Was American Revolution worth it? Revisiting the 'American Dream'

This July 4th we can stop and ponder: was the American Revolution worth it? Here's what NPR had to say about the "American Dream," i.e. social and economic upward mobility:

So, in the 19th century in the U.S., there's unbelievable economic mobility. If your father, for example, was an unskilled laborer, sort of the lowest end of the working hierarchy, then you had an 80 percent chance of doing some more skilled, more highly paid job than your father. At the same time, in the U.K., you had about a 50 percent chance. Half the children of unskilled laborers were unskilled laborers themselves. But by just after World War II, the U.S. and U.K. are converging and the differences start to disappear. And by 1970, the U.K. has pulled ahead. So, by the 1970s, the children of unskilled laborers are more likely to do be doing something higher paying in the U.K. than in the U.S.

Why is that so?  Why is the "American Dream" more alive in Britain today than in America?  There are two basic theories, according to NPR:

• By the 20th century, the U.S. was a mature economy like Britain, without all the exceptional opportunities for growth that exist in a young, expanding nation.

• In early-mid 20th century, the welfare state and education in Britain grew at a faster pace.

These two theories are not mutually exclusive.  I would also point out the respective rates of unionization in the U.S. and UK: 11.1 percent vs. 25.8 percent.  The average in OECD countries for trade union density is 17 percent.  Nordic socialist paradises Denmark, Finland, Norway and Sweden, which top almost every global indicator of economic and social well-being, have well over 50 percent of their workers in trade unions.  In the U.S. we blame falling wages all on globalization, but then we should ask why wages aren't falling elsewhere in G-8 countries?  Unions have a lot to do with it.

And then there is the U.S. tax system, which for the past 30 years has discriminated against wages in favor of income earned through interest and financial securities, thereby inflating inequality and crushing the "American Dream."  Remember this chart?:

Paul Pirie for WaPo  gives us more socio-economic data to ponder:

Most Americans work longer hours and have fewer paid vacations and benefits — including health care — than their counterparts in most advanced countries. Consider also that in the CIA World Factbook, the United States ranks 51st in life expectancy at birth. Working oneself into an early grave does not do much for one’s happiness quotient. This year the United States tied for 14th in “life satisfaction” on an annual quality-of-life study by the Organization for Economic Cooperation and Development. That puts the United States behind Canada (eighth) and Australia (12th). A report co-authored last year by the economist Jeffrey Sachs ranked the United States 10th in the world for happiness — again behind Canada and Australia. The Sachs study found that the United States has made “striking economic and technological progress over the past half century without gains in the self-reported happiness of the citizenry. Instead, uncertainties and anxieties are high, social and economic inequalities have widened considerably, social trust is in decline, and confidence in government is at an all-time low.”

But the difference is not just in economics or happiness, but also liberty.  Pirie points out that the British Empire (including Canada) abolished slavery in 1833, a full 32 years befoe the U.S. ratification of the 13th Amendment to the Constitution. Today's slavery is the U.S. prison-industrial complex that incarcerates more adults, in both absolute and relative terms, than any other country by a wide margin, including Red China and Russia.  

And speaking of Americans' liberty, I have three words for you: N-S-A.  Do I really need to say more?  It doesn't matter, the spooks are archiving this post anyway.

Today, having mentioned some of these factoids to a Brit, I joked about our reneging the Declaration of Independence.  He said Britons are glad America is no longer their problem; they can't imagine trying to govern the U.S.  I joked back, "Yeah, we have enough trouble dealing with places like Texas!"  Can you imagine British PM David Cameron trying to talk sense to the folks in U.S. flyover country? You start to wonder who got the better end of the deal when the U.S. declared its independence....   

Happy 4th of July, everybody!  Have a hotdog and light off a roman candle for me.

UPDATE: If you think I'm unpatriotic, here's a guy who really can't stand the 4th of July: "Hatetriot's Day: July 4th Is America's Crappiest Holiday."

