School Flashcards
(221 cards)
1
Q
Tipping point
A
Tipping points occur when change in part of the climate system becomes (i) self-perpetuating beyond (ii) a warming threshold as a result of asymmetry in the relevant feedbacks, leading to (iii) substantial and widespread Earth system impacts.
2
Q
Tipping point example
A
Were the west Antarctic or the Greenland ice sheet to be destroyed, sea levels around the world would rise by at least fifteen feet. Were both ice sheets to disintegrate, global sea levels would rise by thirty-five feet. It could take centuries for either of the ice sheets to disappear entirely, but once disintegration got underway it would start to feed on itself, most likely becoming irreversible. Other catastrophes have similar built-in delays, which follow from the tremendous inertia of the climate system. DAI is therefore understood to refer not to the end of the process-the moment when disaster actually arrives-but to the beginning of it: the point at which its arrival becomes unavoidable.
3
Q
a tipping point announces
A
the beginning of the end. Once it is reached, the ice will melt and flow into the oceans, the ocean currents will slow down, or stop, the forests will burn and die.
And all these disappearances—the gone glaciers, the stilled currents, the razed forests—will further increase the amount of carbon dioxide in the atmosphere, further limit the planet’s ability to absorb carbon and to reflect heat back into space, further heat up the planet, and trigger more tipping points.
4
Q
How does climate change work
A
As the planet heats up, it produces changes that release more carbon and other gasses into the atmosphere which then increase the heating of the planet. Such cycles are called feedback loops, where the impacts of a situation accelerate and strenghten the situation that caused the impacts.
Humans cut down forests. They burn some of the trees and thus both release carbon dioxide into the atmosphere as they reduce the earth’s ability to absorb carbon dioxide. Where those forests once stood, humans plant irrigated mono crops that depend on diesel pumps, or raise hudrends of thousands of cattle producing methane, they build cities and roads which then fill with cars burning gasoline, buidlings and homes that depend on coal-fire power plants [now more likely natural gas], and entire industries fueled with coal, gas, and oil. All these human activities release more and more greenhouse gasses into the atmosphere, which does not get reabsorbed by the felled trees.
And so the planet heats up. And then, for example, the permafrost thaws, and as it does, the previously frozen organic matter decays and releases more carbon into the atmosphere, further heating the planet, melting glaciers, which then accelerates further melting and heats the planet, melting ice sheets which then reflect less heat back into space, further heating the planet, provoking worsening forest fires, which then release more carbon into the atmosphere and further heat the planet.
5
Q
Paris Agreement
A
Purports to be a legally binding interational treaty to hold the global average temeprature below 2 C above pre-industrial levels.
Nearly ten years later, greenhouse gas emissions have reached an all-time high, for two years in a row.
6
Q
What are the major tipping points
A
Melting ice, shifting air and ocean currents, and the deaths of the amazon raiforest and boreal forests.
7
Q
The Amazon’s future?
A
Multiple studies show that only a slight further increase in average global temperatures and/or the continued cuting and burning of portions of the forest will turn the entire Amazon rainforest, the earth’s largest and most biodiverse, into a savannah.
The most immediate risk to the Amazon comes from fire: landowners clearing the forest for agriculture, ranching, illegal logging and mining, as well as fires that spread out of control due to drought conditions provoked by climate change. If the rates of deforestation in Brazil, which increased widely during Jair Bolsonaro’s administration, continue apace for another 5 to 10 years, the damage would be irreversible.
8
Q
Global warming and drought effect on rainforests
A
As global warming creates drier conditions through longer dry seasons and more severe droughts, deforestation also increases dryness by removing all the plant life that gathers and recycles water through transpiration (plants releasing water vapor that will drift high over the forest canopy and fall back to the earth as rain).
The warmer the planet becomes, the drier the forest becomes. The more trees that are cut down, the drier the forest becomes and the more trees and other plants that will die, provoking more dryness. The more fires that are set to clear the land the more carbon is relesed into the atmosphere, increasing global warming.
9
Q
Amazon dieback
A
A dieback is generally a condition in which a parisite or disease attacks the edges of the leaves or the tips of the roots of trees and woody plants and begins to kill them by advnacing from the periphery to the core.
This is happening on a massive scale with humans as the parisite. Scientists talk about “widespread Amazon dieback,” the process by which combined deforestation and global warming is killing not one tree or thousands, but a tropical rainforest twice the size of India.
10
Q
What is a Super PAC
A
A group that can raise and spend unlimited money independently to support or oppose candidates, but cannot donate directly to them.
11
Q
What is red boxing
A
A campaign loophole where candidates can publicly post strategic guidance to Super PACs without direct coordination
12
Q
What are dmocracy vouchers
A
Publicly funded vouchers given to citizens to donate to political candidates or causes, aiming to democratize campaign finance.
13
Q
Why is money in politics problematic?
A
Because it creates undue influence, where politicians become beholden to wealthy donors rather than voters (think green primary).
14
Q
PAC
A
Can donate directly to candidates but with strict limits on contributions
15
Q
Super PAC vs PAC
A
Super PACs can take unlimited donations and spend independently, while PACs have donation limits and can donate directly to candidates
16
Q
What is the biggest coordination loophole between Super PACs and campaigns
A
redboxing
17
Q
Why are large contributions harmful
A
They centralize access and influence in a few hands, reducing democratic responsiveness.
18
Q
How can grassroots groups be empowered through vouchers
A
Letting people donate their vouchers to trusted groups who can pool and direct funds strategically
19
Q
What is tenure in K-12
A
Legal protections that make it harder to fire teachers without due process, typically granted after 2-3 years.
20
Q
Value added modeling
A
A method to estimate a teacher’s impact on student learning, controlling for prior performances
21
Q
Housing first
A
A homelessness policy that provides stable housing before addressing other issues
22
Q
Why is California’s housing crisis so severe?
A
Zoning restrictions, high costs, mild weather, and fragmented response.
23
Q
Tweedism
A
A system where the powerful control nominations, undermining democratic representation
24
Q
Green primary
A
A money-based first round that determines candidate viability before voting even begins
25
Super PAC effect
Introduce massive, unaccountable money that drowns out clean campaign funding.
26
Two types of corruption
Type 1: Individual bribery. Type 2: Systemic corruption
27
Benefit of small-dollar contribution systems (aka democracy vouchers)
Reduce extremism by forcing politicians to appeal to a broader base.
28
Vetocracy
A government gridlocked by too many veto points and partisan obstructions
29
What voting structures contribute to inequality of citizens?
Winner take all districts, gerrymandering, single-member seats, and Tuesday voting.
30
Why is systemic corruption aka the result of bad campaign finance laws the first problem
Because it must be fixed before any other major reforms can succeed
31
Wealth primary
A de facto stage where only the rich or well-funded candidates can compete
32
Structural dependency worse than bribery?
It affects the entire institution's behavior, not just individual decisions.
33
How does systemic corruption due to campaign finance laws shape legislative behavior without explicit bribery
Politicians rely on wealthy donors for campaign funds. This dependency subconsciously alters which issues they prioritize (or impacts who gets their in the first place), how they vote, and whom they listen to---often favoring lobbyists and the affluent over average citizens (remember constantly calling to ask for money).
34
Why is asking for for money so powerful, even if it doesn't come with any promises (i.e. when no direct exchanges)
Human beings are hardwired for reciprocity. Even small favors, campaign donations, or helpful relationships create feelings of obligation in lawmakers, who then reward donors--consciously or not--with access, influence, and policy outcomes.
35
Earmarks
Allow members of Congress to direct funds to specific companies or industries, which can indrectly result in campaign contributions or favors--creating a feedback loop of influence without explicit quid pro quo.
36
How does systemic corruption distort the legislative agenda?
Issues backed by wealthy donors or lobbyists get attention and resources, while equally or more important public concerns (like support for working mothers) are ignored due to a lack of financial backing.
37
Revolving door
Lawmakers and staff often become lobbyists after leaving office, using insider knowledge and connections to influence former colleagues. This career incentive encourages current officials to favor lobbyist-backed policies.
38
How much would $100 voucher program cost if given to every voter to use in federal elections.
Eight billion per year (16 billion every other year). On the other hand approximately 100 billion per year goes to corporate welfare according to the Cato Institute.
39
Corporate welfare
Government financial support or favorable policies that benefit specific businesses or industries, often at the expense of taxpayers or competitors.
Ex. Direct subsidies (oil, farming), tax breaks and loopholes (deductions or credits only large corporations can exploit), preferential regulation (rules that favor incumbents and block new competition), government-granted monompolies (patents or contracts that lock out rivals)
40
Percentage of time congress members spend fundraising?
30 to 70% of the time. 3 to 4 hours per day.
41
Does UBI reduce work in experiments like Mincome?
Barely, slight drops in work, but big gains in health, education, and lower hopsitalizations.
[and drops were drops we aren't necessarily upset about, because replaced with education, spending time with kids)
42
How does scarcity affect decision-making
Reduces mental bandwith, lowering IQ by 13-14 points. Same as losing a full night's sleep or being drunk
43
How many homes are vacant per homeless person in the US?
five
44
What does DGP ignore? What does it reward?
Volunteering, clean air, unpaid labor. Ignores the costs of polluttion, divorce (lawyers fees) illness (medical fees).
45
How does migration impact jobs?
