Policies vs. Values

It’s difficult to make sense of American politics these days, though not for lack of trying! The following article published in Yahoo News presents some evidence that is more widely confirmed but also introduces some interpretations that are contradicted by that evidence (see blog comments). Most of the mainstream reporting seems to be suffering from these contradictions.

To begin, American voters are not divided so much by policy issues, as the head of the survey institute proclaims. Empirical evidence of voting patterns shows that most of the voting preferences are explained by urban vs. rural and suburban policy interests and household formation, with married voters contrasted against singles, with children or not.

The remainder (about 1/3, but growing) is probably explained by the moral values/ideological divide on which Jon Haidt has done so much research (see my The Righteous Mind review). People who lean left or right in ideology seems to have different value priorities that are reflected in how they view politics. Haidt classifies six moral values with their opposites as 1) care/harm; 2) liberty/oppression; 3) fairness/cheating; 4) loyalty/betrayal; 5) authority/subversion; 6) sanctity/degradation.

He goes on to show that liberals value the first three only and suspect the last three so that they focus on care and fairness as the foundation of a free society more than loyalty, authority and sanctity. Conservatives employ all six in designing their moral foundations. Haidt readily recognized this advantage for conservatives but suggests it is more a tactical advantage rather than a fuller understanding of a sound moral society.

Identity politics seems to have turned differences in moral value priorities into tribalism. So we have a Left tribe, referring to themselves as Progressives, and a Right tribe, calling themselves conservatives and libertarians. These tribes have developed two different cultures that appear incompatible. This cultural divide is far more distinct than race, ethnicity, or gender, despite what the media might proclaim. (MAGA is a cultural clarion call, not a racial or ethnic dog whistle.)

Of course, different cultures need not be antagonistic or adversarial, especially since they can evolve over time to share many of the same values, priorities, and mores. One error I see promoted by the liberal urban media and Democrats is the firm belief that their opponents are regressive and that progressivism must be proselytized. Voting results do not substantiate this belief and voting patterns show a majority of Americans embrace both traditionalism and tolerance for differences. Any friction is caused by the socio-economic disruption due to the rapid pace of change. It’s a mistake to push that pace of change merely for its own sake. Instead, we should manage it more judiciously without alacrity and judgment. People resist change instinctively and they need help adapting. That’s the role for politics and policy.

Unfortunately, truth and accuracy are the first victims of tribalism, and that seems to be the source of our present dysfunction.

Divided by symbols, Americans see a ‘serious threat’ across the aisle

Yahoo News,  Jon Ward, Senior Political Correspondent

An annual survey of American attitudes about politics and values released Tuesday found, to no one’s surprise, that the nation’s divisions are growing dangerously deep and wide.

American Values Survey

More than half the people in both the Republican and Democratic parties see the other side as a “serious threat to the country,” the American Values Survey by the Public Religion Research Institute (PRRI) found. At a panel discussion at the Brookings Institution to discuss the poll findings, Henry Olsen, a senior fellow at the Ethics and Public Policy Center, said a “pre-Spanish Civil War mentality” was taking hold among voters.

The word “war” itself was mentioned numerous times by the panelists, in reference to the way both left and right see politics now as a zero-sum fight.

The good news — or the bad, depending on how one views it — is that the divisions are mostly not about policy, but symbolism.

“When you’re at war symbols begin to matter more,” said Robert Jones, CEO of PRRI. “Confederate monuments, flags … the [border] wall is part of that.”

But, he added, “If you talk policy, Americans are pragmatic.”

He cited a finding in the latest values survey, which PRRI has conducted for eight years in a row, that around half of Republicans support a path to citizenship for undocumented immigrants. He contrasted that with the political rhetoric from President Trump about building a wall along the U.S.-Mexico border.

“It’s the symbolic issues that are animating more than the actual policy issues,” Jones said. “When you turn from symbols to policy, there’s less polarization.”

There was agreement among the panelists Tuesday, including the conservative Olsen, that Trump fuels the conflict by highlighting the most inflammatory public issues.

But the deeper question is, why are Americans so focused on symbols rather than substance when it comes to choosing and following political leaders? Is it a recent phenomenon, brought on by the age of entertainment over information that has dominated the world since the advent of television? Or is it a natural human instinct?

Joy Reid, a panelist who hosts a weekend show on MSNBC, said that the election of former President Barack Obama in 2008 and 2012 was a symbolic act for many black Americans, and that Trump voters — most of them white — engaged in counter-symbolism. [The problem with this interpretation is that the Rust Belt states flipped from Obama to Trump, indicating that symbolism was probably “trumped” by policy results.]

Trump is “almost a flip-side, bizarro-world Obama,” Reid said. “For a lot of hardcore Obama supporters, Obama was the point. It wasn’t specifically that he would do some specific economic thing,” Reid said. “It was the symbolism of having somebody who was not white, somebody who has international roots in his family, somebody who represented a changing America.” [We don’t see a problem here? Voting for someone because they are “not white,” does what for whites in a material sense? Of course, the non-white Obama could never have won an election without the support of a significant plurality of whites. Casting this history in terms of race is probably not helpful.]

Similarly, Reid said, “For a lot of Trump supporters Trump is the point. It isn’t his policies. It’s not what he’s going to do even for them.” [I would agree that it is less about Trump’s policies in a positive sense and more a reaction against Obama’s policies and divisiveness. This extends into the backlash against political correctness that Trump instigated.]

“Just having that man, who is white and very ethno-nationalist in his whitenesss … very proactive about putting forward his gender and racial identity and saying I represent this and I’ll attack the people who in your view are detriments to it … that’s kind of the point,” she said. [There it is again – ethno-nationalism and whitenesss – instead of patriotic sovereignty through Americanism that mischaracterizes the Trump opposition. This is not to say Trump did not take advantage of this mischaracterization.] 

