Blogs

This is an excellent, concise explanation from Brad DeLong of one of the seeming paradoxes of parenting—despite being a highly skilled occupation, it doesn't pay well (or, pretty much, at all):

... looking after children is (a) physically demanding, (b) emotionally wearing, (c) mentally challenging, (d) easy to do badly with small lapses of attention, and yet (e) badly remunerated. In this it differs from nearly all other occupations that fit one or more of (a) through (d), which are relatively well paid because getting the work done is important and few people can do it well. But looking after children is different—very many people can do it well, not because it is easy to do but because it is one of our core human competences: we are driven to learn how to do it well at a deep, basic, powerful level to an even greater degree than we are driven to learn how to throw rocks to hit small moving animals. Thus looking after children is different from skilled occupations—it pays poorly because the supply of people who can do it is not small. And looking after children is different from unskilled occupations--it is hard to do because it is (a) physically demanding, (b) emotionally wearing, (c) mentally challenging, (d) easy to do badly with small lapses of attention.

One way to deal with this problem would be the medieval guild model, which still functions today in the professions, ie, restrict entry by requiring extensive training and certification for parenting; the number of people who could do most lawyering well is much larger than the existing poor of lawyers, but they have banded together to restrict entry to the profession. Since this seems unlikely to fly with regard to parenting, a better approach would be to publicly subsidize parenting to a greater extent than we do now.

Anne Alstott's proposal to create "caretaker resource accounts" is one of the more interesting attempts to address this issue:

With the creation of caretaker resource accounts, the caretaker parent of every child under age 13 would be given an annual grant of $5,000, which the parent could use to pay for child care, (his or her own) education, or (his or her own) retirement savings in the current year or in any future year. Each participant would receive an equal share of public resources per year, and each would decide for herself (or himself) how to divide the funds among the three alternative uses. The program would expand parents' options to give them maximum freedom to shape their own lives as they think best. Parents differ in their values, talents, and aspirations, and they would use their caretaker resource accounts in different ways—which is precisely the point.

....

The $5,000 voucher is significantly more generous than existing child-care subsidies. Tax subsidies for child care provide at most $1,500 to $1,800 per year, and they assist only a subset of families, excluding the poorest. They also vary by family income, sometimes arbitrarily. Working-class families can earn too much to qualify for the child-care subsidies for former welfare recipients and yet too little to benefit much from those for middle-class workers.

More immediately feasible are reforms like paid parental leave, turning the child tax credit into true child allowance, like those that exist in nearly all wealthy nations, and increasing support for public institutions like universal pre-K that would reduce child care costs.

When Amartya Sen won the Nobel Prize for Economics in 1998, the Royal Swedish Academy of Sciences pointed to how he "improved the theoretical foundation for comparing different distributions of society's welfare and defined new, and more satisfactory, indexes of poverty" and "restored an ethnical dimension to the discussion of vital economic problems." Sen's 1999 book, Development as Freedom, is essential reading for any one working on poverty and inequality and a great introduction to his ideas.

Sen's ideas have been influential in international circles—most notably, in the creation of the UN's Human Development Index—but they have yet to really take root in the United States. A new effort, the American Human Development Project, could change that. In mid-July, the project is releasing:

... the first-ever human development report for a wealthy, developed nation. It introduces the American Human Development Index, which provides a single measure of well-being for all Americans, disaggregated by state and congressional district, as well as by gender, race, and ethnicity. The Index rankings of the 50 states and 436 congressional districts reveal huge disparities in the health, education, and living standards of different groups.

According to the project:

Over 150 countries around the world have adapted [a Human Development Index] to analyze progress within their own countries, writing national Human Development Reports and calculating HD Indices for their own societies. But this approach has never been applied to the U.S. or any industrialized country.

Although the UN HDI has limitations (which hopefully will be addressed in the US report), it's a big improvement on conventional measures of well-being which typically focus on a single income measure. The next president would be wise to adopt a multi-dimensional measure like the American Human Development Index as the single most important measure of progress in the United States.

This is a great idea:

Green Carts are mobile food carts that offer fresh produce in certain New York City areas. Local Law 9, signed by Mayor Bloomberg on March 13, 2008, establishes 1,000 permits for Green Carts.

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A total of 500 full-term permits will be available in 2008: 175 permits for Brooklyn, 175 for the Bronx, 75 for Manhattan, 50 for Queens, and 25 for Staten Island. Beginning in July, 2008, these permits will be issued to individuals who have applied to be on the Green Cart waiting lists. In 2009, 500 more Green Cart permits will be available.

