Ross Douthat Makes Some Good Points (and one bad one)

May 19th, 2014 at 6:44 pm

…in his pushback to my Upshot piece.

He writes: “I don’t think even Bernstein believes that it’s actually impossible to improve the situation of the poor without directly raising taxes on the rich.”

True!  And I think the ideas he suggests are good ones.  I can’t speak to the anti-poverty magnitude of “urban upzoning” and I’m not sure it’s cheap either—increasing housing density in existing neighborhoods may call for expanding public utilities and services, including transportation (though perhaps you’d be reducing them elsewhere).  And while I point out the limits of what I call “the behaviorists” here, there are some low-cost anti-poverty elasticities in that bin that could be further tapped for sure.  And “yes” to decriminalization of nonviolent offenses.

Ross next agrees we could pay for an expanded EITC, something I (and many others) recommend, by “cutting or capping existing tax subsidies.”  Now we’re totally on the same page.  We need to raise revenues, not necessarily rates (I cite only effective, or average, tax rates in the piece—Ross is talking about marginal rates).  I will only say that from where I’ve sat in the middle of the DC tax debate, there are many influential people (one is named after a Muppet) who view capping the wealthy’s tax subsidies as soaking them (btw, that idea–to cap tax deductions for the wealthy at 28%–has been in every Obama budget).

His third point is a healthy skepticism about the bang-for-buck re investments in education.  True dat—it’s easy to waste resources in this space.  I cited a) quality pre-school as there’s a very solid research base behind that and b) college completion, where we may be learning new ways to do that on the cheap.

There’s one way in which Douthat misrepresents my argument.  He missed this ‘graf:

To be clear, the tax burden on all Americans, not just the wealthy, is low both in historical and international terms. We’re collecting less revenue than many other advanced economies and less than we have in the past. So it’s not just the rich that will ultimately have to pony up if we’re going to continue to fund the things we want and need in a sustainable way.

OK, clearly I’m not running for office.  And the next sentence does say: “…since most of the pretax income growth in recent years has accrued to households at the top scale, that’s an obvious place to start.”  But it’s curious how readers often miss this broader point–we can’t raise the revenues we need exclusively from the top few percent–in their zeal to play the soak-the-rich card.

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23 comments in reply to "Ross Douthat Makes Some Good Points (and one bad one)"

  1. Pinkybum says:

    “But it’s curious how readers often miss this broader point–we can’t raise the revenues we need exclusively from the top few percent–in their zeal to play the soak-the-rich card.”

    But the top 10 percent earn 50 percent of the income – so you can soak the rich to raise the revenues because that is where the money is.


    • Smith says:

      You definitely can exclusively raise all the revenues you need from just the 1%. They have nearly doubled their share of income in the last 35 years to 20%. So we knock them back to 1980 levels when they made a mere what, 10 times their share (average $700,000).

      However taxing at those levels should create conditions where those high incomes drop thus lowering the amount collected. At that point more taxes may or may not be needed to invest in currently short changed education, research and development, the environment, infrastructure. But those increases on the middle class would be moderate in comparison to marginal rates. Piketty proposed moving top rates from 40% to 80% for above the .1%’s million dollar plus club, but for $200,000 it rises from 33% to 50%.
      Again, you need the 80% and 90% to reduce excessive compensation. Also the big deal is taxing capital gains, restoring effective corporate rates, which is a big part of taxing the rich. The richer you are, the more your taxes will increase of course.
      This doesn’t mean labor issues and debt relief and the bloated financial sector and education can be ignored, but you have to free up the money before there’s hope of better distribution and outcome.


    • Nathanael says:

      What Smith said. We definitely CAN raise the revenues we need exclusively from the top few percent

      Now, once we’ve taken their money away, we’ll have a more equal society. Then we might have to tax everyone else.

      But RIGHT NOW, in the economy which we have now, the top 5% have all the money, and we can raise all the money we need by taxing them. Period.


  2. Robert buttons says:

    Jared,
    Show me the data!!

    I keep hearing about the mounds of evidence proving the value of preschool, but the biggest studies show zero(headstart study) or near-zero(Chicago CPC study) long term gains.


    • Smith says:

      That’s not what I hear, and I’ve worked in the field. My understanding is the results show up as the more important life outcome gains vs. academic performance on standardized tests. And even the drop in long term gains on tests could be the result of conditions experienced after head start that effectively block the gains. I’ll google to check this right now with these keywords
      head start no gains but better life outcomes
      http://www.newrepublic.com/article/117125/head-start-how-program-works-how-it-could-be-even-better
      So the new republic though left leaning provides links, and also explores ways to improve the program, but still maybe get another source or critique, but there is the short answer to your concern.