Reid said that Democrats who want to “convert” Trump voters may be chasing a lost cause. “I’m not sure that can be done,” she said. “He has a power over at least a third of the country that I don’t think anything can break.”

But while the PRRI study found 15 percent of Trump supporters said there’s nothing he could do to lose their support, there were twice as many confirmed opponents of the president. PRRI asked those who disapprove of Trump if there was anything he could do to win them over, and 33 percent of them said there was not.

E.J. Dionne, a Washington Post columnist who was also on the panel, disagreed with Reid that no Trump voters could be won over. “To me, these numbers show that there are a substantial number of Trump voters or supporters who can be converted,” he said, citing Trump’s approval numbers, which are down to 39 percent in the average of all polls, while 56 percent disapprove.

“This is a substantial drop-off from where Trump stood on Election Day 2016,” Dionne said. A year ago, right after he was elected, Trump had a 44 percent approval rating, and a 50 percent disapproval rating. [Mr. Dionne is wrong as he views our politics from within the liberal media bubble, advocating that democratic politics is a zero-sum game: For Democrats to win, Trump has to lose. The country’s voters are not really in sync with this approach, which is why that urban media bubble is subjected to such criticism.]

Olsen’s explanations for the victory of symbolism over substance, and the rise of Trumpism, had more to do with a loss of what Jones called “cultural dominance” combined with economic vulnerability for some of the president’s supporters. [This makes far more sense.]

Trump’s voter base “feeds on fear,” Olsen said.

But he cautioned against dismissing them, saying that would only increase the risk of violence.

“If you’re educated and well-off, you tend to look at these reactions as being hopelessly naive, out of touch, racist, irrational and consequently worthy of being ignored,” Olsen said. “If that’s the response, you shouldn’t expect them to give up their arms. … If the answer is basically to build a wall around populism, what you simply do is build up tension, build up the partisanship. And then, if you go through some sort of economic decline that makes even more people despairing, you raise the possibility of a much more dangerous counterreaction.” [This is the danger that anti-Trump forces want to deny or disregard. They will not avoid blame for any future chaos that results.]

_____

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Political Autopsy

The following is the Executive Summary of a report authored by Democratic Party activists titled “Autopsy: The Democratic Party in Crisis.” On a quick read of the summary, one is left with a mishmash strategy that seems to try to be all things to all people (except for those Republicans, that is! The stated goal is “to end Republican rule and gain lasting momentum for progressive change.”)

That would be the starting point of my critique. What we’ve learned over the past 16 years is that most voters in the US are tired of partisan posturing and could care less about which party wins elections if only their elected representatives would be accountable and serve voters’ interests. Voters are far less partisan than party activists and the media. With Trump’s election, roughly half the population across 85% of the county landscape voted a pox on both their houses. So, let’s start with that inconvenient fact.

Specific comments in red below:

Executive Summary

The Party’s Base

• Aggregated data and analysis show that policies, operations and campaign priorities of the national Democratic Party undermined support and turnout from its base in the 2016 general election. Since then, the Democratic leadership has done little to indicate that it is heeding key lessons from the 2016 disaster.

• The Democratic National Committee and the party’s congressional leadership remain bent on prioritizing the chase for elusive Republican voters over the Democratic base: especially people of color, young people and working-class voters overall. [Yes, but that’s because in a country where whites comprise 70% of the electorate, identity politics based on race and ethnicity have a ceiling of support that is insufficient to win national elections. Identity politics that is based on preferences also leads to zero-sum games over who gets what.]

• After suffering from a falloff of turnout among people of color in the 2016 general election, the party appears to be losing ground with its most reliable voting bloc, African-American women. “The Democratic Party has experienced an 11 percent drop in support from black women according to one survey, while the percentage of black women who said neither party represents them went from 13 percent in 2016 to 21 percent in 2017.”

• One of the large groups with a voter-turnout issue is young people, “who encounter a toxic combination of a depressed economic reality, GOP efforts at voter suppression, and anemic messaging on the part of Democrats.” [The problem with young voters is that they cynically perceive “politics as usual.” Sanders appeal seems to have transcended that, but the question is whether “socialist” policies can. The historical record is not promising.]

• “Emerging sectors of the electorate are compelling the Democratic Party to come to terms with adamant grassroots rejection of economic injustice, institutionalized racism, gender inequality, environmental destruction and corporate domination. Siding with the people who constitute the base isn’t truly possible when party leaders seem to be afraid of them.” [Politics against “injustice, racism, gender inequality, environment and corporate malfeasance, etc.” must be based on some unifying principles in order to filter out subjective grievances that merely favor narrow interests. The party has not made those tough distinctions.]  

• The DNC has refused to renounce, or commit to end, its undemocratic practices during the 2016 primary campaign that caused so much discord and distrust from many party activists and voters among core constituencies. [Yes, there is internal discord.]

• Working to defeat restrictions on voting rights is of enormous importance. Yet the Democratic National Committee failed to make such work a DNC staffing priority. [Empirical data and the appeal of voter ID laws discount this grievance strategy. Thus, deploying it is not likely to have positive effects. Better to advance GOTV efforts.]

Populism and Party Decline

• The Democratic Party’s claims of fighting for “working families” have been undermined by its refusal to directly challenge corporate power, enabling Trump to masquerade as a champion of the people. “Democrats will not win if they continue to bring a wonk knife to a populist gunfight. Nor can Democratic leaders and operatives be seen as real allies of the working class if they’re afraid to alienate big funders or to harm future job or consulting prospects.” [There’s a difficult choice for the party highlighted by the Perez-Sanders split: identity politics or class politics? The mishmash of this manifesto results from trying to pursue both. To do this the party advances an implicit assumption that ‘white’ voters are only virtuous if they are poor. This is blatantly hypocritical to middle class whites.]

