What's the Big Deal About $250,000?

On Monday, President Obama announced that he was asking congress to extend the Bush-era tax cuts for those making less than $250,000. I still want all of them to go away. It's not that I think people don't need the break. It's that I'm still unhappy with the way the cuts were passed in the first place.

To remind everyone, they were given a 10 year sunset aiming for 2010. That happened for two reasons: First, keeping it at 10 years kept the sticker price down to the level that would pass congress with enough Democratic votes. Second, reconciliation is only possible when the expenditure doesn't run past ten years. If they'd been permanent cuts, then the filibuster would have been in play and there wouldn't have been any cuts because they didn't have 60 votes in the Senate. So the law, known as "The Economic Growth and Tax Relief Reconciliation Act" was DESIGNED to expire after 10 years. That's not just a good idea, it's the law.

Of course, as soon as the law was in force Republicans started talking about how Democrats wanted to raise taxes because they wouldn't extend them. As I've written before, nobody has to do anything and these cuts expire. Nobody was trying to raise taxes. They were simply letting the cuts expire as they were intended to do in 2001.

So in December of 2010, President Obama reached a deal with the lame duck congress to extend them for two more years. Now he's proposing they be extended at least for the middle class.

My personal preference is to let them all go. Then Congress can debate new tax policy on an even playing field following the "pay-go" rules we've had on the books for some time.

You've probably read that those who oppose the president's proposal repeat claims about penalizing the job creators and small businesses. The best estimates show that somewhere around 3% of small businesses could be affected. Proponents of the cut observe that everyone gets the cut up to the first $250,000 and income above that would be taxed at 3% higher than it currently is.

Here's some additional interesting data, at least to me. Today in the Washington Post, Lori Montgomery did a story showing that effective tax rates paid in 2009 had been reduced compared to 2007 and that the rates hadn't been that low in 30 years.

In the story, this reaction was given by a Republican spokeperson: Michelle Dimarob, spokeswoman for Ways and Means Chairman Dave Camp (R-Mich.), countered: “Under President Obama and the Democrats who control Washington, Americans have lost their jobs, seen their wages decline and fallen into lower tax brackets. A weak economy and fewer jobs is nothing to cheer about.”

That sounded funny to me. First of all, we're talking about the 2009 tax year, so it's hard to put all that blame on President Obama and the Democrats. More importantly, I went to the CBO data linked in the report. That report gives this summary table.

This table breaks down the changes in income between 2007 and 2009 (in constant 2009 dollars). It explores the data by quintile and then breaks the top quintile into smaller units (the next 10, then 5, then 4, then 1). If you look at the "all quintiles" column, you see that the average tax rate fell from 19.9 to 17.4. The average after tax income dropped by $7,800. That seems to fit with Ms. Dimarob's claim that people had less money.

But averages can fool you because they're affected by extremes. Look what happens to actual income by quintile. The lowest quintile gains $600. The next quintile loses $300. The middle quintile loses $1,000. The fourth quintile loses $1,600. The top quintile loses $34,000. But when you look at the 81st to 90th percentiles, they only lost $2,600. The 91st to 95th only lost $6,400. The 96th to 99th lost $30,500 and the top 1% lost $506,000.

Look at the change in average federal tax rate. The bottom quintile dropped by 4.1%. The second quintile dropped by 3.5%. The middle quintile by 2.9%. The fourth quintile dropped by 2.4%. The top quintile dropped by 1.5%. The 81st to 90th dropped 1.8%. The 91st to 95th dropped 1.4%. The 96th to 99th percentile dropped by 1.3%. The top 1% saw their tax rate go up by .6%.

Now look at the average income levels across the chart. We hit the $250,000 level somewhere above the 95th percentile. It's true that they saw their income levels fall, but their magnitude of their holdings distorts the rest of the picture. In other words, from the bottom quintile through the 95th percentile, there are minor differences in tax rate and in change of income. But above the 95th, there's a significantly different picture.

I don't want to say that "the private sector is doing fine, but the income gap  at the top is humongous. Remember, these aren't middle class impacts. I still think middle class encompasses the 3rd and 4th quintiles.

There's no way the CBO data substantiates the claim that this happens because main street suffers. And it suggests that something significant is happening at about $250,000. I still think we should start over on the tax code, but I'm certainly more comfortable with the two-tiered conversation after seeing this data.

Ms. Dimarob and Rep. Boehner: You can toss your talking points where ever you'd like, but the actual facts don't back up your claims. Given no more trouble than it was for me to pull up the CBO chart and run the comparisons, I have to assume that the congressional staffs know that the data doesn't support their claims. It saddens me that they cynically make them anyway.

In the meantime, I'll keep crunching numbers. It's too easy to do and way too important not to do it.

Unemployment Data, Part Two

After the May jobs report came out, I published a post about temperature (without knowing what a heat wave we had coming) and linking that to our obsession with the monthly jobs report. Well, the June report came out Friday and the political class went crazy again. Either this is an illustration that the administration's policies are flawed or it's the sign of slow but continued progress toward better days.

I was struck with something that Chris Cillizza of the Washington Post blogged recently. He pointed out that June has been traditionally bad for President Obama and that employment has turned downward in the summer months.

