November 8, 2011
In Which Politicalprof Explains All Our Problems

The spectrum of problems facing the United States—and for that matter the rest of the world—are vast. Economic, social, environmental and cultural crises all seem to loom ever larger and ever nearer on the horizon.

And what are we doing about this? Remarkably little. Our politics are frozen as competing interests fight for their preferred outcomes at minimal, or no, cost to themselves.

Which it turns out isn’t actually all that hard to explain. Consider the following premises:

1, People want things.

2. People prefer to get what they want with minimum cost to themselves.

3. People inevitably perceive the cost of some social change as more important—good or bad—when it affects themselves personally than when it affects other people.

4. In any choice matrix, if a person can get what they want at others’ expense, they prefer to get what they want at others’ expense.

5. In any case in which the expected returns are unclear and likely to come to fruition — if at all — some time in the future, but the costs associated with the future potential returns are immediate and clear, people resist current expenditures that may only possibly lead to future benefits.

These simple dicta explain quite a lot.

—Tea partiers think government is profligate and that teachers, police and firefighters get too generous pensions while they (the tea partiers) suffer. The solution? Take back the pensions. Restrict bargaining rights. But no matter what, don’t means test Social Security or engage in honest accounting for Medicare. Those programs (which many tea partiers benefit from) are important and ostensibly earned.

—Need to solve the budget? Well, if you’re a Republican, you cut programs .. . at least those aimed at the poor. Defense is sacrosanct … even if the F-22 has flown exactly NO combat missions in the 10 years it has existed and America has been at war. (At $220 million a copy, I might add.) And NEVER raise taxes. By contrast, if you’re a Democrat, you raise taxes … at least on the better off. And you cut defense spending… but you don’t reform SS or Medicare.

—Want to reduce global warming? Buy a Prius … but ignore the vast chain of transportation costs, refining of rare minerals and toxic chemical waste that underlies its production.

I could offer many, many more such comments, but let me conclude with this thought: global public policy is pretty much the same as local public policy: it’s entirely dominated by NIMBYism (Not In My Back Yard). So long as we want things cheap, and are willing to nod and wink about the real costs of the choices we make, or can fantasize that we can get others to pay for the things we benefit from, we’re going to be frozen in policy terms.

The system rewards simplistic, short-sighted, short-term answers no matter how complicated or long-term the problems are. No one should be surprised at the result.

April 20, 2011
Now here’s a surprise: “Poll shows Americans oppose entitlement cuts to deal with debt problem”

After 30 years of being lied to by elected officials and the intelligentsia that peddles supply side nonsense, the headline above, from today’s Washington Post, may be the least surprising headline in the history of American politics. 

For 30 years now, Americans have been told that they can have high levels of entitlements (the costs of which are paid at some future time, making promises easy) AND low taxes since, somehow or another, growth will fill the gap between promises and tax receipts. It’s been wrong for 30 years. It’s wrong now (as the photo embedded in this post demonstrates). 

So it’s hardly surprising that Americans don’t want to cut entitlements today. It’s also hardly surprising they don’t think they have to pay more taxes. 

But the truth is they’ll have to do both. And the sooner we start the better.

US debt growth

March 24, 2010
How illegal immigration will save Social Security

And Medicare.  And Medicaid.  And even, perhaps, health care.

First things first: the only reason lots of us who live in the US aren’t “illegal immigrants” or the progeny of illegal immigrants is that we got here before there were laws covering the matter.  My first relative got to America in 1636, and while he got chased out of several areas by Native Americans, he eventually settled in what is now Freeport, Maine.  Believe me: if the locals could have made him illegal, they would have.

More broadly, we didn’t really start regulating immigration (or trying to) until the mid-late 1800s.  This was done in response to large amounts of Eastern European/Catholic immigration, which pissed off Protestants, and lots of Asian immigration, which pissed off most everybody.  So, if your family got here before then, you’re not “illegal.” But you’re not specifically legal in today’s terms, either.

So on to entitlements.  All entitlements programs work as social contracts: we pay taxes for current benefits.  Then, should we need the service—or when we need it, like Social Security—working people of that time will pay taxes to support us. 

The key question in all entitlements programs is: what is the ratio of workers to recipients?  This ratio in large measure determines how much of his or her income each worker has to pay to support entitlement programs. In general, if there are lots of workers and few recipients, costs to workers are comparatively low.  If that ratio changes, costs go up.

When Social Security was created in 1936, the ratio of workers to retired persons was something like 17-1.  Today it’s more like 3-1.  People live longer, after all, so there are many more retired persons than there used to be.  Birth rates have also declined.  As a consequence, there are fewer workers to pay more people their entitlements in programs like Social Security.

More than just the ratio has changed, however.  Over time the rate of benefits for programs like SS have gone up.  Retired people receive more benefits today, in inflation adjusted terms, than they did in 1936.  We have also added programs like Medicare (1965), welfare, and now prescription drug benefits and a health care program.  Entitlements costs are expanding dramatically as a consequence. Indeed, the starkest, darkest available predictions suggest that there are something like $79,000,000,000,000 (that’s trillion) of entitlements liabilities looming in the next few decades. 

There are basically two ways to deal with this fact.  One is to reduce benefits—which has proven to be politically difficult if not impossible, not just in the US but across the world.  The other is to change the ratio of workers to beneficiaries. Which is where illegal immigrants come in.

If we legalized illegal immigrants, they would immediately be added to the tax rolls.  They would pay to support current recipients.  Moreover, their children would pay into the system for decades.  This is particularly important as the Baby Boom moves into retirement.  The Baby Boom poses a remarkable problem for the entitlement system since it is especially large and its succeeding generations are much smaller.  Taxing the large untaxed part of our economy would shift this boomer-distorted ratio overnight.

The only other alternative for changing the ratio of workers to beneficiaries in the near term is for legal US citizens/residents of child-bearing age to start having 3 or more kids each.  Now.  Which doesn’t really seem all that likely.

Will illegal immigrants add some burdens to US social services that would detract from their absolute economic impact on the entitlements system?  Absolutely.  But they do that now, anyway.  The question is, do we do what Americans have always done and integrate new populations in ways that make the US stronger rather than weaker?  We’ve done it many times before (a subject of a future post).  We can certainly do it again, and save Social Security and the other entitlements programs at the same time.