Quotulatiousness

July 22, 2014

23% of US children live in poverty … except that’s not actually true

Filed under: Government, USA — Tags: , , — Nicholas Russon @ 07:48

In Forbes, Tim Worstall explains why the shocking headline rate of child poverty in the US is not correct (and that’s a good thing):

The annual Kids Count, from the Annie F. Casey Foundation, is out and many are reporting that it shows that 23% of American children are living in poverty. I’m afraid that this isn’t quite true and the mistaken assumption depends on one little intricate detail of how US poverty statistics are constructed. This isn’t a snarl at Kids Count, they report the numbers impartially, it’s the interpretation that some are putting on those numbers that is in error. For the reality is that, by the way that the US measures poverty, it does a pretty good job in alleviating child poverty. The real rate of children actually living in poverty, after all the aid they get to not live in poverty, is more like 2 or 3% of US children. Which is pretty good for government work.

[...]

However, this is not the same thing as stating that 23% of US children are living in poverty. For there’s a twist in the way that US poverty statistics are compiled.

Everyone else measures poverty as being below 60% of median equivalised household disposable income. This is a measure of relative poverty, how much less do you have than the average? The US uses a different measure, based upon historical accident really, which is a measure of absolute poverty. How may people have less than $x to live upon? There’s also a second difference. Everyone else measures poverty after the influence of the tax and the benefits system upon those incomes. The US measures only cash income (both market income and also cash from the government). It does not measure the influence of benefits that people receive in kind (ie, in goods or services) nor through the tax system. And the problem with this is that the major poverty alleviation schemes in the US are, in rough order, Medicaid, the EITC, SNAP (or food stamps) and then Section 8 housing vouchers. Three of which are goods or services in kind and the fourth comes through the tax system.

July 10, 2014

Argentina’s economic woes – tourist edition

Filed under: Americas, Economics — Tags: , , , , — Nicholas Russon @ 10:56

How bad is the Argentinian economy right now? So bad that middle class Argentine tourists in Brazil eat at soup kitchens, according to the Wall Street Journal‘s Miriam Jordan:

The state-funded Citizen Restaurant in downtown Rio is accustomed to serving a balanced meal at an unbeatable price to about 5,000 poor residents of this city each day. During the World Cup, however, this cafeteria has been catering to another clientele as well: middle-class Argentines.

“We serve homeless people, drug addicts, blue-collar workers and retirees,” said Jose Barbosa, Rio de Janeiro state coordinator for food security. “This World Cup we have been welcoming Argentine soccer fans, too.”

With the value of the Argentine peso deeply eroded amid the country’s economic woes, many Argentines who have flocked here to root for their soccer team [...] say they’re counting every Brazilian real they spend — and hunting for bargains. On Monday, dozens of Argentines lined up alongside Brazilians to buy lunch at the cafeteria, where a meal of black beans, white rice, salad and choice of meatballs or chicken sausage cost 1 real, or about 40 U.S. cents.

“Rio is very expensive — that’s why I am here,” said Fernando Castillo, a 24-year-old bartender from Buenos Aires. With gusto, he dug into his plate of food, which sat on a plastic-blue tray beside a cup of guava juice and a fresh orange for desert, both included in the price. “This is perfect,” he said, “especially at this price.”

“The generous portion keeps us filled all day,” added his cousin, Thomas Castillo.

[...]

To save on accommodations and flights, many Argentines drove to Brazil. In Rio, their campers and cars occupied prime beachfront parking spots until the city evicted them.

It then allowed them to park vehicles and pitch tents in a vast parking lot downtown that abuts the permanent bleachers where Rio’s samba schools perform during the annual carnival celebrations.

Word spread quickly at these parking lots that Citizen Restaurant, within walking distance of the Argentine encampment, offered good Brazilian fare at a bargain-basement price in a clean, safe environment. “It started with 10 of them one day, then 50 of them came and now we’re seeing about 200 Argentines each day,” said Ricardo Chaves, the eatery’s administrator.

June 25, 2014

QotD: The difference between money and wealth

Filed under: Economics, History, Quotations, USA — Tags: , , — Nicholas Russon @ 00:01

… it is a mistake to use “money” and “wealth” as synonyms. Money is not wealth (though it is often a signifier of wealth). Wealth is a concept far greater, deeper, and more complex than mere money can encompass. Money is a tool; wealth is a state of being, an environment, a continuum in which we conduct our lives. When the left speaks of inequality in purely monetary terms, they are engaging in a puerile and futile kind of reductionism.

