AND YET AGAIN PIKETTY

I should like to return yet again to the Piketty, Saez, Zucman paper, about which I have written these past two days, because it is centrally important to my thinking about American politics, but first I must respond to the interesting questions posed by Michael S. concerning the turmoil in British politics [see the comments section on yesterday’s post.]  I realize that I am violating one of the sacred principles of blogging by saying this, but I simply do not know enough either about the British parliamentary system or about Brexit to have a coherent opinion regarding the possibility of a second referendum.  I could, of course, pontificate – what else, after all, is a Blog good for? – but I am so clueless on this issue that I would not even know which is the reliably left-wing side of the issue, let alone [as Michael S. asks] the anarchist position.  There, I have said it.  There are some things I just don’t know anything about.  I hope Google will not decommission my Blog as a consequence.

Without endlessly repeating myself, let me come back to the broad outlines of the Piketty et al. paper, and try in this post to think about what it tells us about the lived experiences of the several groupings on which it concentrates.  Specifically, how do the experiences of the Bottom 50^th in the last two generations differ from those of the Middle 40^th  to 90^th?  I refer to “two generations” rather than a span of time [roughly 1980 to the present] because I am interested in what it is like to grow up and grow old in one or another of those segments of American society. 

Remember, the central and defining fact of human existence is the endlessly repeated life cycle:  birth, childhood, young adulthood, mature adulthood, old age [assuming you are fortunate enough to make it that far].  As Erik Erikson and many others have noted, our lived experience of what happens to us is powerfully shaped by what we learn to expect when we are young and then either have confirmed or disconfirmed by what happens to us as we grow older.

To those born roughly when my parents were young, in the years before the First World War, the defining experiences were that war, the boom years that followed, and then the Great Depression.  People of that generation could see the poverty and fragility of old age, and then experienced the threat of unemployment, only lifted by the Second World War.  The Social Security Administration was established in 1935, and by the time the war years were behind us, people were seeing the radical alteration in the arc of the life cycle that it brought.  Thirty years later, in 1965, Medicare began, and that, coupled with increases in life expectancy, transformed the expectations most people had of retirement and old age.  By the end of World War II, life expectancy in the U.S. was barely up to the age at which Social Security kicked in, although of course if you made it past early childhood the prospects were much better. 

Putting all of this together, we can conclude that children and young adults of the Bottom Half in the early ‘80s could see, looking around them, large numbers of grandparents and aging parents whose Golden Years were protected by Social Security and Medicare.  This was simply a part of the background expectation of their lives.  They did not think of these transfer programs, as economists like Piketty et al. do, as part of their income.  They took them for granted.  So when, for the next thirty years and more, their cash-in-pocket income either barely kept pace with inflation or actually declined, they did not say, “Ah, but we must take into account our future Social Security and Medicare.”  Instead, they felt things slipping away.  What is more, they completely lost the easy confidence of their parents that each generation would have things better than the generation just before.

The life experiences of the Middle Class, so called, were completely different.  Social Security for them was not the only thing between decent old age and desperate poverty.  Rather, it was a convenient add-on to pensions, investments, and other protections of the non-earning phase of the life cycle. 

The Bottom Half watched as politicians ceased to concern themselves with their needs and anxieties, and instead spoke endlessly, obsessively, about a Middle Class of which they were not really members.  To be sure, for reasons of race, White members of the Bottom Half identified themselves as “Middle Class,” by which for the most part they meant “Not Black.” But they were not really part of that ever-better-off 50^th to 90^th, and they knew it.

As has happened so often before in many, many countries, they turned their anger not on the 50^th to 90^th, whose life chances continued to improve, nor on the Top 10^th, whose wealth soared into the stratosphere, but on the Black and Brown fellow Bottom Halfians, who by and large were doing even worse than they.

These are the realities that have shaped American politics for two generations.  Even Bernie’s clarion call for Free College spoke to the burdens of debt of the 35% of Americans who earn college degrees, or maybe to the 55% who start college, whether they finish or not.  It had nothing to say to the thirty-five or forty percent or more who never enroll.

The challenge we on he left face is to craft an integrated program of legislative proposals designed to alter the basic 50/40/10 shape of the American economy.  Clearly it will require major inroads into the already accumulated and relentlessly accumulating wealth of the top 10%, but it will as well require breaking down the division between the next 40% and the bottom 50%.

I do not have a clear vision of what those proposals might be, and I welcome discussion from all of you reading this blog.

