March 08, 2017

Statement of Principles by Middlebury Faculty

So far Bill McKibben has not signed on.

Following the disgraceful events at Middlebury, which included shutting down an invited speaker and assaulting an escorting professor so she had to go to the ER, an impressively large group of Middlebury faculty have written a statement of principles defending free speech and asserting the importance of contrary views. They posted it online along with their names and I’ve quoted it below.

Surprisingly Middlebury professor and environmentalist Bill McKibben is NOT on the list of signers. Since he has made a career of protesting vigorously for his views, I’m sure he understands the importance of free speech and how jealously it must be protected. The list is open until March 11 so perhaps he will still join.

Below is the statement:

On March 2, 2017, roughly 100 of our 2500 students prevented a controversial visiting speaker, Dr. Charles Murray, from communicating with his audience on the campus of Middlebury College.  Afterwards, a group of unidentified assailants mobbed the speaker, and one of our faculty members was seriously injured.  In view of these unacceptable acts, we have produced and affixed our signatures to this document stating core principles that seem to us unassailable in the context of higher education within a free society.

Our statement of principles first appeared in the Wall Street Journal on March 7, 2017.

The principles are as follows:

Genuine higher learning is possible only where free, reasoned, and civil speech and discussion are respected.

Only through the contest of clashing viewpoints do we have any hope of replacing mere opinion with knowledge.

The incivility and coarseness that characterize so much of American politics and culture cannot justify a response of incivility and coarseness on the college campus.

The impossibility of attaining a perfectly egalitarian sphere of free discourse can never justify efforts to silence speech and debate.

Exposure to controversial points of view does not constitute violence.

Students have the right to challenge and to protest non-disruptively the views of their professors and guest speakers.

A protest that prevents campus speakers from communicating with their audience is a coercive act.

No group of professors or students has the right to act as final arbiter of the opinions that students may entertain.

No group of professors or students has the right to determine for the entire community that a question is closed for discussion.

The purpose of college is not to make faculty or students comfortable in their opinions and prejudices.

The purpose of education is not the promotion of any particular political or social agenda.

The primary purpose of higher education is the cultivation of the mind, thus allowing for intelligence to do the hard work of assimilating and sorting information and drawing rational conclusions.

A good education produces modesty with respect to our own intellectual powers and opinions as well as openness to considering contrary views.

All our students possess the strength, in head and in heart, to consider and evaluate challenging opinions from every quarter.

We are steadfast in our purpose to provide all current and future students an education on this model, and we encourage our colleagues at colleges across the country to do the same.

March 06, 2017

Rules for Detecting BS

Borrowed from Astronomer Carl Sagan.

He called them rules for avoiding baloney but he wrote at a politer time. Given the flood of alleged science on the Internet and the impossibility of fact-checking it all, these rules are even more essential than when he wrote them. The list is from his book The Demon-Haunted World: Science as a Candle in the Dark. Highlighting below is mine.

  1. Wherever possible there must be independent confirmation of the “facts.”
  2. Encourage substantive debate on the evidence by knowledgeable proponents of all points of view.
  3. Arguments from authority carry little weight — “authorities” have made mistakes in the past. They will do so again in the future. Perhaps a better way to say it is that in science there are no authorities; at most, there are experts.
  4. Spin more than one hypothesis. If there’s something to be explained, think of all the different ways in which it could be explained. Then think of tests by which you might systematically disprove each of the alternatives. What survives, the hypothesis that resists disproof in this Darwinian selection among “multiple working hypotheses,” has a much better chance of being the right answer than if you had simply run with the first idea that caught your fancy.
  5. Try not to get overly attached to a hypothesis just because it’s yours. It’s only a way station in the pursuit of knowledge. Ask yourself why you like the idea. Compare it fairly with the alternatives. See if you can find reasons for rejecting it. If you don’t, others will.
  6. If whatever it is you’re explaining has some measure, some numerical quantity attached to it, you’ll be much better able to discriminate among competing hypotheses. What is vague and qualitative is open to many explanations. Of course there are truths to be sought in the many qualitative issues we are obliged to confront, but finding them is more challenging.
  7. If there’s a chain of argument, every link in the chain must work (including the premise) — not just most of them.
  8. Occam’s Razor. This convenient rule-of-thumb urges us when faced with two hypotheses that explain the data equally well to choose the simpler.
  9. Always ask whether the hypothesis can be, at least in principle, falsified. Propositions that are untestable, unfalsifiable are not worth much. Consider the grand idea that our Universe and everything in it is just an elementary particle — an electron, say — in a much bigger Cosmos. But if we can never acquire information from outside our Universe, is not the idea incapable of disproof? You must be able to check assertions out. Inveterate skeptics must be given the chance to follow your reasoning, to duplicate your experiments and see if they get the same result.

