Archive for the ‘Political Economy’ Category

the myth of ‘working class’ support for Trump

Friday, May 6th, 2016

Exit polls of primary voters show that supporters of Trump, like others in the Republican party, tend to have high incomes compared to other Americans. This was a surprise to me.

Trump voters’ median income exceeded the overall statewide median in all 23 states, sometimes narrowly (as in New Hampshire or Missouri) but sometimes substantially. In Florida, for instance, the median household income for Trump voters was about $70,000, compared with $48,000 for the state as a whole.

By Nate Silver, “The Mythology Of Trump’s ‘Working Class’ Support“, FiveThirtyEight, 3 May 2016.

Donald Trump and political parties

Thursday, May 5th, 2016

Against all predictions, Donald Trump will soon be the official Republican candidate for president of the United States. The President of the United States functions as head of state and head of government. A President Trump in this powerful office frightens many, including the editors of the Financial Times. Today’s FT contains a strong ‘non-endorsement’ of Trump. Below are highlights from the editorial.

Mr Trump’s personality, intellect and experience make him radically unqualified for the presidency of the United States. ….

It is indeed shocking that the party of Abraham Lincoln and Dwight Eisenhower is about to nominate a shallow narcissistic demagogue such as Mr Trump. But, in some respects, the Republicans have sown the seeds of their own downfall — by flirting for decades with nativist themes and radical anti-government rhetoric that has too often shaded into conspiracy theories about everything from gun control to the “liberal media”. ….

…. Mr Trump’s antitrade stance and isolationism carry disturbing echoes of the 1930s.

Despite all this, … [h]is defenders in the American establishment are already advancing the idea that much of Mr Trump’s campaign rhetoric is an act. They argue that the “real” Donald Trump is a shrewd businessman who would govern pragmatically once he was in the Oval Office. They also suggest that Mr Trump will move to the middle-ground and show a more moderate face to the world once he has definitively secured the nomination of the Republican party.

Yet Mr Trump cannot simply erase the memory of the campaign to date. The past few months have already demonstrated that he would be a disastrous choice for the most powerful political office in the world.

Trump and the future of American leadership“, Financial Times editorial, 5 May 2016 (metered paywall).

Regardless of whether Mr Trump wins (with help from supporters of Bernie Sanders) or not, it is clear that the Republican party will never be the same. I think it is time for the US to move to a three-party system. The Republican party could become the Tea Party in everything but name: a coalition of social conservatives and libertarians. The Democrats since Bill Clinton have embraced conservative policies, similar to those of the Eisenhower and Reagan Republicans of old. What is missing is a party on the left, one that would attract supporters of Bernie Sanders. This new party would be similar to the Labour party in the UK or Canada’s New Democrats. It could even adopt the name New Democratic Party. The Democrats would become the party of the centre, the Republicans the party of the right, and New Democrats a party of the left.

In the three-party system outlined above there is no place for “a shallow narcissistic demagogue such as Mr Trump”. That is intentional. It is not a bug.

crime and incarceration

Saturday, April 30th, 2016

In recent decades, the United States has recorded a falling rate of crime and rising rate of incarceration. (See the two figures below.) Correlation, however, is not causation. Crime rates can fall for other reasons, such as population ageing and more (or more efficient) policing.

Macalester College (Minnesota) economist Timothy Taylor sorts this out in a concise blog, concluding with the following summary:

Crime is falling for lots of reasons over the last three decades. Rising incarceration may well have been a moderate contributor to the fall in crime back in the 1980s, when the incarceration rate was relatively low. But by the 2000s, when the incarceration rate had more than doubled, it had become a costly and not-very-powerful way of reducing crime. From that perspective, it’s not a coincidence that California and other states have been scaling back on their incarceration rate in the last few years. As various states are recognizing, there are more cost-effective alternatives to keep the crime rate on a downward trend.

Timothy Taylor, “Crime and Incarceration: Correlation, Causation, and Policy“, Conversable Economist, 29 April 2016.

Professor Taylor quotes extensively from a 79-page, April 2016 report of the Council of Economic Advisers, titled “Economic Perspectives on Incarceration and the Criminal Justice System“. Here is one example, followed by figures from the report:

CEA conducted “back-of-the-envelope” cost-benefit tests …

  • We find that a $10 billion dollar increase in incarceration spending would reduce crime by 1 to 4 percent (or 55,000 to 340,000 crimes) and have a net societal benefit of -$8 billion to $1 billion dollars.
  • At the same time, a $10 billion dollar investment in police hiring would decrease crime by 5 to 16 percent (440,000 to 1.5 million crimes) have a net societal benefit of $4 to $38 billion dollars.

chart of the day

Friday, April 29th, 2016

Never before in recent American history — perhaps never before, period — have the two major candidates for president been so disliked by the electorate. A huge majority – 65% — of voters dislike Donald Trump. Hillary Clinton does slightly better, as she is disliked by ‘only’ 56% of voters. Their net popularity ratings (measured as positive minus negative views) are negative 23% for Mrs Clinton and negative 41% for Mr Trump. (Mr Trump’s negative rating appears to go off the chart below!)

