January 02, 2004

The Second Gilded Age

Paul Krugman writes:

Op-Ed Columnist: Our So-Called Boom: ...An aside: how weak is the labor market? The measured unemployment rate of 5.9 percent isn't that high by historical standards, but there's something funny about that number. An unusually large number of people have given up looking for work, so they are no longer counted as unemployed, and many of those who say they have jobs seem to be only marginally employed. Such measures as the length of time it takes laid-off workers to get new jobs continue to indicate the worst job market in 20 years.

So if jobs are scarce and wages are flat, who's benefiting from the economy's expansion? The direct gains are going largely to corporate profits, which rose at an annual rate of more than 40 percent in the third quarter. Indirectly, that means that gains are going to stockholders, who are the ultimate owners of corporate profits. (That is, if the gains don't go to self-dealing executives, but let's save that topic for another day.)

Well, so what? Aren't we well on our way toward becoming what the administration and its reliable defenders call an "ownership society," in which everyone shares in stock market gains? Um, no. It's true that slightly more than half of American families participate in the stock market, either directly or through investment accounts. But most families own at most a few thousand dollars' worth of stocks.

A good indicator of the share of increased profits that goes to different income groups is the Congressional Budget Office's estimate of the share of the corporate profits tax that falls, indirectly, on those groups. According to the most recent estimate, only 8 percent of corporate taxes were paid by the poorest 60 percent of families, while 67 percent were paid by the richest 5 percent, and 49 percent by the richest 1 percent. ("Class warfare!" the right shouts.) So a recovery that boosts profits but not wages delivers the bulk of its benefits to a small, affluent minority.

The bottom line, then, is that for most Americans, current economic growth is a form of reality TV, something interesting that is, however, happening to other people. This may change if serious job creation ever kicks in, but it hasn't so far...

Posted by DeLong at January 2, 2004 08:09 AM | TrackBack

Comments

Question for the real economists out there:

I often hear that the labour share of GNP is remarkably constant. Yet a few paragraphs above the quoted section of this article, Mr. K says "In the third quarter of 2003, as everyone knows, real G.D.P. rose at an annual rate of 8.2 percent. But wage and salary income, adjusted for inflation, rose at an annual rate of only 0.8 percent. More recent data don't change the picture: in the six months that ended in November, income from wages rose only 0.65 percent after inflation."

So what's going on? Is "labour share of GNP" different from "wage and salary income"? Or is the constancy only valid over long time periods, not short fluctuations, or what?

Posted by: Tom Slee on January 2, 2004 08:25 AM

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Don't corporate profits have to come first out of a recession, and then comes the hiring and wage increases?
Also, what's the proposed solution to this problem?

Posted by: William on January 2, 2004 08:50 AM

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Prof. DeLong and other economists -- Can you explain the basis for Paul Krugman's assertions regarding the large numbers of discouraged and marginal workers?

Another web site points out that the Dept. Of Labor formally measures "discouraged workers" and "marginal workers"
http://poorandstupid.com/2003_12_28_chronArchive.asp#107291258443223094
The official DOL figures show only small, normal amounts of discouraged and marginal workers, which appears to differ from Prof. Krugman's statements.

Is the DOL's definition of "discouraged workers" different from Krugman's "people [who] have given up looking for work"? Is the DOL's definition of "marginal worker" different from Krugman's? Are there other counts of marginal and discouraged workers?

Krugman is not alone. I have seen other Bush critics also state that there are unusually many discouraged and marginal workers. I hope that Prof. DeLong or some other expert can identify the source the belief.

Posted by: David on January 2, 2004 08:55 AM

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David,
"Poor and Stupid" isn't usually credible when it comes to economic matters, and particularly not when the context is a Paul Krugman column.

Posted by: Patrick (G) on January 2, 2004 09:21 AM

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David,

Check the Prof DeLong's posting about two items down - the one about good unemployment news. There is about 60 comments covering the subject there. You will find a good discussion there with 60 comments from bright people.

Here is a link to the government's statistics. Note that U-9 is 9.7%, that is counting the part-time workers that want full time, and those who would look for jobs if they believed there was a job to find. That number is comparable to European unemployment statistics.

Posted by: ..Dave on January 2, 2004 09:23 AM

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Tom: even broadly measured employee compensation has recently been declining as a share of national income. Your statement might be the labor share HAD been remarkably constant.

Posted by: Harold McClure on January 2, 2004 09:46 AM

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Dave -- thanks for the info. Your post is missing the link to statistics on part-time workers that want full time, and those who would look for jobs if they believed there was a job to find. Can you supply the link?

Do you know how the U-9 figure of 9.7% today compares with what it was when we were coming recessions in the past?

Posted by: David on January 2, 2004 10:19 AM

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The whole "ownership society" thing brings up a question I have. I think that there's a sly political deception involved.

Suppose a 45-year-old guy has a paid-up $100,000 home and a $50,000 / year job with an OK pension plan, is paying into Social Security, and has two kids 6 and 8 whom he plans to send to the public schools, which are pretty good where he lives. (This is a fairly concrete example based on Portland Oregon).

Suppose he also has $30,000 on the stock market. My observation is that a guy like that will tend to vote low-tax Republican because he thinks of himself as a successful investor. Yet, as I described him, the bulk of his assets and income are job-related, government-related or neighborhood related. If his employer starts getting hard-nosed or his neighborhood abd its schools deteriorates, he has more at stake there than in the stock market.

Part of his conservative thinking comes not only from his investments, of course, but from his belief that what is good for his employer (good business climate, low taxes) is good for him. But that's not always true, especially in an anti-labor leagl and political environment, or during a period of low nemployment. (Pension theft is the major example.) Likewise, cuts in social security benefits may hurt him more than low taxes would help him.

It seems to me that there should be some rules of thumb worked-out so that a guy like this can calculate the various weights of the various factors of his own personal well-being -- NOT the general welfare, or the overall welfare of workers, but his own welfare as a unit. (I'm assuming that he considers his childrens' well-being as being his own, though). The fact that there probably is no such metric is, to me, a pretty good example of the bias of the economics profession. It looks doable to me.

My hypothesis is that small investors vastly overestimate the value of their small investments. Stocks and bonds have a sort of glamor because they're over and above the home, job, and family that everyone has.

Another way of formulating the question: how much would a guy like that have to have on the market for it to be worth more than everything else he has (allowing him to send his kids to good private schools). My guess is that the number is between $500,000 and a million, but that's a pure and completely ignaorant guess. So $30,000 is really nothing.

Several previous attempts to raise this question elsewhere have fallen flat, incidentally, for reasons I do not understand.

Posted by: Zizka on January 2, 2004 10:22 AM

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David - even using Luskin's series, discouraged workers are rising, which does seem unusual for a "boom".

Posted by: Harold McClure on January 2, 2004 10:42 AM

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Mr. Dean should be able to come up with a better idea of what "ownership society" might be all about -- in terms of (a) distribution of income and (b) distribution of wealth, especially in the context of distribution of empowerement over investment decisions.. that would mean:

- higher taxes
- expanded social safety net
- expanded higher education coverage
- expanded institutional investment
- expanded direct democracy, starting with corporate governance


all on top of market economy and free enterprise mechanisms.

Posted by: bulent on January 2, 2004 10:50 AM

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Dave-with-two-dots, most European countries (as far as I know) use the ILO definition of unemployment:
http://www.hamburg.emb-japan.go.jp/infojp/wussten/dilo.html

This does not count "discouraged workers" or part-time workers as unemployed. The current ILO unemployment table is here:
http://www.oecd.org/dataoecd/41/13/18595359.pdf

It shows fairly similar numbers to the U-3 numbers for the US.

Posted by: dc on January 2, 2004 10:54 AM

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Zizka,

Self-described Republicans make up roughly 35% of the voting public, with self-described Democrats making up another roughly 35%. In the extreme, we can expect that this 70% of the voting public will change its mind. However, in normal years, we first need to know whether the person you have in mind is willing to be swayed by less than catastrophic changes in economic circumstances. We hear that voters vote their pocket books, but in fact, swing voters vote swings in their pocket books. The rest have either already aligned their votes with their pocket books (poor, old, teachers vote Dem, payers of high marginal taxes vote Rep), or are not voting their pocket books (single or non-economic issue voters).

That said, yeah, there is a bit of evidence that people don't understand how their own futures will be affected by economic policies. Many people think they will be somehow hit by inheritance tax, when almost nobody will. Many think that small farmer and businesses are routinely liquidated to pay inheritance tax when there is no evidence of such a thing happening.

There is also little evidence that people consider granular economic issues when voting. Bush passed more than one tax cut over the objections of the majority, and has generally gotten bad grades on economic management. However, with the unwanted tax policies in place, and no evidence that Bush has done much for the long-term health of the economy, he is not getting some of the highest approvals of his handling of the economy since he came to office, apparently because growth has suddenly strengthened.

In the end, I am not so sure we treat economics raitonally at the polls, in which case, no amount of laying out of the facts is likely to make much difference. When I'm worried about my paycheck, I will tend to think the world is full of back-biters and syndicators, that my car is due to quit any day, that my health is on the verge of going and that my football team is going to have a bad season. My poor brainstem can't fire up happy feelings about one set of circumstances and unhappy ones about another at every turn. My higher brain has limited lattitude in turning abstractions into voting preferences, given what is going on next door in the brainstem.

Posted by: K Harris on January 2, 2004 10:55 AM

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I just can't imagine that Dean's going to have any success selling his higher tax, less free trade, as the economy improves this coming year.
While you make some general comments Bulent the details of those policies are what worry me.

Posted by: William on January 2, 2004 10:59 AM

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Katherine -- I'm talking about people who became loyal and even fanatical Republicans because their $30,000 made them think they were "investors", when they really still were workers, and because they came to believe that Republicans are good for investors. I'm not only talking about swing voters, and I'm not talking about election-to-election fluctuations.

Your response seemed curiously unresponsive. I was really talking about why I think that Bush's "investor society" ploy might be effective, how I think that it's basically fraudulent, and how economists could analyze the situation to make the fraudulence clear (assuming that I am right in my guess).

I've known many working-class people who fit approximately the description I gave. They voted their tiny investment -- as opposed to their job, their pension, their social security, their neighborhood, or their family.

Posted by: Zizka on January 2, 2004 11:12 AM

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Luskin's got a point on "discouraged" workers, but not on "marginally employed". On discouraged workers, it looks to me as if they're following their normal cyclical pattern, so the word "unusually" is wrong. Krugman is probably here referring to the known gap between what unemployment "ought" to be given the level of employment and what it is; but to say that this is because of discouraged workers (rather than, say, under-reporting of the self-employed) is going well beyond the data.

On "marginal" workers, though, Luskin is being stupid for the sake of it. It's clear from context that Krugman can't be talking about the BLS category of "marginally attached to the labour force", because that describes people who don't have a job and haven't been looking for one in the last four weeks. Since Krugman explicitly says in the sentence in question "many of those who have jobs, Luskin's being an ass by putting up the chart of marginally attached workers. It is clear from context that by "marginally employed", Krugman is referring to individuals who have a part time job but want a full time one.

Posted by: dsquared on January 2, 2004 11:13 AM

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Who the hell is Katherine?

Posted by: K Harris on January 2, 2004 11:16 AM

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"I was really talking about why I think that Bush's "investor society" ploy might be effective, how I think that it's basically fraudulent, and how economists could analyze the situation to make the fraudulence clear"

As an investor I invest capital. I would therefore want capital friendly policies that would benefit my capital. While we can all agree on the long term issues that the Bush administration policy's will creat I'm not convinced that coming in and raising the taxes on capital (as Dean advocates) would be what would be termed "investor" friendly.

Posted by: William on January 2, 2004 11:25 AM

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dsquared, excellent points. When Krugman mentions "those who say they have jobs [but] seem to be only marginally employed" he surely isn't referring to what the DOL calls "marginally attached" workers. Krugman may be referring to part-time workers who would like full-time work, as shown on line U-6 here http://www.bls.gov/news.release/empsit.t12.htm

The next question is whether this figure is high by historical standards, as Krugman implies. The cited table only goes back a year.

Posted by: David on January 2, 2004 11:28 AM

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But if you meant me, Zizka, then the reason I seem unresponsive is because I disagree with your premise. I think people say things that seem on the surface to offer logical explanations for their voting behavior, but the reasons offered have little or nothing to do with their actual voting preferences. This is not to say people are dumb. They aren't. It's just that cognitive dissonance sets in pretty frequently, leading us to trump up explanations for cherished behavior so that we don't have to examine that behavior closely.

Voting behavior, I think, is more emotional and so less driven by likely policy outcomes, than is often assumed. That is why wrapping oneself in the flag, saying family this and family that, calling a tax policy with no relation to job creation at all a jobs package, can be effective. Such pure emotional appeals work at their own level without much risk that contradiction by the facts will do real damage.

Judis and Teixeira note that people who think at a fairly complex level for a living tend to vote for Democrats. That's true even youngish white males. These people are an exception to my rule - unless there is just a great deal of emotional satisfaction for them in being offered policy-analysis sorts of political positions. Think back to the days when the Democratic base was fairly reliable - unions, minorities, teachers, the poor, traditional southerners. Back then, a very smart, Ivy-League educated son of the rich could lure them in hitting the same old themes they had always heard. Clinton, for all his fascination with the facts, knew enough about getting people's blood rushing to be extremely popular. He was the "first black president" even though he abandoned a good many of the policies that traditionally were thought to favor minorities - I think because he know how to stroke his audience.

That's why my response, or Katherine's response, or whatever, seemed unresponsive. I don't think your question gets us anywhere. People are smart enough to know the right answer, when they want to know it.

