These States
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Government Budget Cuts Programs for Elderly

I ought to get my wonk on and write about the priority of bolstering state and local government resources, since I’ve worked on this intermittently since the 80s. This crisis will blow a huge hole in state government budgets, due to increased expenses and greatly reduced revenues. When I was at the Government Accountability Office (GAO), I worked with the group that designed the Medicaid bump-up for Obama’s recovery act to aid the states. I was in the formula gang.

Federal efforts in this regard were notably inadequate. The state-local sector suffered a huge loss during the Great Recession, which meant less money for the full gamut of public services that people rely upon, and a slower national recovery from the recession. At GAO, we couldn’t tell Congress how much to spend on aid, but we could suggest the most efficient way to distribute it.

Ezra Klein once remarked that the Federal government was like a huge insurance company with an army. I don’t know if that witticism was original to him. The basic point is that, aside from deploying military force all over the world, what the Feds mainly do is mail checks to health care providers (Medicare), seniors and the disabled (Social Security), and state governments (Medicaid).

Services are delivered by state and local governments. These governments lack the borrowing and money-printing capacities of the national government. They are obliged by law and by economic reality to balance their budgets, at least approximately. They need to keep spending in line with revenues, in order to convince lenders the government’s loan obligations will be honored.

An exception to strict budget balance is the practice of capital budgeting, which allows for long-term borrowing, principally for capital projects. The ability of governments to borrow, by selling bonds, hinges on their perceived ability to meet their debt-service obligations. If their finances are a mess, they must agree to pay higher interest. Borrowing will cost more. In any event, the scope for this “off-budget” borrowing is limited.

State laws regarding finance are relevant insofar as they are forced to rank debt obligations above other spending, even for basic services like public safety, water, or sanitation. It helps if a capital project comes with a guaranteed revenue stream, such as the tolls for a bridge. Those factors are what disciplines state and local budgeting. In a downturn, state and local governments can only deal with lost revenues by cutting services.

Years ago, I organized a seminar for a bond expert who noted that although the state government of Illinois was a financial basket-case, its law protected the bonds it sold. Creditors would be paid before anyone else. In this sense, state governments rarely go bankrupt. There are a few cases of local governments going bankrupt. Detroit, the District of Columbia, and Puerto Rico are notable examples. In extreme circumstances, the local governments are effectively superseded by some kind of control board. The citizens bear the burden of a downturn, in the form of a contraction of vital public services. The creditors are usually made whole.

Two key considerations in designing aid provided according to formula are targeting and timeliness. Targeting benefits from more data, but in the case of state and local governments, some data is too infrequently available for use in combating a recession. Moreover, older data can fail to reflect changes on the ground, in the interim between when data is collected and when it is provided. Target effectiveness erodes over time.

Less data pertaining to state and local jurisdictions is available on a timely basis. You can forget anything like Gross Domestic Product at the state level. There are published numbers, but they involve some hocus-pocus.

The best option is the local unemployment rate, which is revised every month. It is widely understood (at least, people think they understand it), and it is sensitive to local business conditions. It was the key variable used to make the temporary increase in Medicaid grants sensitive to state economic conditions.

It isn’t perfect. The monthly state unemployment data is ‘noisy,’ meaning subject to error. Moreover, a pair of states could have the same unemployment rate but different levels of personal income or poverty. In principle, other data would be relevant to allocations, but other data are only available on an annual basis, and with a lag.

Below the state level, meaning counties or cities, there is even less information to go on: less reliable, and less frequent. One resort is to leave local distribution up to the states, on the grounds that state governments will have a better handle on intra-state conditions. Their considerations, of course, will also depend on the state government’s solicitude towards their local counterparts, which is not always forthcoming.

When Congress considers formula options, it is a seamy business. Often suggestions to include this or that variable are self-interested. Members want to see how the numbers come out for their own state. If they like the results, they volunteer high-minded arguments for their variation that purport to advance the national effort.

In the fight over recovery act money during the Great Recession, Senator Jay Rockefeller of West Virginia played the heroic, selfless role. Senator Max Baucus only cared about what was in it for Montana. Certain Republican Senate staff were most concerned with how to screw California and New York. There was one in particular, whose name I have forgotten, with absolutely the worst hair plugs you have ever seen. It looked like it had been done by a first grader with library paste and dog hair. It was painful to look at.

For the most recent annual data available, state and local governments spent $2,364 billion. A ten percent downturn in GDP, right now an optimistic estimate, would roughly translate to a $236 billion hole in their budgets. You could double or triple that number to simulate the impact of a 20 or 30 percent fall in GDP.

To some extent, state shortfalls will filter down to local governments. Services of all types will have to be curtailed. That means police, fire, corrections, education, sanitation, etc.

The latest Congressional action provides $150 billion to the states, clearly inadequate, and an unnecessary brake to economic recovery. At this point, it looks like the money will be distributed on a straight per-capita basis. It’s the simplest option, which may be encouraged during an emergency, since it minimizes arguments. More sophisticated designs are possible, but once politics is involved, it becomes more of a food fight. With a more enlightened Congress, better technical fixes would be more feasible.

