In Case You Missed It: The Fragile American Safety Net

In Case You Missed It

In this issue, our miserable 21st Century, manufacturing in America, the junk food stamp debate, shrinking Medicaid and market making in impact investing.

In this issue, our miserable 21st Century, manufacturing in America, the junk food stamp debate, shrinking Medicaid and market making in impact investing.

The Manufacturing Debate

In Commentary Magazine, Nicholas Eberstadt looks at why the 21st Century is turning miserable:

It turns out that the year 2000 marks a grim historical milestone of sorts for our nation. For whatever reasons, the Great American Escalator, which had lifted successive generations of Americans to ever higher standards of living and levels of social well-being, broke down around then—and broke down very badly.

The warning lights have been flashing, and the klaxons sounding, for more than a decade and a half. But our pundits and prognosticators and professors and policymakers, ensconced as they generally are deep within the bubble, were for the most part too distant from the distress of the general population to see or hear it. (So much for the vaunted “information era” and “big-data revolution.”) Now that those signals are no longer possible to ignore, it is high time for experts and intellectuals to reacquaint themselves with the country in which they live and to begin the task of describing what has befallen the country in which we have lived since the dawn of the new century...

In our era of no more than indifferent economic growth, 21st–century America has somehow managed to produce markedly more wealth for its wealthholders even as it provided markedly less work for its workers. And trends for paid hours of work look even worse than the work rates themselves. Between 2000 and 2015, according to the BEA, total paid hours of work in America increased by just 4 percent (as against a 35 percent increase for 1985–2000, the 15-year period immediately preceding this one). Over the 2000–2015 period, however, the adult civilian population rose by almost 18 percent—meaning that paid hours of work per adult civilian have plummeted by a shocking 12 percent thus far in our new American century.

This is the terrible contradiction of economic life in what we might call America’s Second Gilded Age (2000—). 

Will automation take away jobs? Check out this Ted Talk with author David Autor:

The New York Times has a set of features on the future of work. Binyamin Appelbaum looks at why policy proposals for American jobs are off the mark:

Forget the images of men in hard hats standing before factory gates, of men with coal-blackened faces, of men perched high above New York City on steel beams. The emerging face of the American working class is a Hispanic woman who has never set foot on a factory floor. That’s not the kind of work much of the working class does anymore. Instead of making things, they are more often paid to serve people: to care for someone else’s children or someone else’s parents; to clean another family’s home.

The decline of the old working class has meant both an economic triumph for the nation and a personal tribulation for many of the workers. Technological progress has made American farms and factories more productive than ever, creating great wealth and cutting the cost of food and most other products. But the work no longer requires large numbers of workers. In 1900, factories and farms employed 60 percent of the work force. By 1950, a half-century later, those two sectors employed 36 percent. In 2014, they employed less than 10 percent...

The wages of service work increasingly determine the welfare of the American working class and, to a substantial degree, the broader economy. But politicians have paid little attention. That’s partly because Americans continue to view service work as a way station, not a way of life. Teenagers get their first job at McDonald’s; mothers dip back into the work force as receptionists; seniors make a little extra money as Walmart greeters. The reality is that these are the kinds of jobs millions of Americans hold for their entire working lives.

In the Weekly Standard, Tony Mecia looks at whether manufacturing jobs can be made in America again using Charlotte, NC as an interesting case study:

With the new administration just starting to spell out its manufacturing agenda, it's too early to guess whether the effort will unleash a new era of prosperity for workers left behind in the anemic recovery, envelop the United States in a disastrous trade war and recession, or land us somewhere in between. What seems more certain is that whatever the policies from Washington, new jobs in manufacturing are unlikely to resemble those of the past. They're not going to be the low-wage, low-skill, repetitive-motion factory jobs that we remember from the opening sequence of Laverne & Shirley (brewery) or the end of An Officer and a Gentleman (paper mill). The jobs are more likely to be like Philbeck's: high-skill, solid wage, with at least some college and brainpower required...

"This notion that we can bring manufacturing jobs back to this county to levels like we had in the '80s, that just can't happen," says Donny Hicks, longtime executive director of the Gaston County Economic Development Commission, which recruits companies to the area. "Can we bring it all back? No. Can we do a better job of keeping what we have? Yes. .  .  . For so long, the manufacturing sector has been used as a chip for other political agendas. We gave up a lot we didn't have to give up."

You might interested in this essay from former Trump economic adviser John Paulson in Foreign Affairs on why reforming corporate tax policy should be used to jump start growth. Speaking of safety nets, in the National Review George Will says beware the issues with pensions:

Pensions, including those of private companies, are being buffeted by a perfect storm of adverse events: People are living longer. Economic growth is persistently sluggish. Bond yields have declined dramatically during seven years of near-zero interests rates, which produce higher valuations of equities, lowering the future returns that can be realistically expected. As of last August, the Financial Times reported that pensions run by companies in the S&P 1500 index were underfunded by $562 billion — up $160 billion in just seven months.    

The generic problem in the public sector is the moral hazard at the weakly beating heart of what Walter Russell Mead calls the “blue model” of governance — the perverse incentives in the alliance of state and local elected Democrats with public employees’ unions. The former purchase the latter’s support with extravagant promises, the unrealism of which will become apparent years hence, when the promise-makers will have moved on. The latter expect that when the future arrives, the government that made the promises can be compelled by law or political pressure to extract the promised money from the public.