Posted by: K Harris on January 2, 2004 11:33 AM

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K -- sorry I called you Katherine. Slip of the brain. Thinking of someone else, I think.

1. William -- I was not talking about Dean's plan or anything like it. I was talking about how many voters think that they're middle class (because of small investments), but aren't.

2. K. -- to me the voters who think that they're middle class, but aren't, and who therefore vote Republican, are a significant demographic in American voting. In my moderatel;y small sample of acquaintances I know of several, all of whom are evry ordinary people.

3. I'm not really talking about "voting behavior" but party identification. And also a Bush strategy which was part of the topic of this thread, and why I expect it to be effective, though fraudulent.

4. I was asking for more specific help on this question from people who know more than I do on the topic, of whom I think you are probably one.

5. Some people are smart enough to know the right answer, some not.

One reason we have an economics profession is so that they will know **more** than other people, such as myself and the people I'm talking about, whom I know personally. And possible share their knowledge with them.

6. I'm not talking about whether Bush's policies are good ones. I'm talking about why people make mistakes in their voting because they wrongly think that they're middle-class, when they're not. As I understand, you think that this factor isn't even worth talking about.

Posted by: Zizka on January 2, 2004 12:08 PM

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K. -- frankly, the voters you describe sound pretty dumb to me. I suppose that makes me an elite snob.

Posted by: Zizka on January 2, 2004 12:11 PM

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Stop being Oppositional to Bush (“This is wrong...”) and be Inclusive, but Better (This ain’t bad, but let’s do it this way...”).

Seems unlikely that people with the hope of feeling better will vote against an incumbent, no matter how he quietly dispossesses them of opportunity. An economic boom is a sigh of relief for an election year! I think it might be easier for the Democrats to say the recovery was coming anyway, as all business cycles return, but it was DELAYED by a misdirective tax cut, and might’ve started a year or two earlier by priming consumer demand, instead. In this, the Democrats appear to have almost all economists on their side. It’s no WONDER the thing’s now rocketing: demand had been depressed most unnaturally.

In this delay, Bush has once again displayed enormous ineptitude, and hurt lots of people.

Delayed recovery + Budget deficit + Iraqi misplanning + Downer cow policy + Etc. = SHORTSIGHTEDNESS WE CANNOT AFFORD

Posted by: Lee A. on January 2, 2004 12:29 PM

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William:

On the matter of "higher taxes"; all Howard Dean has to do is to advocate a return to "reasonable taxation", i.e., get rid of Bush tax cuts, and I think that's what Governor Dean is proposing.

Of course, Mr. Dean should put up front what he plans to have the Federal Government do with the revenues from that "reasonable" tax scheme.

I think he already has a good plan for health care coverage.

Regarding higher education, I'm sure all would remember or appreciate how much America gained from the so called GI Bill. This time round, it could be a higher education loan facility available to any one who wants it to enroll at accredited higher ed institutions.


I'll get to the other two items (institutional investment and corporate governance /direct democracy) later on.


Posted by: bulent on January 2, 2004 01:07 PM

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Poli. Econ. exam questions (bonus points): (1) Try to resolve the gapening distribution of income while dancing gingerly ‘round the concentration of ownership. (2) Imagine how the opposition’s brains are bollixed when you introduce “ownership for everybody” !

Posted by: Lee A. on January 2, 2004 01:07 PM

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bulent, re: taxation and politics, in my view you have a very unrepresentative rational and policy-centric method for understanding how voters make choices. This is a problem for economists, too - the frequent irrationality of actors in the system.

K Harris is completely right - by and large only Democrats vote on policy nuances. Regular people don't want their taxes raised, and don't have much patience to sift through long explanations and evidence - that's why people like me pull their hair out over Dean's (and Gephardt's) tax positioning.

The policy wonk idealistic Dems (supporting Dean in this cycle) think they can just present rational arguments and win people over. It doesn't work that way. This is a non-cerebral culture of image and self interest that likes its explanations fast and simple. Cognitive dissonance is a key factor as well - hence the value of upbeat optimism in national candidates. Which matches our national myths of perpetual righteousness. (*Disclaimer to avoid Republican flames* for the record - this is a fabulous country - but one that makes mistakes, too.)

Posted by: Deep Background on January 2, 2004 01:23 PM

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Zizka, it's the same thing that makes people gamble, and even the genuinuely rich get caught up in it, somtimes--that's how they lost so much money when the recent bubble collapsed. People in the USA usually believe they are higher in the income hierarchy than they in fact are.

Posted by: Randolph Fritz on January 2, 2004 01:23 PM

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I was a bit disappointed with the Krugman column of that Tuesday, really.

1. Low end sales vs. high end sales (Wal-Mart vs. Sharper Image). Krugman claims that this indicates that this shows widening inequality. I think that, empirically, he's right, but one might ask the question, "isn't Wal-Mart a sales place for inferior goods? Could this just indicate that rising income caught low-end retailers off guard as they switched to higher end stores?"

2. Corporate profits are rising while wages/salaries are not... well, aren't corporate profits ALWAYS more cyclically variable than wages/salaries?

I think that the most illuminating part of the column was on the ownership statistics, really, and the sillyness (or, rather, disingenuousness) of Bush's ownership society plans, but that was only about 1/3 of the column, IIRC.

Posted by: Julian Elson on January 2, 2004 01:30 PM

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Randolph Fritz -- thanks. So what do we do about it?

Deep Background -- like K. Harris, you missed the point. I was talking about people who identify as Republicans because they think they're middle class when they're not. I was not talking about election trends or policy proposals. I wasn't saying "What little gimmick should we throw in the direction of these pseudo-middle-class people in order to get their vote". I was asking how we could convince them that they're not really Republicans.

It seems to me that this is a real problem, and that realizing that it is would be a first step toward doing something about it. The consensus here seems to be that it's an imaginary problem, wouldn't really make any difference anyway, and besides that, nothing can be done because voters are irrational.

Posted by: Zizka on January 2, 2004 01:41 PM

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Deep Background:

Well, in that case, Howard Dean should say:

Ladies and Gentlemen! You are so right!? Of course we should not be raising taxes. What is good old borrowing for any way? We shall go forth borrowing and borrow! But let us be aware who is going to pay that debt? Our children will. Without reasonable taxation, we would be spending THEIR money. Therefore let us at least use their money to prepare a better world for them. This, then is my program:.....

And then he should describe a program that would win the election!

Let the subsequent Governments / generations worry about deficit and borrowing.


Posted by: bulent on January 2, 2004 02:29 PM

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Zizka --

I suspect that the number of "middle-class" people who vote Republican because they identify themselves as investors is very very small. There's little (or maybe no) evidence that Americans in general believe Republicans do a better job of running the economy. And I believe every poll has shown that most Americans would have rather the surplus be used for something other than tax cuts (especially of the Bush sort).

That doesn't mean, though, that anti-tax sentiment isn't widespread in America, but I don't think that has much to do with people thinking of themselves as investors and more to do with a sense that government does not deliver the goods or that it delivers them to the wrong people. The Republicans have been very careful, for the most part, not to threaten the quintessential middle-class government programs: the housing tax deduction, Social Security, and Medicare. And even if the long-term consequences of Bush's policies is that the latter two will come under threat, I'm not sure we can reasonably expect even rational people to vote on the basis of what may come to pass. You also suggest that Republican regimes are bad for labor and that they have something to do with neighborhoods deteriorating. I think the former is probably true, but again I'm not sure people would reasonably believe that their employers were getting hardnosed because a Republican was in the White House. And the connection between Republican policies and neighborhood deterioration seems even vaguer.

In any case, I think the reasons "middle-class" people vote Republican are, for the most part, the reasons everyone cites: social, cultural, and military. To the extent that the Democrats are identified as the party that supports welfare, is anti- or at least non-religious, is soft on crime, and weak on defense, it will have a hard time winning over a certain sector of the working-class population, for whom these issues are more important than economic ones (maybe because they don't fully understand economic ones). I don't think that's irrational: there's no obvious reason why economic matters are inherently more real or psychologically important than these other issues.

Posted by: James Surowiecki on January 2, 2004 02:49 PM

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David: Thank you for the compliment... I think! As Will Rogers famously said, "I don't BELONG to an organized party. I'm a Democrat."

If the recovery picks up and stays strong, the Democrats would be foolish to argue against Bush based on the continuing unemployment number, even though it may stay high for a long time. In fact given the length of the campaign, this argument cannot remain. It should be easy for Republicans to point to job-growth numbers, explaining that the backlog of jobless who weren't looking before, are now keeping the unemployment rate high.

If on the other hand the economy stutters for a quarter or so, the Democratic strategists may be misled into making a weak recovery into a campaign issue. This is a real danger. "Never underestimate the ability of the Dems to shoot themselves in the foot." (Somebody else, I forget who.)

One thing the Dems have going for them this season: the candidate is nominated early, and it's going to be a longer campaign. Stronger, slightly more compicated arguments may be strategized (vide Zizka, above).

Posted by: Lee A. on January 2, 2004 03:05 PM

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That would be "complicated"...

Posted by: Lee A. on January 2, 2004 03:08 PM

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K Harris and Zizka

A fine exchange indeed. The topic is awfully important and I do hope you will both go on at length in future. I am thinking.

Posted by: anne on January 2, 2004 03:23 PM

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harold (many posts back)
-- thanks.

Posted by: Tom Slee on January 2, 2004 03:59 PM

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PK will be right!Why?Too difficult to explain but I would only like to add one thing:"He spots an important economic issue coming down the pike months or years before anyone else. Then he constructs a little model of it, which offers some new and unexpected insight. Soon the issue reaches general attention, and Krugman's model is waiting for other economists to catch up. Their reaction is generally a mixture of admiration and irritation(=jealousy?). The model is wonderfully clear and simple. But it leaves out so much, and relies on so many special assumptions including specific functional forms, that they don't think it could possibly do justice to the complexity of the issue. Armies of well-trained economists go to work on it, and extend and generalize it to the point where it would get some respect from rigorous theorists. In this process they do contribute some new ideas and find some new results. But, as a rule, they find something else. Krugman's special structure was so well chosen that most of its essential insights survive all the extension and generalization. His special assumptions go to the heart of the problem, like a narrow and sharp stiletto. By contrast the followers' work often resembles thoracic surgery, involving much clumsy breaking of ribs; sometimes it proves to be no more than an autopsy of the issue."(Dixit),ergo he knows what a globalized economy means and why Dow "reache(d)s" peaks during the boom of the "New Economy =?" within the "Old Economy =?".
Go, go Brad go!

Posted by: don camillo on January 2, 2004 05:30 PM

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Not to whack the closest drum but surely there is a relationship between: "Corporate profits are rising while wages/salaries are not."

and the increasing outcountrysourcing of US jobs? Or perhaps the tooth fairy forgot to add to our pay packets?

Posted by: Josh Halpern on January 2, 2004 05:31 PM

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cm

Again, most interesting. The posts on this thread will keep me thinking for quite a while. Thanks, all.

Posted by: anne on January 2, 2004 05:31 PM

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don camillo

This is a beginning. The model from which Paul Krugman is working will gradually be filled out, with all sorts of twists especially since the problems we perceive are long term and will play out so gradually. Also, we have never been an aging society before. The aging of America must be carefully attented to in thinking through the effects of income and wealth divergence that increasingly squeezes the middle class. Also, I can not imagine how this middle class squeeze will play out politically.

Posted by: lise on January 2, 2004 06:07 PM

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Julian: I don't think of the Sharper Image as selling top quality products, just expensive products that the Japanese name brands will sell cheaper and better within 12 months. The SI sells expensive novelties, ie Krugman's point: lots of disposable income for people who can spend it on trinkets, essentially, while ordinary people are not increasing their spending at the place where they buy most of their stuff, Wallmart.

Posted by: Cal on January 2, 2004 06:32 PM

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"Also, we have never been an aging society before. The aging of America must be carefully attented to in thinking through the effects of income and wealth divergence that increasingly squeezes the middle class. Also, I can not imagine how this middle class squeeze will play out politically."

I think nobody has a good understanding of all of that yet, although the concern is reaching public awareness. When soon (within 10+ years) a large portion of the experienced work force approaches or reaches retirement age (whether they will financially be in a position to retire or not), things will become really "interesting". In which way is hard to fathom though.

I suspect (and fear) one thing that will show then is how much the education systems in the "first world" have been neglected -- in terms of volume, not necessarily quality --, an effect that has so far been masked (?) by "old school" people still working, massive importation of foreign labor, and offshore outsourcing.

One plausible argument that I have heard is that the rapid and large-scale economic progress of the last century is largely due to bringing a solid level of education to the largest part of the population, and making higher education accessible to more people on a merit basis (e.g. by grant programs, to allow less affluent but talented people to enhance their effectiveness in contributing to the society -- this is what education is about in the big picture).

Today there is an increasing trend for colleges and universities to have to rely on industry funding -- the bargain element they have to offer being what amounts to the effective outsourcing of industrial research to universities. An increasing portion of research is "applied", not "basic".

To an extent that's a win-win situation, but the reason I cite this here is that (I believe) it is not voluntary on the part of universities, but forced by cutbacks in state funding and driven by the necessity to maintain certain staffing levels, and undoubtedly some crowding-out of "free" research is taking place. Also college libraries have to rely more on third-party grants, which may have some effect on what selection of literature is purchased.

Posted by: cm on January 2, 2004 06:33 PM

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A postscriptum to my previous post:

If my interpretation of the term "gilded age" is correct (late middle ages?), we knew what came after that -- the Dark Ages, which among other things were characterized by a low level of education in the "masses", rulership of ideologues (although at the time they were not called such), and as a consequence huge economic and social instability.

