The ACA: Good policy, tough politics

Three charts may explain in part why the ACA is working as designed, improving life in America, and hurting Democrats politically.

First, Gallup's latest on the uninsured rate:



Next, an assessment of the redistributive effects of the ACA by Henry Aaron and Gary Burtless (via Bill Gardner) :

A Kling-free future prosperity?

I sure hope Arnold Kling is wrong about the future of employment and wealth distribution in the U.S. --  and I suspect that he does too, as he seems gloomy about his own prognosis. Overviewing a long-range and recently accelerated squeeze on mid-level jobs,, he envisions an American society rather like that portrayed in Kurt Vonnegut's first novel, Player Piano (1952), in which a small uber-class of engineers rules a society in which the masses are consigned to "reeks and recs," a kind of permanent WPA for the superannuated.

Kling suggests that increases in productivity may no longer generate new kinds of jobs in sufficient numbers:

Elitism in college admissions, and well before

David Leonhardt, noting the rooted economic elitism governing admissions at America's top colleges and universities, spotlights several excellent policies implemented by outgoing Amherst president Anthony Marx  to bring more students of modest means to campus. these include devoting a higher percentage of the budget to aid, devoting more aid to grants as opposed to loans, and, most interestingly, focusing transfer recruitment on community colleges -- which, with their terrible completion records, act as a kind of natural selector of able students. 

Leonhardt frames the problem well, noting that a) only 15% of students at the nation's elite colleges come from the lower half of the nation's income distribution, while two thirds come from the top quartile, b) if you screen out race as an admission factor, colleges are no likelier to admit a lower income student with a given SAT score than a higher income student with the same score, and c) only 44 percent of low-income high school seniors with high standardized test scores enroll in a four-year college.

Beyond the scope of his article, however, is the really shocking extent of educational inequality that winnows the field well before students reach college age.

Coming soon: a misleading bump in household income?

One thing I learned from Stephen J. Rose is that census figures make U.S. household income appear somewhat more stagnant than it has been over the last thirty years, because household size has shrunk, and households with fewer people have less income on average than larger households. The census divides households into income quintiles, and half of Americans live in the upper two household quintiles. 

Now, Global Insight analyst Patrick Newport reports that in the wake of the great recession, household size is increasing, while growth in new households hit a postwar low last year (hence the continued depression in new housing construction, Newport's focus). His explanation:

One can also infer from the newly released data that "doubling up" played a greater role in 2009 than it did in 2008. For example, the number of households headed by those 15–24 years old fell by 124,000 (students moving back in with parents), while the number of households with six or more people in the home rose by 355,000, an 8% increase. The breakdown by age groups also suggests that "doubling up" increased in 2009. By 10-year age groups, the number of households headed by those in the 15–24, 25–34, and 35–44 age brackets all fell in 2009, while the number in all of the older 10-year age brackets increased. Job losses and foreclosures are concentrated in the younger age brackets.

I wonder: will the increase in household size produce a misleading bump in household income?  Some of those younger adults living with their folks must be earning some income.  Moreover, the growth in household size should be skewed toward lower income households. Hence we may get a faux reduction in income inequality too.

About those free range little Krugmans and Manzis

There's an irony in Jim Manzi's moment of communion with Paul Krugman over Krugman's nostalgia for early-60s suburbia:

The safety and freedom that Krugman describe are rare now even for the wealthiest Americans – by age 9, I would typically leave the house on a Saturday morning on my bike, tell my parents I was “going out to play,” and not return until dinner; at age 10, would go down to the ocean to swim with friends without supervision all day; and at age 11 would play flashlight tag across dozens of yards for hours after dark.

Here's the thing: leaving aside demographic changes in Krugman's native Merrick, NY, most American suburbs today are very safe places. The murder rate nationally in 2009 was 5.4 per 100,000 people, vs. 5.1 in 1960. Violent crime rates nationally were at lower in 2009 than at any point since 1973. It's true that the 2009 violent crime rate remained  two and a half times that of 1960, but most of that crime was concentrated in poor inner city neighborhoods (and increased reporting of rape probably accounts for some of the difference over time). I doubt that most little Manzis or Krugmans living on suburban streets today are at significantly more risk of being crime victims than their grandparents were in 1960.

