Thursday, September 07, 2006

The Republican Myth of the Good Economy

Reading David Brooks is like heartburn to me--a long, persistent ache that's not debilitating but sure as hell puts you in a bad mood. I try to do it very little, but every so often I venture in, when, as today, I found myself reading The New York Times for relaxation during the evening.

And then there was the fact there was only one editorial today, which is pretty slim pickins, so with a heavy heart and stomach acid bubbling, I waded into "The Populist Myths on Income Inequality."

So, has Mr. Brooks wised up at all to the fact that income inequality is a growing problem in the US, and potentially troublesome to his Republican party, who've been winning elections on the strength of economically squeezed blue collar social conservatives? After all, the space his drivel occupies is shared not only by Paul Krugman but also, for the last month, by Thomas Frank. Well, in short the answer is no. As it turns out, only the rabble-rousing "populists" actually believe there's a problem. Favorite snotty, derisive comment: " The populists, who usually live in university towns, paint a portrait of unrelieved misery that badly distorts reality."

Really? That's a fascinating position, Mr. Brooks, do you care to explain exactly how we're all wrong?

"First, workers over all are not getting a smaller slice of the pie. Wages and benefits have made up roughly the same share of G.D.P. for 50 years."

Interesting point. Isn't that same period the one that saw the percentage of Americans in the work force explode due to women's lib? And what about all those illegal immigrants in the work force whom your party doesn't want there? This is same twisted logic that Republicans used to claim success for the student financial aid program expansion earlier this year: let more people in but don't increase funding. More people getting smaller pieces of the pie. Brilliant!

"Second, offshore outsourcing is not decimating employment. According to the Bureau of Labor Statistics, outsourcing is responsible for 1.9 percent of layoffs, and the efficiencies it produces create more jobs at better wages than the ones destroyed."

That's a fascinating point: let's skip towards the end of Mr. Brooks's argument. "Members of the second and much more persuasive school of thought on inequality say the key issue is skills. Lawrence Katz, formerly of the Clinton administration, now of Harvard, puts it this way: Across many nations, the market increasingly rewards people with high social and customer-service skills."

Huh. Really... Skills. You see, Mr. Brooks is using a pretty lame straw man argument: claim that we're saying outsourcing leaves people unemployed. Not true. The problem with outsourcing et al. is tied to its most basic economic tenet: comparative advantage. Well-paid American unionized manufacturing plant worker has a set of skills but is expensive, so the company moves operations to China where costs are lower. See, it's because the American worker is at a comparative disadvantage. That is, the problem with outsourcing is not that it leaves hundreds unemployed permanently, but that it targets well-paid American workers, mitigating the benefits of their skills and pushing down their earnings as they move into lower-paid jobs, which they can rarely escape because education and retraining are expensive.

Which brings us back to: "Fifth, declining unionization has not been the driving force behind inequality." An interesting question. Actually, unions often accept some responsibility for the cost of training their workers, it's called an "apprenticeship." Republicans frequently love to criticize unions as making the labor force inflexible, a claim to which there is some truth. But it's also true that unions serve as excellent way to train workers in new skill sets while they work by paying them fractional equivalents of full wages for their job. So why do Republicans hate unions? After all, Mr. Brooks's solution to what little problem he admits exists is effectively, "more money for retraining." "In short, government policy is not driving inequality and wage stagnation. But government hasn’t done much to effectively address the problem either, even though per-capita education spending has more than quadrupled since 1950."

Well, the reason Republicans don't want unions to play a role is because they don't like them. Same reason they don't support universal health coverage, which would actually help make America more competitive on the international stage because it lessens the burden of being unemployed and actually makes workers more flexible because they don't receive a punitive period of being uninsured after moving jobs. (Then there's the entire economic efficiency argument which holds that more preventive medicine and less paperwork and overhead would save billions a year, but whoever accused Republicans of actually being good at economics?) Republicans see unions as the devil: they support Democrats, help workers demand flexibility on the part of their employers (strange how businesses need to be granted flexibility on everything except employment, in which case all the flexibility is demanded of the workers, isn't it?) and guarantee higher wages (once again, employers need the flexibility never to do that; that's why Congress every year grants more H1-B visas, rather inflexible work visas that tie workers to their employer and are particularly used by the high tech sector to keep the market for jobs extremely competitive and thus suppress wage gains).

But to return to our sheep, as the French say, I believe I skipped two of Mr. Brooks's five ingenious points. "Third, jobs are not more insecure. Workers are just as likely to hold a job for 20 years as they were in 1969. Fourth, workers are not stuck in dead-end jobs. Social mobility is roughly where it was a generation ago."

Third point may be roughly true, but what does that prove, and what does that have to do with economic inequality? As for the fourth, that claim--which he chooses not to support--is highly debatable. First, I would point out that the last year in which the real wage of the American middle-class increased was 1974, so the claim that "Social mobility is roughly where it was a generation ago" is perfectly true, and that's the problem. He acts like we've all given up on how shitty a president Ronald Reagan was and bought the Republican line that his voodoo economics actually worked; they didn't, they sucked. And so did Clinton's. Only short-term evidence from the late 1990s ever showed real economic gains; more analysis of the data suggests that quite the opposite, over time there were no significant gains.

An insightful and little noticed article on this subject appeared a couple years ago in The New Republic ("False Positive," Jacob S. Hacker, Ph.D., 8/16/04).

"[I]n area after area, there's evidence of a vast shift in the economic security of most Americans--a massive transfer of financial risk from corporations and the government onto families and individuals," he writes. "This great risk shift has gone surprisingly underreported. Though we've heard about economic hardship, most of the stories concern static measures--poverty, inequality, wages, joblessness. That's in large part because no standard economic statistic tries to assess the stability of family income...What has become clear from [my] research is that family incomes rise and fall a lot--far more than one would suspect just looking at income-distribution figures. As a result, a surprisingly big chunk of U.S. income inequality--perhaps as much as half--is due to transitory shifts of family income, rather than permanent differences across families."

So, damn it, I've spent an hour researching a ranting response to that jackass David Brooks! My apologies. I shouldn't get so upset by someone whose facts are so painfully wrong. The purposeful obfuscation is glaring, which is was so funny to go online and find Paul Krugman's Friday column already up, which begins something like this:

"We are, finally, having a national discussion about inequality, and right-wing commentators are in full panic mode. Statistics, most of them irrelevant or misleading, are flying; straw men are under furious attack. It’s all very confusing — deliberately so."


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