The transitory view of the current inflation episode is getting more support from the evidence.…
I fell off the left-right continuum today
Another relatively short blog today – it is holidays after all. There was an article in the New York Times (December 23, 2013) – Inequality for Dummies – by regular Op Ed columnist Bill Keller, who clearly thinks he represents the pragmatic, reasonable progressive “centre-left” as distinct from the “left-left” who have their heads in the sand and apparently are content to mouth of slogans to make themselves feel better but which do nothing to address reality or advance the progressive cause. My version of the topic is inverted. I usually think the “centre-left”, which used to be the centre-right or even further out to the right before neo-liberalism shifted the central point sharply so that it made Genghis Khan look downright reasonable, are gutless wonders who pretend to be progressives if it allows them to extra personal rents (rewards) and/or gain position of power in non-conservative political parties. I typically see the “centre-left” as part of the problem not part of the solution. So I read on.
His topic, not unsurprisingly given the title is income inequality and he seems to think this is a topic that exposes the “left-left” types for who they are – out of touch populists who are:
… indulging a “‘we can have it all’ fantasy.”
He was quoting Allyson Schwartz, a Democratic candidate for Pennsylvania governor and board member of the so-called “centrist think-tank” Third Way, who launched an internicine attack on US Senator Elizabeth Warren and New York City Mayor-elect Bill de Blasio – who are “left-left” types according to Keller.
The “we can have it all” attack was over the Elizabeth Warren’s “plans to expand Social Security benefits and delay Medicare reforms” (Source)
The article that got all this going was published by the Wall Street Journal (December 2, 2013) – Cowan and Kessler: Economic Populism Is a Dead End for Democrats.
It was written by the Third Way leaders and attacked “left-wing populists”. The “we can have it all fantasy” was represented in this way:
If we force the wealthy to pay higher taxes (there are 300,000 tax filers who earn more than $1 million), close a few corporate tax loopholes, and break up some big banks then-presto!-we can pay for, and even expand, existing entitlements. Meanwhile, we can invest more deeply in K-12 education, infrastructure, health research, clean energy and more.
The Third Way representatives then told us that the left-wing populists were in denial when it came to the reality that the:
… payouts to seniors have exceeded payroll taxes collected from workers. This imbalance widens inexorably until it devours the entire Social Security Trust Fund in 2031, according to the Congressional Budget Office. At that point, benefits would have to be slashed by about 23%.
This inexorability (I love it when mindless conservatives use the word “inexorable” – it is a clue they know nothing) apparently leads to an “undebatable solvency crisis”. Phew.
The attack then focused on health care and the populist position was characterised as being “(e)ven more reckless” because it refused “to address the coming Medicare crisis” – which is?
Oh, that as the population ages health care spending will rise and “this disparity will be completely unaffordable”.
Who are these Third Way guys? Their homePage carries the banner “fresh thinking”, which made me laugh.
Their About Us page tells us:
Third Way represents Americans in the “vital center” – those who believe in pragmatic solutions and principled compromise, but who too often are ignored in Washington.
Our mission is to advance moderate policy and political ideas. Our agenda includes: a series of grand economic bargains, a new approach to the climate crisis, progress on social issues like immigration reform, marriage for gay couples, tighter gun safety laws, and a credible alternative to neoconservative security policy.
So the “vital centre” is when you consider their analysis a bastion of economic ignorance that perpetuates neo-liberal free market thinking by promoting the fraud that the currency-issuer can run out of money and that health care and aged care are financial issues rather than real issues.
The Third Way in Britain, which is where the term and approach emerged was just as bad. The Third Way is No Way.
But I guess if they are the “centre” I just fell off the continuum – to the left, in case you are wondering.
These Third Way idiots and that is the only term that suits – and I know it is the season to be charitable – are holding back the progressive movement and standing beside the hard-core conservatives who use the myths about government financial constraints to advance their own agenda.
The Third Way are then fighting on a field that is stacked against any progressive reforms from the start.
Of-course, there is no solvency crisis for the US social security system or the health care system. That is not to say that it cannot be improved to better use the real resources that underpin it.
Please read my blogs – Social security insolvency 101 and The US should have universal public health care – for more discussion on this point.
This is not to excuse Elizabeth Warren and her supporters. The meagre fact that they outline how they will “fund” their proposals tells you that they are also locked into the government financial constraint paradigm. They just want the rich to pay more tax so that the poor can get some more government transfers.
While it might be reasonable to deprive high income earners of more pre-tax income and reduce their purchasing power, there is no necessary connection with doing that and giving more post-tax income to the lower income cohorts. That is the mistake the “left-left” often make.
