In this issue, disabilty benefit growth, better 'free' college policy, the cost of noncompliance, the middle class drug crisis, and research on data and society.
You might want to read or listen to this report from NPR's Chana Joffe-Walt on the growth of disability benefits, the incentives to move people from welfare to Social Security. "Somewhere around 30 years ago, the economy started changing in some fundamental ways," Joffe-Walt writes. "There are now millions of Americans who do not have the skills or education to make it in this country. Politicians pay lip service to this problem during election cycles, but American leaders have not sat down and come up with a comprehensive plan. In the meantime, federal disability programs became our extremely expensive default plan."
In CFR's Renewing America blog, economist Michael Spence looks at how to deliver on the promise to the middle class:
[T]he public-sector investment in infrastructure and human capital that Trump has promised, if properly targeted, would raise returns on – and thus the level of – private-sector investment, with tax and regulatory reform providing an additional boost. Some renegotiation of trade and investment agreements could also help to redistribute the costs and benefits of globalization, though any changes should fall well short of protectionism. And the impact of the Trump administration’s economic policies is likely to be buoyed by the economy’s natural structural adaptation to technological development.
But this will not be enough to combat the forces that have been squeezing American workers. Even if the Trump administration manages to boost economic growth, thereby diminishing the “surplus labor” effect and generating jobs, the labor market will struggle to keep up. At a time of rapid and profound technological transformation, the US also needs a strong commitment from the public and private sectors to help workers adapt.
Spence also talks about heavily investing in education. New York recently annouced tuition-free college but only if students work in state for a period matching their scholarhsip or it will be converted to a loan. Mark Huelsman argues in the Demos blog PolicyShop, that there is a better way to get value from students:
A better approach would be state-specific loan forgiveness for students who stay in-state and enter high-value, low-wage fields. This has the advantage of not being punitive, and can be tweaked over time as state economies shift. It can work in concert with federal Public Service Loan Forgiveness by providing incremental forgiveness every few years, or through some other mechanism, and it beats the bait-and-switch of a grant that turns into a loan if you move.
Bloomberg columnist Noah Smith argues that capitalism isn't going to solve the inequality problem on its own:
So far, no country has ever done very well economically without some form of market economy, and a number of countries -- for example, India and China -- have seen growth accelerate after market reforms.
But I think socialism -- meaning government redistribution, spending on education, etc. -- is also very helpful for reducing inequality. I don’t see that as incompatible with capitalism. The market economy gets taxed to pay for the redistribution and education. To levy taxes, you’ve got to have something to tax.
You might be interested to know that Amtrak is facing the loss of all of its major long-distance corridors under the proposed federal budget, which would leave even more of "flyover country" behind:
The long-haul trains, many of which pass through mountains, forests and deserts, attract their share of sightseers. But they are much more than that, especially in spread-out parts of the country where other transportation options are few, Becker said...Amtrak covered 94% of its operating costs through ticket and other revenue last year, the railroad said recently. Its operating loss of $227 million, the lowest annual loss since 1973, was covered as usual with federal tax money. The federal government also supplies the train equipment. Much or all of that loss is attributable to the long-distance trains.
Passenger rail systems in most other countries are subsidized through taxes, but some American conservatives have complained for years about Amtrak's government support.
This week United Airlines made headlines after a peaceful passenger was dragged off a plane because no one would volunteer to give up their seats to accommodate United employees. Not only was the public condemnation swift and loud, the incident led to questions about lobbying against passenger rights, casual use of police violence and what this all has to do with capitalism in the 21st Century.
In the National Review, Kevin Williamson notes that at the bottom of the public opinion scale on capitalism are health insurers, cable companies, banks and airlines, which all share a similarity--heavy regulation. In the Jacobin, Matt Bruenig argues that the incident highlights the use of violence to mantain the capitalist order:
Instead of soothing ourselves with the idea that this particular application of violence was illegitimate or extraordinary, we should instead confront it head on as a necessary feature of capitalist society. This kind of violence (or threats of it) is operating all the time...
[T]he violence is always there, lurking in the background. It is the engine that makes our whole system run. It is what maintains severe inequalities, poverty, and the power of the boss over the worker. We build elaborate theories to pretend that it is not the case in order to naturalize the human-made economic injustices of our society.
Human Right Watch issued a new report looks at the pre-trial system in California and why it is punitive to poor people:
This report concludes that California’s system of pretrial detention keeps people in jail who are never found guilty of any crime. The state jails large numbers of people for hours and days against whom prosecutors never even file criminal charges. People accused of crimes but unable to afford bail give up their constitutional right to fight the charges because a plea will get them out of jail and back to work and their families. Judges and prosecutors use custody status as leverage to pressure guilty pleas. As one Californian who went into debt to pay fees on $325,000 bail for a loved one who was acquitted said, the actors in California’s bail system are “not in it for justice.”