What's changed is parents' perception of risk -- and tolerance for it. Perhaps the crime-ridden 1980s changed the culture, or perhaps increased affluence (we'll get to that...) inevitably makes parents more risk averse, or perhaps we're just all made permanently jittery by too much information, or maybe our dual-action superparenting ethic renders us incapable of leaving them kids alone. As Megan McArdle points out, too, back then, neighborhoods full of stay-at-home moms increased the sense of on-the block safety.   In any case, as parents we've gone collectively insane. As Lenore Skenazy has documented, parents in many suburbs won't let their kids walk two blocks to school:

As Democrats tank, Is Stephen J. Rose rebounding? Will Obama?

As the Democrats stare at disaster, is Stephen J. Rose finally getting some traction?

An economist former Clinton Administration official, Rose has been crying in the wilderness that Democrats overestimate middle class distress and pitch their programs and rhetoric too much at the disadvantaged, ignoring the broad, relatively prosperous middle of American society. Democrats do not cotton to his rebuttals to assertions that the middle class is  "disappearing" or"drowning in debt" or his critiques of work by Elizabeth Warren and Jacob Hacker propounding those ideas.

Rose's book Rebound: Why America Will Emerge Stronger from the Financial Crisis got a plug from David Brooks just prior to publication this past April, but my impression is that it's been largely ignored otherwise. My customer review on Amazon, posted on May 10 (here on xpostfactoid), remains the only one, and the book's Amazon sales rank is 305,456.  By contrast, Richard Florida's the The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity, published two weeks after Rebound and listed by Amazon as a Rebound comparable, has 15 customer reviews and a sales rank of 10,950.

Perhaps it's coincidence, but Rose's theses popped up on my screen twice yesterday. The first is a shadow appearance. Joshua Green gave a platform to Chuck Schumer, who here expounds pure Rose:

Thomas Friedman at his Thomas Friedmanest*

Confirmation bias, thy name is Thomas Friedman.

Leave it to Friedman to decide, as the U.S. struggles out of the steepest recession in 70 years, that our troubles are due to the moral failings of baby boomers, set off by a cartoonish Goofus/Gallant contrast with the Greatest Generation.  His column putting this moralizing mush across is so jaw-droppingly sloppy that it seems self indulgent to try to debunk it.

First, Friedman uncritically retails Robert Samuelson's recent claim that poor U.S. student performance can be ascribed to poor student motivation --and conveniently ignores Samuelson's main explanation:

The larger cause of failure is almost unmentionable: shrunken student motivation,” wrote Samuelson. “Students, after all, have to do the work. If they aren’t motivated, even capable teachers may fail. Motivation comes from many sources: curiosity and ambition; parental expectations; the desire to get into a ‘good’ college; inspiring or intimidating teachers; peer pressure. The unstated assumption of much school ‘reform’ is that if students aren’t motivated, it’s mainly the fault of schools and teachers.” Wrong, he said. “Motivation is weak because more students (of all races and economic classes, let it be added) don’t like school, don’t work hard and don’t do well. In a 2008 survey of public high school teachers, 21 percent judged student absenteeism a serious problem; 29 percent cited ‘student apathy.’ ”

Never mind that the percentages cited do not exactly suggest absenteeism and apathy to be epidemic: Samuelson acknowledges (while underplaying) that the chief cause of stagnant test scores is a wider pool of graduates:

The reality is that, as high schools have become more inclusive (in 1950, 40 percent of 17-year-olds had dropped out compared with about 25 percent today) and adolescent culture has strengthened, the authority of teachers and schools has eroded.

Samuelson's stats don't fully capture the extent to which full access to a high school education was broadened in the postwar era.  According to Stephen J. Rose's Rebound, in 1960 (the baseline for Samuelson's snapshot of U.S. high school students' educational achievement over time), only half of workers had a high school diploma, almost 30% had some college, and 10% had a college degree. Today, Rose writes, "these numbers are completely reversed": only 10% lack a high school diploma, 60%  have some postsecondary education, and 30% have at least a 4-year college degree.