For millions of adults, the training and education needed to achieve the American dream is unavailable, putting the strength of the economy in jeopardy, too. At at time of intense overseas competition, a lower percentage of the workforce is graduating high school than it did 40 years ago. And about half of the adult workforce doesn't have the basic skills and education that are increasingly required to get good jobs. Responding to the scale and gravity of the problem, National Commission on Adult Literacy has new vision for the adult education and skill development system (full report and summary). Its breadth of knowledge is impressive, and I think its ambition is inspiring.

The Guardian (UK) has an interesting new poll out that "contradicts the widespread assumption that environmental issues are seen by voters as a luxury to be put aside in tough economic times." Although the overall framing of poll, which pits the "economy" against "the environment", is problematic, the findings are still worth a look, particularly those on the greater priority working-class voters in the UK are giving to climate change:

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Environmentalists are constantly accused of being middle-class lifestyle faddists, who don't understand the day-to-day financial pressures faced by "ordinary" working people. But the number of people who thought that environment should be the government's priority rather than the economy was substantially higher (56%) among the lower income, less well-educated DE¹ demographic [Unskilled manual and unemployed] than among the better-off ABs [Managerial and professional] (47%). Lower-income social groups also have a much lighter environmental footprint overall: only 42% of DEs [ took a foreign holiday over the last three years, whilst 77% of ABs did. Better-off people also own more cars, as you might expect – only 5% of DEs have three or more cars, whilst 15% of ABs do.

.... The working-class people who they claim "can't afford to be concerned about climate change" actually care more about the future of the planet than the rich – and are doing a lot less damage to boot. So next time you hear someone defending motorway expansion or cheap flights on behalf of the British poor, ask yourself the question: whose side are they really on?

The NYT's Steven Greenhouse, author of the new book, The Big Squeeze: Tough Times for the American Worker, is blogging at TPM Cafe this week. In his initial post, he argues that "working-class voters want what Harry Truman was promising: A Fair Deal, or at least a Fairer Deal":

.... In talking with workers--be they software engineers or hotel housekeepers, factory workers or freelancers--I often sensed a frustration, even an anger, that unfairness has muscled aside fairness in America in recent decades and especially in recent years, and it goes far beyond stratospheric C.E.O. salaries. ....

....

Workers of course recognize there is no magic wand to make unfairness disappear, but my interviews around the country convinced me that workers are nonetheless eager for political leaders to take some serious steps to ease the big squeeze.

Make jobs less stressful--For many Americans, wages are so low that they need to work two jobs, and many women with children under three are working fulltime to help their families make ends meet. As my book explains, all of this is making it devilishly difficult to balance job and family. The United States is the only industrial nation that doesn't guarantee paid sick days, paid maternity leave or even paid vacation to its workers.

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Increase opportunity and mobility--Many Americans who are not in the country club set worry that they won't be able to send their children to college, making it harder for their kids to move up in the world. ....
The college system is so skewed that at the nation's top 146 colleges, just 10 percent of the students come from the bottom half of households by income, and just 3 percent from the bottom quarter. Many working-class voters view America's promise of equal opportunity as largely an empty promise, and many are eager for government (and college administrators) to do far more to make college accessible and affordable for their children.

Ease the pain caused by globalization--Many workers rail against free-trade agreements because they see that globalization has destroyed many factory jobs and helped hold down wages, and they are searching for something, anything, to blame. While most workers recognize that globalization, offshoring and imports are inescapable facts of modern life, many would love to see the nation's political leaders do some high-visibility jawboning to discourage companies from reflexively moving jobs overseas, just as President John F. Kennedy once did some powerful jawboning to discourage the nation's steelmakers from raising their prices.

Many workers want better life preservers to prevent those hurt by globalization from being pulled under. Retraining programs for those who lose jobs to globalization are often poorly funded and poorly managed--and those programs are available only to laid-off factory workers, not laid-off software engineers and other white-collar workers whose jobs are offshored to India or other countries.

Strengthen the social safety net--After the Great Depression dragged down millions of Americans, Franklin Roosevelt, Congress, corporate America and organized labor built an impressive safety net of good wages, good health insurance, good pensions and strong job security. But nowadays with job security disappearing and many workers losing health coverage and pensions, the safety net has been falling apart. Many workers complain that it is hugely unfair that they and their children often lose health coverage when they lose their jobs. Little wonder that two-thirds of Americans say they want Washington to enact universal health coverage, even if means increasing taxes.

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The retirement savings system is broken and badly needs fixing. In The Big Squeeze, I recommend creating a new universal savings system, like Germany's, that would be built on top of Social Security and would guarantee virtually every worker enough to retire on.

