J. Bradford DeLong's Blog, page 2123

Income Distribution and Social Insurance

I think that Stephen Williamson gets it right. He wishes that people were able to insure themselves against being born with the wrong parents, or against being protein-deprived in utero, or against getting some of the not-so-good brain-development genes:

Stephen Williamson: Income Distribution Part II: Here's another thought relating to this post. Our basic notion of social insurance is that each of us is placed, at birth, in a set of circumstances beyond our control. Before birth, we're not able to write insurance contracts that will compensate us for being born poor, for being born with a serious disease or birth defect, or for other possible bad events. There is then some role for the government in stepping in to provide the insurance that the private market cannot provide, by redistributing income from the rich to the poor, providing health care, or other interventions. The problem... is... prices help to allocate resources efficiently. To a degree, people are rich by virtue of the fact that society puts a high value on their services, and society puts a high value on their services because these are the services society wants. To provide the services that society wants, people have to be motivated to provide them. Becoming a skilled brain surgeon requires time and effort, and people won't do it if there is no payoff. Thus, what we have here is a very standard economic problem. We are trading off insurance with incentives. ...

Mark Thoma has some questions:

When I see the argument about trading off incentives (efficiency) for insurance, the first and most basic question is if there is a market failure preventing the insurance from being offered by the private sector -- and there seems to be -- why does correcting it reduce rather than increase efficiency?... But I want to ask a different question. Why aren't incentives subject to diminishing returns?.... When profit rates are very high, the tradeoff seems much less important...

I think Mark is right on the rhetoric.

When you add a government institution that mimics a missing market, you almost surely increase rather than reduce efficiency--at least for the the first few "transactions." Nearly everybody would, if they could, buy some pre-conception insurance. But a world in which the government forces everybody to buy 100% pre-conception insurance and thus eat the same thing all the time and wear identical blue overalls is a very poor and inefficient world. We try to strike a balance via public policy since there is no competitive industry of insurance companies providing actuarially-fair pre-conception insurance, so we do the best we can. But--Mark says and I agree--we should not view the first tranches of social democratic income redistribution as making the economy less efficient: it makes it more efficient.

Now you can reject the argument: you can say that you simply reject the idea that the government ought to provide social insurance to mimic that particular missing market. The problem with that, I think, is that you have then rejected all government policies that mimic missing or, indeed, establish markets. And you reject all government policies that improve the functioning of markets as well.

Benthamite utilitarianism is not a streetcar that you can dismount from when it reaches a stop that justifies your good fortune and low tax burden. Rather, for the sake of intellectual consistency you need to ride it to the end of the line.

Infants Playing with Flamethrowers

Harold Meyerson nails it:

Dangerous outcomes from a culture of paranoia: Last October, Glenn Beck was musing on his radio show about the

prospect of the government seizing his children if he didn't give them

flu vaccines. "You want to take my kids because of that?" he said.

"Meet Mr. Smith and Mr. Wesson."

Last April, Erick Erickson, the managing editor of the right-wing

RedState blog and a CNN commentator, was questioning the legality of

the Census Bureau's American Community Survey on a radio show. "We

have become, or are becoming, enslaved by the government. . . . I dare

'em to try to come to throw me in jail. I dare 'em to. [I'll] pull out

my wife's shotgun and see how that little ACS twerp likes being scared

at the door."

Do right-wing talk show commentators incite violence against the

government? Feel free to draw your own conclusions - but to dwell on

the rise of violent rhetoric on the right is to miss an even bigger,

though connected, problem. Let's focus, rather, on the first part of

Beck's and Erickson's observations: The government wants to take away

Glenn Beck's (and by extension, your) kids. The government wants to

take a census and will throw Erick Erickson (and by extension, you) in

jail if he, and you, don't comply.

Can we see the hands of all the kids taken from their parents because

they didn't get flu shots? How about all those people rotting in jail

because they didn't cooperate in compiling the census?