Which is not to say that it will happen again (back then the level and breadth of availability of science and technology was also pretty low, and there was no known reference point of a democratic society). Just a thought.

Posted by: cm on January 2, 2004 07:02 PM

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"I agree with you that most Americans want lower taxes. They also want more government services."

We recognize societal responsibilities. We realize that those responsibilities are suboptimally served via reliance solely on the coercive power of the state.

There are alternatives!

Put another way - we want more of those services that have been traditionally provided through government. We'd like to explore more diverse provision methods.

"Stop being Oppositional to Bush (“This is wrong...”) and be Inclusive, but Better (This ain’t bad, but let’s do it this way...”)."

Now you're getting somewhere. How often does Bush mention Dems at all? Why do Dems give him so much attention?

"Judis and Teixeira note that people who think at a fairly complex level for a living tend to vote for Democrats."

This sort of statement, while perhaps true (not even close in most of the areas in which I have lived, though it is feasible in the aggregate), does way more to alienate those whom Dems might win over than it does to add any light to the situation. Al's eye rolls were not helpful!

Building a majority is about finding what we have in common, not what divides us.

Posted by: Ged of Earthsea on January 2, 2004 07:25 PM

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cm,

"If my interpretation of the term "gilded age" is correct (late middle ages?), we knew what came after that -- the Dark Ages, which among other things were characterized by a low level of education in the "masses", rulership of ideologues (although at the time they were not called such), and as a consequence huge economic and social instability."

The Gilded Age refers to the late 19th century - another period of dramatic highs and lows and growing inequality in American history. (BTW, there is some buzz around the net that the "growing inequality" meme goes away if one corrects for rising immigration levels. Any good refutation out there?)

And the Middle Ages (circa 10th-14th centuries, give or take a couple) came after the Dark, which followed the collapse of the Roman Empire.

But then again, I don't tend to vote Democratic (though I have and will again some day), so what do I know?

;-)

"I could never divide myself from any man upon the difference of an opinion, or be angry with his judgment for not agreeing with me in that, from which perhaps in a few days I should dissent myself."

- Sir Thomas Browne


Posted by: Ged of Earthsea on January 2, 2004 07:38 PM

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"And the Middle Ages (circa 10th-14th centuries, give or take a couple) came after the Dark, which followed the collapse of the Roman Empire."

Oops, that's embarassing, and I stand corrected. I was referring to the period around 1500, when Europe saw significant unrest before the Renaissance. What is called dark ages with the height of the Inquisition and all indeed took place before that.

However, layman historian that I am, the point (or rather conjecture) I wanted to make is that all declines of relatively developed societies were partially related to the suppression of education (enlightenment?) and progressive thought by the ideologically motivated ruling elites. There were of course other factors at work as well. On the other hand ascents of scientific and technological development were often related to "liberal" rulerships (liberal in the sense that progressive thought and research was encouraged or at least tolerated) like Frederick the Great in Prussia, or Czar Peter I in Russia.

It was meant as a side note on my point about the education systems.

What do you think?

Posted by: cm on January 2, 2004 08:28 PM

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Here is a well rounded assessment, from knowledge@wharton, of the state of affairs in higher ed and its relations with industry and government -- not too good:


"... examples of how colleges and universities are compromising their mission. Higher ed is selling out, the critics say, arguing that unless the incipient corporatization of the university is stopped, the moral fiber of higher education in the U.S. will be destroyed."


The link may lead to a registration page (I am not sure) but I think it is worth the trouble.

http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&id=915

Posted by: bulent on January 2, 2004 10:31 PM

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A statement about Gilded Age:

"Historians coined the term "Gilded Age" in an effort to illustrate the outwardly showy, but inwardly corrupt nature of American society during the industrialization of the late 1800's."

Link:


http://www.oswego.org/staff/tcaswell/wq/gildedage/student.htm

Posted by: bulent on January 2, 2004 10:37 PM

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"Historians coined the term "Gilded Age" in an effort to illustrate the outwardly showy, but inwardly corrupt nature of American society during the industrialization of the late 1800's."

Thanks. While I understood the literal meaning of the word "gilded", I looked it up on my favorite dictionary website regardless, and it brought up the correction "Guilded Age" (which is probably wrong). That created the association of the medieval guilds, and I was led to believe it denotes the pre-1500 period of the middle ages where many areas in central Europe flourished. Should have used Google instead and saved myself the embarrassment.

Posted by: cm on January 2, 2004 10:55 PM

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A second statement about Gilded Age:

"REACTION - SOLUTION:

The Gilded Age was a period of immense change in the United States. All of the abuses and problems of the time generated many different reactions- most directed at reform. Slowly, government regulations began to reign in the abuses of big business. At the same time, social reformers actively sought to correct the problems evident in American cities."

Link: http://www.oswego.org/staff/tcaswell/wq/gildedage/segment.htm#reactions

Reform is a long term matter, an extended marathon. I recall reading in National Geography how the Republican succession of mayors and city councils in -- I think it was Chicago, but I'm not sure -- over an extended period of time corrupted the city management process from A- to - Z and yet they were in a position to take for granted being relected; how it took a decade for the Democrats to muster will and energy and finally take over the city management; and how it took them two decades to do the cleaning job of reforms. And this was well after the Gilded Age, with I think 1960s being the time when Democracts began to wake up.

That's the kind of perspective the Democrats need to look at these matters. How they can sell it to general public is of course a different story.

You don't run out of solutions in democracy.

Posted by: bulent on January 2, 2004 10:56 PM

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From "[colleges] selling out":

"There is no mention anywhere in the book of the fact that on many campuses, upwards of half of all undergraduate teaching is now done not by fulltime faculty but by undertrained, underpaid graduate students and by a poorly paid and often uninsured corps of part-time, non-tenurable faculty ..."

I know this from the situation in German universities. While lectures are not held by TA's, most post-lecture exercise sessions are. Often times the TA's are doctorates who at the same time have to work on their dissertation, "support" their professor's research activities, and write papers to get publications. As post-doc research assistants (not sure what the proper title is) they are kept on short contracts that have to be renewed every few years, which creates a lot of anxiety.

Regarding the commercialization of research, I tend to believe that Europe is still behind in scale. Research-for-money is there, but not in overwhelming volume.

It is a double-edged sword -- for one thing, it gives researchers and students some insight into real industrial problems so that they can cast a glimpse outside the ivory tower and can build credentials and contacts for subsequent employment opportunities, and it gives some much-needed revenue to the college treasury, but it also crowds out other research, and allows companies to hire fewer R&D engineers, as subcontracting a college is cheaper. (Unless you lowball so much that they tell you (politely) to buzz off. But let's not get into lengthy anecdotes.)

Posted by: cm on January 2, 2004 11:19 PM

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All I can say is that I have seen the dynamic I describe in several people I know. People who think that they're middle class when they're not. I think that Bush's "ownership society" is directed exactly to these people, and that it will be very effective, and that Democrats should figure out a response but probably won't.

What I'm talking about is party identification and NOT the year-to-year choices of swing voters. This seems to be a hard point to get across. I'm talking about people who identify as Republicans because they misunderstand their place in the world -- because they think that their small nest egg puts them into the owner class.

I think that the obsession with polling results and swing voters of the political pros has made it difficult for Democrats to understand what I'm trying to say. People who identify as Republicans for the reasons I give vote Republican because they're Republicans. I don't claim that this is the sole or even the primary reason why we have working-class Republicans, but I think that it is a real factor, and it is exactly this dynamic which is behind the "ownership society" slogan which has been trotted out just now.

A rational technical explanation of how these people are in error won't, in itself, change anything, but it would be a nice thing to have around. I am aware that voters don't vote based on sophisticated social science analyses, but there are people who vote Republican because they think they're middle class when they're not, and because (whatever the reality) they believe that the Republican party is better for the middle class.

Frankly I do seem quite a bit of denial in the responses, but a few people seem interested, so I'm going to give myself a .125 batting average on my four attempts to raise this question. Better than .000.

Posted by: Zizka on January 2, 2004 11:36 PM

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Tom Slee at the top of this page uses the word "real economist" -- me too now calls upon "real economists" and present to them something that occurred to me last night in "analog form" in my cerebral circuits and that I will now try to put in "digital form" :

1- OLD BUSINESS: Through -- I guess -- the equilibrium process in the markets, profits on existing technologies and lines of business tend towards zero.

2- NEW BUSINESS: Meanwhile, new technologies and lines of business emerge, through innovation, operating with high margins of profits.

Taxes speed up the process of driving down to zero the profits in OLD BUSINESS and speed up the contraction of OLD BUSINESS, pushing it more quickly towards the point of termination of their life cycles.

Taxes don't have that effect on NEW BUSINESS because they operate on high profit margins.

If public policy keeps high taxes together with social spending, you get (a) NEW BUSINESS expanding with OLD BUSINESS phasing out and (b) democratization of the fruits of NEW BUSINESS -- e.g., better education and health care for more people. The society makes a leap in further modernization.

If public policy lowers the taxes with military (non-social) spending, you get (a)OLD business continuing to attract capital thereby slowing down growth of NEW BUSINESS and (b) turn the clock backwards on democratization, modernization. If you on top of that do the military spending through borrowing, you further extend these impacts in time and serve your main purpose: Elongating the life cycle of OLD BUSINESS.

It is really warfare between NEW CAPITALISTS and OLD CAPITALISTS, not a "class warfare".

A better educated and healthy population serves the interests of the NEW CAPITALISTS better. OLD CAPITALISTS don't care, they just want their privileges to last a bit longer.

In a way, I can go as far as saying that the Republican policies amount to some form of treason, because Republican policies are weakening the United States, in every aspect of national vitality and survival one can imagine -- be it economic, technological, social, moral, political, and military.

All that for what? So that OLD CAPITALISTS may reign a few years more.

For a few dollars more!

.. .. ... .

That reminds of something in a very different context and historical setting:

In 1920, all the Ottoman Sultan and ruling class cared about was to keep their own comfy and privileges.

Ataturk called it "heedlessness and perversion".

And then he started a movement of national salvation.

He first organized a series of national congregations and put on record the national will, for all to know, within and without the country.

That was the point when the fate of the nation was sealed.


.. .. ..

Back to the subject:

I say it again: I think America needs a New-New Deal with a global reference.

This will become clear no later than 2008, probably in 2005 or 2006, but that of course would be too late for the 2004 window of opportunity.

Posted by: Bulent Sayin on January 2, 2004 11:58 PM

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Zizka: no denial from my side, I think you make a very plausible point.

One aspect of this is that probably all income earners have the perception that they are paying a lot of their income in taxes, which is probably true or at least understandable from each individual viewpoint.

Combined with a perception that they get little out of the taxes they are paying, which I'm not in a position to judge, and the propaganda about waste, embezzlement, and catering to special interests of all sorts (at least part of which is probably true), it is not surprising that there are anti-government spending sentiments.

There is also the effect of those people perceiving themselves as net payers (which is probably even true).

Well, it's a tough one. I don't have a solution to offer, other than making plausible how the tax money is spent to the benefit of society. In European countries they have relatively generous welfare programs, so people who can think at least see that there is a benefit to whoever is hit by hardship (although of course there are exaggerated suspicions of abuses), but in the US those programs are of a much smaller scale.

Posted by: cm on January 3, 2004 01:27 AM

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Bulent: new/old business

Good points, but remember that two parties are fighting each other does not mean that they do not have common enmity with others, and fight them, perhaps even combining their forces, with the one hand at each other's throat.

Also, don't blow off "old business" as old. There are many old and proven technologies, which even with incremental enhancements remain old, like steel casting, transportation, food processing, medical services (partly), many infrastructure services, etc. They have their place in the economy, an poo-pooing them as old is not fair, and will needlessly alienate people. Not everything has to be high-tech.

"In 1920, all the Ottoman Sultan and ruling class cared about was to keep their own comfy and privileges."

Well yes, power (and habit of luxury) corrupts. This reminds me of a Dilbert cartoon where Wally is appointed to some commission and announces that he will use this for his own benefit. When others point out that he is not supposed to abuse his powers, he replies: "But that is the purpose of being in power", or some such.

There was quite a bit of talk how the recent stock options expensing issue was actually a sinister plan of "old business" to level the playing field of recruiting by robbing high-tech companies of an important part of their compensation packages.

Posted by: cm on January 3, 2004 01:41 AM

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cm:

Steel casting is not supposed to be highly profitable any longer. I mean any body can do it. Besides, there are now composite materials etc and nanotech is coming up.

Transport with intelligent highways and vehicles and expanded public transport -- and less and less need for transport any way --- is a completely different animal in a completely different world. New must replace the old.

Food processing is also redefining itself.

Like capitalists replaced the feudal lords, who were the capitalists of their time, new kind of capitalists must once again replace the old kind. Allready, Bill Gates is a very different kind of capitalist than robber barons.

Democracy replaced monarchy.

Direct democracy will replace democracy.

The progress towards more equitable and more democratic society with better quality of life for more people will continue -- unless somebody triggers Apocalypse (spell?) and send us all back to the stone age, just so they could start all over again with their self serving and bullying ways.

Posted by: bulent on January 3, 2004 02:29 AM

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Zizka, your point was a huge issue of debate in the UK in the 80s concerning Margaret Thatcher's ability to capture the 'C2' or skilled manual workers' votes, when their 'objective' class position ought to have led them to vote Labour. The name-URL link (scroll down to 'Working class Conservatism') gives seven different explanations, to which I would add optimism, so that even if people do correctly identify their class position, they vote according to their goals and aspirations, rather than the present day reality. Thus a political approach which seems to deny mobility is a bit of a turn-off. See also 'One Market Under God' by Thomas Frank for a rundown on all the ways Americans have been encouraged to self-identify with the markets, whatever their true participation.