Speaker of the House Nancy Pelosi has noted that the state aid breaks with usual practice and fails to treat the District of Columbia like a state. The aid has a floor for states with the lowest population counts. For no rational reason, the district’s allocation has been set well below that minimum, even though the district has higher population counts than several states. It’s a disgrace.

One available pipeline to increase aid, used after the previous recession, is the Medicaid program, as the National Governors Association has proposed. What’s also in store, on top of the $150 billion noted above, is an increase in Medicaid matching rates for all states. Insofar as Medicaid eligibility expands, this will be eaten up in increased medical services. The rest is effectively unrestricted fiscal assistance, not a bad thing.

An even percentage expansion of Medicaid matching rates has the advantage of being somewhat sensitive to state conditions, but the data employed to determine the rates is not current. In the Obama recovery package, the increase in the matching rate was further modified to reflect up-to-date state unemployment rates.

The advantage of distribution by formula is that it broadcasts what every state will get, which facilitates planning. It is easy to agree upon and the mechanisms are already in place, so the money can be moved quickly. The provision of unrestricted funds in the current moment is justifiable, since it affords discretion to state governments that are better situated to assess needs in their own budgets than is the U.S. Congress.

State governments are not always the most solicitous of local needs in urban areas, but we have to go to this war with the system we have. Whether the politics of this struggle will yield a better system for the future remains to be seen.

32 Poems: Republican Debate Liveblog with Allen Ginsberg

Killing Us: The Genius of Capitalism
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The title was a phrase that I believe emerged after the 2008 financial meltdown. There was also a book title about a hedge fund that effectively went belly-up but was saved by action of the Federal Reserve. The latter title was “When Genius Failed.” Failure is much in evidence now.

The most recent press conference atrocity had an interesting exchange between Trump and a reporter about the Defense Production Act. The president went on a riff about the shortcomings of nationalization. His basic example was the hypothetical of telling a company to produce ventilators, and “they have no idea what ventilator is.” This sort of stupidity is killing us, in real time.

Behind the scenes, it has been reported that the U.S. Chamber of Commerce has been lobbying against implementation of the DPA. So the Chamber is killing us too. Their members, not surprisingly, don’t want to be told what to do.

For his part, I imagine the president likes the idea of dickering with specific companies, which he imagines he is good at, trading favors. His idea is that business firms will volunteer to produce what is in short supply. In the fullness of time, they probably will. But that will be too late, and the cost will be needlessly high. Governor Andrew Cuomo of New York noted that face masks that used to cost 80 cents are now being hawked for $8.00. This is indeed the genius of capitalism.

Trump wants to apply the Department of Defense model to virus-related purchases. In that model, the “market” is reduced to a sole-source contract with soft constraints on cost overruns, guaranteed minimum returns for the company, and concealment of all details of the transaction on proprietary grounds.  

The point of nationalization, even if temporary, is to nail down specific production targets and fair prices. There are undoubtedly business firms in the U.S. that can produce anything that is in short supply. New York State seems to be doing it all by itself, if Governor Cuomo is to be believed.

When a bank fails, the government’s regulators march in after Friday close-of-business. The owners and top managers are dismissed. Shareholders and debtors are given haircuts or beheadings, depending on how bad things have gotten. Depositors are made whole, with capital infusions if necessary.

The Reconstruction Finance Corporation model is relevant here. A firm that fails to produce what is needed, when it is needed, can be propped up with loans or grants, or taken over if necessary.

What’s in question here is not planning versus “the market.” There is no market in any meaningful sense of the word for critical items. Failure to generate necessary supplies, relying on volunteers, is a plan in its own right. A very shitty plan. We can do better.

Cash Me Out
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It’s been said that there are no atheists in foxholes, and more recently, no fiscal conservatives in a recession. In the same spirit, calls for the Federal government to send money are coming from some unlikely quarters.

There are obvious reasons to proceed.

  • Sending individuals money encourages consumer spending, which supports the employment of those producing and distributing the goods and services which are purchased. This boost to spending alleviates the negative impact of workers’ reduced spending resulting from layoffs and business shut-downs;
  • The families of workers who are forced to skip paychecks would suffer losses of food, clothing, and shelter, absent cash assistance from the Federal government;
  • An economic slow-down will generate business bankruptcies and investment reductions that will detract from future economic growth and well-being.

Before consorting with strange bedfellows, it is best to get prior agreement on unorthodox practices

Remedies that have been proposed include expanding the Earned Income Tax Credit, cutting the payroll tax, and sending individuals money directly. Aid to business firms or to state and local governments is a separate can of worms, important but not discussed here.

When it comes to giving individuals cash, the two values in principal tension are the desires to stimulate the economy, and to provide relief to families in greatest difficulty. In one sense, these could be seen to be complementary, but in another, they are not.

They are complementary in the sense that families in the greatest economic distress are also the most likely to spend any Federal aid. The higher one’s income, the less this crisis is likely to detract from one’s routine spending. So what could be seen as fair also happens to yield the biggest ‘bang for the buck.’

This is a little too easy a judgment, however. The reality is that any Federal aid program will be constrained to some finite allocation of funds. We can think of reasons to forego any such limitation, but for political and economic reasons, a ceiling on aggregate aid is likely. That brings up the issue of targeting by means-testing, something that has become anathema on the left.