      • Robert buttons says:

        Go check the long term outcomes for the Chicago CPC study. After spending $18,000 per child for preschool, the study group had an avg salary of about $11,000 at 25yr follow up.


        • Smith says:

          The literature I’m seeing says it is effective and also that a cost benefit analysis reflects positively on the program:
          25 year follow-up
          http://leadershiplinc.illinoisstate.edu/researchcompendium/documents/SchoolbasedEarlyChildhoodReynolds.pdf
          21 year follow-up
          http://www.waisman.wisc.edu/cls/cbaexecsum4.html
          Other programs:
          http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTCY/EXTECD/0,,contentMDK:20259317~menuPK:528561~pagePK:148956~piPK:216618~theSitePK:344939,00.html

          Don’t know why it costs $18,000 per child, even in Chicago. Don’t know why there are not studies addressed to that and these other questions regarding primary and secondary education:
          How do New York and New Jersey spend over $16,000/student?
          http://nces.ed.gov/edfin/graph_topic.asp?INDEX=2
          Why does our country spend more?
          http://nces.ed.gov/programs/coe/indicator_cmd.asp
          Here is the U.S. average figures:
          http://nces.ed.gov/FastFacts/display.asp?id=66
          Why then does it cost only $8,000/student not including room and board and transportation for college (though I’d add college should be free, like high school, but we’re talking cost, not how they are financed)
          https://www.suny.edu/smarttrack/tuition-and-fees/

          Finally, if you’re expecting $11,000/year to be surprisingly low, it turns out the bottom 20% of all households average between $10,000 to $15,000
          Here is the graph showing that, the first four bars add up to 19.2% and the average is over $10,000 but under $15,000
          The really interesting part is looking at number of wage earners in that bottom fifth:
          http://en.wikipedia.org/wiki/Household_income_in_the_United_States#Household_income
          http://en.wikipedia.org/wiki/File:Distribution_of_Annual_Household_Income_in_the_United_States_2012.png


          • Robert Buttons says:

            Instead of taking Reynold’s statistical gymnastics for granted (These are HIS early childhood programs after all), look at the data for yourself:
            (Reynolds, et al. Science(2011) 333:360-364)
            -CPC program was for kids 3-9Y. Preschool costs: $9233 per child year (Some attended two years)
            -Follow up obtained at age 28
            -Avg income at follow up: $11,582. Half were on food stamps. Half had arrest records. 19% had felony arrest records. Only 8.4% had a 2yr or 4yr college degree.

            Further, Reynolds showed preschool only benefited the absolutely lowest SES group. Figure 1 shows, despite a small benefit to the most deprived children, there was ZERO statistically significant benefit to children of mothers who had at least a HS diploma, shattering the myth of UNIVERSAL preschool. Interestingly, the headstart study showed positive results (ECLS-K) for reading on the most at risk 3 year olds (high household risk group) and NEGATIVE effects for the low and moderate risk groups, further reinforcing the findings of Reynolds and shattering the myth of UNIVERSAL benefit.


          • Smith says:

            The Reynolds report shows some benefits:

            Felony arrests drop from 24.6% 19.3% (25% reduction)
            Income rises from $10,796 $11,582 (8% increase)
            Food Stamp usage rises from 44% to 49% (10% increase)
            Arrest for any offense drops from 54% to 48% (10% decrease)
            For children of mothers who hadn’t completed high school, the drop in felony arrests was more dramatic, the graph indicating it being cut nearly in half from 26% to 13%, the same rate as those of mothers who did complete high school.

            http://leadershiplinc.illinoisstate.edu/researchcompendium/documents/SchoolbasedEarlyChildhoodReynolds.pdf

            Is it a surprise that early childhood intervention helps the lowest socioeconomic status group the most? Probably not. Also before dropping inclusion of children seemingly not benefiting, you’d have to consider the overall effect on the program. Is the mixing of groups important to the observed effects? What factor prevent them from benefiting?

            Negative effects on low and moderate risk groups can be used as an argument for the universal nature of preschool proposals. Only by including everyone will their be motivation to improve implementation where even less disadvantaged participants gain. That is a fundamental feature of the U.S. universal public school system.

            A survey of recent debate:
            http://www.nationaljournal.com/next-america/early-childhood/how-everything-we-know-about-early-childhood-has-changed-since-head-start-was-founded-20140418

            http://en.wikipedia.org/wiki/Household_income_in_the_United_States#Household_income
            The low numbers in the fifth column, Mean Number of Earners, implies a central role for poverty caused by lack of work or inability to work vs. low wages. How much of that is due to unavailable affordable childcare or preschool can not be determined from the chart. The point is there is only 1/2 a wager earner for 2 people earning combined $15,000 to $20,000/year. That’s either 1 person working 6 months, or 2 people working 3 months. There’s also 0 people working if one is collecting Social Security.