• “Since Obama’s victory in 2008, the Democratic Party has lost control of both houses of Congress and more than 1,000 state legislative seats. The GOP now controls the governorship as well as the entire legislature in 26 states, while Democrats exercise such control in only six states…. Despite this Democratic decline, bold proposals with the national party’s imprint are scarce.” [So, trying to pursue a triangulation strategy while paying lip-service to identity racial and ethnic grievance groups for the past 8 years has led to defeat across the spectrum. Yet, this new party manifesto really refuses to make a choice. So, it’s more of the same: trying to appeal to white middle class voters while implying that the party is really for social justice that disfavors them because they are white. This is a losing contradictory strategy.]

• “After a decade and a half of nonstop warfare, research data from voting patterns suggest that the Clinton campaign’s hawkish stance was a political detriment in working-class communities hard-hit by American casualties from deployments in Iraq and Afghanistan.” [Yes, but they point with pride to their sacrifices for country. Disrespecting their patriotism by implying they’re dupes is not a winning strategy.]

• “Operating from a place of defensiveness and denial will not turn the party around. Neither will status quo methodology.”

Recommendations

Party Operations and Outreach

• The Democratic National Committee must make up for lost time by accelerating its very recent gear-up of staffing to fight against the multi-front assaults on voting rights that include voter ID laws, purges of voter rolls and intimidation tactics. [As explained above, not likely to be productive.]

• The Democratic National Committee should commit itself to scrupulously adhering to its Charter, which requires the DNC to be evenhanded in the presidential nominating process.

• Because “the superdelegate system, by its very nature, undermines the vital precept of one person, one vote,” the voting power of all superdelegates to the Democratic National Convention must end.

• “Social movements cannot be understood as tools to get Democrats elected. The ebb and flow of social movements offer a rising tide in their own right that along the way can lift Democratic Party candidates — if the party is able to embrace the broad popular sentiment that the movements embody.” [Both parties have willingly dragged their constituencies into cultural conflicts that are largely unresolvable. Thus, the parties gain by making compromise untenable: Vote for us or else!]

• “This is about more than just increasing voter turnout. It is about energizing as well as expanding the base of the party. To do this we must aggressively pursue two tracks: fighting right-wing efforts to rig the political system, and giving people who can vote a truly compelling reason to do so.” [Enthusiasm based on negative opposition (i.e., anti-Trump or anti-liberal) is not very durable.]

• “The enduring point of community outreach is to build an ongoing relationship that aims for the party to become part of the fabric of everyday life. It means acknowledging the validity and power of people-driven movements as well as recognizing and supporting authentic progressive community leaders. It means focusing on how the party can best serve communities, not the other way around. Most of all, it means persisting with such engagement on an ongoing basis, not just at election time.” [Yes, but to do so successfully requires an appeal beyond the particularistic identity of the individual. How can I be part of something bigger if it’s all about who I am?]

Party Policies and Programs

• The party should avidly promote inspiring programs such as single-payer Medicare for all, free public college tuition, economic security, infrastructure and green jobs initiatives, and tackling the climate crisis. [Here we get into the problem of the viability of socialist policies – when they fail, it discredits the bigger goal.]

• While the Democratic Party fights for an agenda to benefit all Americans [Does it? What about those Trump voters?], the party must develop new policies and strategies for more substantial engagement with people of color — directly addressing realities of their lives that include disproportionately high rates of poverty and ongoing vulnerability to a racist criminal justice system. [And then there is an immediate turn back to biological identity. This is not to deny the problems of disadvantaged communities, but merely questions the best way to empower them.]

• With its policies and programs, not just its public statements, the Democratic Party must emphasize that “in the real world, the well-being of women is indivisible from their economic circumstances and security.” To truly advance gender equality, the party needs to fight for the economic rights of all women. [Better to let the economy and the demand for labor sort this out. It works.]

• The Democratic Party should end its neglect of rural voters, a process that must include aligning the party with the interests of farming families and others who live in the countryside rather than with Big Agriculture and monopolies. [Agree. But these are not people looking for pity or hand-outs or victim status. They want to be able to take care of themselves.]

• “While the short-term prospects for meaningful federal action on climate are exceedingly bleak, state-level initiatives are important and attainable. Meanwhile, it’s crucial that the Democratic Party stop confining its climate agenda to inadequate steps that are palatable to Big Oil and mega-players on Wall Street.” [The trade-offs the majority of voters are willing to make here are not clear. It’s not a choice between clean air or the death of the planet, but clean air at what price?]

• “What must now take place includes honest self-reflection and confronting a hard truth: that many view the party as often in service to a rapacious oligarchy and increasingly out of touch with people in its own base.” The Democratic Party should disentangle itself — ideologically and financially — from Wall Street, the military-industrial complex and other corporate interests that put profits ahead of public needs. [Yes, welcome to the corruption of 21st century American party politics. Why do you think Americans of all stripes voted for Trump?]

The Mysteries of Leonardo’s Mona Lisas…

A nude sketch that bears a striking resemblance to the Mona Lisa may have been drawn by Leonardo da Vinci, experts have said.

Scientists at the Louvre in Paris, where the painting is held, have been examining a charcoal drawing known as the Monna Vanna, which had been attributed to the Florentine master’s studio.

The “nude” Mona Lisa

The Prado Mona Lisa

Read the story behind the history…Saving Mona Lisa

Health Care Fantasies

A couple of articles today outlining how far apart from reality are the pro and con arguments for different possible reforms. This is going to matter at some point soon, if not now.

Socialized Medicine Has Won the Health Care Debate

The first article, by Sarah Jaffe published in The New Republic, suggests that “socialized” healthcare has won the policy debate. Citing opinion polls (for which all questions display a certain bias), the author claims that the American public favors government-run socialized medicine. (Here’s a good example of survey bias: “Do you favor free healthcare for all?” – How many No’s do you think that question elicits?)

