LIFE IS UNFAIR, BUT COLLECTIVELY WE CAN CHANGE THE RULES OF THE GAME

“The truth has long been known and has been the bond of the wisest spirits.

This old truth – reach for it.” -- Goethe

Monday, January 30, 2012

Beyond the Sound Bites and Tweets: What Obama Really Said

Before last week’s State of the Union Speech gets completely lost in the black noise that passes for information these days, we ought to take a closer look. We can’t be intelligent voters (or even intelligent non-voters) if we are ignorant of the substantive choices before us in the upcoming election.

In fact, President Obama gave us a comprehensive and balanced centrist agenda for where he would like to lead this country, not just in 2012 but in a second term -- since many of his proposals cannot realistically be enacted in this gridlocked Congress. Here is a brief summary:

* First, he sees a major opening for a resurgence of manufacturing in this country. To help the process along he proposed to (1) eliminate the tax incentives for outsourcing (2) provide tax incentives for companies that create manufacturing here (3) impose a minimum tax on American companies that now avoid taxes with offshore tax havens etc. He has also announced the creation by executive order of a trade enforcement unit that will go after pirated and dangerous imports.

* To support American manufacturers and other businesses, the President wants to strengthen the training role of community colleges, do more to reward good teachers and weed out the bad ones, persuade the states to prevent school dropouts before age 18, extend the tuition tax credit for college students, double the number of work study jobs and pressure colleges (using the stick of losing federal aid) to hold down tuition costs.

* Now that our borders are more secure and illegal immigration has plummeted, the President said there were “no more excuses” for avoiding comprehensive immigration reform.

* To aid small business development, a key engine of job growth, the President proposes to reinvigorate basic research, which has been the key to many of our most important new industries, from computers to solar energy, the Internet and even shale oil fracking. He would also provide temporary tax relief for small businesses that expand their operations and create new jobs.

* On green energy, Obama would double down on developing wind, solar and other alternatives. These are potentially huge industries and we cannot cede them to China and Europe, where governments are providing aggressive support. To fund these initiatives, he would end Big Oil subsidies.

* To address climate change as well as encouraging a market for green energy technologies, the President has committed the Department of Defense to a major conversion program that will also reduce DOD energy costs over time. In addition, he would offer incentives to manufacturers to upgrade the energy efficiency of their plants, etc. Another initiative will be clean energy standards for new construction.

* In response to the widespread concern about the burden of government regulations, the President has ordered every Federal agency to review and reduce regulations where possible. So far, 500 have been eliminated with an estimated savings of $10 billion over five years, and there is more to come. The President also asked for new authority to consolidate agencies and their responsibilities to improve efficiency.

* Congressional approval for funds to address our backlog of infrastructure repairs and improvements remains a priority for the President, along with a new executive order that will clear away red tape for construction projects. This should also help the construction industry.

* To spur construction in our moribund housing industry, the President is asking Congress to facilitate refinancing of existing mortgages at our historic low interest rates with minimal red tape and low fees.

* In response to the growing evidence of widespread fraud in the mortgage and banking industries during the financial ‘bubble,” the President has established a special “financial crimes unit” in the Justice Department that will work with state attorneys general to seek prosecutions and restitution.

* For the veterans of our two wars, the President proposed a veterans tax credit and a new veterans job corps that would undertake various efforts to aid veterans in getting training and employment in civilian jobs.

* To address the Federal deficit beyond the $2 trillion in reductions already underway, the President again offered the outlines of the deal he proposed to Speaker Boehner last summer, namely, to close various loopholes in the tax code and let the Bush tax cuts expire for those making more than $250,000, along with enacting the “Buffett Rule”, which would impose a minimum 30 percent tax rate on those making more than $1 million a year, in return for further spending reductions and changes designed to rein in Medicare and Medicaid costs and strengthen Social Security for the long haul.

* Finally, in an effort to deal with public distrust and the deadlock in Congress, President Obama proposed a ban on insider trading by Congressmen and Senators or the ownership of stock in companies over which they have jurisdiction, along with a new 90-day deadline for an up-or-down vote on judicial and administrative appointments.

I know, this agenda is very far from perfect. And, as always, the devil is in the details, but so are the angels. To be sure, the fate of much of the President’s agenda hangs on the outcome of the next election, given the political realities. But it is a broad vision for the way forward from here.

Perhaps the most important part of the President’s speech was his reaffirmation of our fundamental character as a nation – using the SEAL team that killed bin Laden as an example -- that is being challenged these days in some quarters:

“So it is with America…No one built this country on their own. This nation is great because we built it together. This nation is great because we built it as a team. This nation is great because we get each other’s backs. And if we hold fast to that truth, in this moment of trial, there is no challenge too great; no mission too hard. As long as we’re joined in common purpose, as long as we maintain our common resolve, our journey moves forward, and our future is hopeful, and the state of our Union will always be strong.”