Posted by: Gabriel on January 3, 2004 02:49 AM

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Media, of course, always had a crucial influence on voter alignment.

Internet changes that a bit, perhaps significantly.

Observe Howard Dean campaign.

Some Republican types don't like internet cause they can't control it as easily as TV and press media.

Posted by: bulent on January 3, 2004 03:05 AM

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Bulent: I don't disagree with your points. What I wanted to say is that some old technologies have their place, and should not be denigrated as old. For example, steel will be partially replaced, but will nevertheless remain an important material. That some industry is not highly profitable does not mean it should be given up.

Not exactly similar, but analogous concerns are true for "modern" technologies like computers, software, and computer-like, software controlled devices (cell phones, DVD players to name some ubiquitous consumer products). Product and even technology replacement cycles (commonly called "innovation") are already ridiculously short, and the deltas between them are to a large part (a) functionality enhancements and bugfixes that are delivered late because the previous generation(s) were cranked out too quick, (b) appearance enhancements (new form factors, rearranged menus and different colors in Windows -- OK, I'm exaggerating a bit), and (c) forced incompatibility with prior technology or repackaging the existing function (old wine) in different form (new bottles) to create a new upgrade cycle to a different, but not necessarily much better product base.

I'm working in the software industry, and all this is in part creating the need for my job, but I'm disagreeing with the mindset of "forcibly" replacing "old" with "new" technology, or _generally_ blowing off something as "old" just because it is around for a while.

As an example, I dare to say that today's word processing programs are probably adding little general value over what was available 10 years ago. Sure, they have been continuously honed to the effect that they are now much better, but I could write a decently layed out letter or memo 10 years ago, and today I can do exactly the same thing. Does that make those programs "old"? Well maybe, but some things fit their purpose well.

It is different of course if technology is polluting (smokestacks, CO2, acid rain, toxins, radioactivity, exhaust fumes, etc.) or inefficient (large material input, much waste product, excess heat generation), then it should be replaced.

Posted by: cm on January 3, 2004 03:10 AM

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cm:

Let me put it this way:

Gas industry tried hard to stop Thomas Edison from replacing gas lighting with electricity lighting -- they even tried sabotage.

I take sides with Edison.

And I didn't say any thing about discontinuing steel industry. All I'm saying is it is neither economic nor moral trying to keep that industry profitable at levels that would hinder progress in emerging technologies, increased productivity, and expanded welfare.

The world doesn't need steel magnets any longer, like a time came the world did not need feudal lords any longer.

That's what I mean by OLD BUSINESS/CAPITALISTS.

Posted by: cm on January 3, 2004 04:02 AM

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Hufs! Sorry! Above post signed as "cm" should have been signed "Bulent Sayin" or "bulent". (Terrible head ache since I woke up this morning!)

Posted by: Bulent Sayin on January 3, 2004 05:28 AM

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General:

Zizka points are valid for some percentage of Republican voters and when this percentage is added to the "Right to Lifers" and the NRA members, you have a powerful voting block. The Democrats have a way of talking about the Investor issue (not as well as Lee A.'s idea), but they are stymied on the other issues.

PK - The analysis of Mr. Krugman's ability to be ahead of the curve is interesting and probably correct. Some people can see the core problems that are not being resolved by analyzing small sets of facts as well empirical data. The remainder of the population on both sides of the argument spends their time discussing nuances that in the end don't matter. (This post is an example).

There is no doubt we are becoming an ownership society and it appears the Republican Party will have the muscle (Military) to make sure the Americans and British corporations get their cut. It will be interesting to see how much the US loses in the way of Education, Environment and Social Programs in order to achieve the corporate dream.

Posted by: Greg Hunter on January 3, 2004 06:26 AM

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Lee A writes "I think it might be easier for the Democrats to say the recovery was coming anyway, as all business cycles return, but it was DELAYED by a misdirective tax cut, and might’ve started a year or two earlier by priming consumer demand, instead. In this, the Democrats appear to have almost all economists on their side."

Precisely the kind of fallacious reasoning that will make victory impossible for Democrats. A massive tax cut which put money in the hands of millions of Americans, and two-thirds of which was spent, DELAYED the economic recovery? Get real! The recession was as shallow and short-lived as it was because of so much of that tax cut being pumped back into the economy. The tax cut was the very DEFINITION of "priming consumer demand."

THAT'S what most economists agree with!

Posted by: Michael Brown on January 3, 2004 06:33 AM

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"... it appears the Republican Party will have the muscle (Military) to make sure the Americans and British corporations get their cut. It will be interesting to see how much the US loses in the way of Education, Environment and Social Programs in order to achieve the corporate dream."

You can't sustain military might for long while all along losing on education, environment and social programs.

Posted by: Bulent Sayin on January 3, 2004 07:14 AM

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In particular, I am wondering how working women are faring just now and how retired women and men are faring. The sluggish wages and health care benefit cuts may be especially tough on women as heads of households. Are retirees generally comfortable with income streams or are they spending down assets especially homes to live comfortably? There is an expectation the baby boomers will move comfortably to retirement, but I wonder and worry if there has been enough saving.

Posted by: anne on January 3, 2004 07:28 AM

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Bulent writes "Some Republican types don't like internet cause they can't control it as easily as TV and press media."

As evidenced by what? It's Democrat types who wish to regulate, regulate, regulate. If the internet is anybody's enemy, it's the Dem's, since it's literally a free market world.

Bulent (aka cm) also writes "The world doesn't need steel magnets any longer ... " Yes, it does. What it doesn't need are steel MAGNATES. There's a big difference.

Posted by: Michael Brown on January 3, 2004 07:35 AM

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Zizka --

As I said earlier, I'm not sure I agree there are enough "working-class investor Republicans" to worry about. But assuming that there are, I think one reason why no one has come up with the numbers you're looking is just the complexity of the calculations involved. You have to measure not just the relative importance of each individual component of a person's assets, income, and liabilities or potential liabilities (the cost of private school if the public schools become terrible, college costs, health care costs, etc.) but also, far more trickily, the relative impact of Republican and Democratic policies on the value of each individual component.

It seems like what you're looking for is something along the lines of (for your hypothetical Oregon person):

Republican policies boost the value of your investments 5% a year (all percentages are relative to what the other party's policies would do) and they

cut your taxes 15% (worth $X) and they

cut corporate taxes 10%, giving your company more money to pay you with (worth $X) and they

relax workplace regulations and allow companies to keep unions out, which holds down costs for them and prices for you (worth $X), but they also

relax workplace regulations and allow companies to keep unions out, which holds down your wages (worth $X), and

make it 10% more likely that your kids' public-school education will be bad (worth $X to you)

15% more likely that your employer will increase your co-pay (worth $X)

5% more likely that you'll get fired (worth $X)

50% more likely to limit federal assistance to college students (worth $X) and

make the environment 10% worse (again, than it would be if the Dems were in power) (worth $X)

and increase by 20% the chance that your Social Security benefits will be cut (worth $X)

Then you'd also, most important, want to know which party was best for home values, since that's most Americans' most valuable asset.

I think you're right that calculating something like this is doable, but I'm not sure that anyone would be too comfortable vouching for its accuracy, because there are so many a priori assumptions that have to be built into it. On the other hand, I'm not sure that the calculation would be any less accurate than the one that the people you're talking about seem to be making.

As someone else suggested, I do think the question of mobility and identification is a crucial one in explaining voter preference, at least in the U.S. I think the evidence is pretty overwhelming that Americans have historically, and not just since the birth of the "investor class," identified up, not down. Jennifer Hochschild's books "What's Fair?" and "Facing Up to the American Dream" are quite striking on this point. And Alberto Alesina, Rafael di Tella, and Robert MacCulloch's paper on the different relationship between inequality and happiness in the U.S. and Europe: www.nber.org/digest/aug01/w8198.html also seems relevant. So the challenge of getting American voters not to think of themselves as middle-class runs deeper than just explaining how small the value of their investments really is.

Posted by: James Surowiecki on January 3, 2004 07:38 AM

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fron an article in the Wall Street Journal yesterday

(When it comes to taxes, Mr. Dean thinks really big. In raw numbers, the Dean tax proposal would raise taxes on 109 million Americans by roughly $1.5 trillion over the next 10 years. This comes out to a Dean tax of about $15,440 for every family of four in the U.S. over the next decade. The Dean tax rule of thumb is that if you are in the middle class, he would roughly double your federal income tax payments.
Mr. Dean responds to these charges by countering that his plan will help restore prosperity and produce higher incomes and more jobs. But how exactly? His tax plan would be the equivalent of hitting small businessmen, who create about 70% of the jobs, over the head with a two-by-four. The highest tax rate under the Dean plan rises from 35% to 39.6%. Add on top of this perhaps the most insidious feature of the Dean tax. For the first time ever, he would eliminate the cap on payroll taxes. Henceforth, all income of more than $87,000 a year would pay a 15% payroll tax. This means the Dean tax plan raises the small-business tax rate from 38% to 55%. If you are a self-employed worker with an income of $125,000 a year, which in high-cost-of-living states like California and New York is hardly rich, Howard Dean wants to raise your taxes more than $8,000. That will create jobs? )

Posted by: Lison on January 3, 2004 07:46 AM

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"Bulent (aka cm) also writes "The world doesn't need steel magnets any longer ... " Yes, it does. What it doesn't need are steel MAGNATES. There's a big difference."

LOL! Hey, thanks for causing me laugh! Believe me I needed it. If it is not clear, English is second lang to me but that of course is no excuse for confusing "magnet" with "magnate". (I'm at the same time not sure if there is any such thing as "steel magnet" -- magnet is supposed to be soft iron, as far as I can recall from physcis courses.)

And I am re-phrasing my comment on Republicans not liking internet, as follows :

"I have a hunch that some Republicans....."

And I'd say at least one Democrat named Howard Dean certainly doesn't seem to take internet for enemy.

Posted by: Bulent Sayin on January 3, 2004 07:51 AM

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Lison:

I really do think that Mr. Dean should put up front his program for government spending, then get to talk to financing, and leave some flexibility there, that is, vis-a-vis tax versus borrowing. He should concentrate on operations he proposes, and discuss means of financing them later.

By all means he should critisize tax cut-budget-deficit-military spending- borrowing combination of Bush administration, at every opportunity. But he should not move from there to putting up front higher taxes first. That would be like putting the carte in front of the horses.

Discuss spending program first, financing alternatives later.

Posted by: bulent on January 3, 2004 08:04 AM

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Mr. Surowiecki writes "As someone else suggested, I do think the question of mobility and identification is a crucial one in explaining voter preference, at least in the U.S. I think the evidence is pretty overwhelming that Americans have historically, and not just since the birth of the "investor class," identified up, not down."

Exactly right. Despite the vicious class envy of the "hate the rich" crowd, a significant percentage of the working class don't buy into that nonsense because they expect to join the rich someday ... and many of them will do so. People aren't nailed down within income groups. They move through them (mostly upwardly) as they age, become educated, find better jobs paying more money. Higher economic aspirations are natural, since people see them all around them, and see that they achieve results.

In addition, there are many non-economic reasons why many in the working class identify with conservative principles. Here's two:

1. They have pride in their country and want it to not only be a great power, but to act like one.

2. They have children, and find the amount of what they consider to be trash in the mass media to be disturbing, and the defense of that trash by civil libertarian types (almost always from the left) to be even more disturbing.

Posted by: Michael Brown on January 3, 2004 08:14 AM

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There is no chance there will be a significant federal tax increase in the coming 2 years, no matter who is President. Congress will not allow a tax increase, there is no public call form an increase. The issue may emerge in a few years, but now the issue is moot. If anything there will be a federal tax decrease this year.

Posted by: anne on January 3, 2004 08:15 AM

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Mr. Surowiecki writes "As someone else suggested, I do think the question of mobility and identification is a crucial one in explaining voter preference, at least in the U.S. I think the evidence is pretty overwhelming that Americans have historically, and not just since the birth of the "investor class," identified up, not down."

Exactly right. Despite the vicious class envy of the "hate the rich" crowd, a significant percentage of the working class don't buy into that nonsense because they expect to join the rich someday ... and many of them will do so. People aren't nailed down within income groups. They move through them (mostly upwardly) as they age, become educated, find better jobs paying more money. Higher economic aspirations are natural, since people see them all around them, and see that they achieve results.

In addition, there are many non-economic reasons why many in the working class identify with conservative principles. Here's two:

1. They have pride in their country and want it to not only be a great power, but to act like one.

2. They have children, and find the amount of what they consider to be trash in the mass media to be disturbing, and the defense of that trash by civil libertarian types (almost always from the left) to be even more disturbing.

Posted by: Michael Brown on January 3, 2004 08:19 AM

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Michael Brown

Why ruin a fine thread of discussion with such foolish harshness? There is no need for harshness, besides making foolishly extreme remarks.

Posted by: Ari on January 3, 2004 08:24 AM

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I apologize for the double postings. I'm only hitting the Post button once. Does it post if I hit Preview, too?

Thanks, Bulent, for seeing the humor in my comment. You took it exactly as it was intended.

And Anne is right. No Federal tax increases any time soon.

Posted by: Michael Brown on January 3, 2004 08:41 AM

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>there are many non-economic reasons why many in the working class identify with conservative principles<

I think part of the reason the working class identifies with their betters is that they are pathetic. Sorry for the harsh language, but it needs to be said. Anecdotal example: one Repub that I know, who by income is working class, no assets, no retirement savings, etc, is a golfer who has persistent fantasies of how Bush would be a great golfing buddy. As if!!