Of-course, the Third Way executives are not capable of seeing that so blinded are they by neo-liberalism.
The New York Times’ Bill Keller also cannot see it either, which makes his attack on the “left-left” look ridiculous.
He rightly acknowledges that:
… economic inequality is manifestly real, growing and dangerous. The gulf between the penthouse and the projects is obscenely wide.
In the US Congressional Budget Office publication – The Distribution of Household Income and Federal Taxes, 2010 – which was released in December 2013, the CBO find that:
… real mean household money income rose by 0.2 percent in both 2011 and 2012 … there was a decline in household income for all groups other than households in the top quintile. Consequently, income as measured in the CPS became more unequal, with the share of income going to households in the top quintile rising by 0.7 percentage points. That shift mostly occurred in 2011; the distribu- tion of income was little changed from 2011 to 2012.
Nations with rising income inequality grow more slowly and have higher need for public infrastructure.
Bill Keller also is correct when is says that immobility is a major issue associated with inequality:
It’s not just that we have too many poor people, but that they are stranded in poverty with long odds against getting out. The rich (and their children) stay rich, the poor (and their children) stay poor.
Analysis by the US Congressional Research Service – The U.S. Income Distribution and Mobility: Trends and International Comparisons – published November 29, 2012 found that:
… the U.S. income distribution appears to be among the most unequal of all major industrialized countries and the United States appears to be among the nations experiencing the greatest increases in measures of income dispersion … The extent to which countries undertake policies that affect their income distributions may reflect national differences in perceptions about the degree of income mobility. In the United States, a longstanding argument against redistributionary policies has been that each person has an equal opportunity to move up the income ladder … Empirical analyses estimate that the United States is a comparatively immobile society, that is, where one starts in the income distribution influences where one ends up to a greater degree than in several advanced economies. Children raised in families at the bottom of the U.S. income distribution are estimated to be especially less likely to ascend the income ladder as adults.
The American Dream? Doesn’t exist in reality. The US is a highly stratified society that has strong barriers to upward mobility that keep the poor poor and the rich rich.
Then the attack on the left-left begins. Bill Keller says that:
The left-left sees economic inequality as mainly a problem of distribution – the accumulation of vast wealth that never really trickles down from on high. Their prescription is to tax the 1 percent and close corporate loopholes, using the new revenues to subsidize the needs of the poor and middle class. They would string the safety net higher: expand Social Security, hold Medicare inviolate, extend unemployment insurance, protect food stamps, create more low-income housing. They would raise the minimum wage.
This apparently violates the necessity not to make the rich poor but to make the poor rich. Success should not be punished according to Keller.
Which tells you a lot about how he measures success.
Certainly the “left-left” are misguided into believing that there is only finite financial resources that have to be redistributed to reduce inequality.
The alternative is that the US government could just increase spending targetted to the lower income quintiles and leave the tax structure unchanged. As I noted above, the decisions about tax depend on who the government wants to deprive of purchasing power and the necessity to do the same (that is, how close to full employment the economy is).
The US economy has stacks of idle capacity so increasing net public spending will bring real resources back into productive use rather than straining the price level. That doesn’t mean I support leaving the tax structure as it is. But I would consider that question quite differently from the aims of improving the fortunes of the poor.
Further, I would also declare most speculative financial activity to be illegal (given it is unproductive and destabilising) and that, alone, would put a major dent in the incomes of the uber-rich in the US and force them to get a real job.
Why isn’t that advanced by the “left-left”?
Bill Keller thinks the “left-left” is simplistic and the “centre-left” has a better appreciation of how complicated all this is.
He claims the “centre-left” appreciate that you need to have growth to improve mobility. He claims that the “left-left” do not address this issue properly.
First, he says:
The populists favor putting more money in the hands of the bottom and middle, who will then spend us back to economic vigor. This is classic Keynesian thinking, largely vindicated by history. But the center-left points out that our economy is already 70 percent dependent on domestic consumers, way more than other developed countries.
Which doesn’t take into account the need to be “competitiveness” that helps trade deals. To be more productive, Keller opines, the US government has to “shrink long-term deficits and streamline regulations”.
Phew. I just fell further off the continuum.
If the US government wants to improve productivity it has to invest further in public education and force the financial markets to channel funds into real capacity building rather than slicing and dicing derivatives. Banning most of the latter activity would be a good start.
In the meantime, it should (about) double its federal deficit and target public employment and infrastructure building.
Further, worrying about trade is a waste of time. If the US can continue to run external deficits then its citizens win (overall) while the exporting nations deprive their citizens of access to real resources.