Means-testing may be conflated with a bias towards a small program with less cash forthcoming, in contrast to a universal program. To the contrary, a means-tested program can be huge, and a universal one can be small. Supplemental Nutrition Assistance Program (formerly, ‘food stamps’), for instance, is a large means-tested program. So is Medicaid. Total expenditure is a separate decision. There should be little doubt that the circumstances call for a new, very big, ongoing program.

Size matters, but for any given allocation of funds, means-testing can improve both the spending impact of aid during an economic downturn, and the fairness of the allocation of funds (meaning those of less means get more).

Size aside, another nostrum is that a universal program is more politically durable than a means-tested one. Typical examples are Social Security, as the universal case, and Aid to Families with Dependent Children (AFDC, or popularly, ‘welfare’) as means tested. This is not a good argument.

Here durability is not an immediate concern. The priority is to get through the crisis. That aside, Social Security in the first place is not universal. It requires somebody to have a record of labor earnings. Moreover, it is more than a universal program. It is social insurance, the political strength of which rests in great part on its contributory nature. To be eligible (or for one’s dependents to be eligible), one must have paid into the program directly, via the payroll tax. People can say, “Don’t you dare cut my Social Security; I paid for it!” And they did. Besides not quite being ‘universal,’ Social Security benefits are determined according to a progressive formula, itself a type of means-testing.

The unpopularity of AFDC rested to a great extent on its racialized and gendered connotations. It was viewed as an inducement to irresponsible behavior by poor, black women with illegitimate children.

Both Medicaid and SNAP are means-tested and have proven politically robust. Medicaid in particular grew by leaps and bounds during the presidency of Ronald Reagan. It is also true that Social Security has been under assault since the 1990s, its so-called universal status notwithstanding.

Where does this leave us as far as sending folks money goes? We should keep in mind that in isolation, no program can live up to an idealized scheme. It is always a question of tenable alternatives. We could readily acknowledge that in the current crisis, most any program is better than none. But we ought to do better than “better than nothing.”

Sending everybody (or every adult) a fixed payment, these days, often described as a Universal Basic Income (UBI) grant, is a poor allocation of resources. Those of greater means will spend relatively less of their aid. So the flat payment is inefficient. At the same time, those with lower income have greater need for aid, so a flat payment is arguably unfair as well.

My friend Dean Baker disposes of the “send everybody a check” idea, though a close reading reveals that he says the idea provides both too much and too little. Too much to those who would not spend the money, and too little to those in greater need, who would spend their assistance. In other words, it lacks the impact and efficiency of a targeted program.

Sending everybody a check appeals because it sounds simple and could readily gain political approval. Yes, but that’s because it is less progressive than alternatives. It’s easier to do because it isn’t as good. A concession to conservative politics may sometimes be necessary, but it’s still a concession.

A payroll tax cut is an even less fair or efficient allocation, since there is more relief, the higher one’s salary. Moreover, it provides nothing for those unable to work, those who have been laid off, or retirees whose working lives are over, many of whom have low or zero income.

Bumping up the Earned Income Tax Credit (EITC) brings up similar gaps as a payroll tax cut. Apparently the temporary payments supported by the Republicans resemble an EITC: the benefit starts at zero for those with no income and increases as income does over some range. Then it phases out over some higher range.

For any fixed amount of funds, there is no getting around the superiority of a negative income tax (NIT) scheme. It would provide a fixed payment that decreases as income increases. Benefits could be as high as you like.

It is true that such a scheme would not easily gain political approval, but that’s because it is better – more progressive – not because it is complex. On the complexity front, there is one extra parameter to stipulate – the rate at which the benefit declines as income increases. That’s it. Individuals would have to apply for it and report income and, if you like, dependents.

Remember, the right way to evaluate an option is in light of alternatives. Sending everybody a check sounds simple. It is not, either administratively or politically. For one thing, there is no unified list of “everybody.” And who is everybody? The incarcerated? The undocumented? Ex-offenders? The homeless?

We have existing pipelines that can be used for assistance. The IRS knows who files income tax and pays payroll tax. A problem is that many low-income persons need not file an income tax return. They are invisible to the IRS. The undocumented and the homeless are invisible to the authorities entirely. The states’ Unemployment Insurance systems stand ready to pay workers. But these sources also neglect many in greatest need, who would spend every nickel of their assistance.

Administration is not the only basis upon which to judge a proposal. Administration can be enhanced with a relatively modest expenditure of funds, compared to the size of any significant program. The IRS needs to be scaled up anyway. Moreover, all alternative schemes would have administrative costs.

The difficulty of immediately implementing an NIT scheme suggests the option of providing a fixed payment for a limited period of time, until the NIT could be stood up. The point is that a progressive distribution, as soon as it can be achieved, is both more equitable and more effective.

Every aid program is proposed and evaluated considering some total expenditure. There is a continuous back and forth between adjustments in proposals and their cost estimates. Whether anybody likes it or not, that’s just the reality of how these laws are written. There is competition for every public dollar among Members of Congress. Other worthy causes are crying out for resources.