The reason this is really, deeply, horribly pathetic is that people sacrifice the real interests of their families, e.g. their children's health care, for this sort of delusional fantasy. The rich don't care if the kids of the working class are sick, poorly educated, etc. And if the parents, wrt their political beliefs, don't care either -- what can you say? Pathetic.

Another thing that has to be said is that the failure to stand up for your own interests, the interests of your family, your kids, your elderly parents --- this is the behavior of wimps. Americans have gotten fat and scared and wimpy. On such is built the success of the modern Republican party.

Btw, the dude I mentioned above, he has two kids, and can't afford health insurance on his minimal income as a not particularly successful realtor. But, he's a small business man, and in his fantasy life, there's a direct line between him and the Repub fat cats who 'make this country great'.

Posted by: camille roy on January 3, 2004 09:09 AM

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This thread is a wonder. A time when we can think with conservative and liberal in a way that I will draw on for a long while. So arguing is well, but these issues are so forming and subtle and difficult. Paul Krugman and Brad DeLong have done us quite a favor.

Remember, we have an interest in the well-being of California supermarket employees. Losing wages and benefits for these employees is a problem for us all. We need these employees to live well.

Posted by: anne on January 3, 2004 09:11 AM

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No decent hard working people are never pathetic. They are decent hard working women and men. Beyond that we can argue about interests and beliefs. We need to respect the many people who make our days more pleasing.

Posted by: anne on January 3, 2004 09:18 AM

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Michael Brown

I see the twinkle in your eye now. Hard to see twinkles on the internet. Sorry to be too tough.

Posted by: Ari on January 3, 2004 09:23 AM

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Camille writes "I think part of the reason the working class identifies with their betters is that they are pathetic."

What's pathetic is believing those who have it economically better than the working class are "their betters." They're no such thing. They're just more well off at the moment. There is real income mobility in this country, and it's perfectly reasonable for working class people to expect that their situation will improve, since it happens to people all around them every day.

Your self-interest in attempting to promote class warfare is pretty obvious. But you won't get far with what is essentially a "Who are you going to believe? Me, or your own eyes?" argument.

Posted by: Michael Brown on January 3, 2004 09:24 AM

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Spotted a seagull down in the road and stopped the car. At once a rough tough bunch of construction workers saw and understood and ran into the road to stop traffic. We saved a herring gull.

Hope they vote for Democrats, but that is another matter beyond caring for the gull which relates us.

Posted by: lise on January 3, 2004 09:37 AM

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Lest my point be misunderstood, I was not making Michael's argument (no offense, Michael) about class awareness being "nonsense." I just think that in wrestling with why Americans are not fervent advocates of redistributive policies, thinking about their propensity to identify up is important. Certainly I think that propensity is one reason why talking about what government can do for the poor -- as opposed to what it can do for working people -- is and always has been a political non-starter in the U.S. And it's one reason why Clinton's combination of tough talk on welfare and his emphasis on helping people "who play by the rules" was so effective.

Also, also although other threads have worked this point over pretty well, the children of the would-be middle class are certainly healthier and better-educated (at least in terms of years in school) than their parents were, or at least that's what the numbers on life expectancy and the percentage of Americans who go to college today as opposed to thirty years ago suggest. In relative terms, these people have lost ground, but in absolute terms I think it's a different story.

Posted by: James Surowiecki on January 3, 2004 09:58 AM

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Michael Brown:

Discovering that I have made a harmless mistake always makes me laugh, don't know why but that's the way I am -- guess most people are that way. So thanks again for taking the trouble and it was a nice way to let me know.

On other matters:

I do agree with you that Democrats do lose by siding with marginal issues such as gay marriage to the extent of making it a central focus of their policy. (I now brace for attacks on me but if I'm cornered, I'll get away saying "hey what do you expect I'm a stranger!") And indeed the TV is terrible, I understand, unless it is a specialist channel like PBS or Discovery, etc. (And I have never understood why a left wing person should not or could not advocate Catholic principles of marriage.)

I disagree with you on two issues:

First, easier one to state, is that a country's greatness is in getting things done without even moving the troops. So I think "acting like a great country" means that kind of posture; and it is not being trigger happy. I'm afraid you yourself subscribe to the latter meaning and therefore I will not try to convince you that you should try to spread the word.

Second, people don't identify with upper class because they have a lot of hope of joining them one day. It is true that social mobility in US goes further than it does in other countries, especially European countries, but even in US the chances are slim. And the example Camille Roy refers to is a rare case of a person having different priorities than most folks.

In general, people identify with upper classes in voting because of economic, social and psychological pressure. Their employers always talk to them about conservative values and principles and if the poor folks don't agree with their employers, they get sort of sidelined, to say the least; if they agree with them but not believe it, they feel dishonest; and so eventually they come to believe "what's good for General Motors is good for the country".

And so I think Democrats should (a) try atleast not to put down traditional family ideals, (b)develop and describe a better picture of what a great country is all about, in war and in peace; and (c) teach the people that their vote, along with their freedom of speech, is the primary manifestation of their inalienable rights as free men and women, as guaranteed by the Constitution of the United States.

Posted by: Bulent Sayin on January 3, 2004 10:08 AM

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"Class warfare" is a slogan of little meaning. What you must ask yourself is does it matter that 40 year old single mother of 2 can not afford health care coverage at Wal-Mart. If that is fine, then we have an argument. Health care is no problem for me, but I surely would like to see enough class warfare to get Wal-Mart to treat employees a heck of a lot better. [The Wal-Mart ads do not impress me in the least.]

Posted by: anne on January 3, 2004 10:43 AM

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Bulent Sayin

Civil rights issues always always always matter. Try to imagine from an African-American perspective the struggles we had for racial equality. The struggles are not over. If conservatives snner at civil rights, then thankfully I could not be conservative.

Posted by: lise on January 3, 2004 10:51 AM

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Surowiecki: "I think the evidence is pretty overwhelming that Americans have historically, and not just since the birth of the 'investor class' identified up, not down."

Brown: "Exactly right. Despite the vicious class envy of the 'hate the rich' crowd, a significant percentage of the working class don't buy into that nonsense because they expect to join the rich someday ... and many of them will do so."


So one reason why my original question has not been answered or even asked, is that a lot of people want it not to be asked. If ordinary, not very well-off people "identify up", that's a good thing -- **whether or not** it's rational for them to do so. Anyone who proposes that the rationality of that identification be seriously studied is a class warrior. (Code word for Communist? No, of course not. Who could ever think such a thing?)

Mr. Surowiecki's explanation that such a calculation would be too difficult doesn't work. Don't economists get extra points for doing especially difficult things? For example, take Becker's attempt to come up with an economic explanation of the family in terms of exchange of "child-services" for "parent-services". A much more difficulkt task, and his results seem ludicrous, but he's still part of the profession.

(As I've reiterated a couple of time by now, my question is not "which party is best for the investor class" but "Is it rational for certain people to believe that they are in the investor class at all?" I decribed someone who was really overwhelmingly dependent on his labor and public services paid for by taxes, but who thought of himself primarily as a property owner because of his rather small amount of property. The calculation I was asking for is "At what point is it rational for an individual to think of himself primarily as a property-owner and vote that way?")

Surowiecki doubts (by assumption, giving less evidence than I did) that the people I describe are as common as I think they are, while simultaneously saying that it's always been that way and that it's a good thing too. He actually seems to suggest that the people I know are just a handful of people I know here in Oregon, sort of a statistical glitch in my mix of acquaintances.

Brown again: "They expect to join the rich someday ... and many of them will do so." How many? Are they rational in this belief? What studies I've seen show that upward class mobility is not especially high and is decreasing.

As many have said, class war nowadays is the better-off against the worse-off, and it's pretty fierce. Historically the (non-Communist) Democratic Party has represented the worse-off. I don't see that there was anything wrong with their "class war" or similiar activities in the future. But Republicans have taken some big bites out of the natural Democratic constituencies while increasingly working for the advantage of an increasingly thin slice of the best-off people (the top 1% rather than the top 10%, as Krugman says somewhere).

I think that the ineffectiveness of the Democrats in this area is one of the reasons for their weakness. I think that the question I asked is part of understanding how that happened. I think that the resistance to even asking that question is indicative of an enormous weakness within the Democratic Party itself. (I am assuming that Harris, Surowicki, and maybe even Brown are not Republicans.)

And Bush's "ownership society" plays to the kind of identification I'm talking about. It's a fraud. I think that Democrats need to figure out how to respond. I really don't think that the Democrats will find the advice of Surowiecki, Harris, and Broan very useful when they plan their response.

Posted by: Zizka on January 3, 2004 11:08 AM

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There is every indication that upward mobility in America is lower than we care to think and getting lower still. That is the point made by Paul Krugman and Brad DeLong's fellow professor at Berkeley. My fear is that mobility is becoming rather rapidly more difficult. American Idol works for 1 in 290 million.

Posted by: anne on January 3, 2004 11:26 AM

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Bulent writes "a country's greatness is in getting things done without even moving the troops. So I think "acting like a great country" means that kind of posture; and it is not being trigger happy."

On this point, I'd argue that there is a middle ground between those extremes, which is talking the talk, but being willing, when appropriate, to walk the walk. Anyone out there with children knows this perfectly well. Try "negotiating" with your children while doing absolutely nothing to follow through, and see what kind of child you have on your hands. Helpful? Cooperative? Not!
If you have no credibility, nothing you say matters.

Bulent continues "people don't identify with upper class because they have a lot of hope of joining them one day. It is true that social mobility in US goes further than it does in other countries, especially European countries, but even in US the chances are slim."

Actually, I totally disagree with that contention. In the US the chances of moving up the economic ladder are excellent. Millions of people do it. Virtually everyone I know (including me) was poor 30 years ago when we were in our 20s. Now none of us are. We own our own homes, cars, etc., and our income has steadily increased with time. That's what economic mobility is. And it's real.

As far as being conservative is concerned: I consider myself a conservative. But the question that needs to be asked is "Conserve what?" To me, its "We hold these truths to be self-evident: that all men are created equal; that they are endowed by their creator with certain inalienable rights; that among them are life, liberty and the pursuit of happiness."

To me, anyone who agrees with that fundamental creed is in a fundamental way conservative.

Posted by: Michael Brown on January 3, 2004 11:28 AM

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A first cut at your question of how large a stock portfolio one needs for it to be more important than the other things you listed. It would be fairly easily to construct a portfolio that would yield 2.5% in dividend payments and still grow roughly in line with the market. So the first cut at the question is that at a yield of 2.5% that you can take out of the portfolio every year a
$2 million portfolio would yield an annual income of $50,000. Under the assumption that your retirement income should be about half you current pay the guy making $50,000 in your question would want a stock portfolio of around
$1 to $ 2 million to offset his combined pension and Social security income. That assumes he takes no cqpital out of the portfolio. Doing the math to assume the portfolio has zero value when he turns 100 and gives him $25,000 to $50,000 annual income from age 65 to 100 would be a little more complicated, but it would also reduce the size of the portfolio needed.

Does this address your question?

Posted by: spencer on January 3, 2004 11:40 AM

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Anne writes "There is every indication that upward mobility in America is lower than we care to think and getting lower still. That is the point made by Paul Krugman ... "

Every indication? There aren't ANY indications that's the case. Again, the question Krugman asks is "who are you going to believe? Me or your own eyes?" Anne seems to believe Krugman. From my experience, he's only been right about one issue in all the years I've followed his column. That was his column about the short-sightedness of the anti-WTO crowd, in which he argued that they weren't doing the world's poor one damn bit of good. An argument with which I totally agreed.

Maybe upward mobility has been stifled at the New York Times, and Krugman is once again (as he so frequently is) totally deceived by what he thinks he sees, but it's alive and well here in Central PA. I suspect it is elsewhere, too.

Posted by: Michael Brown on January 3, 2004 11:58 AM

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Anne writes "There is every indication that upward mobility in America is lower than we care to think and getting lower still. That is the point made by Paul Krugman ... "

Every indication? There aren't ANY indications that's the case. Again, the question Krugman asks is "who are you going to believe? Me or your own eyes?" Anne seems to believe Krugman. From my experience, he's only been right about one issue in all the years I've followed his column. That was his column about the short-sightedness of the anti-WTO crowd, in which he argued that they weren't doing the world's poor one damn bit of good. An argument with which I totally agreed.

Maybe upward mobility has been stifled at the New York Times, and Krugman is once again (as he so frequently is) totally deceived by what he thinks he sees, but it's alive and well here in Central PA. I suspect it is elsewhere, too.

Posted by: Michael Brown on January 3, 2004 12:03 PM

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Spencer -- that's the sort of thing I was thinking of.

Michael Brown just explained to us that most people earn more money after they are established in their careers than they did before they started their careers. For this I thank him.


wn just explained to us that

Posted by: Zizka on January 3, 2004 12:05 PM

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Michael Brown:

Obviously, deterrent force is an important element in getting things done without even moving the troops. The term "middle ground" is fine with me. It is important to remember, however, that what gets results is foreign policy and use of force is only one dimension of foreign policy, which should be used very, very sparingly and never without impecable moral justification.

Concerning the other matter, 30 years a long time, during which both conservative and liberal policies come into play and, as the economy grows and per capita income increases, many many people become better off, both conservative and liberal.

And I don't know of any liberal who would disagree with "that all men are created equal; that they are endowed by their creator with certain inalienable rights; that among them are life, liberty and the pursuit of happiness".

---
Lise:

Is the matter of gay marriage a part of civil rights issues in America? If it is, there must be a way to advocate both civil rights and traditional family values. Advocating civil rights and traditional family values should not be conflicting positions -- as I think.

Posted by: bulent on January 3, 2004 12:18 PM

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Michael wrote: "There aren't ANY indications that's the case."