It doesn't take them away. In fact a larger workforce increases demand for goods and services, which means more jobs not fewer. Also has virtually no effect on wages.
46
What safeguards could make open borders more politically acceptable?
Countries could delay benefits, require minimum tax contributions, withhold voting rights.
47
Why do more migrants stay now?
In the 1960s 85% of Mexican migrants returned home. AFter 9/11 only 7% do. This is because the border became too dnagerous and costly to re-cross. Ironically, stricter border enforcement increased undocmented permanence.
48
Mincome
1970 pilot project in Canada that gave residents a guaranteed minimum income. Work only dropped slightly, and most of it came from new mothers taking maternity leave and students staying in school longer.
Hospitalizations dropped by 8.5% percent.
Mental health complaints and domestic violence declined.
49
Impacts of direct cash transfers according to "Just Give Money to the Poor" (global south)
Reduce hunger and disease. Children grow taller, learn more, and work less. Recipients spend less on alcohol and tobacco. Even addicts/criminals use money wisely.
Money mainly spent on food, medicine, starting small businesses.
50
Cherokee Casino Income Study
Cherokee casino opened and begin giving $4,000 per person per year in unconditional income to tribal members. Behavior problems dropped by 40% among those lifted out of poverty. School scores increased. Juvenile crime and substance abuse decreased. Parents had more time for kids (without reduction in hours worked, the money eased stress). 1 additional year of eduation by age 21. 22% decrease in risk of criminal record by 16.
51
An annual investmet of $4,500 per child results in...
12.5% more hours worked, 3,000 per year saved in welfare costs, 50,000-100,000 mor e in lifetime earnings leading to 10,000 to 20,000 more in addition state tax revenue.
It pays for itself my the time poor children reach middl age.
52
Homelessness on street vs cost of housing
In utah. Cost $16,670 per year on street but only 11,000 per year to house them.
Dutch government similar result. Save 2 to 3 euros for every euro invested because it reduced police, court, and social services costs.
53
Hidden costs of homelesnsess
Emergency healthcare (frequrent ER visits and ambulance calls, often for preventable issues but no preventitive care = higher costs.
Repeated arrests for minor offenses (loitering, tresspassing, public urination)
Short term shelters are expensive.
Social services can be fragmented and duplicative and monitoring and enforcing compliance is costly (ex. sobriety, job training).
54
Scarcity mentality
Scarcity mentality is a mental state triggered by not having enough--whether time, food, money, or stability. It narrows focus to urgent needs, reducing long-term planning and self-control.
55
Sugarcane farmer study
Field study in India where sugarcane farmers were tested before and after harvest. Since they get most of their income once a year, the same farmers were poor one month and relatively flush the next.
Farmers performed much worse on cognitive tests before harvest, and significantly better after (this is where the 13-14 IQ points comes from).
56
57
Super PAC and dependency corruption
Dependency corruption—candidates and parties become dependent on super PACs and major funders, warping their behavior and priorities even without direct bribery or coordination
58
How did super PACs affect the 2012 Republican primary?
Lessig describes it as a “wild West” where billionaires backed their preferred candidates (Adelson for Gingrich, Foster Friess for Santorum, etc.). This turned the race into a contest of who could attract the richest backer, not who could appeal to voters.
59
What is the “new corruption” Lessig associates with super PACs?
It’s not bribery—it’s the systemic, legal dependency on a small number of funders. Super PACs amplify this by making campaigns functionally reliant on a few wealthy individuals, who are treated like co-partners in governance.
60
While policymakers were responsive to the increasingly strong preferences of the highest-income groups
(the more of whom supported a policy, the more likely it was to be passed), there was a “complete lack of government responsiveness to the preferences of the poor”101 (meaning increasing support among the poor for a particular policy did not increase the likelihood of its passage). And middle-income voters “fare little better than the poor.”
61
Indeed, were it not for the increase in hours worked over the past thirty years, the middle class
would not have gained at all, and the lower class would have fallen behind, while the highest-income groups have exploded.113 “The bottom went nowhere, the middle saw a modest gain, and the top ran away with the grand prize.”
62
It is instead the reasons that inequality is growing. Conservatives might well and consistently believe that there’s nothing wrong with getting rich. But from the birth of conservative thought, conservatives have always objected to
people getting rich because of the government. It’s one thing to invent the lightbulb and thereby become a billionaire (though sadly, Edison wasn’t so lucky). It’s another thing to use your financial power to capture political power, and then use political power to change the laws to make you even richer.
63
Changes in government policy, Hacker and Pierson argue, account for the radical change in the distribution of American wealth. This isn’t the rich getting richer because the rich are smarter or working harder. This is
the connected getting richer because their lobbyists are more effective.
64
In 2012, these donors amounted to just 0.4 percent of the population, but
supplied 64 percent of the funds received by candidates from individuals.128
65
As Barber concludes, while there’s no real alignment with the median voter, and substantially more alignment with the median voter of the senator’s own party,
among both Republicans and Democrats, the ideological congruence between senators and the average donor is nearly perfect.”
66
For one very effective technique to raising money is
the vilification of the other side—a practice made even easier, as Kaiser notes, because members “never develop personal relationships with colleagues from the other party.”
67
Thus, no matter what reform a new government might try, there is a well-funded and well-connected gaggle of
lobbyists on the other side. Those lobbyists know that politicians will listen to their arguments quite intently, because their arguments about good policy carry with them (through the complicated dance that I described in Chapter 1) campaign cash.
68
In my view, following Judge Richard Posner, there was nothing “reckless” about the behavior from the perspective of the banks. From their perspective, they were behaving perfectly rationally: if you know your losses are going to be covered, gambling
is a pretty good business model.
69
If you have a sector… where losses are socialized but where gains are privatized, then
you destroy the economic and moral supremacy of capitalism.”
70
So the single most important reform here should have been to end this “moral hazard problem” for banks. And the one simple way to do that would have been to
guarantee that banks wouldn’t be bailed out in the future.
71
Real reform must depend upon making it possible to let the gamblers lose—so they know it makes sense for them to stop
gambling. The simplest way to achieve this real reform would be to force banks to a size that would make (their) failure possible.
72
As a practical matter, this means that in order to enact any piece of legislation that may impose costs on the private sector, Congress and the administration must pay off enough industries and subsets of industries…
to gain their support and therefore a fair shot at winning a majority.”
73
For most Americans, that’s all there is to the annual tax ritual. So why not a system that sent the taxpayer a draft tax form that was already filled out? As with the Visa statement, the taxpayer would be free to challenge it. But for the vast majority of taxpayers, no change would ever be needed. Not necessarily a postcard, but just as simple.
So the following year, the state taxing authorities decided to expand the experiment. But very quickly, they hit a wall. Strong legislative opposition was growing to oppose this effort at tax simplification. Why? From whom?
Well, not surprisingly, from those who benefit most from a world where taxes are complex: consumer tax software makers, who sell programs to consumers to make completing complex taxes easier.33 Leaders in the California legislature blocked a broad-based rollout of this immensely popular improvement in the efficiency of the California tax system because it would hurt the profits of businesses who sold software to make California’s existing and inefficient tax system more efficient.
74
The key to the dance is this: When you get a targeted tax benefit, you don’t get to keep it forever. Instead, because of the rules governing how our budget gets drafted (so-called “PAYGO rules”),39 each of these special benefits “sunsets” after a limited period. Because of these sunsets, each must be reconsidered every time a budget gets drafted. Sunsets sound like a good idea. Indeed, some seem to treat them as a panacea for all the ills of a government. But when you begin to think more carefully about the obvious incentives, or political economy, that sun-setting creates, the virtues become a bit more ambiguous. For every time a “targeted tax benefit” is about to expire,
those who receive the benefit have an extraordinarily strong incentive to fight to keep it. Indeed, we can say precisely how much they should be willing to pay to keep it. If the tax benefit is worth $10 million to the company, they should be willing to spend up to $10 million to keep it.
75
One tax rate for everyone would give no one a special reason to
write a check to their congressman. That’s all you need to know to understand why we’re never going to get one tax rate for everyone. So long as tax favors can inspire campaign funds, the game of tax favors will continue. This same insight points to the most egregious feature of the current tax system: its incredible tilt to the tax interests of the wealthiest.
76
This problem, too, would be solved if we simply didn’t have such a big/invasive/expensive government.” Maybe. But the point these three examples emphasize is that you can’t simply assume the problem away. If you believe big or expensive government is the problem, then
what are you going to do to change it? How are you going to shrink it? What political steps will you take toward the end that you seek? My sense is that too many on the Right make the same mistake as too many on the Left. They assume that change happens when you win enough votes in Congress. Elect a strong Republican majority, many in the Tea Party believe, and you will elect a government that will deliver the promise of smaller government and simpler taxes—just as activists on the Left thought that they could elect a strong Democratic majority and deliver on the promise of meaningful health care reform, or global warming legislation, or whatever other reform the Left thought it would get.
77
Yet often the biggest danger to free markets comes not so much from antimarket advocates (the Communists and worse!) as from
strong and successful market players eager to protect themselves from the next round of strong and successful market players.
78
This populist view is wrong. What we know from economics, and from experience with governments across the world, is that if you underpay government officials relative to their talents or their peers, they
will find ways to supplement their income.