Tuesday, January 24, 2012

The American Dream: A Replay

What if we could do-over the past 30 years?

One of the all-time classic Hollywood movies, Frank Capra’s morality tale, “It’s a Wonderful Life,” poses the great “what if” question regarding the life of the self-sacrificing protagonist, George Bailey (Jimmy Stewart). On a dark and snowy Christmas Eve, a guardian angel gives the suicidal Bailey a chance to see what his small community, Bedford Falls, would have been like had he never lived. It would have been a much worse place without him.

Now two distinguished political scientists, Jacob Hacker and Paul Pierson, in their disturbing best-seller, Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class, have posed the “what if” question with regard to the moribund American Dream. A key justification for our capitalist economic system is that the benefits of free enterprise and the accumulation of new wealth will “trickle down” and benefit the rest of us as well. But in fact, during the past 30 years the reverse has happened. There has been a “bubbling up” of income to the benefit of the top one percent and a shrinking standard of living for the great majority of Americans. For instance, the median income of male high school graduates has declined by 28 percent in past three decades, and the income of all wage earners is down seven percent since 1999, while the income at the top of the scale has gone up an astonishing 250 percent since 1980.

What would it be like, the authors ask, if the income distribution today were exactly the same as it was in 1979? Here are the authors’ calculations: As of 2006, the bottom 20 percent of households earned an average of $16,500. Under the alternative scenario, which Hacker and Pierson call “Broadland”, the average household income would be $22,366, or $5,866 more per year. The change for the middle 20 percent of families would be even more impressive, with an average increase of $12,295 more than the current $52,100 a year (or $4,340 a month) – roughly a 25 percent pay raise. On the other hand, the top one percent would see a pay cut of more than half of their 2006 average of $1,200,300, to $506,002 (most of it from the top .01 percent, the billionaires).

Pure fantasy, you say? Well, that’s the way things actually were in this country during an economic boom that lasted for almost 40 years, from the 1940s to the1980s. And it’s even less far fetched when you look at some other highly successful economies, like Germany, Japan, the Netherlands, and Switzerland, where there has been little change in the income distribution during the last three decades. America’s shameful “exceptionalism,” moreover, has nothing to do with the outsourcing of jobs, or automation, or the lack of a college degree. It’s purely a matter of how the income pie has been sliced in this country, and Hacker and Pierson show that politics and government actions (or inactions) had a lot to do with it.

It’s not hard to imagine what “Broadland” would look like today if we could “replay” our income distribution. The fraction of Americans living in (or near) poverty would be far smaller than roughly one-third of us. Government programs that assist low income workers, like Medicaid, food stamps, winter heating oil, subsidized housing, and more, would all be much smaller and impose far less of a tax burden. Indeed, most working Americans would be able to afford health insurance and most middle-income families would be able to avoid running up heavy credit card debts. They would also be able to put money aside for the college expenses of their children and even to save something for retirement. There would also be few if any mega-mansions and mega-yachts, fewer high-end resorts, or gated communities, and certainly no $5 million-dollar campaign contributions. It’s also likely that we would have much less crime, drug addiction, domestic violence, premature deaths and other pathologies associated with poverty.

And that’s just the beginning. Just imagine what you might be able to do with an extra $5-12,000 a year, and how that sum, multiplied by about 300 million, could transform our entire economy and society.

Thursday, January 19, 2012

The American Dream: Time to Wake Up

Perceptions often drive our actions. Our national self-image needs updating.

The "American Dream" has always been a bit ephemeral. When James Truslow Adams coined the phrase (in his book, The Epic of America, in 1931), it had an egalitarian ring to it - "a better, richer, happier life for all of our citizens of every rank."

Over the years, however, the American Dream has come to mean different things for different people. For more than a generation after World War II, it was strongly associated with doing better economically than your parents did. This was relatively easy to do during the post-war economic boom, and with the help of the GI Bill of Rights. More recently, the American Dream has often meant simply getting a good job. For many others it has referred to owning your own home. Still others have associated it with starting poor and getting rich, or famous, or powerful. President Obama likes to think he's an example, and so does House Speaker John Boehner.

But now the American Dream in any form is rapidly becoming a myth that masks and obscures a much darker reality - a society where the middle class has been shrinking, where about one-third of the population are now living in poverty, where home ownership is declining and has become a debt trap for many underwater mortgage holders, where there is only one job available (probably low-paying) for every five job seekers, where the chances of economic success largely depend on the success of your parents (upward mobility in our country is actually much more restricted than in European countries, or even Canada and class-conscious England), and where the only people who are getting rich are the Wall Street casino bankers and grossly overpaid corporate executives.