          • Smith says:

            There is a “their” where a “there” should be in last comment.


          • Robert Buttons says:

            Excluding your, and Reynold’s, tortured data (“25% reduction in felony arrests; these preschool programs must be creating productive citizens!”), what have we learned:

            1. Universal preschool is not helpful and may well be harmful.
            2. For select groups (the very, very bottom) there may be minimal benefit (elevating the kids off the very bottom rung)
            3. Preschool is expensive, 50% more expensive than educating the average high schooler in Utah.


          • Smith says:

            1. Studies of universal preschool don’t offer evidence of benefits to low and mid risk groups. Common sense says an environment where 50% will have arrest records and average income of $11,000, may be influencing the studies.
            2. The high risk groups (mothers not finishing high school) gain significant benefits
            3. The costs seem large, as they do for primary and secondary education as well.

            Utah is an outlier as seen by the link below, which was noted in previous comment:
            http://nces.ed.gov/edfin/graph_topic.asp?INDEX=2
            I like the aesthetics of the chart.
            The comment above which had that link:
            http://jaredbernsteinblog.com/ross-douthat-makes-some-good-points-and-one-bad-one/#comment-2146346

            I agree publicly offered preschool needs improvement to justify costs, and the data is weak. Again, a big deal ignored is allowing a single parent to hold a job with a modest salary, which only preschool and primary school lasting a whole day and year round programs could accomplish. The 3:00pm to 5:00 pm, July and August gaps for young children needed supervised care are bigger than the preschool gap.


  3. Smith says:

    To comment on the post (vs replying to other comments)
    EITC is a wage subsidy lowering everyone’s wage scale, hurts fair wage employers, and is a poor substitute for better wages, jobs and training for unskilled labor, higher minimums, and free child care.
    We need to raise rates, and revenues, rates need to be high enough to bring down compensation. That will in itself lower inequality and give empowered labor something left over to bargain for. Giving up on Piketty rates would be a huge mistake and a surrender to marginally better conditions. Always keep in mind it’s merely restoring Eisenhower rates.
    Education costs need to be contained (New York spends $16,000 per pupil?) and college needs to be free (it’s the new high school, parents shouldn’t decide if their child can afford it)


    • Fred Donaldson says:

      Total agreement on EITC. It is a business subsidy and if people earned a decent wage, it wouldn’t be needed. Instead of pushing for fair wages, politicians supplement poor wages with tax money from the middle class. Anyone working should be part of the capitalist system, not the welfare state.

      Raising worker wages brings Americans into the middle class. EITC makes them dependent not only on employers, but on politicians, as well. It is no secret that the GOP loves EITC along with “centrist” Dems, both caterers to the business powers.


  4. jeff says:

    I could go to the national university in Mexico City for basically free. I can’t do that for any state university in the U.S. And the UNAM is a heck of a lot better than most US state universities.

    This has nothing to do with money and everything to do with political apathy and the wealthy not caring at all. Every deserving student could attend a state university for free in this country for about 60 billion dollars.

    It’s just so pathetic what Washington moans and groans about wen it comes to money.


    • Robert Buttons says:

      In Europe, you can go to college for next to nothing, but high stakes tests prevent all but the most talented from attending top universities. Screw up on the test and you go to trade school.


  5. jeff says:

    Same with Mc Gill . I know Americans who go to Mc Gill because it’s cheaper than US elite public schools, even paying the international rate. How pathetic is that ?


  6. Michael says:

    I particularly liked how Mr. Douthat tried to pivot away from saying that taxing the rich is a bad idea because

    …it indicates, if nothing else, that even if soaking the rich and investing the money in the public sector can help the poor, it doesn’t necessarily do so, and you can’t just make public policy on the assumption that it will.

    That is such a blazing piece of logic. Even if we tax the rich (which is probably a good thing,) the money might not be used productively because of bureaucratic red-tape so we shouldn’t try to tax the rich in the first place.

    Seriously?

    And how exactly do we get bureaucratic red tape in the first place: economic/financial and/or political obstructionism. So we shouldn’t trust the government (influenced by big money) taking in the income because it will be mismanaged, except the very interest involved in making it difficult are often the same people always complaining about high tax rates on the wealthy. It’s like joining the fire department just so you can set fires and prove how bad public fire safety institutions are.

    Then again, when you’ve already made up your mind about what argument you want to believe, the ‘facts’ always have a way of proving your point, even if an objective view of them doesn’t actually make sense.

