Would You Like Salt with that Intellectual Pretzel?

A faithful reader suggested that I look up a paper entitled "Thinking Clearly about Economic Inequality," by Will Wilkinson, a research fellow at the conservative Cato Institute. I did.

Although it's impossible to summarize 24 pages in a short paragraph, Wilkinson's main point seems to be that, although it's true that income inequality has increased in the US since the 1970s, it doesn't matter. In fact, he says, focusing on the discrepancy may be counterproductive because a) there are more relevant measures of economic and psychological well-being; b) the fact that some people are super-rich doesn't prevent others from having economic opportunity (never mind the most essential tenet of all of economics, the principle of scarcity); and c) economic disparity is independent of social justice.

I had two reactions to this article: 1) Wilkinson and I live in two completely different worlds; and 2) alleged intellectuals have an amazing capacity to twist logic to conform to preconceived conclusions.

Wilkinson wants us to measure not inequality of wealth but "the quantity of goods and services a person has consumed over the course of his lifetime, and the value to that person of all those goods and services" (p. 4). He claims that the inequality of this so-called lifetime "consumption income" [without specifying exactly what it measures] is considerably more stable than the inequality of income per se. Among the reasons for this is "the ability to engage in consumption smoothing...through access to credit...[and] the ability to smooth consumption [by racing] ahead of changes in income volatility" (p. 5). He fails to point out that even rich people generally only eat 3 or 4 meals a day and maintain a limited number of vacation homes; their "consumption" is bound to be less extreme than their income.

A lot of people I know don't have the luxury of "consumption smoothing." They frequently carry less than $20 in their pockets. They postpone maintenance on their elderly cars because they can't afford to have the repairs done. If they have a credit card at all, they carry a balance and pay hefty monthly interest charges (which will not worry you if you own stock in one of this country's major financial institutions). They barely have enough money to buy diapers for their babies. They hold car washes so they can pay to bury their deceased relatives.

Have we in fact "won the war against poverty without even noticing it" (p. 8)? I don't think so.

"If we are worred about inequalities in education and health care, as we should be, we might stop to consider that these are precisely the areas we have chosen to shield most jealously from entrepreneurship and market competition" (p. 9). He might have a reasonable case for education, but health care? Aren't pharmaceutical companies and insurance companies entrepreneurial? Aren't most doctors private practitioners? Aren't many hospitals owned by huge corporations?

Wilkinson admits that income inequality in the US "is higher than in any other wealthy nation" (p. 10) but says it doesn't matter because we are 12th on the UN Human Development Index (HDI) -- "a relatively comprehensive measure of well-being." Using the time-tested method of simply leaving out inconvenient facts, he fails to mention that the US has actually been slipping recently in its HDI compared to other countries. The most recent statistics, published in October of 2008, show the US 15th, not 12th as it was in the previous survey, outperformed by the usual cast of nations conservatives love to hate for their governmental intervention into the free market economy and their caring policies toward their less fortunate citizens -- among them Iceland, Norway, Canada (oh, watch out: socialized medicine!), the Netherlands, Sweden, Luxembourg, Finland, Switzerland, Denmark, and yes, even France.

Finally: "Rising income inequality should have very little effect on the ability of the wealthy to influence the outcome of the democratic process" (p. 18) and "Economic resources are not easily converted into political resources" (p. 22). That will be news to the lobbyists, the kingmakers (frequently land developers) who annoint each succeeding generation of local politians, and the corporations that spend billions of dollars every year influencing public policy. I would enjoy hearing Wilkinson explain his ludicrous assertion to the millions of poor, elderly, and disabled Californians who recently lost essential benefits while the rich were shielded from tax increases by the politicians whose campaigns were financed by, uh, the rich. Yes, Barack Obama collected a lot of small contributions from middle class Americans; watch what's happening to his attempt to provide medical care to poor citizens and get back to me in a couple of months if you still believe money doesn't buy political influence.

To his credit, Wilkinson does list a plethora of problems with existing American society, including "inner-city kids consigned to abysmal public schools,...a larger share of its citizens [imprisoned] than any country on Earth,...and patterns of private discrimination [that] constitute for millions a web of real, seemingly inescapable barriers to opportunity and achievement" (p. 13). What's his proposed solution? First, stop wasting time thinking about income inequality. "Focus on things like intergenerational poverty and failing schools" (p. 23) -- as long as you don't meddle with "well-functioning market institutions and entrepreneurial energy" (p. 24). Just exactly how we solve the problems of intergenerational poverty and failing schools in the context of the primary tenets of conservative political philosophy, he doesn't say.