Those locked up pretrial are overwhelmingly poor, working class, and from racial and ethnic minorities. California’s median bail rate is five times higher than that of the rest of the country.
Speaking of taxes, over at Slate Adam Chodorow reports the IRS is now using private debt collecting services:
Currently, private parties pretending to be the IRS harass innocent taxpayers and pressure them into paying debts they don’t actually owe. The IRS never calls taxpayers, but most people don’t know this. With this new program, fraudsters won’t have to pretend to be the IRS—they can credibly claim to be private firms—and phone calls taxpayers receive might actually be legitimate. How are taxpayers supposed to distinguish between real and bogus calls from purported debt collectors?
The IRS argues that it will have communicated with taxpayers several times to inform them that they have debts and that they have been turned over to debt collectors. However, chances are that many of these taxpayers, in misguided but perhaps understandable efforts to avoid their problems, toss those letters without reading them.
In the Nation, Joelle Gamble and Aman Banerji look at the trend of privatization and what it means for the public good:
The outcomes of privately run public goods stem from a flawed logic. Public goods are meant to be accessible to anyone, regardless of their ability to pay. Yet, private firms operate to maximize profit by lowering the cost of provision and seeking opportunities to increase cash flow. The practice of privatization ensures that goods that were once accessible and affordable are now unequally and unjustly provided, fueling historic levels of inequality...Young Americans are particularly affected by the selling off of public goods to private actors. Shrinking public accountability in education, the justice system, and the economy at large means that the tenets of the social contract are under attack. We feel it in the high costs of education and the high rates of incarceration we experience. We feel it when the financial sector experiences high levels of profit while we struggle to find decent jobs.
Finally over at Vox, German Lopez looks at the response to a drug crisis when it is white and middle class:
Because the [opiod] crisis has disproportionately affected white Americans, white lawmakers — who make up a disproportionate amount of all levels of government — are more likely to come into contact with people afflicted by the opioid epidemic than, say, the disproportionately black drug users who suffered during the crack cocaine epidemic of the 1980s and ’90s. And that means a lawmaker is perhaps more likely to have the kind of interaction that Christie, Trump, Bush, and Fiorina described — one that might lead them to support more compassionate drug policies — in the current crisis than the ones of old...If there’s a lesson in any of this, it’s that people, particularly white Americans, need to do more to get out of their racial bubbles and confront their racial biases — or else they’ll risk succumbing to more policy demands and solutions that don’t account for the suffering of other communities.
Barron's Sonia Talati reports that in a couple of weeks Cambridge Associates will unveil new benchmarks for impact in real estate, infrastructure, and timber:
Benchmarks, of course, help investors measure their returns against a sector standard. Cambridge Associates is not new to this space and has already created the pioneering Impact Investing Benchmark. This benchmark tracks 56 private impact funds that invested in companies, organizations, and other funds intending to generate social and environmental impact, alongside financial returns. It shows that the 56 impact funds returned 6.9% annually to investors, below the 8.1% annual return produced by more conventional private-investment funds invested in the same types of vehicles. That’s actually not a bad result. Add in the funds’ nonfinancial “returns”—the do-good results from addressing a major social or environmental problem—and many impact investors are content with such financial returns.
Over at Medium, Omidyar's Martin Tisne discusses their investment in research on data and society:
Data & Society focuses on the social and cultural issues arising from the development of data-centric technology. Its research cuts across the themes of automation, civil rights and fairness, ethics, and privacy, and ranges from short term exploratory projects on emergent areas of interest, to longer term established initiatives focused on topics including, the role of algorithms in shaping media consumption and employment discrimination. One of its recent publications, for a project aiming to reframe debates around the rise of machine intelligence, explores the social impacts of artificial intelligence (AI) systems, and provides potential solutions to mitigate these challenges.
The Case Foundation's Rehana Nathoo looks at the future of impact investing during the Trump administration:
Profit and purpose are not partisan. Impact investing’s strength is in its purpose. It’s a call to arms to build, invest, and grow with intentionality. During this election, conversations around job creation, access to opportunity, and economic rebirth were on repeat — regardless of party affiliation. Bringing new tools that create opportunities for all Americans to flourish is the priority — for any party...
Impact investing invites all types of investors to take a seat at the table. Early impact investing has been dominated by high-net-worth individuals and families. The flexibility of their decision making, their openness to aligning dollars with values, and the lack of barriers around how to deploy that money have created an environment of experimentation.
I believe that the landscape of who can engage is changing in real time. Report after report delves into the forthcoming wealth transfer across generations. Asset ownership, familial decision making, and consumer preferences will be dictated by a growing group of values-based decision makers. Millennials are not the only demographic preparing to call the shots. My colleague Sheila Herrling wrote earlier this month about the role that women are playing in our society, in their positions as investors, employees, and consumers, to demonstrate those preferences. Even the average investor and consumer has the opportunity to try their hand at impact investing, as evidenced by more inclusive crowdfunding activity across the US and Europe.