Consider a man with a wife and three teenage daughters, who lives in a house with only one bathroom. This man wouldn’t need a million dollars to feel wealthier; he’d just need a second bathroom. A chance to have a hot shower in the morning and have a clean space on the sink for his shaving gear. Wealth to this man is not the money it would take to build the extra bathroom; wealth is the time and comfort the new bathroom brings. Wealth is comfort he gains, his improved state of mind, the increased peace in his household, his improved quality of life. The marginal utility of the additional bathroom is great indeed (the utility of additional bathrooms would be less). The wealth of that additional bathroom is much greater, proportionally, than if this man and his family lived in a huge mansion with fifteen bathrooms. (In fact, the huge house might decrease his happiness due to the expense of upkeep and maintenance. Who knows?)

You don’t make a poor person wealthy by giving them money; history is full of lottery winners who ended up just as poor as when they started, and many’s the dissipated scion of a rich family who frittered away the family fortune. Wealthy people tend to have a lot of money because money is correlated with wealth (but does not cause it). Income, investments, assets — all can generate money for a wealthy person.

But wealth is more than just stuff. A loving spouse and healthy, happy children are treasures. Running a successful business can mean more than just the profits it generates; there is deep satisfaction in conducting a successful enterprise. A deep love of art or music can enhance and enrich a life. The company of good friends is truly priceless, and something that wise people learn to value more as time goes by.

Money gives access to some of those things, but all the money in the world can’t buy an appreciation of those things.

But to speak of wealth even in this broadened sense is misleading, for in America even “poor” people are wealthy beyond the dreams of people in many places in the world. And compared to people in most ages of the earth prior to the 20th century, there are no poor Americans. It’s amazing to consider how much better life for an average person is now compared to past times. We have food in amazing abundance and variety. Every house has a big-screen television, central heating and air-conditioning, and a refrigerator and range. Everybody has at least one car. Everybody has a cellular phone, and most people have a computer. Few of us work more than eight hours a day to afford all these things, leaving plenty of free time to relax. Medical technology has extended our lifespans, and made our tour upon the earth far more pleasant than in former times. We live healthier, more active, more stimulating lives than at any point in our history — wealthier lives.

Monty, “Wealth as an end and wealth as means to an end”, Ace of Spades HQ, 2014-06-24.

June 24, 2014

Fairtrade loses the moral high ground

Filed under: Africa, Business, Media — Tags: , — Nicholas Russon @ 11:53

Following up on an article from earlier this month on Fairtrade’s business and ethical problems, Rossa Minogue talks to Professor Christopher Cramer who lead the investigation on which the report was based:

I ask Cramer if he was surprised by the study’s findings. ‘Yes and no’, he says. ‘[Fairtrade] perpetuated this fantasy of rural Africa being full of small, family farmers with roughly the same amount of land as each other. Unless there was an extraordinarily benign trickle-down effect, you wouldn’t really expect things to be much better [on Fairtrade farms]. But to find that the wages were worse and that most of the working conditions were worse, that did surprise me — and it’s a puzzle.’

The study’s findings were certainly disconcerting for Fairtrade’s supporters. They showed that farm labourers often make less on Fairtrade farms than non-Fairtrade farms, while many smallholders live in abject poverty. So, does Fairtrade benefit anyone in Third World agriculture? Cramer tells me that, during his four years of field research, his team realised that what Fairtrade defined as ‘smallholders’ covered everything from owners of farms of half a hectare to 130 hectares. The owners of bigger farms, he tells me, ‘are the ones who capture most of the direct benefits. They also tend to control the leadership of the cooperatives.’ So it seems that the larger farms, the ones that would presumably be doing alright anyway, are the only ones that reap the rewards of Fairtrade — a programme allegedly aimed at helping the poorest of the poor.

Cramer’s report is definitely a damning indictment of Fairtrade, which is why Fairtrade is doing all it can to smear its findings. When I wrote about Cramer’s findings a few weeks ago, I was informed that people who had tweeted my piece received direct tweets from Fairtrade UK, dismissing the article as sensationalist and untrue. Naturally, Cramer has borne the brunt of this hostility: ‘There was a legal threat made against us when [Fairtrade officials] saw the first draft of our press release’, he says. ‘They’ve also sent me hostile letters.’

[...]

In the West, people are often puzzled as to why rural Africans give up what is sometimes perceived to be a poor but idyllic existence in the countryside to live in the slums on the outskirts of cities. However, this puzzlement ignores the harsh realities of rural poverty. For many, moving to the city, where they can at least eke out a living, is the only rational choice. So what is the best path out of poverty for the farmhands of Africa?

‘That’s a big question. The focus must be on increasing agricultural productivity and that involves a lot of things, including infrastructure and investment. I don’t buy into the small-is-beautiful paradigm. My research shows that if you’re interested in driving up quality and enhancing productivity, as well as the lives and prospects of the poorest people, large-scale production has its advantages. Betting on the strong can also be betting on the weak.’