That got me thinking. So naturally, I went to the Bureau of Labor Statistics website to look at the data myself. This is only the new jobs side of things, but it still shows interesting patterns. Naturally, I had to take the data and put it in a chart. I was able to show what happens to job growth monthly from 2002 through June of this year. Here's my chart.

What the data seems to suggest is that June and July have been tough months for most of the last 10 years, regardless of whose policies were in place. June was horrible from 2008 through 2011 and finally went positive in 2011. The chart suggests that July should also have growth below ideal projection levels of 125K. Not because of economic uncertainty, but because we've lost jobs in July every year except for 2004, 2005, and 2011.

I'm all for exploring the factors that contribute to or inhibit job growth but I really wish we'd learn some basic statistics before drawing such certain conclusions.

Our Divided Political Heart by E.J. Dionne

My summer reading list contains a lot of current events and sociopolitical analysis. I've read Fareed Zakaria's The Post-American World, and Michael Lewis' Boomerang. Next in the queue is Mann and Ornstein's It's Worse than You Think. Before long, I'll have to read Robert Draper's Ask Not What Good We Do, about the 2010 Freshmen in Congress. These books are all collections of anecdotes, talking points, detailed analysis, and prognostications about one group or another. Granted, they're all more carefully written than the average "Obama is going to destroy the world" books published by Crown or Regnery that fill the shelf at the local Barnes and Noble. But they take a position -- you can agree with it or challenge it, but you know where they stand and what they'd do.

The end of last month, my morning read of higher ed and politics led me to E.J. Dionne's column in the Washington Post. This one caught my attention immediately. While I always enjoy Dionne's writing, this was reaching chords that run long and deep. Two days later, I ran across a review for Our Divided Political Heart written by Jeff Greenfield, former ABC political commentator who I've always trusted. I ordered my copy from Amazon that day.

From the very beginning, I knew this was a different book from what I've been reading. Dionne has made an argument that draws deeply on our national identity not as we imagine it today but as it has actually been throughout our history. As such, it has more in common with Habits of the Heart or Democracy in America that with the standard "isn't politics awful" writing (including some of Dionne's early works). It is a work of political philosophy, sociological analysis, and deep moral vision. While he critiques those on the right for mis-stating pieces of American tradition, he also challenges those on the left for not appropriately drawing from those traditions to inform their positions.

Here's his essential argument from the introduction.
At the heart of this book is a view that American history is defined by an irrepressible and ongoing tension between two core values: our love of individualism and our reverence for community. These values do not simply face off against each other. There is not a party of "individualism" competing at election time against a party of "community". Rather, both of these values animate the consciousness and consciences of nearly all Americans. Both are essential to the American story and America's strength. Both interact, usually fruitfully, sometimes uncomfortably, with that other bedrock American-value, equality, whose meaning we debate in every generation. (4)

While he begins his analysis with an examination of today's Tea Party and Occupy Wall Street Movements, he uses these as jumping off points. It is possible to find similar arguments from much earlier in our country's history that sound exactly like the claims of today. Because when we get to a point of imbalance in this tenuous relationship between individualism and community (which he also rightly refers to as liberal -- in the enlightenment sense of rational individuals -- and republican -- which refers to our belief in the greater good of the republic and not the political party), our political house falls into disrepair.

He does still examine hot button political issues. He uses the Supreme Court decisions of Bush v. Gore and Citizens United which bookended the first decade of this century as an illustration of what happens when we lose the community side of the equation. But he draws fascinating parallels with the Reconstruction period, the Populist Movements of the early 20th century, the New Deal and its aftermath, the Reagan years, and George W. Bush's "compassionate conservatism." By using the work of political historians and civic philosophers, he's able to demonstrate the repetition of the same themes again and again.

It's something of a national Groundhog Day. We trot out the old arguments as if we're having them for the first time. In doing so, we remain ignorant of the important civic threads the other side is building arguments from. He calls for a fully informed understanding of issues of the Founders (who argued among themselves on the issue of balance and equality) and the carefully articulated positions of leaders like Alexander Hamilton, Henry Clay, Abraham Lincoln, and Theodore Roosevelt (there's a fabulous section summarizing a book by former New York senator Jacob Javits that uses these four as a central theme in a moderate Republican's leadership philosophy). He reminds us that from the earliest days of our nation, we struggled for the right balance between a comprehensive government (after the Articles of Confederation fell apart) and individual freedoms.

In a compelling illustration he recounts Bill Clinton's use of the penny to tell our national story:
"Take a penny from your pocket," Clinton said. "On one side, next to Lincoln's portrait is a single word: 'Liberty'. On the other side is our national motto. It says, 'E Pluribus Unum' -- 'Out of Many, One'. It does not say, 'Every man for himself'. That humble penny," he would continue, is an explicit declaration -- one you can carry around in your pocket -- that America is about both individual liberty and community obligation. These two commitments -- to protect personal freedom and to seek common ground -- are the coin of our realm, the measure of our worth." (70-71)

What we have today, Dionne argues, is a partially formed understanding of that great American tradition. When the essential balance is lost and then distorted by media, internet, and personal isolation from those we disagree with, we feel as if we've lost our way. But he suggests that the way back is not overthrow of the government, dismantling of the New Deal, or mandated rights on behalf of the disenfranchised. The way back is to acknowledge the complexity of the American idea referred to in the subtitle. It's a call not for winner take all but for us to find our common language.