Our future is not in manufacturing

As U.S. unemployment remains stubbornly, dangerously, high, calls mount for a manufacturing revival.  Hence James Fallows, blogging today from Aspen, puts forward a critique of the U.S. economy by Bharat Balasubramanian an engineering executive from Daimler AG in Germany, linking income inequality in the U.S. with a dearth of good manufacturing jobs:

"I will state that there will be a polarization of society here in the United States. People who are using their brains are moving up. Then you have another part of society that is doing services. These services will not be paid well. But you would need services. You would need restaurants, you would need cooks, you would need drivers et cetera. You will be losing your middle class.

"This I would not see in the same fashion in Europe, because the manufacturing base there today can compete anywhere, anytime with China or India. Because their productivity and skill sets more than offset their higher costs. You don't see this everywhere, but it's Germany, it's France, it's Sweden, it's Austria, it's Switzerland.... So I feel Europe still will have a middle level of people. They also have people who are very rich, they also have people doing services. But there is a balance. I don't see the balance here in the US."

Also today, Joe Klein, grudgingly admitting that increased hiring on Wall Street is good news of sorts, indulges in a prescriptive wish:

I guess I'm an economic curmudgeon, but I'd be a lot happier if the headline was: Green Energy Hiring Boom or Auto Industry Rebounds Strongly. But what we may be looking at is a continuation of the disease that forced the bailout in the first place: a distorted economy, where too many of the profits come from making deals and too few come from making things.

Making deals, bad; making things, good: that reminds me of the late-80s complaints that while Japan's Ministry of International Trade and Industry focused Japanese resources on vital industries, U.S. government planners didn't distinguish between production of microchips and potato chips when distributing government largesse.

Doubtless, it's good policy for the U.S. government to stimulate/incent development of "industries of the future" such as alternative energy and biotech.  Doubtless, the growth of such industries would stimulate some good, high-skilled manufacturing jobs -- for a while at least, though technological development tends over time to destroy manufacturing jobs rather than create them.  And yes, the U.S. financial sector has grabbed a bloated share of profits and has been a brain drain from other occupations demanding intense mental labor.

Still, I doubt that rising income inequality in the U.S. can be traced to a failure to generate good  manufacturing jobs. And I doubt that increasing the proportion of the U.S. labor force engaged in manufacturing is either a likely or desirable means restoring income growth, reducing income inequality, or raising job and life satisfaction levels in the U.S. In his 2010 book Rebound: Why America Will Emerge Stronger from the Financial Crisis, Stephen J. Rose shows that the steady shrinkage of the manufacturing sector over the past half century has on balance benefited U.S. workers.

Stephen J. Rose's Rebound foresees America Unbound

Stephen J. Rose, a think-tank economist who worked in the Clinton administration, has drawn ire on the left because he challenges key articles of economic faith: that the American middle class has remained static for three decades; that Americans are "drowning in debt"; that they shoulder far more risk than they did a generation ago.  His new book, Rebound: Why America Will Emerge Stronger from the Financial Crisis, consolidates and develops these theses, which boil down to John McCain's  ill-timed campaign mantra: the fundamentals of our economy our strong.

In Rose's view, financial industry recklessness threw sand in the gears (his cliche) of a rip-roaring economic machine. His prognosis for the U.S. economy in the wake of the financial crisis was well summed-up by a David Brooks column largely based on his findings (with which I picked a rather notorious bone): Relax, We'll be Fine. (That is, if we enact effective financial reform, as Rose simply assumes we will.)

Rose is in his element in the book's middle chapters, in which he parses Census, Current Population Survey and other data on Americans' incomes and wealth to debunk what he defines as five myths: that all income gains in the last thirty years have gone to the rich; that the middle class is declining; that good jobs have been disappearing; that international trade is to blame; and that employee benefits are disappearing.