Ms. Jaffe explains away Obamacare’s unpopularity with this, “What people don’t like are the inequities that still prevail in our health care system, not the fact that “government is too involved. …The law didn’t go too far for Americans to get behind. It didn’t go far enough. And while single-payer opponents continue to evoke rationed care, long lines and wait times, and other problems that supposedly plague England or Canada, the public seems well aware that the reality for many Americans is far worse.”

Really?

What’s more, what makes her think that government control removes inequalities rather than make them worse according to different selection criteria?

Finally, she proclaims, “This is now an American consensus. And if socialism is the medicine our system needs, the country is ready to embrace it—even by name.”

At no point does Ms. Jaffe discuss the associated costs, who is going to pay them, and what kind of trade-offs this will impose on citizens and taxpayers. This is an argument motivated by political ideology, not reality.

***

This brings us to the second article, by Sally Pipes in Investor’s Business Daily (this should give us a clue that Pipes actually plans to address money issues).

Sanders’ Single-Payer Fairy Tale

Ms. Pipes first gives us an indication of polling bias: “The idea is … enchanting ordinary Americans. Fifty-three percent support single payer, according to a June 2017 poll from the Kaiser Family Foundation. But this supposed support is a mirage. According to the same Kaiser poll, 62% would oppose single-payer if it gave the government too much power over health care. Sixty percent would reject it if it increased taxes.”

Sen. Sanders estimates that “Medicare for all” would cost an extra $14 trillion over 10 years, while the Urban Institute’s analysis of the plan puts the figure at $32 trillion. Our current annual health spending is $3.2 trillion, so Medicare at minimum would double that spending level, with no viable way to pay for it, with taxes or otherwise.

Medicare for the 65+ crowd is already a deficit buster, so the nation will not be affording such care for the entire population and promises to do so are a dangerous fantasy. We do know what will happen – the “free” care we expect will never be delivered and the politicians who sell such snake oil will be long gone.

The real problem with our health care debates is that they focus solely on distribution and not on the real problem, which is adequate supply. If no one is producing health care goods, what is there to distribute?

Constitutional Crisis?

The following was a provocative essay published in the NYTimes. Since it touches on the nexus of economics and politics, I deemed it an appropriate topic for this blog.

Our Constitution was not built for a country with so much wealth concentrated at the very top nor for the threats that invariably accompany it: oligarchs and populist demagogues.

No. It wasn’t.

But we can never seem to anchor our attention on the true determinants of economic power. The distribution of wealth is tilted toward those who control society’s primary productive resources. In feudal and agrarian societies it is land; in industrial and post industrial societies it is energy and finance capital; in the information society it is information data and finance capital.

The imperative for a liberal democracy is to democratize land, to democratize finance, and, especially in the 21st century, to democratize big data. There are trade-offs implied (especially the necessary democratization of investment risk), but the objective must be liberty and justice, not national wealth, because sustainable wealth is only derived from liberty and justice.

Aside from economic inequality there is a related but different plague upon the body politic these days. That is the anti-democratic ideology of identity politics and multiculturalism. These ideologies probably arose as a response to the frustration of economic inequality and power that demanded a division into victims and victimizers. The victimizers, of course, were corporate, white, and male, while the victims were all other identity groups not so defined: ethnic and racial minorities, women, LBGTs, etc.

But a constitution based on compromise through participation cannot possibly manage identity groups based on biology and genetics.  There is no compromising our biological identity, there are only zero-sum battles with winners and losers. Thus, the rule of the victimizers must be torn down, though it cannot end there. Coalitions of identity groups do not hold together after the common enemy has been vanquished, so they turn on each other until we see the complete Balkanization of democratic polities.

We will need to solve both these problems – economic inequality and identity Balkanization – in order for our democracy to restore itself and guarantee liberty and justice for all. Unfortunately this professor, and most of our political leaders in the oligarchy, don’t really have any promising ideas about how to go about that.

There are other things the Constitution wasn’t written for, of course. The founders didn’t foresee America becoming a global superpower. They didn’t plan for the internet or nuclear weapons. And they certainly couldn’t have imagined a former reality television star president. Commentators wring their hands over all of these transformations — though these days, they tend to focus on whether this country’s founding document can survive the current president.

But there is a different, and far more stubborn, risk that our country faces — and which, arguably, led to the TV star turned president in the first place. Our Constitution was not built for a country with so much wealth concentrated at the very top nor for the threats that invariably accompany it: oligarchs and populist demagogues.

From the ancient Greeks to the American founders, statesmen and political philosophers were obsessed with the problem of economic inequality. Unequal societies were subject to constant strife — even revolution. The rich would tyrannize the poor, and the poor would revolt against the rich.

The solution was to build economic class right into the structure of government. In England, for example, the structure of government balanced lords and commoners. In ancient Rome, there was the patrician Senate for the wealthy, and the Tribune of the Plebeians for everyone else. We can think of these as class-warfare constitutions: Each class has a share in governing, and a check on the other. Those checks prevent oligarchy on the one hand and a tyranny founded on populist demagogy on the other.

What is surprising about the design of our Constitution is that it isn’t a class warfare constitution. Our Constitution doesn’t mandate that only the wealthy can become senators, and we don’t have a tribune of the plebs. Our founding charter doesn’t have structural checks and balances between economic classes: not between rich and poor, and certainly not between corporate interests and ordinary workers. This was a radical change in the history of constitutional government.

And it wasn’t an oversight. The founding generation knew how to write class-warfare constitutions — they even debated such proposals during the summer of 1787. But they ultimately chose a framework for government that didn’t pit class against class. Part of the reason was practical. James Madison’s notes from the secret debates at the Philadelphia Convention show that the delegates had a hard time agreeing on how they would design such a class-based system. But part of the reason was political: They knew the American people wouldn’t agree to that kind of government.