Yes, I would like to see these rules followed in the debate about climate change which it is essential that we have.

I heard Carl Sagan lecture twice. The first time he was predicting a new ice age, which he called the nuclear winter. He said it would be caused by dust from nuclear testing blocking sunlight from reaching the earth. It’s impossible to know whether he would have been right since above-ground nuclear testing ended. This was the climate worry of its day and was very popular and helped make Sagan a cultural icon. It also helped that he was generally liberal and hated Richard Nixon.

The second lecture was about the likelihood of us ever contacting another intelligent civilization. If I remember right, the odds were 50-50 because he believed that “intelligent” civilizations are likely to destroy themselves in nuclear conflicts around the time they got technically advanced enough for inter-stellar communication. He would be interested to know that his estimate of the frequency of earth-like planets was orders of magnitudes low, partly because he assumed they would have to be circling stars very like our sun. He didn’t have the advantage of recent advances in astronomy. Good scientist that he was he laid out all the steps of his calculation so that it could be updated when astronomy (or history) showed a premise to be incorrect.

Thanks to good friend Eric for pointing me to these rules.

March 03, 2017

The Differences between Camel’s Hump, VT and Camelback, AZ

640px-Camelback_Mountain_2  640px-CamelsHumpVT2012

 


The most important difference between these two very different mountains is what happens when you stumble and reach out to grab the vertical object you see in your peripheral vision. On Camel’s Hump, the object may be a birch and you may crush a slug in your hand. Disgusting. On Camelback you will grab a cactus and you will wish you had crushed slug in your hand.

It’s true that both mountains have humps on them; actually most mountains which don’t have peaks have humps. Neither of the people who named these mountains had ever seen a live camel (don’t fact check me; I made that up).

Both mountains have scrambles at the top. On Camel’s Hump you scramble the last few hundred feet on solid granite. On Camelback the scramble is the top one third of one approach and most of the other approach, in both cases on not-very-trustworthy sandstone.

Which brings us to hiking sticks. On Camel’s Hump a hiking stick is a great help both for pushing up steep places and not tumbling down them on the way back. On Camelback a hiking stick is something you don’t want to have in your hand because you need to grab the rocks you’re scrambling over with both hands (see scrambling above).

Late news from the hot tub: the trails on Camelback used to be walkable. The recent heavy rains washed out the sand and left the shark-tooth-like jagged stone ridges which require two-handed scrambling.

The view from the top of Camel’s Hump is much prettier. Signs of civilization in Vermont are hidden from view by the geography so the foreground is green forest and the background is other mountains to east and west. Suburban sprawl is very visible on the flat plains between Camelback and the taller mountains on both sides as pictured below.

IMG_20170301_133531813

The view at the top of both mountains is disappointing: too many other people who seem to have easily made the climb you struggled with.

Dogs are only allowed on the Vermont mountain.

For a truly great hike in the Phoenix area, try Tom’s Thumb in Scottsdale’s wonderful McDowall Sonoran Reserve. The trail on hard sandstone has perfect traction; the landscape is a garden of huge rocks and cactus. Dogs are allowed. See author below at the eponymous peak, which is as perfect a pluton as Pinnacle in Stowe, VT.

Thumb

February 24, 2017

Time to Face the Health Care Facts

Fix or “repeal and replace” is a political issue.

“So you've got this crazy system where all of a sudden 25 million more people have health care and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half. It's the craziest thing in the world."

