Category Archives: Public Policy and Governance

Stiglitz On The Environment

Today, I’m largely turning this blog over to Joseph Stiglitz, Nobel-prize winning economist who heads up economic research at the Roosevelt Foundation. Stiglitz recently testified before the Senate Budget Committee on what he–and President Biden–have both correctly termed an existential threat: climate change.

The following are excerpts from that testimony.The entire presentation is at the link.

Thank you for this opportunity to share with you some of my concerns about the large economic costs and huge risks of not taking strong actions now to deal with climate change, and the large benefits of doing so.

Some of the downside risks are already apparent. In one recent year, the magnitude of destruction associated with extreme weather events—which will inevitably occur more frequently, with ever more devastation as a result of climate change—was more than 1.5% of GDP, effectively wiping out more than 60% of the growth of that year.1 But this is only one dimension of what is occurring: Rising sea level will put much coastal property under water, destroying homes and property values. Forward-looking markets have already begun to price this in—but still far from adequately.2 3

Recent studies have documented the adverse effects of climate change on health.4 We pay for this in multiple ways, including higher health care costs and a less healthy population, which means a less productive workforce. But there is no way to accurately monetize the shorter life spans and the increased morbidity….

There are, of course, some sectors, some parts of our population, some locations that will be particularly hard hit. During the past year, we have seen the inequities associated with Covid-19. Those associated with climate change are equally severe, with people at the bottom of the income ladder often bearing the brunt of the costs, with fewer resources to respond. But there is an additional dimension of inequity that speaks to our future: While Covid-19 disproportionately affected older Americans, climate change is a risk that we impose on our children and grandchildren—on the future of our country….

Let me spend a few moments discussing the real risks our economy and society face if we do not take stronger actions than we have so far. We have been treating truly scarce resources, our environment, our water, our air, as if they were free. But economics teaches us that there is no such thing as a free lunch. We will have to pay the check someday. And delay is costly. Taking carbon out of the atmosphere is far more expensive than not putting it into the atmosphere. A smooth transition is far less costly than the one we will surely face if we do not take action urgently….

The longer we delay dealing with climate change, the larger the necessary adjustments will be, and the greater the potential for huge economic disruption—an economic disruption that could make the 2008 Great Recession look like child’s play by comparison.6 The danger of a crash is particularly acute for the U.S. economy, given that large U.S. banks are the largest financiers of fossil fuel….

Economics has, for good reason, been called the dismal science. The scenario of doom and gloom that I have painted is, unfortunately, all too real. But I want to end on a sunnier note. Doing something about climate change could be a real boon for the economy.

Too often, critics of taking action point to the job losses. Change is costly. But change provides opportunity. I am also firmly convinced that the opportunities afforded by addressing climate change are enormous. The number of jobs that will be lost in the old fossil fuel industries are dwarfed by those that will be created in the new industries. The value created in the new industries will also dwarf the value of the stranded assets in the fossil fuel and related sectors. As just two examples: the number of installers of solar panels already is a multiple of the number of coal miners; the auto company with the highest valuation today is Tesla…

The current focus on changing to a green economy is already stimulating enormous innovation, innovation that holds out the promise of significant increases in standards of living. The price of renewable energy has been plummeting, and in many areas outcompetes fossil fuels. The drive for a greener society is stimulating the design of new buildings and new ways of doing agriculture, which turn out actually to save resources, particularly if we value them appropriately….

Our country especially has much to gain, because innovation is a key comparative advantage. If we are ahead of the game—rather than a laggard—we will develop technology that will be in demand around the world. If we are behind the game, we will pay a high price. It is almost inevitable that other countries will demand cross-border adjustments that will put our companies at a disadvantage….

There is much more to be done to protect the economy from the risks I have described. For instance, we need immediately to end fossil fuel subsidies and require full disclosure of climate risks—both the risks of physical damage and the financial risks. Markets on their own don’t provide adequate disclosure, necessary both for the efficient allocation of scarce capital and for protecting investors. We need to change statutes governing fiduciary responsibility to mandate looking at these long-run risks, and especially where government is at risk, as in government insurance pension schemes…

There’s much more at the link, and it is definitely worth reading in its entirety.