Second, Bill Keller says that in relation to “entitlement”:
The left-left seems to believe that government investments – roads and bridges, clean energy, education, etc. – and more-generous safety-net benefits can all be had by milking the rich and cutting military spending. Most centrists would raise taxes some and cut defense spending some, but they say that unless we also curb the growth of entitlements, the stampede of baby boomers into Social Security and Medicare will crowd out everything else.
The crowding out will only come if the US runs out of real resources that can be deployed to service the needs of the older citizens.
Increasing benefits to the poor might put a strain on real resources in the future (although I doubt it) which means that other cohorts will have to be deprived. But this has nothing to do with the capacity of the US government to purchase what real resources are available.
Bill Keller seems not to understand that (nor the Third Way idiots by the way).
Third, Bill Keller says that:
And a third difference between the near left and the far left is the question of making government more efficient. This is not so much a policy dispute as a mind-set. In education, health care, Social Security and other areas, the center seems more receptive to reforms intended to get decent results at lower costs. Further left, reform is seen as a euphemism for taking stuff away, and often resisted.
There is no doubt that government should use real resources effectively. We don’t want things wasted. But that doesn’t require corporatisation, privatisation or running down of entitlements.
In the health care system, I sense there is a major attack needed on the pharmaceutical and health insurance companies, not to mention the elite medical specialists etc.
These groups extract massive rents from the system, which by definition of a rent means that they would supply their goods and services in the same way for much lower incomes than they get.
It is obvious that the US health case system is massive rorted by these groups without any major difference in health care outcomes.
Indeed, if you read the – U.S. Health System Scorecards – published by The Commonwealth Fund, you learn that the US system scores poorly in areas such as infant mortality, coordination of chronic care, life expectancy, and avoiding preventable mortality and morbidity. These failings are distributed disproportionately towards the lower income groups.
Progressives should stop worrying about how the US government can “pay” for more equitable health care and instead advance policies that disenfranchise the rent earners – that means, take on the establishment – which, after all, is a truly progressive thing to do in most eras.
Most of this dispute in US democratic politics spreads more widely. It also is based on the fact that the “centre-left” is nothing like a reasonable depiction of centrist positions. They represent positions that the right-wing used to advance especially in economic matters.
They perpetuate the neo-liberal myths about government financial capacity and then demonise positions that used to be centrist. Further, the new left still refuse to embrace a truly progressive view of the monetary system.
They remain locked into believing that currency-issuing governments have financial constraints. Until they jettison that mythology they will remain populist but ineffective.
That is enough for today!
(c) Copyright 2013 Bill Mitchell. All Rights Reserved.
This Post Has 22 Comments
Health care now absorbs 17% of American GDP and has been growing at about 6% per year while the economy has been growing at about 2% per year. Clearly this is unsustainable. At this rate, health care will be about 37% of American GDP 20 years from now.
What is economically feasible is not necessarily politically possible. The real left faces 3 electoral obstacles: 1) the poor are now a minority and people in the middle prefer to identify with those above them than with those below them, 2) the percentage of the poor which votes is lower than the percentage of the rich and the middle-class which votes, 3) leftist economic ideas like MMT seem like an affront to common sense to most people. Most people compare an economy to a household or a company. That’s why they think that exports and trade surpluses are good. After all, a company exports nearly everything that it produces and a household is financially more stable if it runs a surplus.
Suppose that there are 300 voters, and let’s divide them in 3 groups of 100 according to income. 80% of the top 100, 60% of the middle 100 and 40% of the lower 100 vote. Total voters are then 180, but the lowest 1/3 has only 22% of the votes, while the riches 1/3 has 44%. Obviously, that doesn’t make it easier for the real left.
Many leftists implicitly assume that the country is divided in a rich minority and a poor majority. Not so. We could have a situation in which the rich are 15%, the well-off 50% and the poor 35%. A party that represents the poor therefore can’t count on a majority unless it persuades some of the well-off and rich to vote for it. The Third way may well be the result of electoral realism rather than of a conversion to neo-liberalism.
> “His topic, not unsurprisingly given the title is income inequality and he seems to think this is a topic that exposes the “left-left” types for who they are – out of touch populists who are:
… indulging a “‘we can have it all’ fantasy.””
last I checked, the left wing populist position was: “we need to tax the hell out of everyone to equalize the distribution of wealth, and completely regulate banking.”
I consider the “‘we can have it all’ fantasy.”” to actually be the center position.
I was reminded of a quote from the 1970’s, by I believe, then prime minister Pierre Trudeau, leader of what was a progressive center-left party, referring to the party representing the left at that time: “The New Democrats are just Liberals in a hurry”.