A few statistics tell the tale. Once upon a time the United States had the highest standard of living in the world, with a (relatively) egalitarian distribution of income and wealth, steadily declining poverty rates, and steadily improving social and health statistics. But all of this has changed radically over the past 30 years. Today, according to the Organization for Cooperation and Development (OECD), the gap between the rich and poor in the U.S. is the widest of any of its 30 members, except for Mexico and Turkey.

In 2010, the top one percent of income earners took home 24 percent of the total, while the top 10 percent received almost half (49%). The distribution of wealth (including housing but excluding cars, clothes and personal furnishings) was equally skewed, with the top one percent owning 38 percent and the top 20 percent owning 87.2 percent. The remaining 12.2 percent of the wealth was shared among the other 80 percent of us.

One measure of this radical change over time can be seen in CEO salaries. In 1950, Fortune 500 CEOs earned some 20 times as much as the average worker. Today that figure is 320 times as much. CEO salaries (not counting perks) have ballooned to an average of $11.4 million, while the real wages of workers have actually declined. From 1980 to 2008, the median income of high school graduates was down 28.4 percent (from $44,200 to $32,000). In fact, the median income of all households is down an average of seven percent since 1999, despite the "rising tide" at the top of the income scale.

The result of this wide disparity in income and wealth is a nation marked by islands of ever-growing affluence surrounded by a spreading sea of deepening poverty. Currently, there are at least 25 million workers who are either unemployed or underemployed, and this does not count the many millions of young people who have never been employed and cannot find jobs. Moreover, 47.3 percent of those who are working earn less than $25,000 per year, close to (or below) the official poverty line of $22,343 for a family of four. In 2011, some 50 million low-income Americans used food stamps, the vast majority being working poor, or children, or the elderly. There are also currently more than 49 million Americans without health insurance.

Safety net programs like unemployment insurance, food stamps, and Medicaid only partially compensate for our extreme income and wealth gap, judging by key health statistics. We now rank 45th among the nations of the world in infant mortality, below such countries as Cuba, Slovenia, Greece, Portugal and the Czech Republic, and our life expectancy at birth is even worse. We are ranked 50th behind such unlikely places as San Marino, Monaco, Liechtenstein, and Cyprus, as well as every other developed nation. Significantly, there is also a difference of 4.5 years in average life expectancy between the bottom and top 10 percent of the population in relation to income, up from 2.8 years in 1980.

We are also slipping badly in educating the next generation. Currently, less than one-third of our eighth graders are proficient in math, science and reading. We now rank 48th in the world in math education, according to the World Economic Forum, and we are in the middle among the 34 industrialized countries in science and reading test scores. We also rank near bottom in our percentage of high school graduates and sixteenth in our share of adults holding college degrees.

Indeed, we now have a two-tiered system in which the educated, wealthy elite perpetuates itself while a vast underclass lacks the education and skills (or the money) to move up the economic escalator; we have the lowest level of social mobility among the major industrialized countries. As the New York Times'columnist Nicholas Kristof puts it, today "poverty is destiny." To make matters worse, our states have been relentlessly slashing public school budgets, laying off teachers, and cutting school programs, rather than making improvements. And this is in addition to cutting unemployment benefits, tax credits for earned income, and food stamp eligibility, among other things.

Franklin Roosevelt, in his second inaugural address in 1936 -- in the depths of the Great Depression -- declared "I see one-third of a nation ill-housed, ill-clad, ill-nourished." The sad reality is that his words also ring true today, and it is time for us to face up to it. The American Dream has become a myth that serves only to justify the status quo. But this is not an argument for despair. Rather, it is meant to be a wake-up call.

What is needed going forward is an "Occupy Washington" movement armed with the demand for a "Fair Society" -- including a sweeping reform program that would provide a clear mandate for change in the next election. It has happened before in our history, with anti-trust legislation, the minimum wage, collective bargaining rights for workers, Social Security and Medicare, civil rights, women's rights, accommodations for Americans with disabilities, and more.

In short, there are numerous precedents for positive changes, and there is every reason to believe that it can happen again. Political scientists Jacob Hacker and Paul Pierson point out in their disturbing 2010 book, Winner-Take-All Politics, that politics got us into this mess and politics can get us out of it. But we are the only ones who can make that happen. As the TV host and commentator Bill Moyers put it: "The only answer to organized money is organized people."

Monday, January 2, 2012

Darwin’s Psychology

Social Darwinists are wrong and Darwin was right about human nature.

