Monday, November 28, 2011

What I Read Today - Monday November 28, 2011

From: The New York Times

The Politics of Economics in the Age of Shouting

By BILL KELLER


I share a virtual neighborhood with a legion of Times reporters, editors and columnists who know more than I will ever know about business and economics. (Look! Right over there: a Nobel-prize-winning economist!) In this humbling company, on this intimidating matter, who am I to tell anyone what to think? And so my plan was, frankly, to avoid the subject.

But while there are things a columnist can ignore (if Kim Kardashian ever features in this column, just shoot me), our failing economic ecosystem is not one of them. So for the past several weeks my airplane and bedside reading has consisted of sexy documents like “A Roadmap for America’s Future” and “The Way Forward” and “The Moment of Truth” and “Restoring America’s Future” and “Living Within Our Means and Investing in the Future.” I’ve also reached out to a few economists respected for the integrity of their science and their patience with economic illiterates.

The first thing I gleaned from this little tutorial will probably not surprise you: There really is a textbook way to fix our current mess. Short-term stimulus works to help an economy recover from a recession. Some kinds of stimulus pay off more quickly than others. Once the economic heart is pumping again, we need to get our deficits under control. The way to do that is a balance of spending cuts, increased tax revenues and entitlement reforms. There is room to argue about the proportions and the timing, and small differences can produce large consequences, but the basic formula is not only common sense, it is mainstream economic science, tested many times in the real world.

So what’s the problem? Why is our system so fundamentally stuck? Partly it’s a colossal, bipartisan lack of the political courage required to tell people what they sort of know but don’t want to hear. Partly it’s a Republican Party that, for its own cynical reasons, wants no deal with this president. Partly it’s moneyed, focused lobbies that swarm in defense of specific advantages written into the law; there is no comparable lobby for compromise, let alone sacrifice.

But also, I’ve come to think something is rotten in the state of economics. The dismal science, as Thomas Carlyle called it, has been ravaged by the same virus that has corrupted the rest of our national discourse.

Back in the very pre-digital days, the writer A. J. Liebling famously remarked that freedom of the press was guaranteed only to the man who owned one. Nowadays, of course, freedom of the press belongs to anyone with Internet access, from the information guerrillas of WikiLeaks to the blogger next door. The democratization of media has diminished the authority once held — and sometimes abused — by a few big newspapers and broadcasters. In many ways this has enriched society, creating a great global buffet of information and opinion, pooling the knowledge of the masses and providing an almost instantaneous reality check on the conventional wisdom.

The consequences have not all been happy, though. The easiest way to stand out in such a vast crowd of microbroadcasters is to be the loudest, the angriest, the most outrageous. If you want that precious traffic, you stake out a position somewhere in oh-my-God territory and proclaim it with a vengeance. Global warming is a hoax! Vaccines make you sick! Obama is a Muslim! In vanquishing the conventional wisdom, sometimes it seems we have vanquished wisdom itself.

Economists don’t live in caves, so there is no reason they should be immune to the centrifugal politics of this noisy world. Thus serious scholars are tempted to sign onto ideas that stretch their own credulity, and lesser economists are thrust forward for their moment of fame as witnesses on behalf of dubious claims. Economists cluster in ideological think tanks that promote political conformity rather than intellectual rigor. Politicians, with no generally accepted consensus to challenge them, can get away with plucking data out of context to bolster assertions that are based more on faith than on reality. Tax cuts pay for themselves! Protectionism saves jobs! It’s all the Fed’s fault! Deficits don’t matter! Obama is a socialist! Say it often enough and before long it’s a serious discussion on cable TV, in which the proven and the preposterous get the same respectful chin-wagging.

“Nobody who is taken seriously as an economist is going to say ‘cancel the Fed,’ ” said Glenn Hubbard, the dean of Columbia Business School, chairman of the Council of Economic Advisers under George W. Bush, and now Mitt Romney’s chief economic adviser. “I find it very disturbing that the media is giving equal time to some ideas that are just crazy.”

The Web site PolitiFact, the Pulitzer-winning fact-checking service, recently did a thorough debunking of Republican claims that Obama’s 2009 stimulus program created, quote, “zero jobs.” In fact, the checkers established, using still-trustworthy sources like the Congressional Budget Office, that the stimulus created or saved a couple of million jobs. Case closed? No, the Republicans just went on repeating the claim.

“The talking points drive the discourse,” said Bill Adair, the editor of PolitiFact. “They repeat the talking points so often I think they start actually believing them.”

In the Internet age, anyone can be an expert, and anyone who says otherwise is an elitist.

