Tag Archives: political economy

We’re Gonna Keep the Stall Going

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…move along.

At a joint appearance with Canada’s Foreign Affairs Minister, John Baird, [Secretary of State John] Kerry said he has not received a crucial environmental report on the $7 billion pipeline, which would carry oil from western Canada to refineries in Texas.

“My hope is that before long, that analysis will be available, and then my work begins[.]”

Never mind that the “analysis” has been going on for the better part of a decade.

Then Kerry added this bit of mendacity:

I can promise our friends in Canada that all the appropriate effort is being put into trying to get this done effectively and rapidly.

Who does he think he’s kidding?

A Lawless Law

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President Barack Obama is at it again.  Now he’s unilaterally, without legal authority, delaying another aspect of Obamacare.  He’s having his IRS—his Un-American Activities Committee (at least the members of HUAC were elected by us)—not enforce through tax collections a provision that prohibits employers from providing better health benefits to top executives than to other employees.  His excuse is that, four years after Obamacare was enacted, the IRS hasn’t bothered to write the rules that would effect the collections.

This isn’t the only section of Obamacare that Obama has chosen to…waive.  He has chosen to waive for an entire year the Employer Mandate.  He has chosen to waive for three months enforcement of the Individual Mandate.  He has chosen to waive, for a time, the Small Business mandate.  He has chosen to waive, for a time, provisions that forced cancelation of existing policies that individuals already had and preferred—and begun browbeating insurers into allowing those plans to be renewed if a customer wishes.  He has chosen to provide hardship exemptions, for a year, for those who find buying an Obamacare policy a hardship.  He has chosen….

The Obamacare law is quite specific on these provisions: each one must occur; there are no caveats or except-fors that say “no need to enforce if it’s inconvenient to do so, no need if it’s politically expedient to do otherwise.”  Similarly, the Constitution is quite specific: Art II, Section 3 requires the President to take Care that the Laws be faithfully executed.  No weasel words here, either, about picking and choosing those laws or those parts of laws that can be ignored whenever the President feels like it.  If Obama, or any President, doesn’t like a law or a part of a law, he must go to Congress and persuade them to pass appropriate legislation making the desired modification.

Whatever we might think of the “benefits” of any aspect of Obamacare or of the “fairness” of any section of it, it is, as the Democrats are wont to say, the law of the land.  It takes a lawless, arrogant President to choose, on his own recognizance, which parts of a law will not be enforced.

Obama has transformed his own signature law, his very legacy, into a monument to Executive lawlessness.

Another Thought on Economic Mobility

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Gerald Auten and Geoffrey Gee wrote about “Income Mobility in the United States: New Evidence from Income Tax Data.”  It’s an extensive paper; I’m abstracting a couple of points in this post [emphasis added].

  • More than half of taxpayers…moved to a different income quintile over this period [1996-2005]. About half…of those in the bottom income quintile in 1996 moved to a higher income group by 2005.
  • Median incomes of taxpayers in the sample increased by 24% after adjusting for inflation. The real incomes of two–thirds of all taxpayers increased over this period.  Furthermore, the median incomes of those initially in the lowest income groups increased more in per centage terms than the median incomes of those in the higher income groups.  In contrast, the real median incomes of taxpayers who were in the highest income groups in 1996 declined by 2005.
  • The composition of the very top income groups changed dramatically over time.  Less than half…of those in the top 1% in 1996 were still in the top 1% in 2005.  Less than one–fourth of the individuals in the top 1/100th% in 1996 remained in that group in 2005.

Those evil 1%-ers not only had trouble staying in the 1%, a significant fraction of them were erstwhile bottom%-ers.

Taking economic mobility—income changes—relative to all taxpayers, Auten and Gee found this:

  • About 56% of taxpayers…in the lowest income quintile in 1996 had moved to a higher quintile by 2005.  While 29% moved up to the second quintile, nearly as many (27.4%) moved up two or more quintiles and 4.5% moved all the way to the top quintile.
  • More than twice as many middle–income taxpayers moved up to a higher income quintile…as dropped to a lower one[.]

Thomas Sowell had this comment on the matter three years ago:

Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a “problem” for which a “solution” is necessary.  They have created a powerful vision of “classes” with “disparities” and “inequities” in income, caused by “barriers” created by “society.”  But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the “barriers” assumed by many, if not most, of the intelligentsia.

And now comes President Barack Obama and his Democratic Party colleagues decrying exactly that static income inequality folderol in the middle of their failed economic recovery and the outcomes of their failed social control policies.  Truly, they are desperate to change the subject in this election year.

A Short Lesson

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…in employment history, presented pictorially.

Notice that: the share of working-age Americans had started to fall the year before the Panic of 2008, and it started to fall sharply a few months prior to the Panic’s official start.  Those are economic lags working through the system.

The problem is, the share of potential workers actually working has remained static at its historic low of roughly 58.5% ever since.  That’s not economic lag, that’s failed economic policies over the last several years.

Why Does America Have Poor People?

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I’ll start with an old parable.  One man makes $1,000/day, and another makes $10/day.  The “high income” man then opens a factory and hires the “low income” man, and two or three others, at $100/day.  The high income man, with his factory, now makes $2,000/day.  The income disparity difference certainly has increased, markedly, from the original $990/day to $1,900/day.

But has the disparity increased, really?  The high income man, from his factory and hirings has gone from making 100 times the low income man’s earnings to only 20 times that man’s earnings.  And while the high income man’s earnings have doubled, the low income man’s earnings have gone up 10 times.

This brings me to the subject of my post.

We have poor people exactly because the US is the quintessential country where poor people have the opportunity to better themselves, and to do so a very great deal.  They come here from other countries to take advantage of just such opportunities as the parable illustrates, and other opportunities—to be the one who starts the factory, employs others, and both prospers and gives their employees increased prosperity in return for their work.  The same opportunities exist for those who start out as poor US citizens, also.  It’s economic upward mobility that lets people stop being poor and start being middle class, to continue and join the rich, and to set the conditions for their children to do the same and more.

But there’s another reason we have poor people in this country, also.  Despite having spent $20 trillion on poverty programs (I hesitate to call them poverty fighting programs) over the last 50 years, we still have the same per centage of poor people in our population as we had at the start of LBJ’s War on Poverty: 15% of Americans are classed as living in poverty.

Our anti-poverty programs—or at least our programs intended to be anti-poverty—do not encourage people to get off welfare and get a job or get a better job.  Quite the opposite, these programs engender dependence on government in these people.  Here’s how.

As recently as 2005, for instance, poor families spent about two times their income:

A four person-household is in poverty today, according to federal poverty guidelines, if they earn less than $23,550 per year, but the consumer spending of this same household is around $45,000 per year.

They do this not by being able to borrow the difference but because government welfare payments of a variety of sorts, from “assistance” transfers to (refundable) tax credits, make up the difference.  However, because the payments and credits are keyed to household income and not to efforts to work or improve their training and/or education or otherwise to become more self-sufficient and independent, a family whose wage earner(s) get better jobs that increase their income to $40,000 per year—a 70% increase in income—will lose those welfare payments and credits, and will see a net income drop of $5,000 per year to those $40,000—an 11% decrease in actual family income/spending power.

America’s poor aren’t lazy (indeed, the only ones who say so are political hacks trying to make political points by accusing others of saying so); they’re making entirely rational economic decisions, and maximizing (as they see it) their household income.  They’re staying dependent on government rather than coming to rely on their own devices, and opportunities, by logical choice.

And that’s the dead end of our welfare programs.  As structured, these poverty programs do nothing to help our poor, but they do keep our poor poor—and short circuit their opportunity for economic upward mobility.