From my interviews across the country, I got the sense that many working-class voters would be delighted if this year's presidential candidates adopted a great Republican's--Teddy Roosevelt's--version of the Fair Deal: "Our aim is to promote prosperity and then to see that prosperity is passed around."

Following the media coverage of the housing mortgage crisis gives me a headache. It's difficult to make sense of what's actually happening. But without a doubt there's one clear causal factor emerging from the media fog: subprime mortgages. A quick scroll through Dean Baker's blog shows just how often the media pins the crisis on subprime loans. Yet Baker, who was one of the few economists who saw all this coming, makes it clear that the subprime mortgages are just a chapter in a larger story about how housing prices got so out of line with their historical value. Why have they reduced such a complex story to this particular factor?

It's probably because "subprime" is code for minorities and poor people, always an easy target. What do you think the public hears when folks say "subprime?" You can almost see the thoughts taking shape in the public mind: "you know, if those poor people hadn't been so irresponsible with their money, we wouldn't be in this mess. They should have known better than to take out those loans." Personal responsibility being so powerful a cultural trope, it's probably trumping the narrative that places blame on Wall Street bankers.

Am I being paranoid here? I know there isn't much evidence, but in a circular way, that's the point of speaking in code. I'm open to contradictory evidence, though.

Mark Thoma explains:

.... If we had included, say, infrastructure spending as part of the initial stimulus package, then the effects would kick in on a sustained basis over time rather than as a one-time hit as with the tax cuts. Thus, this type of spending could have provided the continuous stimulus Shiller is calling for. And if we are wrong and there is no recession, how big a problem is that? Well, what's so bad about building new infrastructure repairing what we already have, don't we need to do that anyway? With a stronger economy, wouldn't it be easier to pay for it? Insurance that also has investment value seems like a good bet to me. ....

Two prominent economists came out against deficit hawkery today. Perhaps this is the beginning of something. Larry Summers in the Financial Times:

Second, Congress should move promptly to pass further fiscal measures to respond to our economic difficulties. The economy would be in a far worse state if fiscal stimulus had not come on line two months ago. The forecasting community is having increasing doubts about the fourth quarter of this year and beginning of the next as the impact of the current round of stimulus fades. With long-term unemployment at recession levels, there is a clear case for extending the duration of unemployment insurance benefits. There is now also a case for carefully designed support for infrastructure investment, as financial strains have distorted the municipal credit markets to the point where even the highest-quality municipal borrowers are, despite their tax advantage, paying more than the federal government to borrow. There are legitimate questions about how rapidly the impact of infrastructure spending will be felt. But with construction employment in free fall, there will be a need for stimulus tied to the needs of less educated male workers for quite some time. Fiscal stimulus measures must be coupled to budget process reform that provides reassurance that, once the crisis passes, the fiscal policy discipline of the 1990s will be re-established.

And Brad DeLong:

A chain is only as strong as its weakest link, and it seems pointless to work to strengthen the Democratic links of the chain of fiscal advice when the Republican links are not just weak but absent. Political advisers to future Democratic administrations may argue that the only way to tie the Republicans’ hands and keep them from launching another wealth-polarizing offensive is to widen the deficit enough that even they are scared of it.
They might be right. The surplus-creating fiscal policies established by Robert Rubin and company in the Clinton administration would have been very good for America had the Clinton administration been followed by a normal successor. But what is the right fiscal policy for a future Democratic administration to follow when there is no guarantee that any Republican successors will ever be “normal” again? That’s a hard question, and I don’t know the answer.

Granted, Summers repudiation is heavily qualified, and DeLong's is grounded in political considerations. But this beggar will not be a chooser. So I'll be keeping a list of reformed deficit hawks, Keynsians, and other economists who don't think the next administration should make deficit reduction a high priority, immediately or ever. Call it, in the spirit of Greg Mankiw's Pigou Club, the Keynes Club.

Hereby establishing The Keynes Club, chartered June 30th, 2008, the presiding officers and members:

Brad DeLong (founding member)
Lawrence Summers (founding member)

Gregory Acs and Pamela Loprest of the Urban Institute have a new paper describing the demand side of the labor market where college degrees aren't required. Prior research has focused on noncollege workers themselves, some notable Inclusion products excepted. The paper transcends the DC debate over the low wage market, where one side says "it's all about skills and education" while the other says "it's all about job standards and full employment." And it addresses the taboo subject of racial and gender discrimination in labor markets.

Its findings include:

• Jobs that require experience, specific skill training, and basic reading and writing skills pay substantially better. "Soft" skills are also important factors in hiring.

