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doesn't anyone know how to play this game?

So Wal-Mart is threatening to cancel its plans to open three stores in DC if the Council goes forward and passes the “Large Retailer Accountability Act,” which raises the minimum wage from $8.25 to $12.50 only for businesses that occupy more than 75,000 square feet. This showdown has no good potential outcome, is a large embarrassment, was completely predictable, and yet still has a very simple solution.

DC needs work, and it needs groceries and other goods and services easily available to lower-class residents at affordable prices. This is why District officials were wooing Wal-Mart for so long in the first place.

But Wal-Mart is a terribly and notoriously nasty employer and a fiercely spiteful institutional player, one that prizes itself on its willingness to abuse, fire, and sabotage the careers and sanity of its workforce, and its willingness to play chicken and act the bully with political officials. So it’s no surprise that Wal-Mart is reacting to legislation that is all but a bill of attainder with bluster and threats.

So what is a DC Council to do? If they vote for this bill (which they already passed once, 8-5), Wal-Mart may in fact leave, which would be both a short-term setback for living conditions among the District’s worst-off but also a longer-term setback that could prove some of the worst stereotypes about the DC Council true – why would any other non-Wal-Mart business invest in DC if they thought they would wooed until the point of no return, then have the rules changed on them? On the other hand, if the Council fails the bill, it will prove itself powerless in the face of Wal-Mart’s tantrum, leaving itself nakedly toothless for the world to see.

But it’s not quiiiite a no-win situation – the Council does have a winning play, the same play they should have played all along – raise the minimum wage for everybody. Frankly, there is no policy or moral justification for why Wal-Mart and other large retailers should have to pay higher wages than any other business, and the obviousness of this attempt to target Wal-Mart is doubly embarrassing for all the years the District spent wooing the Bully of Bentonville in the first place. Raise the minimum wage for everyone, and the playing field is even, and Wal-Mart suddenly loses either way – if they pull out, they’ve proved their problem is with paying living wages and not with being singled out, and it also shows that all the businesses small and large that will continue to thrive (and they will) prove that Wal-Mart’s protestations of inability to pay living wages are spurious; if they stay, then they’re creating lots of jobs that pay $12.50/hr! And even better, every other minimum wage employee in DC gets a raise.

Ashok Rao busts me for being lazy this morning, and he has me dead to rights. I blithely waved away a further discussion of what would actually happen if there was a large secular increase in aggregate saving on the part of the poor. I was lazy about this, and in my defense, I was using “economic disequlibirum” as a stand-in for saying “a) I’m at the office, b) I didn’t think it was entirely relevant to the final conclusion of my post, and c) I was feeling lazy.”

So now that, at the very least, condition a) has been relieved, let’s take a look at Ashok’s point. He notes – quite correctly – that 1) even if you make unrealistically egalitarian assumptions about the initial wealth distribution that increased saving by the poor doesn’t affect the ratio very much, and the more broad point that 2) the wealth gap between rich and poor will continue to increase so long as the rich save at a higher rate than the poor regardless of the initial distribution. Both of these are correct, but they do end up being somewhat tangential to the real question re: the effect on the economy on a substantial secular increase in the social desire to save.

This is, in fact, a much disputed question in economics, and what effects it might have (and whether that effect depends on whether current conditions are recessionary and whether we’re at the ZLB) are not the subject of much consensus. As a general point, though, Americans used to save much more, so if we decided to save more now, in all actuality it may not have much economic impact at all.

suh-suh-suh-suh-suh-suh-savings!

But just because things used to be one way doesn’t mean that, under current conditions, they could just be that way again – a lot has changed since the 1970s and perhaps it might not be so simple to revert back to saving that much. Tangentially, I’m really not a huge fan of the distinction between “saving” and “consuming” anyway, so maybe I’m not the perfect person to be breaking this down, but what the heck, let’s give it a shot:

What happens to the economy when the poor start saving more depends on what “savings” is in this context. Let’s start with some real data – the lowest quintile of Americans take home 3.4% of national income, and therefore a 1% increase in the savings rate of “the poor” (defining that as coterminous with the bottom quintile of earners, which is totally not actually correct) would result in an increase in the total national savings rate of .034%. So we’re talking pretty small taters, frankly, which is really the key issue.

