Following Up: Why Many of America’s Widest Divides Aren’t What You Think

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college-educated, Democrats, education, Following Up, Gallup, healthcare, inequality, minorities, non-college, opportunity, partisanship, polling, polls, race relations, Republicans, whites

“An anxious and divided nation cast its first votes,” the headline in the Washington Post moaned this morning.

As yesterday’s RealityChek post reported, though, some impressive evidence came out last week showing that the nation isn’t all that anxious, or fatally divided in the most general terms, after all. At the same time, diving into that evidence’s internals shows no shortage of divisions – only many of the dividing lines are pretty surprising.  (See the PDF linked at the bottom where it says “View complete question responses and trends.”)

For not only is the most important division by far the partisan split between Democrats and Republicans. It’s a gap that tends to be considerably wider than those between groups where divides in the last few years are supposed to have been especially and worrisomely gaping – between blacks and whites, between rich and poor, between the better educated and the less well educated.

For me, the big takeaway is that when Americans are in political moods, they get carried away by their emotions, with Republicans feeling awfully chipper about the state of the nation, and Democrats correspondingly gloomy. When they’re not preoccupied with politics, Americans seem more level-headed – and their outlooks are sunnier. But the unexpected findings scarcely stop there!

For example, let’s look at the internals of the headline satisfaction finding, which shows Americans’ feelings about the quality of their lives. A lofty 84 percent of all Americans told Gallup that they’re satisfied on this score, and 37 percent said they were “very satisfied.”

Republicans were the most satisfied Americans by a wide margin – an astonishing 96 percent called themselves satisfied, and 60 percent considered themselves “very satisfied.” The least satisfied group? Democrats. Their satisfaction levels were 77 percent satisfied and only 25 percent very satisfied.

But here’s what really grabbed my attention – and should grab yours. Keep in mind that the various groups of respondents overlap considerably (for example, both Democrats and Republicans include the wealthy and the poor, and the college-educated and the high school grads; and the both the wealthy and the poor include those identifying with both political parties).

The Democrats’ satisfaction levels were lower than those for non-whites (79 percent) and for Americans with a high school education or less (84 percent). That doesn’t sound very consistent with the notion that non-whites and those with relatively modest education levels are feeling especially downtrodden lately. But these readings definitely point to special degrees of unhappiness among Democrats. So does the fact that the “very satisfied” results for both these groups (31 percent and 34 percent, respectively) topped those for Democrats as well.

The partisan divide is even bigger, in both absolute and relative terms, for satisfaction levels regarding whether working hard can get a person ahead in America these days. In toto, 72 percent of respondents were satisfied and 43 percent were very satisfied with this situation. Non-whites’ overall satisfaction and very satisfied levels weren’t too far off those figures (71 percent and 37 percent, respectively). And the figures for those holding a high school degree at most were notably higher (77 percent and 51 percent, respectively).

But the Democrats’ results were completely in the dumps (only 47 percent and 19 percent, respectively).

Also interesting – non-whites, and Americans lacking college degrees are all more convinced than the college grads (68 percent) about the payoff of working hard, with respondents with a high school degree or less expressing the highest (77 percent) satisfaction level.

Satisfaction levels are much lower in absolute terms (43 percent overall) over the distribution of income and wealth in America – which should surprise no one. But again, those lacking a high school degree were more satisfied, and by a wide margin (49 percent), while the least satisfied (also by a wide margin) were the Democrats (21 percent).

The least educated were also more satisfied with the current rich-poor gap than college graduates (40 percent). But on this issue, non-white satisfaction levels were lower than the average (38 percent).

Gallup respondents were even less satisfied with the availability of healthcare in the United States, with only 37 percent expressing such views. Yet a familiar pattern emerges from the internals. The biggest gap was between Republicans (53 percent satisfied) and Democrats (27 percent). These also represented the highest and lowest levels of all the groups examined.

In addition, non-whites (41 percent) were more satisfied than whites the overall total (37 percent), and much more satisfied not only than the Democrats but than college grads (31 percent). The same held for Americans without high school diplomas (also 41 percent satisfied).

Finally, let’s look at a particularly explosive issue – race relations. Or at least it’s supposed to be particularly explosive. But according to the Gallup survey, there’s much more dissatisfaction than polarization – except among Democrats and Republicans.

Overall satisfaction levels are low – coming in at 36 percent. But the widest gap by far is between followers of the two parties, with 51 percent of Republican identifiers declaring themselves to be satisfied compared with only 24 percent of their Democratic counterparts. (Actually, Gallup also measured satisfaction levels according to political ideology – liberals, moderates, and conservatives. I’ve left these findings out due to the assumption because these results closely track the political parties’ results – which include independent voters. But according to this gauge, the conservative-liberal gap is somewhat wider, at 52 percent-17 percent.)

