Monday, April 09, 2007

Morality Plays

Today’s Quote of the Day

The danger is not that a particular class is unfit to govern. Every class is
unfit to govern.
- Lord Acton

Yesterday being Easter, the weekend featured the usual assorted movies about Christ (The Passion of the Christ, The Greatest Story Ever Told, The Last Temptation of Christ) and a reminder to the heathen, in this case me, that Christ existed for our salvation to rescue us from sin and damnation. At the same time the New York Times ran a variety of columns, including this piece by Frank Rich, which makes it quite clear that there is still a vast amount of sin and abomination, much of it emanating from all things Republican, whether from the White House or in the flailing candidacy of John McCain. And of course much of that ties in some way, shape, or form to our involvement in Iraq.

In my stream of consciousness I started to think back about my immediate reactions after the September 11th attacks. I was out walking, getting a good constitutional on what was until then a nice cheery day here. I believe I thought, almost immediately, about the rationale for the attacks. I may be confusing this time with the first time I heard about Bin Laden’s warnings, but in either case this was soon after the attacks had happened. And there was no doubt about the thinking. We are there in the Middle East primarily because of the Oil. Oil is a linchpin for our economy, perhaps the linchpin. We are not there to practice colonialism in the traditional sense. But our need for preserving the flow of oil is in the spirit of mercantilism, and since mercantilism is often associated with colonialism, we look like latter day imperialists. Certainly, we have little direct concern for the welfare of the peoples of the Middle East. Did we show concern for the people of Panama when we ran the Canal?

All this seems like pretty basic stuff to me but somehow it got lost in our outrage and horror from being attacked on our native soil. Now it was we who were the victim and they the perpetrator and any history that led up to that moment be dammed. Then, ever the economist, I started wondering how much of all that ails us, not just Iraq but really everything, could be explain simply by income inequality and that those at the upper end of the income distribution are blithe to the needs of those at the lower, while those at the lower end bear resentment, in part just for that, but more so because they see no realistic way to improve their lot and have suffered a variety of indignities as a consequence. This Nicholas Kristof piece emphasizes the inhumanity that decent poor people must endure in Pakistan. I don’t have a cite for this one, but I heard a piece on NPR last week that said the basis for the entire Al Qaeda thing with the treatment that some of the core members received in Egyptian prisons. The story is that they have a taste for blood, something that was cultivated from their prison experience.

So I started to ask myself a different sort of question. If we did actually care about these people and wanted to help them in some way, do we actually have the resources to do something substantial to help them out, or is it a pipedream, something beyond our own means. And this in turn gave me an urge to look at the data about income distribution for the U.S., where I had a reasonable guess that the data are abundant and where one could ask the parallel question – can we end Poverty as we know it, the clear goal of the Johnson Great Society programs, or is that too beyond our means, something we can idealize about but not reach? In other words, is this primarily a matter of sufficient wealth or sufficient resolve?

I went to the Census Bureau Web site and in short order found this data series about the earnings of individual men for the year 2005, the most recent year available. There is a parallel series for women. (Indeed there are tables of income that are available by household, family, and individual.) I chose that first series to focus on more or less by happenstance, but also to compare with my own situation, where I know the history.

Here are some quick facts for those who want to follow my argument but not directly peruse the data. The series covers all males ages 15 years and above. There are about 113 million people in this category. The mean income for the entire population is not quite $41,000. The income distribution is quite skewed in that on the one hand it is bounded below by $0 and on the other hand the top category for income is $250,000 and above, more than four time the mean. Is this particular cell there is about 1% of the population and they earn almost 12% of the income.

Partly to get a handle on the skewness and partly just because it’s fun for me to play with Excel, I made a little spreadsheet that has a chart of the income distribution graphed as a Lorenz curve, the raw data from the Census table along with the cumulative percentages on both population and income, and a little worksheet to do an inflation adjustment. I started work at the U of I in August 1980. My 9-month salary that year was $19,500. What would that number be like today, in 2007? While giving a precise answer makes little sense to me, I’m comfortable with a multiple of between two and three over the 27-year period, simply to account for inflation. Incidentally, my understanding of starting salaries in Econ this year were around $95,000, meaning there has been some real increase in starting salaries, it’s not all explained by inflation.

There’s one other factor that needs serious consideration before looking at those numbers as an explanation of income inequality. There’s a clue in that 15-year olds are counted. Some of them are bagging groceries after school. Some of them are not working at all. Their annual income is likely to be fairly low, just because of their age. Even after entering the labor market full time, however, wages are likely to increase with seniority, even accounting for inflation. There are several explanations for this, growth in human capital, better matching of the employee to the work, and providing the appropriate incentives are a few of the explanations. The point is that these factors suggest that earnings will vary over the life cycle, and that a census such as reported in the income table I’m looking at, is sampling people at junctures in the life cycle. Those life cycle effects have to be netted out. When one does that the inequality won’t be quite as stark as it seems from first glance at the numbers.