Not long after that it seems the conversion to neo-liberal economic policy began in earnest here in Canada with even the New Democrats now supporting it in part at least, and more recently abandoning it’s left-left identity too.
It is critically important to help society recognize the economic myths that have been propagated, and to see the economic truths or the middle class will eventually vanish altogether.
The problem as mentioned above is the middle class still don’t see it.They don’t see how unsustainable their current position, hard won by their forbears is. Infected by the same disease that has long afflicted the elite, they don’t see how neo-liberals have slowly re woven the very fabric of the world that brought them such good fortune. They currently live in a comfy dream world they believe is maintained by the 1% if they don’t indeed see themselves as being among the 1%.
James, you need to get some more recent data on Health Care costs, and maybe you will be less worried.
Bill, you seem to think inequality is not a problem. I beg to differ. It is just as big, if not a bigger issue, than the lack of understanding of the monetary system. There would have been no financial crisis if the 1% hadn’t been looking for speculative places to put their money. That is just one issue.
Things are just as bad in Australia too. Instead of the ALP trying to explain to voters that a budget deficit may be just the opposite of what is needed right now, they attack the coalition from an even more extreme neo-liberal standpoint.
They obviously have learned nothing from their previous experience in Government. Ie No government can produce a budget surplus simply by cutting spending and raising taxes. Or, if they have, they aren’t saying much about it.
“Health care now absorbs 17% of American GDP…health care will be about 37% of American GDP 20 years from now.”
And? Even if true all this means is most of our job growth over the period was in healthcare. If job growth occurs in this area it means there was an increase in demand for that product.
What you appear to be ignoring is that a lot of the increase in healthcare costs have been excess profits, coupled with parasitic business activities (insurance companies) and the hawking of useless drugs at astronomical prices.
In any case affordability is not an issue…the issue is whether we have enough resources to deliver the healthcare that people demand.
Falling off the political continuum struck me as a pass on the growth of government and weakening public policy determinations, with little regard for cause and effect. So, if I am correct, why is government the answer to matters of compensation, economic growth, or to generally private sector determinations (resource allocations and market based free choices) —-issues decided by buyer/sellers, providers/consumers, risk managers/risk generators, resource allocators /resource consumers?
What I agree with is the present left/right arguments placed into the political marketplace are highly suspect. They tend to favor an interest (groups) or very pedestrian uncritical views of how public policy works best.
Finally, I am still looking how falling off the political continuum benefits better decisions concerning public policy.
Reaganism and Thatcherism saw the most rapid distribution of economic prosperity and shared benefits in modern history, and it happened quickly with a relatively long period of traction. When its tenents were voided by the passage of time through the corrupting side of political decision making essentially lobbying for individual gain at the expense of the overall good, the two major market economies’ politics repackaged risk and growth inhibitors. This repackaging almost took the financial sectors down. Reaganism/Thatcherism placed economic matters more directly in the hands of the private sector,and public policy could not keep up with the massive forces unleased by more market driven economics. Public policy blindness to lobbying and to ploicy’s proper, efficient use of public power fell into the wake of overly narrow, highly favored industry/sector private interests.
This just keeps on giving. Well done now if some action type can join you , operationalize this and lead those of us waiting to be led maybe we can unseat some of the people who dominate our “leadership” regardless of what the call temselves. We need a Ghandi, MLK, Mandela.for the new era of oppression.
Looking over the comments, it seems that one of Mitchell’s main points was missed: the left-left is too focused on redistribution that is tax-based, and that is an effect of the withering (or absorption) of social forces outside of government. We need to get an industrial policy back on the political agenda. We also need to promote revision of labor laws to make union formation and effective negotiations more feasible.
I fell off on the right a long time ago. As long as you’re not enamoured of the bankster fetish of gun-control, I’m open to cooperation. BTW this idea of bringing radical leftists & radical rightists into the same party has a name. It’s called radical centrism (contra “vital”).
Has anyone ever contacted elizabeth warren and explained to her how the monetary system works? I bet she’d at least listen, it’s not like it’s hard to understand.
And to amplify paulmeli comment: healthcare costs have been excess profits, coupled with parasitic business activities (insurance companies) and the hawking of useless drugs
A very quick search on Medicare costs per enrollee in 2009 were (wait for it): $10,365 (http://kff.org/medicare/state-indicator/per-enrollee-spending-by-residence/) That’s the cost to deliver HC to the 65+ crowd. Figure another $300/month for supplemental and Part D (prescription. So total cost (and the supplement includes overhead and profits) of just under $14,000 per enrollee per year. No deductibles, no copays (except prescriptions), no “narrow” networks.