Obama lacks the 'leadership thing'

What a shame for our country that President Obama is too aloof, timid and devoid of the "vision thing" to lead our country in these momentous, turbulent times.  What a wasted opportunity!  It seems Obama really wanted to be elected President, but he doesn't want to be President.  

Egan makes a wonderful point: "[Rep. Darrell] Issa is typical of Obama’s opponents; they are laughable, unserious people."  It's not like Obama is getting overshadowed by dynamic Republicans.  He's the brightest dull bulb in a very dim room.  

Bill Clinton would be rolling over these GOP clowns right now, with a smile and a twinkle in his eye to the roar of applause, and he'd love waking up every morning to do it all over again.  I miss Slick Willy.  

The Up-in-the-Air President

By Timothy Egan

June 27, 2013 | New York Times

URL: http://mobile.nytimes.com/blogs/opinionator/2013/06/27/the-up-in-the-air-president/

MB360: Record-high delinquency of student loans

I don't necessarily agree with MB360 that student loan debt is a "bubble" in the sense that speculation is driving up prices beyond any underpinning value.  A few weeks ago, Law professor Charles J. Reid explained why:

Student loans, however, are not like this, for the simple reason that they are non-dischargeable in bankruptcy. They are not a bubble and cannot become one. What they can become -- and show increasing signs of actually becoming -- is an anchor that is sinking the fortunes of an entire generation.

But just because they're not a bubble doesn't mean these levels of indebtedness are not extremely worrying. They are.  These delinquency rates mean that graduates are not getting the kinds of jobs they thought they would get thanks to their expensive degrees.  If higher education is not the key to employment and higher income, then what is?  So far, our nation does not have another answer.

The most delinquent loan of them all: Student debt delinquencies at record levels on the eve of rates doubling. Half of college graduates working in jobs where their degree is not required.

By mybudget360 

June 30, 2013

If the news for college graduates couldn’t get any better.  Our woefully motivated millionaire Congress is unable to figure out what is necessary to stop the doubling of interest rates on student debt.  While the Fed can turn on a dime to rectify zero percent interest rates for member banks, trying to help the youth of the nation well, that is just too hard to do.  Milling around through the data I found that for the first time in history, student debt had the highest delinquency rate of all household debts.  This is a big deal given that Americans now carry over $1 trillion in student debt and most of it is in the hands of the young.  At the nucleus of this argument is that people are going into too much debt to finance their educational pursuits.  Collecting tips at the Olive Garden is not exactly going to payoff that $50,000 in student debt.  How is it that the Fed can subsidize big banks with zero percent rates so they can speculate in real estate and other ventures while college graduates are now faced with the doubling of interest rates?

Half of college graduates not utilizing degree

Part of the problem is the voting power (or lack of it) from younger Americans.  Many simply do not vote.  And the baby boomer cohort is guiding many policies through elected officials although they only serve a tiny pizza slice of the baby boomers at that.  So with that said, the voice of the young is largely drowned out by big business and higher education has turned into a very lucrative private-public venture.  With that as our backdrop, half of college graduates are not utilizing their increasingly more expensive degrees:

Half of recent college graduates are either unemployed or underemployed.  And recently many have given up on pursuing careers where their degrees would be utilized and have taken up other jobs.  Other jobs that would have gone to lower skilled workers.  And of course, these workers get pushed down into a lower level of the economic ladder.  And what a shocker that as we go into the various levels of Dante’s Economic Inferno we find that 47.7 million Americans are on food stamps.