The other day House Speaker John Boehner put out a list of 132 economists who signed a statement endorsing a Republican menu of spending cuts, tax cuts and deregulation. All of these are legitimate things to propose, but the statement claimed the Republican list “will do more to boost private-sector job growth in America in both the near-term and long-term than the ‘stimulus’ spending approach favored by President Obama.” Reputable number-crunchers like Moody’s Analytics and some top-tier economists of both parties said Boehner’s statement would have little or no impact on the short-term employment problem. So who were these 132 economists? With a few exceptions they were academics from off-the-beaten-path colleges (no offense to Dakota State University), bloggers (the Calafia Beach Pundit?) and economists from devoutly libertarian think tanks. But the news had the right-wing tom-toms beating with excitement.

“I’ve never in my professional life seen the disjunction between the political debate about economics and the consensus of economists be as large as it is today,” said Justin Wolfers, a Wharton School economist who favors Democrats, and who tweeted withering commentary on the list of 132.

Surely this dilution of authority contributes to our national paralysis. At the very least it befogs the discussion and fosters a pervasive cynicism.

Columbia’s Hubbard says the way to weed out the quackery is for serious economists to speak up when silly ideas get a political foothold. He’s right, but once a mainstream economist has settled comfortably into a party-line think tank or joined a candidate’s brain trust, or even enjoyed the adulation at partisan cocktail parties, a degree of self-censorship takes hold.

Of course, there have always been economists who leaned right or left — and some outright snake-oil salesmen — but until recently the public debate about economics pretty much stayed within the boundaries of accepted science. Friedrich Hayek and Milton Friedman have become conservative icons, John Maynard Keynes and Paul Samuelson are stalwarts of the liberals, but in their lifetimes they all had a reverence for evidence (even if their acolytes did not).

Rereading some of the alternating, left-right weekly columns Samuelson and Friedman wrote for Newsweek in the 70s, I’ve been struck by their shared assumptions, and by the fact that the tone was so civil. It’s not hard to imagine both men signing on to the kind of grand bargain that keeps eluding Congress now. But if they were getting started in today’s media market, they would probably be obliged to amp up the vitriol, to sound like the old “Saturday Night Live” “Point-Counterpoint” parody:

“Paul, you pompous ass!”

“Milt, you ignorant slut!”

Tuesday, November 22, 2011

What I Read Today - Tuesday November 22, 2011

From:  Tax Vox - The Tax Policy Center Blog

It’s Time Stop Squabbling about the Bush Tax Cuts


Howard Gleckman
Posted on November 22, 2011, 1:53 pm

As long as politicians keep squabbling about what to do about the Bush era tax cuts, we are doomed. There will be no serious deficit reduction. There will be no tax reform. There will be nothing but the same old partisan arguments. Don’t believe me? Just listen to the chatter coming out of the failed deficit super committee.

That’s why it is time to reframe this debate. Rather than bickering endlessly about whether what they are doing is a tax cut or a tax increase compared to a law first passed a decade ago, lawmakers should start talking about what a fair and economically efficient tax code should look like. They ought to just decide how much tax revenue they need and then figure out how to raise it.

Much as I’d love to take credit for this brilliant new insight, it is hardly original. The chairmen of the 2010 White House deficit reduction commission, Erskine Bowles and Alan Simpson, proposed rewriting the entire tax code from scratch and fixed a revenue target for the new law of 21 percent of Gross Domestic Product. House Budget Committee Chairman Paul Ryan (R-WI) did much the same thing when he called for a bottom’s-up tax reform that produces 18 or 19 percent of GDP in federal taxes.

Of course, pols will—and should– argue loudly and often about what the right revenue target should be. But unlike the pushing and shoving over the 2001/2003/2010 law, that debate might actually lead somewhere. Besides, the public might be able to understand it, in contrast to Washington’s current incomprehensible incantations over current policy and current law baselines.

An editorial in this morning’s Washington Post, for example, contained the following description of one of the plans proposed in the super committee: “Some Republicans began the process of accepting the need for new tax revenue, offering up a package that would total $300 billion more over the next decade than would be collected if the Bush tax cuts remained in effect.”

Does any normal human being have any idea what that means?

Without an agreed-upon revenue goal, tax reform is impossible. In 1986, reform happened only after President Reagan and both parties in Congress agreed the new tax law would raise neither more nor less revenue than the code it was replacing. Similarly, lawmakers will have to agree this time on how much they want to collect before they can decide how they want to collect it. Not a change relative to somebody’s favorite baseline, but how much money they want to raise.

Will reframing the tax debate in this way break the logjam? I honestly don’t know. But I do know that endless wrangling about the Bush era tax cuts got us nowhere in 2010 when, after much angst, Congress and President Obama extended the law for another two years but resolved nothing. It got us nowhere during the hideous debt limit battle last summer, and it got us nowhere in the super committee that fell apart over the same old argument. Remember the definition of insanity: Doing the same thing over and over again and expecting a different outcome.