• Large firms, higher-wage paying industries, and companies in rural areas are more likely to report having trouble finding workers.
• Most jobs offer unpaid leave, but about half offer paid leave.
• Unionized firms and sectors that are targeted by employment service providers tend to pay better.
• About 70 percent of jobs offer a chance of promotion, and 64 percent of workers reportedly receive a raise after 6 months on the job.
• Minority and female workers are paid less than their white, male counterparts.
• Empolyers show a willingness to hire former welfare recipients, but not ex-offenders.

The graph below, from a post by Andrew Gelman, plots 48 states (sans Alaska, Hawaii, and DC) by the average economic and social ideology of adults within them. (I made a few minor design changes to Gelman's original graph, including adding the lines to divide the graph into four quadrants, but the data plots and scale are the same.) The more liberal a state in both dimensions, the closer it is to the bottom left corner (Massachusetts is the most liberal); the more conservative, the closer it is to the top right (Idaho is the most conservative).

A few interesting things to note: New Hampshire and Maine are both represented by two Republican Senators, yet both are in the Liberal/Liberal quadrant; my home state, Minnesota, is often perceived as a sort of Vermont of the midwest, but on economic issues, it skews slightly conservative (as does Wisconsin); Montana is one of seven Liberal Econ/Social Conservative states, which makes one wonder why Sen. Max Baucus (D-MT) tends to be a Social Liberal and Economic Conservative.

I know, I know, my ongoing beef with Alice Rivlin is starting to get as long in the tooth as the now-settled one between Nas and Jay-Z, but I just realized that I forget to mention her quote in that awful and error-plauged article on the budget in last Saturday's WaPo:

"I suspect that McCain will be more constrained and will have a veto power over the Democratic Congress," said Alice M. Rivlin, who served as the first director of the Congressional Budget Office, as well as one of Clinton's budget directors. "If it's Obama, the Democratic Congress is going to be pushing for spending and it's awfully hard to rein in your own folks. No Democrat is going to want to go to war with Congress."

The Brookings-Urban Tax Policy Center estimates that the McCain tax proposal would increase the national debt by a trillion more dollars over the next 10 years than Obama's plan. Some constraint.

Based on the results of MDRC's latest evaluation, Career Academies should be getting a lot more attention. As described by MDRC, Career Academies:

Typically serv[e] between 150 and 200 students from grades 9 or 10 through grade 12 [and] are defined by three distinguishing features: (1) they are organized as small learning communities to create a more supportive, personalized learning environment; (2) they combine academic and career and technical curricula around a career theme to enrich teaching and learning; and (3) they establish partnerships with local employers to provide career awareness and work-based learning opportunities for students.

The new MDRC evaluation looks at the relatively long-term--eight years after high-school graduation--results of Career Academies, finding:

• The Career Academies produced sustained earnings gains that averaged 11 percent (or $2,088) more per year for Academy group members than for individuals in the non-Academy group — a $16,704 boost in total earnings over the eight years of follow-up (in 2006 dollars).
• These labor market impacts were concentrated among young men, a group that has experienced a severe decline in real earnings in recent years. Through a combination of increased wages, hours worked, and employment stability, real earnings for young men in the Academy group increased by $3,731 (17 percent) per year — or nearly $30,000 over eight years.
• Overall, the Career Academies served as viable pathways to a range of postsecondary education opportunities, but they do not appear to have been more effective than options available to the non-Academy group. More than 90 percent of both groups graduated from high school or received a General Educational Development (GED) certificate, and half completed a postsecondary credential.
• The Career Academies produced an increase in the percentage of young people living independently with children and a spouse or partner. Young men also experienced positive impacts on marriage and being custodial parents.

The only really disappointing finding is the lack of results for young women. It's not clear from evaluation why women didn't benefit:

.... The evaluation did not find evidence that the Career Academy experience was systematically different for young women than for young men. Nor does it appear that the Career Academies had systematically different impacts on the high school experiences of young women and young men. One hypothesis, however, is that the lack of post-high school labor market impacts for young women may be an artifact of their somewhat shorter and more intermittent employment spells associated with having children or attending postsecondary education programs. This will be explored in nonexperimental analyses to be presented in a future paper.

Although reports have focused on employment and earnings gains for young men, the results on "family formation" are even more striking. Students who attended Career Academies were 13 percent more likely to be married and living with their spouse than non-attendees. Young men who attended academies were 33 percent more likely to be married and living with their spouse than male non-attendees.