Most significantly, this partisan divide is far wider than the racial divide, with 35 percent of whites expressing satisfaction with the state of race relations and 39 percent of nonwhites so stating. Also doubtless significant: The next-least-satisfied group is college graduates, of whom only 28 percent expressed satisfaction. Further, their “very satisfied” levels (3 percent) were by far the lowest along with the Democrats’. And they were only one-third the nine percent “very satisfied” levels of non-whites.

Is the country indeed anxious?  To some extent, sure.  Is it divided?  That’s where the answer gets especially complicated.  And this complex picture indicates that, especially in this presidential campaign year, all Americans should beware of pundits and others bearing sweeping generalizations. 

(What’s Left of) Our Economy: An Historically Uneven, as Well as Sluggish, Recovery

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cities, inequality, Jobs, Labor Department, recovery, unemployment, {What's Left of) Our Economy

As the late, great comedian Rodney Dangerfield might have said, this current U.S. economic recovery “don’t get no respect,” and dissing it seems to grow ever more popular. Long derided as historically slow, and marked by marginal wage increases and lousy productivity, it’s now coming under fire for being shockingly uneven as well, confined to a handful of (admittedly huge) urban islands of prosperity like New York City and Washington, D.C., and the San Francisco Bay Area.

This morning came worse news – the gap between haves and have-nots is getting wider, at least when it comes to unemployment rates. This depressing conclusion – after nearly nine years of economic expansion – stems from the latest Labor Department data (for April) on joblessness and how it’s changed in 387 American urban areas.

But let’s start at the beginning (of the recovery). In June, 2009, unemployment rates rose year-on-year in all 372 of the metro areas then measured. So there was literally no place to go but up. But by February, 2010 – when the number of total American job-holders bottomed in absolute terms – unemployment rates were still increasing on an annual basis in 347 of these areas and falling in only 21.

This April, the situation was greatly improved. Unemployment rates dropped in 269 metropolitan areas and were up in only 94. (By now, the number of urban areas tracked has risen to 387.) But here’s the rub. The previous April, jobless rates were down in 344 areas and up in 36. In April, 2014, the numbers looked even better – down in 357, up in a mere 12. (In some areas, the rates haven’t changed.)

An optimist (or an Obama-phile) could argue that progress in cutting unemployment is slowing because the rate has already come down so dramatically during the recovery. And indeed it has – from the most recent peak of ten percent in October, 2009 to five percent in April. So clearly, there isn’t much more to go until any reasonable definition of full employment (which BTW, isn’t hard and fast).

At the same time, as RealityChek has reported so often, other measures of the employment scene, like wage and broader pay growth, still look pretty shaky. And heading into its eighth year, the recovery is looking pretty long in the tooth. The economy has so far displayed the ability to generate more impressive employment than growth results (hence, in a nutshell, the crummy productivity improvement), so it’s entirely possible that even when the recovery peters out, the number of jobs can keep increasing.  Therefore,however unsatisfactory the geography of prosperity these days, it may not get significantly worse for the time being.

But that’s likely a best case. If today’s growth shifts into reverse to any meaningful degree, America’s islands of prosperity could become even harder to find on a map.

Following Up: Why Mass Immigration Can’t Solve the U.S. Entitlements Crisis

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2016 election, amnesty, Bernie Sanders, Branko Milanovic, Donald Trump, entitlements, Following Up, Global Inequality, Immigration, inequality, New York magazine

The (overwhelmingly one-sided) Donald Trump-Bernie Sanders-fueled debate on trade policy that’s broken out in the Establishment Media lately has been so heated that it’s eclipsed even immigration as a hot button presidential campaign issue. Not even Trump’s release of crucial details for his illegal immigration-stopping wall has managed to push trade out of the spotlight. It’s almost as if mainstream journalists and the elites they so often coddle have given up on pimping for Open Borders policies as America’s only non-racist, non-xenophobic immigration policy options.

All the same, who can reasonably doubt that pro-amnesty media propaganda will stage a comeback, especially if Trump shows signs of surmounting his current troubles and cruising again toward the Republican nomination? (Democrat Sanders nowadays is far from a maverick on immigration issues.) If immigration returns to the fore again, it will be worth remembering that one of the world’s leading economists has just punched big holes in one of the Open Borders’ backers’ main economic claims.

As noted in a September, 2014 RealityChek post, mass immigration supporters have taken to arguing that major inflows of newcomers are needed in large measure to help America deal with its looming entitlements crisis. The idea is that because the native-born U.S. population is aging so rapidly, and because so many immigrants are so young – and enterprising – their future earnings potential is the nation’s best bet for responsibly financing the immense wave of baby-boomer retirements that’s already begun.

As I also argued in that post, however, although immigrants who come to the country with high levels of skills and education are good candidates to play this essential role, the same cannot possibly hold for most illegal immigrants and many legal newcomers – who come with none of those attributes. For it’s becoming abundantly clear that America is becoming an economy and society with not only record levels of economic inequality, but an increasingly rigid class structure.