79
For if lobbyists weren’t able to channel funds to campaigns, and hence, if congressmen didn’t depend upon lobbyists to get them the resources they need to run, then
the value of lobbying services would decline
80
Many members of Congress (at least 436, up from 397 in first edition of this book, according to the Center for Responsive Politics)9 have leadership PACs. A leadership PAC is
a political action committee that raises money from individuals, and other PACs, and then spends it to support candidates for office. Members of our Congress stand in the well of the House handing one another checks for up to $5,000. Such checks are the glue that keeps the system together.
81
Congress has the power to do more than just criminalize quid pro quo bribery. It also has the power to ban contributions that might
raise the suspicion of quid pro quo bribery. Buckley held, and no decision has ever doubted, that Congress has the power to ban large contributions to campaigns, at least when it is reasonable for people to wonder whether those large contributions are really just disguised bribes.
82
whether or not corporations are persons, Congress has no power to “abridge the freedom of speech” (in the context of campaign finance regulation)—unless
that “abridge[ment]” is for the purpose of reducing “corruption.”
83
So when an originalist says that the “hallmark of corruption is the financial quid pro quo: dollars for political favors,” it is a perfectly fair question to ask that originalist,
From where do you derive that meaning?” The answer for the originalist should be clear: The meaning of the word is the meaning the Framers would have given the word.29 But then what’s striking about the many Supreme Court opinions describing the scope of the term “corruption”—from Buckley to Citizens United to McCutcheon—is that not one tries to explicate the meaning of the term for our Framers.
84
The Framers repeatedly referred to Parliament as a “corrupt institution.” But when they said that, they were not alleging that individuals within Parliament accepted bribes. They may or may not have accepted bribes (no doubt they likely did). But the corruption that the Framers were charging turned not on those bribes.
It turned instead on the role of the king in the British Parliament. The House of Commons was to represent the people—virtually, but it was the people that the House was to virtually represent. It represented the people through elections conducted in boroughs throughout Britain. Those boroughs were not evenly or equally crafted. Some were big, some were small, and the electors in those boroughs were not always or only the people. But in a “good enough for government” sense, the idea was that the people would be represented in the Commons, while the aristocracy would be represented in the House of Lords. But the king corrupted this balance. In a bunch of boroughs—so called “rotten boroughs”—the king effectively controlled who was elected to Parliament. Those members were therefore not independent of the king. Those members were directly dependent on the king. They were therefore a corruption of an institution meant to represent not the king, but the people.
85
two researchers at Harvard collected 325 usages of the term “corruption” by the Framers in the time surrounding the framing of the Constitution. Of those, in more than half of the cases—57 percent—
the Framers were discussing corruption of institutions, not individuals. By contrast, discussion of quid pro quo corruption was rare—only six instances, and all of them focused on corruption of individuals.
86
Remember, a super PAC is a political action committee that can take unlimited contributions, so long as it does not coordinate with any candidate or coordinating committee. The Supreme Court didn’t create super PACs directly. Instead,
it was a lower court that thought that Citizens United entailed that super PACs were protected by the First Amendment. As Chief Judge Sentelle reasoned in SpeechNow v. FEC,37 if an individual or a corporation is free to spend unlimited amounts independent of a political campaign, an individual or a corporation must be free to contribute unlimited amounts to a political action committee that will spend its money independently of a political campaign.
87
The Republican candidates suffered the indignity of competing in the
Sheldon Adelson primary”—for a prize of hundreds of millions of dollars in campaign spending. Marco Rubio was even driven to say that “billionaires didn’t have enough influence” in our political system while competing in the Koch brothers’ primary (they promised to spend close to $1 billion in 2016).
88
we don’t actually have much “Citizens United speech” independent of super PAC speech.
Not many rich people, however, have taken advantage of their rights.45 There are a few. They are famous. But most rich people hesitate before putting their name on the line pushing one politician over another. Most seem to feel that that’s one entitlement too far. That pressure is even greater with corporations. Very quickly after Citizens United, corporations discovered the high cost of free speech. Target, for example, became its own name—a target—when it supported an antigay candidate for governor in Minnesota. Very quickly, it found its stores being picketed all across the country. Very quickly it decided to back down.
89
I expect that if the super PAC option wasn’t an option, and if elections were otherwise publicly funded, there would be a very small return to a corporation spending money in an election, which means
because remember, if there isn’t a return, there’s little reason to expect them to act—there would be very few which would actually do it.
90
I want to make a brief point about “corruption.” I come from a software development background. When I use the word corruption, it isn’t a moral judgment. It is
design judgment. When a file or application becomes corrupted, it isn’t because the developer is bad or evil. It’s because there’s a mistake in the design and architecture. The fact that the job description of a politician in the US has become primarily fundraiser is a design problem. It’s broken and must be fixed—before it’s too late.
91
Our Republic has been corrupted, because
we’ve allowed it to evolve a structure of influence that denies the equality of citizens. That inequality is a corruption of the idea of a “representative democracy,” or of what the Framers would have called “a Republic.”
92
I don’t care who does the electing, as long as
I get to do the nominating.” That’s precisely the idea behind both of these schemes—a multistage process, with a biased filter in the first stage, intended to benefit those who control the “nominating” power.
93
If you’ve become good at your job, it’s because you’ve become good at saying what you need to say to make the people you’re begging for money
give you that money. If you’ve become good, it’s because you’ve become responsive to them.
94
In 2014, that number was 57,854. That is, 57,854 gave the equivalent of $5,200 to candidates running for Congress. 57,854 is
.02 percent of America. .02 percent.
$5,200 is a lot of money. That’s the equivalent of what the average American spends each year on her retirement.18 It’s also a handy target for candidates as they try to raise money for their campaigns. If we’re trying to imagine who the relevant funders of campaigns are—those who give enough to matter to a candidate as that candidate is thinking about the positions that candidate should take—$5,200 is not a bad target. I’ve had many incumbents tell me it is wildly too low. I’ve had some tell me it “gets someone on the radar.”
95
We have concentrated the funding of campaigns in the
tiniest fraction of us, and thus made candidates for public office dependent upon this tiny fraction of us. They do the nominating while we do the electing.
96
An institution could be corrupt even if
every individual within that institution was not corrupt. The only wrong necessarily attaching to any individual within a corrupt institution is the wrong of not repairing the corruption.
97
But to say that Congress has no power to equalize speech cannot mean that Congress has no power to eliminate tweedism. For tweedism isn’t speech. Tweedism is a structure that has the formal effect of rendering certain citizens less represented.
a structure that “defeat[s] the right of the people to choose representatives for Congress” is one that Congress can regulate. Indeed, it is one that Congress must regulate, if the “great purposes” of the Constitution are to be respected.
98
In states where Republicans drew the lines, they won
72 percent of the seats with just 53 percent of the votes; in states where Democrats drew the lines, they won 71 percent of the seats with just 56 percent of the vote.25 Eliminating winner-take-all districts (as was the practice at the founding26) would be a powerful next step. And adding a procedure by which people could rank their choices (“ranked choice voting”) would give more people a better chance of real representation.
99
As Milton Friedman famously wrote, we certainly want competition within the rules of a free market.6 But we don’t want
the competitors in that market to compete to define those rules.
100
The incumbent large firms are politically powerful but not necessarily the most efficient. Thus
they have a strong incentive to manipulate the power of the state to preserve their market power through political means. The winner take all economy, in other words, breeds crony capitalism
101
Neither political party can afford to make Wall Street, or pharmaceuticals, or the energy sector,
their enemy. Both parties are thus held hostage by these special interests, because both parties need their campaign contributions.
102
Directly or indirectly, the lobbyists help fund campaigns.
Directly, by giving money themselves. Indirectly, by steering the funds of their clients to the candidates the lobbyists select. This sounds like a burden for the lobbyists. In fact, it is an incredible benefit. Because as the members become dependent on the lobbyists, they become responsive to the requests of the lobbyists. And to the extent they become responsive, the lobbyists have a valuable product to sell to their clients.
103
It’s one thing to say that I have a constitutional right to spend my money to support my ideas. (Indeed, so has the Court directly held in Buckley v. Valeo [1976].) But it is quite a different thing to say that I have right to
contribute unlimited amounts to an entity that will then spend it to support my ideas.
104
Corporations and unions didn’t need to spend their money directly. They could give their money to a super PAC, which would spend it for them. And even better, because of a loophole in the way the law requires disclosures, corporations and unions could effectively use a super PAC to launder their contribution. All contributions to super PACs must be disclosed. But
if the entity giving money to a super PAC is itself a nonprofit, then all that must be disclosed is the name of that nonprofit. That nonprofit may or may not disclose its contributors.
105
In the 2014 election cycle, 5 percent of the money contributed to candidates or organizations was “dark.” 1.5 percent was semi-dark. So that means, we know with certainty where 93.5 percent of the money came from in 2014.6 Dark money is a problem. But a much more important problem than the dark money is
the super PAC itself.
106
Thus the Supreme Court has upheld the power of the government to decide that large contributors create a risk of improper quid pro quo corruption. To avoid that improper dependence,
the Supreme Court has permitted Congress to limit such large contributions.
[read Buckley v Valeo and Mccutcheon v FEC]
107
But, you wonder, doesn’t extremism hurt a candidate’s chances with swing voters? Of course it does. But that doesn’t matter if
swing voters don’t matter—which they don’t in so-called “safe seats.”
