Opinion

The Great Debate

from Breakingviews:

Review: Brazil’s toughest tests lie off the pitch

By Dominic Elliott 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Michael Reid’s astute new book has a stark warning: the country of samba, sex and soccer is teetering on a knife-edge. “Brazil: The Troubled Rise of a Global Power” explains why protests against this year’s World Cup are turning increasingly violent. Reid, a journalist for The Economist, persuasively urges a return to the broad liberal consensus that served Brazil so well between 1994 and 2006.

Brazil taxes and spends like a European country and shares other bad habits with the West. Yet it produces “distinctly Latin American” results, says Reid. GDP per person is still a disappointing $12,000, about two-thirds of the level of Argentina, and it remains the world’s twelfth most unequal country. The masses understandably want more opportunity, as well as better hospitals, schools and public transport.

The book’s central argument is that Brazil’s underlying problem is a dysfunctional political system, built on a “bastardised version of liberalism,” made illegitimate by patrimony and elitism. Reid’s on-the-record interviews with Brazilian presidents past and present sit alongside a masterful analysis of the hard data. Everything points to the urgent need for profound reforms.

Rare economic advantages that provided air cover for an overhaul are evaporating fast. Brazil’s economy briefly replaced the UK’s as the world’s sixth biggest by GDP in 2011. But Chinese demand for Brazil’s commodities is waning, and the population is ageing rapidly after an almost Chinese decline in the birth rate from six to two children per woman over the last two generations. Brazil already spends as much on pensions as southern European countries, and that can only rise.

Elites focus on inequality; real people just want growth

kochs & warrenThe economic debate is now sharply focused on the issue of income inequality. That may not be the debate Democrats want to have, however. It’s negative and divisive. Democrats would be better off talking about growth — a hopeful and unifying agenda.

Democrats believe income inequality is a populist cause. But it may be less of a populist issue than an issue promoted by the cultural elite: well-educated professionals who are economically comfortable but not rich. There’s new evidence that ordinary voters care more about growth.

Growth and inequality are not separate issues. Nobel Prize-winning economist Joseph E. Stiglitz wrote, “Politicians typically talk about rising inequality and the sluggish recovery as separate phenomena when they are in fact intertwined.  Inequality restrains and holds back our economic growth

The increasing significance of race

Behind every Supreme Court decision is a sociology of ordinary life. Opinions reveal the justices’ view of what’s what in the world, how people act and why things change.

Justices probably prefer that we focus on their legal analyses, but we can glean the sociology behind their assumptions. Last week, judicial world views spun into interplanetary conflict when the court voted to affirm Michigan’s vote to bar all consideration of race, gender, ethnicity, color or national origin in public decision-making, including in state college admissions.

The justices based their decision on a novel faith in the democratic process, which Justice Sonia Sotomayor spent 58 pages countering in a dissent that seemed to come from another universe.

Why not a war on child poverty?

President Barack Obama’s recent speeches at the LBJ Presidential Library and National Action Network marking the 50th anniversary of the War on Poverty and the Civil Rights Act had a serious omission. While acknowledging “our work is unfinished,” Obama failed to mention this nation’s worst social trend: the stunning increase of children and youth living in poverty.

Since 1969, the proportion of children and youth in poverty rose by 56 percent, even as the economic fortunes of the elderly improved under programs like Medicare and Social Security. Today, 32 million American children and youth are confronting poverty — including 7 million suffering utter destitution, another 9 million living in serious poverty and 16 million more in low-income households struggling just above poverty lines.

Even as Obama has launched My Brother’s Keeper, an initiative to help poorer young men, his administration continues to largely ignore this larger issue. In fact, Obama said, addressing youth poverty “doesn’t take all that much.” No federal money has been budgeted for the initiative.

The lost promise of progressive taxes

By midnight on April 15, roughly 140 million Americans will have filed their federal income tax returns and breathed a sigh of relief. Politicians from both parties, however, will spend most of the day criticizing our current tax system.

