What is progress?

I’m a political newb, but even I can see why progressives would concern themselves with “stagnating” middle class wages rather than poverty (e.g. here). Poor folks don’t vote, but if you can convince the middle class (which is like everybody if you ask ‘em) they’re getting screwed and you’ll fix it, then you’ll get elected.

The thing is, you’re already elected, progressives!

And if you’re looking for more electoral advice from a political naif: everybody cares about poverty. Nobody likes to see people suffer. If you want to broaden your political base even further, tackle poverty.

I recently learned of a group of people called the “undeserving poor”. These people, apparently, don’t deserve to not be poor. You don’t want to associate your anti-poverty rhetoric with them, of course. What you do then, is talk about how the current social safety net actually encourages people not to work!

In fact, progressives, if you want to have the greatest chance of helping people — you know, to make progress— you might consider non-state-based anti-poverty programs. Half of folks think the government can’t do anything about poverty anyway. You come up with a way to help poor people that doesn’t involve the government and you’ll win a lot of those folks over to your camp. An idea I haven’t heard a good argument against is to replace the current welfare state (including tax deductions and credits and the minimum wage) with a basic income guarantee or the EITC on steroids.

In the end, its about making progress, right?

14 Responses to “What is progress?”

  • Gavin says:

    So we should promote 共生?

  • sraffa says:

    Obama is a progressive? It would be nice, but the policy so far has been pretty moderate. No torture prosecutions, praising war at his Nobel prize speech, still no movement on gays in the military. I guess it depends on your definition of progressive, butt Obama so far doesn’t pass mine.

    Poverty is a losing electoral strategy, which is why you rarely see it. Since the Great Society, what major anti-poverty programs or reforms has the US seen? The EITC and the 1990s welfare reform are the only things I can think of. Most voters aren’t poor like you said.

    How is the EITC not a state-based poverty program? It’s still state money. I would bet that people prefer transfers framed as tax relief like the EITC than things like TANF that is framed as government spending, but it’s still the state’s money. Did you mean state as opposed to federal, or non-state anti-poverty group like religious charities?

    The EITC is good, but it only covers those that work and it creates high implicit marginal tax rates after it gets phased out (like the Mankiw blog post said). Basic income guarantee sufficient to raise everyone over the poverty line is better.

    The basic income guarantee is a good idea, If you count poverty as covering basic needs, then the basic income guarantee should be enough for food, medical care, housing, and other basic needs. I’ll support a basic income guarantee that eliminates poverty, and I’m willing to eliminate a lot of our welfare state (medicaid, medicare, much of social security) given the basic income guarantee. To get back to your main point, there are a lot o progressives (non-politicians) that support a basic income.

  • Doc Merlin says:

    Basic income guarantee, isn’t that roughly what welfare USED to be (more or less) before it was reformed by the ’94 republicans and Clinton. If I remember correctly, replacing it was hugely popular.

  • pushmedia1 says:

    Doc, welfare was means tested so there were nasty disincentive effects.

  • sraffa says:

    push is right, they’re not the same.

    Also, UI wouldn’t really be needed with a sufficient basic income guarantee, forgot to mention that.

  • pushmedia1 says:

    I meant to respond to this: “How is the EITC not a state-based poverty program?”

    I think a lot of small-state (as in government) types can get behind the idea of a minimalist state that basically takes tax revenues and just cuts checks to everyone (but don’t call it redistribution!). Especially if the idea was packaged with elimination of UI, welfare, SS and so on. I’m not sure that the welfare reforms actually reduced spending on welfare, but I do know small government types liked it. Also, doesn’t the popularity of welfare reforms argue against your claim that poverty policy is an electoral loser?

  • pushmedia1 says:

    One test of this is to see if Bruce Bartlett supports a minimum income guarantee… I haven’t started it yet, but I think his new book is all about the revenue side (I think he supports a VAT).

  • sraffa says:

    push- perhaps, though Friedman and you are the only ones that come to mind. The welfare reform was popular because it was a cut of welfare, which s popular. I should be more specific: a more generous poverty policy is an electoral loser. Cuts can be popular, though this sort of speaks against the idea that voters really want to end poverty. The phrase “what voters wants” is not very well defined though, I’ll admit.

    I would be interested too to see what Bruce Bartlett’s take is, but I think you’re right that the book is mostly revenue side. According to the wikipedia page on it, Hayek and Friedman supported a basic income. Friedman makes sense, as this would be part of a negative income tax.

  • sraffa says:

    I think the discussion on a basic income guarantee is productive and can pridge the political spectrum, but is the right ready to pay the high marginal tax rates that something like a basic income guarantee would require?