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About That Shortage Of Workers…

Bars and restaurants are reopening–something for which we are all grateful–but according to media reports, having trouble finding workers. Republicans are jumping on those reports, arguing that employers just can’t compete with unemployment insurance checks. It’s the standard GOP argument that helping people breeds “dependence,” — that workers would rather collect benefits than go back to work.

A 2020 study by Yale economists found that–convenient as that argument may be–it’s wrong. Unemployment benefits don’t create a disincentive for job seekers.

Recent reports suggest that the pandemic has cost America’s economy 2.5 million restaurant jobs and closed more than 100,000 eateries. Now, just as the nation begins to return to whatever “normal” looks like, the restaurants that made it through 2020 can’t find staffers.

A recent Brookings report  looked at Census survey data from early April. It found that 37% of small businesses in the hospitality and food sectors were affected by worker availability, compared to 16% for all small businesses.

So–if those Yale researchers are right, and the dearth of restaurant workers isn’t attributable to sloth enabled by unemployment compensation–what is causing the problem?

One likely factor is the unusual timing. When everyone is trying to hire at the same time, it is harder to find workers. Add to that the fact that easing of the pandemic does not equate to defeat of the pandemic. Many workers–especially those who will face the public as servers, hosts and the like–remain fearful, and not without reason.

But a substantial and overlooked reason for the problem is Trump’s immigration policy. 

Restaurants (and for that matter, farmers) have long been dependent upon immigrant labor, and Trump’s policies (if hatred of Black and brown people can be dignified by the label “policy”) sharply curtailed the supply of those workers. Of course, pointing out that consequence is incompatible with Republican’s anti-immigration orthodoxy.

An ugly truth further complicating the situation is the fact that food establishments don’t depend exclusively on legal immigrants. A study from last year pointed out the significant extent to which restaurants rely on undocumented workers–and how they exploit those workers’ fears of deportation to underpay them.

Undocumented immigrants as a whole pay billions in taxes and a higher effective tax rate average than the top 1 percent of taxpayers (8 percent versus 5.4 percent).

And, as they often work in the back of house — as line cooks, bussers, dishwashers, and janitors — they’re largely invisible to the dining public. In reality, they’re the backbone of the industry. And yet, many are unable to obtain health insurance even though they perform backbreaking work day after day. Most didn’t receive a $1,200 stimulus check from the government, and they often fear getting tested for COVID-19 or obtaining care for fear of deportation.

The next time a GOP flack attributes the scarcity of workers to “dependency” caused by government largesse (a dependency that somehow doesn’t affect the wealthy and corporate beneficiaries of sizable subsidies), you might connect the dots for him.

You might also ask GOP opponents of immigration if they are willing to pay higher prices for fruits and vegetables, and more for that hamburger, if farmers and restaurant owners have to pay something close to a living wage to attract workers in a tighter (and Whiter) labor market. (For the record, I would be willing to pay more if I could rely on the assumption that the people picking produce and waiting on my table–whatever their ethnicity– were being paid a fair wage. )

Bottom line: anti-immigrant rhetoric grounded in barely veiled bigotry may generate votes, but rational, comprehensible and humane immigration policies are more likely to reopen your favorite watering hole….

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Alternate Realities

If we needed a reminder that today’s Republicans and Democrats occupy very different realities, Pew recently provided it.

The Pew Research Center fielded one of its periodic surveys, asking Americans to identify the issues facing the country that they considered most pressing. A majority of Democrats identified gun violence, health care affordability, the coronavirus outbreak and racism as very big problems facing the country today. Each of those issues was identified by two-thirds or more of Democrats and Democratic leaners.

But far fewer Republicans saw these issues as major problems.  The closest they came was the four-in-ten Republicans who did identify health care affordability; approximately two-in-ten rated the coronavirus and gun violence as big problems.

The extent to which climate change and economic inequality are viewed as very big problems is similarly split along partisan lines. About six-in-ten Democrats say each of these are very big problems, while just 21% of Republicans say economic inequality is a very big problem and even fewer (14%) say this about climate change.