From the standpoint of fighting the coming recession and providing the greatest possible relief to the working class, the negative income tax is the best option. Assistance should be large and quickly forthcoming, and nostrums about the public debt should be left by the wayside. The permanent well-being of tens of millions of families depends directly and significantly on the relief that is provided over the next six months.

The Story of Trumpsgiving
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“It was wonderful to find America, but it would have been more wonderful to miss it”.

– Mark Twain, The Tragedy of Pudd’nhead Wilson

The Story of Thanksgiving (updated)

MaxSpeak Summary: Among Puritan Christian fundamentalists, the Pilgrims were treacherous, murderous swine. The Pilgrims made a treaty with the indigenous people around Plymouth until they had enough forces to wipe them out. This they later did with smallpox and guns, unless they were able to sell them into slavery, all for the greater glory of God.

Wait a minute. That wasn’t quite right. Let’s try it again. Here’s how it goes.

The Puritans in England were subjected to religious persecution, lo unto death. They were not allowed to say ‘Merry Christmas.’ They needed borders, because without borders you don’t have a country. But in order to have borders, you need land. The Puritans tried to settle in the Netherlands, but the people there were all crooked; they refused to accept eminent domain, provide tax subsidies, or hand over land for free. The New World beckoned. It was a land without a people, with first-class hotels and golf courses, and they were a people without a land.

Upon settling around Plymouth, the first Puritans (Pilgrims) began to get along with the Wampanoag Nation. The Wampanoug were lovely people but subject to aggression by immigrants from other Native American groups, who sent murderers and rapists and bad hombres instead of their best. Sad! The Wampanoag provided thousands, no millions of jobs for the Puritans; their alliance became an outpost of peace and freedom in the New World.

As more Puritans arrived, they required more lebensraum. The Wampanoag, like other indigenous peoples, lacked a modern system of property rights. They did not see fit to build fences, put up street signs, or trade in mortgage-backed securities. The Puritans remedied these defects of indigenous civilization. It just happened that the Puritans ended up owning all the property, and Native Americans themselves became classified as property.

Taking umbrage at this advance of Judeo-Christian civilization, the indigenous people were reduced to terrorism. Some were sufficiently maniacal as to sacrifice their own lives in order to murder innocent settlers. There was a virtual cult of death. Underlying this irrationality was a primitive religious belief system that celebrated exterminating one’s enemies, as well as the consumption of locoweed and psychedelic mushrooms. Nobody knew how bad they were. In short, the natives hated America.

As a matter of self-defense, the Puritans were compelled to rise to the challenge of this war of civilizations; they had to get tough by exterminating both the terrorists, their families, and the societies that nurtured them. There was no middle ground; you were with them or against them. Those Native Americans that were willing to live in peace were provided with alternative living arrangements, under the protection of the new government. Sadly, they proved unequal to the rigors of modern society and eventually disappeared.

Today we celebrate Thanksgiving as a tribute to their memory, and to the invaluable assistance they unselfishly provided to the Christian conquest of America.

Now please pass the gravy, and have a Happy Thanksgiving, from all the MaxSpeak mispochah.

John Bolton, My Hero
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Many comrades have trouble getting their arms around the removal of the most depraved, reactionary president in memory. Not surprisingly, nobody in their right mind wants to launch a new Cold War against the Satanic Russians. Nevertheless, heartfelt encouragement of impeachment from the Left is fully warranted.

As the impeachment process struggles to be born, Democrats in Congress are cautiously constructing a case against the president on the narrowest grounds available – his attempt to extort the government of Ukraine to assist his 2020 re-election campaign.

It has not mattered that Donald Trump manifested his crookedness from day one, not to mention earlier. As one pundit noted, New York area elites have a lot to answer for, in failing to restrain this creature decades ago. His racist rhetoric, his vicious assault on immigrants, his indulgence of violence-prone right-wing street goons, his blatant attempts to obstruct justice, his myriad acts of garden-variety graft, none of this was enough to jump-start impeachment.

We have a lot to be bitter about. It’s turning out that the Democrats are impeaching Trump for being a bad Republican, for betraying the conservative principles of Ronald Reagan, the Bushes, and their foreign policy attack dog, John Bolton.

Nevertheless, we are where we are. Democrats have Trump dead to rights on Ukraine. A vote to impeach in the House of Representatives is likely. Democratic Speaker-of-the-House Nancy Pelosi is not known for calling votes she will lose.

On the Senate side, of course a vote to remove Trump is unlikely. However, a weekly ventilation of evidence over the next six months cannot but have a salutary political impact on public opinion and on Democratic prospects in 2020.

One dubious objection is that failure of the Senate to remove Trump would enable him to claim vindication. As we speak, the president is shoveling money to Republican incumbent senators in danger of defeat next year. The legitimacy of their votes to keep him in office is vulnerable to derision. Trump’s burgeoning record of dishonesty increasingly diminishes the veracity of claims he will make between now and next November.

Another objection is that removal would give us President Pence. Of course, if the Senate doesn’t vote to remove, there will never be a President Pence. If it does, however, the ensuing intra-Republican bloodletting would cripple the party for several electoral cycles. Resentment of Pence and any traitors by Trump’s core deplorable voters would lead to a Democratic tidal wave of victories in 2020. Odds are that an embittered, vengeful Trump would facilitate it.