My final analysis is that this is a remarkably important book. But it's not just political philosophy or civic history. On finishing, I realized that it provides the context for political debate. I could imagine a candidate for office articulating not simple talking points, but the deep traditions of individualism and community that have run throughout our nation's history. I'm an optimist, but I find myself thinking that "the American people" would actually respond to such a commitment to balance. It's not simple compromise but rather a deeper willingness to wade into the stream of American tradition and find our place afresh.

Killing the Lie about 8% Unemployment

My overall goal in this blog is to encourage people to expect their leaders to tell them the truth. If they lie, they should be held accountable at the polls. But when they repeat the lie over and over, it takes real effort to provide the rebuttal. The lie is quick and catchy. The reality is nuanced and has to be explained. But it's worth the effort.

Yesterday in Cincinnati, Mitt Romney said the following: “The president said that if we let him borrow $787 billion for a stimulus, he'd keep unemployment below 8 percent nationally. We've now gone 40 straight months with unemployment above 8 percent.” This talking point has been called out by fact-checking sites so many times, it's simply amazing that it's still there. Glenn Kessler of the Post has given it multiple pinochios, Politifact has rated it "mostly false" every time it's been reported. 

The general explanation goes like this: In January of 2009, Christina Romer (chair-designate of the council of economic advisors) wrote a report outlining why a stimulus was needed. In the report is a now infamous graph showing what would happen if there was no stimulus and what would happen if there was one. 

Critics have repeatedly jumped on the fact that the curve peaks in March 2009 (end of the first quarter) at 7.9% This, they say, is the president's promise. It sometimes gets characterized as a campaign promise, which is wrong on two levels -- first, he didn't say it and second, this report came in two months after the election.

The fact-checking folks have observed that while Romer did put this in the report, she also had the appropriate "best guess" disclaimers. As Kessler observes, the first page of text in the report (which is page 2) closes with the following paragraph:

"It should be understood that all of the estimates presented in this memo are subject to significant 

margins of error.  There is the obvious uncertainty that comes from modeling a hypothetical 

package rather than the final legislation passed by the Congress.  But, there is the more fundamental 

uncertainty that comes with any estimate of the effects of a program.  Our estimates of economic 

relationships and rules of thumb are derived from historical experience and so will not apply exactly 

in any given episode.  Furthermore, the uncertainty is surely higher than normal now because the 

current recession is unusual both in its fundamental causes and its severity."

Clearly, even with the disclaimers, Romer's report was overly glowing. And from a purely political standpoint, it's awful to have something so easily quoted lying around. 

But I'm struck with an even more intriguing critique of the Romer argument that further underscores the deception of the Romney campaign and his surrogates. Romer's projection is not simply rosy with regard to the impact of a stimulus -- its rosy in terms of No Stimulus. The very chart that critiques delight in quoting misses the top end of unemployment by 1.2% (10.2 vs. 9.0). As others have explained, the data she was using was from the middle of 2008. By early 2009, things were worse than those previous projections would suggest.

I charted the data above against the actual unemployment rate for the same period. Here's what that shows:

What's striking is that the slope on the actual unemployment rate between 2008 and 2009 was far more aggressive that previous data would suggest. How do we add that reality to Romer's disclaimers? One quick way to do this is to imagine adjusting the bottom two curves upward so that the green line follows the blue one. To do that, I just added 1% to both curves. Here's how that comes out.

Even with this adjustment, Romer's prediction is still too rosy. There are two other pieces to understanding why the unemployment rate didn't fall as fast as she expected. First, there was much of the stimulus bill that got structured as tax cuts which helped it get passed by Congress. But in that very first page of the report critics like to quote, Romer says the following:

"Tax cuts, especially temporary ones, and fiscal relief to the states are likely to create 

fewer jobs than direct increases in government purchases.  However, because there is a 

limit on how much government investment can be carried out efficiently in a short time 

frame, and because tax cuts and state relief can be implemented quickly, they are crucial 

elements of any package aimed at easing economic distress quickly."

So the stimulus wasn't as stimulative as it might have been. Here's the second piece, two bullet points down:

"More than 90 percent of the jobs created are likely to be in the private sector.  Many of 

the government jobs are likely to be professionals whose jobs are saved from state and 

local budget cuts by state fiscal relief."

As I pointed out in my post from last week, government jobs have not been held safe. We have shed them at an unprecedented pace. What happens if you put those back in? Estimates are that it lowers the unemployment rate by about 1%. Here's how Talking Points Memo summarized it.

Can you see where the bottom right side of the TPM chart ends? Right where my adjusted Romer chart would come in.

So let's review: 1) the president never promised 8% unemployment; 2) the estimate was based on incomplete data that underestimated the size of the problem (which was acknowledged at the time); 3) tax cuts aren't as stimulative as other projects; 4) loss of government workers masks other improvements.