Actually, Michael, there are. If you'd care to actually do some research or if you had actually bothered to *read* what Krugman wrote, you might have found that out for yourself, instead of making yourself look foolish by mentioning totally irrelevant anecdotes about you and your friends.

Posted by: PaulB on January 3, 2004 12:34 PM

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Zizka: "Mr. Surowiecki's explanation that such a calculation would be too difficult doesn't work."

Actually Mr. S was trying to explain that the calculation would not be all that meaningful -
"so many a priori assumptions" and all that. It isn't the difficulty that's the problem.

Zizka: "The calculation I was asking for is "At what point is it rational for an individual to think of himself primarily as a property-owner and vote that way?")"

But in an earlier post by Mr. S, he explained (rather well, I thought, but it seemed to go ignored) why your entire project is silly - voters care about other things besides economic issues.

camille roy: "one Repub that I know, who by income is working class ... is a golfer ...
and can't afford health insurance."

He plays golf but "can't afford" health insurance? The reason the reason the Al Gore wing of the D party will never win a national election (okay, unless the R party drives the economy into the ground) is pretty well articulated by CR's use of the term "can't afford" instead of the term "chooses not to buy."

camille roy: "The rich don't care if the kids of the working class are sick, poorly educated, etc."

But this is obviously ... ridiculous? One thing rich people enjoy is getting even richer. Sick and poorly educated workers are not conducive to this. In the real world, you could argue (or discover, by paying attention) that the group of persons who as a class care the most about educational reform are business executives. No one prospers when the lot of the poor improves like the rich - less crime, better
workers, more corporate profits, etc. - and they're not stupid, they know it. (I'm sure there are plenty of rich people who just want to spend down their capital and ignore the future, but generalizing is silly).

Joe Mealyus

Posted by: Joe Mealyus on January 3, 2004 12:52 PM

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I have problems believing the decline of the dems party and rise of the reb party over the last 20-30 years is due to the problem of middle class people thinking they are wealthy. I think the problem has been much more that the Dem party has become too extreme and identified with social and political ideas that middle america reject. The first real example of the shift in middle class voters to the Reb were the Reagan Dems in the mid-west in the 1980s. Their reason for shifting to Reagan was much more that they wanted to get rid of the "welfare queens". Many, many, blue collar workers really resent paying taxes to support people they believe are taking advantage of the welfare system rather than working for a living.
How accurate the belief about "welfare queens"
is is besides the point. This may be the greatest thing than Clinton has done for the Dem party -- by reforming the welfare system he ended the Reb party ability to use this issue. Note welfare is not an issue at all in this election but in the 1980s it was a major issue even though Reagan did not do anything about welfare.

Dean says he has a plan to "reform" the tax code so that middle class people actually end up with a tax cut under his plan. But he has not spelled out any details -- probably a good thing during the primary season. The only tax change he is talking up is corporate taxes with
his argument that the corporate taxes have fallen sharply over the last 20 years.

In my mind one way the Dems need to attack the Bush tax program is to point out how it actually
makes it more difficult to have economic-social mobility because it makes "wealth" or investment income tax free. In a way the Dems have to take a strategy similiar to what the Rebs did with the "death" tax. The death tax, along with the lottery is really almost a purely voluntary tax.
The Rebs have created a completely false impression that the death tax destroys small businesses and the family farm when in reality about all the wealth tax impacts is really massive inherited wealth like the Bush family or the Kennedy family have.

the other issue the Dems have to make their own is that the Reb tax policy is destroying our public capital that we need just as much as private capital. The main thrust of this issue should center on education. My daugher is a school teacher that lost her job this year. When I bring this up to people, Dems or Reb, their first reaction is what is going on that we are firing school teachers. The Bush education program is a complete farce like the drug benefit for seniors--interestingly the polls clearly show that seniors have quickly recognized this and it will not be a positive for Bush. All the Dems have to point out is the truth about the Texas
education improvement that Bush ran on in the last election. All the improvements in Texas education was the result of the education establishment cooking the books like Ken Lay did at Enron. Ask Bush why he does not fire his Sect. of Eductation . His former job was as supt of schools in Houston. They forced the poorly performing teenagers to drop out of school so
the schools showed inprovements in the test --
but in reality there was no improvement. We now have school systems in both rich and poor school systems starting to opt out of the federal programs becuase of the poor way the "no child left behind" system works.

The real way to defeat Bush is to tar him with the brush of being incompetent. what every you think about the war in Iraq, there is no way to avoid the conclusion that the Bush admin went off half cocked and had no idea what they were getting into. He was warned by the CIA and others that the military would face the type of problems in the occupation they have. But Bush claimed the troops would be met with cheering crowds.
Dean is right that the capture of Saddam has not made the US more secure and Bush should be made to demonstrate how Dean is wrong, not the other way around.

Posted by: spencer on January 3, 2004 12:56 PM

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Zizka --

Saying Americans have historically identified up is not, at all, the same thing as saying that that is a "good thing." It's saying that the American aversion to a politics that is explicitly dependent on class has to do with more than whether people own stock. That's why it's worth reading work like Hochschild's, because it makes it clear how powerful the faith in the American dream -- even if that dream is an illusion -- is.

In my first response to you, I cited evidence as to why I'm skeptical about the size of the group you're describing: most Americans do not think Republicans do a better job of running the economy and most Americans were not supportive of the Bush tax cuts as a way of handling the surplus. But part of my evidence comes from the same place as yours do, but to opposite effect: the middle/working-class people I know who have become either Republicans or Republican-leaning after having been Democrats their whole lives did so not because of the stock market, but because of the familiar panoply of reasons: fatigue with the welfare state, a conviction that the Democrats were dominated by special interests, anger about crime, and, now, national defense. I think it's no coincidence that Clinton took an avowedly center-right position on all those issues.

More important, when I said the calculations were too hard, I didn't mean just that they were complicated. I meant that the assumptions underlying those calculations would be inherently political, and therefore the value of the final number would be uncertain at best. Take your question: at one point should someone identify himself as a property-owner? Well, the most important asset most Americans have is their home, and I think all homeowners would identify themselves as property-owners. Are Republican or Democratic policies better for homeowners? I don't think I even know how to answer that. Or take corporate taxation. Any taxes levied on a corporation will be passed along, in one way or another, to workers and consumers. Will the benefits of the money we raise from increased corporate taxes outweigh the costs? I think the only rational answer would be that it depends.

The source of all the complexity is that the day-to-day well-being of the vast majority of Americans depends far more on the private sector than on "public services." I'm not making a value judgment, just a statement about economic reality. In the U.S., if businesses are not prospering, then workers will not, either. So supporting policies that are thought of as hostile to business -- whatever that means -- is not necessarily economically rational for someone with a $50K a year job.

It is, though, obviously rational for someone with a $50K a year job to support, say, a more progressive income tax, universal health insurance, greater aid to college students, protection of Social Security, etc. I don't think there's a number that you're going to be able to come up with to prove this, but frankly I don't think you need one. The vast majority of Americans don't have enough liquid wealth, and don't earn enough income, to make opposition to higher taxes on the rich or support for the cutting of Social Security rational.

I don't think that selling these things -- with the possible exception of health insurance -- is as hard as you believe. But I don't think that the Dems can sell their message by warning people of how bad things can get and offering protection from hard times, nor by telling them that they're much worse off than they think themselves to be. I do think they can sell it just the way Clinton did (had Magaziner and Hillary not come up with their Rube Goldberg health-care scheme, even Clinton's health-insurance plan might have worked).

Posted by: James Surowiecki on January 3, 2004 01:00 PM

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>camille roy: "The rich don't care if the kids of the working class are sick, poorly educated, etc."

But this is obviously ... ridiculous? One thing rich people enjoy is getting even richer. Sick and poorly educated workers are not conducive to this. <

Wal-mart, that paragon of the best of American business, has a health insurance policy which is so expensive only a minority of its workers can afford it. When Wal-mart moves into a community, emergency room expenditures at county hospitals go up, due to their uninsured workers. Food stamp expenses go up. The LA Times had a good 3 part series on Wal-mart recently which I highly recommend (it's online).

Don't be stuck in the past! We're in the era of globalization and high costs (of either sick workers or health insurance) doesn't drive corporations to improve benefits. Oh no, it drives them off-shore entirely.

Posted by: camille roy on January 3, 2004 01:27 PM

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I believe that we can assume that Brown is not a Democrat.

My assertion that people who misidentify themselves as more prosperous than they are are a factor in elections does not imply, infer, or presume that this is their only consideration, nor that they comprise the majority of Republican voters. Just that they are a factor. The particular angle I was taking is that Bush's "ownership society" is a sly and fraudulent attempt to appeal to this group, which I think will be successful if not effectively combatted. Of course, if this group does not exist, as I keep being assured, and if this dynamic is imaginary, then we really have nothing to worry about. But frankly I think that Karl Rove is smarter than most of the people on this thread.

I do not say that this dynamic is "the" cause of the decline of the Republican party. I say it's part of the cause, or one of the causes. In historical events you almost never find "the" cause. These are not either-or choices. Yeah, social conservativism is a factor.

Surowiecki and Harris both simply asserted that the kind of people I described are very few and unimportant. No evidence, no argument.

I have never, ever been told before that economists are reluctant to use arbitrary ceteris paribus assumptions. Just in this case. Sure, the number would be political. Jesus F. C., what are we talking about here? Getting an exact dollar amount is not the point; a ball park figure could show that the guy with $30,000 on the stock market is fooling himself.

Again -- what I'm trying to do is locate and define a specific factor, not "the cause of the Democrats decline" or "what most Americans think", and also not "how to get the marginal moderate vote in the upcoming election".

Posted by: Zizka on January 3, 2004 02:19 PM

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Michael Brown:

"Actually, I totally disagree with that contention. In the US the chances of moving up the economic ladder are excellent. Millions of people do it. Virtually everyone I know (including me) was poor 30 years ago when we were in our 20s. Now none of us are. We own our own homes, cars, etc., and our income has steadily increased with time. That's what economic mobility is. And it's real."

I think that's not what is meant by income (or economic) mobility. You should compare people of similar age groups. I think it is somehow obvious that individuals go through different (financial) stages in their life. And BTW, that you are well off today does not mean you will be when you are old, although I wish you well.

What you are saying is that the population is getting much taller every year. Why? "Because at age 20 I was much taller than at age 10, and so were all my friends."

No offense intended. Just wanted to illustrate my point.

Posted by: cm on January 3, 2004 02:33 PM

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cm writes "What you are saying is that the population is getting much taller every year. Why? "Because at age 20 I was much taller than at age 10, and so were all my friends."

Close, but no cigar. That's the equivalent, actually, of saying "now I'm 20, and I'm making twice the money I was at 15." The younger (or shorter) the base, the bigger the short range change. Your example was the best possible to make your case, but not representative.

Posted by: Michael Brown on January 3, 2004 02:47 PM

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spencer: regarding portfolio

I would like to add to you analysis that in order to build the $2m portfolio over an assumed 30 years (to account for some years where he can contribute less for whatever reasons), he would have to put in about $30,000 (largely after-tax) anually, at an assumed 5% annual after-tax (!) growth rate. Half of that for a $1m target. Let's assume $10k is sheltered by 401(k) or such, then $30k contribution would amount to $40+k pre-tax at a 35% tax rate ($17+k for $15k).

Posted by: cm on January 3, 2004 02:57 PM

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Zizka --

I'd appreciate it if you'd stop saying that I'm offering no evidence on the relative dearth of "working-class investor Republicans," because I have offered evidence. You just have not responded to it. The evidence is, as I said, based on my own experience (and I'm not sure why that counts as less relevant than your own experience, which appears to be your only evidence) and, far more important, the evidence of people's attitudes toward fiscal policy and government spending: most Americans preferred other plans to the Bush tax cuts (both the initial one and the dividend cut, to which they were even more opposed). Essentially no Americans are in favor of cutting Social Security. And only a small minority believe in cutting education or health-care spending. This poll, from March 2001, showed that Americans favored the Democratic alternative tax plan to Bush's 55-30%. And this poll, which is especially eerie because it came out on September 10, 2001, shows how supportive Americans are of traditional Democratic fiscal policy (though it's not phrased that way): http://abcnews.go.com/sections/politics/DailyNews/poll010910.html. I'm perfectly willing to believe that a very small percentage of American voters support the Republicans because they misunderstand their true economic position. But if the percentage were in fact truly significant, those numbers would be very different. Of course, if you believe that if voters were rational, 80% of them would be Democrats, then there's no evidence I can offer to convince you that people aren't deluded, but at this point, I think the burden of proof is on you to come up with some concrete data showing that a meaningful percentage of working-class voters have become Republican because of the party's economic policies.

What I find confusing about your argument, as I said in my first response, is that Republican policies for the past decade have not, for the most part, altered any of the middle class' sacred cows -- Social Security, Medicare, housing, even education spending. And every time they've made noises about doing so, as Gingrich did, they've been almost immediately cowed by the hostile reaction. So it's not as if people have been asked to choose between social democracy on the one hand and Goldwater-ian conservatism on the other. It may be true that down the road, Bush's policies will spell disaster for the $50K a year guy. But it's a lot to expect people to have long time horizons when voting.

Posted by: James Surowiecki on January 3, 2004 02:57 PM

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One other thing: the point about assumptions isn't that ceteris paribus assumptions are a problem. It's that the answer you want is built into the assumptions that you think should be used to build the model. So you think Republican policies are good for investors, but bad for workers, bad for schools, bad for homeowners, bad for neighborhoods. Therefore, someone who's not a true member of the investor class should rationally vote Democratic.

