Let's start with a cartoon:
First, we turn to chatter about the 2016 presidential election. First, the Washington Post's Jennifer Rubin argues they need to step up their game on poverty:
A realistic view of the 21st century and a recognition of the problems wrought by an expanding liberal welfare state should cause conservatives to rethink the simplistic notion that growth automatically solves poverty. As reform conservatives advocate, there is more to promoting upward mobility than lowering top marginal rates, reducing regulation and encouraging exports — although those are positive goals. Republicans need to stand for a cohesive set of principles that promote work, reform education, support intact families and allow local and private anti-poverty groups to operate effectively. [The Manhattan Institute's] Scott Winship writes, “By advocating an attractive, reform-minded anti-poverty agenda, conservatives have a chance to do what Great Society liberalism did not—increase upward mobility out of poverty and into the middle class. A conservative anti-poverty agenda must build on the past success of work-promoting welfare reforms while addressing their shortcomings. In so doing, it could help beneficiaries of aid take the initiative to move into the world of work and thereby reap the benefits of employment and self-sufficiency.”
In the New Republic, Danny Vinik contends Republican candidates and some economists have difficulty deciding whether to focus on inequality (a growing meme globally) or economic mobility. Meanwhile, the New York Times looks at Republican views on inequality and find that candidates are more likely to align with views of the wealthy:
[According to a 2013 paper] only 13 percent of wealthy interview subjects said the government should “reduce the differences in income between people with high incomes and those with low incomes.” Only 17 percent said the government should “redistribute wealth by heavy taxes on the rich.”
...More recently, [another set of interviews found that] the rich tend to see inequality “as a story about individual hard work, effort and character.”
They recognize that growing up poor puts workers at a disadvantage but argue that a middle-class background presents no barrier to economic success and that growing up wealthy can even be a liability because it robs people of their incentive to work hard. In general, Ms. Chin has found, the rich regard those who do not succeed in life as “people who didn’t take advantage of the education system,” not victims of circumstances beyond their control.
Medium report on a new paper making waves by a young person from MIT, who says Thomas Piketty's book from last year sounding the alarm on inequality misses point. Matthew Rognlie argues that rather than "the idea that rich capitalists have an unfair ability to turn their current wealth into a lazy dynasty of self-reinforcing investments," the trend is being driven entirely by housing:
Land/housing is really one of the only investments that give wealthy people a long-term leg up. According to the Economist, this changes how we should rethink policy related to income inequality.
Rather than taxing businesses and wealthy investors, “policy-makers should deal with the planning regulations and NIMBYism that inhibit housebuilding and which allow homeowners to capture super-normal returns on their investments.” In other words, the government should focus more on housing policy and less on taxing the wealthy, if it wants to properly deal with the inequality problem.
Meanwhile former White House adviser Peter Orszag over at Bloomberg View attempts to debunk what he says are three misconceptions about inequality and goes on to suggest the data shows an entirely different narrative.
Promote the General Welfare
And now a bit of tragic silliness: A while back Fox News did a story of an able-bodied young man who receives $200 a month in food stamps, which he claims to spend on steak, sushi and lobster. Missouri lawmakers are seeking to right this wrong by creating a list of foods that would be prohibited from being purchased with the subsidy, reported the Washington Post's Wonkblog last Friday. In another Wonkblog post, Emily Badger looks at all the other government subsidies for which there are no strings attached and says that this may be going a bit far:
There's virtually no evidence that the poor actually spend their money this way. The idea that they do defies Maslow's hierarchy — the notion that we all need shelter and food before we go in search of foot massages. In fact, the poor are much more savvy about how they spend their money because they have less of it (quick quiz: do you know exactly how much you last spent on a gallon of milk? or a bag of diapers?). By definition, a much higher share of their income — often more than half of it — is eaten up by basic housing costs than is true for the better-off, leaving them less money for luxuries anyway. And contrary to the logic of drug-testing laws, the poor are no more likely to use drugs than the population at large... We rarely make similar demands of other recipients of government aid. We don't drug-test farmers who receive agriculture subsidies (lest they think about plowing while high!). We don't require Pell Grant recipients to prove that they're pursuing a degree that will get them a real job one day (sorry, no poetry!). We don't require wealthy families who cash in on the home mortgage interest deduction to prove that they don't use their homes as brothels (because surely someone out there does this). The strings that we attach to government aid are attached uniquely for the poor.
If you missed it before (or tried to click on it but found the link faulty), be sure to check out your editor's piece on growing up on welfare. And you also might want to check Linda Tirado's new book,"Hand to Mouth, Living in Bootstrap America," an expanded view of her poverty experiences, which went viral in 2013. Her piece in the Guardian last year explains in part the healthy food issue and why poor people eat junk food:
I know how to cook. I had to take Home Ec to graduate from high school. Most people on my level didn’t. Broccoli is intimidating. You have to have a working stove, and pots, and spices, and you’ll have to do the dishes no matter how tired you are or they’ll attract bugs. It is a huge new skill for a lot of people... We have learned not to try too hard to be middle class. It never works out well and always makes you feel worse for having tried and failed yet again. Better not to try. It makes more sense to get food that you know will be palatable and cheap and that keeps well. Junk food is a pleasure that we are allowed to have; why would we give that up? We have very few of them.