The primary problem with the political discourse of the right in

today's America isn't that it incites violence per se. It's that it

implants and reinforces paranoid fears about the government and

conservatism's domestic adversaries.

Much of the culture and thinking of the American right - the

mainstream as well as the fringe - has descended into paranoid

suppositions about the government, the Democrats and the president.

This is not to say that the left wing doesn't have a paranoid fringe,

too. But by every available measure, it's the right where conspiracy

theories have exploded....

[T]he imputation of lurking totalitarianism, alien ideologies, and

subversion of liberties to liberals and moderates has become the

default rhetoric of the right. Never mind that Obama is a Marxist, a

Kenyan and an advocate of sharia law. Consider the plight of poor Fred

Upton, the Republican congressman just installed as chairman of the

House Energy and Commerce Committee, over considerable right-wing

opposition. According to Beck, Upton is "all socialist," while Rush

Limbaugh calls him the personification of "nannyism" and "statism."

Upton's crime is that he supports more energy-efficient light bulbs.

How that puts him in a league with Marx, Engels and Nanny McPhee, I

will leave to subtler minds.

American politics and culture have a rich history of paranoia, as

historian Richard Hofstadter and many others have documented. Many of

the incidents of anti-government violence over the past couple of

years - flying a plane into an IRS building in Texas, shooting police

officers in Pittsburgh and carrying out last weekend's savagery in

Tucson - came from people who, however individually loony they may

have been, also harbored paranoid visions of the government that

resembled, though by no means entirely, those put forth by the Becks

and the Ericksons.

That doesn't make Beck, Erickson, Rupert Murdoch and their ilk

responsible for Tucson. It does make them responsible for promoting a

paranoid culture that makes America a more divided and dangerous

land.

One Failure Mode of an Apple Mac Book Pro

Conor Friedersdorf: Tone Versus Substance

Conor Friedersdorf:

Tone Versus Substance | Politics | The American Scene: Since Barack Obama took office, prominent voices on the right have called him an ally of Islamist radicals in their Grand Jihad against America, a radical Kenyan anti-colonialist, a man who pals around with terrorists and used a financial crisis to deliberately weaken America, an usurper who was born abroad and isn’t even eligible to be president, a guy who has somehow made it so that it’s okay for black kids to beat up white kids on buses, etc. I haven’t even touched on the conspiracy theories of Glenn Beck.... [P]eople making these chargers are celebrated by movement conservatives – they’re given book deals, awards, and speaking engagements.

If all of these charges were true, a radicalized citizenry would be an appropriate response. But even the conservatives who defend Palin, Beck, Limbaugh, D’Souza, McCarthy, and so many others don’t behave as if they believe all the nonsense they assert....

They’re in a tough spot these days partly because it’s impossible for them to mount the defense of their rhetoric that is true:

I am a frivolous person, and I don’t choose my words based on their meaning. Rather, I behave like the worst caricature of a politician. If you think my rhetoric logically implies that people should behave violently, you’re mistaken – neither my audience nor my peers in the conservative movement are engaged in a logical enterprise, and it’s unfair of you to imply that people take what I say so seriously that I can be blamed for a real world event. Don’t you see that this is all a big game? This is how politics works. Stop pretending you’re not in on the joke.

Sources of Violent Political Rhetoric in Recent Years

James Fallows:

Data Point: Sources of Violent Political Rhetoric in Recent Years:

The Committee to Stop Gun Violence has prepared a compendium of sources of "violent" or "insurrectionist" political rhetoric in the past two and a half years. It is here. Let's stipulate that there could have been a tilt, conscious or unconscious, in selection of items for the list. Still, it is stunning in its totality. It is also hard to imagine coming up with a comparable list from "the other side." One item....