That is, the American Dream is far from completely dead, but Americans who are born poor are ever more likely to stay that way. And why should low-skill, poorly educated immigrants be an exception? Ironically, I added, the inequality crisis has become so apparent in large measure because of research from self-styled progressive analysts who favor more or less Open Borders. In addition, it was great to be able to point to a recent article in establishment organ Foreign Affairs that similarly debunked the portrayal of mass immigration as an economy saver.

Now, more reasons to doubt this pro-amnesty meme has just come in from Branko Milanovic, a former senior World Bank economist now with the City University of New York.

In his new book on Global Inequality, Milanovic has documented three major economic and social reasons for thinking that yawning rich poor gaps in the United States are here to stay, but that they will keep growing wider. As Milanovic explained in an interview in New York magazine: 

> “the share of total income going to capital compared to labor has been increasing” – and its wealthy Americans who dominate income generated by capital (i.e., the return on investments like property or stocks);

> in a new development, many wealthy Americans are now earning income both from their investments and from their labor – e.g., in very high-paying jobs in finance or technology companies; and

> these economic out-performers are increasingly marrying each other, and thus boosting the odds that both their wealth and their natural gifts will be inherited by their children. Interestingly, according to Milanovic, a major engine of this homogamy is the huge increase in the result of highly educated women.

Milanovic also cites a fourth reason to expect widening U.S. inequality – a political system increasingly of, by, and for the wealthy. In fairness, though, however formidable, this obstacle to a more equitable society seems less intractable than the three economic and social factors.

The author also cites reasons for supposing that America’s rich-poor gap might start narrowing once again. But their impact seems unlikely to predominate any time soon. And given the power of the inequality drivers Milanovic describes, nothing seems likelier to swamp the pro-equality forces if they ever do start gathering than a sizable new wave of impoverished, barely literate immigrants. Not to mention the pressure they themselves will place on the nation’s public purse.

Im-Politic: The Elite Media Just Became Even More Elitist

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American Prospect, Bill Clinton, boardroom liberalism, Establishment Media, Fred Hiatt, Harold Meyerson, Hillary Clinton, Im-Politic, Immigration, inequality, living standards, middle class, Noam Scheiber, Obama, offshoring, The Washington Post, Trade, unions, wages, working class

If you think (as you should) that the top priority of the Mainstream Media is to protect the nation’s bipartisan ruling class and its selfish, Main Street-shafting policies, you got strong support for your views last week, when Washington Post columnist Harold Meyerson announced he was being dropped from the paper’s roster of regular columnists.

The Post insists that ditching Meyerson had nothing to do with his liberal positions, but with what the TV business has long called “low ratings.” Here’s the official explanation, from Post editorial page editor Fred Hiatt, who wielded the axe:

“The Post opinion section takes pride in publishing a wide range of views, including progressives Eugene Robinson, EJ Dionne, Ruth Marcus, Greg Sargent, Paul Waldman and Katrina vanden Heuvel and contributing columnists Rachel Maddow and Danielle Allen. We’ve been pleased to publish Harold’s columns for the past 13 years, but he failed to attract readers as these others have. And while our decision should never be made based only on clicks, I think it would be arrogant to entirely ignore what our readers are telling us.”

But Meyerson himself – who has not protested the decision – nonetheless provided information making clear that his politics were indeed an issue. In an email to a reporter covering the move, Meyerson wrote:

“In my discussion with him, Fred cited two reasons for not renewing my column. In addition to the click-count, he said there was too frequent an emphasis in my column on ‘unions and Germany,’ by which he meant — my phrasing, not his — worker rights and an alternative form of corporate governance.”

This description, which Hiatt has not disputed, shows how misleading the Post‘s rationale is. It’s true that the paper publishes figures on the left end of the political spectrum. But none of them has consistently focused on the issues of economic power, its structure, and its effects, the way Meyerson has. Moreover, none of them has paid significant attention to the offshoring-friendly trade policies responsible for so much of destructive kind of wealth and income inequality characterizing America today – in which not only does the gap between the rich and the rest widen, but in which the living standards of working and middle class families actually worsens.

In fact, many of the writers listed in the Post statement are most accurately described as what New York Times reporter Noam Scheiber has insightfully called “boardroom liberals.” Here’s his definition:

“It’s a worldview that’s steeped in social progressivism, in the values of tolerance and diversity. It takes as a given that government has a role to play in building infrastructure, regulating business, training workers, smoothing out the boom-bust cycles of the economy, providing for the poor and disadvantaged. But it is a view from on high—one that presumes a dominant role for large institutions like corporations and a wisdom on the part of elites. It believes that the world works best when these elites use their power magnanimously, not when they’re forced to share it. The picture of the boardroom liberal is a corporate CEO handing a refrigerator-sized check to the head of a charity at a celebrity golf tournament. All the better if they’re surrounded by minority children and struggling moms.”

