Posts tagged with: Welfare economics

dncplatformEarlier this week, I talked about the religious and economic implications of the RNC platform. As the DNC wraps up, it is time to examine the relevant points of the Democratic platform.

Innovation & Entrepreneurship

We need an economy that prioritizes long-term investment over short-term profit-seeking, rewards the common interest over self-interest, and promotes innovation and entrepreneurship.

Minimum Wage

Democrats believe that the current minimum wage is a starvation wage and must be increased to a living wage. No one who works full time should have to raise a family in poverty. We believe that Americans should earn at least $15 an hour and have the right to form or join a union. We applaud the approaches taken by states like New York and California. We should raise and index the minimum wage, give all Americans the ability to join a union regardless of where they work, and create new ways for workers to have power in the economy. We also support creating one fair wage for all workers by ending the sub-minimum wage for tipped workers and people with disabilities.

Democrats support a model employer executive order or some other vehicle to leverage federal dollars to support employers who provide their workers with a living wage, good benefits, and the opportunity to form a union. The $1 trillion spent annually by the government on contracts, loans, and grants should be used to support good jobs that rebuild the middle class.

Poverty

We believe that today’s extreme level of income and wealth inequality—where the majority of the economic gains go to the top one percent and the richest 20 people in our country own more wealth than the bottom 150 million—makes our economy weaker, our communities poorer, and our politics poisonous.

We reaffirm our commitment to eliminate poverty. Democrats will develop a national strategy to combat poverty, coordinated across all levels of government. We will direct more federal resources to lifting up communities that have been left out and left behind, such as the 10-20-30 model, which directs 10 percent of program funds to communities where at least 20 percent of the population has been living below the poverty line for 30 years or more. We will also focus on communities that suffer from persistent poverty, including empowerment zones and areas that targeted government data indicate are in persistent poverty.

Democrats will protect proven programs like the Supplemental Nutrition Assistance Program (SNAP)—our nation’s most important anti-hunger program—that help struggling families put food on the table. We will also help people grow their skills through jobs and skills training opportunities.

Religious Liberty

Opposes attempts to impose a religious test to bar immigrants or refugees from entering the United States.

Supports a “progressive vision of religious freedom that respects pluralism and rejects the misuse of religion to discriminate.”

Supports protecting both Muslims and religious minorities and the “fundamental right of freedom of religion” in the Middle East. (Read more here)

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Leighblackall-76202405Andrew Biggs of AEI has a piece up today at Forbes addressing the gender pay gap and provides a neat solution: “forbid women from staying at home with their children.” As Biggs points out, such a policy would address perhaps the greatest root cause of gender pay inequality: varied work experience attributable to choices women make. “Most mothers who stay at home or work only part-time are doing what they wish to do and what they view as best for their kids,” writes Biggs. This results in gaps in pay when those women re-enter the work force or increase their labor participation.

Biggs’ proposal to “make staying at home with kids illegal, just like child labor is illegal” would have another benefit favored by many: it would be a boon to GDP. As I point out in a review essay in the latest issue of Christian Scholar’s Review, the work that stay-at-home parents do is not counted toward GDP. When those parents pay someone to take care of their children as part of a business transaction, however, as in the case of day care centers, then that exchange does count towards GDP.

My piece, “Affluence Agonistes–A Review Essay,” takes a look at the book The Poverty of Nations by Wayne Grudem and Barry Asmus, in addition to a couple of other recent publications. The CSR essay expands upon a review of the Grudem/Asmus book I wrote for Public Discourse, “Life to the Full: The Dangers of Material Wealth and Spiritual Poverty.” As Grudem and Asmus put it simply, to combat poverty “the goal must be to increase a nation’s GDP.”

So not only are stay-at-home moms a major source of wage inequality, they are also “a drag on GDP.” As one press report put it, “With female participation stagnating, potential growth isn’t rising as quickly.”

Biggs’ proposal to ban stay-at-home mothers should logically be embraced by both anti-gender inequality progressives as well as GDP growth fundamentalists. As I argue in the essay, “If a nation were to pursue GDP growth as its highest goal, it would probably institute policies and incentives to induce women to work outside the home and professionalize child care. GDP incentivizes specialization and the division of labor, since such transactions are the only things taken into account.”

But the Grove City College economist Shawn Ritenour rightly concludes, “We ought not give into the temptation that all of human welfare is encapsulated in GDP.” Another way of putting it is that men, women, and children do not “live on GDP per capita alone.”

Update: For those readers who might not bother to read Biggs’ piece, he does not (and neither do I, for that matter) actually advocate for this policy.

o-man-taller-facebookFor most of my life I was, at 5-foot-10, of exactly average height. But in the span of one day in 1989 I became freakishly tall.

While I hadn’t grown an inch upward, I had moved 6,000 miles eastward to Okinawa, Japan. Since the average height of native Okinawans was only 5-foot-2, I towered over most every native islander by 8 inches. It was the equivalent of being 6-foot-6 in the United States.

Unfortunately, when I would leave the towns of Okinawa and step back onto the military base I instantly shrunk back to average height. My height advantage only lasted as long as I got to choose my point of reference.

Where did the truth lie? Was I truly tall or only of average height? The answer was completely dependent on my point of reference. Height, after all, is just a statistical artifact.