August 11, 2009--William Kostric is filmed openly carrying a handgun outside of President Obama's health care reform town hall meeting in New Hampshire. Kostric holds a sign that reads, "IT IS TIME TO WATER THE TREE OF LIBERTY!" a reference to the following Thomas Jefferson quote: "The tree of liberty must be refreshed from time to time, with the blood of patriots and tyrants."

Please review this as a basic background document on considering the possibility that a tone of extremist rhetoric could be related to outbursts of political violence -- or, more constructively, whether one response to this tragedy should be deliberate cooling down of political talk.

The Monkey Cage: Atmospheric politics

Henry Farrell:

The Monkey Cage: Atmospheric politics: [O]ne useful way to think about the relationship between violent rhetoric and violent action is to borrow from arguments about climate change. Very often, people engaged in debate over climate change either argue that a specific event (e.g. a cold winter) disproves or demonstrates the reality of climate change. But this is to misunderstand the debate.... [I]t is usually going to be next to impossible to tell whether any given event is 'caused' by climate change (it may simply be the result of random fluctuation). Testing arguments about climate change involves multiple data points and the usual problems of statistical inference etc. Similarly, it is probably a bad idea to attribute any particular violent action to an overall climate of violent rhetoric.... [T]o the extent that it does point to a possible relationship between violent rhetoric and violent action, it is to a probabilistic relationship.... [V]iolent rhetoric makes violent action more likely. But this does not and cannot show, in the absence of other evidence, that any particular violent action is the product of a general atmosphere of violent rhetoric...

The Dollar's Reign as Reserve Currency

Barry Eichengreen:

The Dollar: Dominant no more?: If the euro’s crisis has a silver lining, it is that it has diverted attention away from risks to the dollar. It was not that long ago that confident observers were all predicting that the dollar was about to lose its “exorbitant privilege” as the leading international currency. First there was financial crisis, born and bred in the US. Then there was the second wave for quantitative easing, which seemed designed to drive down the dollar on foreign exchange markets. All this made the dollar’s loss of pre-eminence seem inevitable.
The tables have turned. Now it is Europe that has deep economic and financial problems. Now it is the European Central Bank that seems certain to have to ramp up its bond-buying program. Now it is the Eurozone where political gridlock prevents policymakers from resolving the problem.

In the US meanwhile, we have the extension of the Bush tax cuts together with payroll tax reductions, which amount to a further extension of the expiring fiscal stimulus. This tax “compromise”, as it is known, has led economists to up their forecasts of US growth in 2011 from 3% to 4%. In Europe, meanwhile, where fiscal austerity is all the rage, these kind of upward revisions are exceedingly unlikely.... Ten years from now the renminbi is likely to be a major player in the international domain. But for now capital controls limit its attractiveness as an investment vehicle and an international currency. Yet this has not prevented the Malaysian central bank from adding Chinese bonds to its foreign reserves. Nor has it prevented companies like McDonald’s and Caterpillar from issuing renminbi-denominated bonds to finance their Chinese operations. But China will have to move significantly further in opening its financial markets, enhancing their liquidity, and strengthening rule of law before its currency comes into widespread international use. So the dollar is here to stay, more likely than not, if only for want of an alternative.

With exorbitant privilege comes exorbitant responsibility

The one thing that could jeopardise the dollar’s dominance would be significant economic mismanagement in the US. And significant economic mismanagement is not something that can be ruled out. The Congress and Administration have shown no willingness to take the hard decisions needed to close the budget gap. The Republicans have made themselves the party of no new taxes and mythical spending cuts. The Democrats are unable to articulate an alternative. 2011 will see another $1 trillion deficit. It is hard to imagine that 2012, an election year, will be any different. And the situation only deteriorates after that as the baby boomers retire and health care and pension costs explode. We know just how these kind of fiscal crises play out.... Previously sanguine investors wake up one morning to the fact that holding dollars is risky. They fear that the US government, unable to square the budgetary circle, will impose a withholding tax on treasury bond interest – on treasury bond interest to foreigners in particular. Bond spreads will shoot up. The dollar will tank with the rush out of the greenback.