Sounds like something President Trump might’ve tweeted except it’s more than 140 characters. However, this is a quote from President Bill Clinton about the Affordable Care Act (aka ACA aka Obamacare). He walked it back some the next day but he knew what he was talking about.

If Hillary Clinton had been elected President, she’d be dealing with the same real health care cost problems Republicans are struggling with. The main difference would be political: she’d have to be sure that her left wing accepted that changes were only routine maintenance while Republicans have to mollify their right wing by claiming that whatever they come up with is not Obamacare.

There are two separate issues: how do we stop the relentless climb in the cost of health care and who pays the remaining cost. As we’ve seen with ACA, moving the costs from one population, in this case the uninsured and the hospitals who are required to treat them, to another population, “the people who are out there busting it”, doesn’t make the costs go away. This post is about the hard choices we have to make to reduce overall cost. Because all of these choices are politically unpalatable, they are mainly missing from the current healthcare debate. Nor do I have answers for them, but they must be discussed,

The drug epidemic.  An increasing share of hospital budgets goes to treating the same population over and over for drug abuse and its health consequences. Tragically, more and more children of drug abusers need treatment for addiction from the moment of birth and suffer poor health and many other evils from having incompetent parents. Is there a way and is there the will to withdraw treatment from serial abusers who will not (or cannot) be cured of their habit? Is there a way to stop drug abusers form having babies? These are very tough questions.

The obesity epidemic. Obesity is known to cause heart disease and diabetes and multiple other ills, all of which require treatment. We do know that much obesity is caused by bad diet abetted by sedentary ways. We know that children on food stamps are more likely to be obese than those who are not and that childhood obesity is particularly dangerous.  We can and should defy the candy and soda lobbies and make these products ineligible for food stamp purchase just as liquor and cigarettes already are. How much of a nanny state should we be after that? If we’re offering healthcare to everyone, do we have to be a nanny state to keep the cost down?

Geezer care. I benefit from this. But how much treatment should my Medicare pay for? A huge part of the country’s medical budget is spent caring for people in the last year of their lives. Any discussion of this gets shut off politically with talk of “death squads”. But you can’t have free care without rationing it somehow. A dollar spent on me is not available to treat a child with a lifetime ahead of her or him.

If we can bring down the overall budget for healthcare by addressing these issues, then the problem of who pays for it gets simpler to solve. But we can’t bring the cost down while ignoring the elephants in the room.

February 22, 2017

Don’t Panic!

No question these are scary times. The new President, to be charitable, has made a lot of rooky mistakes. His grasp on reality slips in the face of any criticism, and he is faster to go on an ad hominem attack than a pit bull. Things are pretty scary on the other side as well. Most of the press thinks that the most important issue facing the nation is how the President treats them; they confuse criticism with censorship. Most importantly, the country is badly and deeply divided. That’s real. People on both sides of the divide, but particularly on the now-out-of-power left, are reacting with panic.

The best description of panic I ever read is in the novel Norwegian By Night by Derek B. Miller.

“Panic is the enemy,” said Staff Sergeant O’Callahan in 1950. “Panic is not the same as being scared. Everyone gets scared. It is a survival mechanism. It tells you that something is wrong and requires your attention. Panic is when scared takes over your brain, rendering you utterly fucking useless. If you panic in the water, you will drown. If you panic on the battlefield, you will get shot. If you panic as a sniper, you will reveal your position, miss your mark, and fail your mission. Your father will hate you, your mother will ignore you, and women across this planet will be able to smell the stench of failure oozing from your very pores.”

Panic isn’t pretty. It isn’t helpful, either. Dangerous times call for calm and judgment. If we want to stop really bad things, you’ve got to distinguish them from the things we just disagree with. We can’t automatically assume that everything Trump does is wrong – or right, for that matter. We can’t assume every news story we disagree with is false – or assume that it is true just because we agree with it. We can’t imagine ourselves as heroic members of the resistance when we go to a police-protected demonstration; that’s an insult to the people in the Syrian resistance being gassed and barrel-bombed by their government. Equally we are not the “Indians” of the Boston Tea Party because we demonstrate against the bailout of banks (that is the first thing the modern day Tea Party was against).

It’s a scary time; we can’t panic.

