Links to start the week: “That horse ain’t real,” Reeves v. Samuelson, Why R’s don’t understand insurance.

July 17th, 2017 at 8:53 am

First, an excellent video-metaphor for the R’s health-care replacement ideas thus far. I particularly like the way the real horse shakes its head in a kinda equine WTF moment after it checks out the other “horse.”

Second, given that Ben S and I featured Richard Reeves talking about his new book “Dream Hoarders” in our last episode of the On the Economy podcast, I wanted to take on a few points Robert Samuelson makes today in his critique of Reeves thesis. While Bob makes some important points, I think he gets some stuff wrong.

In response to Reeves’ fundamental point that relative mobility in the US income distribution is too sticky–too many kids end up in adulthood near where they start–Bob S points out, and he’s right, that there is, in fact, some degree of downward mobility (“roughly two-thirds dropped out of the top fifth”).

But check out this figure (not the one from the book but one to which I can link with very similar results) which shows that close to two-thirds of kids who start out in the top fifth end up in the top 40% (39%+23%=62%). And even more importantly, look how relative downward mobility declines–gets stickier–as you go up the income scale. Or, inversely, how too many poor kids are stuck at the bottom.

Bob asks the fair question, “how many is too many?” That is, what, ideally, should that mobility matrix look like? No one expects 20%’s across the figure (meaning total upward and downward mobility across the quintiles–where you’re born has no impact of where you end up) but I suspect Reeves has an answer to this query, which I’d like to hear, and will post here.

The second thing I think Bob gets wrong is his intimation that Reeves’ work contradicts this goal: “As a society, we should try not to restrict the upper middle class, but to expand it.” Since we’re talking relative mobility here, you can’t really expand the upper class (it will always be 20%) but what I think Bob is getting at is we want people to make good choices that improve or maintain the economic life chances of themselves and their kids.

That’s surely what Richard wants too, but he believes, and I agree, that there’s far too little by way of opportunity for poor and low-income kids to climb that ladder (which again, given relativity conditions, means some richies have to climb down to make room for others to climb up). And this is a policy problem that Richard sees clearly, as we discuss in the podcast. The tax code, for example, is fraught with upside-down subsidies that serve as the glue behind the stickiness in the income distribution (see figure), a fact that I suspect both Richard and Bob would agree is problematic.

Third, see my new WaPo piece about how today’s conservatives clearly and willfully do not understand the critical role of government as an insurer, in no small part because they’re paid not to understand it.

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2 comments in reply to "Links to start the week: “That horse ain’t real,” Reeves v. Samuelson, Why R’s don’t understand insurance."

  1. Edward Measure says:

    Can we just get rid of this ridiculous idea that the top 20% is “the upper class?” The 80th percentile income is less that 1/4 that of the 99th percentile, which in turn is a small fraction of the income of the truly rich. Most people in the top 20% are middle class – period. The 90th percentile might reasonably be considered upper middle class.

  2. Smith says:

    Every second you waste on mobility are precious seconds lost to solving real problems. Republicans, conservatives, and rich people would like nothing better than to have you focus on mobility. Mobility, shmobility. Flush it down the toilet, banish it to the hinterlands, leave it to the dustbin of history.

    The real problem is income distribution, poverty, and inequality. The real problem is lack of good and meaningful jobs for everyone. Mobility as you discuss it is by definition a zero sum game. Distribution is not in the sense that less inequality for some means less inequality for all. Admittedly distribution is zero sum in the sense that income previously channeled to the rich would go to lower incomes. But it should occur through means other than redistribution. For example, tax the rich and spend on child care, universal child care, not credits for child care, and only for the poor.

    Greg Mankiw and ilk would be happy to see equal opportunity for all. Equal opportunity to fall into poverty is stupid. Is that what you want? Of course not. So why waste time on a problem that doesn’t address the fundamental fault with society? No one should be consigned to a life of poverty, to a job that doesn’t pay adequate wages, to lack of good affordable housing. Everyone is entitled to a good educations, healthcare, and a safe neighborhood in which to live. Fix that stuff first. The main problem isn’t mobility. The main problem is all the gains are being grabbed by the top 10 percent. If only 10 percent prosper, mobility doesn’t help 90 percent anyway.

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