Regardless of which of the two candidates is elected president, I fear the United States will become even more ungovernable in the future than it has been in the recent past. So much hatred of political leaders makes sane governance all but impossible.

Chart: Clinton, Sanders data

According to the latest Wall Street Journal-NBC poll, only a third of US voters have a positive opinion of Mrs Clinton, while 56 per cent of Americans view her negatively. She fares somewhat better than Mr Trump, who is disliked by 65 per cent of Americans and liked by just 24 per cent, but worse than all the other remaining presidential candidates including Ted Cruz, the Texas senator.

Courtney Weaver and Demetri Sevastopulo, “US election: Can Hill thrill after you’ve felt the Bern?“, Financial Times, 29 April 2016.

libertarian logic

Tuesday, April 19th, 2016

These are not direct quotes, but similar statements are sometimes uttered simultaneously, by the same person.

“Redistribution of income with revenue from taxes will never work because people are inherently selfish.”

“Charity will cover everything because people are inherently generous.”

HT “The Discovery of the Heart“, CBC Ideas podcast, with Paul Kennedy, 13 April 2016.


working-class Republicans in US politics

Saturday, April 16th, 2016

American journalist Jacob Weisberg has an interesting op-ed in this weekend’s Financial Times. Here are two paragraphs that caught my attention. To place these paragraphs in context, note that working-class Democrats who became Reagan Republicans decades ago are Donald Trump Republicans today.

Working-class Republicans are waking up to the reality that their party does not represent them any more than the Democrats did. On issue after issue, Mr Trump’s supporters are at odds with Republican dogma. They do not support free trade and globalisation. They do not favour tax cuts for the wealthy, or bailouts for banks, or financial deregulation, or the rollback of consumer protections. And, though nationalistic, their families are the ones that paid the human cost for the neoconservative fantasy of bringing democracy to Iraq. ….

In this context, the rise of the Tea Party now appears as a red herring. Rank-and-file Republicans were not dismayed by George W Bush’s failure to shrink their benefits. It was the party’s wealthy elite who were frustrated about that. Working-class Republicans were enraged because they saw the federal government bailing out Wall Street banks instead of ordinary citizens. The Tea Party quickly dissipated into irrelevance because it did not represent the people it claimed to represent.

Jacob Weisberg, “The Republicans face a historic rupture“, Financial Times, 16 April 2016.

Jacob Weisberg (born 1964) is editor-in-chief of Slate Group, and former editor of Slate magazine.

Robert Frank on success and luck

Thursday, April 14th, 2016

It is often said, tongue in cheek, that the two most important decisions a child can make is to choose good parents and a good place of birth. Parents and birthplace, for the bably, are of course a matter of chance, since choice is not possible. But the fact remains that these are incredibly important determinants of success in life.

Cornell University economist Robert Frank (born 1945) has written a book on this very topic, which was published just days ago by Princeton University Press. The book’s title is Success and Luck: Good Fortune and the Myth of Meritocracy. An essay adapted from his book has been printed in the May 2016 issue of The Atlantic magazine. Here are some excerpts. (more…)

tax transparency in Norway

Saturday, April 9th, 2016

With the leakage of the so-called “Panama Papers”, there is renewed interest in the subject of tax avoidance. A simple way to attack this problem directly is to publish the reported earnings and tax payments of everyone. I cannot imagine this happening in any country. I recently learned, though, that Norway has had this system in place for nearly two centuries. BBC correspondent Jonty Bloom reports “at the click of a mouse – the earnings, tax and wealth of everyone from the prime minister down is available online for anyone to see.”

[Every Norwegian] has been able to see how much you earn and how much tax you pay since 1814. Until recently the data was only available at the town hall or in expensive printed books, rather like the Yellow Pages, but these days it is all available online. ….

It started when Norway won its independence and needed to set up a central bank. Taxes were raised and to make sure everyone was paying their fair share, all the details were published. ….

As a result Norway is one of the least corrupt countries in the world.

Jonty Bloom, “Tax transparency: Could the UK take a leaf out of Norway’s book?“, BBC News, 1 April 2016.

EU leadership

Monday, April 4th, 2016

Who heads the European Union?

Eight months ago Europe finally seemed to have answered Henry Kissinger’s quandary about whom to telephone. That was Angela Merkel. The US intelligence services admittedly took that too literally by eavesdropping on Ms Merkel’s calls. But it was clear who was in charge. Others were prepared to follow her. All that is now moot. Following Ms Merkel’s decision to open Germany’s doors to Syrian refugees, even domestic allies have distanced themselves from her — not to mention neighbours, such as Austria, Poland and France, which explicitly repudiated her move.

Edward Luce, “The self-induced twilight of the west“, Financial Times, 4 April 2016 (metered paywall).

democracy in the USA

Sunday, April 3rd, 2016

Can America’s democratic system of government be harnessed by the wealthy to serve the will of the few? FT columnist Edward Luce reviews books written by three authors who think so.

Charles and David Koch, two brothers reputedly the sixth- and seventh-richest individuals in the world, are outstanding examples of the power of wealth in US politics. “The story of the Kochs,” writes Mr Luce, “tracks the evolution of US democracy over the past generation.” (more…)