The above chart is rather sobering because many recent graduates are leaving school with high levels of debt.  Incomes for many of these graduates are not justifying the sky high rates of tuition at many schools.  Education is still a worthy venture and that is why people continue to go into high levels of debt for this.  Yet our banking system has been rather obsessed with one sector of our economy since the tech bubble burst in the early 2000s.  Real estate has seemed to dominate every big decision in the last decade to the detriment of creating an economy where millions of jobs are added to meet this more educated workforce.  That has clearly not happened.  Colleges are not going to turn their back on willing students with fresh loans in hand.  And I suppose that is the point.  Easy access to debt is like an aphrodisiac for the industry.  Go to any college campus and you will see palatial stadiums and massive buildings.  Do Olympic sized pools make people discover cures for modern diseases quicker?

What is even more troubling is that the underemployment rate for recent college graduates has trended up in the last few years while the overall unemployment rate has fallen:

No, we are not looking at a chart of Spain or Greece but a chart of US recent graduates.  A large part of the decline in the unemployment rate has come because the civilian employment population ratio continues to lower:

While many older Americans have dropped off the radar, many recent graduates simply do not have this option.  Many over the last few years have clearly opted to take on jobs that are underutilizing their degrees.  Does that mean they overpaid for their education?  $1 trillion in student debt seems to give us an answer that not only did many overpay, they didn’t even have the funds to afford it in the first place.  Higher tuition would make more sense if wages were also rising but that doesn’t seem to be the case with the new batch of graduates.  And many are falling into student debt quicksand and are unable to pay the loans they now have.

The most delinquent of them all

Student debt before the 2000s hit was typically a safe financial bet.  Delinquencies on student debt reflected this.  Today, we now find ourselves at the precipice of another bubble with student debt having the highest delinquency of any form of household debt:

You can see this rate doubling only in the last few years.  Keep in mind this is occurring without the potential doubling of student loan interest rates.  Rates are set to go from 3.4 percent to 6.8 percent if Congress does not act.  Amazingly, they are able to act quickly when it comes to the interest of large banking but to help the young in our nation?  No, let us go on holiday break and see what happens.

The rising delinquency rates are simply the last straw in the student debt bubble.  This is a bubble.  When you have prices soaring without any underlying economic change, you have a big problem on hand.  Keep in mind that what you can afford and the price of something are fully disengaged since the government will lend pretty much whatever is necessary to go to school.  If the cap was $100,000 a year, you can rest assured you will have some for-profits cropping up with $100,000 a year degrees.  Record delinquencies and half of recent graduates working in jobs where a massively expensive degree is not being used does not bode well for higher ed at the moment.  No one has a crystal ball on how this will play out but you can rest assured that something is going to give.  You don’t need a college degree to figure that one out.

One-page solution to climate change

You know why this cannot work, politically?  Because it involves a tax.  That's it.  Economically, it makes the best sense.  It wouldn't require any expensive red tape or intrusive regulation of business.  Just a tax.  But Americans hate the word "tax," especially new taxes, so this could never fly.  Too bad.  

But at least you and I know the solution.  We won't let our politics make us dumber, right??....

Economists Have A One-Page Solution To Climate Change

By David Kestenbaum

June 28, 2013 | NPR

Climate change seems like this complicated problem with a million pieces. But Henry Jacoby, an economist at MIT's business school, says there's really just one thing you need to do to solve the problem: Tax carbon emissions.

"If you let the economists write the legislation," Jacoby says, "it could be quite simple." He says he could fit the whole bill on one page.

Basically, Jacoby would tax fossil fuels in proportion to the amount of carbon they release. That would make coal, oil and natural gas more expensive. That's it; that's the whole plan.

Jacoby's colleague John Reilly told me the price of gasoline might rise by 25 cents a gallon in the first year. Over time, that would increase. By 2050, Reilly figures the carbon tax would add about $1 to the price of every gallon. Across the economy, prices of energy-intensive goods and services would rise. This would encourage people and businesses to be more efficient.

This is why economists love a carbon tax: One change to the tax code and the entire economy shifts to reduce carbon emissions. No complicated regulations. No rules for what kind of gas mileage cars have to get or what specific fraction of electricity has to come from wind or solar or renewables. That's by and large the way we do it now.