108
But at a minimum the correlation should concern us: On some issues, the parties become more united—those issues that appeal to corporate America. On other issues, the parties become more divided—
the more campaign funds an issue inspires, the more extremely it gets framed. In both cases, the change correlates with a strategy designed to maximize campaign cash, while weakening the connection between what Congress does (or at least campaigns on) and the desires of ordinary Americans.
109
The insiders must learn a dance that never seems like an exchange. Demands or requests can be made. (Day one: “Congresswoman, our clients really need you to see how harmful H.R. 2322 will be to their interests.”) But those demands are unconnected to the gifts that are given.
Day two: “Congresswoman, we’d love to hold a fund-raiser for you.”) Even congressmen (or at least their staff) can put one and one together. And even when the one doesn’t follow the other, everyone understands how to count chits. There’s nothing cheap or insincere about it. Indeed, the lobbyist is providing something of value, and the member is getting something she needs. And so long as each part in this exchange remains allowed, the dance can continue—openly and notoriously—without anyone feeling wrong or used.
110
many, including the American Bar Association’s Task Force on Federal Lobbying Laws, have recommended “so far as practicable, those who advocate to elected officials do not
raise funds for them, and those who raise funds for them do not advocate to them.”
111
But not every issue the member wants to support has the same “subsidy” behind it. If, for example, a member went to Washington after campaigning on two issues, the need to stop Internet “piracy” and the need to help working mothers on welfare, on day one she’d find a line of lobbyists around the block eager to help with the first issue, but none there to help her with the second. That difference would be for all the obvious reasons. And the consequence
would be that her work would get skewed relative to her desires going in.
112
Look at the trend lines for any number of key economic indicators—wages, mergers and acquisitions, manufacturing jobs, union representation, executive compensation, corporate tax rates—and it’s clear that right around 1981,
the year Welch took over, things started to go off the rails.
Whereas CEOs made less than 50 times the annual worker salary when Welch took over, they were making 368 times as much by the end of his term. Put another way, CEO compensation has grown by 940 percent since 1978. During the same time, the average worker’s wage has increased by 12 percent.
113
Welchism has at its heart the conviction that companies must
prioritize profits for shareholders above all else, that executives are entitled to enormous wealth and minimal accountability, and that everyday employees deserve nothing more than their last paycheck.
114
From 1948 to 1979, worker pay grew in
tandem with worker productivity. That is, as companies became more efficient and profitable, and the economy expanded, employees saw their compensation increase at roughly the same rate.
115
After growing between 5 and 9 percent annually from the late 1960s until 1981, blue-collar workers saw
those gains erased. During Welch’s twenty years as CEO, factory workers’ wages never increased by more than 4 percent a year. Often the raises were just 2 percent, which at times lagged inflation. The share of aggregate income funneled to the middle class followed an almost identical trajectory over the last forty years of the twentieth century, falling from about 53 percent in the late 1960s to less than 47 percent in 2001.
116
Workers rarely fared so well at their new employers. Instead of having a job at GE, a stalwart of the Dow Jones Industrial Average and a reliably decent employer, the workers were funneled to
contractors that typically offered inferior pay, fewer benefits, and little job security. “The idea of who belongs inside the firm and who belongs outside the firm was really pervasive in the ’80s,” said Louis Hyman, the Cornell professor. “That leads to workplaces where you have people who work side by side, but some are considered first-class citizens, and some are considered second-class citizens. It started with janitors and food service workers, but by the late ’80s, it becomes all kinds of workers, and office workers especially.”
117
By the late 1980s, major corporations were spending around 30 percent of their profits purchasing their own shares. That figure rose to about 50 percent in the 1990s. In theory, the money spent on buybacks and dividends is supposed to trickle down to everyday Americans in the form of richer retirement accounts, as the fund managers who hold so much GE stock dutifully increase the value of the everyman’s 401(k). In practice, however,
research has shown that buybacks exacerbate inequality.
Looking at the S&P 500, he found that between 2003 and 2012, companies deployed a full 54 percent of their earnings—some $2.4 trillion—to buy back their own stock. Another 37 percent of earnings during that period was spent on dividends paid out to shareholders. “That left very little for investments in productive capabilities or higher incomes for employees,” he wrote. And as for those 401(k)s? At the end of the day, workers don’t benefit from buybacks and dividends because on balance, they own relatively little stock. So why then, were executives so enamored with buybacks and dividends? Lazonick had an simple explanation: “Stock-based instruments make up the majority of their pay,” he said, “and in the short term buybacks drive up stock prices.” Given these dynamics, “the very people we rely on to make investments in the productive capabilities that will increase our shared prosperity are instead devoting most of their companies’ profits to uses that will increase their own prosperity.” Had so much of the wealth created by corporations not been “reverse distributed” back to investors in the form of buybacks and dividends over the past forty-five years, and had pay kept pace with productivity, the average full-time American worker would be making about $102,000 annually, roughly double what he or she is today.
118
The pursuit of shareholder value had become all consuming, and for Welch and his ilk,
the layoffs, the ceaseless disposals and acquisitions, the fuzzy accounting—it was all the cost of playing the game. He had identified his goals—to keep earnings endlessly ticking up, and to create the most valuable company in the world—and he would do whatever it took to win.
119
In the 1980s alone, the top 500 companies in America reduced their head count by a combined
three million people.
120
The wave of downsizing that Welch unleashed quickly began to reshape the distribution of wealth nationwide. Whereas productivity and worker pay had more or less risen and fallen in tandem over the years,
that was no longer the case. Now, corporate profits began to explode and the earnings of CEOs skyrocketed, but the wealth of everyday workers barely rose at all. Even as thousands of people were suddenly unemployed, sapped of incomes and purchasing power, their former employers were being bid up on the stock market, creating billions of dollars in new value for investors.
121
Executives’ faith in the easy math of mass layoffs—that fewer employees will mean higher profits, that labor is a cost, not an asset—persists in spite
of a growing body of research debunking that dogma. “The research evidence has not found any support for the overall idea that layoffs help firm performance,” said Peter Cappelli, a professor at the University of Pennsylvania’s Wharton School of Business. “There is no evidence that cutting to improve profitability helps beyond the immediate, short-term accounting bump.” One study showed that when retailers cut staff, any short-term cost savings were overshadowed by long-term losses. It turns out that when stores are staffed by a skeleton crew, sales dry up quickly. And
122
Whereas in the 1980s less than half of corporate profits were going back to investors, over the past decade
that figure has soared to 93%
123
In the United States, life expectancy has fallen in recent years, reversing a century’s worth of progress. Americans—mostly the working class—are
dying earlier from suicide, drug overdoses, alcoholism, and poor health, what economists Anne Case and Angus Deaton refer to as “deaths of despair.”
124
Over time, I became cognizant that there was a reason why American society didn’t trust business,” he said. “And it had a lot to do with wage arbitrage, outsourcing—things that really had a negative impact on the high-end industrial worker that was so essential. In a town like Erie, Pennsylvania, people don’t go from working at GE, making $36 an hour, to working at factory X making $30 an hour. They go from earning $36 an hour to earning
$15 an hour. And that gap is a hugely negative impact. I get that
125
The past two centuries have seen explosive growth in both population and prosperity worldwide. Per capita income is now
ten times what it was in 1850. The average Italian is fifteen times as wealthy as in 1880. And the global economy? It is now 250 times what it was before the Industrial Revolution–when nearly everyone, everywhere was still poor, hungry, dirty, afraid, stupid, sick, and ugly.
whereas today, even sub-Saharan Africa outperforms the most affluent countries of 1800 (despite the fact that incomes in the Congo have hardly changed in the last 200 years).
126
127
The best minds of my generation are thinking about how to
make people click ads,” a former math whiz at Facebook recently lamented.
128
Poverty is fundamentally about a lack of cash. It’s not about stupidity,” stresses the economist Joseph Hanlon. “You can’t pull yourself up by your bootstraps if
if you have no boots.”
129
In fact, a major study by the World Bank demonstrated that in 82% of all researched cases in Africa, Latin America, and Asia, alcohol and tobacco consumption
actually declined.20 But it gets even stranger. In Liberia, an experiment was conducted to see what would happen if you give $200 to the shiftiest of the poor. Alcoholics, addicts, and petty criminals were rounded up from the slums. Three years later, what had they spent the money on? Food, clothing, medicine, and small businesses.
130
The “Mincome cohort” studied harder and faster. In the end,
total work hours only notched down 1% for men, 3% for married women, and 5% for unmarried women. Men who were family breadwinners hardly worked less at all, while new mothers used the cash assistance to take several months’ maternity leave, and students to stay in school longer.33 Forget’s most remarkable finding, though, was that hospitalizations decreased by as much as 8.5%. Considering the size of public spending on healthcare in the developed world, the financial implications were huge. Several years into the experiment, domestic violence was also down, as were mental-health complaints. Mincome had made the whole town healthier.
131
Behavioral problems among children who had been lifted out of poverty went down
40%, putting them in the same range as their peers who had never known privation. Juvenile crime rates among the Cherokee also declined, along with drug and alcohol use, while their school scores improved markedly.
132
Parents who were lifted out of poverty now reported having more time for their children. They
weren’t working any less though, Costello discovered. Mothers and fathers alike were putting in just as many hours as before the casino opened. More than anything, says tribe member Vickie L. Bradley, the money helped ease the pressure on families, so the energy they’d spent worrying about money was now freed up for their children.
