The psychology of power: Absolutely | The Economist

The psychology of power: Absolutely | The Economist: "Power corrupts, but it corrupts only those who think they deserve it"
This is a warning about meritocracy. The meritocratic should not think that they are entitled lest they abuse their status. Even merit is bestowed by grace and the recipients are no more morally worthy than anyone else. This is what humility should really be about.

Matthew Yglesias » Heuristic-Driven Public Opinion

Matthew Yglesias » Heuristic-Driven Public Opinion: "My view of the public is that it doesn’t have strong views on policy matters. But most voters do have strong views about famous politicians. A large minority of voters really like Barack Obama, for example, and if he tells them something is good they’ll assume he’s right. Another large minority of voters has strongly negative feelings toward Obama, and toward the Democratic Party writ large, but has positive views about the Republican Party and its leadership.

Then there’s another, smaller faction that takes a dim view of both parties and of politicians generally. But even though this group is small, it’s centrally located on the opinion spectrum. And it tends to assume that if elite leaders from both parties get together and say something’s a good idea—like George Bush and Dick Cheney but also Hillary Clinton and Tom Daschle and John Kerry and Dick Gephardt say we should invade Iraq—that it’s probably a good idea. On the contrary, if only one party will support something then it’s probably partisan and bad and probably the party pushing the idea didn’t try hard enough to reach a sensible compromise.

Therefore, almost anything that an opposition party succeeds in mounting unanimous opposition to—Bill Clinton’s 1993 budget, George W Bush’s 2005 Social Security privatization push, Barack Obama’s 2009 health reform push—will wind up polling poorly."

Matthew Yglesias » Money for Nothing, and Votes for Free

Matthew Yglesias » Money for Nothing, and Votes for Free:

Something worth mentioning in the context of the Citizens United decision, though not directly tied to the issue at hand there, is that a group doesn’t actually need to spend vast sums of money to have a decisive influence on politics. It just needs to be able to credibly threaten to spend said sums. Bank of America, for example, dedicates $2.3 billion to marketing in 2008 so it’s clear that they’ve got the budget to mount a $100 million series of scathing attacks on a Senator who pisses them off and basically laugh that off (and note that in 2004 total spending on Senate campaigns was just $400 million). And if you can have it be the case that just one Senator goes down to defeat for having pissed off BofA then everyone else will learn the lesson and avoid pissing them off in the future. You don’t need to actually sustain that volume of campaign spending.

I’ve seen a lot of jokes about the idea of corporate-sponsored candidates and such. But the real issue here isn’t so much affirmative activity on the part of businesses as it is negative activity on the part of politicians. We’ll be looking at one further step toward a political system in which large business interests have a de facto veto over all policy questions. Politicians will still be free, of course, to have feisty debates about which party is more to blame for the budget deficit, about who loves the pledge of allegiance more, about who’s more determined to pretend that there won’t be bailouts after the next financial panic, etc.

Federal Estate and Gift Taxes

Federal Estate and Gift Taxes: "The share of estates that were taxable rose substantially between 1950 and the mid-1970s, when that share reached almost 8 percent, but has declined sharply since then (see Figure 2). Since 1977, generally about 1 percent to 2 percent of adults who died each year have left estates large enough to be taxable. In 2000, before EGTRRA was enacted, 51,200 estates were taxable, representing 2.2 percent of adult deaths in that year. EGTRRA reduced the percentage of estates that were taxable. For example, 17,400 taxable estate tax returns were filed in 2007; most were for deaths in 2006, when the effective exemption amount was $2 million, representing about 0.7 percent of adult deaths in that year."

Figure 2.

Estate Tax Returns

Source: Congressional Budget Office based on data from the Internal Revenue Service.

Matthew Yglesias » GDP Maximizing Policies

Matthew Yglesias » GDP Maximizing Policies: "Right now, if you take a childless single person who earns $60,000 a year, he pays a lower proportion of his income in taxes than does a two-parent, two-child family earning $240,000 a year. You could assess taxes on a per capita basis and dramatically shift the incentive structure."