While this example may seem silly and rather obvious, it highlights how we our choice of what is a relevant standard of comparison can shape our thinking on important matters of economic policy. Take, for instance, the issue of poverty and income inequality. As Robert Higgs explains,
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Wilkins Micawber from David Copperfield art by Frank Reynolds (2)

Wilkins Micawber, the namesake for the Micawber Principle.

Joe Carter points to a Lifehacker article that sums up two basic equations that lead to the creation of wealth (with what I consider to be a clarifying correction applied in the first formula):

Income > spending = surplus

Surplus x time = wealth

Likewise, Wilhelm Röpke, in his A Humane Economy, points to two equations arising from classical literature that connect surplus with happiness and deficit to misery (the Micawber Principle).

According to Mr. Micawber from Dickens’ David Copperfield:

Annual income £20, annual expenditure £19.975 = happiness

Annual income £20, annual expenditure £20.025 = misery
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I recently came across an interesting academic journal, Diaconia: Journal for the Study of Christian Social Practice. One of the sample articles available is by Herman Noordegraaf of the Protestant Theological University in Leiden. His piece is titled, “Aid Under Protest? Churches in the Netherlands and Material Aid to the Poor” (PDF).

The latest issue of the Journal of Markets & Morality is a theme issue on “Modern Christian Social Thought,” and a series of pieces take up a line of recent history in the Netherlands. A significant article by Rolf van der Woude, senior researcher at the Historical Documentation Centre for Dutch Protestantism at the VU University Amsterdam, examines the changes in Reformed thought on the social question from the First Social Congress in 1891 to the Third Social Conference in 1952. As van der Woude concludes, in the post war era, “A new generation believed that the beast of the state, caged for so long, had now been tamed. At the end of the 1950s, Van den Heuvel’s generation retreated, the Netherlands entered a period of economic boom, and a generous welfare state was rapidly erected from the ground up wherein welfare was no longer a matter of charity but a matter of justice guaranteed by the government. The beast of the state had become an ally.”

Noordegraaf’s piece can be read as a companion article to van der Woude’s, tracing the development (or lack thereof) in Christian social thought in the Netherlands over the last half century. As Noordegraaf writes, the situation has largely remained the same, in that the church’s primary responsibility is understood not merely to have to provide material assistance to the poor, but rather advocate for reliance on the welfare state for such provision. As Noordegraaf writes, a declaration on the problem of poverty in 1987 codified the approach of “aid under protest,” in which the churches provide aid to the poor but only under protest that the government was not meeting welfare needs appropriately. The statement reads:

We reject the way people are once again made dependent on charity. We plead for social security that is not charity but a right that is fully guaranteed by government. For this reason, financial aid given by churches in situations of need should be combined with protest against the causes of this need to government and society.

Noordegraaf’s observation is that the churches, both locally and denominationally, have been too concerned with meeting the momentary concrete needs of the poor and need to pay more attention to the mandate to lobby the government for more expansive social welfare programs. The point is that the need for Christian or church-based charity indicts the lack of justice under a modern constitutional state, where freedom from need and want ought to be simply guaranteed.

As Nordegraaf concludes concerning recent trends, “More and more, as the above mentioned reports show, churches have been involved in material aid: when people are in need and ask for help, you give it. It is a kind of safety net under the increasingly porous safety net of the state.” He continues, “The fact that the churches found this problematic reflects their belief that the principles of the welfare state are worth fighting for. This has to do with a vision of the task of the state to promote the general welfare and to secure the basic needs of people in society.” Noordegraaf concludes that “it is in harmony with the calvinist approach of the responsibility of the state that churches try to make clear to government and to society at large that they have helped with material aid. This signalizing can take many forms: in letters, reports, talks, discussions, programmes in the media, articles in newspapers and so on. In this way, individual aid is combined with advocacy in the public domain.”

I commend these two articles to your reading: Rolf van der Woude, “Taming the Beast: The Long and Hard Road to the Christian Social Conference of 1952,” and Herman Noordegraaf, “Aid Under Protest? Churches in the Netherlands and Material Aid to the Poor.”

They will make clear just how much things have changed over the last 120 years in the Netherlands, when Abraham Kuyper emphasized the priority of Christian giving in 1881, arguing that “the holy art of ‘giving for Jesus’ sake’ ought to be much more strongly developed among us Christians. Never forget that all state relief for the poor is a blot on the honor of your savior.” Such emphasis on private Christian charity is now understood to be retrograde and obsolete.

An interesting report in The Economist on the rise of flashy and free spending entrepreneur “gazillionaires” in India and China and how they are perceived:

In much of India, life is getting perceptibly better each year. Wealth per person has vaulted by 150% in the past decade, from $2,000 to $5,000. Many Indians think the nation’s entrepreneurs deserve some of the credit. In Dharavi, a slum outside Mumbai, an illiterate mother called Aruna sits in her tiny one-room flat, which is home to ten people. Asked how she feels about the rich, she says: “They have worked hard. And we must work hard, too.” Her eldest daughter has a job entering data at a bank. The next one is studying diligently. The family may be near the bottom of the ladder, but it sees a way up.

But this in China:

The perception that commercial success often depends on political ties makes inequality in China more galling. In the mid-1980s Chinese incomes were more evenly distributed than India’s—hardly surprising, since China was nominally communist and India is afflicted by a caste system. But now China is less equal than India, with a Gini coefficient of 0.4 to India’s 0.37. China has 800,000 dollar millionaires, but also 400m people who live on less than $2 a day.