June 15, 2014

QotD: Shut up – it’s your right and (for some) your privilege

Filed under: Law, Liberty, Quotations, USA — Tags: , , , , — Nicholas Russon @ 08:54

“Privilege” is a term that’s overused and misused in modern political discourse. Too often it’s used like a crass “shut up, I win” button in an argument. But “privilege” is sometimes an apt descriptive term of a human phenomenon: a person’s evaluation of a situation (like interaction with law enforcement) is colored by his or her own experiences, and those experiences are usually circumscribed by that person’s cultural identity and wealth. Any criminal defense attorney who has served affluent clients is familiar with this: such clients often conclude that they are a victim of a conspiracy, or of a “rogue cop” or “loose cannon prosecutor,” because their life experiences lead them to assume that the system can’t possibly treat all people the way they are being treated. By contrast, clients who have lived in poverty (or clients who are African-American or Latino) tend to recognize outrageous conduct in their case as the system working the way the system typically works — business as usual. In my post about the prosecution and death of Aaron Swartz, I argued that Swartz’ community showed such privilege in its reaction to his prosecution, seeing some sort of singular conspiracy where others saw the banal grinding of the system’s unfeeling wheels.

My advice to shut up is colored, in part, by privilege. I was reminded of this yesterday when Los Angeles County Sheriff’s Deputies searched Justin Bieber’s house. I praised Bieber for shutting up and declining to talk to the cops, and joked that criminal defense attorneys could shame clients into better practices by asking why they aren’t smarter than Justin Bieber.

But Justin Bieber and I — and many of my clients — share a crucial quality: we’re affluent and fortunate. This privilege makes us better able to endure the potential downside risks of shutting up. If we get arrested on a petty or bogus charge by a pissed-off cop, we can make bail. We won’t spend weeks or months in custody on that bogus charge because we can’t scrape together a few thousand dollars. Maybe we’ll spend the weekend in jail, because cops love to arrest you Friday afternoon, but we’ll get out in a few days at most, and in the meantime we won’t lose our jobs. Because we have families and support systems, if we do get thrown in jail on a bogus job by an angry cop, the Department of Child and Family Services won’t take away our children, plunging us into another broken system we have neither the money nor the knowledge to navigate. If the cops tow or impound our car, we can afford to pay the few hundred to few thousand dollars to get it out, and we won’t lose our jobs for lack of transportation. Even if we do lose our jobs because of a bogus and retaliatory arrest, we have savings, and families with savings, and we won’t swiftly lose our homes. If the police choose to retaliate against our silence with petty tickets and infractions and fines rather than arrest, we can fight them or absorb them.

That’s a privilege. Poor people don’t have it. Poor people live on the razor’s edge, and a bogus retaliatory arrest can destroy them. Retaliatory and capricious enforcement of petty crimes and infractions can destroy them financially. Police wield disproportionate power over them, and the criminal justice system and its agendas (like the War on Drugs) disproportionately impacts them. Police are more likely to use force against poor people and for the most part can do so without any significant risk of discipline.

When you and I weigh the downside risks of shutting up against the downside risks of talking, our downside risks are milder, and can be endured. People without our resources face a must starker choice: talk, and incriminate themselves, or shut up, and face an array of consequences they may not be equipped to survive.

Ken White, “The Privilege To Shut Up”, Popehat, 2014-01-15

June 10, 2014

The Catholic case against libertarianism

Filed under: Economics, Liberty, Religion — Tags: , , , , — Nicholas Russon @ 08:14

First, let’s talk about the evils of the free market and how God wants to abolish free exchange of goods for our spiritual and moral welfare, shall we?

Something strange happened in Washington last week: A panel of Catholic intellectuals and clergy, led by His Eminence Oscar Andrés Maradiaga, was convened to denounce a political philosophy under the headline “Erroneous Autonomy: The Catholic Case against Libertarianism.” The conference was mainly about free-market economics rather than libertarianism per se, and it was an excellent reminder that the hierarchy of the Church has no special grace to pronounce upon matters of specific economic organization. The best that can be said of the clergy’s corporate approach to economic thinking is that it is intellectually incoherent, which is lucky inasmuch as the depths of its illiteracy become more dramatic and destructive as it approaches coherence.

[...]

The increasingly global and specialized division of labor and the resulting chains of production — i.e., modern capitalism, the unprecedented worldwide project of voluntary human cooperation that is the unique defining feature of our time — is what cut the global poverty rate in half in 20 years. It was not Buddhist mindfulness or Catholic homilies that did that. In the 200,000-year history of Homo sapiens, neither of those great religious traditions, nor anything else that human beings ever came up with, made a dent in the poverty rate. Capitalism did. One of the great ironies of our times is that so many of the descendents of the old Catholic immigrant working class have found themselves attracted to an American Buddhism that, with its love of ornate titles, its costumes, its fascination with apostolic succession, and its increasingly coddled professional clergy, is a 21st-century expression of Buddhism apparently committed to transforming itself — plus ça change! — into 15th-century Catholicism. Perhaps it should not be entirely surprising that it has embraced the same intellectual errors.