133
Greg Duncan, a professor at the University of California, calculated that lifting an American family out of poverty takes an average of about $4,500 annually–less than the Cherokee casino payouts. In the end, the return on this investment, per child, would be:
12.5% more hours worked $3,000 annual savings on welfare $50,000–$100,000 additional lifetime earnings $10,000–$20,000 additional state tax revenues Professor Duncan concluded that combating poverty “pays for itself by the time the poor children have reached middle age.”
134
A 2013 study estimated the costs of child poverty in the U.S. at as much as
$500 billion a year. Kids who grow up poor end up with two years’ less educational attainment, work 450 fewer hours per year, and run three times the risk of all-round bad health than those raised in families that are well off. Investments in education won’t really help these kids, the researchers say.16 They have to get above the poverty line first.
135
The crux of poverty, he says, is that
it annihilates the future.” All that remains is surviving in the here and now. He also marvels at “how people take it for granted that they have a right to preach at you and pray over you as soon as your income falls below a certain level.”
136
Imagine this: A welfare mother with two kids has her benefits cut because she hasn’t sufficiently developed her job skills. The government saves a couple thousand bucks, but the hidden costs of
children who will consequently grow up poor, eat poor food, get poor grades at school, and be more likely to have a run-in with the law, are many times greater.
137
The current tangle of red tape keeps people trapped in poverty. It actually produces dependence. Whereas employees are expected to demonstrate their strengths, social services expects claimants to
demonstrate their shortcomings; to prove over and over that an illness is sufficiently debilitating, that a depression is sufficiently bleak, and that chances of getting hired are sufficiently slim. Otherwise your benefits are cut. Forms, interviews, checks, appeals, assessments, consultations, and then still more forms–every application for assistance has its own debasing, money-guzzling protocol. “It tramples on privacy and self-respect in a way inconceivable to anyone outside the benefit system,” says one British social services worker. “It creates a noxious fog of suspicion.”
138
Well, that’s easy, you say: The GDP is the sum of all goods and services that a country produces, corrected for seasonal fluctuations, inflation, and perhaps purchasing power. To which Bastiat would respond: You’ve overlooked a huge part of the picture.
Community service, clean air, free refills on the house–none of these things make the GDP an iota bigger.
account for the first time the country’s formidable underground economy of tax evaders and illegal workers.”4 And that’s to say nothing of all the unpaid labor that doesn’t even qualify as part of the black market, from volunteering to childcare to cooking, which together represents more than half of all our work.
The GDP also does a poor job of calculating advances in knowledge. Our computers, cameras, and phones are all smarter, speedier, and snazzier than ever, but also cheaper, and therefore they scarcely figure.
139
Besides being blind to lots of good things, the GDP also benefits from all manner of human suffering.
Gridlock, drug abuse, adultery? Goldmines for gas stations, rehab centers, and divorce attorneys. If you were the GDP, your ideal citizen would be a compulsive gambler with cancer who’s going through a drawn-out divorce that he copes with by popping fistfuls of Prozac and going berserk on Black Friday. Environmental pollution even does double duty: One company makes a mint by cutting corners while another is paid to clean up the mess.
Mental illness, obesity, pollution, crime–in terms of the GDP, the more the better.
140
At the beginning of the twentieth century, Henry Ford conducted a series of experiments which demonstrated that his factory workers were most productive when they worked a forty-hour week. Working an additional twenty hours would pay off for
four weeks, but after that, productivity declined.
141
On January 1, 1974, he imposed a three-day workweek. Employers were not permitted to use more than three days’ electricity until energy reserves had recovered. Steel magnates predicted that industrial production would plunge 50%. Government ministers feared a catastrophe. When the five-day workweek was reinstated in March 1974, officials set about calculating the total extent of production losses. They had trouble believing their eyes: The grand total was
6%
142
But the irony is that it was precisely in overworked, industrialized cities that more and more people sought refuge in the
bottle. Now we’re living in a different era, but the story is the same: In overworked countries like Japan, Turkey, and, of course, the United States, people watch an absurd amount of television. Up to five hours a day in the U.S., which adds up to nine years over a lifetime. American children spend half again as much time in front of the TV as they do at school.56
143
A study conducted at Harvard found that Reagan-era tax cuts sparked a mass career switch among the country’s brightest minds, from teachers and engineers to bankers and accountants. Whereas in 1970 twice as many male Harvard grads were still opting for a life devoted to research over banking, twenty years later
the balance had flipped, with one and a half times as many alumni employed in finance.
144
For every dollar a bank earns, an estimated equivalent of 60 cents is destroyed elsewhere in the economic chain. Conversely, for every dollar a researcher earns,
a value of at least $5–and often much more–is pumped back into the economy.22 Higher taxes for top earners would serve, in Harvard science-speak, “to reallocate talented individuals from professions that cause negative externalities to those that cause positive externalities.”
145
Instead, we should be posing a different question altogether: Which knowledge and skills do we want our children to have in 2030? Then,
instead of anticipating and adapting, we’d be focusing on steering and creating. Instead of wondering what we need to do to make a living in this or that bullshit job, we could ponder how we want to make a living. This is a question no trend watcher can answer. How could they? They only follow the trends, they don’t make them. That part is up to us.
146
Productivity is at record levels, innovation has never been faster, and yet at the same time,
we have a falling median income and we have fewer jobs.”
147
“I have one opinion–one should evaluate things–which is strongly held. I’m never unhappy with the results. I haven’t yet seen a result I didn’t
like
148
Ethics, too, favors open borders. Say John from Texas is dying of hunger. He asks me for food, but I refuse. If John dies, is it my fault? Arguably, I merely allowed him to die, which while not exactly benevolent, isn’t exactly murder either. Now imagine that John doesn’t ask for food, but goes off to the market, where he’ll find plenty of people willing to exchange their goods for work that he can do in return. This time though, I hire a couple of heavily armed baddies to block his way. John dies of starvation a few days later. Can I still claim innocence?
The story of John is the story of our “everything except labor” brand of globalization.23 Billions of people are forced to sell their labor at a fraction of the price that they would get for it in the Land of Plenty, all because of borders. Borders are the single biggest cause of discrimination in all of world history. Inequality gaps between people living in the same country are nothing in comparison to those between separated global citizenries.
149
A person living at the poverty line in the U.S. belongs to the richest
14% of the world population; someone earning a median wage belongs to the richest 4%.
150
Take a Somalian toddler. She has a 20% probability of dying before reaching the age of five. Now compare: American frontline soldiers had a mortality rate of 6.7% in the Civil War, 1.8% in World War II, and 0.5% in the Vietnam War.30 Yet we won’t hesitate to send that Somalian toddler back if it turns out
her mother isnt a “real” refuge
151
A Mexican citizen living and working in the U.S. earns more than
twice as much as a compatriot still living in Mexico. An American earns nearly three times as much for the same work as a Bolivian, even when they are of the same skill level, age, and sex. With a comparable Nigerian, the difference is a factor of 8.5–and that’s adjusted for purchasing power in the two countries.
152
Researchers at Yale University have shown that educated people are more unshakable in their
convictions than anybody.2 After all, an education gives you tools to defend your opinions. Intelligent people are highly practiced in finding arguments, experts, and studies that underpin their preexisting beliefs, and the Internet has made it easier than ever to be consumers of our own opinions, with another piece of evidence always just a mouse-click away.
discovered that people are most likely to change their opinions if you confront them with new and disagreeable facts as directly as possible.
153
Stop for a moment to ponder the billions of tax dollars being pumped into training society’s best brains, all so they
can learn how to exploit other people as efficiently as possible, and it makes your head spin.
154
Old corruption system
The “Old Corruption” system was a term used (mostly by reformers and critics in the late 18th and early 19th centuries) to describe the deeply corrupt and undemocratic political system of Britain before the Reform Act of 1832.
Key Features of the “Old Corruption” System:
1. Rotten Boroughs
• Tiny or depopulated areas still elected MPs, often controlled by a patron (a duke, lord, or rich man).
• Votes could be bought or dictated.
2. Pocket Boroughs
• Similar to rotten boroughs, but the term emphasizes direct control by a single person. The MP was effectively “in their pocket.”
3. No Representation for Industrial Cities
• Big new cities like Manchester, Birmingham, and Leeds had no MPs at all, while tiny villages did.
4. Restricted Franchise
• Only a tiny fraction of men (and no women) could vote—often under 5% of the population.
• Property requirements meant voting was for landowners and elites.
5. Sale of Offices and Titles
• Government posts and even church positions could be bought or traded for political loyalty.
• Rich families could buy influence, ensuring a closed, elite-run system.
6. Royal and Aristocratic Influence
• The king, nobles, and their allies controlled much of Parliament through appointments, bribes, and boroughs.
• Many MPs owed their seats not to voters but to patrons or the crown.
155
Additive
An additive is any substance added to food during processing or preparation to improve its taste, appearance, shelf life, texture, or safety.