Economic Mobility

Matt Zeitlin: Impetuous Young Whippersnapper: "Bhashkar Mazumder, an economist at the Federal Reserve Bank of Chicago, has a paper which says that “Using administrative data containing the earnings histories of parents and children,the IGE is estimated to be around 0.6. This suggests that the United States is substantially less mobile than previous research indicated.” And, “estimates of intergenerational mobility are significantly lower for families with little or no wealth.”
Or, from Markus Jantti of Abo Akademi University:

The United States, Italy, and France all have high persistence, at 0.45, 0.44, and 0.42, respectively, which with a 12-fold income advantage in the parental generation would translate to roughly three times higher incomes among the children of the richest fifth compared to those of the poorest. Denmark has the lowest persistence at 0.12, and most other countries are quite close to 0.25. These numbers translate to 1.35 and 1.86 times higher incomes among the richest fifth offspring, holding constant the parental income advantage

In summary, “Intergenerational income persistence in the United States is quite high compared to other countries, and that persistence.”

And, from a Center for American Progress report ‘Understanding Mobility in America,’ “By international standards, the United States has an unusually low level of intergenerational mobility: our parents’ income is highly predictive of our incomes as adults. Intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Among high-income countries for which comparable estimates are available, only the United Kingdom had a lower rate of mobility than the United States.”

Brendan Nyhan

Don't miss this extremely valuable story in the Economist on inequality and social mobility in the US. The magazine -- which is no bastion of bleeding heart liberalism -- has issued an important warning:

A growing body of evidence suggests that the meritocratic ideal is in trouble in America. Income inequality is growing to levels not seen since the Gilded Age, around the 1880s. But social mobility is not increasing at anything like the same pace: would-be Horatio Algers are finding it no easier to climb from rags to riches, while the children of the privileged have a greater chance of staying at the top of the social heap. The United States risks calcifying into a European-style class-based society.

The evidence on social mobility is hardly encouraging to those who believe that every American has a solid chance to pull themselves up by their bootstraps:

[M]ore and more evidence from social scientists suggests that American society is much "stickier" than most Americans assume. Some researchers claim that social mobility is actually declining. A classic social survey in 1978 found that 23% of adult men who had been born in the bottom fifth of the population (as ranked by social and economic status) had made it into the top fifth. Earl Wysong of Indiana University and two colleagues recently decided to update the study. They compared the incomes of 2,749 father-and-son pairs from 1979 to 1998 and found that few sons had moved up the class ladder. Nearly 70% of the sons in 1998 had remained either at the same level or were doing worse than their fathers in 1979. The biggest increase in mobility had been at the top of society, with affluent sons moving upwards more often than their fathers had. They found that only 10% of the adult men born in the bottom quarter had made it to the top quarter.
The Economic Policy Institute also argues that social mobility has declined since the 1970s. In the 1990s 36% of those who started in the second-poorest 20% stayed put, compared with 28% in the 1970s and 32% in the 1980s. In the 1970s 12% of the population moved from the bottom fifth to either the fourth or the top fifth. In the 1980s and 1990s the figures shrank to below 11% for both decades. The figure for those who stayed in the top fifth increased slightly but steadily over the three decades, reinforcing the sense of diminished social mobility.
Not all social scientists accept the conclusion that mobility is declining. Gary Solon, of the University of Michigan, argues that there is no evidence of any change in social-mobility rates, down or up. But, at the least, most people agree that the dramatic increase in income inequality over the past two decades has not been accompanied by an equally dramatic increase in social mobility.
Take the study carried out by Thomas Hertz, an economist at American University in Washington, DC, who studied a representative sample of 6,273 American families (both black and white) over 32 years or two generations. He found that 42% of those born into the poorest fifth ended up where they started—at the bottom. Another 24% moved up slightly to the next-to-bottom group. Only 6% made it to the top fifth. Upward mobility was particularly low for black families. On the other hand, 37% of those born into the top fifth remained there, whereas barely 7% of those born into the top 20% ended up in the bottom fifth. A person born into the top fifth is over five times as likely to end up at the top as a person born into the bottom fifth.
Jonathan Fisher and David Johnson, two economists at the Bureau of Labour Statistics, looked at inequality and social mobility using measures of both income and consumption. They found that mobility "slightly decreased" in the 1990s. In 1984-90, 56% and 54% of households changed their rankings in terms of income and consumption respectively. In 1994-99, only 52% and 49% changed their rankings.
Two economists at the Federal Reserve Bank of Boston analysed family incomes over three decades. They found that 40% of families remained stuck in the same income bracket in the 1990s, compared with 37% of families in the 1980s and 36% in the 1970s. Aaron Bernstein of Business Week points out that, even though the 1990s boom lifted pay rates for low-earners, it did not help them to get better jobs.