But beyond that, we can still discuss the theoretical side, which truly does depend on what “savings” means. If it means “putting the money into deposit accounts at banks” then the aggregate effect of those savings depends on whether it increases loaned funds from that bank in an amount that equals or exceeds the forgone consumption. The reason the “paradox of thrift” doesn’t always hold is that the saved money “has to go somewhere” which means it could (though not will) become someone else’s consumption (of perhaps a more durable good) that will offset the loss in more short-term oriented consumptions. So the disequilibirum” that results could be a net loss in output and/or it could be a sectoral shift in output, and how disequilibirum-izing you think that is depends on how PSST-y you think the economy is or more broadly how inflexible it his, how high transaction and discovery costs are, how rooted labor markets are, that kind of thing.

Anyway, the point is, while this is theoretically all interesting, my two conclusions from Ashok’s post are a) the net short-term economic impact of even a substantial shift in the savings preferences of the poor will be small and b) I still think the conclusion of my prior post was right because it wasn’t dependent on whether or not a) is true.

So I already commented on Ashok Rao’s blog re: the content of Ryan Enos’ op-ed in The Washington Postre: racial polarization and partisan preferences, but after more careful examination following Noah Smith’s call for Richard Florida to refute it, I realized that a substantial part of the op-ed is not only wrong-headed but dishonest as well. He writes:

In that same year, I examined the voting of Latinos in Los Angeles and found that those who lived near predominantly African American neighborhoods were far less likely to vote for Obama than Latinos who lived farther away — suggesting that contact with their African American neighbors may have prompted them to vote against an African American candidate.

The link is to a paper authored by Enos, which, if you read, is about the 2008 Democratic presidential primary. Putting aside (very real) questions about the paper’s internal validity, by citing it in the article without mentioning that it is about the primary and not general election vote in the context of an op-ed warning of partisan polarization, Enos can only be said to be deliberately misleading readers into believing that Latinos who live nearer to African-American neighborhoods were more likely to vote for McCain or Romney as opposed to Hillary Clinton. In fact, the same precints his paper cites as the best examples of polarization in the Democratic primary are precints that went 9-to-1 for Obama in 2012.

At the very least this calls for a substantial correction to the article.

Russ Roberts approvingly links to this diatribe from John Papola that is either very confused, attacking straw men, deliberately mendacious, or all of the above. Rather than engage it point-by-point, because I am tired and have better things to do, I will instead just start with the conclusion then go read a good book.

Of course economic growth is driven by production. Non-satiation is a key understanding of economics – that no matter how much people have, they will always want more (in some sense). Therefore, since the desire to consume is a constant the level of growth is almost definitionally a question of supply (though on a truly philosophical level, if humans did not experience want there would be no incentive to produce, but presumably that random mutation would be selected out). As long as we can continue to figure out how to make more, make better, and make more efficiently, consumers will demand the same.

But this is not the same question as what causes recessions. The reason that macro befuddles and confounds is that recessions are weirdOn the one hand, we have all these people who (as we just said, by definition) want more stuff; on the other hand, we have all these people who were making stuff yesterday and weren’t making stuff today. Here are some theories for what cause recessions:

1. A sudden and contagious plague of laziness.

2. A sudden and contagious plague of contentedness.

3. A sudden and contagious plague of confusion and stupidity.

These are idiot theories. None of them are remotely true. Yet recessions still happen. Which means that even though everyone who is consuming less would like to resume consuming what they were consuming and everyone who is producing less would like to resume producing what they were producing they can’t. For some reason.

That reason is, in a word, money. Why and how it’s money are complex and tricky questions, but there should be zero doubt that that is, in fact, the answer. And that means that recessions are about demand.