MORE THOUGHTS

Yesterday, I discussed an extremely important essay by Piketty, Saez, and Zucman.  Today, I want to quote several passages, and comment on their significance for American politics.  [By the way, I had no recollection of having read it before and having linked to it on August 31 of this year!  Clearly, I am losing it.  I mean, it is amusing when I discover in my files something I wrote thirty years ago and have since forgotten I wrote, but this is ridiculous.  Maybe it is not such a bad thing that I am in an old people’s home.]

Here are three passages, each from the last pages of the essay.

(1)  p. 601   “In 2014, payroll taxes amount to 11.3% of pretax income, significantly above the next largest items—federal and state income taxes, 6.6% of pretax income, and sales taxes, 4.7%.  Although payroll taxes finance transfers—Social Security and Medicare—that go in part to the bottom 50%, their increase contributes to the stagnation of the posttax income of working-age bottom 50% Americans.”

So in effect, the payroll taxes paid by the lowest waged half of the population are going to subsidize the improvements experienced by the better off half.  In short, this is massively regressive taxation.

(2)  Also from p. 601 “Transfers. One major evolution in the U.S. economy over the past 50 years is the rise of individualized transfers—monetary and more importantly in-kind.  While public goods spending has remained constant around 18% of national income, transfers— other than Social Security, disability, and unemployment insurance, which are already included in pretax income—have increased from about 2% of national income in 1960 to close to 11% today. The two largest transfers are Medicare (4% of national income in 2014) and Medicaid (3.4%); other important transfers include refundable tax credits (0.8%), veterans’ benefits 0.6%), and food stamps (0.5%).  Overall, individualized transfers tend to be targeted to the middle class. …  Despite Medicaid and other means-tested programs which entirely go to the bottom 50%, the middle 40% receives larger transfers than the bottom 50% Americans, in particular because Medicare largely goes to the middle-class. In 2014, the bottom 50% received the equivalent of 10.5% of per-adult national income, the middle-class received more—14%—and the top 10% received less—about 8%.”

(3)  p. 603  “The middle class appears as the main winner of redistribution: while it receives growing individualized transfers, its effective tax rate has remained stable at around 30% since the late 1960s. Transfers have played a key role in enabling its income to grow in recent years.  Without transfers average income for the middle 40% would not have grown at all from 1999 to 2014. In fact it grew 8%, thanks to an increase of 32% in transfers received excluding Social Security. Tax credits—the 2008 Economic Stimulus Payments, the American Opportunity Tax Credit, the Making Work Pay Tax Credit, and Health Insurance Premium Assistance Credits (in the context of the Affordable Care Act)—played a particularly important role during the Great Recession. Without transfers the average income of the middle class would have fallen by 11% between 2007 and 2009; thanks to transfers the decline was limited to 3%.  In contrast, given the dynamic in their pretax income, transfers have not been sufficient to enable bottom 50% incomes to grow significantly.”

Read these three passages carefully and then think about the rhetoric and the policy priorities of the Democratic Party in the last several election cycles.  Democratic candidates talk incessantly about “the Middle Class,” and their policy proposals deal with the sorts of transfer payment programs that have benefitted the 50^th to 90^th percentiles of the American population.  Their efforts have been successful, as the statistical analysis of this essay demonstrates, both in making possible increases in real posttax income for that 50-90% income group over the past two generations and, equally important, in cushioning the blows of economic downturns for the same group.   No one in American politics has been looking out for the bottom half of the population.

All of this long predates the faux populism of Trump and, unless there are major changes in existing transfer programs, will continue unaltered after he passes from the scene.  The Democratic Party has survived, and perhaps is even flourishing, essentially by pursuing policies that help that “middle” group from the 50^th to the 90^th percentile, while being visibly non-racist and non-sexist, which brings to its support millions of Americans who are not actually very much helped economically by its policies.

Limiting ourselves to the politically possible, as opposed to the ideologically desirable, what policies might the Progressive wing of the Democratic Party embrace in an effort actually to help the bottom 50%?  It is not hard to think of some, in fact.  Here are four:

Raise the wage limit on social security taxes and use the additional monies to decrease the tax on the first 30 or 40 thousand dollars of earned income.

Dramatically raise the minimum wage so that, adjusted for inflation, it at least recaptures what it has lost to inflation over the past thirty years.

Medicare for all, with the cost means tested so as to constitute a transfer payment from the top 50% to the bottom 50%.

Cancel the recent tax decreases for the rich and impose new inheritance taxes to pay for the rise in transfer payments to the bottom 50%.

