Ways to think about government distribution policy

With the debt ceiling theatre nearly reaching its climax, remarks about spending cuts, tax increases, ending tax loopholes, and other sorts of deficit reduction approaches are being tossed out daily by politicians and political commentators. In addition to being a bit abstract, the debates surrounding these topics often devolve into a muddled mess. One of the primary reasons for the muddling is the confused ways that people try to understand government policy that affects economic distribution.

The chief confusion is centered around what we consider the baseline to be when making comparisons of different government distribution policies. With America’s strong laissez-faire tradition, it is common for individuals to take a roughly laissez-faire policy to be the baseline against which comparisons are made. Using a laissez-faire baseline, increasing taxes to fund programs for the poor is a form of redistrbution. Under the same baseline, decreasing taxes and cutting programs for the poor is not a form of redistribution; rather, it is a rectification of previous redistribution.

This logic also holds for tax loopholes and tax deductions. For better clarity, consider the mortgage interest deduction. Under this program, home owners are able to deduct from their income taxes the amount they pay in interest on their mortgage. If we consider the amount of income taxes paid at the established marginal rates to be the baseline, then the mortgage interest deduction is a form of targeted government spending. It is functionally indistinguishable from sending a check to homeowners for the amount of their mortgage interest. In the context of a marginal-rates baseline, targeted deductions are a way the government spends through the tax code.

Under a laissez-faire baseline, tax loopholes and tax deductions are not considered targeted government spending; instead, they are considered ways of rolling back — in a very narrow way — previous deviations from the laissez-faire norm. This is how conservative commentators are able to suggest that closing tax loopholes which permit corporations to pay far fewer taxes than the established marginal rates allow is a tax increase. Against a laissez-faire baseline, it is a tax increase because anything above no taxes is a tax increase. Against the aforementioned marginal-rates baseline, closing a tax loophole is not a tax increase; it is the elimination of a targeted government spending program.

It is clear then how confused this discussion can get. Depending upon your baseline, the very way that you understand and describe what a particular government action is changes dramatically. Although I mentioned two possible baselines above — the marginal-rates baseline and the laissez-faire baseline — there are dozens of other possible baselines as well. In an egalitarian framework, equal distribution of economic products would be considered the baseline, and anything which causes deviations from that would be considered a form of redistribution. Under a Rawlsian framework, a distribution of economic products which maximizes the minimum available to everyone would be the baseline, deviations from which would be redistribution.

None of these baselines can reasonably be considered a neutral default. The only group who might try to argue that their baseline is a neutral default would be the proponents of laissez-faire distribution policies. Within the political culture of the United States, that might be a safe bet rhetorically, but it is not a sound position. Laissez-faire distribution policies are just that: distribution policies. Proponents of a laissez-faire baseline like to think of their baseline as being what occurs without government intervention. But in fact, laissez-faire distributions are just as much a consequence of intentional public policy as any other distribution.

There are a whole set of government policies that are put in place to generate what we call laissez-faire economies. Municipalities create land title systems which establish a singular authority on who owns what land. They create property laws which permit individuals to exclusively control and own a piece of nature, while forbidding others from making any claim on that piece of nature. They build police forces to ensure compliance with those property laws. They create courts to enforce contract compliance. The list can go on and on. All of these actions are intentional policies set up to promote a particular lassiez-faire distribution.

Now laissez-faire proponents certainly have arguments they can make in favor of these policies. They might argue that they reflect certain narrow conceptions of property rights which they favor as the correct ones. They might also argue that laissez-faire distributions reflect merit. But in making those points, they are still arguing for the government to adopt and implement intentional public policies to generate an economic distribution that they favor. It is not a default, non-interventionist distribution; it is dependent on government policies just like any other approach.

No baseline should reasonably be considered a neutral default. They all require intentional public policy to realize. So it is not possible to suggest that tax deductions and tax loopholes are really government spending or that they are really lower taxes. From some baselines it is the former; from others, it is the latter. Although it might seem that we need a baseline to describe government actions, that’s not true. In fact, using baselines is precisely what causes the confusion inherent in divergent descriptions of the exact same government action.

The logical reality is that every set of government distribution policies is redistributive and unjust from the perspective of every other set of government distribution policies. Talking about one set while adopting the framework assumptions of another is always going to yield the conclusion that the set being discussed is wrong. Using baselines based on assumptions of certain frameworks is ideologically loaded from the very start which is precisely why those baselines yield such diverging understandings of identical government policies.

