Posts Tagged ‘United States’

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While I was finishing up the latest right-wing libertarian dystopian finance novel, I was also trying to figure out the dystopia that the U.S. healthcare system has become.

Clearly, for most Americans, the combination of private healthcare and private health insurance (and, now with Obamacare, public subsidies) is a nightmare. There is a glaring contradiction between healthy profits and the health of the U.S. population. Over the course of the next couple of weeks, I plan to explore various dimensions of that system.

To start with, consider how much of an outlier the United States is in terms of expenditures and outcomes compared to other countries. As Max Roser explains,

the US spends far more on health than any other country, yet the life expectancy of the American population is not longer but actually shorter than in other countries that spend far less.

If we look at the time trend for each country we first notice that all countries have followed an upward trajectory – the population lives increasingly longer as health expenditure increased. But again the US stands out as the the country is following a much flatter trajectory; gains in life expectancy from additional health spending in the U.S. were much smaller than in the other high-income countries, particularly since the mid-1980s.

This development led to a large inequality between the US and other rich countries: In the US health spending per capita is often more than three-times higher than in other rich countries, yet the populations of countries with much lower health spending than the US enjoy considerably longer lives. In the most extreme case we see that Americans spend 5-times more than Chileans, but the population of Chile actually lives longer than Americans.

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Everyone knows wealth in the United States is unequally distributed, even more than the nation’s income (and that’s saying something).

For example, according to a new report from the Congressional Budget Office [ht: ja],

In 2013, families in the top 10 percent of the wealth distribution held 76 percent of all family wealth, families in the 51st to the 90th percentiles held 23 percent, and those in the bottom half of the distribution held 1 percent. Average wealth was about $4 million for families in the top 10 percent of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt.

But, wait, it gets worse. The distribution of wealth among the nation’s families was more unequal in 2013 than it was in 1989. For instance, the difference in wealth held by families at the 90th percentile and the wealth of those in the middle widened from $532,000 to $861,000 over the period (both in 2013 dollars). The share of wealth held by families in the top 10 percent of the wealth distribution increased from 67 percent to 76 percent, whereas the share of wealth held by families in the bottom half of the distribution declined from 3 percent to 1 percent.*

Yes, that’s right: in 2013, the bottom half of U.S. families held only 1 percent of the nation’s wealth.

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And it gets even worse: from 1989 to 2013, the average wealth of families in the bottom half of the distribution was less in 2013 than in 1989. It declined by 19 percent (in contrast to the 153-percent increase for families in the top 10 percent). And the average wealth of people in the bottom quarter was thousands of dollars less in 2013 than it was in 1989.**

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So, let’s get this straight. The share of wealth going to the top 10 percent of households, already high, actually increased between 1989 and 2013. And the share held by the bottom 50 percent, already tiny, fell. And, finally, the average wealth for families in the bottom half of the distribution was less in 2013 than in 1989 and many more of them were in debt.

Now, to put things in perspective, the United States had Democratic presidents (Bill Clinton and Barack Obama) during thirteen of the twenty-four years when workers and the poor were being fleeced.

And now they’re being asked to vote for one more Democrat, with the same economic program, because it will “make history”?

 

*To be clear, a large portion of the decline in wealth for the bottom 50 percent occurred after the crash. Still, compared with families in the top half of the distribution, families in the bottom half experienced disproportionately slower growth in wealth between 1989 and 2007, and they had a disproportionately larger decline in wealth after the 2007-09 recession.

**In 1989, families at or below the 25th percentile were about $1,000 in debt. By 2013, they were about $13,000 in debt, on average. Overall indebtedness also increased during the same period: by 2013, 12 percent of families had more debt than assets, and they were, on average, $32,000 in debt.

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Utopian novels, it seems, are no longer published.* Instead, bookstores now feature non-fiction books about utopia (the latest of which is Erik Reece’s just-released Utopia Drive: A Road Trip Through America’s Most Radical Idea) and, as a counterpoint, a burgeoning section of dystopian fiction. Whereas books about actual utopian experiments (especially, as in Reece’s book, those that were imagined and enacted in nineteenth-century America) are inspired by a sense that things could be better (indeed, much better), and we might have something to learn from our radical predecessors, dystopian novels move in the opposite direction, imagining a much worse world, one created by our own evil impulses and institutions (or at least each author’s fears concerning the possible effects of one or another negative feature of contemporary reality).