The Wall Street Journal recently featured the differences in the ways the wealthy and poor spend their money. Check out this chart:
Higher-earning consumers spend less on housing, food and health care. (They spend more total dollars in these categories, but because of their higher incomes, such purchases are a smaller share of their expenditures.) Transportation, however, takes up a bigger share of expenditures for those in the middle, and less for the lowest-earning households. This group in the middle is the biggest beneficiary of falling gas prices. Education follows a U-shaped pattern, taking up the largest share of expenditures for those at the bottom and top of the distribution. As families become richer, they spend a little bit more on entertainment, but significantly more on financial products such as insurance, annuities and retirement programs.
Surprise, the poorer you are the more likely your biggest expenses will be food and shelter. The piece also charted incomes by source:
Politico's Brian Mahoney contends that some big corporations seem to be taking a more liberal note:
With McDonald’s following Wal-Mart, Target, TJ Maxx and Marshall’s in raising wage minimums, big companies are buckling under pressure to address the problem of wage stagnation and workplace issues... Business imperatives drive some of the changes in corporate attitudes. Aetna, for example, believes it will need a more highly skilled sales force to serve the new “consumer-centric” marketplace created by Obamacare. Low-wage employers are also feeling pressure from a tightening in the low-wage labor market, the result at least in part of minimum wage increases enacted last year in 15 states under pressure from, among others, Fight For $15. Higher state wage minimums reduce, incrementally, the likelihood that workers will seek new work. Regulatory pressure is also having an effect. McDonald’s has a strong interest right now in demonstrating corporate goodwill toward employees because the National Labor Relations Board, led by Obama appointee Richard Griffin, is trying to hold the company jointly liable for illegal reprisals, including firings and reduced hours, allegedly leveled by franchisees against Fight for $15 protesters in 2012.
You may also be interested in this story from the Washington Post about a minimum wage worker who lost her job after speaking to one of their reporters about her pay circumstances. A new Center for American Progress report says beware those rosy unemployment numbers because there are lots of people who want jobs no longer being counted among the unemployed. Check out this chart:
Also in the Washington Post, Robert Samuelson looks at the aspirations of full employment, which he contends is primarily a liberal notion, but has gained some traction on the right:
Given the uncertainties, the Fed should now err on the side of job creation. Inflationary pressures are scant; the economy’s strength seems fragile. Call it “the pursuit of full employment,” or whatever. It merely acknowledges that the economy is still recuperating from the “Great Recession.” But we shouldn’t delude ourselves: What’s justified in the short run won’t work in the long run. Ensuring permanent “full employment” in a “high-pressure economy” is a seductive goal. It’s also utopian. It exceeds our powers of economic management. The promise of constant full employment poses internal contradictions. If people believe that prosperity is guaranteed, they will behave in reckless ways that destroy prosperity. This happened in the 1960s with inflationary psychology, in the late 1990s with the tech bubble and in the 2000s with the housing crash. Societies that sow unrealistic expectations will reap destructive disappointments.
In a trio of commentary in the Chronicle of Philanthropy, experts in the nonprofit sector take a look at the Council on Foundation's competition controversy featured in the last ICYMI post. The debate focuses on the role of market and how decisions get made about grantmaking and who makes them. NYU's Paul Light takes on the notion that nonprofits can't hack it in the market:
I am currently studying 1,200 of these nonprofits and can already attest that they are all skilled market managers who know the difference between fashion and fad. Many have already won prizes for their work and know how to give a winning pitch, set a stretch goal, manage long, and ethical supply chains and are comfortable talking about all kinds of for-profit approaches...At the same time, many are keeping track of the rule breakers who created so much economic inequality. They are especially wary of the investment banks that gamed the debt market, bet against the financial innovations that continued to sell, accepted the federal government’s market-distorting bailouts, and are now driving the social-impact bond market...Asked if they are comfortable with market rules, these nonprofits would almost certainly reply that the answer depends on which markets and which rules.
Also to tie to the last post is this piece by Nicholas Kristoff looking Wall Street trader Matt Wage's effort to donate half his wages to charity as part of the effective altruism movement. Also in the Chronicle, we have a piece on Apple's stepped up corporate giving:
This month, the company announced a $50 million gift to promote technology training for women and minorities. More than $40 million of the donation will go to the Thurgood Marshall College Fund to support technology training at historically black colleges and universities and to create a database of gifted tech students at those institutions. The remainder will go to the National Center for Women and Information Technology. Apple hopes the gift will establish a pipeline of women and minority technology workers to fill jobs in the company’s Cupertino, Calif., headquarters and its other corporate offices. Those announced gifts pale in comparison to the size of the tech colossus, which last year paid out $11 billion in shareholder dividends and notched a profit of $39.5 billion on sales that reached nearly $183 billion.
Former Labor Secretary Robert Reich is back with a piece in Huffington Post about whether "big money" donations are quashing criticism:
It's bad enough big money is buying off politicians. It's also buying off nonprofits that used to be sources of investigation, information, and social change, from criticizing big money.
Your editor and colleagues believe all enterprises have social aspects (positive and negative). So we were happy to see this piece over PWC Strategies from Eric McNulty arguing that social responsibility is no longer optional for companies:
The growing trend for business leaders to embrace solving social problems and behaving more responsibly is unmistakable. It is commendable, and I applaud it. But it also reminds me of the old quip that Columbus didn’t discover America because it was already there. The notion that businesses operate in a bubble where they can pick and choose their responsibilities — where they can pretend their own microeconomic reality that operates independently of macroeconomics, public health, and environmental sustainability — defies both common sense and reality. The increasingly obvious impact of climate change is just one piece of hard-to-ignore evidence.
He goes on to attempt to counter the following four misconceptions such as whether a business needs a social mission, or that shareholders hold special status, or that "capitalist business practices to the world’s most intractable social problems will solve them."