According to Scheiber, President Obama is a leading exemplar. Though the author seems to demur, I would argue that Hillary Clinton and her former chief executive husband are two others. And regular readers of the Post edit page and many of the aforementioned columnists will find this characterization familiar, too.

Not that Meyerson was the last word on what ails the nation economically. In particular, he toed the labor union line far too slavishly, including a refusal to recognize mass immigration as a mortal threat to U.S. wages, broader living standards, and economic security. His own particular dogmatism also included an uncritical worship of Big Government.

But Meyerson – who will still be appearing in his own American Prospect magazine, and apparently from time to time in the Post – did write from a perspective that’s all too rare inside the bipartisan Beltway political and media bubble. And Hiatt’s tortured rationalization all but guarantees that whatever replacement is chosen for Meyerson won’t make this capital gang any more diverse.

Im-Politic: New Survey Shows Surprising Areas of National Consensus

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abortion, American Values Survey, blacks, China, Democrats, Donald Trump, equal opportunity, family leave, Hispanics, illegal immigration, Im-Politic, Immigration, independents, inequality, Islam, minimum wage, multinational corporations, Muslims, offshoring, parental leave, police killings, polls, Public religious Research Institute, race relations, regulations, Republicans, same-sex marriage, Trade, whites

Just when you think you’re getting a handle on the American public’s mood in these raucous political and social times, along comes some polling data that rock your world. And I’m pleased to report that, in the case of the new American Values Survey published by the Public Religion Research Institute (PRII), the net results strike me as encouraging as they are surprising. Specifically, they indicate that the U.S. public is much less divided on many hot button social and cultural issues than politicians and the national media coverage have been indicating. In fact, the findings of this November survey suggest the gathering of a common sense consensus on these supposedly bitterly divisive matters.

The unexpected areas of agreement start with a subject close to the leading headline-maker of the day – Republican presidential front-runner Donald Trump’s call for a temporary ban on travel by all non-citizen Muslims into the United States. It’s too early for a poll on this specific proposal. But I found it instructive that, according to the PRII, Americans agree by a 56 percent to 41 percent margin that “the values of Islam are at odds with American values and way of life.” In 2011, only 47 percent agreed and 48 percent disagreed.

Moreover, although breaking the results down by political leanings produces differences, even 43 percent of Democrats share these suspicions of Islam. For Republican and independents, the figures are 76 percent and 57 percent, respectively.

The survey shows an even split on the question of whether immigrants “strengthen the country because of their hard work and talents” (47 percent agreed) or “constitute a burden on the U.S. because they take jobs, housing, and health care” (46 percent). But only last year, the “strengthen” option won out by 57 percent to 35 percent. The partisan gap is indeed wide, with 63 percent of Republicans holding such negative views of immigrants and 66 percent disagreeing. But 32 percent of Democrats were focused on immigrant-created economic burdens as well.

Even more suggestive of consensus on this issue, though, are the results for a slightly different question. Fully 45 percent of Democrats agreed that “illegal immigrants are at least somewhat responsible for America’s current economic woes” (as well as 70 percent of Republicans and 53 percent of independents). And check out the racial split: Majorities of white and black Americans (58 percent and 52 percent, respectively) told held illegal immigrants “at least somewhat responsible” for the nation’s economic troubles – along with 40 percent of Hispanic Americans. For good measure, so do 44 percent of the white and college-educated, who often benefit from low-wage illegal immigrant labor.

The PRII survey will scarcely comfort President Obama, Congress’ Republican leadership, or the multinational corporations who all support America’s current trade policies. Breakdowns were not provided, but 86 percent of Americans hold “corporations moving American jobs overseas…somewhat or very responsible for the present economic troubles facing the U.S.” That’s up from 74 percent in 2012. “China’s unfair trade practices” were cited by 73 percent. Not surprisingly, 72 percent of Americans believe the country is still in a recession, a figure that’s remained pretty steady 2012. Keep in mind that the current recovery began, at least technically, in mid-2009.

Large majorities also believed that “the current economic system is heavily tilted in favor of the wealthy” (79 percent); that lack of equal opportunity in America is a “big problem” (65 percent); and that “hard work is no guarantee of success” (64 percent – including 52 percent of Republicans).

And these majorities extended to numerous economic policies. Just over three-quarters of all Americans favor increasing the minimum wage to $10.10 per hour (including 60 percent of Republicans). Eighty five percent support paid sick leave and 82 percent back paid parental leave. And although no questions were asked about desired regulatory policy changes, 69 percent of respondents blamed “burdensome government regulations” for at least some of the nation’s economic predicament.

Signs of common ground were also evident on domestic social issues that are thought to be highly polarizing. For example, relatively few Democrats (36 percent) or Republicans (43 percent) considered abortion important to them “personally.” And the partisan split on same-sex marriage was smaller, and at lower levels of salience – 28 percent for Democrats and 29 percent for Republicans.