Conversely, a “bronze” plan (arbitrarily selected) in Eastern Pennsylvania is “from” $250/month with a $6000 deductible that covers 60% of expenses with an out of pocket annual max of $6,250. (http://www.healthpocket.com/individual-health-insurance/apply/2014-marketplace-solutions-13-8xxt1) Before one dollar ($1.00!) of benefits are received, the enrollee has spent $9,000. And anything beyond trivial expenses will hit the out of pocket max almost immediately — so you’re at $15,250.
If we want to make HC delivery efficient, all we need to do is have Medicare for All.
You didn’t fall off the left-right continuum. You underestimate its size. Beyond left left there’s left-left-left, and I’m sure there’s even something left beyond that.
But as for your question…
…I suspect it’s because they’ve learned from their mistakes and now reject authoritarian solutions and market suppression.
Most speculative financial activity is not completely unproductive as it provides liquidity. It’s not always destabilising – indeed it can have a stabilising effect, reducing the size of bubbles. And even when it is destabilising, governments have the opportunity to exploit that instability in a way that benefits everyone.
The financial sector being too big is a symptom of the real problem, not the problem itself.
the financial sector will devour everything
Derivatives trading does not improve liquidity (term deposits, on the other hand, are much safer AND provide liquidity to safer investments), in reality this risky behaviour with currency being the proxy leads to even riskier real-world behavioural tendencies. Follow the rabbit down that hole and you’ll find some pretty horrific expenditure, exactly the sort of thing that human beings need to take a BIG step away from.
“indeed it can have a stabilising effect, reducing the size of bubbles”
Do you mean like Collateralized Debt Obligations and Credit default swaps? I think I must have come down in the last shower, I thought those were the cause of the largest bubble and then stock market crash in history. Where have I been?
“(term deposits, on the other hand, are much safer AND provide liquidity to safer investments)”
I wish that were true Jeff.
I’m quite sure my small term deposit with the bank just provides the back-room boys with the currency they need to keep playing derivatives games.
They can’t use “bank” money and I know they don’t lend my term deposit to somebody else, so what else can they do with it (after topping up their reserves) ?
I guess it does, but what they do with my term deposit really doesn’t bother me since at least I’m not complicit in their stupidity (I don’t have a term deposit BTW, just saying they’re safer than derivatives as a single-ended investment).
For all I know, they’re using term deposits as a basis for ten times larger bets on trifectas in the Melbourne Cup. You could say the same thing about any entity in a macroeconomic scale though. What if the local mechanic is an avid gambler? What if the local greengrocer is a massively leveraged Forex trader? All I can do is invest my money in ways that it is most likely going to benefit myself and my fellow man more than an available alternative, and that’s all anyone can be asked to do.
The point was that a term deposit in its own right is less likely to cause a bubble than an equally available derivative.
I should’ve added that I’m in total agreement with your broader argument Jeff, emphasised in your subsequent comments.
TDs are of course mostly guaranteed by the government, thereby making govt complicit in the games banks play.
One can really only opt out of the game by stashing one’s savings under the bed.
So, “electoral realism” means to give up the fight _before_ the first shot is fired.
Which is somehow very different from what everybody has done until now and has brought us to the situation we are in.
There’s only one thing left to say: there is no alternative…
I dont know if pepole like Warren dont know or matberedare do. But if they did argu that expanding social security and so on dident need any funding they would have been portrayed as lunatics and fools. The neoliberal economics is now so deeply rooted among people it would succeed. Then they had to go in to abstract explanations that take more than 15 – 30 sec on TV. And there is very few experts/economists to back it up.
in the present political climate it could risk there political platform, and there would be less of the good gals in powerfull position.
The truth maybe good but this is politics where truth not always is hard currency.
To change the perception of truth about money and economics will take time. I believe the argument that no funding is needed or money is no constrain is to early to make to the general public, especially at the level where Warren is, the level where real decisions to expand e.g. SS can be made.
The issue of household analogy and funding is so embedded as the “truth” that it have to be circumvented. Probably better to attack with “novel” concepts and images, make the arguments about real resources available and avoid the financial mud wrestling. As a side effect it should make cracks in the present financial nonsense about funding and money.
Warren seems quite good at bypassing how the neoliberalism are depicting reality, se have the strength to make her own analogies and images and don’t engage in wrestling the neoliberal pig, that pig would liked it while she only get muddy. Her arguments about the middle class and that their children could not hope to be better of than the parents appeal to much larger group than e.g. the direct beneficiaries of expanded SS.