This claim is not just technically false as the fact-checkers point out. It is demonstrably false. It should not be repeated by anyone who has a commitment to truth-telling.

An Open Letter to Turner Broadcasting President Phil Kent

Dear Mr. Kent:

I was interested to read in yesterday's Huffington Post that "CNN is considering leadership changes in wake of ratings woes".  The story reports how the current president's contract is up for renewal and implies that some major changes are called for. Allow me to make some suggestions about the direction you might consider in looking for a replacement.

1. It is essential that CNN return to its place as "the most trusted name in news". The contrast between the caliber of your news coverage during the first Gulf War and more recent years is very disappointing. What made the Gulf coverage so amazing was that you had people on the ground sharing information that couldn't be found anywhere else. Today too much of your coverage is about what people think about what might be happening and what that might mean. You really need to return to value-added reporting.

2. This is an opportunity for CNN to foreswear "gotcha" journalism. Too much of modern broadcast journalism is designed to catch someone off guard or to spark a conflict between candidates. Bernard Shaw questioning Michael Dukakis about someone raping his wife was a forerunner of what is now commonplace. Instead, it would be great to have your anchors asking candidates about their policy positions. When Senators and Congresspeople are on, they could be asked about the specifics of legislation and how they hope to see their views represented in legislation that could pass both chambers and be signed by the president (whichever parties are represented).

3. Stop using pundits all the time. Too much of the broadcast news day is spent with people filling time. The positions that are shared appear to be predictably shaped by ideology and not any data. Too many opinions are shared with more confidence that the situation calls for. And lose the retired military spokespeople. They have personal interests and too often speak without any current information. In the long run they confuse more than they help.

4. The rise of fact-checking provides an opportunity for CNN to incorporate an educational role into its work. Let Fox News and MSNBC reflect ideological views. CNN should instead take the role of clarifying claims made on the other networks. If you focus on what actual data reflects in terms of employment patterns, economic growth, issues in Europe, or struggles in states and cities, you could show that your journalistic commitments rise above talking points.

5. Scale back your reliance on technological gimmicks. Much of what you've done in terms of real-time data during elections is great. On the other hand, holographic images of the Tampa convention just look silly. Just because you can do something, doesn't mean you should. If it doesn't have added informational value, just let your anchors talk. And for goodness sake, stop with the tweet and e-mail reports. Isolated comments from random citizens does not add to the information flow. If you are to be "the most trusted name in news" it won't be because we heard form Joe Smith in Topeka. If I want to know what my neighbors think, I can ask them. But I never think they're giving me news.

6. Dedicate times of your day to human interest or entertainment news and keep those separate from the hard news reporting. The Today Show can enjoy jumping from the debt ceiling to Kim Kardashian, but a news network shouldn't do that. If there's real breaking news of national or international scope (which doesn't mean simply good helicopter footage of a local issue) you can come on at the relevant point in your reporting when you have solid information to share. Don't come on live television and speculate incessantly during a developing story.

6. Stop trying to fight the media bias fight. It has become commonplace for those who criticize the news to argue that the media is biased. Some very good press reporting recently has examined the claim and shown that bias is claimed when people don't get their personal views endorsed. What that suggests is that you will always be accused of bias. So quit worrying about it and focus on quality information. The Crossfire days were the forerunners of today's 24 hour ideology television. It's good that you moved away from that. The necessary information for an informed democracy doesn't divide by political party. Your role is to hold to reporting.

7. I recognize that you operate in a highly competitive environment and that ratings drive your economic success. So the solution for you is to go where the hole is in the marketplace. Between Fox News and MSNBC, the Huffington Post and the Daily Caller, the New York Times and the National Review, the Daily Kos and the Drudge Report, people have lots of opportunity for hearing only what they want to hear. So why watch CNN? Because it's "the most trusted name in News". It's the place where you get to see how the ideas you hear on your preferred sites test out against reality.

8. Recognize that it's hard to fill 24 hours a day. That big hold that demands attention is what feeds the fluff stories and the incessant pontificating. Do your best to develop careful stories, factually based, providing personal impact illustrations. Tell the truth and demand the same of those you interview. If your guest spins a talking point, ask the follow up question. Your anchors (especially Soledad O'Brian, Wolf Blitzer, and Anderson Cooper) have tried to do this but it too often gets played as if they have personal opinions that simply disagree with the speaker. Avoid the personal. Make use of existing fact-checking sources and let your guests know that they should expect to be challenged with they trot out their favorite previously-disputed talking point.

I end this where i started. There is today a golden opportunity for CNN to return to an earlier period of glory. It has the potential to do what no one else is doing. If it can do that, it might even reshape some of the other networks and websites. And I'd return as a viewer and gladly listen for James Earl Jones to tell me "This is CNN".

Yours,

John

"I'm altering the deal. Pray I don't alter it any further."

The quote in the title, of course, comes from The Empire Strikes Back. Lando Calrissian had made a deal with Darth Vader -- he'd allow Han Solo to be taken in exchange for protecting Princess Leia and Chewbacca. But when the event actually came, Vader ordered everyone taken into captivity. When Lando argued that they had a deal, Vader said this line. Here's a quick clip to refresh your memory.