Big divides remained on numerous issues, to be sure – like confidence in the federal government, and a $15 minimum wage (lots of Republicans climb off that boat), and police treatment of minorities. Interestingly, in this vein, minority Americans are significantly more optimistic than whites that “America’s best days are ahead of us.”

But it’s hard to finish this latest American Values Survey feeling deeply pessimistic that the nation can’t overcome its differences and create that better future. In fact, one of my biggest reasons for hopefulness is the following finding: “Nearly two-thirds (66%) of the public agrees that, ‘everyday Americans understand what the government should do better than the so-called ‘experts.’ There is broad agreement across racial, generational, and partisan lines.”

(What’s Left of) Our Economy: New Data Showing the Fed Really has Worsened Inequality

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asset prices, Bank of America, Ben Bernanke, bubbles, Federal Reserve, finance, housing, inequality, interest rates, Janet Yellen, QE, quantitative easing, recovery, stocks, Wall Street, zero interest rate policy, ZIRP, {What's Left of) Our Economy

Here’s a shock! A study claiming that the Federal Reserve’s historically unprecedented easy money policies have supercharged Wall Street (and the rich) and left Main Street (and the rest) in the dust! And it comes from Wall Street!

The debate over how the central bank’s zero interest rate policy (ZIRP) and quantitative easing bond-buying program (QE) has impacted inequality in America has been just as heated as the debate over how these decisions have impacted economic growth and the prospects for recreating real national prosperity.

The critics charge that easy money has greatly widened the rich-poor gap, largely by boosting incentives to buy and own stocks, and thereby fueling a long, powerful bull market that has overwhelmingly benefited the wealthy because they dominate stock ownership.

The mainstream Fed position was stated by Chair Janet Yellen at the September press conference following the decision to keep interest rates on hold:

“It is true that interest rates affect asset prices, but they have a complex effect through balance sheets, through liabilities and assets. To me, the main thing that an accommodative monetary policy does is put people back to work. And since income inequality is surely exacerbated by a high—having high unemployment and a weak job market that has the most profound negative effects on the most vulnerable individuals, to me, putting people back to work and seeing a strengthening of the labor market that has a disproportionately favorable effect on vulnerable portions of our population, that’s not something that increases income inequality.”

Her predecessor, Ben Bernanke, has made similar points, albeit with more reservations.

A new study from Bank of America, however, contains some data strongly indicating that the Fed’s critics deserve to win this clash hands down. For example, the B of A researchers examined the fate of various possible uses of $100 since the Fed began massively supporting the U.S. economy after the collapse of Lehman Brothers in the fall of 2008. The main findings? A $100 dollar investment in a standard stock and bond portfolio during this time would have more than doubled in value. But a $100 dollar wage would be worth only 14 percent more.

The same methodology also reveals that the financial system is channeling much more credit to the wealthy than to the rest. Thus for every $100 they raised at the start of 2010, venture capital and private equity funds are now raising $275. But for every $100 of mortgage credit extended in America since then, just $61 is being loaned and accepted today. And prime real estate in the nation has appreciated in value more than ten times as much as all U.S. residential real estate.

These results (and others in the study) hardly end the debate over the Fed and inequality. Bernanke and Yellen still make powerful “counterfactual”-based arguments – i.e., claiming that as bad as the situation is now, it would be even worse had the central bank not acted so decisively. And B of A’s possible motives need to be noted. Generally speaking, the financial sector has been campaigning strongly for a Fed rate hike because rock bottom interest rates have greatly reduced the profitability of lending.  (In that respect, this report may not be such a shock.)

But the B of A study should greatly increase the burden on the Fed to demonstrate that its monetary policies haven’t been little more than a boondoggle for the nation’s upper classes – not to mention a flop in and possibly an obstacle to restoring genuine economic health.

Im-Politic: A Worrisome Early Economic Message from Hillary Clinton

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2016 elections, an economy built to last, bubbles, Hillary Clinton, Im-Politic, inequality, minimum wage, Obama, Populism, recovery, structural reform

Hillary Clinton’s formal announcement of her presidential candidacy yesterday has triggered so much reaction and commentary – on top of what’s been written during her prolonged run-up – that it’s legitimate to wonder if much of value can be added before she actually starts campaigning. But this point seems worth making about the core claims in her declaration.

According to Clinton, “Americans have fought their way back from tough economic times. But the deck is still stacked in favor of those at the top. Everyday Americans need a champion, and I want to be that champion – so you can do more than just get by. You can get ahead – and stay ahead. Because when families are strong, America is strong.”

