Category Archives: Public Policy and Governance

Flavors of Freedom

There is a book review in the latest issue of the Washington Monthly of “No Freedom Without Regulation: The Hidden Lesson of the Subprime Crisis.”  It was written by a Professor Singer of Harvard Law School, and in it, he considers a type of freedom that gets short shrift from the various special interests who are constantly insisting that any and all government regulation constrains our liberties.

I found this passage illuminating:

When the state sets minimum standards of safety and transparency for the manufacture and sale of consumer products, it affords me the freedom to buy a toaster oven without first hiring a lawyer to read the fine print and an electrician to look over the specs to make sure it won’t catch on fire. Other restrictions protect us from negative externalities. Building codes may limit my neighbor’s ability to contract for the construction of a house with cheap material and bad wiring, but it protects my house from the fire likely to erupt in his.

As I have noted in previous posts, I’m grateful for the Food and Drug Administration that relieves me of the need to test that chicken I bought at Kroger for e coli. (Before the recent news from Flint, Michigan, I used to be more grateful for the EPA’s monitoring of water quality–now, I’d like to see those regulations stiffened up a bit…)

The ongoing debate about government regulatory activity displays all the deficiencies of American policy arguments generally: it oversimplifies, assumes an “either/or” answer, and focuses on the wrong questions.

Can regulation be too stifling? Can a “nanny-state” approach impose unnecessary costs on businesses and consumers? Sure.

Can the lack of appropriate regulation endanger innocent people, and impose additional costs on those same businesses and consumers? You betcha!

The questions we should be addressing are the “how” questions: is this particular regulation necessary? Is it “narrowly tailored” to accomplish its goal? Does it make sense from a cost-benefit standpoint?

We’ll still disagree, still argue about the extent and substance of regulatory activity. But at least we’d be arguing about the right things.

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Why Indiana’s Economy Lags

Indiana’s Institute for Working Families conducts research on Indiana’s economy–more specifically, the ways in which the state’s economy is or is not working for low-income Hoosiers who work.

The news, you will not be shocked to discover, is not good.

Recently, the Institute posted a list of 16 reasons why Indiana’s minimum wage should be raised. I encourage you to click through and read them all, but I want to highlight some of the most compelling.

  • There is not one county in Indiana where where working full time at the minimum wage of $7.25 per hour is sufficient to support even a single adult.
  • Waiters and waitresses in Indiana are paid $2.13 per hour by their employers (29% of the minimum wage). The last time they saw a raise was a quarter-century ago (1991), even as the industry has seen strong growth and profitability.
  • In Indiana, the median number of work hours at the minimum wage for a single adult to become self-sufficient is 48 hours per week. The number of hours increases significantly to 108 hours for a single adult with one preschooler and one school-age child. For a family with two adults, a preschooler, and a school-age child, each adult would need to work 64 hours for the family to be self-sufficient.
  • Standard and Poor’s cites rising income inequality as “contributing to weaker tax revenue growth”, making it more difficult for state and local governments to invest in education and infrastructure.
  • Children whose parents work for the minimum wage live below the federal poverty line. Research has found that children being raised in poverty have lower academic achievement, poorer nutrition, fewer job prospects as adults, and worse physical health than their more affluent peers.

The usual objection to raising the minimum wage makes superficial sense: if businesses have to raise what they pay, they will hire fewer workers. Logical as that seems, the evidence from decades of research says otherwise. As the Institute notes,

Two recent meta-analyses of research on minimum wage increases during the 1990s found that “the minimum wage has little or no discernable effect on the employment prospects of low-wage workers.”

There is a reason for this seemingly counter-intuitive result: when the minimum wage goes up, the buying power of low-wage workers also goes up. Unlike wealthier Americans, low-wage workers spend those extra dollars, and that increased spending boosts the economy. Increased buying power translates to increased sales of goods and services; employers who see improved bottom lines hire more workers.

A raise in the minimum wage to 10.10 per hour would affect 637,000 Hoosiers (23.4% of the workforce). That number includes 436,000 who are currently making less than $10.10 and another 201,000 whose wages would be pushed up due to pay scale adjustments. That’s a lot of additional buying power.

And as an added bonus, paying a living wage to hard-working Americans might ameliorate some of the rage and resentment currently fueling our toxic politics.

Just a thought.

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Words Fail–Edition Number Zillion…

Every day, it seems, Americans are waking up to new expressions of punitive hatefulness erupting in state legislative chambers, mostly but certainly not exclusively in the South.

From The New Civil Rights Movement, we learn that

Led by Republican Speaker Tim Moore (photo), Republican House lawmakers in North Carolina have just passed a sweepingly broad anti-gay bill in a special session called just for this one bill. The bill will void all local nondiscrimination ordinances. It will also mandate that all public accommodations ordinances, all minimum wage ordinances, and all employment discrimination ordinances come only from the General Assembly – state lawmakers – effectively banning any localities from protecting citizens in any of these areas.

The bill, HB 2, passed by a huge margin, 83-24, after less than three hours of debate and just 30 minutes of public comment.

HB 2 now heads to the Senate, who will take it up immediately.

It is expected to pass and Governor Pat McCrory, who called for the bill, is fully expected to sign it.

So–as long as we are striking back at LGBT citizens who have had the nerve to demand equal treatment before the law and the right to use a gender-identity-appropriate bathroom–let’s also pile on and punish the working poor, minorities, women….It is really hard to fathom what could impel an elected official to vote for a measure this hateful.

It’s worth noting that this North Carolina eruption is yet another illustration of the growing divide between urban and rural Americans; this special legislative session is a response to the passage of a nondiscrimination measure in Charlotte. In North Carolina–like other states, including Indiana–rural areas wield disproportionate influence in the statehouse.