The Fragile Safety Net

Let's have a cartoon:


Congress held hearing this week on whether junk food should be excluded from the food stamp subsidy, reported Heather Haddon and Annie Gasparro in the Wall Street Journal:

Food stamps currently allow low-income beneficiaries to purchase anything edible other than hot meals, tobacco and alcohol. About 20% of food-stamp dollars are spent on sweetened beverages, desserts, salty snacks, candy and sugar, according to a November report by the U.S. Department of Agriculture, based on 2011 sales at a national retailer.

On Thursday, some members of Congress and researchers told a hearing that food stamps distributed by the Supplemental Nutrition Assistance Program, or SNAP, shouldn’t fund purchases of junk food. Others say possible restrictions wouldn’t change eating habits and would place undue burden on retailers to act as food police...

There has been no significant legislative action on food stamp restrictions since the Food Stamp Act of 1977, but last year the House held 16 hearings related to overhauling SNAP, which culminated with a report in December that mentioned taking a new look at what foods and beverages should qualify.

In the Washington Post, Charles Lane argues that it makes no sense for "liberals" to oppose such restrictions:

[A] report, published in November, found that SNAP households spend 20 percent of their benefits, typically about $255 per monthper household, on sweetened beverages (including both sodas and non-fizzy drinks), desserts, salty snacks, candy and sugar...

Those who argue for the SNAP status quo may do so with good intentions, because they fear that airing concerns about SNAP’s junk-food subsidy plays into the hands of conservative budget-cutters looking for reasons to gut the program.

The opposite is just as likely to be true: A SNAP purged of sodas or candy, or both, could be less vulnerable to cuts.

Supporters could seek full funding, not in unholy de facto alliance with Big Junk Food, as they do now, but armed with a truly compelling argument: Every dollar for SNAP will help nourish the poor, just as Congress intended.

Over at Mother Jones, Tom Philphott looks at a debate started in a recent New York Times article by Anahad O'Connor and the scrutiny on junk food amounts to poor people shaming. "The report found that 'there were no major differences in the expenditure patterns of SNAP and non-SNAP households, no matter how the data were categorized.'"

Meanwhile, the fate of Medicaid and its ties to the Affordable Care Act is also up for debate and some folks are not happy with the proposals of the GOP-led Congress. In the New Yorker, John Cassidy calls it a shameful assault:

Under the outline released on Thursday, the current Medicaid system would be replaced by block grants to the states, and the extra federal money that went to Medicaid as part of the A.C.A. would gradually be removed. In effect, the Medicaid expansion would be slowly suffocated...

For some reason, this fact has received less attention than other elements of the Republicans’ approach, such as the replacement of subsidies with tax credits. But in many ways the expansion of Medicaid has been Obamacare’s most successful element. Since the start of 2014, more than sixteen million Americans have been added to the rolls of Medicaid and CHIP, the children’s version of the program. That’s more than the roughly 12.7 million people who bought private insurance plans on government-run exchanges in 2016. The expansion was targeted at working families who aren’t officially in poverty but don’t earn enough to buy even subsidized private insurance plans—roughly speaking, these are households earning less than thirty-five thousand dollars a year—and it has been popular, uncontroversial, and cost-effective. Rolling it back would be cruel, and wrong.

In GQ, Jay Willis grouses the proposal does not even pretend to care about poor people:

When the proposal (misleadingly) grouses about the injustice of providing Medicaid coverage to "able-bodied adults," it pointedly ignores the fact that said adults had no coverage before the ACA. Similarly, tying benefits to age isn't inherently irrational, since older people tend to incur higher healthcare costs. But eliminating the means test callously ignores what I thought was one of the foundational tenets of life in a developed democracy, which is that poor people shouldn't die because they can't pay for healthcare. America, your legislature apparently does not feel the same way.

You might also be interested in this New Yorker piece on what the Trump administration's "America first" governance might mean for the world's poorest places. Also of interest may be this Grist article on the bad air plaguing public schools.

Noodling on Giving

In the Stanford Social Innovation Review, MacArthur's Julia Stasch says impact investing needs more market makers:

I do not mean that only in the conventional sense of standing between buyers and sellers to facilitate transactions. I am talking about institutions that work globally across multiple sectors to raise, structure, and deliver flexible capital to high-impact enterprises and funds. The field needs players who understand what investors and capital seekers need, and how to bridge even the most challenging capital gaps. They can unlock and accelerate investments with an eye toward maximizing impact, not just profit...In addition to our traditional grantmaking of about $250 million each year, we have expanded our impact investing strategy, working in new ways and tapping a dedicated pool of $500 million to help make the global impact investment marketplace more inclusive, efficient, and effective. Our goal is to drive impact well beyond what we can achieve with our capital alone, and to create high-impact investment opportunities for other investors who are unwilling or unable to engage on their own.

You might be interested to learn what Bill and Melinda Gates have been up to with the $30 billion gift from Warren Buffett. The gift they said "doubled the foundation’s resources" and allowed them "to expand our work in U.S. education, support smallholder farmers, and create financial services for the poor."

In a shocking twist, sixteen of the world's largest asset managers called on the G20 to begin phasing out use of fossil fuels within three years, reports the Independent. "Many members of the group, which includes Aegon Asset Management, Aviva Investors, Legal and General and Trillium, hold significant investments in fossil fuel companies but said a clear policy signal that clean energy will be backed would give them the confidence to shift their billions into renewables."



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