Of course, these words were hardly chosen at random. To me, they signal the Clinton strategy for embracing the economic record of an Obama administration in which she served, while spotlighting urgent national needs that remain unmet. In fact, they closely resemble the president’s position (as most recently voiced in his latest State of the Union): “[T]onight, we turn the page [on a “vicious recession”]. Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999…. It’s now up to us to choose who we want to be over the next 15 years and for decades to come. Will we accept an economy where only a few of us do spectacularly well?”

No one can reasonably doubt that this message is astute politically. It enables Democrats to claim vital accomplishments while demonstrating their awareness how narrowly distributed the economic recovery’s benefits have been. This message also dovetails nicely with the idea that government assistance of various types, ranging from minimum wage hikes to more worker-friendly regulations on business, is mainly what’s needed to broaden prosperity.

Economically, however, the message could not be more misleading. For the bulk of the evidence clearly shows that whatever recovery America has experienced is overwhelmingly due to monetary steroids provided by the Federal Reserve. The Fed itself admits this. Largely as a result, the crucial quality of the nation’s recent growth remains as low – and therefore as dangerous – as it was during the previous decade’s dangerous bubble inflation.

Interestingly, during his first Inaugural Address, Mr. Obama blamed the economy’s woes on “greed and irresponsibility on the part of some but also our collective failure to make hard choices and prepare the nation for a new age. “ Subsequently, he’s repeatedly, and rightly, emphasized the imperative of creating “an economy built to last.” It’s bad enough that the president is now suggesting that even much of the job of structural reform is already done. It would be even worse if his likeliest Democratic successor perpetuated this myth.

Following Up: The Geography of U.S. Income Inequality Keeps Surprising

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conservatives, Following Up, income inequality, incomes, inequality, liberals, middle class

Let’s return to income inequality, the subject that’s on the mind of everyone, it seems, except most of the American people (at least according to the polls).

Last week, I posted on how the data show there’s a strong correlation between the American states with the biggest rich-poor gaps and votes for President Obama in the 2012 election. In other words, the most unequal states were mainly pro-Obama states. But trends over time are even more important than snapshots, so let’s look at which states became the most and the least unequal from 2012 to 2013 (the latest data available). First, the ten states in which inequality grew the most, according to the U.S. Census Bureau, from the fastest to the slowest growth:

Delaware

Vermont

Hawaii, Indiana (t)

Montana, Rhode Island (t)

Illinois, Nebraska (t)

Iowa

Kansas, New Hampshire, New York, South Dakota (t)

California, Connecticut, Maine, Maryland, New Jersey (t)

Arizona, Idaho, North Carolina, Washington (t)

Louisiana

Due to ties, it’s actually 23 states, but here’s their political line-up: 13 of the states in which income inequality rose the most from 2012 went for President Obama, and 10 voted Republican Mitt Romney. That’s a lower percentage for Obama than among the states in which inequality was highest in 2013, but just as with that list, the stronger the growth in inequality, the likelier an Obama verdict.

But do we seem a similar apparent political pattern for states in which inequality rose least, or even fell? Here are the top ten according to this criterion, starting with those states that reduced inequality the most:

Alaska (fell)

Mississippi (fell)

North Dakota (fell)

Oklahoma, South Carolina (t) (fell)

Missouri (unchanged)

Virginia, West Virginia (t) 

Florida, Massachusetts, Michigan, Minnesota, Utah, Wyoming (t)

Alabama, Georgia, Nevada (t)

Colorado, Ohio, Oregon, Texas (t)

Arkansas, Kentucky, New Mexico, Pennsylvania, Tennessee, Wisconsin (t)

The ratio for this somewhat larger sample of 27 states is pretty similar to that for the best inequality performers – 15 Romney states versus 12 Obama states. Moreover, on this list, the tendency for the Romney states to outperform on the positive side is even stronger than on the first list.

Nonetheless, one year isn’t much of a sample. So for our next look at the geography of inequality, we’ll examine the inequality changes from the start of the recession (2007) to 2013. For now, however, the pattern seen in my first post on the subject still holds: If the liberals who are most worked up about inequality are really determined to solve the problem they see, they should focus first on their own backyards.

(What’s Left of) Our Economy: The Dubious Economics of Executive Amnesty

Tags

border security, comprehensive immigration reform, deportation, executive amnesty, illegal immigrants, Immigration, inequality, Obama, wages, {What's Left of) Our Economy

If you think looking under the hood is vital when you buy a used car, take it from me: It goes double when you’re reading reports on the economy, and the White House’s new report on the economic effects of President Obama’s Executive Amnesty plan is a vivid reminder why.

One of the most controversial claims made by the President and his supporters is that Executive Amnesty and the broader immigration reform bill passed by the Senate in 2013 would actually raise wages in America and reduce income inequality. These claims have been especially crucial for the politics of immigration reform. How else could liberals, Democrats, and others who profess to champion “the common man” support measures that both logic and economic theory strongly indicate would have the opposite effects, since they will greatly increase the supply of U.S. labor available to employers, especially for jobs requiring relatively modest education and skills?