I could go on, but you get the idea. Besides, what good comes from pouring more salt on a badly twisted would-be intellectual pretzel?

George Will

Arguably one of the most intellectual of today's conservative media commentators, George Will produces a newspaper column that promulgates views on any and all political topics. In recent months, he has weighed in on health care, Spain's alternative energy program, the government bailout of General Motors, the significance of the death of Robert McNamara, regulation of tobacco, and the Supreme Court's ruling in the Ricci (New Haven firefighters) case.

Like many entertainers masquerading as sources of news and analysis, Will rarely passes up an opportunity to criticize liberals and successful government programs, usually out of the side of his mouth. On 6/11/09, for example, he refers to "the preposterous entitlement to collect Social Security at age 62." He fails to mention that people opting for such payments forego a significant portion of the monthly benefits they would receive if they retired at a later age. Will apparently feels no empathy (oh, that's a "bad word" these days) for workers who have paid into the system for at least 10 years (and probably much longer) and who now wish to enjoy some leisure time. (Perhaps opting out of the capitalistic rat race is something Will simply can't comprehend; what higher calling could there be than making more money?)

Continuing his first amendment right to engage in linguistic legerdemain, Will says (6/19/09) that "In a 1998 settlement, 46 states conspired to seize $206 billion from companies selling legal tobacco products..." An impartial observer might have said that "46 states cooperated in using the judicial system to hold tobacco companies liable for alleged infractions of laws and regulations duly adopted by democratic legislative bodies." Using neutral language, however, would be have been so, well, like Walter Cronkite.

Not content to lambaste President Obama by utilizing oblique literary references ("But the capitol, gripped once again by the audacious hope of mastering everything..." 7/10/09), Will apparently cannot stand the fact that we now have a President who accepts responsibility for his actions and speaks the English language. When our leader dares to use the word "I," Will denigrates him for being "inordinately fond of the first-person singular pronoun" (6/7/09). Where was his vehement protest when George W. Bush proclaimed "I am the decider"?

Will loves pointing out apparent inconsistencies using mildly clever language. "Washington mandates that Detroit must build cars for which there is much less demand than Washington demands that there be" (6/7/09). When you finish chuckling, remember that small, fuel-efficient cars are best-sellers. Until the recent recession, Toyota and Honda could barefly keep up with the demand. I don't mind "mildly clever" as long as the facts are correct, but Will has not mastered the art of presenting a comprehensive picture of a complex situation.

I absolutely love this one: "Government is incapable of behaving like market-disciplined private insurers" (6/21/09). What?? Could Will possibly be referring to the oligarchy of health care insurance companies that is raising premiums much faster than general inflation and using every trick in the book (legal and otherwise?) to avoid paying expensive legitimate claims by denying coverage ex post facto? Has he forgotten that MediCare, while far from perfect, is successfully providing health care to millions of Americans?

On 7/10/09, Will berates "behavioralists" (I think he means "behaviorists") for believing in "nation-building" (hmm, how quickly we forget the rationale Bush used to justify the war in Iraq once it became clear there were no WMDs). "Liberals," he says, "tend to treat hopes as probabilities," suggesting that it "would be wise to entertain a shadow of a doubt...that history is linear and progressive."

I would like to see George Will occasionally entertain a shadow of a doubt about what he apparently views as his own omniscience.

Health Care Debate (continued)

My last post compared health care insurance to food insurance, the latter being a ridiculous proposition that bears too much resemblance to the current health care industry. Paul Krugman made exactly the same point when he asked in his recent column (New York Times, 6/22/09) "Isn't the purpose of health care reform to protect American citizens, not insurance companies?"

Krugman, unfortunately, is a singular voice in a sea of complaints that insurance companies won't be able to compete with a public endeavor. "Regardless of how it is initially structured, a government plan would use its built-in advantages to take over the health insurance market," whined Karen M. Ignagni, president of America's Health Insurance Plans, and Scott P. Serota, president of Blue Cross and Blue Shield Association, in a letter to the U.S. Senate (New York Times, 6/24/09).

To which I believe the proper answer is "who cares?" If government can do it better, then why not let it? If private sector corporations can provide greater efficiency, better customer service, and enhanced results (more actual health care!), then let them demonstrate their capacity to do so.

