“Where Government Excels”: Recognizing The Reality That There Are Some Things The Government Does Better Than The Private Sector
As Republican presidential hopefuls trot out their policy agendas — which always involve cutting taxes on the rich while slashing benefits for the poor and middle class — some real new thinking is happening on the other side of the aisle. Suddenly, it seems, many Democrats have decided to break with Beltway orthodoxy, which always calls for cuts in “entitlements.” Instead, they’re proposing that Social Security benefits actually be expanded.
This is a welcome development in two ways. First, the specific case for expanding Social Security is quite good. Second, and more fundamentally, Democrats finally seem to be standing up to antigovernment propaganda and recognizing the reality that there are some things the government does better than the private sector.
Like all advanced nations, America mainly relies on private markets and private initiatives to provide its citizens with the things they want and need, and hardly anyone in our political discourse would propose changing that. The days when it sounded like a good idea to have the government directly run large parts of the economy are long past.
Yet we also know that some things more or less must be done by government. Every economics textbooks talks about “public goods” like national defense and air traffic control that can’t be made available to anyone without being made available to everyone, and which profit-seeking firms, therefore, have no incentive to provide. But are public goods the only area where the government outperforms the private sector? By no means.
One classic example of government doing it better is health insurance. Yes, conservatives constantly agitate for more privatization — in particular, they want to convert Medicare into nothing more than vouchers for the purchase of private insurance — but all the evidence says this would move us in precisely the wrong direction. Medicare and Medicaid are substantially cheaper and more efficient than private insurance; they even involve less bureaucracy. Internationally, the American health system is unique in the extent to which it relies on the private sector, and it’s also unique in its incredible inefficiency and high costs.
And there’s another major example of government superiority: providing retirement security.
Maybe we wouldn’t need Social Security if ordinary people really were the perfectly rational, farsighted agents economists like to assume in their models (and right-wingers like to assume in their propaganda). In an idealized world, 25-year-old workers would base their decisions about how much to save on a realistic assessment of what they will need to live comfortably when they’re in their 70s. They’d also be smart and sophisticated in how they invested those savings, carefully seeking the best trade-offs between risk and return.
In the real world, however, many and arguably most working Americans are saving much too little for their retirement. They’re also investing these savings badly. For example, a recent White House report found that Americans are losing billions each year thanks to investment advisers trying to maximize their own fees rather than their clients’ welfare.
You might be tempted to say that if workers save too little and invest badly, it’s their own fault. But people have jobs and children, and they must cope with all the crises of life. It’s unfair to expect them to be expert investors, too. In any case, the economy is supposed to work for real people leading real lives; it shouldn’t be an obstacle course only a few can navigate.
And in the real world of retirement, Social Security is a shining example of a system that works. It’s simple and clean, with low operating costs and minimal bureaucracy. It provides older Americans who worked hard all their lives with a chance of living decently in retirement, without requiring that they show an inhuman ability to think decades ahead and be investment whizzes as well. The only problem is that the decline of private pensions, and their replacement with inadequate 401(k)-type plans, has left a gap that Social Security isn’t currently big enough to fill. So why not make it bigger?
Needless to say, suggestions along these lines are already provoking near-hysterical reactions, not just from the right, but from self-proclaimed centrists. As I wrote some years ago, calling for cuts to Social Security has long been seen inside the Beltway as a “badge of seriousness, a way of showing how statesmanlike and tough-minded you are.” And it’s only a decade since former President George W. Bush tried to privatize the program, with a lot of centrist support.
But true seriousness means looking at what works and what doesn’t. Privatized retirement schemes work very badly; Social Security works very well. And we should build on that success.
By: Paul Krugman, Op-Ed Columnist, The New York Times, April 10, 2015
“Power And Paychecks”: There’s No Excuse For Wage Fatalism; We Can Give American Workers A Raise If We Want To
On Wednesday, McDonald’s — which has been facing demonstrations denouncing its low wages — announced that it would give workers a raise. The pay increase won’t, in itself, be a very big deal: the new wage floor is just $1 above the local minimum wage, and even that policy only applies to outlets McDonald’s owns directly, not the many outlets owned by people who bought franchises. But it’s at least possible that this latest announcement, like Walmart’s much bigger pay-raise announcement a couple of months ago, is a harbinger of an important change in U.S. labor relations.