There’s another great paragraph in Norwegian By Night. This time Miller is writing about Oslo, where he lives as an American ex-pat. The book was published in 2012 so he wrote this before the last great migration, but he's writing about part of what divides us today.

"Recent immigration from Africa and Eastern Europe— and Muslim countries farther east— created a new social tension in the city that still lacked the political maturity to address it. The liberals expounded limitless tolerance, the conservatives were racist or xenophobic, and everyone debated from philosophical positions but never from ones grounded in evidence, and so no sober consideration was being given to the very real question now haunting all of Western civilization— namely, How tolerant should we be of intolerance?"

February 20, 2017

Is Border-Adjustment the Answer to Broken US Corporate Tax Structure?

The US corporate tax system combined with globalization turns free trade into unfair trade (see last post). Profits domestic companies make overseas are not taxed until they come home; so, naturally, corporations invest these profits abroad and build new factories abroad and favor the output of their foreign factories even if the cost of labor is the same or somewhat better in the US. To add insult to injury, while we are favoring imports with our tax code, most of our trading partners (including all OECD countries except us) favor their exports by rebating value added tax (VAT) when goods leave their country.

If we are going to continue to have the benefits of free trade and globalization, we must make sure free trade is fair to American workers. Sanders and Trump voters are right in saying that these benefits are flowing to the 1% at the expense of American workers. I’m embarrassed not to have thought about this before being hit alongside the head by the strength of these voters’ anger.

One proposal to solve these two problems in the corporate tax code is called a border-adjusted tax. Here’s how The Economist describes it:

“Firms currently pay corporate taxes on their profits. Border-adjustment would change how those profits are calculated. Accountants could no longer deduct imports—say, goods brought in from China—as costs. And their exports would no longer count as revenues. For tax purposes, “profits” would be domestic sales minus domestic costs. Effectively, imports would be taxed, and exports would be subsidized.”

Let’s take a toy which can be purchased by Walmart’s in China for three dollars and which costs twenty cents to bring home. Since the VAT in China is 17%, the refund to Walmart on export to $.51. The net cost is $2.69. Suppose the toy can also be purchased from a factory in the US for three dollars and local transportation is only a nickel. Since there is no refund of corporate taxes in the US like the VAT refund, the cost to Walmart for the US product is $3.05 - $.36 higher than the Chinese toy. Let’s suppose the toy sells for $3.99 at your local Walmart. Under the current system Walmart has a gross taxable profit of $1.30 on the Chinese toy and of $.94 on the US equivalent. Assuming for the sake of example that Walmart pays the effective US corporate tax rate, which is about 26% according to the GAO, the after tax profit on the Chinese product is $.96 and only $.70 on the US product, even though manufacturing costs were the same and transportation from China is more expensive. How do you compete with that?

One answer is border adjustment. Let’s border adjust the example:

This time Walmart is not allowed to deduct the cost of the imported product when calculating its taxable profit, which we’ll assume includes transportation (actually depends on the version of border-adjustment). The full $3.99 sales price is now taxable incremental income to Walmart and the tax due at 26% is $1.03. Walmart will now have an after tax loss of $.07 cents on the Chinese toy as opposed to a gain of $.70 on the US product. Guess who gets the order for the toy – even if the US cost of manufacture is actually somewhat higher.  If, after the tax change, Walmart still wants to make the same after tax profit on the US toy that it used to make on the Chinese toy, it will have to raise the selling price from $3.99 to $4.34. There’s no question that’s an added cost to US consumers (although it might not all be passed through); but all of the cost of the product stays in the US economy.

Walmart is NOT in favor of a border-adjusted tax nor are most other retailers or processors of imported raw materials like refineries. The Koch brothers are against it. See this website for many arguments against.

Suppose the US and China are competing to sell the toy to a third country and transportation is the same and suppose that both factories have a cost of goods and labor of making the product of $2.00. They both sell nominally at $3.00; but the net cost to the buyer of the Chinese toy to the buyer is only $2.49 after the VAT refund. Guess who gets the sale. But, with a border-adjusted tax, the US seller essentially has been forgiven tax on the whole selling price – a savings of $.82 at the effective tax rate of 26%. Now the US manufacturer can afford to drop its price and will win the sale – even if the US price of labor is somewhat higher, the US still gets the sale. The US is more likely to be selling airplanes than toys so add eight zeros to the end of all these numbers.

