Low Hanging Fruit and Politicians

What a couple of weeks! If only there were three rings at once we could call it a circus. This has been more exciting than a fireworks display at a Zippo convention.

Obamacare, Gay Marriage, Iran, Race, Greece, Presidential jockeying, the Pope, Ted 2, and Bruce Jenner. You can’t fault Washington if you are bored. Stuff is happening. Of course, depending on which issue it is, you are either happy as a clam or ready to move to Canada.

I am trying to filter it all down. JD helps but there is a lot to get my hairy arms around. So it hit me. There are basically two themes to follow. The first one is that society has gotten to a new place. It is a place where nothing is easy. All the political fruit within arm’s reach is gone. All that is left requires a ladder. And ladders are notoriously dangerous.  In short, there are no easy answers. 

The second theme is that politicians are, well, politicians. I found this on Wikipedia: There have been some publishers who criticized politicians for being out of touch with the public. Areas of friction include the manner in which politicians speak, which have been described as too formal with too many euphemistic and metaphorical expressions, and is commonly perceived as an attempt to "obscure, mislead, and confuse". 

So if you are pissed and possibly confused then there it is – we live in a world where it takes real and tough analysis and negotiation to solve our problems. And the people who should lead the process are simply not up to the task -- caring more about wooing voters with simplistic slogans that actually solving problems. 

Think about some of the problems that got a lot of of time in the last weeks…

            Guns – if there was a simple solution President Obama would have already found it and proposed it.

            Iran, Russia, Syria – being friendly with these people does not seem to be working.

            Healthcare – solving the healthcare needs of more than 300 million people in a country whose national debt is approaching 100% of GDP is not a trivial undertaking

            Racial Discrimination – Stamping out the last vestiges of hateful, persistent discrimination is challenging to say the least

            LGBTs – marrying religious freedoms with economic and social opportunity in a secular society is no easy union

            Income Inequality – despite decades of trying to reduce poverty in this country it hangs on like a drunk at closing time

If you are on the fringe of the debate on any of these issues you will hate what I am about to say. To some of you fringers it is either your way or the highway. What I am about to say is that both sides have at least a smidgen of merit. And both sides hold to their beliefs tenaciously. Iran, Russia, and Syria have some legitimate views. Russia might feel threatened by a growing Europeanization of their adjacent neighbors. Maybe there are racists and homophobes whose lives were somehow diminished by gays or blacks. Having better opportunities for healthcare makes sense for a country. The Constitution seems to allow people to have guns. Poverty makes no one proud.

I am not arguing that any of the above statements in any way proves the point of one side or the other. The above paragraph is meant to say that there are two sides to every debate and we have reached a point in history when resolving these issues is not the real goal.  The real goal is for my side to win. The real goal is to support ideology or to pad the pocketbooks and power of those who represent those ideologies. In the meantime some of us would prefer solutions and we know this will take patience and VERY hard work. Yet the charade goes on. 

We hope our elected officials will assemble all the data and do the analysis and then duke-it-out in government institutions. But so far that is not what we see. What I see are politicians on both sides of the spectrum hurling naïve and damaging statements, cleverly disguised insults, and silly statements. Basically they are saying things like “trust me and I will solve all these problems. Do not trust my adversary as he/she wants to hurt you.” Really!

Since the ice melting is diluting my fine JD I really should finish this. So let me end with one example: income inequality. It seems to be the strongest candidate for my points today. Political candidates make it sound so easy to transfer a dollar from some rich guy to a homeless person on the street. Perhaps we spent too much time reading fairy tales. Ahh Robin Hood. Such a nice boy with tight pants. But please. Spend a little time at a soup kitchen or a park bench and get to know the clients. You could sprinkle hundred dollar bills on many of these people and it wouldn’t do a thing for the poverty rate.

