Links: June 2008

U.S. economy

Why it’s worse than you think, by Daniel Gross

Embedded vs. non-embedded inflation, by Paul Krugman

Why central banking is no longer boring, by Guido Tabellini

Living standards, poverty , inequality, well-being

What if Adam Smith was right about poverty?, by Don Arthur

A financial transactions tax, by Dean Baker

Should the government make us happy?, by Ryan Blitstein

The rise in American inequality, by Ian Dew-Becker and Robert Gordon

Social mobility: the nasty arithmetic, by Chris Dillow

Upward intergenerational mobility in the United States, by the Economic Mobility Project

How big government got its groove back, by William Galston

The end of summer vacation, by Steven Greenhouse

Shaky economic times are shakier for women, by Heidi Hartmann

Schools, skills, and synapses, by James Heckman

A new social contract, by Michael Kazin and Julian Zelizer

Surging wage growth for topmost sliver, by Lawrence Mishel

Inconspicuous consumption, by Virginia Postrel

Trends in men’s earnings volatility, by Donggyen Shin and Gary Solon

Is income volatility really rising? For whom?, by Justin Wolfers

Taxes

Tax evasion, 2008, by Clive Crook

What the Obama and McCain tax plans would mean for real taxpayers, by Howard Gleckman

Fiscal poison pill, by Paul Krugman

Three questions for McCain, by David Leonhardt

A preliminary analysis of the 2008 presidential candidates’ tax plans, by the Tax Policy Center

Obama and McCain: Who would pay taxes?, by Bernard Wasow

Health care

A fresh look at health care reform, part I and part II, by Maggie Mahar

Health care in the Netherlands, by Maggie Mahar and Niko Karvounis

The Emanuel-Fuchs voucher system proposal, three parts (here, here, and here), by Ezra Klein

Financing the U.S. health system: issues and options for change, by Meena Seshamani, Jeanne Lambrew, and Joseph Antos

Housing

Housing slump rivals deepest slowdowns in 60-plus years, by Amy Hoak

What can the US government do to put you in a new home tomorrow?, by Ezra Klein

Home not-so-sweet home, by Paul Krugman

Education

A broader, bolder approach to education, by Helen Ladd, Pedro Noguera, Tom Payzant, and others

Does education really make you smarter?, by Norman Nie and Saar Golde

Summer learning, summer losses, by Christina Satkowski

Cities

A league table of liveable cities, by Tyler Brûlé

The urbanist party, by Felix Salmon

Density and intercity rail, by Matthew Yglesias

Trade

This global show must go on, by Tyler Cowen

Migration

World’s refugee count in 2007 exceeded 11 million, U.N. says, New York Times

Labor’s ambivalence on immigration, by Roger Waldinger

Milton Friedman’s argument for illegal immigration, by Will Wilkinson

Environment

The European Union’s emissions trading system in perspective, by Denny Ellerman and Paul Joskow

Carbon clincher, Financial Times

U.S. politics

The general election map, by Marc Ambinder

Rumors the Obama campaign shouldn’t try to correct, by Christopher Beam

Obama rides the wave, by Thomas Edsall

Ranking states by the liberalism/conservatism of their voters, by Andrew Gelman

Democrats in Congress, by Ezra Klein

Democratic primary fight is like no other, ever, New York Times

The fall of conservatism, by George Packer

True campaign reform: bring people into politics, by Theda Skocpol

Jason Furman, Social Security, and Wal-Mart, by Mark Thoma and others

Abroad

Turkey turns away from the future, by Cengiz Aktar

Let us now praise coups, by Paul Collier

Norway’s wealth: not just oil, by Thorvaldur Gylfason

Exodus of the Polish plumber, by Andrew Leonard

Italy gives cultural diversity a lukewarm embrace, New York Times

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Making Ends Meet on $300,000 a Year

BusinessWeek‘s June 16 issue has a story on the “not-so-rich” rich. It asks “Just what does it mean to be wealthy these days? … Many facing higher taxes [if Barack Obama is elected president] don’t consider themselves part of the exalted crowd. They have good incomes, to be sure, particularly compared with the median household income of $48,200. Of the 149 million households filing federal income taxes for 2006, some 3% reported income between $200,000 and $500,000; fewer than 1% claimed income above half a million dollars.” The article goes on to cite comments by a few others in this income range who say they feel “stretched” and “middle class at best.”

It would help to have a sense of what a household budget at this income level might look like. Here’s an attempt at one. I assume two employed adults and two preschool-age children. I use a pretax income of $300,000, which comes to $25,000 a month.

A lot of this — loan payments, property taxes, savings, child care expenses, and others — will vary depending on household circumstances. But are there any significant errors or omissions here?

Calculations by the Tax Policy Center suggest that Obama’s plan would increase taxes for this type of family by perhaps $6,000 a year, or $500 per month (about 2% of pretax income). Is that too much to ask? You be the judge.

