American Political Preferences Are Not Well Explained By Conventional Categories

This article describes the political categories that are used by Pew in its political polling.  Pew does not divide Americans into left, right and center.  There is no coherent center in American politics.  There are two right wing groups, that have some things in common, and they are very committed.  Left leaning groups lean Democratic but many lack coherence or commitment.  The percentage of Democratic leaning Americans is larger than the Republican leaning percentage but they do not share a consistent ideology and the commitment that comes from a shared ideology.  That is why Republicans do better in elections than their numbers suggest. 

A Warning About Growing Inequality From A Billionaire

Nick Hanauer is an entrepreneur from Seattle who made billions by investing in successful start ups like Amazon.  He is not a technologist and he claims that he is not particularly smart.  He is good at seeing the future a little bid earlier than other people.  The future that he envisions for America is not a good one.  Growing inequality will lead to two bad outcomes: social revolution or a police state.  His message for his fellow billionaires is that they should support policies that will promote equality.  He believes that this will be good for the economy, and for them. It is a better alternative than revolution or a police state.  While a revolution may be unlikely, a police state can be dangerous even for billionaires.  Some billionaires will attempt to capture the state and use its power against their economic competitors.  We know what that looks like in other parts of the world.

Supply Side Economics As The New Bible In Kansas

The far right has not been able to take over the federal government but it has a program in place to take over state governments.  This article describes how a far right program to capture state governments, and put them in the service of the plutocracy, has led Kansas into a financial disaster area.  Economists, working for ALEC, which is the far right organization intent upon capturing state governments, convinced the governor that tax cuts, primarily for the wealthy and corporations, would stimulate growth in the Kansas economy.  Faster economic growth would produce more tax revenue for the state than what was lost from the tax cuts.  That is the myth that was sold to Ronald Reagan in the 1980's.  Reagan was forced to raise taxes when it turned out to be a myth.  Kansas may have to do the same thing.  The promised economic growth, and higher tax revenues, never happened.  The state budget is in deficit and its debt has been down graded by rating agencies.

The high priest of supply side economics, who sold the myth to Ronald Reagan, was part of the team that convinced the governor of Kansas to commit economic suicide.  Old charlatan's never die.  They just fade away.  Unfortunately for Kansas, ALEC found a way to bring a discredited myth, and the economist who created the myth, back to life.  Where there is a will, there is a way, and ALEC is intent upon capturing state governments, particularly in red states which have compliant governors and cooperative legislatures.  ALEC will get lots of help from conservative think tanks that helped to sell the failed tax program to Kansas.  The tax supported think tanks provide a home for economic cranks who supply the economic mythology needed by ALEC.

Which Variation On Capitalism Will Survive And Dominate?

The graph below (click to enlarge) illustrates that capitalist societies are quite different in their outcomes.  For example, the US produces more low paying jobs than any other OECD country.  One view, discussed in this article, is that other nations will move towards the US version of unrestrained capitalism in which market outcomes dominate over social democratic forms of capitalism.  On the other hand, the wide differences that currently exist are the result of political and economic coalitions that lead to very different implementations of capitalism.  The basic question is whether those institutional differences will prevail in the future.  The recent elections in Europe show that nationalism and anti-immigration forces are a threat to the coalitions that have made a more equitable system of capitalism politically possible in many European countries.  Will the US model or the European model prevail?

The Difficult Task Of Conservative Intellectuals

Conservative intellectuals have the following problem, which is aptly summarized by this quote from John Quiggen:

The Republican party is a coalition of crazies, racists and plutocrats. But there is a political requirement to talk about policy in a way that is not obviously crazy, racist or pro-rich. The task of conservative intellectuals is to square this circle…

So how do conservative intellectuals deal with the problem of climate change without infuriating their base which has been taught to deny climate change?  They respond by shifting the argument away from climate change denial.  They exaggerate the cost of mitigation and they underestimate the risks of doing nothing.  The following post by Paul Krugman shows that reform conservatives have not found a good alternative to climate change denial.  Their economic argument is easy to attack.  Its not easy to be a conservative intellectual when your political base is crazy and anti-intellectual.