I know you said you're not asking the question, "Which party is best for the investor (or working) class?" but you have to ask that question to get the number you want. Think of it this way: if Republican policies would increase the value of investments by 30% a year and have no negative effect on one's income or the value of one's home, then it would be economically rational for your $50K-a-year, $30K-portfolio guy to vote Republican. It's only if Republican policies hurt ordinary workers that it becomes irrational.

Now, I realize you know that Republican policies are bad for ordinary workers. But I have a hard time believing that if your acquaintances who vote Republican really believed that Republican policies were bad for them as workers, bad for their children's educational prospects, bad for their neighborhoods, and bad for the value of their homes, that the thought of their portfolios would keep them voting Republican. Yet that's exactly what your argument implies is happening. I think it's much more likely that these people simply don't agree with you about the impact of Republican policies on their everyday working lives, on their kids' schools, and on the value of their homes.

Posted by: James Surowiecki on January 3, 2004 03:11 PM

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spencer: democrats vs. republicans

Plausible points that you are making. However, I would like to offer that I have heard the case made (and partly have to agree) that one problem of the Democrats (as a party, not individuals) is that by trying to embrace the "middle class" they are assuming more of Republican positions. Also the perception is out there that Democrats and Republicans have become so close in their special interest ties that the only difference is to which groups they are pandering. (I also have heard how Clinton was referred to as a Republican under the guise of a Democrat.) Admittedly those are quite cynical views, but I want to cite them anyway, as I think they are relevant.

Similar effects are observed in Europe with mostly social democrats/labor vs. "conservative" parties of various descriptions. By trying to embrace the middle, labor appears to be making concessions, some say even corrupting their core values and goals. While Europe generally has more "relevant" 3rd/4th parties than the US, they are often forming coalitions with the major parties, and the resulting two party "blocks" also split the vote somewhere close to 50:50 (although sometimes the vote spread is larger), and elections appear to be getting closer. But maybe the latter is only an effect of both party blocks being "optimal" at managing their campaigns?

Posted by: cm on January 3, 2004 03:21 PM

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Hey guys, try to be more gentle in your contributions. (I don't want to single out individuals.) Flinging insults, accusations, and labels does not help anything. Don't respond tit-for-tat. Some people have preconceptions, and being rude or harsh will only reinforce them. That's not our purpose here, is it?

Posted by: cm on January 3, 2004 03:39 PM

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Michael Brown: re: economic mobility

The point I wanted to illustrate is that "economic mobility" means mobility between socio-economic "strata" of a group of people relative to their family.

Another ways the problem has been phrased that you may have heard is, how are adults doing vs. their parents when at the same age, or their grandparents.

It is not about how you are doing at 30+ versus you at 20, but how are you at various stages in your life doing versus how your parents or your grandparents did.

Technically, your definition of economic mobility is a valid interpretation of the phrase, but it is not how this term is understood by economists and sociologists.

And actual research tracking people appears to show that economic mobility of the definition that I cited is decreasing, i.e. people originating from poor/well-off/rich backgrounds tend to remain more in that category than earlier.

This is the measured result. How representative it is can always be questioned. The next hurdle is interpretation. One interpretation is that lower-income/wealth people have increasingly less opportunity (note: there is no allegation that a sinister force denies the opportunity, simply that as a matter of fact the opportunity becomes less accessible).

One other interpretation that one can occasionally hear is that all those people are good for nothing and get no less than what they deserve, but that is not my view.

Posted by: cm on January 3, 2004 04:05 PM

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on the topic of why the working class (esp the white working class male) identifies and votes up the social ladder, thereby undermining his own position in society, arlie hochschild has an interesting article on alternet...

http://www.alternet.org/story.html?StoryID=16885

Posted by: camille roy on January 3, 2004 04:35 PM

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James S. -- You seem to agree with me about some things: "Now, I realize you know that Republican policies are bad for ordinary workers.....It may be true that down the road, Bush's policies will spell disaster for the $50K a year guy. But it's a lot to expect people to have long time horizons when voting."

Well, isn't it our job to confront that problem and do something about it? In what you've said and much of what I read from New Democrats, what I'm talking about (an erroneous and self-damaging upward identification by working-class people) is ontologized, as if it is carbved in stone, with the result that populism, which has traditionally been a valuable (and in my mind legitimate) weapon for Democrats, not only becomes useless, but starts to be used fraudulently against them. I think that Democrats have to quit conceding that point.

In other words, I am saying that the upward identification and optimistic self-misperception that everyone seems to concede should be fought, rather than surrendered to. It's a problem to deal with, not a law of nature.

Frequently you call what my examples -- what I call successful working class people -- "middle-class". To me this is the issue: they are really still almost entirely dependent on wages, benefits, and tax-supported government programs.

The example I gave only was to demonstrate that the individual I was speaking of was in fact still much more dependent on his labor, benefits, and government programs than he was on his piddly property ownership (house plus stocks). This calculation can be done independently of politics. The second step is trickier and different -- what are the effects on this guy if Republicans vs. Democrats run the government. If we had a good answer on the first step, the trickier second step would certainly be more doable.

An example of the way recent Republican policies have genuinely already hurt people (not in the future) is pension looting, which Republicans condone and enable. Deterioration of public schools through tax revolts is another real case -- something that has actually already happened. Steady reduction of benefits is another. Not all of it is in the future.

Somehow Bush programs get through Congress even though most major elements of the program are rejected by the people according to the polls. Obviously there are overriding factors here which cause people to accept the plans. Social conservativism and war fever are two. I am proposing another. Something is confusing people's perceptions. I regard it as a challenge. Your response seems to be that people's reasons are complex, they're short-sighted, we can't understand why they think the way they do, etc.

I think that the moderately successful people I'm talking about with the small investments are thinking too much about the investments and not enough about the other stuff; not that they have a firm but mistaken opinion about the other stuff, or that they are knowingly and deliberately making a stupid choice. There's a lot of deliberate confusion about, and I think that we have to deal with it.

It's funny, but this is something I agree with the Republicans about. We frequently hear about how more than 50% of Americans hold stocks. The whole "death tax" scam plays to this delusion. So does the recent "opportunity society" stuff. So does all the tax break rhetoric, which depends on people misunderstanding where the breaks are going. So do the various plans to change government entitlements into individually-controlled tax-free accounts of various sorts. The stuff I'm talking about is happening. A certain number of people are being terribly fooled by it.

I still suspect that one reason that Democrats as a party are allowing themselves to be killed by this particular type of fraud is that too many of them half-believe the underlying scam -- "we're all middle class now". And too many are too quick to talk about "class warfare".

Posted by: Zizka on January 3, 2004 04:37 PM

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Zizka, James S.: How do you define middle class?
I don't want to lead you, so I'm not offering at this time what my (kind of fuzzy) definition is.

Maybe one problem when discussing these matters is that people have different understandings what the middle class and other social "strata" actually are?

Posted by: cm on January 3, 2004 04:50 PM

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Zizka "Randolph Fritz -- thanks. So what do we do about it?"

In general, the three things that are most needed are (1) honest reporting and a rhetorical environment where multiple viewpoints are heard; (2) a rhetorical environment which tends to moderate fear; and (3) a political system which makes it possible for people to effectively express their views. If people can form a clear picture of their choices and are not in complete panic, or drowning in greed, and if people know that their voices will be heard there's the best chance they will make reasonable choices. This is, of course, something we are very distant from. I've tried to delineate some of the problem in my article at:
http://www.livejournal.com/users/randwolf/12253.html
but that really only points up the problem--to get at solutions will require more study, and still more work to implement.

Posted by: Randolph Fritz on January 3, 2004 05:26 PM

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Zizka --

I'm not sure about "graven in stone," but you're right that I am assuming that Americans' tendency to identify up would be a very hard thing to change. For more than a century, after all, people on the left have been wondering why more Americans were not class-conscious. So that suggests to me that something more than a self-identification as an investor is at work.

In any case, I agree with you that the Dems need to meet the Republicans on their own turf. And you're right that there's a lot of deliberate confusion out there, in no small part because for all the Republican rhetoric they haven't really governed as conservatives in the last three years (even the tax cuts have been balanced by massive spending). And the Dems need to deal with it, most obviously in the case of taxes. I'm unconvinced of the need for your number, but I do think that if the Democrats can make a convincing case that people's jobs, schools, and neighborhoods are worse off (or will be worse off) because of Republican policies (and that is an if, not a given), voters will not let their portfolios dictate their decisions.

Where I disagree with you is that I think most Americans are closer to the Democrats -- at least as represented by Bill Clinton -- than to the Republicans. And I don't think it requires a dramatic remaking of working-class opinion on economic matters for the Dems to win elections. There's little doubt in my mind that if the Dems were seen as tough on national defense, tough on crime, tough on welfare, and pro-religious, they would be a majority party.

Posted by: James Surowiecki on January 3, 2004 05:40 PM

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I really think that the issues I've been talking about need to confronted and foregrounded. A lot of people are fooling themselves, with ample help from the Republicans and the media.

The Republicans' choice of issues tells me that the dynamic I'm talking about is real. (In a winner-takes-all election, moving even 1% of the total vote from other guy's column into yours changes a 50-50 standoff to a clear 51-49 victory.) I think that Democrats have failed to confront the Republicans in this area, in part because they've conceded a lot of the issues.

Clinton to me was a mixed blessing, doing a lot of the right things (and wanting to do more) but also leaving a terribly weakened party behind him.

"Tough on national defense, tough on crime, tough on welfare, and pro-religious" -- well, your faction within the Democratic party is not hard to figure out.

My example was more like one of those mental experiments or hypothetical models you see all the time in philosophy and economics. (It's a lot more realistic than the hypothetical economy producing three products, though). I was trying to highlight the way people think of their actual wealth, and their overvaluation of their actual possessions vs. their job, benefits, entitlements, etc.

A guy with two kids, a wife, and a net worth of $130,000 will be destitute and homeless in ten years if he stops earning money (and it's that long only only if he's extremely frugal from the minute that his money stops coming in; my guess is that very few would last longer than five years). But to a lot of people $130,000 looks like real money.

Posted by: Zizka on January 3, 2004 06:08 PM

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I enjoyed the confusion above over social mobility.
cm is certainly correct in pointing out that from an individual's standpoint, we should be comparing their income to that of a comparable person 10,20 or 30 years ago. However, it misses the point.
When Krugman et al whip up outrage over the share of national income commanded by the top 1%, they are implicitly (if slyly) ignoring the fact that this statistic is a fixed snapshot that precisely ignores the income mobility that many of us experience as we get older and more experienced. If you strip out that factor, then you'd no doubt find that things are much more equal than is often advertised.
So if we are going to quote the "share of national income" statistics, we should honestly acknowledge this subtlety.

Posted by: Gary the Actuary on January 3, 2004 06:24 PM

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"For more than a century, after all, people on the left have been wondering why more Americans were not class-conscious. So that suggests to me that something more than a self-identification as an investor is at work."

First, I think that the word 'century' collapses some very distinct eras. There was intense labor strife through the 30's. Unions were not a charitable dispensation. They arose as the result of real struggle and sacrifice. Unions only began to decline once the middle-class was established, during the post-war period.

Second, I think the 'something more' you refer to has been the great American job machine. This, combined with our minimal safety net, has provided an awesome amount of opportunity in this post WWII period. It wasn't perfect but it was good enough to keep the domestic peace. However we are in a new era as a result of the 'global labor arbitrage'. Due to intense competition, the internet as a international platform for integrating complex tasks, and low pay for an educated, skilled workforce in 3rd world countries, the middle class in the USA is toast.

As a result, the awareness of class will rise (is rising) as a direct result of the decline in prospects and living standards for the American middle-class.

Posted by: camille roy on January 3, 2004 06:36 PM

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Gary: share of national income

Unless I misunderstand your reasoning (please explain more), the argument coming out of the income mobility research is precisely that there is little income mobility in and out of that 1%.

The confusion that you are referring to has two aspects generally: (1) different interpretations on people's part what "economic mobility" means, and (2) interpreting statistics in ways that are not proper. In the "growth" example that I gave, the statistic may claim that people tend to grow 3 feet within 10 years, which on an individual basis is correct. But you cannot conclude that the whole population grows 3 feet per decade, and thus people will be 20 feet tall at age 70.

And no, I don't think things are much more equal. Many people don't seem to imagine (and I don't claim I fully can) how filthy rich and filthy poor people can be. For many it's out of their world.

No offense intented, imagination often falls short.

Posted by: cm on January 3, 2004 06:41 PM

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Camille --

My point about going back a century was that even before the post-war boom the left was frustrated by the lack of class consciousness among American workers. Eugene Debs famously said that he wanted to rise with the masses, not from them, but as a crude generalization few American workers have agreed with him. You're right, of course, that the 1930s saw intense labor strife. But the unemployment rate in the 1930s was, at its worst point, around 25%. It's not surprising that people thought the American dream had pretty much gone up in smoke. But the Great Depression was a unique event, and not one that is of much value in understanding American politics today (or, for that matter, in the postwar period). And we need to be careful in interpreting even the 1930s. The evidence suggests that most of the CIO sit-down strikes that effectively created the modern labor movement were not supported by a majority of workers at the plants where they were held at the time they took place. It was only after the strikes succeeded, and the benefits of union membership were palpable, that most workers became fervent union supporters.

Zizka, I think you're right that some people overvalue their "assets" and undervalue their income, benefits, etc. But as I've said, I think that's in part because the Republican threat to their income, benefits, etc. has been, up to this point, pretty hard to identify, what with the increases in government spending, tax cuts for everyone, etc. That's what's perplexing to me about your argument that the Republicans are challenging the Dems by promoting issues that are friendly to investors and inimical to the working/middle class. I see it rhetorically, sort of. But in terms of policy, mostly I see the Republicans giving everyone whatever they want as long it suits their short-term political ends. Still, I believe that the class of deluded would-be-investor voters is large enough to swing an election. It remains, though, much smaller than the class of voters who, after 9/11, will not vote for a Democratic candidate whom they see as weak on national defense. If the Dems want to get their house in order, it's more important to deal with the latter point than the former, as the 2002 election demonstrated.

