Thursday, October 31, 2013

Populist Solutions?

populism: the political doctrine that supports the rights and powers of the common people in their struggle with the privileged elite.

Here, from Michael A. Fletcher of the Washington Post, another dismal report on what’s happening to our middle class:
A majority of Americans with 401(k)-type savings accounts are accumulating debt faster than they are setting aside money for retirement, further undermining the nation’s troubled system for old-age saving. . .Three in five workers with defined contribution accounts are “debt savers,” . . . meaning their increasing mortgages, credit card balances and installment loans are outpacing the amount of money they are able to save for retirement.
Most of these folks are over 40, college educated and earning more than $50,000 a year. According to Mike McNamee of the Investment Company Institute, which represents mutual funds, these people fail to consider their “full balance sheet and financial picture, which for many households may mean saving for retirement through a 401(k) plan while also paying down student loans, taking out a mortgage to buy a house, or borrowing to send their children to college.” So they end up with debt outstripping retirement savings.
We have documented middle class pain. It’s time for solutions. What follows are three, from individuals I admire.   
  • Go for “Less Government, More Responsibility” 
Thomas Sowell
Thomas Sowell, at Stanford’s Hoover Institution, is a bright man unimpressed with the value of intelligence. He just wants power passing to the people instead. Sowell  writes:
If the preconceptions of the Left were correct, central planning by educated elites who had vast amounts of statistical data at their fingertips and expertise readily available, and were backed by the power of government, should have been more successful than market economies where millions of individuals pursued their own individual interests willy-nilly. But, by the end of the 20th century, even socialist and communist governments began abandoning central planning and allowing more market competition.
Yet this quiet capitulation to inescapable realities did not end the noisy claims of the Left. In the United States, those claims and policies have reached new heights, epitomized by government takeovers of whole sectors of the economy and unprecedented intrusions into the lives of Americans, of which Obamacare has been only the most obvious example.
In the same vein, Sowell adds:
Those we call "public servants" have in fact become public masters. And they act like it. They squander ever more vast amounts of our tax money, and still leave trillions of dollars of national debt to be paid by our children and grandchildren. They intrude into our private lives with ever more restrictions, red tape and electronic surveillance. And they turn different groups of Americans against each other with class warfare rhetoric and policies. . . we have . . . a Congress and an ever growing federal bureaucracy composed of people who have become a permanent ruling class.
  • Regain Economic Growth 
Robert Samuelson
Sowell wants government’s role reduced so that the market economy can work.  Washington Post columnist Robert Samuelson knows that what best helps people is economic growth, and that we suffer terribly today because growth has slowed:
Economic growth . . . encourages lending because borrowers can repay from rising incomes. It supports bigger government because a growing economy expands the tax base and makes modest deficits bearable. Despite recessions, it buoys public optimism because people are getting ahead. The presumption of strong economic growth supported the spirit and organizational structures of postwar America.
Everyday life was transformed. Credit cards, home equity loans, 30-year mortgages, student loans and long-term auto loans (more than 2 years) became common. In 1955, household debt was 49% of Americans' disposable income; by 2007, it was 137%. Government moved from the military-industrial complex to the welfare state. In 1955, defense spending was 62% of federal outlays, and spending on "human resources" (the welfare state) was 22%. By 2012, the figures were reversed; welfare was 66%, defense 19%.
In our slow growth economy, the welfare state is devouring us. But Samuelson is worried it will be hard to achieve change. We won’t have growth, yet we won’t give up on the need for growth:
As economist Stephen D. King writes in his book When the Money Runs Out -- The End of Western Affluence: "Our societies are not geared for a world of very low growth. Our attachment to the Enlightenment idea of ongoing progress -- a reflection of persistent postwar economic success -- has left us with little knowledge or understanding of worlds in which rising prosperity is no longer guaranteed."
While annual U.S. economic growth has averaged slightly more than 3% since 1950, predictions of future growth cluster around 2%, with the forecasted slowdown tied to more permanent factors than the Great Recession. According to Cato Institute economist Brink Lindsey:
U.S. economic growth [was due] to four factors: (a) greater labor-force participation, mainly by women; (b) better-educated workers, as reflected in increased high-school and college graduation rates; (c) more invested "capital" per worker (that's machines and computers); and (d) technological and organizational innovation. The trouble, [Lindsey] writes, is that "all growth components have fallen off simultaneously."
Samuelson believes
What looms -- it's already occurred in Europe -- is a more contentious future. Economic growth serves as social glue that neutralizes other differences. Without it, economic and political competition becomes a game of musical chairs, where "one person's gain is another's loss," King writes.
We need economic growth. How do we get it back?
  •   Help the Middle Class 
Joel Kotkin
Joel Kotkin, a geographer at California’s Chapman University, of the three thinkers is the most focused on helping the middle class, not the wealthy. Kotkin is a true populist. Kotkin writes:
the top 1% of earners garnered more than 90% of the income growth in [Obama’s] first two years, compared with 65% under George W. Bush. . . the greatest inequality was found in the nation's megastates – California, New York, Florida and, yes, Texas. At the metropolitan level, generally the worst income gaps were found in some of our biggest metros, such as first New York, followed by Miami, Los Angeles, Houston and San Francisco, as well as New Orleans.
California is producing. . . billionaires, three times as many as in regularly faster-growing Texas, but the middle class . . . now constitutes less than half California's population. The state also suffers the highest rate of poverty in the country and is now home to roughly 1/3rd of the nation's welfare recipients, equal to almost three times its proportion of the nation's population.
Remember when you thought California represented America’s future? If it still does, we are in trouble. Kotkin is interested in the “why” of other parts of the country being more equal, more nurturing of our middle class:
ethnicity, something discussed more emotionally than logically[, seems to explain equality]. The least inequality. . .occurs within . . . the “Germanic belt” that extends from large parts of Pennsylvania, across the northern Great Lakes and the Plains, all the way to the Pacific Northwest, as well as Utah; many Mormons are of German, Scandinavian and other northern European stock.
The “Germanic belt” areas . . . tend to emphasize education, most importantly, at the grade school level. The best science scores among eighth-graders, according the National Educational Assessment, are found almost totally in the northern-tier, heavily Germanic region of the country. Northern European redoubts such as Minnesota, the Dakotas, Montana, Utah and northern New England all scored best.
Washington and Oregon also score relatively well on the science tests, and rank among the most egalitarian areas of the country. These areas, along with the San Francisco Bay Area, also attract high levels of Asian immigrants, people who, like German-Scandinavians, tend to stress education and generally have prospered more than the norm.
So Kotkin would argue we do need government support of education, though probably not of the industrial-era-government-school model currently inflicted on so many young Americans. We have to combat the growing distance between the elite and the rest of us:
“trickle down” economics, as practiced now by the Fed and celebrated on Wall Street, clearly does not improve life for most people. If we follow this approach, we could very well end up, as economist Tyler Cowen suggests, with a country where 85% of the population struggles while 15% enjoys unprecedented high standards of living.
under the current liberal regime, the prospects for the poor and working class have decreased markedly while the wealthy, often villainized by the administration, have luxuriated. During much of the tenure of the first black president, the gap between Anglo incomes on the one side and those of blacks and Hispanics has widened, doubling since the Great Recession.
Like Sowell and Samuelson, Kotkin encourages broader-based economic growth. But Kotkin also calls for “nurturing fundamental values of education, family and social engagement,” values he sees in the “Germanic belt” and among Asian Americans.

Kotkin implies it comes down to culture.

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