    Furthermore, Mr. Douthat uses the phrase ‘soak the rich,’ as if someone in the 1% is going to suffer hardship if he is taxed at 30% or higher. Does Mr. Douthat need to sponsor Warren Buffet’s book career, since he once said “I am tempted, because I’ve been calling people with a billion dollars or more, to think that if they can’t sign up for 50 percent, maybe I should write a book on how to get by on $500 million. Because apparently there’s a lot of people that don’t really know how to do it.”

    And let’s talk about this whole ‘soaking’ metaphor. Let’s talk about someone with 250 million dollar net worth being metaphorically taxed at 50% so that they are ONLY left with 125 million. Oh the pain…I hear a thousand fast-food workers silently sobbing because of the horror, a thousand wait-staff trying to hold back the tears as they try to trudge through another hit-or-miss work-day, when $100 in tips is probably considered a good day. Let’s talk about the relative tax rate for someone making $24,000 a year (if they are lucky) vs the tax rate of someone who has millions or billions of dollars.

    Furthermore, let’s talk about the % that person making $24k per year spends (if they are a parent) on sending their kids to school. And let’s talk about how the financial manipulation at the local and state level has basically created a two-tier school system where poorer families are increasingly priced out of sending their children to adequate schools and yet still pay an exorbitant amount of their income towards education.

    Letting the rich keep more of their money is how we got into this situation in the first place.


  7. Fred Donaldson says:

    Most economists and pundits did not grow up in the ghetto, so their concept of why people are poor is usually misguided and sometimes, dangerous to progress.

    Children are not born with a desire to be poor. However, American cities for decades have focused their expenditures on downtown business development, sports stadiums for those who could afford tickets, and towers of steel and stone to house the poor, who could not find jobs.

    Banks red-lined huge swaths of poor neighborhoods and no mortgages were granted. Instead, cash investors bought up properties at bargain rates and rented them at very high rates to people with nowhere else to go. Even with husbands and wives both working, rents were 30% to 50% of take home. Most had no cars, or junkers, and music lessons, private schools and a decent life were just dreams.

    City services – street repairs, public transit, libraries, police, fire – were cut in the poor neighborhoods in favor of the “better” places. Banks decided that they didn’t belong in “those” neighborhoods and moved, opening payday joints in their wake. Realtors rushed in to churn sales, and hospitals closed, schools were not repaired, and the people grew more poor and feeling hopeless.

    Being poor is not a rung on the ladder to prosperity. Being poor is being under the heel of a society that offers pity, when you need a good job, and analysis, when you know the problem is local government corruption and national indifference unless it’s time to vote.


  8. readerOfTeaLeaves says:

    I sometimes wonder whether the Douthats, Mankiw’s, and Feldsteins of the punditry ever take the time to look at social systems. Given their economic assumptions, I suspect that they would advocate a beehive in which it is okay for the Queen Bee to get 50% of the hive’s food, while the worker bees get increasingly less, week by week… At some point – simply in metabolic terms – the worker bees and drones won’t have the energy to create the waxy cells, search for the pollen, and make enough honey for the hive to survive.

    I suspect that’s about where we are today, in terms of outdated, creaking infrastructure: like a hive that is being starved because a tiny few have a wildly asymmetric share of the resources. It is a symptom of a social system in dysfunction.

    Even bees have enough social sense to ensure that every member of the hive gets ‘enough’ to do their job. The Queen Bee, out of simple self-interest, takes enough to keep her going, but in no sense does she take a disproportionate share — and if she did, the hive would die. And if the hive dies, she dies.

    I realize that humans are more complex than bees, but fundamentally we are both social species. In any social species, extreme disparities damage every member – not only those at the bottom of the heap.

    IOW, I’ve seen a bee or two with more social aptitude than a number of pundits appear to possess. It is frustrating and tragic to see the blindness of people who seem oblivious of the fact that their own well-being is deeply dependent upon the quality of the culture in which they live. And the quality of the culture is fundamentally shaped by the distribution of wealth within the social group.

    Douthat’s point about the fact that one can’t simply ‘throw money’ at problems is sound. However, that is no reason to dodge the fundamental issue: our economic system today is becoming more and more asymmetric. That affects the well-being and safety of every member.


  9. jo6pac says:

    Yes tax the rich and while at it make corp. Amerika pay their share also. Then slice in half dod budget and close bases around the world. Then close the surveillance state and I’m sure there would be enough money for free education and free health care in Amerika. The other funds could be spent on the rebuilding of Amerika before us old trades people are dead. Then stop TTP and GATT trade deals these are only another way for the elite to enslave Main Street. This isn’t going to happen in my life time and I feel bad for the young on the planet.


  10. billy gorson says:

    when we bailed out the banks,if the gov’t tells the banks to credit the troubled mortgagees with the cash they were gifted…then the massive real estate crash is more gentle…it is a simple pass thru…a bookkeeping entry that saves homes and banks……..please discuss and share…


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