Despite the best efforts of The Economic Effects of Executive Action on Immigration, however, that’s still a challenge these supposed middle- and working-class advocates haven’t met. The study contends that the President’s decision would increase wages for native-born American workers by 0.1 percent on average over the next decade. In 2014 dollars, that’s $40 – not a king’s ransom, but at least not a decline.

Here’s where the problems start, though. That prediction isn’t based on original research by the White House’s own economists at the Council of Economic Advisors. It’s based largely on the results of a single academic study. And there’s more: This study doesn’t break down the wage effects by education level, as the CEA acknowledges. So the CEA offers no evidence on how evenly distributed – or not – these miniscule economy-wide wage gains might be. Given that less than a third of U.S. workers hold a B.A. or more advanced degree, and given the huge, rising wage premium produced by higher education, that’s a huge omission.

The CEA leaves the matter there. But no one with any common sense needs to, or should. Other Open Borders-friendly analysts have addressed the issue recently, and Jared Bernstein (who has done excellent work on subjects like the impact of offshoring-friendly trade deals on U.S. wages and living standards) sums up their case:

“[T]he undocumented workers who will gain temporary legal status are already here, so we’re not talking about increased supply effects. In fact, by entitling them to leave the shadows of the undocumented workforce, their own pay could get a boost, especially as they may now be more mobile across both geography and sectors of the economy. And the pay of those with whom they compete is also helped by this change. If you’re competing with someone who can be exploited by dint of their undocumented status, that hurts you too. ”

Sounds great – until you start thinking beyond the textbook. For Executive Amnesty is unlikely to leave the supply of new foreign-born labor frozen at today’s levels. First, deportation relief is not extended to all illegal immigrants, so those left out will still be able to undercut the wages both of illegal workers who are brought out of the shadows and of native-born workers who compete with them. In principle, effective enforcement measures, like harsh sanctions on the business owners that hire them, takes care of this problem.  But when has Washington ever taken this approach seriously?

Does this mean that the main shortcoming of Executive Amnesty is its failure to include all illegal immigrants? Only if you forget the magnet issue and the aims of Mr. Obama and his supporters. After all, as the President has just reminded, the Senate-backed immigration reform bill would protect most of the rest of the illegal population from deportation. Although support in the incoming Senate arguably will be weaker, over the longer-term, as so many political analysts believe, the American electorate seems to be changing in ways that boost the pro-reform vote.  Therefore, a more lenient immigration policy is at least a distinct possibility.

As a result, powerful incentives still exist for foreigners to enter the United States illegally, in full confidence that they’ll find work as well as schooling and other government benefits for their children, as well as that, sooner or later, they’ll receive amnesty whether from new executive orders or from legislation. So there’s every reason to expect that the illegal population will keep growing – unless you believe in the fairy tale that the border will become much more secure.

In fact, as the CEA inadvertently makes clear, the Congressional Budget Office has already provided evidence that the reformers’ version of immigration policy will reduce, not raise wages, at least for the next decade. According to the CBO, implementation of the Senate reform bill will depress average wages on average for newcomers and native-born workers alike through 2024, and start raising them thereafter. The nearer-term wage decline is not big – 0.1 percent – and CBO emphasizes that all the gains will accrue to the native-born.

Interestingly, although CBO doesn’t break down the effects according to educational attainment, it does provide a breakdown by skill levels. Its findings: “The legislation would particularly increase the number of workers with lower or higher skills but would have less effect on the number of workers with average skills. As a result, the wages of lower- and higher-skilled workers would tend to be pushed downward slightly (by less than ½ percent) relative to the wages of workers with average skills.”

So the foreseen effects of greater immigration inflows again are not large, but at least for America’s native-born poor, they’re harmful. But the CBO doesn’t seem to account adequately for the magnet effect, either. I could discuss additional problems with its findings, like the reliance on estimates of overall economic growth and productivity growth that entail enormous uncertainties – to put it kindly.

Yet one final reason for skepticism is even stronger: The same kinds of models and other methodologies that are generating only modest wage effects from greater immigration flows also long showed few if any wage effects from the kinds of trade expansion policies pursued by Washington for the past twenty years. Now this conventional wisdom, which of course helped fuel and legitimate these policies is changing substantially – though arguably too late to undo the decisive damage. Benign projections of conventional immigration reform’s economic impact serve powerful agendas, too – both on the Left and on the Right. The difference is that there’s still a chance to save the economy from its effects.

(What’s Left of) Our Economy: It’s Not Just Inequality

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carried interest, family formation, Federal Reserve, housing, Immigration, inequality, lobbying, median income, millennials, offshoring, private equity, quantitative easing, recession, stock buybacks, tax loopholes, Trade, wages, {What's Left of) Our Economy

Folks at the Social Contract‘s Writers’ Workshop seemed so pleased with my talk on sources of inequality in the U.S. that it seemed worth sharing on RealityChek. Here goes.