I wouldn't say the "tough" faction is my faction of the Democratic Party. But it's the only faction that can win. You cannot win a national election in America if you are seen as weak on defense, weak on crime, and non-religious. You might be able to get away with one of the three, but not all three. And that is, I would say, pretty close to a law of nature.

Posted by: James Surowiecki on January 3, 2004 07:11 PM

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James -- I think that we've exhausted the topic, without agreeing yet. One disagreement is about the magnitude of the problem. The funny thing to me is that I dislike the kind of Republicans I'm talking about and try to avoid them, but here in liberal Portland, OR, I seem to run into them all the time. Whereas you doubt that there are very many such people. (Of course, I also dislike true Republicans who are genuinely rich, but I'm less likely to meet them. And some of the people I'm thinking of are probably non-partisan swing voters who just sound like Republicans to me).

I definitely still think that the Democrats have to start pushing back on this issue. Even from a very moderate point of view, if the so-called "class war" card is definitively renounced, the Republicans will take advantage. The dominant point of view in the Republican party these days seems to be unbelievably far to the right on these issues.

Posted by: Zizka on January 3, 2004 07:39 PM

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In fact, Ken Lay was found to have been negligent by the auditor appointed by the court. He's also got at least one class action lawsuit filed against him (for negligence) by former employees. Negligence (and possible fraud) was pretty obvious to me after reading the Wall St. J articles. Given the astromical sums (in addition to getting to use the corporations as payors of ones' kids private school educations, wife's birthday parties, family vacation homes and banks offering lower then market rate loans for whatever and rarely requiring repayment of said "loans") some of these CEOs and CFOs, COOs make, they should know and be held legally responsible for knowing what's going on in their own corporations. As should the board members.

Regarding the "new" must replace the "old." Why? and who decides? The pharmecutical industry constantly pushes newer (on patent) drugs, yet there are older drugs on the market that often do the same job for much, much less and often their side effects are known. Unless of course you enjoy being a guinea pig for the pharmecutical industry. As for new technologies being less polluting--I suspect that the boards in PCs, cell phones, et al are considerably more polluting (heavy metals-not recovered before placed in landfills, lack of biodegradability of the plastics used, the toxics produced in the plastic making processes etc., )then say, a pencil and non-chlorine bleached paper. Or soy ink. It's just that the actual environmental and other costs are rarely publicized and it's those old fogies there in Europe (Germany, for one) who are insisting that computer manufacturers take responsibility for recycling computers--not burdening the consumer. What a radical concept. So new is not always better then old and certainly not in every way. However selling something new as being better is generally seen to be in the best short term interests of business. I don't consider the "best interests" (maximizing short term profits by shifting costs onto employees, consumers, the environment) and good advertising but perhaps others do--i.e., what's good for GM . . .

Posted by: sh on January 3, 2004 08:37 PM

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In fact, Ken Lay was found to have been negligent by the auditor appointed by the court. He's also got at least one class action lawsuit filed against him (for negligence) by former employees. Negligence (and possible fraud) was pretty obvious to me after reading the Wall St. J articles. Given the astromical sums (in addition to getting to use the corporations as payors of ones' kids private school educations, wife's birthday parties, family vacation homes and banks offering lower then market rate loans for whatever and rarely requiring repayment of said "loans") some of these CEOs and CFOs, COOs make, they should know and be held legally responsible for knowing what's going on in their own corporations. As should the board members.

Regarding the "new" must replace the "old." Why? and who decides? The pharmecutical industry constantly pushes newer (on patent) drugs, yet there are older drugs on the market that often do the same job for much, much less and often their side effects are known. Unless of course you enjoy being a guinea pig for the pharmecutical industry. As for new technologies being less polluting--I suspect that the boards in PCs, cell phones, et al are considerably more polluting (heavy metals-not recovered before placed in landfills, lack of biodegradability of the plastics used, the toxics produced in the plastic making processes etc., )then say, a pencil and non-chlorine bleached paper. Or soy ink. It's just that the actual environmental and other costs are rarely publicized and it's those old fogies there in Europe (Germany, for one) who are insisting that computer manufacturers take responsibility for recycling computers--not burdening the consumer. What a radical concept. So new is not always better then old and certainly not in every way. However selling something new as being better is generally seen to be in the best short term interests of business. I don't consider the "best interests" (maximizing short term profits by shifting costs onto employees, consumers, the environment) and good advertising but perhaps others do--i.e., what's good for GM . . .

Posted by: sh on January 3, 2004 08:40 PM

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Re: Double posts

This is a community service announcement :-)

When you "POST" a comment, it is almost immediately in the system, but the page will take a long time to come back.

You can verify that the comment is in by loading the "Comments" page at the lower-left end of the article on Brad's main page, perhaps in a different browser window/tab. After that it should be safe to abort the post process. That's what I'm doing.

The "Permanent link" page will show your comment only much later (when the POST page has come back?). I'm not sure whether this is due to browser settings, so that page updates are infrequently checked, or whether it takes time to update on the server.

Don't hit POST again, and don't reload the page after aborting the post. (Some browsers may tell you it contains POSTDATA that will be resent.

Posted by: cm on January 3, 2004 08:51 PM

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sh: "Regarding the "new" must replace the "old." Why? and who decides?"

Bulent (who posted the original comment) had more in mind radically new technologies to replace old, inefficient [my word] ones (where his notion of efficiency, even if not directly stated, includes environmental effects).

I tend to agree with this notion -- efficiency should measure "units of effect/benefit" per units of inputs of all kinds, and (adversarial) side effects and (waste) outputs, not just some sort of "cost" that excludes environmental damage, suffering, and unnecessary activities (like counteracting an undesired side effect).

Posted by: cm on January 3, 2004 09:03 PM

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Zizka --

Yes, I think we're probably not going to agree, although some of the difference here has to do with rhetoric rather than substance. (I think the Democrats would do well to emphasize the need for progressive taxation, the value of public services, etc. I just don't think "class war" is the right way to frame the debate.) Your last comment was interesting to me, though. The people I know who now vote Republican all used to vote Democrat, and almost all of them are the children of Northeastern union members, although most of them are middle-class now. Maybe that explains why they don't seem especially enamored of Republican economic policies but nonetheless seem ready to vote for Bush. (I know people who say they would vote for Gephardt but who are vehemently opposed to Dean.) I wonder if the background of "working-class Republicans" in Portland is different, making them more susceptible to investor-class rhetoric.

Posted by: James Surowiecki on January 3, 2004 09:16 PM

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Goodnight everyone. This has been real fun.

Posted by: Michael Brown on January 3, 2004 09:33 PM

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"Class war" isn't my phrase. It's just the phrase which gets thrown at me or anyone who yalks about this stuff. By Mr. Brown on this thread, but often enough by New Dems.

I think that the dynamic I'm talking about might coexist confusedly with (and override) an awareness that Bush's (and Reagan's) policies were not really too good. Incidentally, my whole argument has been based on the last 23 years, and not just the last 3 years.

Posted by: Zizka on January 4, 2004 06:14 AM

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Thankee cm!

Darrrned!

Turkey's probably only submarine optic cable broke this morning, which I understand put the backbone out of commission all day, my ADSL would not give me any international connection up to half hour ago and my dial-up connection which I am using at this moment gives me only a trickle of a passage (this page took nearly 20 mins to open), so, there.... I missed all the fun!

Grrrrr!!!

Posted by: Bulent Sayin on January 4, 2004 07:30 AM

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Zizka: "The dominant point of view in the Republican party these days seems to be unbelievably far to the right on these issues."

Zizka: "...I dislike the kind of Republicans I'm talking about and try to avoid them..."

But some of us see the world very differently. I have a strong preference for the economic policies of Clinton (or a Clinton D) over Bush, but at the same time I have a strong preference for the policies of Bush over Gore (or a Gore D). Am I nuts? To me the Clinton Democrats represent (at least a hope of) real (education, entitlement, health-care, trade) reform, while the Gore D's basically represent the status quo. Bush wobbles back and forth between the two, plus he cuts taxes a lot.

Is Zizka's project (certain people only vote R because they're deluded) based on truth? Or is it just essentially a prejudice? I wonder how easy it is to really understand the point of view of people you actively dislike and shun....

I think JS's point about voters having other interests (Jan 2 2:49 PM) should have pretty much wound up the discussion, but another point is that even if you don't like the effects of the Bush tax cuts (as I don't), you might still place greater weight on other factors which affect the long-run trend of economic growth - such as education and entitlement reform.

JS: "I think the Democrats would do well to emphasize the need for progressive taxation, the value of public services..."

It would be nice if the public could actually be led to understand that rich people get (per dollar of taxes) more benefits and suffer less disutility, but I doubt that Democratic you're-a-victim rhetoric is up to the job. Better (electorally) for the D's to emphasize the deficit, the deficit, the deficit, the deficit, crony capitalism, and maybe a bit of the ol' free-trade-is-bad-for-you SO to keep the base happy. (Okay, my prejudice).

Joe Mealyus

Posted by: Joe Mealyus on January 4, 2004 04:57 PM

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Joe M:"I have a strong preference for the economic policies of Clinton (or a Clinton D) over Bush, but at the same time I have a strong preference for the policies of Bush over Gore (or a Gore D). Am I nuts?"

Guy, Gore *is* a Clinton Democrat and W. Bush fronts for the hard right. I say you've been fuddled by skillful propaganda. Which isn't nuts, but is discouraging. I stress yet again that even the experts can be deceived and until the rhetorical environment becomes more honest the mass consciousness is not likely to be clear on these matters.

James, Zizka--this whole thing is too big to handle in this medium. In general, though, New York City Republicans are a very different breed from Pacific Northwest Republicans. One of the great differences is that New York is, still, "the empire city"--a world trading center--and New Yorkers believe, rightly, that their politics makes a difference in their lives. The history of the US Pacific Northwest has been dominated by the economics of extractive resource industries, and has a long history of disempowerment. Object lesson: the biggest port city between San Francisco and Seattle is little Coos Bay, Oregon, which exports wood and ore. These thinly populated states play almost no role in electing presidents and have very limited legislative power; their citizens, made frugal through a long history of depression (look at the chart at http://www.econ.state.or.us/distareamap.gif ) generally have every reason to distrust federal economic policy-making.

Posted by: Randolph Fritz on January 4, 2004 08:16 PM

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I know this thread is exhausted, and I hesitate to be the guy who feels the need to endlessly clarify his positions, but in this case the topic is interesting, so I'll risk it. Randolph, tbe people I was talking about aren't from NYC, but from what used to be the industrial Northeast -- towns like Waterbury and Bridgeport. I think their relationship to politics is probably different from NYC voters, although as you said it's too big a question to answer convincingly here.

Having said that, I think your point about the Northwest and its relationship to the federal government is a really interesting one, and not something I've heard before. Thanks.

I also didn't know Coos Bay was a big port. I only knew it as the home of Prefontaine.

Posted by: James Surowiecki on January 4, 2004 08:25 PM

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127 comments. I see that Krugman continues his drawing power - love him or hate him.

Posted by: Ian Welsh on January 4, 2004 11:16 PM

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Ian: I think we can be glad to have a person of such quality who is able (and willing!) to identify the important issues and to present them in a crisp, right-on, and no-BS manner, and I'm sure it takes a fair bit of stamina and courage as well.

Posted by: cm on January 5, 2004 12:57 AM

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RF: "Guy, Gore *is* a Clinton Democrat and W. Bush fronts for the hard right. "

Well, I think Clinton is/was pro-free trade, pro-welfare/entitlement reform, and tried to do as little harm as possible (while remaining a D) on education and the cost of health care. I think on the international front Clinton is/was very good at using words as cover....

And these (aside from corporation, union and tort reform) are the issues I care about. These are the issues that I believe will make the greatest difference in the future lives of ordinary US citizens. And Al Gore has very different views than Clinton, or at least chooses to advertise himself as having such.

Bush has cut taxes. But who doesn't think taxes won't eventually go back up? I don't think Bush's plan was very astute, but it seems to me that "fronting for the hard right" is only one possible explanation of his motives.

Yes, perhaps I have been "fuddled by skillful propaganda," I have to admit that is so. But "swayed by propaganda" always seems to me to be one of those criticisms similar to "never comes through in the clutch" - kind of a seductively easy explanation of complex phenomena, maybe too easy.

RF: "I stress yet again that even the experts can be deceived and until the rhetorical environment becomes more honest the mass consciousness is not likely to be clear on these matters."

Hmmm. Well I live in Seattle, where both the Weekly (K Berger) and the Times (W Williams) have run editorials in the past year (quite seriously) proposing that Bush be impeached for political reasons - e.g. the USA Patroit Act. I'm sure the P-I has run one too, but I didn't see it.

RF: "These thinly populated states play almost no role in electing presidents and have very limited legislative power; their citizens, made frugal through a long history of depression generally have every reason to distrust federal economic policy-making."

Depression characterizes the timber (and perhaps fishing) towns, certainly, but aside from that, huh? We rely on trade, we're procyclical....

Washington and Oregon have more liberal R's because we don't have as many folks who fit the "Southern" pro-God, pro-military, etc., profile. We're closer to Sweden than Alabama. Well, that's what I'd always thought....

Joe Mealyus

Posted by: joe mealyus on January 5, 2004 02:48 PM

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