Maybe it’s not that hard to give American workers a raise, after all.
Most people would surely agree that stagnant wages, and more broadly the shrinking number of jobs that can support middle-class status, are big problems for this country. But the general attitude to the decline in good jobs is fatalistic. Isn’t it just supply and demand? Haven’t labor-saving technology and global competition made it impossible to pay decent wages to workers unless they have a lot of education?
Strange to say, however, the more you know about labor economics the less likely you are to share this fatalism. For one thing, global competition is overrated as a factor in labor markets; yes, manufacturing faces a lot more competition than it did in the past, but the great majority of American workers are employed in service industries that aren’t exposed to international trade. And the evidence that technology is pushing down wages is a lot less clear than all the harrumphing about a “skills gap” might suggest.
Even more important is the fact that the market for labor isn’t like the markets for soybeans or pork bellies. Workers are people; relations between employers and employees are more complicated than simple supply and demand. And this complexity means that there’s a lot more wiggle room in wage determination than conventional wisdom would have you believe. We can, in fact, raise wages significantly if we want to.
How do we know that labor markets are different? Start with the effects of minimum wages. There’s a lot of evidence on those effects: Every time a state raises its minimum wage while neighboring states don’t, it, in effect, performs a controlled experiment. And the overwhelming conclusion from all that evidence is that the effect you might expect to see — higher minimum wages leading to fewer jobs — is weak to nonexistent. Raising the minimum wage makes jobs better; it doesn’t seem to make them scarcer.
How is that possible? At least part of the answer is that workers are not, in fact, commodities. A bushel of soybeans doesn’t care how much you paid for it; but decently paid workers tend to do a better job, not to mention being less likely to quit and require replacement, than workers paid the absolute minimum an employer can get away with. As a result, raising the minimum wage, while it makes labor more expensive, has offsetting benefits that tend to lower costs, limiting any adverse effect on jobs.
Similar factors explain another puzzle about labor markets: the way different firms in what looks like the same business can pay very different wages. The classic comparison is between Walmart (with its low wages, low morale, and very high turnover) and Costco (which offers higher wages and better benefits, and makes up the difference with better productivity and worker loyalty). True, the two retailers serve different markets; Costco’s merchandise is higher-end and its customers more affluent. But the comparison nonetheless suggests that paying higher wages costs employers a lot less than you might think.
And this, in turn, suggests that it shouldn’t be all that hard to raise wages across the board. Suppose that we were to give workers some bargaining power by raising minimum wages, making it easier for them to organize, and, crucially, aiming for full employment rather than finding reasons to choke off recovery despite low inflation. Given what we now know about labor markets, the results might be surprisingly big — because a moderate push might be all it takes to persuade much of American business to turn away from the low-wage strategy that has dominated our society for so many years.
There’s historical precedent for this kind of wage push. The middle-class society now dwindling in our rearview mirrors didn’t emerge spontaneously; it was largely created by the “great compression” of wages that took place during World War II, with effects that lasted for more than a generation.
So can we repeat this achievement? The pay raises at Walmart and McDonald’s — brought on by a tightening job market plus activist pressure — offer a small taste of what could happen on a vastly larger scale. There’s no excuse for wage fatalism. We can give American workers a raise if we want to.
By: Paul Krugman, Op-Ed Columnist, The New York Times, April 3, 2015
“Image Conflicting With His Actual Personality”: The Real Ted Cruz; Country Music, Harvard Law, And Tea Party ‘Populism’
Nobody who knows Ted Cruz — the Texas freshman senator who became the first official contestant for the Republican Party’s presidential nomination this week – doubts that he is very, very smart. That includes Cruz himself, whose emphatic confidence in his own superior intelligence has not always endeared him to colleagues and acquaintances (whose opinions of his personality are often profanely negative).
Yet while Cruz cleverly seeks to highlight the Tea Party persona that appeals to many Republican primary voters, he exposes the fraudulence of his ultra-right brand of “populism.”
Cruz announced his candidacy at Liberty University, a religious-right institution founded by the late Jerry Falwell. No doubt he chose the misnamed Liberty to underscore his commitment to the political attitudes – “anti-elitist” and often opposed to scientific and intellectual inquiry – that the late reverend represented. To Falwell, secular education and the Enlightenment tradition of free thought always seemed suspiciously irreligious; at Liberty, creationism is a required course, the Young Democrats are outlawed, and both students and faculty are rigorously censored.