Boeing is in favor of a border-adjusted tax as are most US manufacturers, drillers, and miners. Farmers are on the fence because of fear of foreign retaliation. This website is sponsored by a who’s who of companies that a border-adjusted tax would benefit.

In a perfect world neither imports or exports would be advantaged. But we don’t live in that world; all of our major trading partners DO advantage their exports. Border-adjustment is one way to enable US workers to compete fairly – even if we pay a little more at Walmart. It’s the best way I’ve seen so far and far better than a set of punitive tariffs – although some countries might challenge it as unfair and we might suffer some retaliation (but they already have VAT refunds). If we had a border-adjusted tax, we could drop a crazy-quilt of tax exemptions whose purpose is to make our products competitive as well as subsidies like the Import-Export Bank.

A border-adjusted corporate tax is part of the tax reform plan Speaker Ryan has been working on for years. It is not clear whether it has enough Republican support to pass nor how much Democrat support to can muster. President Trump is ambiguous on it.

The real shame will be if this important debate gets lost in the noise of hyper-partisanship and the lobbyists keep control of the tax code.

February 17, 2017

The US Corporate Tax Structure Is an Incentive to Send Jobs Abroad

The way the US currently taxes corporate income is toxic for American workers when coupled with globalization. It turns free trade, which I think is a good thing, into unfair trade. It is a bizarre structure which only its parents – lobbyists and those corporations which benefit from it – could love.

Problem 1: in theory, the US taxes domestic corporations on their worldwide income with a deduction for foreign taxes paid. But, besides the obvious problem of ever discovering what the true income is in places immune from audit, there’s a huge loophole. Foreign income is NOT taxed until it’s brought home. Obviously, this is incentive NOT to bring the foreign income home if there’s any use at all for it abroad; this costs tax revenue.

Even worse, there’s an incentive to turn domestic income into foreign income. Here’s one easy and very popular way: transfer corporate patents to a subsidiary in a low-tax country like Luxembourg or Ireland and then charge the US corporation huge fees for the use of the patents. The overall corporate earnings don’t change; they just get shifted to the low-tax subsidiary – but they don’t get taxed “until the profits come home” -  like never or not until Congress passes a “tax holiday” to get the money back into the country.  This causes indirect job loss (as well as tax loss)because the incentive is to invest these profits abroad rather than here

But there’s worse. If the corporation build a subsidiary factory in the low-tax jurisdiction and charges a high price to the parent company for goods it buys from that factory, these goods are cheaper to the corporation as a whole than if they were purchased in the US – even if the cost of manufacture is actually the same – because no present taxes are due to the US on the profits of the foreign subsidiary. Now American workers not only have to compete with foreign workers who may or may not be paid less, they also are disadvantaged by their own tax code. That’s a high hurdle to climb.

Problem2: Our competitors mostly use a tax system which rewards exports from their countries at the expense of imports. It’s called a value added tax (VAT) and it’s rebated on exported goods (if you travel and are as diligent as Mary, you may have claimed your VAT rebate at the airport before coming home). The US taxes export sales at the same rate as imports. That sounds fair but it isn’t if everybody else is favoring their exports. The effect is that goods imported to the US are cheaper by the amount of tax that was rebated on them than goods made in the US which are fully taxed. Once again, American workers are paying the price for this disparity in tax policy between us and our trading partners – they either have to get paid less or lose the sale.

Mea culpa: I blindly assumed globalization is a good thing because it IS in economic theory. It took the revolt which propelled Sanders and Trump and even made Clinton a protectionist (after she wasn’t) to make me look harder at whether globalization has resulted in fair trade as well as free trade.

Next post: is a border-adjusted tax the answer?

February 15, 2017

It Depends How You Ask the Question – The Asian Disease Problem

Which explains a lot of where we are today

Quotes are from Michael Lewis’ The Undoing Project describing the work of Israeli psychologists Daniel Kahneman and Amos Tversky.