I get the politics of all this: The existing formulation allows Democrats to accuse Republicans of wrecking the economy to protect the tax cuts of their fat cat pals. And it lets Republicans claim Democrats are raising taxes on “job creators” and heartlessly throwing millions on the unemployment rolls. I get it. But I’m tired of it.

What I Read Today - Tuesday November 22, 2011

From: The New York Times - November 21, 2011


The Two Moons

By DAVID BROOKS

In 1951, Samuel Lubell invented the concept of the political solar system. At any moment, he wrote, there is a Sun Party (the majority party, which drives the agenda) and a Moon Party (the minority party, which shines by reflecting the solar rays).

During Franklin Roosevelt’s era, Democrats were the Sun Party. During Ronald Reagan’s, Republicans were. Then, between 1996 and 2004, the two parties were tied. We lived in a 50-50 nation in which the overall party vote totals barely budged five elections in a row. It seemed then that we were in a moment of transition, waiting for the next Sun Party to emerge.

But something strange happened. No party took the lead. According to data today, both parties have become minority parties simultaneously. We are living in the era of two moons and no sun.

It used to be that the parties were on a seesaw: If the ratings of one dropped, then the ratings of the other rose. But now the two parties have record-low approval ratings together. Neither party has been able to rally the country behind its vision of government.

Ronald Brownstein summarized the underlying typography recently in The National Journal: “In Allstate/National Journal Heartland Monitor polls over the past two years, up to 40 percent of Americans have consistently expressed support for the conservative view that government is more the problem than the solution for the nation’s challenges; about another 30 percent have backed the Democratic view that government must take an active role in the economy; and the remaining 30 percent are agnostic. They are open to government activism in theory but skeptical it will help them in practice.”

In these circumstances, both parties have developed minority mentalities. The Republicans feel oppressed by the cultural establishment, and Democrats feel oppressed by the corporate establishment. They embrace the mental habits that have always been adopted by those who feel themselves resisting the onslaught of a dominant culture.

Their main fear is that they will lose their identity and cohesion if their members compromise with the larger world. They erect clear and rigid boundaries separating themselves from their enemies. In a hostile world, they erect rules and pledges and become hypervigilant about deviationism. They are more interested in protecting their special interests than converting outsiders. They slowly encase themselves in an epistemic cocoon.

The Democrat and Republican parties used to contain serious internal debates — between moderate and conservative Republicans, between New Democrats and liberals. Neither party does now.

The Democratic and Republican parties used to promote skilled coalition builders. Now the American parties have come to resemble the ideologically coherent European ones.

The Democrats talk and look like a conventional liberal party (some liberals, who represent, at most, 30 percent of the country, are disappointed because President Obama hasn’t ushered in a Huffington Post paradise). Meanwhile, many Republicans flock to Herman Cain or Newt Gingrich because they are more interested in having a leader who can take on the mainstream news media than in having one who can plausibly govern. Grover Norquist’s tax pledge isn’t really about public policy; it’s a chastity belt Republican politicians wear to show that they haven’t been defiled by the Washington culture.

The era of the two moons is a volatile era. Independent voters are trapped in a cycle of sour rejectionism — voting against whichever of the two options they dislike most at the moment. The shift between the 2008 election, when voters rejected Republicans, and the 2010 election, when voters rejected Democrats, was as big as any shift in recent history.

Sometimes voters even reject both parties on the same day. In Ohio last month, for example, voters rejected the main fiscal policy of the Republican governor. On the same ballot, by 31 points, they rejected health care reform, the main initiative of their Democratic president.

In policy terms, the era of the two moons is an era of stagnation. Each party is too weak to push its own agenda and too encased by its own cocoon to agree to a hybrid. The supercommittee failed for this reason. Members of the supercommittee actually took some brave steps outside party orthodoxy (Republicans embraced progressive tax increases, Democrats flirted with spending cuts), but these were baby steps, insufficient to change the alignment.

In normal circumstances, minority parties suffer a series of electoral defeats and then they modernize. But in the era of the two moons, the parties enjoy periodic election victories they don’t deserve, which only re-enforce their worst habits.

So it’s hard to see how we get out of this, unless some third force emerges, which wedges itself into one of the two parties, or unless we have a devastating fiscal crisis — a brutal cleansing flood, after which the sun will shine again.

Tuesday, November 15, 2011

What I Read Today - Tuesday November 15, 2011

From:  The New York Times - November 14, 2011


Let’s All Feel Superior

By DAVID BROOKS

First came the atrocity, then came the vanity. The atrocity is what Jerry Sandusky has been accused of doing at Penn State. The vanity is the outraged reaction of a zillion commentators over the past week, whose indignation is based on the assumption that if they had been in Joe Paterno’s shoes, or assistant coach Mike McQueary’s shoes, they would have behaved better. They would have taken action and stopped any sexual assaults.