Cardinal Rodríguez Maradiaga and likeminded thinkers, stuck as they are in the hopelessly 19th-century distributist model of economic analysis, apparently are incapable of thinking through the implications of their own dogma. The question of how certain goods are “distributed” in society is a second-order question at best; by definition prior to it is the question of whether there is anything to distribute. To put it in Christian terms, all of the great givers in Scripture — the Good Samaritan, the widow with her mite, Joseph of Arimathea — had something to give. If the Good Samaritan had been the Poor Samaritan, with no resources to dedicate to the stranger’s care, then the poor waylaid traveler would have been out of luck. All the good intentions that we may muster are not half so useful to a hungry person as a loaf of bread.

Those who put distribution at the top of their list of priorities both make the error of assuming the existence of some exogenous agency that oversees distribution (that being the Distribution Fairy) and entirely ignore the vital question of what gets produced and by whom. Poverty is the direct by-product of low levels of production; the United States and Singapore are fat and happy with $53,101 and $64,584 in per capita economic output, respectively; Zimbabwe, which endured the services of a government very much interested in the redistribution of capital, gets to divide up $788 per person per year, meaning that under circumstances of perfect mathematical equality life would still be miserable for everybody. Sweden can carve up its per capita pie however it likes, but it’s still going to be 22.5 percent smaller than the U.S. pie and less than two-thirds the size of Singapore’s tasty pastry. You cannot redistribute what you don’t have — and that holds true not only for countries but, finally, for the planet and the species, which of course is what globalization is all about. That men of the cloth, of all people, should be blind to what is really happening right now on the global economic scale is remarkable, ironic, and sad.

June 3, 2014

“Fairtrade [is] a Western vanity project that impoverishes those it’s meant to benefit”

Filed under: Africa, Business, Media — Tags: , , , , , — Nicholas Russon @ 00:01

Rossa Minogue on the image and reality of Fairtrade:

The world’s ethical shoppers are still reeling this week after a report revealed that Fairtrade programmes are of little benefit to those working on farms in the developing world.

The government-funded study published by SOAS, a part of the University of London, was conducted over a four-year period in Uganda and Ethiopia. It showed that labourers on farms that are part of Fairtrade programmes are usually paid less and are subject to worse working conditions than their peers on large commercial farms, and even other small farms that are not part of Fairtrade programmes. Professor Christopher Cramer, the study’s main author, said: ‘Fairtrade has not been an effective mechanism for improving the lives of wage workers, the poorest rural people.’

The study also found that the ‘social premium’ incorporated into the price of Fairtrade products, which is meant to be used to improve infrastructure in poor communities, is often misspent. In one instance, researchers found that modern toilets built with this premium were in fact for the use of senior farm managers only. The report also documented examples of health clinics and schools set up with social-premium funds that charged fees that were too high for the labourers they were intended to benefit.

Of course, nobody needed the clever people at SOAS to tell us all this. From its very inception, the concept of Fairtrade was rooted in maintaining low ‘sustainable’ horizons for the poor by those who consider people in Africa and other parts of the Third World to be intrinsically different to the rest of us. The movement did not originate with the poor farmers of the developing world, but with Western NGOs and their army of gap-year do-gooders intent on imposing their reactionary ‘small is beautiful’ values on an Africa desperate for change.

May 22, 2014

Dickens 2.0 – debt prisons of the 21st century

Filed under: Law, USA — Tags: , , , , — Nicholas Russon @ 00:01

At Outside the Beltway, James Joyner calls attention to the widespread practice of sending minor offenders to prison for failing to pay minor fines:

NPR’s “Morning Edition” has been running a series called “Guilty and Charged,” chronicling the plight of Americans forced to go to jail because they’re unable to pay the court fees and fines associated with very minor infractions. The Supreme Court ostensibly outlawed the practice three decades ago but left the determination as to whether defendants are truly to poor to pay or simply unwilling to trial court judges. Not shockingly, perhaps, they almost invariably presume the latter.

You can listen to Tuesday’s segment, “Unpaid Court Fees Land The Poor In 21st Century Debtors’ Prisons,” at the link. Unfortunately, they only have the audio and not a transcription. Aside from what I’ve already written in the introduction above, what really stood out to me was the sheer contempt judges displayed to indigent defendants. Despite being highly educated professionals supposedly trained in the law and selected for their ability to dispassionately way evidence and reach just results, those featured on the program were positively knee-jerk and sneering. It was as if they’d plucked some random yahoo from a Denny’s, dressed him in a black robe, and had him preside over the trial.