The Obama and McCain Tax Plans

Bernard Wasow at the Century Foundation has a nice post on Obama’s and McCain’s tax proposals. He uses estimates by the Tax Policy Center to try to answer two key questions:

  1. What will happen to total tax collections under the two candidates’ proposals?
  2. How will taxes and after-tax income change for households at various points in the income distribution under the proposals?

Euro 2008

Game on! Quarterfinal matchups:

Germany vs. Portugal (Thursday)

Croatia vs. Turkey (Friday)

Netherlands vs. Russia (Saturday)

Italy vs. Spain (Sunday)

Hope: based on their first-round form coupled with history of disappointment, I’ll root for Portugal, the Netherlands, and Spain, and perhaps for a Portugal-Spain final.

Expectation: a final that includes Germany or Italy, quite possibly both.

Nixonland: One, Two, or Many Americas?

Rick Perlstein’s Nixonland is a terrific book. It’s a fascinating history of American society and politics from 1965 to 1972, woven together in a compelling and exceptionally well-written narrative. I had such a hard time putting the book down it nearly spoiled my recent family vacation.

Nixonland aims at more than a historical recounting. Perlstein suggests that during these years Americans increasingly divided into two political groups, and these groups’ opposition to one another grew more intense and passionate. Here’s how he puts it on the book’s penultimate page (p. 747): “I have written of the rise, between the years 1965 and 1972, of a nation that had believed itself to be at consensus instead becoming one of incommensurate visions of apocalypse: two loosely defined congeries of Americans, each convinced that should the other triumph, everything decent and true and worth preserving would end.”

It’s difficult to read the book and not be at least somewhat convinced. The 1960s brought enhanced government support for economic security and opportunity via Lyndon Johnson’s “Great Society” programs, civil rights legislation that opened economic and social doors for racial minorities and women, and massive cultural liberalization among young Americans. Yet it also brought a backlash. Hence the remarkable contrast between the 1964 and 1972 presidential elections — two of the most lopsided in American history, the former yielding an activist-government Democratic president, the latter a law-and-order Republican. And stunningly, given the seemingly inexorable liberalization of the mid-to-late 1960s, Republicans have won seven of the ten presidential elections since 1964.

Perlstein is at his best in providing insight into the motivations behind the backlash: the overwhelming sense of chaos, disorder, violence, insecurity, change — urban riots by frustrated African Americans, widespread drug use, disintegration of authority on college campuses and in public spaces, the seeming impotence of the American military in a poor Asian nation, unruly protesters at the Democrats’ 1968 political convention, exploding crime rates, horrific murders in once-calm suburban neighborhoods. The changes were fast, furious, and, to many ordinary Americans, frightening.

It isn’t only the historical facts that persuade. It’s also Perlstein’s telling of them. He steps quickly from one aspect of change to another, digs deeply into a particular event, such as the Newark riots or an antiwar rally, and then jumps abruptly to another and another. The prose is vivid and punchy. Without going overboard, it conveys the feel of growing chaos.

Is Perlstein right about what happened during these years? Did America harden into two warring camps? I think an argument can be made that something very different occurred: the developments of the 1960s coupled with (and accentuated by) Nixon’s political tactics opened up new fissures that left the political landscape not more crystallized, but more clouded. Instead of shifting from (more or less) one America to two, the shift was, arguably, toward a greater multiplicity of political identities that the two political parties had to struggle mightily to try to shape into manageable coalitions.

After the New Deal, economic policy was the chief fault line between Democrats and Republicans. The political legacy of the 1960s is the diminution of one incongruous aspect of American party politics, the Democrats’ dominance in the conservative south, but simultaneously the growing importance of issues that cut across the economic divide:

Race. With the 1964 Civil Rights Act, Democrats became not only the party representing the economic interests of the lower and middle classes, but the champions of economic opportunity for black Americans — and soon of integration of neighborhoods and schools.

Cultural norms about authority, sex, drugs, appearance, and public behavior

Crime

Gender relations in the home and at work

Foreign policy

Separation of church and state

The environment

Socio-political status. One of Nixon’s chief contributions to altering the fault lines in American politics, according to Perlstein, had to do with social and political status. Nixon always felt himself an outsider. In college he formed a club, the “Orthogonians,” composed of self-perceived commoners, hard-working strivers excluded from the well-bred, elitist, condescending “Franklins.” Beginning with his 1952 “Checkers Speech,” in which he invoked his family’s humble financial circumstances and his wife’s “respectable Republican cloth [as opposed to mink] coat,” Nixon played up the seeming incongruity of rich Ivy-league-educated Democratic politicians claiming to speak and govern on behalf of working- and middle-class Americans.

It’s widely recognized that these issues increasingly fractured the Democratic coalition. But they also, if perhaps less dramatically, created new rifts among Republicans.

Despite the popularity of the “two Americas” image, recent research (such as this, this, and this) suggests that the views of Americans are not especially polarized. Was it different in 1972?