The real point of contention then should not be on what we name a particular government action since the names we use are already dependent upon ideas about what distribution policies the government ought to be pursuing. Instead, in a more honest debate, the discussion should simply be about what kinds of distribution policies the government should pursue and why it should do so. In that kind of debate — unchained from framework-specific naming disputes — there are many ways to think about government distribution policy.

Individuals can argue for a laissez-faire distribution policy if they are swayed by arguments for a certain narrow conception of property rights and merit. Individuals can argue for a distribution policy based on John Rawls’ Difference Principle if they think impartiality is central to economic justice issues. They can even argue for distribution policies which maximize a certain set of human capabilities in the population if they are impressed by the capability approach to economic justice championed by Amartya Sen and Martha Nussbaum. The list of course goes on.

What is important though is to understand that these are all different ways to begin thinking about government distribution policy, not ways to deviate from the default baseline (which does not exist). So long as political commentators continue to rely on unstated baselines in their analyses, they will never be able to avoid the pitfalls of that approach. This more expanded way to think about government distribution policy offers a way to turn the debate back into the substantive realm and to avoid the frustrations inherent in the existing approaches.

Reconsidering the DREAM Act

The Development, Relief and Education for Alien Minors Act (DREAM Act) is a piece of legislation which aims to provide paths to permanent residency for undocumented youth. Organizations like United We Dream and the United States Student Association have come out in support of the legislation, arguing primarily that not providing permanent residency for undocumented youth is manifestly unjust. Penalizing immigrant youth for being undocumented — something they had no control over — runs against the basic tenets of fair and equitable treatment.

The DREAM Act is supposed to remedy this injustice by creating two specific paths to residency. There have been various versions of the bill over the years, but the present version in the senate basically lays out a two step process. Undocumented individuals under 35 years of age with a high school diploma or GED will be eligible in most circumstances to apply for conditional permanent residency. Once individuals are granted that status, they have 6 years to either complete a two-year post-secondary degree, complete 2 years of a four-year post-secondary degree, or enlist in the military for 2 years. After doing so, they can apply to have the conditional status removed from their permanent residency.

Advocates of the DREAM Act have focused much more attention on the education track of the bill than on the military track. The defenses of it tend to rely on conjuring up the idea of students getting a college degree while also getting out from under their unjust second class status. However, in reconsidering the DREAM Act, I think it is important to determine what percentage of undocumented youth would even make it through the much praised education track provided in the bill. Given that Latino immigrants are the primary constituency that will be affected by the DREAM Act, I will focus on them.

According to a report from the Pew Hispanic Center, 18 percent of Latino immigrants do not graduate from high school. Of those non-graduates, 57 percent have not passed the GED by the age of 26. So, slightly more than 10 percent of Latino immigrant youth receive neither a high school degree nor a GED, and would thus be ineligible for even the initial process of receiving conditional residency status.

As far as I know, there is no reliable data on the percentage of Latino immigrants who obtain post-secondary degrees. Those numbers would not be helpful in any case because they are certainly skewed downward due to the difficulties of attending college as an undocumented student. Nonetheless, there are numbers for the overall Latino population which should approximately reflect how Latino immigrants would fare if they were given the same opportunities to attend college as non-immigrant Latinos already have.

According to another report from the Pew Hispanic Center, 82 percent of Latinos who graduate from high school go on to college. Of those who attend college, 36 percent go on to achieve a bachelor’s degree, certificate, or associate’s degree. These are the types of degrees that are required to complete the second step of the permanent residency process under the DREAM Act.

With these numbers, a rough estimate of the reach of the DREAM Act’s education track can be derived. If we generously assume that all of those who receive a GED fare as well as high school graduates in obtaining post-secondary degrees, a representative group of 100 undocumented Latino youth would achieve the following on the education track:

  • 10 — No GED or high school degree — permanent residency denied
  • 16 — GED or high school degree, but no post-secondary education — permanent residency denied
  • 48 — Post-secondary education attempted, but no certificate, associates degree, or bachelor’s degree achieved — permanent residency denied
  • 26 — Post-secondary degree achieved — permanent residency granted

So on the education track, the DREAM Act, even when making generous assumptions, will only provide permanent residency to 26 percent of undocumented Latino youth. Admittedly this is an approximation, and challenges to the effect that it is too low or too high can certainly be brought against it. It could be challenged, for instance, that the incentive of permanent residency will drive undocumented Latino youth towards education more than documented Latino youth, and so using data from the latter generates an estimate lower than it should be. On the opposite side, it could be challenged that the lack of Pell Grant access and other difficulties associated with being undocumented might actually generate hardships that documented Latino youth do not face, making the 26 percent number too generous.