Today’s follow-up, “Supreme Court Ruling Not Enough To Prevent Debtors’ Prisons,” was if anything more infuriating. It dove deep into the case of Kyle Dewitt, an Iraq War vet who went to jail and got caught up in an unending series of problems with the law over catching the wrong species of bass at the wrong time of year.

[...]

I’ve long been of mind that we ought to do away with fines as a means of punishment altogether. Whether paying $150 for exceeding the speed limit (almost always some nominal fine for the offense and a much higher amount for “court costs,” owed even if one just mails in the fine and never goes to court) is a deterrent depends entirely on one’s financial circumstances. It was a big deal when I was in college; it’s a nuisance now. Further, those with the means will often spend far more than the fine plus court costs to hire an attorney to plead it to an offense that doesn’t come with points that go against their license or their insurance record. It’s incredibly inequitable.

May 15, 2014

The real Havana, outside “Cuba’s Elysium”

Filed under: Americas, History — Tags: , , , — Nicholas Russon @ 00:01

Michael Totten lied to Cuban immigration officials to get into Cuba. Then he went outside the area of Havana that the foreign tourists see. The movie Elysium is supposed to be about a dystopian LA in the future, where the plutocrats live in vast luxury aboard a satellite, looking down on the squalor of those left behind. Totten says this is a pretty accurate description of Cuba today:

Outside its small tourist sector, the rest of [Havana] looks as though it suffered a catastrophe on the scale of Hurricane Katrina or the Indonesian tsunami. Roofs have collapsed. Walls are splitting apart. Window glass is missing. Paint has long vanished. It’s eerily dark at night, almost entirely free of automobile traffic. I walked for miles through an enormous swath of destruction without seeing a single tourist. Most foreigners don’t know that this other Havana exists, though it makes up most of the city — tourist buses avoid it, as do taxis arriving from the airport. It is filled with people struggling to eke out a life in the ruins.

Marxists have ruled Cuba for more than a half-century now. Fidel Castro, Argentine guerrilla Che Guevara, and their 26th of July Movement forced Fulgencio Batista from power in 1959 and replaced his standard-issue authoritarian regime with a Communist one. The revolutionaries promised liberal democracy, but Castro secured absolute power and flattened the country with a Marxist-Leninist battering ram. The objectives were total equality and the abolition of money; the methods were total surveillance and political prisons. The state slogan, then and now, is “socialism or death.”

Cuba was one of the world’s richest countries before Castro destroyed it — and the wealth wasn’t just in the hands of a tiny elite. “Contrary to the myth spread by the revolution,” wrote Alfred Cuzan, a professor of political science at the University of West Florida, “Cuba’s wealth before 1959 was not the purview of a privileged few … Cuban society was as much of a middle-class society as Argentina and Chile.” In 1958, Cuba had a higher per-capita income than much of Europe. “More Americans lived in Cuba prior to Castro than Cubans lived in the United States,” Cuban exile Humberto Fontova, author of a series of books about Castro and Guevara, tells me. “This was at a time when Cubans were perfectly free to leave the country with all their property. In the 1940s and 1950s, my parents could get a visa for the United States just by asking. They visited the United States and voluntarily returned to Cuba. More Cubans vacationed in the U.S. in 1955 than Americans vacationed in Cuba. Americans considered Cuba a tourist playground, but even more Cubans considered the U.S. a tourist playground.” Havana was home to a lot of that prosperity, as is evident in the extraordinary classical European architecture that still fills the city. Poor nations do not — cannot — build such grand or elegant cities.

[...]

Cubans in the hotel industry see how foreigners live. The government can’t hide it without shutting the hotels down entirely, and it can’t do that because it needs the money. I changed a few hundred American dollars into convertible pesos at the front desk. The woman at the counter didn’t blink when I handed over my cash — she does this all day — but when she first got the job, it must have been shattering to make such an exchange. That’s why the regime wants to keep foreigners and locals apart.

Tourists tip waiters, taxi drivers, tour guides, and chambermaids in hard currency, and to stave off a revolt from these people, the government lets them keep the additional money, so they’re “rich” compared with everyone else. In fact, they’re an elite class enjoying privileges — enough income to afford a cell phone, go out to restaurants and bars, log on to the Internet once in a while — that ordinary Cubans can’t even dream of. I asked a few people how much chambermaids earn in tips, partly so that I would know how much to leave on my dresser and also to get an idea of just how crazy Cuban economics are. Supposedly, the maids get about $1 per day for each room. If they clean an average of 30 rooms a day and work five days a week, they’ll bring in $600 a month — 30 times what everyone else gets. “All animals are equal,” George Orwell wrote in Animal Farm, his allegory of Stalinism, “but some animals are more equal than others.” Only in the funhouse of a Communist country is the cleaning lady rich compared with the lawyer. Yet elite Cubans are impoverished compared with the middle class and even the poor outside Cuba.