“Problem 1. Imagine that the U.S. is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimate of the consequence of the programs is as follows: If Program A is adopted, 200 people will be saved. If Program B is adopted, there is a 1/ 3 probability that 600 people will be saved, and a 2/ 3 probability that no people will be saved. Which of the two programs would you favor?”

An “overwhelming majority” of people chose Program A which saves 200 lives for sure.

Now ask this question:

 “Problem 2. If Program C is adopted, 400 people will die. If Program D is adopted, there is a 1/ 3 probability that nobody will die and a 2/ 3 probability that 600 people will die.”

An “overwhelming majority” of the group given problem 2 chose Program D. Note that Program A and C are identical in their outcomes as are B and D. The questions are just framed differently. When A was framed as a gain, people chose it; when it was phrased as a loss (as it is in C), people rejected it.

This is scarcely new news. Every salesperson worth his or her salt knows that fear sells. Sales 101 (which I only attended by osmosis) teaches “first create anxiety in the prospect.” IBM famously used FUD (fear, uncertainty, and doubt) in the early mainframe days to convince IT managers not to buy cheaper computers from competitors like Burroughs and Sperry Rand (remember them?). “You’ll never get blamed for picking IBM”… but, if the cheap computer you chose breaks, ….

As we’ve seen, a political campaign based on xenophobia and fear of job loss (they overlap but they’re not the same thing) can be successful against long odds. And as we see now, fear of President Trump is a potent fund-raising theme and impetus to demonstrate even where it is not clear exactly what the demonstration is against.

Framing may explain why so many polls about BREXIT and Trump were wrong. Probably unconsciously, pollsters phrased their questions in a way likely to elicit the response they expected. The lesson of the quotes above is that people respond to the framing of a question, not to its actual content. I will never again pay any attention to a poll unless I see the exact question that was asked.

More broadly framing may explain why some people persist in socially dangerous anti-vaccination behavior: they are avoiding what is explained to them as a risk, which we tend to do at almost any cost. Framing may also explain why discussions on what actions should or shouldn’t be taken to avoid climate change are shouting matches rather than exercises in reason: the two sides have the question framed differently in their minds.

More on The Undoing Project is here.

February 13, 2017

Don’t Believe the Experts

A frightening study

We know from recent experience that political experts don’t have a very good track record but we’d all like to think that a doctor’s opinion is a fact. This scary old story is from Michael Lewis’ new book The Undoing Project.

Way back in 1968 Lew Goldberg published a study of how consistent doctors were in diagnosing ulcers from x-rays. Here’s how Lewis tells the story:

“The researchers then asked the doctors to judge the probability of cancer in ninety-six different individual stomach ulcers, on a seven-point scale from “definitely malignant” to “definitely benign.” Without telling the doctors what they were up to, they showed them each ulcer twice, mixing up the duplicates randomly in the pile so the doctors wouldn’t notice they were being asked to diagnose the exact same ulcer they had already diagnosed….

“More surprisingly, the doctors’ diagnoses were all over the map: The experts didn’t agree with each other. Even more surprisingly, when presented with duplicates of the same ulcer, every doctor had contradicted himself and rendered more than one diagnosis: These doctors apparently could not even agree with themselves. ‘These findings suggest that diagnostic agreement in clinical medicine may not be much greater than that found in clinical psychology— some food for thought during your next visit to the family doctor,’ wrote Goldberg. If the doctors disagreed among themselves, they of course couldn’t all be right— and they weren’t.”

The really interesting – and scary –  part for me is that each doctor contradicted himself or herself at least once.

1968 was a long time ago. We have much better imaging technology. It’s likely that doctor training has gotten better. But my point is about experts. These were the experts of their time.

Now here’s the good part of the story if you’re a nerd like me. The same researchers asked the same doctors how they made their diagnoses. They took the doctors’ answers and wrote a simple computer algorithm to do the analysis the way the doctors said it was supposed to be done. The computer did better than even the best doctor in the group!

Lewis’ conclusion is “You could beat the doctor by replacing him with an equation created by people who knew nothing about medicine and had simply asked a few questions of doctors.” But he is also an expert and he isn’t telling us 1) how the programmers decided what method to use when doctors disagreed and 2) how the model got access to the data; back in 1968 computers read punch cards, not pictures. I suspect some human read the pictures and coded them for the computer so that human actually had a hand in the diagnosis.