India is a really good example about how poor public policy and social organization can lead to unnecessary supply-side constraints that impoverish everyone. America is not India. We usually grow. When we don’t, it’s weird. It’s a malfunction.

I saw this come up in my email:

Alice Paul for President!

 

And thought “now the Republicans are against that, too?”

You may recall, oh those many moons ago, when Chief Justice John Roberts decided that basic economics (not to mention basic decency) could inform jurisprudence after all and therefore PPACA could stick around, making him Dolchstoss-er of the decade as far as the conservative movement was concerned.

You may also recall that, in order to throw said conservative movement a bone, Roberts led the SCOTUS into tossing out the stick in the enticement mechanisms for the Medicaid expansion, meaning governors suddenly had a lot less negative incentive to accept the giant wad of federal money.

However, the law of unintended consequences seems to have fully kicked-in – rather than be any kind of political win for conservatives, empowering governors to make this decision has been totally miserable. When governors didn’t have a choice, they didn’t have a choice – but now that they actually have to choose, they are faced with refusing the money, which is irresonsible bordering on evil, or taking it and therefore inviting the federal vampire into their home. Unsurprisingly, many GOP governors have chosen the latter path, especially those who might be running for re-election, even those who were conservative darlings before hand.

So instead of just one big Dolchstoss from Roberts, we now have a running clown car of conservative Dolchstosses across America and a big juicy political target for Democrats.

Well done, your honor!

monopoly_man.png

Matt Yglesias is correct to ding Jamie Dimon for claiming that he pays “39.6 percent in taxes.” But he doesn’t ding him nearly hard enough!

So, in no particular order:

· Matt’s point that the top tax bracket is 35%, not 39.6%, is correct.

· But that’s just the top tax bracket! Assuming he and his spouse are filing jointly, on income under $379,151 they would pay no more than 33%, which declines quickly to brackets of 28%, 25%, 15%, and 10%. So that top tax bracket is only applied to the 379n151st dollar of income and beyond.

· I would be very, very, very surprised to learn that Jamie Dimon and his spouse take claim no deductions, credits, or exemptions on their taxes. Very, very, very, very, very, very surprised.

· I would also be very, very, very, very, very surprised to learn that Dimon & spouse claim all their income as “income” and none of it as “capital gains” which can be taxed at a top rate as low as 15% depending on how it is claimed.

· Dimon is roughly correct about the top tax bracket in New York City – “add in another 12 percent in New York state and city taxes” – but again forgets that this rate is not applied to all his income, just that above the top bracket, which is $90,000 in NYC but a cool half-a-million for the state.

· He weirdly neglects to mention sales or property taxes in this, which would buttress his argument.

Anyway, the point of this is that unless Jamie Dimon has the world’s worst accountant or is patriotically donating to the US Treasury there is just no way he’s giving every other dollar he makes to the government. And his whiny stupidity about this certainly doesn’t strengthen the argument that people who can accumulate Dimon-esque levels of wealth are somehow especially gifted and therefore morally entitled to hoard wealth.

chris-christie-.jpg

I can understand why Republicans are not terribly thrilled with their current options in this whole nomination contest buisness, but I am mystified that the latest attempt at recruitment is focused on New Jersey Governor Chris Christie. When it was focused on Paul Ryan at least it made a snake-oil sort of sense – he was young, banally easy on the eyes, and had a notable plan to address a key issue (albeit a massively unpopular one). But speculation on Chris Christie is bizarre. He’s an arrogant lout most known for bullying his constituents in attempts to promote himself via YouTube. He has no record of note as governor, he has baggage from his previous position as US Attorney, and he was elected mostly as an expression of monumental loathing for his predecessor. His approval rating has rebounded from "bad" to "good," but there’s no reason to think he even has a good shot of carrying his own state against Barack Obama. I fail to see what, if any, problem a Christie candidacy solves for the GOP.