At the time, many Americans believed the new nation would not be afflicted by the problems that accompanied economic inequality because there simply wasn’t much inequality within the political community of white men. Today we tend to emphasize how undemocratic the founding era was when judged by our values — its exclusion of women, enslavement of African-Americans, violence against Native Americans. But in doing so, we risk missing something important: Many in the founding generation believed America was exceptional because of the extraordinary degree of economic equality within the political community as they defined it.

Unlike Europe, America wasn’t bogged down by the legacy of feudalism, nor did it have a hereditary aristocracy. Noah Webster, best known for his dictionary, commented that there were “small inequalities of property,” a fact that distinguished America from Europe and the rest of the world. Equality of property, he believed, was crucial for sustaining a republic. During the Constitutional Convention, South Carolinan Charles Pinckney said America had “a greater equality than is to be found among the people of any other country.” As long as the new nation could expand west, he thought, it would be possible to have a citizenry of independent yeoman farmers. In a community with economic equality, there was simply no need for constitutional structures to manage the clash between the wealthy and everyone else.

The problem, of course, is that economic inequality has been on the rise for at least the last generation. In 1976 the richest 1 percent of Americans took home about 8.5 percent of our national income. Today they take home more than 20 percent. In major sectors of the economy — banking, airlines, agriculture, pharmaceuticals, telecommunications — economic power is increasingly concentrated in a small number of companies. [Don’t we need to discuss why before we embark on solutions?]

While much of the debate has been on the moral or economic consequences of economic inequality, the more fundamental problem is that our constitutional system might not survive in an unequal economy. Campaign contributions, lobbying, the revolving door of industry insiders working in government, interest group influence over regulators and even think tanks — all of these features of our current political system skew policy making to favor the wealthy and entrenched economic interests. “The rich will strive to establish their dominion and enslave the rest,” Gouverneur Morris observed in 1787. “They always did. They always will.” An oligarchy — not a republic — is the inevitable result.

As a republic descends into an oligarchy, the people revolt. Populist revolts are rarely anarchic; they require leadership. [See Trump AND Sanders.] Morris predicted that the rich would take advantage of the people’s “passions” and “make these the instruments for oppressing them.” The future Broadway sensation Alexander Hamilton put it more clearly: “Of those men who have overturned the liberties of republics, the greatest number have begun their career by paying an obsequious court to the people: commencing demagogues, and ending tyrants.”

Starting more than a century ago, amid the first Gilded Age, Americans confronted rising inequality, rapid industrial change, a communications and transportation revolution and the emergence of monopolies. Populists and progressives responded by pushing for reforms that would tame the great concentrations of wealth and power that were corrupting government.

On the economic side, they invented antitrust laws and public utilities regulation, established an income tax, and fought for minimum wages. On the political side, they passed campaign finance regulations and amended the Constitution so the people would get to elect senators directly. They did these things because they knew that our republican form of government could not survive in an economically unequal society. As Theodore Roosevelt wrote, “There can be no real political democracy unless there is something approaching an economic democracy.”

For all its resilience and longevity, our Constitution doesn’t have structural checks built into it to prevent oligarchy or populist demagogues. It was written on the assumption that America would remain relatively equal economically. Even the father of the Constitution understood this. Toward the end of his life, Madison worried that the number of Americans who had only the “bare necessities of life” would one day increase. When it did, he concluded, the institutions and laws of the country would need to be adapted, and that task would require “all the wisdom of the wisest patriots.”

With economic inequality rising and the middle class collapsing, the deep question we must ask today is whether our generation has wise patriots who, like the progressives a century ago, will adapt the institutions and laws of our country — and save our republic.

Ganesh Sitaraman, a professor at Vanderbilt Law School, is the author of “The Crisis of the Middle-Class Constitution: Why Economic Inequality Threatens Our Republic.”

G–gle Culture

DO NO EVIL

 

These excerpts are from a recent online interview by Stefan Molyneux of the fired Google employee James Damore explaining himself:

Generally, I just really like understanding things,” he said about his reasons for compiling his argument. “And recently, through interactions with people, I have noticed how different political ideologies divide us in many ways. I wanted to understand what was behind all that.”

“I read a lot into Jonathan Haidt’s work, a lot about what exactly is the philosophy behind all of these things. And that led me to the beginning of the document,” he explained. 

He described his crystallizing moment as: “I could see that all of us are really blind to the other side, so in these environments where everyone is in these echo chambers just talking to themselves, they are totally blind to so many things.We really need both sides to be talk to each other about these things and trying to understand each other.” 

He critiques both the left and right for not working together: “The easiest way of understanding the left is: It is very open, it is looking for changes. While the right is more closed, and wants more stability. There are definitely advantages to both of those. Sometimes there are things that need to change, but you actually need a vision for what you want. There is value in tradition, but not all traditions should be how they are.”

“We create biases for ourselves. This is particularly interesting, when we talk about how it relates to reality,” he said.

“Both sides are biased in a way, they have motivated reasoning to see what they want out of a lot of things,” he continued. 

This happens a lot in social science, where it is 95% leaning to the left. And so they only study what they want, and they only see the types of things that they want, and they really aren’t as critical of their own research as much as they should. The popular conception is that the right doesn’t understand science at all, that the right is anti-science. It is true that they often deny evolution and climate science, climate change, but the left also has its own things that it denies. Biological differences between people — in this case, sex differences,” he explained. 

He described the experience of diversity training at Google, which inspired him to write: “I heard things I definitely disagreed with in some of the programs. I had some discussions with people there, but there was a lot of just shaming. ‘No you can’t say that, that’s sexist, you can’t do this.’ There is so much hypocrisy in a lot things they are saying. I decided to just create the document just to clarify my thoughts.

I have often recommended Jon Haidt’s research presented in his book, The Righteous Mind. It’s worth a read because much of what is happening in social and political discourse these days reflects a psychological pathology that should be completely unnecessary. But getting out of our own way in politics is a difficult challenge.

I find nothing particularly mendacious about Mr. Damore’s document or his intentions to clarify what is basically an empirical puzzle concerning gender differences. Of course, this was all blown way out of proportion because it challenges some unscientific political agenda.