Conservatives bemoan that not enough people are paying taxes. They insist that a minority of “job creators” and “makers” are underwriting the social benefits that go to the “takers.” Liberals cite the growing concentration of wealth and lament that the rich don’t pay their fair share. In this new Gilded Age, they say, the 1 percent should be paying far more of their annual earnings.

Yet neither party seems willing to reform our tax system dramatically. Both avoid talking about the vital link between taxes and government spending. This was not always the case.

Self Help is no help for inequality

For all the howls of rage from plutocrats like Tom Perkins and Ken Langone over possible tax rate increases, there has been relatively little public anger about the increasing wealth disparity in the United States — especially compared to the past.

During the Progressive era in the early 20th century and the Great Depression, we saw violent strikes and marches on Washington. These days, we have an army of sometimes-intemperate bloggers and a labor movement so bereft the United Auto Workers union recently failed to mobilize workers in a Volkswagen factory in Chattanooga, Tennessee. Occupy Wall Street, meanwhile, is now a distant memory, even as more than half of all Americans say they believe the nation remains in an economic recession.

So what changed? Kathleen Geier speculates in the Washington Monthly that the mainstream media no longer reflects the values of the working class. That’s true, but it’s more complicated than that. In fact, the media reflects our values all too well.

from Lawrence Summers:

On inequality

Inequality has emerged as a major economic issue in the United States and beyond.

Sharp increases in the share of income going to the top 1 percent of earners, a rising share of income going to profits, stagnant real wages, and a rising gap between productivity growth and growth in median family income are all valid causes for concern. A generation ago, it could have been plausibly asserted that the economy’s overall growth rate was the dominant determinant of growth in middle-class incomes and progress in reducing poverty. This is no longer plausible. The United States may well be on the way to becoming a Downton Abbey economy.

So concern about inequality and its concomitants is warranted. Issues associated with an increasingly unequal distribution of economic rewards will likely be with us long after the cyclical conditions have normalized and budget deficits finally addressed.

The minimum wage fight: From San Francisco to de Blasio’s New York

In his State of the Union address last month, President Barack Obama urged cities and states to bypass Congress and enact their own minimum wage increases. “You don’t have to wait for Congress,” he stated.

On Monday, New York City Mayor Bill de Blasio followed the president’s advice. De Blasio announced, in his State of the City address, that he plans to ask Albany next week to give the city the power to raise the minimum wage.

The New York mayor is not the only elected official putting Obama’s words into action. Cities across the country, from New York to Seattle, are moving aggressively to confront rising income inequality and falling real wages for low-paid workers. These cities can learn important lessons from San Francisco’s bold experiments over the last 15 years.

The other inequality is structural

For the second year in a row, the issue of economic inequality was featured in President Barack Obama’s State of the Union Address. Even some Republican lawmakers have now dared to speak the “i-word.”

Though Obama predictably avoided comparisons between the earnings held by the top 1 percent and the 99 percent of Occupy Wall Street fame, the message was familiar: The widening income gap between the very rich and everyone else is a stain on the social compact and a serious problem for future economic growth.

Focusing on this income inequality is crucial. Lower incomes create an oxymoronic class of “working poor.” Inadequate pay hurts consumption and reduces tax revenues. People simply do more for themselves with more money, growing it into wealth for future generations — and as a cushion against economic downturns. A good job, as the president said, remains the best access to the promise of opportunity.

Obama’s small steps won’t fix inequality

President Barack Obama is taking on the challenge of increasing the United States’ all but stagnant economic mobility.

He wants, he said in Tuesday’s State of the Union Address, to both “strengthen the middle class” and “build new ladders of opportunity” into it. His modest plan — modest so that it does not need the congressional approval he’s unlikely to receive — includes raising the minimum wage for federal contract workers and offering workers a new workplace retirement savings account option.

It’s a nice start. But nowhere near enough.

The United States’ sluggish economic mobility is not new. According to a paper recently published by academics at Harvard University and the University of California, Berkeley, it has been mediocre for those born in the 1970s, and it is just as bad for those born 20 years later.

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