Some conservative marriage promoters have argued that the correlation between marriage and earnings in the general population is evidence that marriage directly causes higher earnings. The Career Academies evaluation suggests that the casual link moves in the opposite direction, with higher earnings leading to more stable families.

In a thoughtful TPM Cafe post, Theda Skocpol argues that despite Obama's current lead, McCain is actually doing a better job of shaping the agenda:

Why isn't Obama getting his economic message across with a few bold symbolic gestures -- eyecatching programs (not necessarily really new) that he uses to feature what he proposes on gas prices, college access, family leave, etc? This whole area needs much more thought. The elite media find it boring and irrelevant to talk about the huge distributional consequences of an election like this—after all, most of them are rich and spend time talking to other rich folks and insider "analysts"—yet ordinary voters have to be able to wrap their minds around specific examples of what Obama and Demcorats can do to make life better. It up to Democrats to use eye-catching moves and message discipline (lots of surrogates at once) to get specific messages through on the economy. So far, little effectiveness here, yet this is what Democrats should have going for them in this election!

....

Creative thinking about better agenda-control needs to happen now, in his campaign, in the DNC, and in the Congressional leadership. Too much attention is focused on fighting the last war, preparing to avoid the Swift-boating-type attacks Kerry lost in August 2004, rather than on shaping this war, which is a new one on different but equally tough terrain! This election is an agenda-shaping war to focus on real-life economic concerns and convince ordinary voters that Obama and the Democrats CAN make a difference for them. If they don't believe that, voters, especially older ones, will take the safe course and install McCain for a while.

I've been reading the book The Politics of Free Markets: The Rise of Neoliberal Economic Policies in Britain, France, Germany, & the United States, and there's a chapter on deregulation that shows the dangers of pursuing progressive policy goals within a conservative frame.

The short version of the story is that in the 1970s, some liberals took a critical look at the regulatory state and decided that rather than protecting the public, it was in effect subsidizing companies that didn't need it (contrary to what I thought, it was liberals that deregulated certain industries in the 1970s). Ralph Nader lead the movement from the left, but as it turned out he had a lot in common with a pre-presidential Ronald Reagan. Take this mind-exploding exchange from 1975:

Reagan: I agree with you about business and the fact that business is responsible in part for going along with regulations that finally have led to some advantages for them such as preventing entry of new businesses into the field, competition, price fixing, and so forth. I still think those businesses are wrong. And I think ti's led to what I call an interlocking bureaucracy. That the bureaucracy in government is now being matched by a bureaucracy employed by business to do business with the bureaucracy here and now you have two bureaucracies feeding on each and neither one of them wants the other to go away because then they wouldn't have a job.
Nader:If you make that your campaign theme next year you'd be making a major contribution to the American dialogue.
Reagan: Well. I-
Nader: Speaking out against corporate socialism and government subsidies of big business where big corporations are so big they can't be allowed to fail; only small businesses can go bankrupt, but if you're big like Lockheed and those other companies you can go to Washington instead....Massive outflow of the taxpayer's revenue into the coffers of these giant corporations...people who say they're conservatives do not speak out enough against monopolistic practices, highly concentrated industry; they don't speak for the enforcement of the antitrust laws for beefing up the Justice Depeartment's budget; they don't speak against the massive, inflated contracts and subsidies that pour out of Washington which makes up the bulk of government...And if you speak out against that, politics will be enriched.

Nader then lists the parts of the federal government he wanted to see eliminated. Indeed, Reagan and Nader agree that the solution is to eliminate government, rather than reduce corporate influence. Their biggest disagreements were probably over which programs to eliminate.

This movement kicked off a sweep of deregulation that didn't benefit consumers. As the author puts it, "Public opinion in favor of the populist consumers' movement, and this movement's late-1960s to mid-1970s salience...lit the torch under the deregulatory effort. Executive control of deregulation and the 'frame ambiguity' of the cultural Left allowed Ronald Reagan to shift this effort in favor of business."

There's a lot to unpack here. I think the whole episode is analogous to the anti-poverty debate. Anti-poverty advocates, many of which are Nader's contemporaries and are set back by the same "frame ambiguity," construct their arguments according to a progressive understanding of the conservative impulse to do charity, which John thoughtfully wrote about. Their case for reducing poverty centers around a magnanimous donor (the public) and a deserving recipient (the poor). Conservatives easily reinterpret this framing to support their policy goals.

But I also think it shows that progressives should be careful when we frame policy that unfairly benefits corporations and the rich, something that got considerable attention when Bear Stearns was rescued. 2008 is a different political environment than 1975, but then again, the public has extremely negative feelings about government. Anti-government rhetoric from the left could be wrapped around conservative policy yet again.