Dystopias are, perhaps not surprisingly, popular among young-adult readers. Just think of the success (in both book and film form) of Suzanne Collins’s trilogy of novels, The Hunger Games, which take place at some unspecified time in North America’s future. Part social commentary (in the case of the Katniss’s world, a critique of both reality TV and of grotesque inequalities in the wider society), part a mirror of adolescent disaffection and angst (of life with unsympathetic parents and cruel schoolmates)—they’re mostly about “what’s happening, right this minute, in the stormy psyche of the adolescent reader.”

Adult dystopias are something different—more didactic, more scolding, in which the author often issues a dire warning about the dangers of one or another current trend. They make sense when the idea is readers can do something to correct the situation, which most adolescents do not share. The latter are caught in the maelstrom; adults are supposed to be able to shape events (or at least to be held responsible for not doing the right thing).

Lionel Shriver’s The Mandibles: A Family, 2029-2047 is certainly that. It warns, it scolds, and it seeks to teach—perhaps even more than other novels in the new sub-genre of dystopian finance fiction. Given the financialization of the U.S. economy in recent decades and the spectacular crash of 2007-08, which has come to be closely identified with the bubble-and-bust trajectory of Wall Street, it should come as no surprise that the sub-genre itself exists.

But The Mandibles is perhaps even more didactic than other novels in the area, such as the closely related Cosmopolis: A Novel (published before the crash, in 2003) by Don DeLillo. While DeLillo’s novel certainly presents a disturbing view of reclusive billionaire Eric Packer and his financial machinations (including a spectacular bet against the yen, which goes badly for him as he travels in his limousine across New York City to get a haircut), it is more an exaggerated portrayal of certain features of contemporary life (including the deregulation of finance, the growth of inequality, the role of information, and the decline of affect) than a clear explanation of why and how we’re headed to the apocalypse if things continue as they are.

Shriver, however, uses the saga of four generations of the Mandible family after the “crash of 2029” to tell such a didactic story. And the story she has chosen to relate is a pointedly right-wing libertarian version of a cascade of possible events (reinforced by some absurd future slang) that stem from, in her view, a bloated Keynesian state and its escalating national debt (accompanied by out-of-control migration from south of the border and a coalition of hostile foreign powers).

The thinly veiled critique of contemporary political economy, borrowed in equal parts from Rand Paul and Donald Trump (with, toward the end, a celebration of the Free State of Nevada, of which Ayn Rand would be proud), does have its humorous, liberal-tweaking moments. I had to chuckle as I read about the head of the Federal Reserve (Krugman) and, later in the novel, the new presidential administration (of Chelsea Clinton), as well as the fact that one group of academics (economists) are mostly left unemployed as the economic crisis unfold.

But, overall, the economics of the novel (and the author does present a great deal of explicit economic theorizing, from the mouths of members of all four of the generations, especially the precocious self-taught economic savant Willing) are decidedly from the right-wing of the current political and economic spectrum. The economic apocalypse that engulfs the Mandible family and the entire country stems from the precipitous decline in the value of the U.S. dollar occasioned by a debt-financed explosion of federal financing for entitlement programs. A desperate nation (led by a Hispanic president) renounces its debts, both foreign and domestic. Other nations respond by devising an alternative currency, the “bancor” (the hypothetical name for the international bank money of an international currency union once devised by Keynes), which is not convertible into U.S. dollars. To refill the treasury, the federal government confiscates citizens’ gold, right down to their wedding rings.

We are then witness to the inevitable slide that tears apart the entire country, with a focus on East Flatbush where the various members of the clan are forced to gather. Fortunes are lost and people are evicted from their homes. Hyperinflation causes mind-spinning changes in prices, shortages provoke hoarding, and then, when basic goods are no longer available, life as we know it devolves (the replacement of toilet paper by cloth “ass-napkins” is the final ignominious assault on middle-class sensibilities). As for public order, the crime rate soars and public utilities no longer function properly (with water now in short supply). The Mandibles are forced to escape by traveling upstate to work on a farm (although a mercy killing-suicide en route means not all of them make it).

Years later, the remaining members of the clan (at least those who haven’t died or made it across the wall into the newly prosperous Mexico), led by now-grownup Willing, travel across the country, past factories (now owned by foreign capitalists and staffed by low-wage American workers) and geriatric facilities (for the elderly sent from abroad, attended to by low-wage American orderlies) to the only remaining sanctuary: the Free State of Nevada. The seceded state is on the gold standard, with a flat tax rate of 10 percent, no social safety net and no gun control, and where everyone has a chance to be a successful entrepreneur. It’s a society everyone there describes as “not a utopia”—with the obvious implication it’s the best alternative to the oppressive liberal-paradise-turned- dystopia the Mandibles have left behind.