My liberal friends are ready to BBQ my testicles on the nearest Big Green Egg. But wait. I am not saying that poverty programs are useless. I am not saying that government does not have some role to play in reducing poverty. I am not saying that high income people should not share their wealth. What I am saying is that whatever we have been doing for 50 years does not seem to be working well enough. Lyndon Johnson said these programs were going to eliminate poverty! Yet there it is worse than ever.  

To make any real headway today is going to take harder work. It will take real leaders who understand that the easy choices are gone. It will take people who can objectively evaluate, explain, listen, and then implement policies that matter. 

Honestly, can you name a living leader ready for this job? 

Income Inequality and Economic Growth

Dad, can I have some money? Why do you need it honey? Because my friend got hurt and it makes me sad and if I bought a chocolate bar I might feel better. In that case, honey, here’s a five dollar bill. I hope you feel better soon. Come on. That is the dumbest reason ever given for wanting money from Dad and no kid would ever try it. But alas, Alan Blinder is up to his old tricks again and his article amounts to asking for that chocolate bar, “The Supply-Side Case for Government Redistribution,”” Wall Street Journal, August 15, 2014, page A13.

On July 1 I wrote a post Blindly Following Alan Blinder Over a Poverty Cliff. In that case I reviewed Blinder’s desires to expand most social programs aimed at low income persons.  Blinder never bothers with evaluating these programs and just cavalierly advocates expansion. If one billion wasn’t enough then we should try 2 billion.  In this August article Blinder gets more brazen when he concludes that long-run economic growth can and should be expanded if we spend more money on social programs.

Those of you who are not familiar with economic literature or colonoscopies should know that there is nothing written much-less proved or demonstrated about poverty programs causing economic growth. There are reams of articles written about the reverse – the impact of economic growth on poverty – but alas as Alan Blinder was hitting his deadline for the WSJ, he came up with a new and earth-shattering economic truth. If you want to increase economic growth then you should spend more money on programs for the poor.

Many of you will say that it sounds intuitive that helping the poor will create more economic growth. Widely shared economic growth models explain changes in long-term economic growth with several key indicators – labor, capital, and productivity. If turning a poor under-educated and unskilled person into a new and productive worker in the labor force can be accomplished, then the growth model shows how and why poverty programs might lead to stronger economic growth. And the reverse would be true too – rising poverty leading to fewer good workers in the work force would be bad for a country’s economic growth.

But just like needing chocolate to make you happy because your friend fell off her bicycle makes sense at some level, poverty programs simply are not an explanation for economic growth. The proof is in the pudding. Blinder made this whole thing up last week. Please someone show me in a journal or a book or a classroom or on a bathroom wall at an Irish Pub in Itaewon where economists have some sort of evidence to support the relevance of this idea.

There are several ironies here beyond lack of scientific rigor and evidence. First, Blinder says he wants to talk about the Supply-side as a means to promote stronger economic growth. Please pass me more JD. Isn't he among a group of liberal economists who routinely decry and label supply-side policy in the most horrible terms like trickle-down, Trojan Horse, and more? Second, Blinder says in the article about the ethical issue of poor people, “Either side can talk until it’s blue in the face without convincing the other.” Blinder apparently believes that ethics is not going to solve the poverty problem. 

Third, Blinder then goes on to minimize the case for improving national spending.  He argues that most people spend the same. Thus if you take $100 away from a person making $200,000 per year and give it to someone with $20,000 income per year – it would have no net effect on national spending. Thus poverty and income redistribution programs get no support from Blinder for ethics and spending.

And so we are left, according to Blinder, with economic growth. Help the poor more and the economy will grow stronger and faster.  And we better do it fast because we are becoming more unequal all the time. An afterthought of his article is that this inequality is exploding in both economic and political terms. That means we are all going to suffer because this will hurt economic growth even more. This is nonsense. I personally feel better about helping the poor because it is the right thing to do. And as I said in the last post, we do that best by first evaluating the programs we already have. We have 50 years of experience with such programs. An honest evaluation would find strengths and weaknesses. Why can’t we do such an evaluation before adding more fuel to the fire?