There are several types of food additives, including:
1. Preservatives – prevent spoilage (e.g. sodium benzoate, BHA, nitrates).
2. Colorants – make food look more appealing (e.g. Red 40, Yellow 5).
3. Flavor enhancers – intensify taste (e.g. monosodium glutamate, or MSG).
4. Sweeteners – replace sugar (e.g. aspartame, sucralose).
5. Emulsifiers & stabilizers – keep texture consistent (e.g. lecithin, carrageenan).
6. Thickeners – give body to sauces or dressings (e.g. xanthan gum, guar gum).
7. Anti-caking agents – keep powders from clumping (e.g. silicon dioxide).
Some are harmless or even beneficial, but others are controversial or potentially harmful—especially with long-term exposure.
156
157
woman who leave their abusive partners have a
75% greater risk of being killed than those who stay.
158
It is important to note that a survivor parent’s decision to leave an abusive relationship may leave them without
- the financial resources to care for the child and might result in loss of employment, housing, and childcare.
The survivor parent may stay in the relationship as a protecgtive response, believing that the perpetrator will do more serious harm if the survivor parent tries to leave.
159
It is common for the preptrator to use the children to
- control the survivor parent. Perpetrators may threaten to gain sole custody, kill, kidnap, or otherewise harm children if the survivor parent leaves. Services, planning, and hearings should be conducted with the safety and well-being of the children as a primary concern and in the context of domestic violence dynamics.
160
When possible, keeping the children and survivor parent safe and together is
- preferred. If separation must occur due to safety concerns, judges can request input from the survivor parent about placement for the children with relatives or fictive kin who the survivor parent trusts. This should be a time-limited placement that allows for safe visitation by the survivor parent and should address any safety concerns that the survivor parent identifies.
161
Ordering anger management classes is not recommended since perpetrators can use information
- information from those classes to become more effective at controlling their intimate partners while minimizing the visibility of their possessive behavior, parenting choices, and coercive control.
162
Batteres Intervention and Prevention Programs (BIPPs) are designed to give clients
- clients the skills to treat their partners and children with respect and handle conflict without violence. However, these programs cannot guarantee safety for survivor parents, or “fix” someone who has chosen to utilize abusive and coercive behaviors that harm and disrupt the family functioning of the survivor and their children.
163
Increasing the safety of a domestic violence survivor is inextricably linked to
- increasing the safety of their children. Courts can support survivor safety by encouraging DFPS to connect the survivor to informed safety and support services, legal services, housing support, and other economic resources. Encouraging this collaboration between the department and the survivor can enhance safety of the children by helping to establish long-term safety and stability.
164
“Beyond this, he needs to know that he has a right to his good fortune.”20 Many people feel uncomfortable driving past slums on the way to tropical beach getaways. What they need is a
model of society in which the inequality they observe is part of a larger design that works to the betterment of all people.
165
Instead, inequality is necessary, even celebrated, because
it is the natural outcome of an economic system that provides the greatest good to the greatest number.
166
The price mechanism decides based on people’s willingness to pay, which is partly based on the benefit they receive from a shovel but also
reflects how rich they are. So the venture capitalist who works at home can afford a shovel, but not the single mother who will be fired if she can’t get to work. In most cases, we rely on prices because alternate means of distributing goods have their own problems: Could you imagine if the hardware store asked people to apply for snow shovels by explaining how much they needed them?
167
The business community and the rich, which obviously overlapped, formed the major interest groups contesting the economic order of postwar America, when tax rates as high as 91 percent funded federal government programs aimed at helping the poor, protecting ordinary families from economic risks, and regulating the private sector. But corporate executives and the wealthy couldn’t just demand a better deal for themselves. Instead,
they needed a conceptual framework that showed why their preferred policies were good for society as a whole (and only incidentally good for them).
168
supply-side economics. According to this doctrine
reducing barriers to “supply,” such as taxes and regulations, is the key to unleashing entrepreneurial activity and boosting economic growth. In particular, lower tax rates could increase growth enough to generate higher tax revenues—an idea now referred to as the Laffer Curve (supposedly originally sketched on a restaurant napkin). The general idea that lowering taxes would increase growth by encouraging more people to save, invest, and work came straight out of Economics 101, although few people at the time thought tax revenues would actually rise as a result.*2
169
As president, Reagan backed up words with action. The centerpiece of his first year in office was the Economic Recovery Tax Act of 1981, which
slashed income taxes, with the top rate falling from 70 percent to 50 percent. (The Tax Reform Act of 1986 later lowered the top rate to 28 percent.) Reagan pressed his staff to reduce the burden of government regulation.
170
In a rich, post-industrial society, where most people walk around with supercomputers in their pockets and you can have virtually anything delivered to your doorstep overnight, it seems wrong that people who work should
have to live in poverty. Yet in America, there are more than ten million members of the working poor: people in the workforce whose household income is below the poverty line.
171
Any change in the minimum wage would have different effects on different groups of people, and should also be compared with other policies that could help the working poor—such as
the negative income tax (a cash grant to low-income households, similar to today’s Earned Income Tax Credit) favored by Milton Friedman, or the guaranteed minimum income that Friedrich Hayek assumed would exist.
172
At that point, the workers’ wages are equal to their marginal product: the amount of value that each person contributes to the company. In Henry Hazlitt’s words, “The more [an individual worker] produces, the more his services are worth to consumers, and hence to employers. And the more he is worth to employers, the more he will be paid.” But..
This assumes perfect knowledge, and that it is worth it to achieve perfect knowledge, about the relative skills of workers.
173
However, the simple principle that pay equals marginal product has little to do with how the world actually works. It certainly isn’t true for the economy as a whole. In the United States, growth in wages closely tracked increases in productivity from the late 1940s until the early 1970s; since then, however,
wages have risen much more slowly than productivity.44 This divergence highlights the possibility that pay levels are determined by negotiating power, not pure productivity.
174
if companies pay people less than their work is worth, they may choose to do something less valuable. But
this is not how the richest executives, fund managers, and technology entrepreneurs seem to make decisions; the money they already make so far dwarfs the amount they could consume in a lifetime that they are free to choose whatever job or activity gives them the most personal satisfaction. The ones who continue to work do so because they enjoy it or because it gives them a feeling of accomplishment that they cannot realize through other means.
175
In addition, awards linked to short-term targets that can be manipulated by insiders can
cause executives to make decisions that maximize their bonuses but harm the company in the long run. For example, if a CEO is evaluated based on her company’s quarterly results, she may boost profits by reducing expenditures on research and development—investments that only pay off years later. More worryingly, the allure of massive bonuses was one reason why major financial institutions were so eager to take on risk in the years leading up to the recent financial crisis. From mortgage brokers whose commissions were based on the value of the loans they originated to CEOs whose stock awards were closely tied to their banks’ stock price, people responded to these compensation plans by pumping up deal volumes and placing increasingly one-sided bets. This tremendous appetite for risk helped inflate the housing bubble and ensured that when it finally collapsed, some of the world’s largest financial institutions collapsed along with it. When anyone argues that excessive compensation is a problem, however, economism comes to the defense of the status quo. After the financial crisis, reforming compensation practices seemed to be one logical step toward building a safer financial system. However, the mere thought of government regulation provoked vociferous opposition from the usual suspects among think tanks and media outlets.
176
A higher tax rate reduces your expected profit, but we’re talking about people who
can already consume anything they want to and still have large amounts of money left over. At the very high end of the wealth distribution, people invest most of their money because there’s virtually nothing else they can do with it.
177
More detailed empirical research confirms that tax rates have at most a minor impact on people’s
willingness to work. According to a recent review by the economists Emmanuel Saez, Joel Slemrod, and Seth Giertz, the impact of a change in tax rates on working-age men is “close to zero,” although it is higher for married women. In other words, men work basically the same amount in any case, but married women are more likely to look for jobs if taxes are lower. Another review by Robert McClelland and Shannon Mok of the Congressional Budget Office estimates that a 10 percent increase in tax rates would reduce the total supply of labor by anywhere from 0 percent to 3 percent. The Congressional Research Service report also concluded, “Empirical evidence has generally found small and uncertain labor supply effects from higher wages.”
178
The moral argument for redistribution is that it is fair: after all, why should some people who work hard and follow the rules make thousands of times more money than other people who also work hard and follow the rules?*5 There is an economic argument as well, however:
that redistribution can increase the aggregate utility of society. The key here is the concept of diminishing marginal utility, which is an intimidating name for a commonsense idea. People generally gain utility by having more stuff—more food, more clothes, more toys—or at least most people behave that way. But the more you have of a particular thing, the less you benefit from getting even more of it. For example, a family moving from a thousand-square-foot house to a two-thousand-square-foot house gains enormous utility from the added space, while a different family living in a twenty-thousand-square-foot mansion might not even notice an extra thousand square feet. Similarly, $100 matters a lot more to a working mother making minimum wage than it does to Warren Buffett.
179
Kenneth Arrow, one of the towering figures in modern economics, in 1963 wrote a canonical paper explaining why health care does not behave like a textbook market. The most obvious anomaly,
he emphasized, is that we do not incur medical expenses regularly. In fact, we rarely need most forms of health care. When we do need them, we need them badly, however; illness itself can be costly, both in lost income and in reduced quality of life, even before the high cost of medical treatment. Because we are not regular consumers of health care, we lack both the knowledge and the experience necessary to be smart shoppers. If you are diagnosed with a severe condition, you may have to choose among a variety of treatments that meant nothing to you the day before while facing a huge degree of uncertainty about their outcomes.
180
“The usual absence of reliable information on the quality and prices of health care available to consumers…effectively converts them into
blind-folded shoppers in a bewildering shopping mall.”17 These are all reasons why people tend to put themselves in the hands of their doctors rather than trying to become experts themselves and why informed consumer choice is rare in the medical sphere.