If only they’d listened to the warnings about the “dodgy hocus-pocus” of Keynesian economics and the social-welfare state. They could have avoided the breakdown and their self-inflicted dystopia. That’s the lesson Shriver wants us to learn today.

As readers know, there is a well-founded critique of Keynesian economics and the problems of contemporary capitalism (which I’ve attempted to develop in some detail on this blog). However, the pressing issue, at least in the United States with its own sovereign currency, is not national debt or “easy money.” That’s for the Chicken Littles who stoke fears about a falling fiscal sky and want nothing more than low taxes, a diminished safety net, and the freedom of capital.

But that’s Shriver’s story and she spares no moment or patch of dialogue over the course of more than found hundred pages to attempt to drive it home.

 

*In fact, Fredric Jameson argues in his recent book, An American Utopia: Dual Power and the Universal Army, that the last real utopian novel was Ernest Callenbach’s Ecotopia, published in 1975.

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Not so fast!

Posted: 18 August 2016 in Uncategorized
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Everyone has read or heard the story: the labor market has rebounded and workers, finally, are “getting a little bigger piece of the pie” (according to President Obama, back in June).

And that’s the way it looked—until the Bureau of Labor Statistics revised its data. What was originally reported as a 4.2 percent increase in the first quarter of 2016 now seems to be a 0.4 decline (a difference of 4.6 percentage points, in the wrong direction).

What’s more, real hourly compensation for the second quarter (in the nonfarm business sector) is down another 1.1 percent.

So, already in 2016, the decline in real wages has eaten up more than half the gain of 2.8 percent reported in 2015 (and after a mere 1.1 percent gain in 2014).

And, since 2009, real hourly wages have increased only 4 percent.

Workers may be getting a little bigger piece of the economic pie since the official end of the Great Recession but the emphasis should really be on “little.”

 

P.S. I’m not a conspiracy theorist by nature. And I don’t plan to start now. As far as I’m concerned, the revision in the real-wage data should not be understood as any kind of deliberate manipulation by the Bureau of Labor Statistics. But it does represent a cautionary tale about the precision of the numbers we use to understand what is going on in the U.S. economy—and about the willingness of some (like Paul Krugman) to dismiss workers’ anxiety about the state of the economy.

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We’re been through this before (e.g., here and here). But no matter. Let’s take it up again.

Even as the overwhelming evidence is U.S. corporate taxes have been decreasing and workers’ wages have also been falling (both, in the chart at top of the post, as a percentage of gross domestic income), there are still those who try to convince us corporate taxes should be lowered still further—and workers are the ones who will benefit.

Really?!

I know. It goes against all logic (and, as it turns out, the empirical evidence). But, according to Kevin Hassett and Aparna Mathur of the American Enterprise Institute, lowering corporate taxes is the only real cure for wage stagnation among American workers.

They’re right about wage stagnation (although they miss the declining share of national income going to workers). But lowering corporate taxes is not going to solve that problem. Raising workers’ wages will.

I wrote above that it was against all logic. Actually, it is consistent with the logic of neoclassical economics, which goes as follows: capital moves to or stays in lower tax zones (states or countries), which boosts the productivity of workers (who are not as mobile), which in turn leads to higher wages (since the presumption is workers are paid according to their productivity). And, on the reverse side, if corporate taxes go up (as some, like me, have argued they should), corporations will shift the burden of the tax to workers, who will then be paid less.

The holes in the logic are, to use the current vernacular, HUUGE. Where corporations decide to realize their profits may shift according to tax rates but that doesn’t mean capital itself moves to those zones. Even if capital moves, it can often replace workers (or leading to the hiring of other, lower-waged workers). And, even if workers become more productive, they’re not necessarily paid more.

And then there’s the evidence—or lack thereof. As Kimberly Clausing explains, “a review of the prior empirical work in this area fails to reveal persuasive empirical evidence of adverse effects on labor.” And that’s because of globalization itself:

First, if corporations are mere intermediaries in global capital markets in which a wide assortment of investors with different tax treatments invest, tax policy changes could affect the ownership and financing patterns of assets more than they affect the aggregate level of investment in different countries. Second, since multinational firms have become increasingly adept at separating the reporting of income from the true location of the underlying economic activities, international tax avoidance itself comes with a silver lining. Mobile firms move profits without needing to substantially alter the underlying investments, whereas immobile firms do not respond like the open-economy actors of modern corporate tax incidence models. In both cases, workers in high-tax countries are relatively insulated from adverse wage effects due to capital reallocation toward low-tax countries.

So, if the logic is faulty and the empirical evidence questionable, what’s left? Merely one more attempt to lower the tax burden on corporations—and thus put private profits even more out of the reach of public claims on those profits.