    For example, take a BIG that would be $10,000 per adult and $5,000 per child. There are about 230 million adults and 80 million kids, so that makes 2.7 trillion dollars. GDP is about 14.2 trillion, so that’s 19% of GDP. The US Federal government collects about 18% of revenue *total* in a given year, though states and localities collect some taxes as well. Let’s hypothesize and say that we eliminate all non-defense spending (remember, there’s still infrastrucuture, research, interest on the debt, and other non-social spending components, so this is a very conservative estimate). Defense spending is about 5% of GDP, and let’s say state and local taxes of 6%.

    We’re already at 30% of GDP (19+5+6). Even with a relatively efficient tax like a VAT or a simple income tax with no exemptions or deductions and assuming a flat tax, that would require marginal tax rates of at least 30%. Now those are lower marginal rates than the rich pay, or that “welfare trapped” individuals may pay, but for a lot of the middle class that a big increase in marginal rates. For me, the efficiency gains from a basic income is definitely worth the high marginal tax rates (which I think are not as damaging as many economists say), but it’s something to consider. Plus imagine the opposition ads about 30% tax rates on working people….

  • pushmedia1 says:

    I think those benefits are a bit high. To keep a family of four out of poverty you’d only need about $7-8k per adult and $3-4k per kid. And assuming we don’t have to fund everyone completely out of poverty, even that is too high.

    In any case, while I think your setup is how the politics would work (if they went wrong), I think your economics are wrong. The PV of all funded and unfunded entitlements and welfare programs is much greater than what our current cash flows are… It could be on net, even with your high benefits, we come out even.

    Also, consider we’d tax these benefits.

    I can’t find it now, but I read a paper that simulated the effects of several BIG type plans. Several generous plans were able to be funded by eliminating current programs. These simulations didn’t include estimates of the incentive effects (any idea how big these might be?). It was in some special issue of some obscure journal that I can’t remember right now. BTW, the journal was scary for someone like me to read… Socialists and communists were coming out of the woodworks. :-)

  • sraffa says:

    I had a feeling you would think the benefits are too high :)

    1) Even with 7k adults and 3k kids, you’re still at 13% of GDP. State and local spending is actually more like

    2) Does that include health coverage or not? Because that makes a big difference. This number is rough, but one back-of-the envelope estimate is that health care costs the median american household 15k a year. The low end of the basic income is 20k for a family of four. This matters if you want to eliminate medicare and medicaid.

    http://economix.blogs.nytimes.com/2009/07/21/how-much-does-health-care-cost-you/

    3) Fine to consider taxing the benefits, but then how much is the BIG after-tax?

    4) I don’t totally understand what you mean about the economics being wrong. Do you mean that the BIG is essential to cap growth in entitlement obligations?

    If, so a couple points. The biggest problem with entitlements is medical. The social security shortfalls are overhyped: reasonable increases in taxes or benefit cuts can resolve it. Medicare and medicaid are much much harder to solve.

    Also, increases in medical costs are almost the same between public health insurance and private health insurance. That means that even in you eliminate medicare and medicaid today, the costs of medical care to the average american will still be growing. Instead of individuals paying taxes to the government for extremely expensive health care, employers will take the cost of extremely high medical care out of wages. Many seem to think that the latter is much better than the former, but medical care is a budget buster no matter whose budget has to deal with it. So unless the BIG is tied somewhat to the cost of medical care, the stipend is going to cover less and less medical coverage.

    I’d like to see a simulation of a BIG plan, I couldn’t find any with a quick google scholar search either. The incentive effects could be large, which is one major critique of the program, but it probably depends a lot of the size of transfers, the type of tax system, etc.

  • pushmedia1 says:

    I hesitated critiquing the size, because I don’t think its that important. I wasn’t very articulate on my actual critique.

    Take all current promised benefits and take their present value. These promises can’t be paid for by current tax levels. So, I don’t think its right to think of “tax increases” from a BIG as tax increases. Someone would have to do the math, but in any case, this is why your analysis was misleading.

    BTW, I’m using the poverty thresholds. So if the Census considers health care, so am I (isn’t it in the CPI?). Also, the point of the BIG is for the government to get out of the business of buying things for people so I wouldn’t want to treat health care expenditures different.

  • pushmedia1 says:

    I think chapter 8 of this book was what I was thinking of… Table 5 makes me think this could be an electoral winner.

  • sraffa says:

    push- I think I understand better now what you meant. But I wasn’t looking at tax increases to pay for future entitlements, just that to fund current lump-sum benefits, you need to increase marginal tax rates. Looking at the chapter 8, it seems like you can replace current welfare programs and social security with a BIG and almost no tax increases, so my estimates of marginal tax rates were probably far too large. In the future though, the elderly would still be collecting the BIG, and the worker/retiree ratio is going to fall, so the effect on the fiscal position will still have to be dealt with. Basically, the BIG should be sold politically as more efficient and more egalitarian, but I don’t think it would help the long term fiscal position in and of itself.

    I actually like the proposal in Ch.8 of the book a lot and I agree that it could be an electoral winner. Beyond the equality impacts, total elimination (under 0.3%) of poverty in the elderly? (p.26) That can’t be beat.