May 13, 2014

The global 1% includes almost all North Americans

Filed under: Economics, USA — Tags: , — Nicholas Russon @ 07:14

Peter Jaworski explains that as with so many other issues, where you sit on the issue of economic inequality determines what you see:

When people talk about the “1%”, I think they think that they are talking about a specific group of individuals, who have been and remain in that category over time.

When they say “We are the 99%” I think they think that that’s a static category, designating a group of people who persist as members over their lifetime.

Would people be so upset if it turned out that the individuals who made up the 1% were different people over time? That those who are in the 1% spend most of their lives in the 99%, and will go back to being 99%ers after a few years of being 1%ers?

I’m not sure. I am sure that if those categories represented a permanent group of specific individuals, we would be justified in lamenting the state of the economy.

But at any rate, if you’re someone who worries a great deal about the 1 and 99 %ers, would you be as worried if the following were true?:

Suppose just over one-in-ten (or 12%) would be in the 1% for at least a year of their lives.
Suppose further, to expand our view a bit, that just over one-in-three (or 39%) would hit top 5%, just over one-in-two (or 56%) would hit top 10%, and two-in-three (or 73%) would hit top 20%, each for at least a year of their lives.

And now suppose that less than one-in-150 (or a mere 0.6%) remained in the top 1% for 10 consecutive years.

If all of that were true — if the income distribution were that fluid — would you still be so upset?

All of that isn’t a hypothetical: “it’s a description of the income distribution over time in the U.S.” (and Canadians are probably similarly distributed).

For people in India, I bet they think the heated discussion about top 1%ers and 99%ers in Canada and the U.S. is a great big joke. The very same kind of joke that we would laugh about if the Tremblays in the Westmount area of Montreal were to bitterly complain about the Jones’ living in the Bridal Path area of Toronto. Sure, the Tremblays with their average $8 million net worth have half what the Jones’ and their $16 million net worth have, but it would take a comic to suggest we should lament and despair about the Tremblays’ attempts to keep up with the Jones’.

But it’s not a joke. Or, maybe, the people who occupied Bay Street and Wall Street didn’t get it.

Us Canadian 99%ers are not just rich, which we are. By global standards, we’re filthy, stinking rich. It takes roughly an annual net income of $41,600 to be in the global 1%.

If that’s you, then take a deep breath, find a mirror, and repeat these words, “I am the 1%.”

April 9, 2014

Amity Shlaes on “progressive” tax rates

Filed under: Government, USA — Tags: , , — Nicholas Russon @ 09:36

The US tax system, like those in many Western countries, incorporates the concept of “progressivity” — the higher the income you earn, the higher the tax you pay on the last dollar. Your income is divided into blocks where each block of dollars is taxed at a different (rising) rate. In other words, the lower your personal income the less tax you pay per dollar of income. Amity Shlaes explains why this mechanism makes reforming or cutting taxes such a challenge:

Over the hundred years intervening, studies have shown that generally people do think that the greater the wealth, the more dollars wealthy people should pay in tax, proportionally. But that is not a progressive rate structure. That is a flat tax. A progressive tax increases rates as you earn more, disproportionally.

Nor are many people aware that under a progressive structure the last dollar is taxed at a different rate from the first dollar. The top marginal rate is not necessarily the average rate. In the early 1980s, scholar Karlyn Keene found that many Americans, when interviewed, thought flat taxes fair. Before Keene, Walter Blum and Harry Kalven at the University of Chicago studied attitudes toward progressivity and its functions and came away, despite their liberal predilections, concluding that the case for progressivity is “uneasy.”

[...]

Vanity of two sorts provides answers. Most Americans are unwilling to concede that they may not understand or be comfortable with long formulas and complex economic ideas. So, like the Enron audit committee, they simply nod and go along.

The second vanity involves not intelligence but a kind of Puritan pretension. No American wants to be caught appearing unfair, even if in the most fleeting snapshot. “Progressivity” sounds like “progress.” Nobody wants to be seen opposing progress, even if that progress is regress and unfair to boot.

In any case: That willed American ignorance is the single greatest reason our progressive income-tax rates have moved, at times, into the 90 percent range, up from that original 7 percent.

Worse, the attitude makes progressivity hard to undo. When you cut taxes for all in a progressive rate structure, the rich necessarily get a larger tax break because they pay a greater share of the taxes. But “larger tax breaks for the rich” are impossible to sell. A redistributive corollary: benefits for the poor. This week Paul Ryan is getting scourged because his budget cuts affect the poor more than the rich. That is because the poor get more of the benefits in the first place.