In criminal proceedings, it is common for lawyers to impugn the credibility of witnesses or defendants by reference to acts outside whatever offense is in question. Sometimes this is legal and sometimes it isn’t. The relevance is that while the House Democrats are pursuing a political project – impeachment – on the narrowest of grounds, no such scruples restrain the Left.

A full-spectrum assault on the Republican Party’s depredations over the past three years, under the leadership of their poster boy, Donald Trump, facilitates impeachment in the same way aspersions on a defendant’s character reduce his or her standing in the eyes of the jury. In court this can be unfair; in politics, it is fair. It also supplies much-needed progressive context to the proceedings.

The specifics of the Ukraine affair should not be off-putting on the Left. Whatever you think of the U.S./EU aligned government of Ukraine, itself chock-full of dubious characters, there is no good reason to favor Russian aggression against it. Nor is criticism of Russia really redolent of Cold War hysteria. Russia is no longer Soviet or Red. Arguably, it has drifted quite far from any such station. It is merely one of the larger autocratic adversaries of the U.S. Foregoing any sympathy for its conflicts with less-powerful, neighboring countries is no indulgence of U.S. imperialism.

So impeachment can be fun. Others may take different sorts of satisfaction with it, but our own interests can be furthered as well. Democratic Party victories open up space for challenges to incumbents from the left. It’s easier to consider a progressive challenger when the potential Republican alternatives have little hope of benefitting. A higher margin of D votes in Congress, as well as possession of the White House, puts a greater obligation on the party establishment to produce results for the working class. Instead of being embroiled in arguments with ridiculous Trumpist loons, we can look forward to more serious debate with Democratic centrists on neoliberalism vs. democratic socialism.

The alternative to progressive engagement in the impeachment drama is progressive invisibility, just as public opinion is moving left and crying for change and leadership.

It doesn’t pay to get too far ahead of where the heads of most people are at. Back in the day, at a certain point the anti-war movement that the Left had done so much to germinate became mainstream. Some radicals became bored when everybody started agreeing with them. It was no longer cool. They moved on to more distant concerns.

That was a mistake.

M4A is not easy
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Jacobin tees off again on Elizabeth Warren’s M4A proposal. I’m afraid I don’t think much of Higgenbotham’s argument. At the start, he centers the political difficulty of M4A on the resistance of providers. That is certainly one pole of resistance. There is another that he fails to note until later in the article — the disruption entailed in changing financing from the status quo to something — Warren’s or Bernie’s — entirely different. Later in the piece he makes this explicit: “We can easily pay for Medicare for All. Let’s reject the premise that financing it is our main fight.” I call this whistling past the graveyard.

Warren’s plan is arguably crafted to resist political problems in the latter realm, and for this the author criticizes her. Another gloss on the difficult politics of finance.

Then the author echoes Bruenig’s arguments, which I addressed in my previous post.

Ultimately, for Higginbotham, the politics are magically overcome by political revolution, but while it should be clear that furious mobilization will be required to win M4A, simply invoking it doesn’t make the politics of a grand financing change go away.

Warren’s M4A, Round 1
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Just read this blast from Brother Matt, lambasting Warren’s M4A financing plan as “a disaster.” Wrong on several counts. Every count, actually.

“WrongManagement"

Matt castigates Warren’s employer tax as a “Medicare head tax,” contrasting it unfavorably with a straight payroll tax. (The ‘head tax’ in this case is a firm-specific dollar amount based on prior health insurance costs; a payroll tax is simply a rate — a.k.a. ad valorem —  applied to taxable payroll). Matt glosses over the fact that the status quo is also a head tax, also known as employer-paid health insurance, in his sense.

Warren’s tax is less disruptive than a straight employer tax. It would be lower for firms that had cheaper insurance, because of healthier workforces and/or more narrow coverage. I don’t know how it would apply to firms with no coverage.

Matt’s comparison of the head tax with a non-existent payroll tax does not follow. In public finance jargon, a head tax is the same fixed charge applied to all persons. Warren’s tax varies with prior health insurance premium costs, which are generally assumed to be borne by the worker.

That exemption of smaller firms would encourage a wave of outsourcing and vertical disintegration may be doubted. There are already incentives for this, and we are stuck with what we have, at least for the time being. Currently, employer provision of coverage is voluntary, so if their costs are not much altered under Warren’s ‘head tax,’ there is less reason to fear some wave of spin-offs. Firms are a bundle of non-market transactions for reasons that supersede the purported efficiencies of fragmented, competitive sub-markets, as someone wrote in the 1930s.

Matt gives the game away by acknowledging he might start with Warren’s plan, horrible though it may be, but transition it towards a payroll tax. At first blush I would agree this end result is preferable to a nationally-uniform charge per worker.

There are going to be plenty of reasons to take exception to Warren’s proposal, but these aren’t very good ones.

Bruenig & UBI
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“Politics is not arithmetic.”

– Álvaro Cunhal, former Secretary-General, Partido Comunista Português

My friend, the semi-notorious Matt Bruenig, responded to my bit in Jacobin on Andrew Yang and Universal Basic Income (UBI) on his Peoples Policy Institute website, so here I return the favor. (An older piece is here.)