With those caveats, I’m now going to sound the alarm. The median income is just $27,500 while a full 80% of the population makes under $60,000. Most of us who are faculty or reasonably well placed administrators, even if we feel we’re underpaid and under appreciated, are in an income elite relative to the population as a whole.

And the key point is that high income tends to isolate people from the rest of the population. There is a tendency to live near other people of a similar status. When I was a grad student 1976-1980, I believe my stipend in the last year was still under $4000 and with that I had to pay rent and buy food and gas for the car. (My folks helped me out or I would not have been able to do this.) But I had to live in Chicago where rents were cheaper and incomes more modest, in order to live within my means. Moderate income democratizes. Extreme incomes isolate. Until I did this little calculation, I didn’t realize just how away from the norm we are in academe. That there is an urge to make more income to insulate oneself from some of the hustle bustle is perhaps understandable. That too much of this anesthetizes one from the travails of others may be less immediate, but seems obviously the case. The university as sanctuary itself is meant to provide such insulation, to enable deep inquiry and the institution of tenure may be a necessary component of that. But there has been less commentary about the pernicious effects from creating an income elite that, especially at a public university such as Illinois, is almost certainly wealthier than the student population they teach.

I want to get back to my main theme, about the society as a whole and not worry simply about the isolation within academe. So let me try to address the question of whether we are rich enough to end poverty as we know it simply via income transfer. My conclusion (this warrants more serious argument but here’s the quickie one) is that if one did a linear tax on all income above the mean and likewise a linear transfer of income back to those below the mean then a 10% tax/transfer of this sort wouldn’t do the trick and while a 50% rate would, if the income numbers held up, such a 50% tax would kill incentives on income generation at the upper level (make the tax rate high enough and the Republicans do have a point) and so it wouldn’t work at that level either. So, at the least, that naïve approach is not going to work.

One might want to think about that income distribution curve in my spreadsheet not in the static way it is represented there, but in an inter-generational sense. Given the income of the parents, what is the income distribution that the children will face? We all know that if you’re born with a silver spoon in your mouth you’re more likely to end up rich and if you’re born poor in the inner city you’re more likely to end up poor. But is there a decent chance to beat the odds and break out of that circumstance?

I confess that over the weekend I watched a fair amount of golf. At first the Masters tournament seemed like a dud to me. The blustery conditions led to poor play and that watching all the pros fail made for poor television. But on Sunday things warmed up a bit, there were some really wonderful shots, including some long putts that went into the hole after making a 90 degrees change of course due to the undulations in the green, and the tournament ended up producing a great Horatio Alger story. The champion, Zach Johnson, a heretofore unknown from the state of Iowa who at the time wasn’t good enough to earn a scholarship at the University of Iowa (great golf school, right?) so went to Drake instead, just kept at it and kept at it, and went through all the levels of tournament golf below the PGA tour, ultimately making it to the highest level and then proving himself to be the best on this the most visible stage in golf (at least in the U.S.).

We love stories like this. As long as these things can happen on occasion, and not just for sports performance but for other areas of achievement too, then we’re ok with the income distribution chips falling where they may. As long as the game is fair and not rigged, then fine. All of us live with the immigrant myth of how the grandmother washed floors for a living so the father could have time to attend night school and so the children could go to Harvard (or the U of I). It’s the opportunity for advancement that the system must provide. It’s not a guarantee that everyone succeeds in the struggle.

The problem is, the game is rigged. Education was supposed to be the equalizer, the guarantee of equal opportunity, the enforcer of the meritocracy. But inner city kids, overwhelmingly Black and with no one caring about their learning, have no chance. Kozol calls it apartheid. No Child Left Behind blames the schools. But nobody cares for the children. This is a tragedy. It’s here, not in Iraq. Yet it doesn’t make the papers. The test scores make the papers. The conditions in the schools do not. What could speak louder about our insulation?

* * * * *

There is a different morality play going on that also doesn’t seem to be getting enough attention. This one is about Barack Obama and his raising a vast war chest of campaign contributions, enough to rival Hillary Clinton and literally give her a run for her money. Has anyone who is not Republican been asking about the type of press Obama is getting? If the linked piece from the New York Times is any indication, he’s getting only praise, cast as a sensitive intellectual type who is above the fray of partisan politics but in tune with the needs of ordinary people. Adlai Stevenson is mentioned… the possible downside. It seems everything is coming up roses for Senator Obama.

But what of the implied promises to those donors, the ones who’ve given the big bucks? Don’t they expect their voices to be heard and heard loudly? How can one raise all that money and credibly preach a populist message? When the reckoning comes, how will this play out? Will Obama’s bubble burst or will it be ours that bursts because we have so much hope in him?

This is not the inexperience question. It’s different. After Bush, we want the Messiah. We need the Messiah. Obama seems like a good guy, but he is not the Messiah. It would really help if the press, particularly the New York Times, made that point forcibly. Unfortunately, they’re not ready to do that and nobody really wants to listen even if they did.

In our collective hubris, we’ll cometh to a collective fall.

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