This line has been ringing in my head since the election on Tuesday. Not only did Scott Walker survive his recall vote, but in California, San Diego and San Jose both passed citizen initiatives to reduce pensions for city workers. The Wisconsin legislature stripped public workers of collective bargaining rights last year. The citizens of San Diego and San Jose say that public workers will not have to pay up to 16% of their own salaries to support their pension plans. Comments on the Wall Street Journal's page Tuesday night were ripe with anti-union sentiment, gleeful in their victory.

There is no denying that the costs of those pension plans have risen dramatically in recent decades. This is a function of early retirement ages in demanding jobs followed by increased longevity. The first attempts to control this were done by reducing pension plans for new hires but grandfathering the other employees. But that was not sufficient to support the plans put together by previous administrations.

Michael Lewis' Boomerang examines the bursting of financial bubbles in Iceland, Ireland, Greece, and California. His last chapter includes details on the pension problems of San Jose and nearby Vallejo, both of whom have seen their police and fire departments decimated, their libraries cut back, and their roads in disrepair.

Critics will suggest that these pensions were the result of the ties between public sector unions and Democratic mayors. There is little evidence that this is a complete explanation. The more realistic explanation is that cities struggled to pay workers what they thought was a fair wage in light of their service. So they offered improved payout over the long haul to avoid layoffs and service cuts without increasing tax revenue.

Today, public sentiment has turned against those workers. They are readily vilified for being greedy. Why, people ask, should they receive more money that those working in the private sector? The first answer is that they don't. No one is arguing that we should have some kind of maximum salary allocation (ask Jamie Dimon, who seems sure of his salary in spite of a loss of over $2 BILLION at J.P. Morgan). How did we turn on police, fire, city, and education workers? (As Colbert said the other night, "suck it, people who teach our kids!") The second answer is that we did this because we recognized that the work could be dangerous (for fire and police workers, just as it was for coal miners and meatpackers) and that we needed to provide more pay due to the risk of disability (which is why NFL players make so much).

Michael Lewis quotes the San Jose mayor, who argues that cities thought that money would continue to flow -- that the internet boom in Northern California would run forever. But money dried up. People moved away. Property values dropped. And new revenue was politically unwelcome.

Those in power then did what those in power do, which is where Vader comes in. The negotiation that took place was what we call an asymmetric negotiation. Power was not evenly distributed. It's true that an agreement existed between the parties, but it was not balanced. There is nothing holding the powerful figure (Vader or the citizens of San Diego) from changing the deal. When challenged, the response is "pray we don't alter it further".

An April report from the Economic Policy Institute summarizes the impact. Since June of 2009, private sector jobs are up by a net 2.8 million jobs. In contrast, public sector jobs are DOWN by 584,000. My conservative friends worry about our government "picking winners and losers". But we have clearly done so. And this is a new trend. The EPI piece includes the following chart showing how previous recessions dealt with the public sector.

I'm not suggesting that we don't have financial issues that need attention. I'm just saying that people entered into agreements in good faith and now they're being rescinded. And the workers are left in exactly the same place as Lando Calrissian. Which wasn't quite as bad as Han Solo's predicament. But what kind of heroic move will restore the relationship that we have so badly damaged?

Lewis reports that the city of Vallejo now has 67 firefighters for a city of 120,000 people. The mayor of San Jose estimated that by 2014 the city of a million people will be served by 1,600 people. The thing that troubles me is that these remaining folks will still be blamed as greedy and self-interested.

I just pray we don't alter the deal further.

It's cloudy today (why data points are not trends)

Yesterday, we had the kind of weather you expect at the end of an academic year. The high temperature was in the upper 70s and the sun was shining. It felt like we were ready for summer.

Today is a different story. While I was looking forward to sitting on the deck and grading papers (well, that might be a little exaggerated), the fact that it's cloudy with a light breeze and temperatures in the upper 50s means that all bets are off. How disappointing. I guess summer isn't here after all.

Of course, we had some summer back in February. It was way warmer than usual. Then things got sort of back to normal. Then they got below normal. A month ago today, the high temperature here was 42 degrees. You'd think I'd be happy with 56.

With all this change in weather patterns every day, you can almost feel sorry for folks who have questions about Global Warming. How could such a shift align with what we see as such volatility on a regular basis? Maybe we're just in February but it wil cool off.

This isn't really about weather, much to my son Matt's regret. It's about our annoying tendency, made worse by media hype, to see data points in isolation. What might today's sudden drop in temperature mean for our long-term planning? Why doesn't it match what the five day forecast said just 3 days ago? (Why do the NOAA people get to keep their jobs with records like this? And why isn't the House Oversight committee holding hearings?)

Yesterday, the April jobs report came out. It was below expectations, while still being in positive territory. It's below the amount necessary to handle labor market expansion due to population (although there's other data that explains we've been seeing increased rates of retirement for since the turn of the century). It may be true that the warm weather in February (see above) artificially shifted hiring patterns earlier, but it's too soon to tell.