Apparently Jeremy Binckes at TBD has weird thoughts about more than just driving:

It was a long and contentious battle, but the D.C. Council finally passed a statistically small but symbolically significant tax hike on the richest residents. The smart thing to do after such a measure would be to not give the opposition — the design-inept D.C. GOP — any ammunition. Needless to say, a council member has done exactly the opposite.

Two days after that tax hike, $2,300 in taxpayer-funded furniture was delivered to Councilman Michael A. Brown’s office, the Post reports. The couch "smelled like and looked like it was new," but his staff insisted the furniture — four chairs, a desk, a bookshelf and two floor lamps — was used, purchased from Cort to replace "shoddy" furniture from the 1980s.

It’s not about how much it cost, really, but the appearance of spending money while taxing others. This is the practical definition of a disconnect. After all, if the existing furniture had been in use since the ’80s, why choose this exact moment to buy replacement furniture? Why not two weeks ago, or perhaps two months from now? It’s almost as if the council wants bad press.

OK, so let’s avoid the "appearance of spending money while taxing others," forgetting that this is sort of what all governments do at all times. In a parallel universe where the DC Council filled its budget gap with nothing but spending cuts should they avoid the appearance of spending money on themselves while shafting the poor and needy? Maybe! Or maybe sometimes the government has to do things that seem frivolous like "replace ratty old furniture" but are really just the good old-fashioned cost of doing business. The furniture has been there since the 1980s? Why not replace it now? Notice that even he is too embarassed to make this argument directly, simply pointing out a "disconnect" or a "bad appearance," "giv[ing] the opposition…ammunition." That’s because this is not an issue. Grow up.

Last nights House GOP FAIL got me thinking about something I once wrote:

Wading into this whole debate about Kos’ American Taliban, I think we’ll see that the difference between "difference in degree" and "difference in kind" dissolves when you realize that the whole question centers around values, which is what puts the lie to both Kos and his (in this particular case) conservative doppleganger Jonah Goldberg. Kos wants to make the argument that in, say, hatred of women’s sexuality, American Christian conservatives and the Taliban are different only in the ways they express that hatred – ie, the values are the same but they’re just enacted more moderately here. And these kinds of situations often leave people fumbling around finding differences of differences of differences. But really the answer is: how you decide to enact your value is in-and-of-itself a value. All of us, all the time, carry around all kinds of values and beliefs and urges about all kinds of things that clash, compete, and in the end mitigate each other. The reason Christian conservatives in America are not regularly stoning or disfiguring women is because they think its wrong, and their value of "don’t physically harm other people" outweighs their value of "women who have violated traditional sexual norms deserve to be punished." The value of "respecting the democratic process" is important enough in the United States that it outweighs the desire of both sides to see their side in power, and it is in fact exactly this that we are trying to instill in the Taliban! We want opposing factions and radicals and extremists and violent types everywhere to sublimate those beliefs to a shared belief in values like "thou shalt not kill" and "let’s make rules and follow them." This is why conservatives aren’t the Taliban, Hillary Clinton isn’t Mussolini and everybody needs to seriously chill out.

I think it’s clarifying and very important to understand that differences of degree – ie, "I don’t like you but I’m not going to kill you" v. "I don’t like you and therefore I’m going to try to kill you right now" – as differences of kind. The difference between the former and the latter is not "how much they don’t like you" but whether or not they think violence is an acceptable repsonse to loathing, which is itself a very important value system.

So, what does that have to do with the House GOP’s inability to pull together for a simple CR? Well it’s become my opinion that the new Tea Party rump of the GOP is different not in degree from their predecessors but in their values, which also explains things like the debt ceiling. The old GOP thought that taxes were bad, but that destroying the American economy or the American government’s ability to function were also bad. The new Tea Party types seem to think the latter concerns are much less of a problem, and therefore is an acceptable risk in pursuit of destroying taxation. The Tea Party is defined not by an extreme hatred of taxes; that’s always been the GOP. The Tea Party is defined by considering everything else so far behind that particular evil that they are willing to roll the dice on economic devestation and meltdowns of governance in order to get their way.

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