Update, 10 April: Here’s a great example of how much tax rates can increase at higher levels (although this particular example is not an income tax). In New York state, a recent change to estate tax rates can result in a marginal tax of 164%:

On its face, the new law seems like tax relief. Under the previous law, New Yorkers paid estate taxes of 3.06 percent to 16 percent on the value of estates over $1 million. The new law raises that exclusion to $2.062 million this year and gradually increases it to more than $5 million by 2017.

But because the law also phases out certain credits related to federal taxes, people who have estates valued just above the $2 million threshold could get massive estate tax bills. An analysis by U.S. Trust found that a New York resident who dies today with a taxable estate of $2,165,625 could have to pay an estate tax of over $112,050. That represents a tax of over 100 percent on the value of the estate over $2,062,000.

It gets worse in a few years. Matz said that assuming that the exclusion rises to $5,250,000, a New Yorker with a taxable estate of $5,512,500 would have to pay an estate tax of $430,050. That’s a marginal tax rate of 164 percent on the value of the estate above the exclusion.

March 28, 2014

Putting the WHO global pollution death figures into perspective

Filed under: Economics, Environment, Health — Tags: , , , — Nicholas Russon @ 07:56

James Delingpole agrees that the most recent WHO report on deaths due to pollution is shocking, but points out where the press release does a sleight-of-hand move:

Even if you take the WHO’s estimates with a huge pinch of salt — and you probably should — that doesn’t mean the pollution problem in some parts of the world isn’t deadly serious. During the 20th century, around 260 million are reckoned to have died from indoor pollution in the developing world: that’s roughly twice as many as were killed in all the century’s wars.

Here, though, is the point where the WHO loses all credibility on the issue.

    “Excessive air pollution is often a by-product of unsustainable policies in sectors such as transport, energy, waste management and industry. In most cases, healthier strategies will also be more economical in the long term due to health-care cost savings as well as climate gains,” Carlos Dora, WHO Coordinator for Public Health, Environmental and Social Determinants of Health said.

    “WHO and health sectors have a unique role in translating scientific evidence on air pollution into policies that can deliver impact and improvements that will save lives,” Dr. Dora added.

See what Dora just did there? He used the shock value of the WHO’s pollution death figures to slip three Big Lies under the impressionable reader’s radar.

First, he’s trying to make out that outdoor pollution is as big a problem as indoor pollution. It isn’t: nowhere near. Many of the deaths the WHO links to the former are very likely the result of the latter (cooking and heating in poorly ventilated rooms using dung, wood, and coal) which, by nature, is much more intense.

Secondly, he’s implying that economic development is to blame. In fact, it’s economic development we have to thank for the fact that there are so many fewer pollution deaths than there used to be. As Bjorn Lomborg has noted, over the 20th century as poverty receded and clean fuels got cheaper, the risk of dying of pollution decreased eight-fold. In 1900, air pollution cost 23 per cent of global GDP; today it is 6 per cent, and by 2050 it will be 4 per cent.

But the third and by far the biggest of the lies is the implication that the UN’s policies on climate change are helping to alleviate the problem.

March 20, 2014

Today in misunderstood income inequality stats…

Filed under: Britain, Economics, Media — Tags: , , — Nicholas Russon @ 08:20

Tim Worstall pokes fun at a recent Oxfam report that claims that Britain’s five richest families own more than the bottom 20% of the population:

I read this and thought, “well, yes, this is obvious and what the hell’s it got to do with increasing inequality?” Of course Gerald Grosvenor (aka Duke of Westminster) has more wealth than the bottom 10 per cent of the country put together. It’s obvious that the top five families will have more than 20 per cent of all Britons. Do they think we all just got off the turnip truck or something?

They’ve also managed to entirely screw up the statistic they devised themselves by missing the point that if you’ve no debts and a £10 note then you’ve got more wealth than the bottom 10 or 20 per cent of the population has in aggregate. The bottom levels of our society have negative wealth.

[...]

Given what we classify as wealth, the poor have no assets at all. Property, financial assets (stocks, bonds etc), private sector pension plans, these are all pretty obviously wealth.

But then the state pension is also wealth: it’s a promise of a future stream of income. That is indeed wealth just as much as a share certificate or private pension is. But we don’t count that state pension as wealth in these sorts of calculations.

The right to live in a council house at a subsidised rent of the rest of your life is wealth, but that’s not counted either. Hell, the fact that we live in a country with a welfare system is a form of wealth — but we still don’t count that.

Doing this has been called (not by me, originally anyway) committing Worstall’s Fallacy. Failing to take account of the things we already do to correct a problem in arguing that more must be done to correct said problem. We already redistribute wealth by taxing the rich to provide pensions, housing, free education (only until 18 these days) and so on to people who could not otherwise afford them. But when bemoaning the amount of inequality that clearly cries out for more redistribution, we fail to note how much we’re already doing.

So Oxfam are improperly accounting for wealth and they’ve also missed the point that, given the existence of possible negative wealth, then of course one person or another in the UK will have more wealth than the entire lowest swathe.