Related to the jobs report and election uncertainty in Europe, the Dow fell yesterday ending what all media sources called "the worst week of the year". It dropped 1.6% compared to April 27th. Oh, and in the second week of March, the Dow had it's "best week of the year" gaining 2.1%. Tuesday, the Dow hit its highest point in four years! And then the market corrected downward.

Here's another crazy example: Gas prices. Two months ago, there was great panic about how gasoline prices had risen dramatically. If you project that trend line out, we could be looking at gas prices approaching $5 per gallon by the end of the year. Last month, gas prices started to fall, dropping about 25 cents a gallon from the previous $4 mark. I was waiting for the media stories about how this could usher in the potential for $3 gas, if the trend continues. But they didn't write that story because you can't evaluate gas prices in short term patterns. There are seasonal impacts, supply issues, and the growth of the Chinese middle class that all play a role. But gas prices are back up a bit. What might that mean for Obama's reelection prospects?

One more example: We've begun paying attention to the national polling about President Obama and Governor Romney. As I posted on Facebook recently, the number of firms doing polling and the frequency of the polling means that we have new data all the time. What do these pieces of information tell us? First, as somebody finally pointed out on NPR this morning, we don't vote nationally but have 50 state elections. At that level these polls tell us nothing. Second, individual polls are skewed by the pollster, impacted by blips in the media, are subject to the specifics of the sample frame, and the nature of the question wording. But if you look at the trends, particularly at the state level, you see something much more substantial.

I've complained about 24 hour news incessantly on this blog and I will continue to do so. If you have to fill that much airtime, reflecting on how the trend lines have shifted on a seasonal basis (which happens in the stock market, at the gas pump, with hiring, and with the weather) isn't a hot story. It doesn't give pundits much to speculate about.

My point is that we have to take the long view. Minute fluctuations are meaningless unless we hype them out of proportion and then the hype impacts trends more than the fluctuations did.

I'd write more, but with a 20 degree drop in temperature since yesterday I'd better go get my parka out. If this pattern holds, the temperature could be in the TEENS by Monday!

Moving the Safety Net

On Thursday, the House of Representatives passed the budget crafted by Rep. Paul Ryan. The vote was 228-191 with 10 Republicans voting against and 0 Democrats voting in favor. There has been the predictable news coverage about breaks for the wealthy and "ending Medicaid" with a lot of talking points from both sides playing politics without really getting at the impacts.

So I set out trying to take it at face value and figure out what was going on. The full argument is summarized in this website created by the House budget committee. The picture at the right is the cover of the PDF that provides the narrative supporting the legislation.

I was particularly interested in the impact on the social safety net and found an excerpt from the full document posted by the Kaiser Family Foundation. In reading through that excerpt, I was struck by how much of the argument in the Ryan Budget is based in polemics and not in policy. I'll examine a few of these examples and then consider the larger implications.

There are two implications in these opening passages. First, the safety net is for those who have difficulty "through no fault of their own". The logical outcome is that those who have acted badly deserve their fate and the safety net is not for them. Second, non-governmental institutions will always be better suited to solve these issues. It's not just the government is inefficient (although the document contains lots of anecodotal stories about waste and abuse). It's that it fosters dependence while localities would solve problems. They just need to be freed up to do so.

Again, it's not a federal government that cares for people but citizens helping their neighbors. Furthermore, the heart of shifting medicaid and food stamps to the states allows them to better manage their costs within the needs of their local population.

Theoretically, state and local governments can use competition to manage costs and "tailor programs" that meet those unique local needs.

At the heart of this proposal (the solutions in the document are in bold) is the idea that competition will solve the cost problems at the local level. But competition in a fixed market like health care will either lead to increasing personal premiums (the claim of the "ending Medicaid" crowd) or result in reduction of services. That's what "better options" and "personal choice" lead to. It's why I got to keep my employer-provided insurance but now have a $30 co-pay. That's what competition for plans looks like when there are only a fixed number of sources at the local level.

This passage expresses some of the same concerns with regard to access to higher education. Two things to notice here. First, Pell Grants would be limited to low-income students, presumably raising out of pocket college costs for some segment of families. Second, we've again got the intrusive "truly need it" line, suggesting that there must be those taking advantage of the system. (By the way, it's always puzzling that conservatives never mean for-profit schools when they talk of those taking advantage. Must be that profit thing.)

I could take apart the rest of the document (including the parts that are about social security, defense, and tax policy). But the same basic principles would apply. Decisions are best at the local level, the federal government makes things worse, and immoral individuals are unfairly gaming the system.

This all ties in with something it took me a long time to figure out but has never been part of the analysis of the political media. For all the focus on Grover Norquist and his infamous tax pledge, the real issue to folks like him isn't cutting spending and taxes. Even his famous, "government small enough so I can drown it in the bathtub" quote isn't quite right. What he wants is for the FEDERAL government to drown.

The logic expressed in the Ryan budget and by those who argue for austerity budgets is that the Federal budget must get under control. But because they really don't like revenue based solutions, the only solution is to shift the costs to 1) state and local governments and 2) individual citizens.