If we are serious about our socialist longings, we need to take Piketty, Saez, and Zucman to heart and shape our policy priorities accordingly.

WHAT TO DO ON A SNOWY DAY

As you may have read, the southland was hit by a snowstorm yesterday, and at 2 p.m. or so, while Susie and I were working on the jigsaw puzzle in the lobby, the power went out [a falling tree limb hit a power line.]  Each of the buildings in my retirement home is supposed to have an emergency generator, but the switch-over mechanism in the generator for Building 5 was faulty, so we were pretty soon without any power at all, even for the elevator.  I went door to door in my building, checking on everyone to make sure they were o.k. [as I have mentioned, the office of Precinct Representative for Building 5 is the only thing I have ever been elected to, and I take my duties seriously.]  Then Susie and I ate in the main dining room while the generator was being fixed and afterward, guided only by the flashlight built into my IPhone, we fed the cat and went to bed, even though it was only 6 p.m.  The apartment was quickly getting colder [no heat] and there did not seem to be anything else to do.  At 7:05, just as we were drifting off to sleep, the power came back, lights went on, and I got up to reset all the clocks.

The power is still on, but we got a good deal of snow and freezing rain which continues as I write, so today I am snowbound.  Early this morning, as I surfed the web, checking the NY TIMES and the Washington Post, I came across an Op Ed by the economist Robert Samuelson, with an arresting tagline:  “We’ve become addicted to the income stagnation story. It’s probably not true.”  Seeing as how I am one of those addicted, I thought I had better read the column.  In it, I found a link to a new article by Thomas Piketty and others ostensibly providing evidence for Samuelson’s claim. Well, readers of this blog are aware that I was very impressed with Thomas Piketty’s book, CAPITAL in the Twenty-First Century, even going so far four and a half years ago as to write a four-part 9,000 word review, so I followed the link, and have spent the past two hours reading a fascinating and very lengthy essay published in the QUARTERLY JOURNAL OF ECONOMICS for May, 2018, entitled DISTRIBUTIONAL NATIONAL ACCOUNTS: METHODS AND ESTIMATES FOR THE UNITED STATES, by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman.  I don’t know what Samuelson has been smoking, as we used to say back in the day, but the essay by Piketty, Saez, and Zucman presents a detailed and, I think, politically very important story of American income stagnation in the past thirty-five years.  My aim in this brief blog post is to tell you a bit of what I learned from the essay.  If this is a subject that interests you, I strongly urge you to read the entire thing.  You can find it here.

The focus of Piketty’s 2014 book was the growth, or rather the re-emergence, world-wide of extreme inequality of income and wealth, with most of the attention on the top 1%, or 0.1%, or 0.01%, or even 0.001%.  The new essay deals with trends in income across the board in America, not just among the rich.  The authors divide the American population into three groups:  the Bottom 50%, the “Middle Class,” identified as the 50^th to the 90^th percentiles, and the rich – the top 10%. 

Now, it is, if you think about it, extremely peculiar to call those in the 50^th-90^th percentiles “the middle class.”  Surely it would make more sense to call those, say, in the 30^th-70^th percentiles “Middle.”  But the authors have a method in their methodological madness, and it is, I think, deeply and deliberately political.

If I may summarize 50 pages of statistics, diagrams, and methodological cautions in a phrase, Piketty et al. show that in the last thirty-five years in America, the bottom half has stagnated, the 40% above them have done well enough to make them feel that the system is working for them, and the rich have made out like gangbusters.

The authors are able to break the statistics down so that they can track income pre- and post-tax, income by age, and even income by gender.  The post-tax income includes government transfers and redistributions, principally, but not solely, in the form of Social Security payments and Medicare and Medicaid.  They are able to show that whatever post-tax improvement there is over the years in the income of the Bottom 50% can be traced almost entirely to Social Security and Medicare.

What does all of this mean for politics?  [You realize that I am rushing past vast quantities of fascinating and important detail.  You really must read the essay yourselves.]  Well, think of it in human terms, as I think Piketty and company intend us to do.  For more than thirty years, fully half of American adults have seen no material improvement in their life chances and experiences.  They are better off when they get old – indeed, in real terms, they are sometimes better off old than when they were young – and that means, among other things, that when they are in middle life, they are not burdened with caring for their indigent parents.  But they have no reason to think that their children will be better off than they are.  What is more, they can see all around them that the “Middle Class” is in fact doing better and better, which is manifestly and infuriatingly unfair.