He leads off with a claim that there is five trillion in capital income available to pay for a three trillion UBI. There are two problems with this claim, one a matter in national income accounting, the other – much the more important one – in political economy.

The five trillion (line 9 in BEA Table 1.10) of Matt’s “Net Operating Surplus” includes the incomes of proprietors, much of which is implicitly labor income. If you run a candy store you record your net income as profit, even though it’s basically a wage. In the same vein, another component, rental income, is received by Uncle Joe who rents a house as well as by the Trumps. Some corporate profits and interest are received by workers as a return on their savings.

I note in passing that Matt characterizes capital income as passive income paid to those who do not have to work for it. This is not exactly right. Besides the candy store and Uncle Joe, if I save part of my wage and receive interest, dividends, or capital gains, the latter types of income are not quite benefits for which I did not have to work. And finally, a piece of that is tax already being paid, which can’t be paid again to finance a UBI.

I would grant that the bulk of the five trillion is received by the top quintile of the population, with a disproportionate, gross amount to the top tenth of a percent.

This is quibbling in light of the larger point, which is that financing a UBI is not a matter of arithmetic, but of political economy. The Federal budget includes about $4.4 trillion in spending. Diverting one-tenth of the cost of the UBI from other uses would be daunting. Three trillion? End of story. Carving it out of capital income? Ambitious goals deserve praise. But at some point ambition can give way to hallucination. Matt acknowledges this, saying “Liquidating the capitalist class will of course be difficult to pull off politically.” Ya think? When he says “pull off,” I think of the difficulty of pulling off a thirty-foot putt or winning a tango contest.

Matt wants to distinguish between political difficulty and “what is possible as a policy matter.” Policy requires arithmetic, but it is never reducible to arithmetic. It is only made possible by struggle. Power concedes nothing, notwithstanding the technocratic elegance of any proposal.

The distraction implied by UBI chatter is underlined by the primacy of other priorities on the Left, especially Medicare For All and the Green New Deal, neither of which individuals could buy on their own with a UBI check.

The way things look now (9/4/19), I’d say we have an excellent chance in 2020 for a President Sanders or Warren, and a conceivable opportunity to flip the Senate. In that scenario, we can look forward to non-trivial expansions of health insurance coverage and the green transformation of the economy. Liquidating the capitalist class is about as likely as that dude Andrew Yang being elected president.

 

 

 

Liz Warren and the Correct Line
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Every sane American will be greatly relieved if any Democrat displaces the current occupant of the White House in 2020. However, we should be positively thrilled if that person is either Bernie Sanders or Elizabeth Warren. They have contrasting strengths and weaknesses, but their most impassioned supporters are dwelling on points of contention that are either trivial or specious. We would have a much better debate if the important differences were hashed out.

Some of Sanders’ support is founded on his radical bona fides. This interests me because I happen to come from an odd place in the distant past, as someone with a prior commitment to doctrinaire Marxism-Leninism (no Mao Tse-Tung thought, thank you very much).

I’m not the only such type who has migrated to the Democratic Socialists of America (DSA). We know a few things. We know there isn’t going to be any smashing of the capitalist state. Marx is still enlightening, “Revolutionary Marxism” is a fantasy. Been there, done that. Now we could be on the right wing of DSA. Given our background, the radical postures of some Sanders and DSA peeps can be adorable.

By now it is a commonplace that Bernie Sanders’ version of “democratic socialism” is not different from FDR’s New Deal or Lyndon Johnson’s ‘Great Society.’ Sanders evinces no interest in nationalizing the means of production, the traditional socialist touchstone. In his recent speech aimed at elaborating his own vision of democratic socialism, Sanders invoked the ‘Four Freedoms’ of FDR, and more generally the idea of economic rights. Every single one of these rights (to a job, to health care, to education, etc.), which I enthusiastically endorse, can be satisfied with an expanded welfare state. Socialism in the traditional sense is not necessary.

A much-discussed point of distinction for Elizabeth Warren is her insistence that she is a capitalist and believes in markets, rather than a socialist like Sanders. Both campaigns get more exercised about this than is warranted. Sanders would not nationalize the means of production. The government would not end up owning IBM. Nor has Sanders shown any interest in any sort of economic planning. The inescapable implication is that a Sanders economy would continue to rely on markets.

Guess what? Sanders is no more opposed to markets than Warren, and Warren is no more dedicated to them than Sanders. Their differences are purely rhetorical, or what economists call “product differentiation”—the practice of inventing cosmetic differences in otherwise identical products for the sake of marketing advantage. These days they call it “branding.”

I could note that the idea that somebody is a “capitalist” by virtue of some accumulated wealth is also a non-sequitur. Of course, both Sanders and Warren are considerably better off than the average person, but properly speaking, in Marx the term “capitalist” refers to a collective body – a class. “Capital” is not a hoard of wealth but a social relation. If you owned a thousand shares of Amazon, you would be worth nearly two million dollars, which would be glorious, but it wouldn’t give you any sort of lever over the means of production. Even Trump as a Manhattan real estate hustler had little control of that sort. From a radical standpoint, neither Sanders nor Warren are capitalists in any meaningful sense.