With those objections noted, it appears that 26 percent is at least somewhere near what the actual number will be. This number, I think, poses challenges for the DREAM Act campaigners. For 10 percent of undocumented Latino youth, the Act provides no help at all; for 64 percent, the Act forces them into an unjust position where they must choose between deportation, living life undocumented in a permanent underclass position, or joining the U.S. military.

Forcing nearly 3 out of 4 undocumented Latino immigrants to make a choice like that is as equally unjust as the problem the DREAM Act is set up to remedy. Putting someone into an extraordinarily loaded situation like that for reasons totally outside of their control — their immigration status — is exactly the kind of thing that proponents of the DREAM Act criticize in the status quo.

Instead of fixing the injustices the immigration system forces on undocumented youth, what the DREAM Act primarily does is set up an easy road for military recruiters to fill the ranks of the armed forces with vulnerable populations that have no other option. In a candid reconsideration of the legislation, it is hard to see how one could support it. The education track is great — even if limited in reach — but if coupled with the military track, the bill as a whole slants heavily towards encouraging the exploitation of the overwhelming majority of undocumented youth.

Enormous productive potential being wasted as unemployment creeps higher

The Bureau of Labor Statistics released their June employment report today, and almost all of the findings recorded in the report were awful. Unemployment is up to 9.2 percent, more than 0.4 percent higher than it was two months ago. This puts the total number of unemployed people — a term which only includes those who are actually looking for jobs — at 14.1 million. An additional 8.6 million people are underemployed, working part-time because no full-time work can be found.

The reaction to the report — at least in the mainstream outlets — has been predictably narrow. Article after article has been published speculating on the impact it will have for a presidential election which takes place 17 months from now. This speculation, in addition to being totally without merit as Nate Silver explains over at Five Thirty Eight, demonstrates the completely misguided way that political commentators typically handle these kinds of reports. Either out of laziness or a lack of creativity, the slant taken on news of this sort almost always involves discussing its relevance to some forthcoming election, even ones so far out as to make the commentary border on the absurd.

More substantive analysis would ask the questions that really matter. What does long-term unemployment actually mean for those who are made to endure it? What impact does it have on a family when one or both of the parents cannot find a job? In short, how much suffering does this massive amount of unemployment and underemployment impart on the people in the country?

About the only reprieve from the endless horse race analysis — analysis that crops up even when a horse race is not present — is Ezra Klein’s blog over at the Washington Post. Filling in for him today, Dylan Matthews highlights the significance of unemployment, pointing to two studies which show the permanent negative effects of unemployment on a person’s long-term income and health. It suffices to say that unemployment’s actual significance lies not in its effects on polling, but in the ways it wreaks havoc on the country.

In addition to the long-term health and income losses it imposes on individuals, large-scale unemployment and underemployment results in an enormous waste of productive potential. Imagine what 14.1 million people working every day could produce, and what 8.6 million people working full-time instead of part-time could produce. With that labor, we could be building high-speed rail lines, wind turbines, and repairing existing infrastructure. That of course is just to name a few possibilities. However, instead of utilizing this massive labor force, the present economy is preventing it from being tapped at all, at least in the private sector.

With unemployment increasing, the highest levels of income and wealth inequality on record, and decades of total wage stagnation for the bottom 90 percent, it becomes harder and harder to take seriously efforts to preserve American-style capitalism. When large swaths of the population are forced to remain idle because the private sector cannot conceive of ways to make them profitable, we need some other way to put them to work. Perhaps a public jobs program like the Works Project Administration — an approach Paul Krugman has endorsed — is something that should be seriously considered.

Whether it is a new WPA or something else, inaction on the issue of unemployment should be totally out of the question. But instead of working overtime to address the unemployment problem, the political apparatus of this country has been hooked into a months long bit of political theatre centering around the debt ceiling. Once that theatre concludes in early August, even worse theatre will start to kick into high gear surrounding the upcoming presidential election.

These misplaced political priorities are fairly normal for the circus that is the federal government, and in some cases the theatre they generate is harmless and amusing. The lack of action on unemployment is not such a case. In a more level-headed political atmosphere, Obama and the national Republicans would be completely embarrassed about the productive potential high unemployment is leaving untapped. But in this political climate, almost no one seems to care.