Matthew Yglesias » The Other Public Sector Pension Problem

Matthew Yglesias » The Other Public Sector Pension Problem: "Yesterday I mentioned the huge looming budgetary problem caused by the habit of giving public sector employees deferred compensation in the form of guaranteed benefit pensions rather than higher salaries, and then under-funding the investment plans that are supposed to pay the money out.

It’s worth emphasizing, however, that even if you did fund these plans properly it’s a really bad model for paying public sector workers. I have no problem with the idea of spending a healthy chunk of change on public sector compensation, but the point should be to achieve effective public services and that would be best done by just paying people more money up-front. Putting such a large chunk of people’s compensation into pensions creates bizarre incentives for people who’ve decided they’ve lost their passion or interest in what they’re doing to stay on the job. We should want a world where a guy who’s been a cop for twelve years and done a good job, but doesn’t really want to do it anymore just looks for another job and moves in. Instead, he has a lot of incentives to stay on for eight more years doing a really half-assed job in order to get the pension money that will otherwise vanish. Similarly for teachers. An awful lot of public sector functions, at the end of the day, work much better if you have properly motivated people. People doing work for purely cynical “I want to get money” reasons should really be encouraged to go work in the cynical “we’re trying to maximize profits” sector of the economy. But giving people generous pensions, instead of higher salaries, encourages the reverse.

Then by the same token, the knowledge that a lot of the monetary value of public sector work will only accrue if you stay on the job for a long time deters people from entering the profession in the first place, and also deters them from shifting from city to city. One strength the military has going for it is that it’s created a robust notion that there’s nothing wrong with signing up, serving competently for a few years, and then moving on with your life. People who do that are “veterans” not “quitters” —it makes the military mesh well with the modern private sector economy.

There’s no real upside for citizens or for employees. Instead there’s only the apparent upside that it looks cheaper on the budget to promise people a big pension 20 years from now rather than a raise tomorrow. Those savings, however, are entirely illusory as we’re about to find out when it turns out that a lot of state and local funds can’t cover their promises."

Our view: Warfare, outsourced: ADN Editorial | adn.com

Our view: Warfare, outsourced: ADN Editorial | adn.com: "Congress begins to rein in role of private contractors

Published: January 3rd, 2010 05:26 PM

Congress has finally begun to reconsider the nation's heavy reliance on private contractors to fight our wars in Iraq and Afghanistan. Measured by personnel numbers, the country has outsourced almost half of our war-fighting effort. As of September, 242,000 contractors supported 280,000 military in the two war zones, according to the Congressional Research Service. In Afghanistan, contractors actually outnumber troops by 40,000.

That outsourcing was supposed to help save money and liberate soldiers from doing routine, safe tasks behind the battle lines, so they could concentrate on fighting.

Congress is realizing it hasn't always worked out that way. In fighting an insurgency, there are no battle lines, and no secure rear areas for contractors to work in.

In that dangerous environment, it takes a lot of money to compensate for the risk of death on the job. U.S. civilians driving supply trucks through hostile territory, for example, could earn triple or more the pay of the GI grunts riding in the seat beside them.

Last year, Congress concluded that each military contract worker cost $250,000 a year. As the Washington Post noted this month, Congress expects to save $44,000 per worker in the defense budget by 'in-sourcing' about $5 billion worth of work now handled by contractors.

In Iraq, more than 12,000 of the contractors are handling security-related jobs - the kind of work a uniformed soldier should be doing. The infamous 2007 Blackwater massacre, where jittery 'security' contractors hosed a crowd with gunfire, killing 17 Iraqis, shows the hazards of letting hired guns use firepower without proper supervision and accountability.

The same dangers arise when the country lets 'contractors' interrogate enemy suspects, as happened in the Abu Ghraib scandal. This year Congress insisted that interrogations be conducted by military personnel, not contractors. An earlier 'sense of the Congress' resolution said contractors should not perform inherently governmental functions, such as providing security in high-risk conflict zones.

There will always be a role for private contractors in helping supply the country's military on the field of battle. As the Congressional Research Service noted, contractors have carried part of the nation's war effort dating as far back as the Revolutionary War.

But contracting out doesn't automatically guarantee the military will save money. When there are savings, they may come from cutting quality, rather than improving efficiency, so proper oversight is critical. Some jobs - like interrogating enemy suspects or pulling the trigger to kill people -- are just too important to outsource.

It's good to see Congress realize that when the nation is fighting to protect itself; only carefully limited functions are properly handed over to private business.

BOTTOM LINE: Hiring contractors to handle some military logistics can help, but hiring them to wield weapons is asking for trouble."