As a scientist, I assume that all empirical phenomena should be open to skepticism and challenges. I’m not sure how we progress intellectually any other way. The attack on Mr. Damore is an attack on science and for me can only reveal an indefensible political agenda. This is sad, if not dangerous, to say the least.

My own approach in this blog has been to suggest analytical frameworks to help understand how human behavior aggregates up into social behavior that defines our civilization; past, present and future (see Common Cent$). The universe is constantly changing, and survival depends on successful adaptation. Unsuccessful adaptation leads to extinction. Thus, the problem for all species is how to successfully adapt.

It seems to me our knowledge-base in the biological and social sciences, and in the arts and humanities can help us humans out here and I can’t understand why anyone who wants to survive would ignore or discount anything we can learn from that wealth of knowledge. Yet, some would choose to ignore anything that might challenge their world-view, even when they know it is false. G–gle seems to have succumbed to that pressure. That’s a shame, but not a path any of us have to accept.

What’s G–gle’s motto again?

 

 

 

 

QE Pains and Gains

Reprinted from Bloomberg.

The Unintended Consequences of Quantitative Easing

Asset inflation doesn’t have to be bad. Flush governments could invest in education and infrastructure.
August 21, 2017, 11:00 PM PDT

Quantitative easing, which saw major central banks buying government bonds outright and quadrupling their balance sheets since 2008 to $15 trillion, has boosted asset prices across the board. That was the aim: to counter a severe economic downturn and to save a financial system close to the brink. Little thought, however, was put into the longer-term consequences of these actions.

From 2008 to 2015, the nominal value of the global stock of investable assets has increased by about 40 percent, to over $500 trillion from over $350 trillion. Yet the real assets behind these numbers changed little, reflecting, in effect, the asset-inflationary nature of quantitative easing. The effects of asset inflation are as profound as those of the better-known consumer inflation.

Consumer price inflation erodes savings and the value of fixed earnings as prices rise. Aside from the pain consumers feel, the economy’s pricing signals get mixed up. Companies may unknowingly sell at a loss, while workers repeatedly have to ask for wage increases just to keep up with prices. The true losers though are people with savings, which see their value in real purchasing power severely diminished.

John Maynard Keynes famously said that inflation is a way for governments to “confiscate, secretly and unobserved, an important part of the wealth of their citizens.” Critically, inflation creates much social tension: “While the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at the confidence in the equity of the existing distribution of wealth.”

Asset inflation, it turns out, is remarkably similar. First, it impedes creative destruction by setting a negative long-term real interest rate. This allows companies that no longer generate enough income to pay a positive return on capital to continue as usual rather than being restructured. Thus the much-noted growth of zombie companies is one consequence of asset price inflation. Thus also the unreasonable leverage and price observed in real estate, with the credit risks it entails for the future.

Second, it also generates artificial winners and losers. The losers are most found among the aging middle class, who, in order to maintain future consumption levels, will now have to increase their savings. Indeed, the savings made by working people on stagnant wages effectively generates less future income because investable assets are now more expensive. The older the demographics, the more pronounced this effect. Germany, for instance, had a contraction of nearly 4 percent of gross domestic product in consumer spending from 2009 to 2016.

The winners are the wealthy, people with savings at the beginning of the process, who saw the nominal value of their assets skyrocket. But, as with consumer inflation, the biggest winner is the state, which now owns through its monetary authority, a large part of its own debt, effectively paying interest to itself, and a much lower one at that. For when all is accounted for, asset inflation is a monetary tax.

The most striking similarity between consumer price inflation and asset inflation is its potential to cause social disruption. In the 1970s workers resorted to industrial action to bargain for wage increases in line with price increases.

Today, the weakened middle class, whose wages have declined for decades, is increasingly angry at society’s wealthiest members. It perceives much of their recent wealth to be ill-gotten, not resulting from true economic wealth creation [and they are correct], and seeks social justice through populist movements outside of the traditional left-right debate. The QE monetary disruption almost certainly contributed to the protest votes that have been observed in the Western world.

The central banks now bear a large responsibility. If they ignore the political impact of the measures they took, they will exacerbate a politically volatile situation. If, on the other hand, the gains made by the state from QE can be channeled to true economic wealth creation and redistribution, they will have saved the day.

This is entirely possible. Rather than debating how and how fast to end quantitative easing, the central bank assets generated by this program should be put into a huge fund for education and infrastructure. The interest earned on these assets could finance real public investment, like research, education and retraining. [That’s fine, but it does little to compensate for the massive transfer of existing wealth that is causing the political and social dislocations, such as unsustainable urban housing costs.]

If the proceeds of QE are invested in growth-expanding policies, the gain will help finance tomorrow’s retirements, and the government-induced asset inflation can be an investment, not simply a tax.

Economic Inequality??

One can easily misrepresent or exaggerate reality with a few select statistics and come to conveniently chosen conclusions. This doesn’t really help the conversation.

The distribution of wealth and income has become a social, economic, and political problem in recent decades. And not only in the US. But the question is why and what to do about it.

First, we should notice the timeframe of the comparison: 1980 vs. 2014. During these years there has been a massive credit bubble with low to zero interest rates and low inflation, especially over the past 16 years. This has disproportionately rewarded asset holders and debt-driven consumption and the income shares in industries associated with that, like FIRE.

The cheap credit has also led to massive investments in technology and biotech, where income levels have far exceeded those in other industries. This is not necessarily a bad thing, especially for aggregate growth, but it does have distributional consequences for wealth and income. Globalization, through outsourcing, trade and labor migration, has also served to keep labor costs low in developed nations.

So, what to make of this? I would have differences with the suggestions of the author as stated here:

Different policies could produce a different outcome. My list would start with a tax code that does less to favor the affluent, a better-functioning education system, more bargaining power for workers and less tolerance for corporate consolidation. 