What happens if we block grant Medicaid to the state of Michigan? The program can be adjusted at the state level to provide the amount of support the block grant will cover. What happens when we max out Michigan's block grant? Either 1) provisions will be cut, 2) state taxes will have to be raised because the state can't run a deficit, and/or 3) individuals will have to pay a larger share of their health care costs. The same things happen to Food Stamps, Pell Grants, and Highway funds, In fact, everything except defending the borders moves downward.

The result of all this is that the social safety net does get closer to where people live, but so do the costs. It's fascinating to think that the Tax Revolt in this country began in 1978 about property tax rates in California. The Tea Party's concern with taxation and deficits is the grandchild of that earlier revolt. So if we really shift costs downward, local taxes will go up.

Families, churches, social service agencies, and non-profits can try to pick up the slack. But it's really hard to argue that the cost burden on local entities will go down. True, the federal deficit will come under control but people will be paying higher state taxes, greater out of pocket costs, or participating in greater rates of voluntary activity on behalf of the needy down the street. It's hard to figure out how our household will be better off if we're paying higher taxes to Jackson or Lansing but not to the IRS.

As a result, the social safety net might remain in some form but it will be closer to the ground, more regionally variable, and more costly to those trying to hold it together. At some point, the webbing of the net gets so loose that it's hard to call it a net at all.

Politifact Report Card

I've written before that I'm a follower of Politifact. While they aren't perfect, they attempt to use consistent methods in evaluating the claims made by politicians. They rank statements as True, Mostly True, Half True, Mostly False, False, and Pants on Fire.

Today they came out with a new tool -- the Politifact Report Card. They summarize the ratings they have given to each of the Republican candidates plus President Obama. You can see their summary here.

Because I'm a geek, I had to take the raw data and convert it to percentages. Then, of course, I had to create pie charts. The results are very interesting. If you look at the three shades of "false" statements, the  totals are Romney (40%), Santorum (51%), Paul (36%), Gingrich (59%), and Obama (29%). While I wish the president would be far more careful, the summary says everything that is wrong with modern politics. An informed electorate requires better and we should expect it.

Thinking about Coming Apart

In my attempt to avoid the very kind of balkanized information gathering I regularly post about, I followed closely the various news stories about Charles Murray's recent book, Coming Apart: The State of White America 1960-2010. I wasn't a fan of Murray's earlier work, but this seemed to speak to issues related to the 1% and 99% in ways that were worth tracking.

Since I'd be doing some solo driving during my recent spring break, I downloaded the book from I-tunes. The main advantage to listening to the book is that you can talk back (hopefully with not too many others listening). The downsides are that you can't look up particular passages and that the narrator mispronounces certain sociological words (mores in sociology is pronounced like Morays not S'mores). But I decided it would be good for me to listen. And it was until I got really angry and had to quit about 3/4 of the way through the 12 hour audiobook.

First, Murray posits a cohesive society on the eve of JFK's assassination. He's speaking nostalgically about his own 20s (he was born in 1943) and I could forgive some rose-colored glasses (he ignores the cold war and much of the civil rights movement). Next, he explores the world of Belmont -- a town made up of the 5% of Americans he claims make up "the broad elite". These folks have wealthy lifestyles, work in knowledge/opinion/finance kinds of jobs, went to elite schools, live in McMansions surrounded by other folks with McMansions, have relatively high IQs, and have children with higher IQs (Murray's been making too much of IQ since The Bell Curve). He paints this picture by combining census data with anecdotes about conspicuous consumption. It's no different than scores of similar sociological pieces that show the sorting impacts of college, neighborhood, and occupation. His conclusion is that these opinion shapers changed the culture (beginning, for some reason, with the television show thirtysomething). Furthermore, these folks are isolated from the rest of America in terms of values, politics, and culture.

The next part of the book shifts from Belmont to Fishtown, where the poor live. He begins this section by talking about how the Founding Fathers placed importance on certain values: Family, Religion, Honesty, and Ingenuity. He then suggests that the residents of Fishtown have abandoned these critically American values. He notes that Workers Disability claims have gone way up, which is a sign that people would rather take money from others than work. He talks about the breakdown of the family and how out of wedlock births and divorce rates are higher in Fishtown than in Belmont. He sees a decline in religious attendance among his Fishtown residents. And our attempts to placate Fishtown residents with social support networks have been counterproductive (about six hours in, Murray makes clear that he operates from a libertarian framework -- might have been good to start with that).

As I said, I got mad and had to quit. But it took me until this week to figure out what made me so upset. In prepping for my stratification class, it finally came clear. Murray's argument about the rich Belmont residents is entirely correlational. These neighborhoods show such and such patterns, and residents have different lifestyles. But the argument about poor Belmont residents is entirely characterological. In other words, they lack the basic values that Americans take for granted. Their cultural expressions are different from what was originally intended.

Murray has written about what his preliminary solutions would be here. In fact, I've never seen anybody write as many editorial responses to others who commented on his book (he's been running about one every couple of weeks since the book came out).

Here's where Murray goes wrong and how it relates to our entire conversation about inequality in America. He bases his argument about the poor in terms of what's wrong with them -- the deficiencies in their values and behaviors. He bases his arguments about the rich in terms of advantages in social network opportunities. If one is to argue that Fishtown residents turned from values of honesty, family, religion, and industriousness then it makes sense to argue that the Belmont folks got that way by embracing those same values. But that's not the case. Conversely, if Belmont residents can leverage their networks toward cultural cohesion then Fishtown folks simply lack social capital.