Why Its A Good Idea To Fight Climate Change In A Depressed Economy

Paul Krugman explains why conservative pundits have the economics all wrong about the timing of government investments that will reduce carbon emissions.  They argue that we can't afford the investment in a slow growth economy.  The worst time to increase government spending is when we have a full-employment economy.  That would lead to price inflation.  We currently have a shortfall in demand, and an oversupply of capacity and labor.  Government can also borrow at very low interest rates.  We can reduce carbon emissions and create jobs by fighting climate change now.

CEO's Are Highly Paid But Their Compensation Is Determined By Market Forces???

It is impossible to look at the data on CEO compensation without reaching the conclusion that it has been rising at a very rapid rate relative to the wages earned by the average worker.  This creates an opportunity for some economists to justify the increase in CEO compensation and to defend corporate directors against a charge of malfeasance.  I posted an earlier article by Greg Mankiw who justified the rise in CEO compensation by consulting his introductory economics textbook.  According to Mankiw, CEO's compete in a competitive labor market.  The demand for CEO's who have the necessary skills is very high relative to the supply of candidates with the required skills.  Therefore, the rise in CEO compensation has been determined by the laws of supply and demand for rare skills.  Mankiw's argument also assumes that those rare skills have enabled to CEO's to make a contribution to organizational productivity that is a least equal to their compensation.  Mankiw's defense of CEO compensation did not require him to examine the process that corporate boards employ to determine CEO compensation.  He only had to consult his introductory textbook.

Steve Kaplan made a more sophisticated defense of CEO compensation than Greg Mankiw.  He argued that CEO compensation has risen in line with that of other highly paid professionals in the top 0.1%.  Therefore, weak corporate governance is not responsible for the rise in CEO compensation.  They were underpaid prior to 1980, and they are now being paid what they are worth.  Kaplan was at the conservative Cato Institute when he did his research.  He also presented his study at a special meeting of the NBER which honored Martin Feldstein for his many years of leadership at the NBER.  Feldstein was an economic adviser to Ronald Reagan.  He was also the Chair of the economics department at Harvard.  He did what he could to shape the department at Harvard in his image during his tenure. 

In this article, Brad DeLong reports on another study which shows that CEO compensation has risen at a faster rate than that of others in the top 0.1%.  That study used the same data that Kaplan had used to reach a much different conclusion.  DeLong claimed that he could not understand how Kaplan had reached a much different conclusion.  He changed his mind about the debate and argued that CEO compensation is not determined by the labor market.  He believes that an oligarchy which consists of CEO's, corporate board members and financiers makes the rules that better explain the rise in CEO compensation.  Some might wonder why DeLong was shocked that a study funded by the Cato Institute, and presented at an event to honor Martin Feldstein, had found a way to prove that the rise CEO compensation was market determined. 

Hedge fund managers and CEO's who are hired by private equity firms also have seen a rapid rise in their incomes.  Their compensation has not been determined by compliant corporate boards.  Private equity funds find the best executives they can find to run the corporations that they have acquired.  They also compensate them very well.  Some argue that this shows that CEO compensation has not been determined by weak corporate governance.  This argument quickly breaks down.  Private equity firms have to pay CEO level wages in order to recruit CEO's from other firms.  Moreover, the long term performance of firms acquired by private equity firms has been very poor.  The CEO's hired to run these firms have a mission to fix them up quickly in order to sell them.  Cost reductions are the easiest way to reach that goal.  They also strip the firms of assets while they are managed in order to pay fees to the private equity firms while they are under management.  It takes a very special kind of person to operate a business under those guidelines.  Brad DeLong's conclusion about an oligarchy is probably accurate.  Moreover, he should not have been shocked by that conclusion.  Economic textbooks are poor source of information about CEO compensation and so are studies funded by conservative think tanks that receive their funding from the oligarchs.