181
Multiple subsequent studies have confirmed that “cost sharing is as likely to depress appropriate care as it is to
depress inappropriate care,” as the health law professor Timothy Jost concluded. A recent research paper found the same was true of high-deductible plans: when a company switched tens of thousands of employees from a traditional PPO (preferred provider organization) plan to a high-deductible plan, they reduced consumption of both valuable and wasteful procedures, with no evidence that they sought out lower prices for services.19 In other words, higher cost sharing does get people to buy less health care in the short term but does not make them better at getting value for their money.
182
Higher levels of cost sharing make poor families several times more likely to skip seeing a doctor for
their children’s asthma and are also correlated with a higher frequency of asthma attacks among children. When retired state employees in California faced higher co-payments, they cut back on both office visits and prescription drug utilization, as predicted, but hospital visits went up, particularly among the very sick.
183
The private health insurance market is nearly fatally flawed. The goal of any insurance company is to predict how much a given person will cost in claims over the next year and
charge a premium that more than covers those expected costs. The sicker the person, the higher the price. This is known in economics as price discrimination. In a competitive market, insurers will get better and better at figuring out how much you are likely to cost—by looking at your medical records, your genetic data, your purchasing patterns, and your online searches—so they can charge you the appropriate price. But if someone is likely to need $50,000 of health care, the appropriate price from the insurer’s perspective is more than $50,000, which most people obviously can’t afford. If you have a chronic illness, or your grandparents had expensive hereditary diseases, or you are simply old, the “correct” price could easily exceed your budget.25 [helping pay for other people's insurance is the price you pay for being lucky, counter to this is that this is why coprehensive health care doesn't work, the argument becomes less powerful when you're only paying for unexpected, high cost care. The market works fine for home and auto insurance, it can work here. Most people will pay more than they get because most won't need to use insurance, those who do will get a lot more back then they put in. This isn't the case when you already know everyone will go the doctor once a year, get basic prescrptions, etc so insurance has to charge more than that would otherwise cost]
184
The current system provides widespread but not universal access to health care by
(a) selling insurance in “competitive markets,” (b) forcing everyone to buy it, (c) providing subsidies to people who can’t afford it, (d) limiting the policies that insurers are allowed to sell, (e) restricting their ability to set prices, (f) subsidizing employer-sponsored plans because companies can get better deals than individuals, (g) penalizing people who get plans that we don’t like, and (h) reshuffling money among insurance companies. Surely, there must be another way.
[all of which could explain why healtchare operates differently than other markets]
185
In the United States, the most common label for this type of system is “single payer,” because
one entity would pay for most health-care expenses. (The term is not entirely accurate, because some countries actually have multiple payers even for basic services, but they are so heavily regulated that they essentially behave the same way.)
186
There are reasons to be skeptical about single payer.
The regulations necessary to implement such a system could end up enriching private interest groups with disproportionate influence over politicians (think about doctors, pharmaceutical companies, and medical device manufacturers) rather than improving the health of ordinary people. The bureaucracy that administers the system, unchecked by the pressure of competition, could impose its own layer of additional and excessive costs, as Friedman feared.33 In addition, if a single payer plan is successful in reducing spending, that could result in fewer people wanting to become doctors and fewer health-care providers investing in new technologies.
187
Defaults and foreclosures were particularly high among people who took out subprime mortgages:
loans designed for borrowers who were considered risky because of limited incomes, poor credit histories, or houses of questionable value. Traditionally, these people would have been shut out of the housing market by banks unwilling to take on the risk that they would default. Beginning in the 1990s, however, a resurgent subprime lending industry enabled millions of aspiring homeowners to buy or refinance houses with innovative new mortgage products. In addition to high interest charges, these loans included several complicated features such as floating interest rates, multiple payment options, prepayment penalties, and even negative amortization, which causes the total amount due to go up over time. By 2009, a staggering 40 percent of subprime mortgages were delinquent (more than thirty days overdue), and more than 15 percent were in the foreclosure process.4 If the housing collapse had only shattered the dreams of millions of families, things would have been bad enough. In addition, it effectively bankrupted most of the world’s largest financial institutions, which had placed massive bets on the housing market in general and on subprime borrowers in particular.
188
Complicated subprime mortgages would not have been possible in the “boring banking” system that lasted from
the 1930s to the 1970s.
[what is this]
189
With a traditional mortgage, a borrower would pay 20 percent down and then make monthly payments at a fixed interest rate for thirty years, after which she would own the house free and clear of debt. Only in 1982, with the passage of the Garn–St. Germain Depository Institutions Act, were
most banks allowed to offer virtually any mortgage features they wanted, including adjustable rates, interest-only payments, or negative amortization.8 The Garn–St. Germain Act was in part an attempt to help savings and loan associations find additional revenues, because higher interest rates at the time were driving up their costs, but deregulating the mortgage market was also part of the Reagan administration’s larger economic program. [what are these things]
190
The most extreme was probably the option adjustable-rate mortgage, or Option ARM, which allowed the borrower to decide how much to pay each month: she could even pay less than the interest on the loan, in which case
the total balance would go up from month to month. After a few years, the loan would convert into an ordinary adjustable-rate mortgage with a higher interest rate—at which point the monthly payment could easily double or triple, leading to default or, at best, the need to refinance.
191
Derivatives are essentially
side bets in financial markets. A credit default swap (CDS), for example, is a bet that some company will or will not default on its debt.
192
Securitization was
the state of the art in repackaging and redistributing risk. Although just about any financial asset can be securitized, the most popular raw material was mortgages, particularly subprime ones. First, mortgage originators sold individual loans to investment banks (Merrill Lynch, Goldman Sachs, and so on).*2 The banks then created trusts—separate legal entities—which bought the loans. The trusts paid for them by selling mortgage-backed securities (MBSs) to a new set of investors (hedge funds, pension funds, mutual funds, and so on).
193
In 1999, Congress approved the Gramm-Leach-Bliley Act, which allowed
investment banks, commercial banks, and insurance companies to combine into single firms for the first time since the 1930s. Gramm-Leach-Bliley rejected the long-held belief that risk-taking activities by investment banks could threaten the financial system. A year later, Congress passed the Commodity Futures Modernization Act, which, among other things, enshrined into law the nonregulation of over-the-counter derivatives.
194
In 2001, federal agencies gave banks new flexibility in determining how much capital they needed when investing in certain types of complex assets.15 Then, in 2004
the Securities and Exchange Commission allowed the largest investment banks to use their own, internal models to calculate their capital requirements. The premise was that banks had an interest in measuring their risk accurately and had “developed robust internal risk management practices,” so they could be trusted to regulate themselves effectively.
195
Consider the Option ARM, the emblematic mortgage of the subprime boom. In order to make a rational decision about an Option ARM, you would need to
understand how the product worked, how much interest rates might go up, and the potential range of future housing prices (which would determine whether or not you could refinance in the future). In retrospect, it is clear that many borrowers during the housing bubble had no idea how much risk they were assuming. Most people taking out ordinary adjustable-rate mortgages—not even the fancy Option ARMs—did not realize how much their interest rates could rise. As Option ARMs became more popular, the vast majority of borrowers were making only their minimum monthly payments and were therefore highly likely to default when the teaser period of low rates ended.21
196
So people tempted by the prospect of owning a house took out complex mortgages without asking questions. Still, however, few people sought out Option ARMs. Instead,
they had to be sold. Mortgage brokers actively pushed them onto customers by showing how low their initial monthly payments could be. Internal research by Washington Mutual, a large mortgage lender, indicated that people were more likely to buy an Option ARM if they knew less about the product; brokers often did their part by making sure that borrowers did not understand what they were signing up for.
197
But anyone who has ever worked at a large company—or read Dilbert, for that matter—knows that corporations are not ruthlessly efficient profit maximization machines, but collections of fallible and often self-interested human beings. In economics, this is known as the principal-agent problem:
the principal (company) can only act through agents (employees), who may not do what’s best for their principal.*4 Wall Street investment banks in particular are populated by highly competitive bankers, most of whose pay comes in an annual bonus that depends heavily on the fees they generated in the previous year. For the people who packaged and distributed MBSs and CDOs, those bonuses were based on the size of the deals they closed, not what happened later when housing prices started to fall.
198
Credit rating agencies such as Standard & Poor’s, Moody’s, and Fitch evaluate the riskiness of bonds, giving them grades like AAA, AA, A, BBB, BB, and so on, with the chance of default increasing as you move down the alphabet. These seemingly objective designations helped convince investors that MBSs and CDOs were safe investments. It was the investment bank managing a securitization, however, that chose the rating agency, which therefore
had the incentive to keep the bank happy. According to one insider, the banks said, “Hey, if you don’t [give me the rating I want], the guy across the street will. And we’ll give him all the business.”35 That business was vitally important to the rating agencies, whose revenues grew rapidly during the housing boom. At Moody’s, executives who thought the firm was giving overly generous grades found themselves out of a job.
199
The same story reads differently from the perspective of the losers, however. When a rich country like the United States increases trade with a poor country, some industries will lose jobs because of competition from cheaper foreign labor. This can mean concentrated layoffs in specific sectors, as has happened to American manufacturing. Although those job losses may be balanced by gains in other parts of the economy, longtime assembly-line workers at automotive parts manufacturers in the Midwest cannot
easily get hired by New Jersey pharmaceutical companies or Silicon Valley software firms.