Sanders’ commitment to socialism, if we’re talking about current or recent times, has never quite hung together. The New York Times columnist Jamelle Bouie has proposed an interesting explanation for Sanders’ rhetoric. By relating his program to the New Deal of Franklin D. Roosevelt, Sanders is making socialism wholesome, even if it isn’t what his real hero Eugene Debs espoused a hundred years ago. After all, a genuine socialist of the 1930s, Norman Thomas, remarked that FDR carried out the socialist program “on a stretcher.” For Sanders, FDR’s economic rights are a point of departure from which the road leads, and for which the destination is open-ended. Today, this is the radical aspect of democratic socialism.

It’s possible that “socialism,” as opposed to socialism, will be the central bogeyman in Trump’s 2020 campaign. It could become an election problem for Democrats, or it might prove energizing. For the past hundred years, Republicans have described most anything proposed by Democrats as socialism. They may have exhausted its shock effect. Sanders chooses to own the term, rather than run away from it.

Political predictions are more hazardous these days than ever. But socialism as epithet should really be retired, as far as the intra-Democratic primary campaign is concerned. Colorado Governor Hickenlooper might testify to that, as the ship of his campaign sinks before leaving the harbor. By dwelling on it, more important matters are neglected. And the more contenders for the nomination invoke it as a negative, the more it will prove useful to Trump in the general election, regardless of whom the Democratic nominee may be.

One important policy difference between Sanders and Warren is foreign policy. Sanders breaks new ground in several places, such as Israel/Palestine and the international neo-fascist surge, which has to hearten any erstwhile anti-imperialist. Still, one would be at pains to discern much of a difference from, say, George McGovern in 1972.

Regarding the national security state, Sanders still hasn’t caught up with Senator Frank Church (from Idaho, of all places), circa 1975. To be clear, it’s all still a breath of fresh air, so leaden at the highest level has been the foreign policy debate for the past forty years.

Thus far, Warren has resolutely avoided any heterodoxy in foreign policy. She might be in the mainstream of the Democratic Party in this respect, but the mainstream leaves much to be desired. To her credit, Warren has recently taken steps to stand against a potential war with Iran, co-sponsoring a bill to this effect authored by, you guessed it, Sanders. At best, she’s playing catch-up.

Sanders has gotten lefty black marks voting for defense budgets. This reflects a failure to understand how the Congress operates. Sanders is a Democrat in all but name. He caucuses with Senate Democrats, he votes with them, and he is assigned leadership tasks by them. It is amusing to note that some senators, such as unlamented alumni like Claire McCaskill or Heidi Heitkamp, routinely classified as Democrats, may have voted differently than their caucus more frequently than Sanders, while the Sanders-is-not-a-Democratic wailing from Hillary dead-enders continues.

When the Democratic caucus arrives at consensus on their budget proposals, including defense, he is obliged to keep in step. The alternative is to have none of his concerns considered. Sanders abstention would have no positive impact on the outcome. There is no socialism in one senate seat.

Candidates are often rated against a menu of desirable stands. Items in the litany include Medicare for All, the Fight for 15, reparations, abolition of ICE, reproductive rights, Black Lives Matter, and the Green New Deal.

Ambitious, “aspirational” demands need not be scorned. They get the political juices flowing. Beckoning towards Utopia inspires people and stokes mobilization. Simplification helps folks to sort themselves out. It intensifies the energies of those already focused on a specific objective.

The downside of binary check-the-box tests is twofold. One is that an intense minority does not necessarily prevail politically, which can lead pragmatic politicians to consider incremental changes that appeal to a broader constituency. Of course, for some candidates, rejection of an ambitious goal can be a refuge from commitment of any sort.

Two is that when it comes to actual policymaking, a binary framework obviates any tactical considerations bearing on the practical disposition of issues – on actually getting shit done.

The health care debate encapsulates the most important difference between Sanders and Warren, one that does not necessarily credit either. There is a continuum of health care reform options from ObamaCare to Medicare For All. The likelihood is that under the best of circumstances, we will end up somewhere on that continuum, short of the maximum program. (The real socialist option in health care is actually a bridge further than the Sanders plan, something like the British National Health Service.)

There are multiple channels through which more uninsured Americans could obtain insurance, or better insurance. Subsidies under ObamaCare could be expanded. The minimum age for Medicare could be lowered. The income limits for Medicaid could be raised. A robust public option for insurance could be made available to all. Automatic enrollment in a universal Medicare plan – the Sanders option – is not the only possible remedy for the uninsured.

The Sanders approach entails a significant shift of finance from the private to the public sector, and the elimination of private health insurance. The merits of this option aside, its political prospects are undeniably uncertain. While it is possible that the total cost of health care could be reduced, what would be in prospect is a massive shift in payments from individuals and their employers to taxpayers. In the process, many will find their costs have decreased, and many others – perhaps not as many – could see increases. In advance of the implementation of any such reform, many will prefer the devil they know to the other kind. The vast majority might be persuaded to expect that they will benefit, but the vast minority could become a huge political obstacle to change.