What could someone like Ted Cruz, a vocal advocate of First Amendment rights, honestly think about a place like Liberty? Falwell’s school languishes far below the standards of educational achievement – including an undergraduate degree from Princeton and a Juris Doctor degree from Harvard Law School — that have always filled Cruz with pride. Sometimes with excessive pride, like when he reportedly told Harvard Law classmates that he intended to form a study group including only those who had attended Harvard, Yale, or Princeton as undergrads.
Josh Marshall, a journalist who attended college with Cruz, noted in Talking Points Memo that this bit of academic snobbery marked the future senator as a “pompous a**hole” at Harvard Law, “an amazing accomplishment since the competition there for that description is intense [his emphasis].”
In a further attempt to portray himself as a right-wing populist, Cruz now claims to be a country music fan – having changed preferences after 9/11, when he abandoned “classic rock” for country, which he suggested is more patriotic:
“My music tastes changed on 9/11. I actually intellectually find this very curious, but on 9/11, I didn’t like how rock music responded. And country music — collectively — the way they responded, it resonated with me. And I have to say just at a gut level, I had an emotional reaction that says, ‘These are my people. And ever since 2001, I listen to country music,” he told CBS News – without naming a single country artist or band.
Now every presidential candidate carefully cultivates a public personality by promoting and even adopting tastes that might resonate with desired constituencies. But there are few politicians whose image conflicts so sharply with his actual personality and real base of support.
Analyzing the Texan’s financial base as he entered the presidential arena, Bloomberg News revealed “surprising weakness when it comes to small donors.” Only 16 percent of Cruz donors gave less than $200, compared with 43 percent of the donors to his fellow Tea Party favorite Rand Paul. The funding that propelled him into the Senate came from groups like the billionaire-backed Club for Growth and the Washington-based Tea Party organizations underwritten by the Koch brothers with their oil billions. Having attended the same elite schools, the people writing those big checks must feel quite comfortable with Cruz.
Need anyone be reminded of the policies favored by such interests? They oppose raising the minimum wage, or even the existence of a minimum wage. They would gut Medicare, Social Security, and unemployment benefits, along with every other government program that supports the middle class. They would reduce their own taxes even more, while raising taxes on working families – all retrogressive ideas that even the average Republican rejects.
If that’s populism, Ted Cruz is truly a man of the people.
By: Joe Conason, Editor at Large, Featured Post, Editor’s Blog; The National Memo, March 27, 2015
“Don’t Run, Elizabeth Warren, Don’t Run!”: She Just Might Actually Have More Leverage As A Non-Candidate
And so the ratcheting up continues: Now The Boston Globe has weighed in with not one or two or three but four pieces, one of them an in-house editorial, urging Elizabeth Warren to run for president. All right; this is the kind of thing hometown newspapers do, and it gets them attention. And it means that more people will press Warren to take The Globe’s advice when they run into her at the Star Market. But does it really raise the pressure on her in any serious way?
The arguments, by the paper’s editorial board and by contributors Bob Kuttner, Josh Green, and Anna Galland, are reasonable and sound. Warren has a huge following (true). Warren is the Democratic Party’s most articulate and high-profile crusader for the middle and working classes (true). Warren uniquely can pressure Clinton to adopt more populist positions on these issues than she has been associated with in the past (true).
But then come two arguments I find less persuasive, and I write as an admirer of Warren’s. The first is that Warren can have more influence as a candidate than not. The second is that a primary run against an opponent who’s in her political weight class (none of the other Democrats are) will toughen Clinton up in all the good ways. I think there are very good reasons to be less sure about the validity of either of those.
Inside the Democratic Party right now, Warren has as much influence as just about anybody short of the president. She has moral authority. She can move armies. But here’s the next thought in that chain, and it’s important: She can move them without much—or even any—intra-party pushback. The Clinton people know that to throw a brushback pitch at Elizabeth Warren is to risk alienating her millions of followers in a deep way.