Piketty has some statistics about the higher educational credentials of those in one or another of the three groups, and not at all surprisingly, those in that 50^th to 90^th group are far more likely to possess those credentials than those in the Bottom 50%.

There really are Three Americas.  The authors do not present any statistics on intergenerational mobility, but it is almost certainly the case that upward mobility depends heavily on education, which in turn depends on the income level of the parents. 

The adult American population probably numbers around 200 million [the authors count those 20 and older as adult, rather than those 18 and older], so we are talking about one hundred million men and women whose life chances have been essentially flat since Reagan was elected.

The political implications of this simple fact are enormous.

WEATHER REPORT

No walk this morning.  Down here in North Carolina, home of Republican voter fraud, we are snowed in.  It will be days before I can drive, let alone take my morning walk.  So naturally, like any obsessive news junkie, I have been listening non-stop to the commentary on Mueller’s court filings this last week, along with that of the Southern District of New York.  Mueller’s documents were rather disappointing, inasmuch as they contained fewer juicy details than hoped for.  There was a good deal of discussion of the fact that the Southern District’s filing identified Trump as having committed a felony, but the felony was violation of laws regulating campaign finances, and no one thinks that is really big news.  So the commentators were reduced to picking over the unredacted portions of the documents for hints and clues of what Mueller has on Trump.

I will leave that exercise to the experts, of whom there is no shortage on MSNBC and CNN.  Rather, I would like instead to hark back to the July 2018 indictment of a dozen Russian GRU officers handed up by Mueller’s Grand Jury.  That was one of the most extraordinary public documents I have ever read, and it tells me more about what Mueller has on Trump than any of the hints and winks and nods of last week’s filings.

The July indictment made it clear that Mueller knew what the Russians did.  He knew exactly to the minute when they did it.  He knew their names.  He knew their ranks.  He knew the addresses where they worked.  He knew their login IDs.  He knew whom they were talking to.  I suspect he knew what they ate and when they took bathroom breaks.  And he knew all this in Russian!

Can anyone have the slightest doubt that Mueller has at least as much detailed knowledge about the doings of Jared Kushner, Donald Trump Jr., Eric Trump, Ivanka Trump, or Donald J. Trump himself?

Were these folks, and many others besides, part of a conspiracy to defraud the United States government, as defined by the statutes?  I would be happy to place a money bet that they were, and that Mueller can prove it.

Two final points, called to our attention by Rachel Maddow.  First, the court filing says Trump stood to make “hundreds of millions of dollars” from the Moscow Trump Tower” project that was the focus of many of the Trump/Russia communications through the middle of 2016.  For many years now, Trump has been signing leasing deals lending his name to real estate projects around the world.  These leasing deals have been paying him one, two, maybe five million each.  The Moscow deal was several orders of magnitude larger than anything he had been engaged in.  We may be sure he knew absolutely everything that was done in furtherance of the deal.

Second, the Russian bank designated as the lending agent for the project is a bank under sanctions by the U. S. government and hence ineligible to underwrite the Moscow project.  That, almost certainly, is why Trump was on board with lifting sanctions.

Stay tuned.

WHAT IS ETHICS? OR IS IT WHAT ARE ETHICS?

Let me add a few words about a subject on which Jerry Fresia, David Palmeter, and S. Wallerstein have had something to say.

Over the past two and a half millennia, there have been three broad sets of questions addressed by philosophers under the general heading of Ethics or Moral Philosophy.  The earliest question, very much front and center in the writings of Plato, is “What is the nature of the good life?”  The Greeks themselves offered an array of answers:  A life of reason uncontaminated by passion or desire;  A life in which desire has its place but is subordinated to reason;  A life free of pain;  A life that includes as much pleasure as possible [these last two pessimistic and optimistic versions of the same answer];  A life of honor.

The second question, quite different from the first is, roughly:  Is there a rule or a technique by the use of which we can make hard decisions in which it is not clear what we ought to do because there are weighty considerations or strong arguments sending us in opposed directions?  The ethical theory known as Utilitarianism is the best known answer to this question.  It offers some hope of transforming moral disagreements into processes of calculation.  Not surprisingly, its deployment most often occurs in debates about public policy rather than in private deliberations about individual action.  Bentham and Mill, in the English speaking philosophical community, are the names most often associated with this view.

The third question, identified with Kant, is:  “Can we find a moral principle binding on all rational agents as such for which a persuasive argument can be given entirely a priori, and hence grounded in reason alone?