If the purpose of public policy is to protect shareholders and employees of private sector companies, then letting buggy whip manufacturers go out of business was a huge mistake. And what about the corporations that used to make those ubiquitous dials on telephones? Where are they now? (Could it be that the great American free enterprise system actually has the capacity to retrain employees to perform functions that are useful and valuable in today's -- not yesterday's -- economic climate?)

This entire debate exemplifies what I regard as a central dilemma in this country today: we have totally lost sight of our true values, objectives, and aspirations. The ends have been displaced by the means. The holy grails of conservatism are free enterprise in the private sector, limited government, and low taxes, regardless of whether they actually produce the kind of country most Americans want to have. Why? Because these are the principles that preserve a comfortable status quo for the upper- and upper-middle class societies. The evolutionary power of self-preservation is alive and well.

Bob Cable and Dana Cox, in a recent "Point of View" op-ed piece in the Inland Valley Daily Bulletin (6/24/09), suggest that "Now would be a good time to remember how and why this great nation was formed..." Unfortunately, they don't provide an explicit conclusion. I'll suggest the following (without any claim to originality): 1) "to [organize]...its powers in such form, as to...[the People] shall seem most likely to effect their Safety and Happiness"; and 2) "to establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity."

All right, which is more essential to the promotion of the "general Welfare": maintaining the profitability of private sector insurance companies, or providing health care to every American using whatever method achieves the desired result most effectively and efficiently?

It's a rhetorical question.

Food Insurance?

I am grateful to Vicki Riba Koestler for the idea resulting in today's blog post. She wrote a letter, published in the New York Times on July 4, pointing out that, like education and food, health care is a necessity. However, rather than spending our money on health care directly, we buy health care INSURANCE, positioning (with rare exceptions) a profit-oriented company as the gatekeeper between ourselves and the desired product.

Maybe we're missing a really good bet here -- an opportunity to provide jobs for hard-working Americans, investment vehicles for would-be shareholders, and executive positions for top-flight managers who feel they deserve million dollar salaries and bonuses.

Basically, here's how food insurance would work. To get an individual policy, we'd first need to do a complete inventory, detailing all the foods we have ever consumed that might have caused an upset stomach (including that incident when we were six months old and we spit out that yukky spinach). We'd submit the application to one of three or four major loosely regulated food insurance carriers that, like all corporations, are required by law and custom to make decisions in the best interest of their shareholders. Hope would be high that we'd be accepted, despite costly premiums, because without food insurance we would no longer be permitted to enter the local supermarket. (In an emergency, we'd could drive 45 miles to the nearest public food bank and wait in line several hours while all those who showed up were assessed (triaged) for the urgency of their need. Of course, we'd be on the hook for the expenses associated with such a visit.)

Perhaps our neighbors would be luckier. The husband (or wife) might still be employed, making him (or her) eligible for food insurance for the entire family through the employer. This would be fortuitous, just in case someone had an allergic reaction to broccoli at the age of four. The premiums would eat up 28% of the net paycheck, but hey, at least the family would be covered. And the wage earner would be able to feel very patriotic, knowing that a hefty percentage of the premiums would be devoted to providing employment to industrious Americans, performing such important tasks as: planning and implementing marketing campaigns on behalf of the insurance company; lobbying Congress; and determining how much people would have to pay for their food insurance, how often they could buy free-range chicken, and whose policies would be canceled retroactively when it came to light that they forgot to state on their applications that they have an occasional craving for sushi.

Generally, the system would work pretty well. Three days before each shopping trip we would submit a list of desired foods to the insurance company, which would approve or deny each item based on its own interpretation of what we should be eating. After paying the deductible at the entrance to the grocery store, we would proceed to fill our cart and check out. The store would then send us a bill, since the insurance would cover only 80% of the actual cost of the approved items.

If Aunt Jenny, her second husband, and a gaggle of cousins decided to drop in unexpectedly, the need for food would skyrocket. Quickly we would submit a supplementary list to the insurance company, and the underwriters might be kind enough to approve 50% of what we request, claiming that our policy includes in the small print a limitation on the number of visitors we can feed during a holiday.

OK, the analogy isn't perfect (but it's instructive nevertheless). Unlike treatment for cancer or other long-term, debilitating conditions, which some people need and others don't, the food bill is fairly predictable. But over the collective lifetimes of reasonably small groups of people, healthcare is also fairly predictable. We all need it regularly throughout our lifetimes, and large expenses can be anticipated sooner or later as a function of age.

So, seriously folks, why can't we devise a system for getting medical care without wasting a large percentage of our resources on profit-oriented middlemen? (I'll provide a partial explanation next week -- stay tuned, faithful readers!)