But if Warren gets into the race, that hesitation on the part of the Clinton people ends. It would not be a gloves-off, no-holds-barred kind of combat, but combat it would be. The Clinton team would plant negative stories about her. Is there even any real dirt on Elizabeth Warren? Not that anyone knows about, now that she danced her way across Scott Brown’s “fake Cherokee” bed of hot coals. But this is politics. There’s always something. Tim Geithner at least would probably try to supply it. Jim Carville would go on the Sunday shows and start popping off about it. So suddenly, her profile would change: Right now, she’s above the fray; as a candidate, she’d be knee-deep in it, against the Clinton operation.
Even so, Warren would probably win a primary or two, or more, maybe several more. What then? It could actually get kind of ugly in a way that damages both of them. Now I suppose we’ve segued into the second argument, about how a good primary would toughen Clinton up. Maybe. But no one who is writing that sentence today can possibly know for certain that that’s how it would turn out.
People say, “Oh, but look at how the 2008 primary process helped toughen up Obama.” Did it? I’m not so sure. Or if it did, this fabled toughening-up process didn’t have much to do with Clinton. The two biggest crises Obama had to work through during the primary process were entirely self-inflicted: explaining away both a) why he spent all those years in the pews of a pastor who hated America and b) what exactly he meant when he said red-state people cling to guns and religion.
And anyway, Obama did not win the 2008 general election because a long primary season toughened him up. He won for three reasons: America was psychically ready to elect a black man, this particular black man, as its president; the financial meltdown happened on GOP watch; and John McCain chose Sarah Palin as his running mate. It had very little, or indeed arguably nothing whatsoever, to do with the primary process.
One could well argue that a long primary fight between her and Clinton would mainly work to the Republicans’ benefit. Especially with the media acting as they inevitably would with two women running against each other—that is, playing up the catfight angle as much as possible, running deep into the ground every cliché from the kingdom of nature about emasculating females.
I have speculated in the past that maybe Warren doesn’t even really want to be president (for foreign policy-related reasons). I also suspect there’s a part of her that doesn’t want to risk doing anything that might end up helping the GOP and allowing the media to indulge its Bette Davis vs. Joan Crawford fantasies at the expense of the party.
Finally I suspect Warren knows that she has a tremendous amount of power and leverage as things stand right now. She can sway Clinton’s course plenty as a non-candidate. She doesn’t even have to say or do much. She just needs, every so often, to remind Clinton that she exists, and that her army exists.
So, presidential candidate? She doesn’t need to bother. The things people say she would gain from such a candidacy she in fact has already. However…vice presidential candidate…think about it. Clinton-Warren. I’ve been chewing on this one for months. Mold-shattering. Exactly like what Clinton’s husband did in choosing Al Gore. Precisely the kind of bold play she needs to make to shed her image of caution. Two-thirds of women voters, easy. They’d be a great team on the trail. And imagine that closing-night convention visual. And in office, they could be a great governing team, too.
But I’m getting ahead of myself. For now, my contention is that Warren is at a point of very high leverage as it is, and no one from anywhere inside the Democratic tent wants to lay a glove on her. That would change if she ran. I can understand why her most ardent partisans want her to run—there’s only one gold ring in American politics, and that’s the presidency. But she has been absolutely insistent that she does not want to run. At some point, people ought to accept that she means it. Besides, she’s actually in the catbird’s seat now. She has the power without having to endure the scrutiny. I don’t know many politicians who wouldn’t take that.
By: Michael Tomasky, The Daily Beast, March 25, 2015
“Ted Cruz Cannot Be Serious”: With Ill-Conceived Fantasies, Cruz Is Entirely Unsuited To Be President
The big news of the day is that Senator Ted Cruz is officially running for president. Not setting up an exploratory committee or any of that perfunctory foreplay, but actually running. “It is a time for truth. It is a time for liberty,” he said in a 30-minute speech at, yeah, Liberty University. “It is a time to reclaim the Constitution of the United States.” Cruz’s address was full of red meat for the conservative crowd. But other than his oratorical skills, Cruz is entirely unsuited to be president. Luckily for America, his candidacy is likely doomed to fizzle.
Cruz recapped his life story, focusing on the role faith plays in his life, before diving into his traditional conservative talking points. He asked the crowd to imagine “millions of young people coming together and standing together, saying, ‘We will stand for liberty'” and “instead of economic stagnation, booming economic growth.” He asked people to imagine the next president repealing Obamacare, abolishing the Internal Revenue Service, implementing a flat tax and “finally, finally, finally secur[ing] the borders.” The crowd cheered each time.
