combat forces are withdrawn in 2013.

Once again, Thoughtful Ideas urges all those in the U.S. government along with those in the broader policy community concerned with foreign policy and the decision to go to war in ethnically divided countries should, indeed must, read Politics in Plural Societies:  A Theory of Democratic Instability.  The notion that the U.S. government can build stable democracies in the short span of a decade in a region beset with centuries of tribal, ethnic, and religious conflict epitomizes the word "chutzpah."

Monday, January 7, 2013

Supply Side Economics--Then and Now

The original focus of Supple Side Economics was on bringing down the top marginal tax rate of income tax to improve incentives to work, save, and invest.

Now the focus is on bringing down every rate but the top one.  Even Grover Norquist of Americans for Tax Reform praises Republicans for their willingness to agree to a rise in the Top Marginal Rate from 35% to 39.6% (actually higher due to phaseouts of personal exemptions and itemized deductions) because the fiscal cliff deal made permanent all other rates but the top one.

Never mind how much higher the now permanent rates are than the the two rates of 15% and 28% of President Reagan, and even the addition of the 31% rate of President George H.W. Bush.

Where have you gone Joe DiMaggio?

Sunday, January 6, 2013

Tax Reform, R.I.P.

The Simpson-Bowles Commission, which recommended lower personal income tax rates coupled with broadening of the tax base (reducing deductions), is dead and buried.

The reason is that President Obama will not accept any proposals for tax reform that lower the top rate from the new high of 39.6% that he worked so hard to achieve.  Obama has now thoroughly dismantled President Reagan's Tax Reform Act of 1986, which set the top personal rate at 28%.  (It should be remembered that President George H.W. Bush laid the foundation for its dismantling when he signed into law a higher top rate of 31%.)

Perhaps the president and Congress will do something with the corporate income tax.  Who knows?  But the comprehensive tax reform to simplify the tax code, which has been so much discussed in the prattlesphere, is nothing more than idle chatter during Obama's second term.  Indeed, expect Congress and the president to further complicate the code with any new tax legislation.

Wednesday, January 2, 2013

Liberal Think Tanks 1, Conservative Think Tanks 0

The Tax Bill, enacted into law on January 1, 2013, permanently enshrines higher tax rates on hard-working successful individuals.  The higher rates affect the top 1% of households, the so-called millionaires and billionaires whose taxable income exceeds $400,000 for individuals and $450,000 for families, who will pay higher rates on labor income, dividends, and capital gains.

Moreover, the endless prattling about the need and desire for comprehensive tax reform--a broader base in exchange for lower rates--will not be in the cards until 2017 at the earliest.  President Obama will not agree to any deal that lowers the new higher rates he achieved.

What's next in the battle of ideas between liberal and conservative think tanks?  The biggest issue is the scope and size of the public sector, whether it remains at, or even increases beyond, its current high level of 24-25% of GDP, or reducing it back to its historical level of 20%.  Ditto on curtailing annual budget deficits and stabilizing the public debt.

Will conservatives score the equalizer or fall further behind? From today's vantage point, this could be a long year for conservative thinkers, especially with a large split in the Republican ranks.