You could conclude that the doctors didn’t follow their own prescription or that that the algorithm was crowd-sourced wisdom and therefor better than what any one doctor would do. You could also say we still need experts to come up with the rules which become the programs which do the diagnoses. The latter was true but artificial intelligence and big data available to be processed is all about generating rules. That’s how cars learned to drive themselves.

But surely we need experts (nerds) to write the programs that process the data that make the rules that do the diagnoses… but for how long?

February 09, 2017

No Job is Bad

Raise the Minimum Wage AND Remove Disincentives for Work.

This is a radical non-partisan proposal; probably both the left and right will hate it.

The national and Vermont unemployment rates ignore huge numbers of people who could be working but aren’t – the people who aren’t actively looking for jobs. At least part of the cause of the drug epidemic raging in America is the demoralizing effect of joblessness. The economy is held back both because potentially productive people are not productive and because we have a vast and duplicative welfare apparatus to support both those who aren’t working and those whose jobs don’t pay them enough to get by. Children who grow up in a house without a wage earner are less likely to successfully enter the labor force themselves.

For many people, not working is currently a good personal economic decision even if it is a poor lifestyle decision and bad for the economy as a whole. The jobs they can get pay less than the benefits they are eligible for if they don’t work. We need to address both sides of the equation: raise the pay for entry level jobs and reduce or eliminate benefits for not working – except, of course, for those who can’t work.

These two steps have to be taken together. Together they will be very powerful. This is part of how we put America to work again.

Let’s look at some of the objections that will be raised:

  1. Employers like restaurants can’t afford to pay more. The truth is that they can’t afford to UNILATERALLY pay more. If McD pays 30% more than Burger King, it will price itself out of business. If both pay 30% more, the price of fast food will go up but neither of them will be at a competitive disadvantage.
  2. Prices will go up. This is true (see above). But taxpayers are subsidizing the low wages and low hamburger prices by paying needed supplements (welfare) to those who can’t get by on what they’re paid. If wages go up, it IS essential that this be reflected in a reduction or elimination of benefits for those who will now be able to support themselves. We will pay more for hamburgers but less in taxes and less in the social and dollar cost of permanent unemployment. One over-simplified way to look at this is that the middle class is subsidizing low wages to benefit the 1%.
  3. Some jobs will disappear if the minimum wage is raised. This is also true; the incentive to automate will get even larger. However, a stronger economy will produce more jobs; people who earn more spend more. Right now in Vermont there are MORE minimum wage jobs available than people willing to take them – look at the help-wanted signs in every fast food restaurant. Employment - real employment – can go up even if some jobs are eliminated. However, it is important that these steps be taken at a time when there are jobs available. This isn’t a strategy for a recession; it’s a strategy to make us stronger before the next recession.
  4. It will be harder for kids to find part time work. This is true and needs thought. An apprentice program with a lower minimum wage would be good for kids but might drain too many jobs from adults. Overall I think it’s most important that kids have the example of working parents.
  5. It’s inhumane to tell people they will lose their benefits if they don’t take jobs they don’t find fulfilling. No Job is Bad. It is very bad not to have a job. Any job which is safe and pays a living wage is better than no job. It is inhumane to discourage people from working with our current policy of an historically low minimum wage AND high benefits for not working. It is inhumane to force those who are working to also become dependents of the welfare system to get by.
  6. What we really need are more higher-paying jobs and people trained to fill them. Yeah, we need those things, too. But we must immediately address the problem of people without fancy skills. Moreover, there is no better job training program than a job.
  7. It’s not so simple. We’ll need a transition. We’ll need to make sure people don’t fall through the cracks. Health care is still “unaffordable”. Child care is an issue. But the tradeoff of higher wages for lower subsidies needs to be set in law and set in motion.

Because we do have both unfilled entry-level jobs in Vermont and people who have left the labor force but can work, we are in a position to implement this here now. We don’t need permission from the Feds. We might set a good example, which we always like to do. The motto might be Everyone Works for a Living Wage.

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