March 17, 2014

Current US government programs actually increase income inequality

Filed under: Bureaucracy, Government, USA — Tags: , , , , — Nicholas Russon @ 09:32

In the Washington Post, George Will says that we’ve learned nothing about helping the poor since Daniel Patrick Moynihan’s day:

Between 2000, when 17 million received food stamps, and 2006, food stamp spending doubled, even though unemployment averaged just 5.1 percent. A few states have food stamp recruiters. An award was given to a state agency for a plan to cure “mountain pride” that afflicts “those who wished not to rely on others.”

Nearly two-thirds of households receiving food stamps qualify under “categorical eligibility” because they receive transportation assistance or certain other welfare services. We spend $1 trillion annually on federal welfare programs, decades after Daniel Patrick Moynihan said that if one-third of the money for poverty programs was given directly to the poor, there would be no poor. But there also would be no unionized poverty bureaucrats prospering and paying dues that fund the campaigns of Democratic politicians theatrically heartsick about inequality.

The welfare state, primarily devoted to pensions and medical care for the elderly, aggravates inequality. Young people just starting up the earnings ladder and families in the child-rearing, tuition-paying years subsidize the elderly, who have had lifetimes of accumulation. Households headed by people age 75 and older have the highest median net worth of any age group.

In this sixth year of near-zero interest rates, the government’s monetary policy breeds inequality. Low rates are intended to drive liquidity into the stock market in search of higher yields. The resulting boom in equity markets — up 30 percent last year alone — has primarily benefited the 10 percent who own 80 percent of all directly owned stocks.

February 3, 2014

The welfare trap

Filed under: Britain, Bureaucracy, Government — Tags: , , , — Nicholas Russon @ 09:27

An older post by A Very British Dude discusses the real problem with most of the public welfare/income support/unemployment benefits in Britain, but the same argument applies to most Western countries:

So your taxes, about a third of which go to paying working-age benefits, about a third in pensions, and the rest, everything else are part of a decent society in which everyone’s helping everyone else. Or they would be if the system wasn’t comprehensively broken, failing at all the significant tasks the welfare state is supposed to achieve. The welfare state is supposed to prevent poverty. It is, in fact, its major cause.

The problem is one of incentives, and not just those faced by the poor themselves. It’s obvious to anyone who isn’t paid handsomely to farm the poor, that for many people, it’s simply irrational to work. Once they’ve paid for taxes, clothes, transport and lunch, they’re considerably worse off than they would have been had they stayed in their pyjamas and watched Jeremy Kyle. Why would you take a miserable, boring, unpleasant minimum wage job instead of existing on benefits? The job insecurity at the bottom of the pyramid and the bureaucratic complexity of informing the authorities of a ‘change in circumstance’ is a further barrier. So when when the low-waged is “let go” after a couple of weeks, he’s got to re-apply for Housing benefits, Job-seekers’ allowance, Council Tax Benefit, income support and so on, from scratch. He may be genuinely destitute as a result of payments stopped, then restarted again too late, thanks to an abortive effort to “do the right thing”. Is it really any wonder so many feel trapped?

So, who benefits from this system? Certainly not those getting the benefits many of whom are comprehensively trapped in a life they wouldn’t have chosen. Not the Children of those getting benefits, who learn no other life thanks to the distorted incentives faced by their parents, but in whose name the benefits are paid. Certainly not the people paying the bill, John Q. Taxpayer, who thanks to the system face a sullen and resentful underclass, some of whom spend their non-working lives looking for ways to relieve you of your easily saleable property in order to buy sufficient narcotics to break the tedium for a few hours.

The main benefit of the benefits system accrues to those employed on secure graduate salaries to administer the system. These people are the farmers of the poor. This is not just the civil servants and local government employees who administer the system, but also the charity employees who don’t see the homeless and destitute (they outsource this to unpaid volunteers). It’s the police who are part of the state-crushing of the spirit of the young who find themselves trapped in this hell. The that the poor exist at all causes fear in the hearts of the affluent, and justifies the need for a police force. The Bureaucracy is an excellent provider of jobs. Which is why none of the solutions suggested by the Left of the political spectrum would ever reduce bureaucacy or police numbers, or the benefits bill. For that would involve firing sub-paying members of Unite or the PCS, and Unite is by far the biggest funder of the Labour party.

H/T to Amy Alkon for the link.

Update: A useful reminder from Rob Fisher at Samizdata — inflation hits the poor much harder than anyone else.

The Institute for Fiscal Studies is pointing out that while poorer people are paying more for food and fuel, richer people are enjoying low interest rates. So government spending and borrowing and the artificially low interest rates that go along with that are harmful to poor people, as are taxes on fuel, and income tax on minimum wage earners, and countless other instances of state meddling.

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