First, the problem with the tax code is that it creates barriers for asset accumulation for those without assets. In other words, it favors the haves over the wannabes, even if the wannabes are more deserving. So we need to reduce those barriers. Not by making it harder to get rich, but by making it harder to stay rich and idle sitting on assets that have ballooned in value through no effort on the owners of those assets. Thus, we should look more toward wealth taxes as opposed to income or capital taxes. We should also make capital taxes more progressive so that the have-nots are not doomed to remain so. Have you seen your interest on savings lately?

Second, a better functioning education system is always a deserved policy priority, but it won’t fix this income distribution problem. The cost of education is becoming prohibitive and elitism is turning top universities, where costs are in the stratosphere, into branding agents rather than educating institutions. In other words, the Ivy League degree is more valuable as a signalling device than anything a student may or may not have learned there. Thus we are biasing favoritism over meritocracy.

Third, the focus on wages and organized labor is completely misguided.  Most workers in growth industries in the 21st century eschew labor unions in favor of equity participation and risk-taking entrepreneurship. Does that mean manufacturing labor has no future? Not at all. But it should be bargaining for equity in addition to a base wage. Competing solely on wages means workers are competing with the global supply of labor, which is a losing proposition for developed countries’ workers.

The inability of policymakers to see clearly how the world has changed and how ownership and control structures must adapt to the information economy leads them towards the rabbit hole of universal basic incomes, which fundamentally is a universal welfare program to support consumption. One thing we’ve learned over the past 60 years is that nobody wants welfare, but many become addicted to it. It’s not a solution or even a short-term fix.

Refer to the NYT website link to view the graphs…

Many Americans can’t remember anything other than an economy with skyrocketing inequality, in which living standards for most Americans are stagnating and the rich are pulling away. It feels inevitable.

But it’s not.

 

A well-known team of inequality researchers — Thomas Piketty, Emmanuel Saez and Gabriel Zucman — has been getting some attention recently for a chart it produced. It shows the change in income between 1980 and 2014 for every point on the distribution, and it neatly summarizes the recent soaring of inequality.

 

The line on the chart (which we have recreated as the red line above) resembles a classic hockey-stick graph. It’s mostly flat and close to zero, before spiking upward at the end. That spike shows that the very affluent, and only the very affluent, have received significant raises in recent decades.

 

This line captures the rise in inequality better than any other chart or simple summary that I’ve seen. So I went to the economists with a request: Could they produce versions of their chart for years before 1980, to capture the income trends following World War II. You are looking at the result here.

The message is straightforward. Only a few decades ago, the middle class and the poor weren’t just receiving healthy raises. Their take-home pay was rising even more rapidly, in percentage terms, than the pay of the rich.

 

The post-inflation, after-tax raises that were typical for the middle class during the pre-1980 period — about 2 percent a year — translate into rapid gains in living standards. At that rate, a household’s income almost doubles every 34 years. (The economists used 34-year windows to stay consistent with their original chart, which covered 1980 through 2014.)

 

In recent decades, by contrast, only very affluent families — those in roughly the top 1/40th of the income distribution — have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else.

 

The basic problem is that most families used to receive something approaching their fair share of economic growth, and they don’t anymore.

 

It’s true that the country can’t magically return to the 1950s and 1960s (nor would we want to, all things considered). Economic growth was faster in those decades than we can reasonably expect today. Yet there is nothing natural about the distribution of today’s growth — the fact that our economic bounty flows overwhelmingly to a small share of the population.

 

Different policies could produce a different outcome. My list would start with a tax code that does less to favor the affluent, a better-functioning education system, more bargaining power for workers and less tolerance for corporate consolidation.

 

Remarkably, President Trump and the Republican leaders in Congress are trying to go in the other direction. They spent months trying to take away health insurance from millions of middle-class and poor families. Their initial tax-reform planswould reduce taxes for the rich much more than for everyone else. And they want to cut spending on schools, even though education is the single best way to improve middle-class living standards over the long term.

 

Most Americans would look at these charts and conclude that inequality is out of control. The president, on the other hand, seems to think that inequality isn’t big enough.

The Bubble Economy

This is where the easy credit goes. A slush fund for Wall St. and Silicon Valley…

Full article here.

Money, money, money: Silicon Valley speculation recalls dotcom mania

Venture capitalists and private equity investors keep the bubble going with their millions

by Rana Foroohar

Financial Times
July 17, 2017

…It’s a bubble that is different — but the same — as the last time. In 2000, start-ups like pets.com were able to go public and jack up share prices even as they were losing hundreds of millions of dollars. The digital ecosystem has since grown, changed and deepened. Today it is harder for companies to receive funding just by sticking “.com” behind their names.

But now, as then, you do not necessarily need profits or paying customers to draw investor interest but rather “users” in a hot market niche. Compelling narratives develop around these sectors (wearables, electric cars, the “sharing” economy). Companies send market signals about their own “value” with announcements that play off these narratives, for example, Uber’s $680m purchase of self-driving truck firm Otto).

Venture capitalists and private equity investors keep the bubble going by buying into it at higher and higher valuations. The smartest ones guarantee their own success by taking rich advisory fees along the way and exiting before disaster via the secondary market for private shares. And this is, as behavioural economist Peter Atwater recently pointed out to me, unusually liquid thanks in part to central bank-enabled easy money.

The virtual money, generated by valuations that are based as much on narrative as fact, is used to salaries: it can cost upward of $2m in cash and stock options to recruit a driverless-car engineer in the Valley. These then distort the price of property, services and labour. You’ll weep when you see the prices of depressing ranch-style homes off Highway 101, which runs through Silicon Valley. The whole cycle is straight-up “madness of crowds”, as described by Charles Mackay in 1841.

UBI, or Something Better?