Warren has shyed away from ‘M4A’ and failed the popular lefty litmus test, though in the first debate she endorsed it. For her ambiguity she is criticized. For instance, Tim Higginbotham in Jacobin asks why Warren has no plan for health care. In fact, along with her pro forma endorsement of M4A, Warren has related her own plan. It is threefold. First, it is to defend ObamaCare, to block Republican efforts to squeeze enrollment. Second, it is to target some narrow, attainable objectives, such as reducing prescription drug prices. And third, it is to pursue what she judges to be more politically tenable devices for expanding coverage.

There’s a lot of there there. Higginbotham pretends the only alternative to M4A is the preservation of the execrable private health insurance industry. Agitating for M4A is praiseworthy, but the notion that universal coverage cannot be obtained in a satisfactory way without the wholesale elimination of private insurance is simply false. The fact is that private insurance of different types survives in European social-democratic systems that provide universal coverage. As University of Chicago economist Harold Pollack recently wrote, the principle at stake is not “single-payer,” a mere means to an end, but the end itself of universal coverage.

The problem with the left critique of Warren is not that M4A is an unworthy objective, or that it is a political non-starter. It is that the practical, political difficulties of getting it are entirely glossed over. Sanders people envision the force of a mass uprising, non-violent of course, that will bludgeon the Congress into following orders from President Bernie.

This same distinction between Sanders and Warren affects virtually every item on the domestic agenda. It is less a disagreement on objectives than it is on process. But process does not typically enter the discussion.

The neglect of process, or more simply, the current political state of play, takes a lot of air out of the litmus tests. Of the House of Representatives’ newly triumphant Democratic majority, there are presently 27 members who have joined the “Blue Dog Coalition.” A hundred or so have declared fealty to the so-called “New Democratic Caucus” (descendants of the Bill Clinton political tendency, and not so new any longer). The Democratic edge in the House is fewer than twenty seats.

If the Democrats do well enough to retake the Senate in 2020, the incoming victors will be much like the moderates in the House. In this setting, the fate of the medley of ambitious criteria erected by the left is dubious, to say the least. It is fine to strive for consensus on ambitious goals. It is folly to insist upon them well in advance of any prospects for their achievement. One can make a case that polling supports the premise that the public favors major changes. But any radical analysis understands the barriers between public support and actual legislative accomplishment.

The implication is that the sparring over support or rejection of maximalist demands in the primaries, and not just in the Bernie vs. Liz conflict, is a waste of oxygen. The real action for a Democratic president may well turn out to be in the realm of executive actions, rather than legislation. A recent piece by Meagan Day in Jacobin acknowledges the near-term political obstacles to change and explores the executive orders that a President Sanders might issue. We could note that insofar as this is the most relevant field of play, whether any candidate gloms onto M4A or similar proposals becomes less salient.

I’m not suggesting that either Sanders or Warren are correct in their appraisal of the political prospects for reform. My point is that people are sorting themselves into opposite poles founded on vague intuitions: either very ambitious things will be possible, or that much less will be possible.

What should be undeniable at this point is that U.S. politics is in a fluid, not to say frightening, state. Shifts in public opinion and political forces, both good and bad, have come at a rapid and disruptive tempo. It’s hard to say how little or how much will be possible. As Ta-Nehisi Coates recently pointed out in his advocacy of reparations, it wasn’t that long ago that support for gay marriage was a seriously inconvenient position for a politician. Now rejection of the institution is more of a burden. Ideally, voters would become versed in the full spectrum of progressive options and be prepared to go as far as they would like to go. Arguments about the political unfolding are a premature exercise in thinly sourced speculation.

The biggest difference between Sanders and Warren is outside the realm of legislative proposals, domestic or foreign. Sanders has been self-consciously building a movement that he envisions outlasting his own time on this Earth. He indicates that this movement and the greater mobilization it would attempt to foment is the essential foundation for genuine reform. Sanders’ organization links itself to progressive struggles outside of the campaign proper.

Sanders’ enemies have a difficult time understanding the concept of an enduring, progressive movement. Why didn’t Bernie go home once he had lost the nomination? Why does he keep grandstanding? Why doesn’t he just shut up?

I do have to ask why Sanders keeps his operations separate from the only bona fide democratic socialist organization on the ground, the aforementioned Democratic Socialists of America. Sanders’ is basically a top-down operation, not unlike the defunct Nader outfits, which raises the question of its democratic credentials.

By contrast, Barack Obama built a formidable organization to power him to electoral success, but he demobilized it once his electoral victory was secured. Of course it was never democratic either. In this way he was following the usual pattern of conventional Democratic politicians – excite the electorate up until the point where it has provided the donations and votes to attain office. After that, it’s goodbye Charlie. In this sense, Warren has thus far shown no indication of being any different.

The deck of American politics is increasingly stacked against progressive reform. We are looking at an enduring right-wing Supreme Court majority, an implacable Republican Senate elected by a national minority of white voters in rural states, the ongoing deformation of the political process by vast inequalities of wealth and unaccountable flows of money in service to that inequality, and the increasing disenfranchisement of people of color.

The likelihood is that for Warren or Sanders, and for most any other Democrat, continuous popular mobilization will be needed to advance their policies, if not to merely survive. There will be no permanent victories. Even venerable institutions of the public sector are not safe. The magnitude of the neo-fascist threat demands the reform of the Democratic Party itself.