200
In a developed economy like the United States, then, foreign trade adversely affects low-wage workers who can be replaced by even cheaper workers in developing countries. Advanced economies’ comparative advantage is not in labor-intensive sectors, but
in those industries with the highest productivity levels and the most skilled employees—software companies, not banana farms. Companies in these industries enjoy higher revenues and profits because they can now sell to customers all around the globe, enriching their shareholders and employees. Within a rich country, in short, the primary winners are people who are already well-off, and therefore one result of increased trade with poor countries is greater inequality within the U.S. workforce.
201
In theory, because trade makes the total pie bigger for everyone, both globally and within any one country, there should be a way to redistribute some of the gains from the winners (consumers and workers in export industries) to the losers (workers in industries exposed to foreign competition). In practice, however,
this would require an increase in taxes to pay additional benefits to the long-term unemployed—something that is virtually inconceivable in the contemporary American political landscape.
202
“The view now is that trade and globalisation have increased inequality in the U.S. by allowing more earning opportunities for those at the top and exposing ordinary workers to more competition.”20 In this setting, free trade policies present a trade-off between modestly greater overall welfare (largely in the form of cheaper consumer goods) and
worse outcomes for the working class, with the net result of increased inequality.
203
There are many reasons why the upper class has more political power than the middle class. Most obviously, they have the money: the richest 0.01 percent of households—that is, the top one-hundredth of the top one-hundredth of the income distribution—made more than
40 percent of all itemized political contributions in 2012.10
204
Economists at the International Monetary Fund studied the actual relationships between inequality, redistributive policies, and growth and found the opposite:
when other factors are controlled for, higher inequality (after taking into account redistributive policies such as taxes and transfers) is associated with slower economic expansion, and redistribution itself seems to have no impact on growth. They conclude, “On average, across countries and over time, the things that governments have typically done to redistribute do not seem to have led to bad growth outcomes, unless they were extreme. And the resulting narrowing of inequality helped support faster and more durable growth.”
205
ustin Wolfers and Jan Zilinsky identified several reasons why higher wages boost productivity:
they motivate people to work harder, they attract higher-skilled workers, and they reduce employee turnover, lowering hiring and training costs, among other things.
206
Here’s a breakdown comparing poverty, abuse investigations, and foster care populations by race:
White Children:
* Poverty: 42.5%
* Reports of Abuse Investigations: 43%
* Foster Care: 44%
* Analysis: Fairly proportional across all categories.
Black Children:
* Poverty: 22.3%
* Reports of Abuse Investigations: 22%
* Foster Care: 21%
* Analysis: Slight underrepresentation in foster care relative to poverty.
Hispanic Children:
* Poverty: 27.5%
* Reports of Abuse Investigations: 21%
* Foster Care: 21%
* Analysis: Underrepresentation in both foster care and investigations relative to poverty.
Native American Children:
* Poverty: 1.6%
* Reports of Abuse Investigations: 2%
* Foster Care: 2%
* Analysis: Overrepresentation in both investigations and foster care relative to their share of the population and poverty.
Summary:
* White children are represented proportionally in all areas.
* Black children are slightly underrepresented in foster care.
* Hispanic children are underrepresented in both investigations and foster care.
* Native American children are overrepresented in investigations and foster care.
207
Labor unions, and their ability to create a powerful collective voice for workers, played a huge role in building
the world’s largest, richest middle class. The success of American business of course played a major part as well, but it was unions’ strikes, and the millions of workers who took to the streets, that pressured companies to share their profits more fairly after World War II. Unions also played a crucial role in achieving many things that most Americans now take for granted: the eight-hour workday, employer-backed health coverage, paid vacations, paid sick days, safe workplaces. Indeed, unions were the major force in ending sweatshops, making coal mines safer, and eliminating many of the worst, most dangerous working conditions in the United States. “Factory jobs didn’t start as good jobs,” one union leader told me. “They were shit jobs. People got killed all the time. Unionization caused them to change that.”
208
DARVO
DARVO is an acronym that describes a common manipulation tactic used by abusers to avoid accountability and shift blame onto the victim. It stands for:
* Deny: The abuser denies the abusive behavior or the harm caused.
* Attack: The abuser attacks the victim’s credibility, character, or motives.
* Reverse Victim and Offender: The abuser portrays themselves as the victim while framing the actual victim as the offender.
Characteristics of DARVO Behavior
1. Gaslighting: Making the victim doubt their own experiences or perceptions.
2. Emotional Manipulation: Exploiting the victim’s guilt, shame, or confusion to deflect blame.
3. Public Smearing: Turning others against the victim by portraying them as irrational, malicious, or abusive.
4. Projection: Accusing the victim of the very behaviors the abuser is engaging in.
Impact on Victims
* Self-Doubt: Victims may begin to question their memories or actions.
* Isolation: Victims may lose support from others who believe the abuser’s narrative.
* Emotional Exhaustion: The constant need to defend oneself can take a toll on mental health.
209
But something else is also fundamentally awry: corporate profits and the stock market have repeatedly climbed to new records in recent years, while
wages for the typical American worker have either flatlined or inched up only slightly, after factoring in inflation.
210
The share of national income going to business profits has climbed to its highest level since World War II, while workers’ share of income (employee compensation, including benefits) has slid to its lowest level since
the 1940s.
211
Globalization has thrown American workers into
direct competition with lower-wage workers in China, India, Mexico, and other countries, exerting a downward pull on pay. Partly because of imports and outsourcing, more than sixty thousand American factories have closed since 2000, causing many unions and workers to grow gun-shy about making aggressive pay demands, which could lead to even more jobs being shipped overseas. All told, manufacturing employment has fallen from 19.5 million in 1979 to 12.8 million today, badly eroding organized labor’s longtime base.
212
From 1948 to 1973, worker productivity and hourly pay rose in tandem (productivity increased 95.7 percent during that span, while hourly compensation climbed 90.9 percent). But from 1973 to 2016
a period of waning union and worker power, productivity rose over six times as fast as compensation. This means that workers are receiving a far smaller share of the increased productivity that they’re providing to their employers. Hard though it may be to believe, average hourly pay for American workers remains below the levels of 1973, after accounting for inflation. CEOs at the largest 350 corporations make 312 times as much as the average worker, up from 59 times in 1990 and 20 times in 1965. Nearly fifty million American workers earn less than $15 an hour. For a full-time worker, that translates to $31,200 a year. The top 1 percent of households received 22 percent of the nation’s income in 2015, up from 9 percent in 1984. That’s the highest percentage the 1 percent has received since the 1920s.
Tags
213
The top 10 percent now receive nearly
half of the nation’s income (50 percent in 2015), up from one-third in the 1970s. (That of course leaves less for the bottom 90 percent of households.)
214
Janus Supreme Court case in which the conservative majority dealt a severe blow to labor by barring any
requirement that government employees pay union fees. That ruling is expected to cut many unions’ treasuries by 10 to 30 percent.
215
A survey done by the National Restaurant Association—echoing many other surveys—showed that Americans, by 71 percent to 22 percent, overwhelmingly support raising the $7.25 federal minimum wage to at least $10. A New York Times/CBS News poll found that Americans, by 85 percent to 14 percent, want a law that would guarantee paid sick leave for workers—60 percent of the nation’s low-wage workers don’t receive paid sick days. By 80 percent to 17 percent, that poll found that Americans want to require employers to provide paid leave to the parents of new children and to employees caring for sick family members. But
barring a political earthquake, because of corporate America’s huge power there seems little chance of Congress enacting either of these measures, fundamental worker protections that are nearly universal in other industrial nations.
216
In the 2015–16 election cycle, business outspent labor sixteen to one in the presidential, Senate, and House elections
$3.4 billion to $213 million. All of the nation’s labor unions taken together spend about $45 million a year for lobbying in Washington, while corporate America spends $3 billion. Little wonder that many lawmakers seem vastly more interested in cutting taxes on corporations and the so-called 1 percent than in helping the American worker.
[what about on state level]
217
Sadly, the United States has, in contrast to Western Europe, become a low-wage, low-road economy for millions of workers. Europeans often deride America’s $7.25-an-hour minimum wage jobs as McJobs, while McDonald’s workers in highly unionized Denmark
average more than $20 an hour. [how]
218
It would be great if all those $15-million-a-year CEOs and $250,000-a-year think tank senior fellows who denounce efforts to raise the minimum wage would spend a month or two living on $7.25 an hour. As for their oft-repeated advice that every $8-an-hour hamburger flipper, janitor, and home-care aide should go to college if they want to increase their pay, we as a nation are still going to need
millions of hamburger flippers, janitors, and home-care aides, and we shouldn’t consign them to poverty.
219
For low skill jobs companies don't care sbout finding the best workers
just ones that are good enough, so their's no need to pay more to get the best. Plus, it's incredibly difficult to aquire the necessa knowledge to determine who is the best.
220
Just a few decades ago, American corporations used to say that their role was to serve multiple
stakeholders, including workers and communities, and not just shareholders. But as America has moved away from its focus on the common good and on pulling together as a nation, a self-interested ideology focused on maximizing profits has taken firm hold, turbocharging the nation’s income inequality.
221