What’s odd about this discussion on Universal Basic Income below is that nobody successful in Silicon Valley participates in a UBI scheme, nor would they. They rely on risk-taking, equity, and reward. Not sure why they don’t advocate this for everybody – after all, because of the way risk is assigned to asset ownership, labor ends up taking all kinds of risk, yet almost never participates in the rewards to that risk. Instead they get a one-time bonus or profit-sharing.

But Zuckerberg would never accept those terms, either now or before he made his first dollar. It looks to me that Silicon valley tech supports redistribution in order to make their outsized gains from network effects more politically palatable.

Unfortunately, this critic of Zuckerberg and Silicon Valley in general wants to double down on failed tax and redistribution schemes instead of empowering people to participate in the risks and rewards of capitalist entrepreneurial success.

“He (or She) who is without capital in a capitalist society is little more than a wage slave and a captive consumer.” 

Another truism about the future: In a world run by robots, he who owns and controls the robots is king. Make sure you own your robot!

Original article here.

What Mark Zuckerberg Gets Wrong About UBI

New Republic, July 7, 2017

By Clio Chang

It’s no secret that tech bros love universal basic income. Sam Altman of Y Combinator is funding a UBI pilot program in Oakland, California, in part because he was inspired by Star Trek. Tesla’s Elon Musk supports the policy because he realizes that the aggressive automation caused by the tech industry will make UBI “necessary.” This week, as part of his “I’m-not-running-for-president” tour around the country, Mark Zuckerberg visited Homer, Alaska, which resulted in him writing a Facebook post lauding the merits of the state’s Permanent Fund as a model for a national form of basic income.

UBI, a concept that dates back centuries, is the idea that every person should receive some amount of money so that no one dips beneath a basic standard of living. For those on the left, it’s seen as an alternative to our country’s woefully limited cash welfare system. For libertarians, a basic income is lauded as a slimmer, less intrusive way to deliver government benefits. It is the rare utopian idea that people of different political stripes can agree on—Zuckerberg himself made sure to note the “bipartisan” appeal of the policy in his post.

But Zuckerberg reveals exactly why the left should be alarmed that Silicon Valley is taking the lead on this issue.

First, the idea that UBI has bipartisan appeal is disingenuous. The left would have a policy that redistributes wealth by funding UBI through a more progressive tax scheme or the diverting of capital income. But libertarians like Charles Murray argue for a UBI that completely scraps our existing welfare state, including programs like Medicare, Medicaid, and housing subsidies. This would be extremely regressive, since money currently directed towards the poor would instead be spread out for a basic income for all. And certain benefits like health insurance can’t effectively be replaced with cash.

Second, Zuckerberg asserts that Alaska’s Permanent Fund—which uses the state’s oil resources to pay a dividend to each Alaskan and is seen as one of the few examples of an actual UBI-like policy—is advantageous because it “comes from conservative principles of smaller government, rather than progressive principles of a larger safety net.” But a UBI policy can only reflect small government principles if one envisions it eating into the country’s existing welfare state, rather than coming on top of it. In this respect, Zuckerberg’s advocacy of UBI “bipartisanship” starts to look more like a veiled libertarian agenda.

This attitude echoes other pro-UBI tech lords like Altman, who sees basic income as providing a “floor” but not a ceiling. In his ideal scheme, no one will be very poor, but people like Altman will still be free to get “as rich as they fucking want.” The tech vision of the world is one where it can wash its hands of the rising joblessness it will generate through automation, but where those at the top can still wallow in extreme wealth. As Altman told Business Insider, “We need to be ready for a world with trillionaires in it, and that’s always going to feel deeply unfair. It feels unfair to me. But to drive society forward, you’ve got to let that happen.”

This is deeply telling of the tech UBI mentality: driving society forward doesn’t mean reducing inequality, but rather fostering more entrepreneurship. The former is viewed as unnecessary and the latter as an inherent good.

Zuckerberg also compares Alaska’s Permanent Fund to running a business—a very specific one:

Seeing how Alaska put this dividend in place reminded me of a lesson I learned early at Facebook: organizations think profoundly differently when they’re profitable than when they’re in debt. When you’re losing money, your mentality is largely about survival. But when you’re profitable, you’re confident about your future and you look for opportunities to invest and grow further. Alaska’s economy has historically created this winning mentality, which has led to this basic income. That may be a lesson for the rest of the country as well.

The idea that a “winning mentality” is what is going to lead to a basic income in the United States reveals how little Zuckerberg understands about politics. This is a pervasive ideology among tech leaders, who believe the lessons that they have gleaned from their own industry are applicable to all of the country’s problems. But remember the last time a disrupter said he was going to step into the political arena and run our country like a business?

For moguls like Zuckerberg, there is never any deep consideration of, say, the fact that racism, sexism, and classism are deeply intertwined with our country’s policies and are some of the biggest obstacles to implementing a highly redistributive policy like a UBI. Nor is there any attempt to consult with lifelong organizers and activists on the issue.

At the end of his post, Zuckerberg states that the “most effective safety net programs create an incentive or need to work rather than just giving a handout.” This echoes the “personal responsibility” rhetoric that drove workfare policies in the 1990s, which ended up kicking millions of people off of welfare rolls, leaving them in extreme poverty. The line also directly undermines the push for a UBI, which is quite literally a handout that can help liberate people from the “need to work.”

It would appear that Silicon Valley’s support for a basic income comes from self-interest. As Jathan Sadowski writes in the Guardian, “the trouble comes when UBI is used as a way of merely making techno-capitalism more tolerable for people, when it is administered like a painkiller that numbs the pain and masks the symptoms of economic injustice without addressing the root causes of exploitation and inequality.”

Tech moguls may seem like tempting allies for UBI advocates, but their vision of an ideal social safety net does not look anything like the left’s. If it did, they wouldn’t be pushing just for a basic income, but also for things like universal health care, free public education (not just for engineers!), and strong labor unions. For Silicon Valley, UBI is a sleek technological means to a very different end.

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