It may also be that these lawmakers feel free to act on their bigotries because they are confident they will not have to defend their votes in a democratic election. After all, it can’t be coincidental that North Carolina is the most gerrymandered state in the country, and is currently embroiled in litigation over that fact, and over the state’s other assaults on voting rights.

I refuse to believe that this measure is an accurate reflection of North Carolina voter sentiment. This despicable behavior is what you get when the legislators choose their voters, rather than the other way around.

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It’s Complicated, and We’re Scientifically Illiterate

The Washington Post recently reported on correspondence raising an issue that members of the U.S. Senate should respect, but probably won’t.

A letter was sent by ecologists and climate scientists and was endorsed by 65 other researchers, including a number of leaders of forest science, and by several scientific societies, and pointed out that pending bipartisan (!) energy legislation includes claims that burning trees for energy is carbon neutral–a claim that is scientifically incorrect.

“Legislating scientific facts is never a good idea, but is especially bad when the ‘facts’ are incorrect,” say the researchers, led by Phil Duffy, president of the Woods Hole Research Center. “We urge you and other members of the Senate to reconsider this well-intentioned legislation and eliminate the misrepresentation that forest bioenergy is carbon-neutral.”

The amendment in question was introduced by Sen. Susan Collins of Maine; it has seven cosponsors and urges leaders of the federal government to act in ways that “reflect the carbon neutrality of forest bioenergy and recognize biomass as a renewable energy source.”

Shortly after its passage, a press release by Collins hailed the amendment, which, she said, would “help ensure that federal policies for the use of renewable biomass are clear, simple, and reflect the importance of biomass for our energy future.” The release noted the support of groups including the American Forest and Paper Association and the American Wood Council.

The argument for carbon neutrality–which sounds reasonable–is that, although burning trees emit carbon, trees grow back and when they do, they sequester carbon, making the process neutral.

A key problem, say the scientists, is that it takes a long time for trees to grow back after they’re cut down — and a lot can happen in that span of time.

Here’s the real issue: We elect lawmakers to make policy determinations—determinations that inevitably involve tradeoffs. Those tradeoffs may prove to have been unwise, or based upon faulty information, but that’s the nature of the job.

We don’t, however, elect people to legislate scientific fact. (Indiana’s legislature is still the butt of jokes from a century-old effort to change the value of pi.) It may seem like a picky quibble when Congress is doing so much other damage (Yuuge damage), but when lawmakers triumphantly “demonstrate” the falsity of climate change by throwing  snowballs in the Senate chambers, it’s important.

There is a difference between language claiming that a policy choice is being made based upon scientific consensus, or upon careful consideration of contending scientific opinions, and language that characterizes a conclusion as scientific “fact” And it’s an important difference.

In an era where presidential candidates routinely make colossally untrue statements, when Indiana’s governor can tamper with an “independent” report in order to reflect more desirable “factual” findings, when Michigan’s governor can tell Flint’s citizens that he can assess water quality, you might argue that the mere existence of a bipartisan bill recognizing the importance of cutting carbon emissions should be considered a huge win. I get that.

But I think the real lesson is that respecting the distinction between fact and opinion is for that very reason more important than ever.

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Economic Despair

More and more, I am reminded of that old adage that “it ain’t what you don’t know that hurts you, it’s what you know that just ain’t so.”

A recent research paper from the Brookings Institution investigated one of those “things we know,” and came to some disquieting conclusions.

When it comes to staying in school, many economists talk about the “aspirational effects” of income inequality. When students look around them and see a better life, they are incentivized to invest in their own human capital—such as investing in their own education.

But what if that conventional thinking is wrong? What if inequality doesn’t incentivize students at the bottom of the income ladder to work harder, but rather disincentivizes them? This is one of the questions Melissa S. Kearney and Phillip B. Levine sought to answer in a new paper published as part of the Spring 2016 Brookings Papers on Economic Activity.

Among other things, Kearney and Levine found that low-income children growing up in states that have greater income inequality are dropping out of high school at higher rates than are children living in states with less income inequality.

The authors point to a concept they call “economic despair,” or a feeling that economic success is unlikely because the distance from the bottom to the middle of the ladder is too far to climb. If a student perceives a lower benefit to remaining in school, then he or she will choose to drop out—even if they aren’t struggling academically.

What is particularly interesting about this study is that it focused upon the perceived distance between the bottom and the middle of the income distribution—not the distance between the bottom and the top. The idea is that what they call “lower tail” inequality is a more relevant measure, because—although the top may realistically seem to be out of reach—making it to the middle would seem to be a more manageable goal.

The authors suggest interventions: mentoring programs that connect youth with successful adults, programs focused on establishing high expectations and pathways to graduation, or early-childhood parenting programs to build self-esteem and engender positive behaviors. Although such interventions might help ameliorate the problem, it’s hard to escape the conclusion that the effects would be modest, at best.

In fact, this study is one more “data point” in a picture that increasingly points to an inescapable conclusion: the level of inequality in America today is unsustainable and extremely detrimental, not just to the prospects of poor children, but to the nation as a whole.

We are in the midst of an election season that has unleashed a furious and troubling display of social dysfunction, in-your-face bigotry and populist anger. It’s hard not to attribute a significant part of that to economic realities that pit low-wage workers against each other and against a perceived plutocracy that has “rigged the system.”

Social scientists tell us that stable democracies are characterized by distributional equity, and the existence of a large and relatively secure middle class. Economists tell us that economic growth requires robust demand, generated by consumers with discretionary dollars to spend in the market, and a well-educated workforce.

When large numbers of people working 40 hours a week cannot earn enough to cover basic living expenses, when children don’t believe education offers them a path out of subsistence, democracy and the economy both suffer.

It’s past time to revisit some of the economic “facts” we think we know.

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