By contrast, illegal immigration and the federal budget deficit are the top problems identified by Republicans. About seven-in-ten say both of these are very big problems for the country. Only about three-in-ten Democrats identify these issues as very big problems

It isn’t hard to see the influence of partisanship in these responses. Pew reports that Republicans today are 40 percentage points more likely than Democrats to say the deficit is a very big problem, a finding that–among other things– is in stark contrast to the numbers who said so during the Trump Administration, when there wasn’t a partisan split on that issue. Evidently, deficits incurred when Republican Presidents cut taxes on the wealthy aren’t as worrisome as deficits caused by Democratic Presidents spending on pandemic relief and infrastructure.

It is stating the obvious to say that government cannot solve a problem it fails to properly diagnose. We have evidently reached a point in our political lives where Americans refuse to see problems that are at all inconsistent with their political identities–so people who embrace so-called “Second Amendment” liberties don’t see the steady toll of mass shootings (not to mention the consistent loss of life attributable to suicide by gun) as a big problem.

What is truly difficult to understand is the survey’s finding that only 14% of Republicans identify climate change as a problem. This, in the face of dramatic increases in damaging weather events, out-of-control fires attributable to unusually severe droughts, rising sea levels and other evidence that is widely reported and just as widely attributed to climate change– and that increasingly affects the daily lives of ordinary Americans.

The fact that members of the GOP don’t consider income inequality a problem is more understandable, if equally unforgivable. After all, Republican policy preferences have caused that inequality.

It also isn’t surprising that Republicans named immigration as a “big problem.” For many of them, immigration these days equates to the entry of people of color, hastening the time when White Americans are no longer in the majority. Democrats who consider immigration a problem generally define the problem differently; for them, the problem is a dysfunctional system that takes far too long, is difficult to administer, and is unfair to categories of would-be immigrants.

The Pew survey illustrates what most observers already know: Republicans and Democrats no longer simply disagree about the policies needed to solve our problems. They occupy different realities, in which the identity and severity of the nation’s problems are starkly different.

No wonder our political system is gridlocked.

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I Hate It When My Husband Is Right…

A couple of weeks ago, Jennifer Rubin had an unsettling column in the Washington Post.

She was considering a recommendation issued by the nonpartisan Unite America Institute. The organization had been analyzing the “root causes, effects, and potential solutions to political polarization and partisanship,” and determined that fixing our political system requires eliminating partisan primaries. Instead, the Institute favors nonpartisan contests decided by “immediate runoffs,” sometimes called ranked-choice voting.

This recommendation rankled, because it echoed an argument my husband has made for years–one with which I’ve largely disagreed. He points to the (well-documented) fact  that primary election voters–right or left– are far more ideological than general election voters, and that the slates of candidates we used to get, chosen by those men in smoke-filled rooms, tended to be far more reasonable and appealing to the broad middle, or to the less doctrinaire voters.

I would respond to his position with a defense of “more democracy” represented by an additional electoral choice. I would also point out that primary voters were likely more ideological because they were more interested in/ informed about the political process; and I’d argue that what we need to do is engage and educate more people, not eliminate an election.

The Unite America Institute agrees with my husband.

“Voters who participate in primary elections are often unrepresentative of both their own party, and especially the electorate as a whole, producing similarly unrepresentative outcomes in the candidates they elect,” the report argues. “New polling data from Colorado’s 3rd Congressional District, for example, found that the Republican primary electorate that voted for challenger Lauren Boebert over incumbent Rep. Scott Tipton was nearly twice as likely (60%) to identify as ‘very conservative’ compared to general election voters (25%).”

Since so few people vote in partisan primaries, the election outcomes for Congress are essentially decided by the most ideological voters that dominate these contests. “Though turnout in the 2020 general election shattered records at 67%, a supermajority of Congress had already been elected in the primaries,” the report found. “As our analysis found, only 10% of eligible Americans cast votes that mattered in partisan primaries that effectively decided 83% of seats.”

The Institute favors nonpartisan primaries and general election ranked-choice voting. These mechanisms have gained wide support by scholars seeking to address polarization.

“Compromise is politically dangerous, so candidates appeal to their bases,” Larry Diamond argues in a symposium for Politico. “General election voters can’t vote for a third alternative without wasting their vote on a ‘spoiler.’

I must (grudgingly) concede that the argument is persuasive. My husband wins this round.

If that wasn’t annoying enough, a blog post by Paul Ogden, expanding on a comment he made to a previous post here, did further damage to my pro-democracy assumptions.