At the height of the banking crisis in 2009, the CEO of Mellon Bank, one of the beneficiaries of the massive taxpayer-funded bank bailout, had the gall to tell a PBS interviewer "Capitalism works; Darwinism works." His chutzpa in the middle of an economic disaster was a particularly flagrant example of how Darwin's name, and his theory, have been exploited as propaganda for a laissez faire, "survival of the fittest" model of capitalism.

The roots of what has come to be known as "Social Darwinism" can be traced back to the robber baron era in the latter nineteenth century. The idea that the economy of a successful capitalist society amounts to a cut-throat competitive struggle, much like what was supposed to be the case in the natural world, was inspired by the British social theorist Herbert Spencer. In fact, it was Spencer who coined the term "survival of the fittest," not Darwin.

Fairly typical of the Social Darwinist rhetoric of that era was this pronouncement by the American sociologist E.B. Tylor: "The institutions which can best hold their own in the world gradually supersede the less fit ones, and...this incessant conflict determines the general resultant course of culture." Business magnate John D. Rockefeller, in a Sunday school address, told his audience that "The growth of large business is merely a survival of the fittest.... It is merely the working out of a law of nature and a law of God." Likewise, the steel baron Andrew Carnegie, in an 1889 essay entitled "The Gospel of Wealth" assured us that: "While the law [ofcompetition] may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department. We accept and welcome, therefore...great inequality...as being not only beneficial, but essential for the future progress of the race."

Today, we refer to wealthy capitalists as the "job creators." We are told that the rich deserve their wealth, because they have earned it in the competitive "free market." The unemployed and the poor, on the other hand, have failed to take advantage of the opportunities that were available to them. Their hardship is their own fault. Thus, Newt Gingrich tells us: "I'm opposed to giving people money for doing nothing." (Evidently, searching for a job, the only way to qualify for unemployment insurance benefits, doesn't count.) President Obama, in his recent Osawatomie speech, characterized it as "'you're on your own' economics ....We are better off when everybody is left to fend for themselves and play by their own rules."

With Social Darwinist rhetoric, and policy proposals, being much in evidence these days in the Republican Presidential debates and in Congress, we should try to set the record straight about Darwin. In fact, Darwin's Darwinism was radically opposed to an individualistic, "nature, red in tooth and claw" political ideology (as the poet Alfred Lord Tennyson described it), especially in social species like honeybees and humankind. In his treatise on human evolution, The Descent of Man, published twelve years after The Origin of Species, Darwin recognized that humans evolved in interdependent cooperative groups, not as isolated individuals, and that cooperation was the key to our success.

Indeed, Darwin attributed our dominant position in nature and our remarkable cultural attainments to our evolved social, moral, and mental faculties, in combination with our language abilities. Following a discussion in The Descent devoted to the role of social behavior in various species, Darwin dealt at length with the subject of "Man as a Social Animal." He concluded that our morality is a product of the evolutionary process, and he believed that our "social instincts," including even our capacity for "sympathy," "kindness," and the desire for social "approbation," are rooted in human nature. The rudiments of these behaviors, he pointed out, can be found in other social species as well:

"In the first place, as the reasoning powers and foresight of the members became improved, each man would soon learn that if he aided his fellow-men, he would commonly receive aid in return. From this low motive he might acquire the habit of aiding his fellows. And the habit of performing benevolent actions certainly strengthens the feelings of sympathy which gives first impulse to benevolent actions" (p. 146).

Darwin also believed that "group selection" between various competing "tribes" played a major role in shaping the course of human evolution. "Natural selection, arising from the competition of tribe with tribe...would, under favourable conditions, have sufficed to raise man to his high position." The tribes that were the most highly endowed with intelligence, courage, discipline, sympathy and "fidelity" would have had a competitive advantage, he argued.

"Selfish and contentious people will not cohere, and without coherence nothing can be effected. A tribe rich in the above qualities would spread and be victorious over other tribes; but in the course of time it would, judging from all past history, be in its turn overcome by some other tribe still more highly endowed. Thus the social and moral qualities would slowly tend to advance and be diffused throughout the world" (p.148).

President Obama, in his recent Osawatomie speech, picked up on this theme: "Our success has never just been about survival of the fittest. It's about building a nation where we're all better off. We pull together. We pitch in. We do our part." The President also quoted from President Teddy Roosevelt's 1910 "New Nationalism" speech, also delivered in Osawatomie: "The fundamental rule of our national life, the rule which underlies all others, is that, on the whole, and in the long run, we shall go up or down together."

Darwin's Darwinism was grounded in a more accurate understanding of human nature, and of the cirumscribed role of comppetition in any society. Social Darwinism represents a perversion of Darwin's views. It is time to consign it to the museum of antiquated ideologies.