Reilly says the current web of rules is a more complicated and more expensive way of getting the same outcome as a carbon tax. The current system "pretty much is one of the worst ways we could do it," he says.

As with any fix for climate change, a carbon tax would hit some people harder than others. People with long commutes would pay more. People who work in coal mines could lose their jobs.

But here is where Reilly brings up what is perhaps the most surprising thing about a carbon tax: If you do it right, he says, carbon tax can be nearly painless for the economy as a whole.

Besides reducing carbon emissions, a carbon tax brings in a bunch of money — it's a tax after all. So, Reilly says, you can reduce, say, income tax to balance out the new taxes people are paying for carbon emissions. People pay more for gas, but they get to keep more of their income.

I called around and talked to a bunch of economists about this, and they said the basic idea was sound: If you give the carbon-tax money back by cutting income taxes, you can probably offset a lot of the pain.

President Obama has indicated he would support a market-based solution to climate change. But a carbon tax would, of course, require an act of Congress. And right now, that seems unlikely.

Sunlight Foundation: 31,385 people control USA

Here's yet another reason wealth inequality is bad: it gives inordinate power to the top one one-thousandth of the U.S. population.  This is plutocracy, not republican democracy!  

Here's how the Sunlight Foundation sums up its study:

The U.S. now has a campaign finance system where a tiny slice of individuals – 31,385 people, not even enough to fill half of a professional football stadium – collectively account for more than a quarter of all individual contributions (that we can trace), even though they represent just one in ten thousand Americans. Every single member of Congress elected in 2012 received a contribution from this group of individuals, and the vast majority of those elected (84 percent) received more money from the "1% of the 1%" than they did from all small donations (under $200).

A tiny sliver of Americans who can afford to give tens of thousands of dollars in a single election cycle have become the gatekeepers of public office in America. Through the growing congressional dependence on their contributions, they increasingly set the boundaries and limits of American political discourse – who can run for office, what their priorities should be and even what can be said in public. And in an era of unlimited campaign contributions, the power of the 1% of the 1% only stands to grow with each passing year.

We need shorter, publicly financed election campaigns!  Then a whole host of "unsolvable" policy problems would be solved naturally, almost immediately.

You gotta read the whole article to see who these people are, where they're from, and how much money they give to whom.  

The Political 1% of the 1% in 2012

By Lee Drutman

June 24, 2013 | Sunlight Foundation

More than a quarter of the nearly $6 billion in contributions from identifiable sources in the last campaign cycle came from just 31,385 individuals, a number equal to one ten-thousandth of the U.S. population.

In the first presidential election cycle since the Supreme Court's decision in Citizens United v. FEC, candidates got more money from a smaller percentage of the population than any year for which we have data, a new analysis of 2012 campaign finance giving by the Sunlight Foundation shows. These donors contributed 28.1 percent of all individual contributions in the 2012 cycle, a record high.

One sign of the reach of this elite “1% of the 1%”: Not a single member of the House or Senate elected last year won without financial assistance from this group. Money from the nation’s 31,385 biggest givers found its way into the coffers of every successful congressional candidate. And 84 percent of those elected in 2012 took more money from these 1% of the 1% donors than they did from all of their small donors (individuals who gave $200 or less) combined.

This elite 1% of the 1% dominated campaign giving even in a year when President Barack Obama reached new small donor frontiers (small donors are defined as individuals giving in increments of less than $200). In 2014, without a presidential race to attract small donors, all indicators are that the 1% of the 1% will occupy an even more central role in the money chase.

The nation’s biggest campaign donors have little in common with average Americans. They hail predominantly from big cities, such as New York and Washington. They work for blue-chip corporations, such as Goldman Sachs and Microsoft. One in five works in the finance, insurance and real estate sector. One in 10 works in law or lobbying. The median contribution from this group of elite donors? $26,584. That’s a little more than half the median family income in the United States.

[...]