This isn’t much explored by Perlstein, in part because the second half of the book, covering the period from 1969 to 1972, focuses heavily on Nixon and Vietnam. In the book’s Preface, Perlstein writes (p. xiii) “The main character in Nixonland is not Richard Nixon. Its protagonist, in fact, has no name — but lives on every page. It is the voter who, in 1964, pulled the lever for the Democrat for president because to do anything else, at least that particular Tuesday in November, seemed to court civilizational chaos, and who, eight years later, pulled the lever for the Republican for exactly the same reason.” I think that’s accurate for the first half of the book. But in the second half the story is much more about Nixon himself than about those voters.

Throughout this latter part of the book I wanted to hear less about what Nixon was thinking and what he and Abbie Hoffman and the Weathermen were doing (though that’s plenty interesting) and more about what those voters were thinking. For instance, were they still, in 1970 and 1972, concerned about the urban riots that are front and center in Perlstein’s discussion of 1965 and 1966? His description of post-1968 developments focuses almost entirely on Vietnam and the counterculture, with very occasional and brief mentions of crime and busing. Notwithstanding the book’s considerable virtues, I finished it feeling just as uncertain as before about the political sensibilities of the “switchers” that Perlstein sees as his protagonist.

Were they, by 1972, committed Republicans? Or was their vote for Nixon largely a function of the perceived extremism and stumbling campaign of the Democratic presidential nominee? After all, as Perlstein notes, in the same 1972 election in which McGovern was pummeled, the Democrats lost only twelve seats in the House, maintaining a majority of more than fifty, and gained two in the Senate.

Were there really two Americas in 1972, or had political views and allegiances instead become, like the events of the preceding years, increasingly chaotic and confused?

Measuring Living Standards: The Family Road Trip

For many American households, incomes have been stagnant over the past generation. But (lack of) change in incomes isn’t necessarily a good indicator of change in living standards.

On the one hand, as Elizabeth Warren and others have pointed out, the cost of some key middle-class consumption items — housing, health care, and college — has increased much more rapidly than the consumer price index. And inflation-adjusted income data don’t capture important aspects of quality of life such as commuting time, work stress, and crime, which have gotten worse for some people over the past several decades.

On the other hand, income data also fail to capture many ways in which living standards have improved. Consider the quintessential American middle-class summer ritual: the family road trip. In 1974 my parents drove us from Atlanta, where I grew up, to Phoenix, where one set of grandparents lived. My wife and kids and I have just done the reverse, driving from our home in Tucson to Atlanta to visit my parents and siblings.

Some things haven’t changed: You still get in an automobile and drive 1800 miles over three(ish) days. Food at most freeway exits isn’t much different than it was a generation ago; Subways have replaced Stuckeys, but McDonalds, Burger King, and Dairy Queen are still the chief options, and their menus still feature mainly burger-fries-soda. It’s a far cry from the Italian Autogrill.

One thing has gotten worse: Gas is, at the moment, almost twice as expensive as in 1974.

Yet there are a host of ways in which the family road trip has gotten better:

In 1974 my parents drove a Chevy station wagon. We now drive a Toyota minivan. Toyotas, largely unknown to Americans prior to the late 1970s, are comparatively reliable. And the minivan gets better gas mileage. Also, the fact that it’s a minivan means an adult can walk (sort of) to the back to separate quarreling kids, something my parents were unable to do as my brothers and I bickered our way across 800-plus miles of Texas.

Freeway speed limit: 55 in 1974, it’s now 70 or 80 on much of the I-10 and I-20 stretch that takes you from Arizona to Georgia.

Cruise control.

Cell phones. What a convenience to be able to chat with friends and relatives during the seemingly endless drive, or to get a listing of hotels in the next town and make a reservation at the last minute.

Portable DVD players. On our 1974 trip we listened to Robin Hood on a portable tape player. My kids now watch the video version. Both are fun, but videos are more entertaining and hold kids’ attention for longer stretches.

Music. In 1974 there were no CDs, iPods, or satellite radio.

Laptop computers.

The internet, and wireless access to it.

MapQuest (we don’t yet have GPS).

A number of fast-food restaurants now have enclosed play areas, helpful for letting kids blow off some steam.

Hotel breakfast. Each night one of my parents would drive to a grocery store to buy milk and cereal, then put the milk on ice, so that we could eat a quick inexpensive breakfast before heading out the next morning. Now we walk to the hotel lobby for breakfast and choose from a half-dozen cereals, pancakes, eggs, orange juice, coffee, and so on.

More public rest stops across the south seem to have shaded areas and clean restrooms.

It appears to me there’s less litter on highways these days.

Starbucks. A decade from now minivans may come equipped with an espresso maker in the dashboard. For now the availability of decent coffee at semi-regular intervals is a big help to those of us for whom conversation and music and breaking up kids’ squabbling isn’t quite sufficient to ensure constant alertness at the wheel.

For more on changes in quality of life, this book is a good place to start.