I have applauded the growth of small-dollar political donations, which the internet makes possible. Such fundraising, I have fondly believed, erodes the influence of the well-heeled political donors who have previously been able to command the attention and obedience of political figures they supported. 

After all, what candidate is going to be influenced by my twenty dollar contribution? And on the “pro-democracy” side of the ledger, people who send ten or twenty bucks to a candidate are demonstrably more interested in the campaign, more likely to vote, follow policy arguments, etc. It’s a win-win!

Paul argues otherwise–convincingly.

The big money for Republican officials today is in small donor donations, not corporate contributions.  Republican elected officials like Representatives Marjorie Taylor Greene, Lauren Boebert, Matt Gaetz and Senators Ted Cruz and and Josh Hawley are examples of GOP elected officials who raise huge sums of money off of small, individual contributions.

If you would have told me that there would come a day in politics in which elected members of Congress could eschew hosting big fundraising events attended mostly by corporate donors in favor of raising small donations from individuals, mostly online, I would have applauded the change.  The lack of corporate contributions means these elected officials can now act in a way that is in the people’s best interests rather than the interests of their big corporate donors.Or so I thought. 

That supposed “good government” change to fundraising practices has turned ugly. For elected officials to get a plethora of small donations, they have to draw attention to themselves.  The best way to do that is to act as crazy as possible, say outrageous stuff, and get as much time on Fox News, NewsMax and other conservative media outfits as possible.  

Damn damn damn. He’s right too.

I need a drink…..

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Defining Infrastructure

A few days ago, Talking Points Memo ran a story about Republicans’ assault on Biden’s infrastructure bill. That bill is extremely popular, even with the GOP base, so the party’s determination to oppose it had to be something other than “hell no, don’t fill those chuckholes or reinforce the electrical grid…”

According to the story, they’ve chosen to defend their opposition by arguing that the bill improperly defines the term “infrastructure.”

“You look at this bill, the $2 trillion in the bill that, only about 5 to 7 percent of it is actual roads and bridges and ports and things that you and I would say is real infrastructure and that we tried to get passed under the last administration with President Trump,” former Office of Management and Budget Director Russell Vought said recently on Fox News radio. 

That statistic is particularly misleading, as it doesn’t count even things like rail and water systems — improvements that fall into the traditional infrastructure bucket. 

Republicans charge that expenditures for broadband and green energy, among other provisions of the bill, aren’t infrastructure.

That argument prompted me to look at some of the academic literature. It turns out that there aren’t many publications dealing with the definition of infrastructure, although there’s more than I ever imagined on the economics involved–the returns on investment, the pros and cons of “public-private partnerships,” and various aspects of construction. But there was some, and it was enlightening.

For example, a number of scholars use the term “social overhead capital.” It evidently grew out of  Samuelson’s theory of public goods; Samuelson understood infrastructure to be  investments by the state that are a precondition for the successful development of the private sector– the basic services without which primary, secondary and tertiary types of production activities cannot function.

In other words, infrastructure is a support system, a floor built by government, that allows businesses and individuals to be productive. That certainly includes roads, bridges, and other elements of our transportation requirements. It also includes technology we need in order to communicate–hence broadband–and the need to keep the lights on–hence the electrical grid. It rather obviously includes water and sewers.

But these days, what constitutes that supportive floor has also come to include social infrastructure–services as well as brick and mortar assets. Social infrastructure includes educational institutions, libraries, parks…It definitely includes police and fire protection, courts of law, garbage collection and other municipal services.  In saner countries, it includes healthcare and a menu of social services.

Effective government is a mechanism through which we provide a network of support that allows individual citizens to prosper. That network of support is Infrastructure and it isn’t  something the market can supply. Using government to provide foundational systems and services is simply the process of doing collectively what we cannot do individually. 

In that literature I consulted, there was ample evidence that physical infrastructure is required if business and the economy are to thrive, and a substantial amount of emerging evidence that social infrastructure is equally necessary to support and empower individuals and families.

Biden’s American Jobs Plan would invest $400 billion in the caregiving economy; $137 billion in schools, early learning centers, and community colleges; $111 billion in clean drinking water; and $621 billion in various transportation projects. All of those investments are part of a supportive network that will pay dividends by enabling more Americans to live productive lives.

That supportive network is certainly infrastructure.

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