In the jargon that has become widespread among academic philosophers, these three approaches are labeled Virtue Ethics, Teleological Ethics, and Deontological Ethics.  Since they seek answers to three quite different questions, they do not exactly stand in opposition to one another.  It is not at all odd to argue about what the correct answer is to a question once it has been asked, but it is, I should think, a trifle odd to argue about what question ought to be asked. 

Plato’s Dialogues, particularly the early and middle ones, present us with brilliant images of individuals who, in their life choices and modes of self-presentation, embody competing visions of the Good Life.  Although the Dialogues are filled with arguments – indeed they seem to consist of nothing but – in the end I think it is Plato’s genius to elicit from us the response “Ah, yes, Socrates is the sort of person I should strive to be if only I have the courage and the honesty to do it.”

Bentham and Mill leave us thinking, “Ah, that is a good way to resolve hard cases and determine, taking all in all, how we ought as a community to choose and act.”

And Kant inspires in at least some of us the thought, “Now I understand the grounds and justification for what I already believed I ought to do.”  Indeed, he said that the Moral Law is no more than a formal statement of the old rule, Do unto others as you would have others do unto you.

IMPEACHMENT

Ralph Waldo Emerson once wrote wisely, "When you strike at a king, you must kill him."  Until there are twenty Republican senators ready to vote to remove Trump from office, it would be madness for the House to impeach him.  What would move those senators to vote for conviction?  Only the clear-eyed judgment that their personal survival in the 2020 election requires it.  Nothing else.  Will that time come?  It is too soon to tell.

LIT CRIT

In response to my brief response to MS, anonymous writes “Is it possible to disagree with a literary critic? It seems that they refuse to accept that a text may be uninteresting, despite the often considerable effort devoted to its interpretation. Do they make any falsifiable statements at all?”  Absent an accompanying emoji, it is difficult to determine in what tone of voice this question is asked, but since it raises some interesting issues, I will respond as though it was a genuine request for an answer.

Let me begin by distancing myself from the high priests of Lit Crit who, in a desperate grasp for dominance, have advanced the absurd view that a text is indeterminate and hence their interpretation of it is more important than the text itself.  I sympathize with their dilemma, which is that they spend their entire careers discussing the productions of creative types and yet themselves never create anything original at all.  For a senior tenured member of an elite private university, this must be a terrible blow to the ego.  But though I feel for them, I cannot take their claims seriously.

Do literary critics make any falsifiable statements at all, asks anonymous.  Well, the simple answer is that of course they may very possibly do so.  A literary critic who calls John Steinberg the finest English satirist of the earlier eighteenth century can reasonably be said to have mistaken Steinberg for Swift, perhaps because of the similarity of their first names.  And another who describes War and Peace as a trenchant Spanish novella has also clearly gone astray.

But that is not what anonymous means.  He [?] means, are their literary analyses factual assertions capable of falsification?  Are they aesthetic judgments answerable to some defensible norms of interpretation?  Or with them, as the Cole Porter song says, is it that Anything Goes?

To answer this question, we need to be a bit clearer about the function of literary [or musical] criticism, or indeed of any sort of aesthetic criticism.  Opinions differ, needless to say, but my own view is as follows.

The primary activity in the field of art is the creative effort of the artist.  That effort produces a poem, a tragedy, a novel, a painting, a sculpture, a carving, a dance, a symphony, a song, or some other object or action or installation that is intended as an act or product of creativity.  The work of art may be offered to an audience to be experienced, appreciated, enjoyed, reviled, exalted, condemned, or whatever. 

There is no limit to what can count as art, and there is no authority who gets to say what is and what is not real art.  Some efforts to create art will be welcomed and enjoyed, celebrated and revered by others.  Some efforts will, as David Hume said of his immortal Treatise, “fall stillborn from the presses.”  Some will never be recognized as art by anyone else, and some may even not be intended to be shared with anyone other than the creator.

The function of the literary critic, insofar as literary critics have any function at all, is to say things about a work of literary art that readers or listeners may find illuminating, insightful [or inciteful], helpful, amusing, profound, scholarly, shrewd.  At its best, literary criticism may improve the experience of reading a text.  At its worst, literary criticism can all but ruin a reader’s enjoyment of a text.

Think of literary critics as akin to those audio guides that some museums offer to their visitors, for a price.  If you want someone’s opinion of what you are looking at, rent one.  But there is nothing stopping you from simply walking through the galleries on your own.

My interpretation of The Color Purple was offered in that spirit.  If you find it suggestive, I am gratified, but for heaven’s sake, do not view it as a substitute for reading the novel!