Inequality clearly has been a major preoccupation of Americans this year, especially in the chattering classes. The most talked-about economics book in recent memory focused on the subject (Thomas Piketty’s Capital in in the Twenty-First Century). And although some polling evidence indicates that Main Street-ers are more concerned with jumpstarting economic growth than with reducing the rich-poor gap, politicians such as President Obama and likely presidential contender Hillary Clinton have called narrowing the gap a major national priority.

But for all the attention the subject has received, two important points are still generally overlooked. First, inequality is far from America’s leading income-related challenge nowadays. After adjusting for inflation, the median incomes of Americans aren’t simply falling behind those of the top one percent or however the affluent are labeled. They’re falling, period.

In other words, the vast majority of Americans have gotten poorer in absolute terms according to the broadest measure of economic well-being (which includes benefits, rental and investment income, and other earnings as well as wages and salaries). Moreover, this decline didn’t start during the financial crisis and Great Recession. It dates back 25 years. And it’s continued into the recovery. At least as striking, although the nation has suffered worse economic times in its history, never before has such income deterioration lasted so long.

As never before, then, Americans are confronted with the question, “Why is a national economy developed and organized in the first place if not to help most people improve their lives?” An economy in which living standards are falling for the majority for more than two decades is an economy that can only be labeled a failure.

But not only is America’s income problem worse than widely recognized (at least by the powers-that-be). The roots of this problem are more numerous and widespread than commonly supposed. And those inequality engines that have been identified look even stronger, and work in a greater number of ways, than originally thought.

For example, critics of U.S. trade policy have long argued that recent American trade deals and related policy decisions have worsened income inequality by providing too many incentives for businesses to ship lucrative middle class jobs overseas. But it’s increasingly clear that jobs don’t actually need to be exported for these policies to drive down worker incomes. Simply making the offshoring option widely available to employers has surely curbed employees’ wage demands, much less willingness to strike.

Open Borders-style immigration policies, it should be equally clear, have pressured incomes on the bottom rungs of the U.S. economic ladder by flooding their job markets with millions of poorly skilled and educated foreign-born competitors. But such policies also fuel inequality, as I wrote in Fortune this summer, by increasing the demand for public services whose costs the rich can often evade or limit by their ability to exploit tax loopholes.

But the list of inequality engines hardly stops there. For example, even aside from immigration issues, tax loopholes tend to benefit the wealthy disproportionately because they reflect the kind of lobbying power that less wealthy Americans can rarely mobilize. One prime example: how private equity fund partners have persuaded Washington to tax the vast bulk of their earnings at the low long-term capital gains rate rather than at the much higher income rate.

And speaking of American finance, let’s not forget how regulations encourage publicly held companies to use debt to buy back enormous amounts of their own stock. These purchases of course boost stock prices and massively benefit top executives – who often are compensated with stock or paid based on share performance. But they can often harm non-managerial workers because they further divorce corporate financial performance from the vigor of the real economy whose fortunes they once depended on. Thus they tend to undercut business’ actual and perceived stakes in broadly based and shared national prosperity.

Once the equity markets began recovering in spring of 2009, largely due to cost-cutting that super-charged profits despite ongoing economic malaise, CEOs and their boards unquestionably realized that their company’s fates were no longer closely connected to those of their customers. And when investors began worrying about the sustainability of such bottom-line growth, the buyback spree enabled Corporate America to persist with customer- and worker-light strategies.

Macro-economic forces are also helping to weaken wages and incomes for huge percentages of the American people. On top of the recession’s impact on the entire economy, it’s been widely noted that it and the historically weak recovery have taken an especially heavy toll on younger Americans. Forced to postpone family formation and first-time home-buying, the typical millennial will face unprecedented obstacles to amassing the kind of nest egg that has underlay middle class and working class prosperity for decades.

Finally, just as stock buybacks have loosened the relationship between Corporate America and the rest of the economy, the Federal Reserve’s quantitative easing measures have loosened the relationship between those who do and don’t own capital, and inevitably fostered neglect of the latter. The main purpose of the Fed’s bond-buying has been to lower the returns on safe assets like treasury bills to induce investors to abandon them for riskier, higher-yielding assets with greater potential to quicken economic growth.

The growth effects have disappointed even the Fed, it’s just been learned. But QE has been a roaring success in boosting asset prices across the board, and thus immensely enriching those who owned them already or were capable of buying them.

My audience at the Writers’ Workshop consisted mainly of activists who have worked long and hard on the remarkably successful campaign to prevent a dramatic and disastrous loosening of controls over American immigration flows. I ended by congratulating them on their ability to resist the combined forces of Big Business, organized labor, the White House, the leaders of both major political parties, and Big Media – and by telling them how fervently I hoped that their counterparts working to dismantle other engines of income deterioration would get their acts together as effectively.