The impact on the international system would not be pretty....

With exorbitant privilege comes exorbitant responsibility. Responsibility for preventing the international monetary and financial system from descending into chaos rests with the US. How much time does it have? Currency crises generally occur right before or after elections. Can you say November 2012?

Josh Marshall: Flashback

Josh Marshall:

Flashback: I'm listening to Rep. Debbie Wasserman Schultz (D-FL) on Hardball discussing the issues sounding violent political rhetoric. And she's reminding Chris how last year her opponent in her reelection campaign had one of these shooting range campaign events where he fired a gun at a silhouette marked with the initials DWS.

A Nice New York Times Editorial

NYT:

Bloodshed and Invective in Arizona: She read the First Amendment on the House floor — including the guarantee of “the right of the people peaceably to assemble” — and then flew home to Arizona to put those words into practice. But when Gabrielle Giffords tried to meet with her constituents in a Tucson parking lot on Saturday, she came face to face with an environment wholly at odds with that constitutional ideal, and she nearly paid for it with her life.

Jared Loughner, the man accused of shooting Ms. Giffords, killing a federal judge and five other people, and wounding 13 others, appears to be mentally ill. His paranoid Internet ravings about government mind control place him well beyond usual ideological categories. But he is very much a part of a widespread squall of fear, anger and intolerance that has produced violent threats against scores of politicians and infected the political mainstream with violent imagery. With easy and legal access to semiautomatic weapons like the one used in the parking lot, those already teetering on the edge of sanity can turn a threat into a nightmare. Last spring, Capitol security officials said threats against members of Congress had tripled over the previous year, almost all from opponents of health care reform. An effigy of Representative Frank Kratovil Jr., a Maryland Democrat, was hung from a gallows outside his district office. Ms. Giffords’s district office door was smashed after the health vote, possibly by a bullet.

The federal judge who was killed, John Roll, had received hundreds of menacing phone calls and death threats, especially after he allowed a case to proceed against a rancher accused of assaulting 16 Mexicans as they tried to cross his land. This rage, stirred by talk-radio hosts, required marshals to give the judge and his family 24-hour protection for a month. Around the nation, threats to federal judges have soared for a decade. It is facile and mistaken to attribute this particular madman’s act directly to Republicans or Tea Party members. But it is legitimate to hold Republicans and particularly their most virulent supporters in the media responsible for the gale of anger that has produced the vast majority of these threats, setting the nation on edge. Many on the right have exploited the arguments of division, reaping political power by demonizing immigrants, or welfare recipients, or bureaucrats. They seem to have persuaded many Americans that the government is not just misguided, but the enemy of the people...

Equality, Opportunity, and Indecency

Paul Krugman:

More Thoughts on Equality of Opportunity: [T]he typical conservative line about equality of opportunity, not results, really implies the need for a radical restructuring of our society, which doesn’t offer anything remotely resembling equal opportunity. At this point, however, there’s a tendency to think about what that restructuring would involve — and because it’s basically impossible, to throw up one’s hands....

[But] you don’t... have to be that radical once you drop the rigidity of the conservative position. If you admit that life is unfair, and that there’s only so much you can do about that at the starting line, then you can try to ameliorate the consequences of that unfairness... something like the kind of society Western democracies have constructed since World War II — societies in which the hard-working, talented and/or lucky can get rich, but in which some of their wealth is taxed away to pay for a social safety net, because you could have been one of those who strikes out.

Such a society doesn’t correspond to any kind of abstract ideal, whether it’s “people should be allowed to keep what they earn” or “from each according to his ability, to each according to his needs”. It’s a very non-Utopian compromise. But it works, and it’s a pretty decent arrangement (more decent in some countries than others.)

That decency is what’s under attack by claims that it’s immoral to deprive society’s winners of any portion of their winnings. It isn’t.