Murray's mistake plays out again and again in our political discourse. The rich are morally pristine and should be trusted to pursue business opportunities which will benefit us all. The poor are seen as freeloading (called "takers") with critics wondering why they don't pay federal taxes (it's because they don't make enough and are disproportionate retired). This is bad sociology and worse theology. The real problem with inequality in America is not cultural first but structural first.

We just played my modified monopoly game in the Intro to Sociology class. For 30 years it has shown that the structural differences built into the game create certain cultural responses. This is true regardless of the intentions, values, or IQ scores of the players. Libertarians bemoan using the tax code to "pick winners and losers" but we seem quite comfortable picking winners and losers when it comes those who live in Belmont and Fishtown.

Brad Pitt's Upbringing and The Republican Primaries

As an unrepentant political junkie who will not consider rehab (in spite of his wife's urging), I have followed the Republican Presidential Nomination race with great interest. I'm fascinated at how the arguments are made, at the exaggerations and distortions that are expressed, at the media's obsession with video snippets as potentially meaningful, and the responses of the voters at the polling booth (which sets off the entire cycle again).

There's been lots to follow and nothing happening all at the same time. I've read descriptions of the process as Kabuki theatre or as a reality show like Survivor or American Idol. Perhaps the larger question is "why do we treat public posturing in front of a small set of non-representative audiences as if they were indicative of anything?". We get this cycle of candidates playing to the crowd (who don't even reflect the values of their own state) with the glee and near bloodlust of the Roman Coliseum. The media then treats the posturing and applause as real. (What did they talk about before these debates?)

Maybe it is wearing on me. A quick Wikipedia check reminded me that the first of these debates was held on May 5, 2011. Tomorrow night's debate in Florida will be the 18th in 256 days (that's one debate every 15 days). Actually, there was a three month lag between debates 1 and 3, so we've had 16 debates since August 11th (dropping the rate to one every 10 days!). Since the Kabuki is about how they're all better than President Obama (they've only just begun actually running against each other), we don't learn much.

Except, of course, for insights into the character of the candidates. Or more, correctly, into the impression of a character they're presenting. Erving Goffman captured this idea in his brilliant book, The Presentation of Self in Everyday Life. He argued that we try to manage the impressions other have by intentional action but that we are also giving off cues to signify who we really are. I have always argued that "authenticity" comes when the gaps between the impressions "given" and the "given off" are tiny.

It's been evident throughout the debates and varied campaign stops that the candidates (including Obama) fall far short of my ideal. (By the way, they need to realize that in this smart-phone age there is no such thing as an off-stage moment!). In case after case, you can see candidates exposed as playacting.

As usual, a convergence of events prompted this post. As I was reading about the debates from last week and pondering what we learn from this circus, I heard a rebroadcast of Fresh Air while on my way to visit folks at Calvin College this past Friday. The clip in question was from an earlier interview with Brad Pitt after making Moneyball. It was replayed as the DVD was released. Pitt describes his Southern Baptist turned Charismatic upbringing (followed by his personal movement from faith). But in response to a question about the press junkets surrounding movies, he said the following: "You know, I think one of the lovely things about where I grew up is it's considered great hubris to talk about yourself, and yet, you know, as we sit here now, it's part of the business, and I find it actually interesting and cathartic in some way."

This comment really struck home because in the previous day's debate, Romney came off as inauthentic (the frozen smile and the scary little laugh are his "given off" cues) and Santorum accused Gingrich of being grandiose, which Newt sort of accepted. (Thanks to Niki Hawthorne for sharing this post.) Gingrich's "tell" is when he drops into lecture mode (Please God, protect us college professors from using that voice!) as he did in scolding the media in both debates this week. I haven't quite figured out where Santorum fits in this, but I think you can tell that when he gets snarky and sarcastic it means that he knows he doesn't really believe what he's saying. Of course Ron Paul doesn't have these problems. He is what he appears to be and has been remarkably consistent. It's just that those ideas are so screwy (but consistent) that you can't take him seriously. But at least he's not inauthentic.

As I've reflected on this, I realize that Brad Pitt's folks gave him the wrong message. It's not hubris to talk about yourself. It's hubris if you exaggerate who you are or make something more of yourself than you should. It's interesting to me that the definition linked above mentions "loss of contact with reality". Hubris comes when your pretense becomes so common that everybody knows you're distorting the image. (BTW, this is what's wrong with Tebow testifying after every game -- it's authentic to claim that you love the game of football. God gets that.)

When you made strange faces as children, you were told to be careful or you'll get stuck that way. In today's video age, it may be impossible to reform yourself. You can't really say, "oh, that? I was just playacting in order to win." Newt, Mitt, and Rick, you might find yourself stuck that way. And that will not just make you a bad leader, it will damage your soul. 

As Frederick Buechner writes: "Self-love or pride is a sin when, instead of leading you to share with others the self you love, it leads you to keep yourself in perpetual safe-deposit. You not only don't accrue any interest that way, but become less and less interesting every day."