The rest of the Republican field, whenever they officially announce their candidacies, will probably make similar promises; it’s hard to picture a candidate winning the Republican nomination without vowing to repeal Obamacare. As the Washington Post’s Greg Sargent writes, the Republican primary will reveal whether Cruz’s policy positions are extreme within the GOP or whether he differs mainly in his tactics.
His positions, regardless of where they fall within the Republican Party, are ill-conceived fantasies. Take taxes. A flat tax may appeal to the conservative base but it entirely misrepresents the actual problems with the U.S. tax code. The tax code is complicated not because of its progressive structure but because it is full of deductions, exemptions and credits that make it hard to calculate your taxable income. Cruz promotes the flat tax by saying it “lets every American fill out his or her taxes on a postcard.” But the exact same could be said about a progressive tax system. Senator Marco Rubio, another presumptive presidential candidate, didn’t propose a flat tax in his recently released tax plan (although he did say he wants to get there someday) because doing so is just not feasible. A flat tax would need to be set at a high enough level to fund critical government programs, requiring a massive tax increase on the middle class and poor. That’d be a political nightmare.
On Obamacare, Cruz wants to repeal the law … and then basically see what happens. This is, of course, the Republican Party’s position as well. But it’s unacceptable as a presidential candidate’s health care agenda. If you want to repeal the health care law, you better have a replacement plan. The same goes with abolishing the IRS. A Cruz government would eliminate the agency but it would still collect taxes—somehow. Cruz has never said how that would work. Would there be a new agency to replace the IRS? Would it have employees? Who, after all, would collect all those postcards? All unanswered questions.
Yet above all, one particular position should disqualify Cruz—or anyone else who holds it—from the presidency: using the debt ceiling as a hostage device. Breaching the debt ceiling would be disastrous. It’s hard to forecast exactly what would happen, but we can somewhat forecast day one after default. The government would have to prioritize its payments. Do you withhold food stamps from low-income Americans? Delay Social Security checks? Maybe we should stop payments on infrastructure projects. Those missed payments would harm millions of Americans and cause mass disruptions around the country as cash flow problems cause companies to become insolvent. Over the long term, it would permanently raise our borrowing costs, making our interest payments more expensive. In short, it would be self-inflicted economic Armageddon. Cruz considers his willingness to risk that catastrophe a selling point, touting his role in opposing the debt ceiling hikes on his website.
Beyond his policy positions, Cruz has demonstrated himself to be particularly un-presidential. During the 2013 government shutdown, for one, he demanded that President Barack Obama defund Obamacare in return for keeping the government open and avoiding a default on the national debt. It was a ridiculous demand that elevated Cruz’s national profile and ended with Republican approval ratings cratering. In the process, he infuriated much of the Republican establishment—not the only time he has done that.
That episode wasn’t an outlier. Throughout his time in the Senate, Cruz has shown a distinct lack of interest in policymaking or governing. Instead, he has calculated every move to prepare for a 2016 run. Every politician considers the optics of their positions, of course, but Cruz has taken it to the next level, with little care for how his actions affected the Republican Party or his colleagues. In doing so, he probably doomed his candidacy. On Monday, Five Thirty Eight’s Harry Enten convincingly argued that Cruz’s extreme views and his few friends within the Republican Party make it highly unlikely that he will win the nomination.
And that means Cruz’s role in the Republican primary will likely benefit Democrats. He’ll pull the rest of the party to the right on immigration, taxes and health care. Moderates such as former Florida governor Jeb Bush may have to resist the urge to adopt more conservative positions. In December, for instance, Bush said that the GOP candidates had to be willing to “lose the primary to win the general without violating your principles.” But that position is easy to hold 23 months before the general election and more than a year before the first primary. It will become harder to sustain as Cruz and others repeatedly hammer the moderates.
In Cruz’s speech Monday, he never mentioned Hillary Clinton. Instead, he painted a bleak picture of America and its role in the world, saying that the American dream “is slipping away from our hands.” He sees a desperate need for a conservative president to “restore that shining city on a hill that is the United States of America.” Implied throughout: Democrats are ruining America. Yet his actions are only making a Hillary Clinton presidency more likely. The Senator who would hold the government hostage has become the candidate doing the same to his party.
By: Danny Vinik, The New Republic, March 23, 2015
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