Some of these myths he dispatches more thoroughly than others; his argument with liberal economists such as Jacob Hacker and Elizabeth Warren is often aptly characterized as a glass half empty/half full dispute because at times he emphasizes different aspects of a data set that is not in dispute.  This is almost literally true when Rose points out that "54 percent of households had no credit card debt after paying their monthly bill; this means that the median credit card debt of Americans is zero" (212). Okay -- it also means that almost half of Americans are paying double-digit interest rates on a credit card balance every month. More on this later.

To get a purchase on Rose's attack on the notion that the American middle class is shrinking, it's useful to work one's way backwards through his central claims. The vast majority of American retirees are satisfied with their retirement.  There is every reason to believe that Americans approaching retirement age are equally well positioned -- though Rose does acknowledge that the major decline in wealth caused by the financial crisis seriously dents this relative prosperity, knocking asset levels back to about 2004.  Those subject to the most income volatility -- prime age adults -- also have much higher incomes than oft-cited median income figures for all Americans would indicate.  While growing income inequality is a real problem (indeed, Rose takes credit for bringing it to national attention in 1983), its worst effects are concentrated among the least well educated; the majority of Americans who have at least "some college" have benefited substantially from the strong growth in GDP over the past four decades.

Among the facts Rose cites that run counter to the 'disappearing middle class' thesis:

In which I (essentially) win my "quick bet against Brooks"

Three weeks ago, I put up a post based on my inference that David Brooks had misrepresented a statistic cited from Stephen J. Rose's not-yet-published Rebound: Why America Will Emerge Stronger from the Financial Crisis.  Brooks reported that according to Rose, "Over the last 10 years, 60 percent of Americans made more than $100,000 in at least one of those years, and 40 percent had incomes that high for at least three."  My inference, that Rose was referring to household rather than individual income and that "Americans" should be "American households," was based on past Rose writings and a near-identical error that George Will made in citing Rose's income data claims. 

Andrew Sullivan linked to my post. Brooks complained that I was wrong, that Rebound did refer to "adults" as opposed to "households." The Dish posted a direct quote from Rebound: ""Another way to look at incomes over many years is to see how often people experienced high and low incomes. Indeed, fully 60 percent of adults had at least one year in which their incomes were at least $100,000" (p. 119).  I posted a retraction and apology -- conceding that whatever the truth behind the numbers, I was wrong to jump to the conclusion that Brooks had misquoted Rose (though I did originally acknowledge the "highly unlikely" possibility that Rose's numbers or terminology may have changed from 2007 to 2010).

Today my copy of Rebound finally arrived (Update: my full review here). I am happy to report that while the book does indeed (of course) contain the sentence above, Rose's definition of terms earlier in the chapter makes it clear "their incomes" signifies the household income of each "adult" -- adjusted, moreover, for age and household size (see Update 2 and Stephen Rose comment below).

A quick bet against Brooks

UBER UPDATE 4/26/10:  My copy of Rebound finally arrived, and I was essentially right (as were many commenters): Rose's figures do refer to household income. They're also limited to "prime age" adults. Brooks did not literally misquote, and I shouldn't have inferred that he did without the book in hand. But he missed some key definitions early in the chapter. More here; full review of Rebound here. I have moved prior updates to the bottom, so that everything appears in sequence. 

-------ORIGINAL POST:
Arguing today that America's future is bright, David Brooks retails a stat from Stephen J. Rose: 60 percent of US adults have earned over 100k in at least one of the last ten years..I am willing to bet that "adults' should be 'households.' George Will made a similar error in a Jan. '08 column arguing that all was rosy with the American middle class. I will check this out later today.

UPDATE:  Bingo. Post above was from a Blackberry.  The book by Stephen J. Rose that Brooks references, Rebound: Why Americans Will Emerge Stronger from the Financial Crisis, is not out yet. But in a June 4, 2007 Huffington Post column, Rose wrote (my emphasis): 

Because income swings up tend to be larger than income swings down, the median of multi-year income is higher than median in each of the separate years. Consequently, the median income over ten years ending in 2002 was nearly $75,000 (in 2005 dollars) for prime-age adults and only 20 percent had ten-year average incomes below $40,000.

In addition, half of adults had at least one year in which their total household incomes were greater than $100,000.