Unfortunately, none of us can safely make that assumption. Over the course of history — during the Holocaust, the Rwandan genocide or the street beatings that happen in American neighborhoods — the same pattern has emerged. Many people do not intervene. Very often they see but they don’t see.

Some people simply can’t process the horror in front of them. Some people suffer from what the psychologists call Normalcy Bias. When they find themselves in some unsettling circumstance, they shut down and pretend everything is normal.

Some people suffer from Motivated Blindness; they don’t see what is not in their interest to see. Some people don’t look at the things that make them uncomfortable. In one experiment, people were shown pictures, some of which contained sexual imagery. Machines tracked their eye movements. The people who were uncomfortable with sex never let their eyes dart over to the uncomfortable parts of the pictures.

As Daniel Goleman wrote in his book “Vital Lies, Simple Truths,” “In order to avoid looking, some element of the mind must have known first what the picture contained, so that it knew what to avoid. The mind somehow grasps what is going on and rushes a protective filter into place, thus steering awareness away from what threatens.”

Even in cases where people consciously register some offense, they still often don’t intervene. In research done at Penn State and published in 1999, students were asked if they would make a stink if someone made a sexist remark in their presence. Half said yes. When researchers arranged for that to happen, only 16 percent protested.

In another experiment at a different school, 68 percent of students insisted they would refuse to answer if they were asked offensive questions during a job interview. But none actually objected when asked questions like, “Do you think it is appropriate for women to wear bras to work?”

So many people do nothing while witnessing ongoing crimes, psychologists have a name for it: the Bystander Effect. The more people are around to witness the crime, the less likely they are to intervene.

Online you can find videos of savage beatings, with dozens of people watching blandly. The Kitty Genovese case from the ’60s is mostly apocryphal, but hundreds of other cases are not. A woman was recently murdered at a yoga clothing store in Maryland while employees at the Apple Store next door heard the disturbing noises but did not investigate. Ilan Halimi, a French Jew, was tortured for 24 days by 20 Moroccan kidnappers, with the full knowledge of neighbors. Nobody did anything, and Halimi eventually was murdered.

People are really good at self-deception. We attend to the facts we like and suppress the ones we don’t. We inflate our own virtues and predict we will behave more nobly than we actually do. As Max H. Bazerman and Ann E. Tenbrunsel write in their book, “Blind Spots,” “When it comes time to make a decision, our thoughts are dominated by thoughts of how we want to behave; thoughts of how we should behave disappear.”

In centuries past, people built moral systems that acknowledged this weakness. These systems emphasized our sinfulness. They reminded people of the evil within themselves. Life was seen as an inner struggle against the selfish forces inside. These vocabularies made people aware of how their weaknesses manifested themselves and how to exercise discipline over them. These systems gave people categories with which to process savagery and scripts to follow when they confronted it. They helped people make moral judgments and hold people responsible amidst our frailties.

But we’re not Puritans anymore. We live in a society oriented around our inner wonderfulness. So when something atrocious happens, people look for some artificial, outside force that must have caused it — like the culture of college football, or some other favorite bogey. People look for laws that can be changed so it never happens again.

Commentators ruthlessly vilify all involved from the island of their own innocence. Everyone gets to proudly ask: “How could they have let this happen?”

The proper question is: How can we ourselves overcome our natural tendency to evade and self-deceive. That was the proper question after Abu Ghraib, Madoff, the Wall Street follies and a thousand other scandals. But it’s a question this society has a hard time asking because the most seductive evasion is the one that leads us to deny the underside of our own nature.

Friday, November 11, 2011

What I Read Today - Friday November 11, 2011

From: The New York Times - November 10, 2011


The Inequality Map

By DAVID BROOKS

Foreign tourists are coming up to me on the streets and asking, “David, you have so many different kinds of inequality in your country. How can I tell which are socially acceptable and which are not?”

This is an excellent question. I will provide you with a guide to the American inequality map to help you avoid embarrassment.

Academic inequality is socially acceptable. It is perfectly fine to demonstrate that you are in the academic top 1 percent by wearing a Princeton, Harvard or Stanford sweatshirt.

Ancestor inequality is not socially acceptable. It is not permissible to go around bragging that your family came over on the Mayflower and that you are descended from generations of Throgmorton-Winthrops who bequeathed a legacy of good breeding and fine manners.

Fitness inequality is acceptable. It is perfectly fine to wear tight workout sweats to show the world that pilates have given you buns of steel. These sorts of displays are welcomed as evidence of your commendable self-discipline and reproductive merit.

Moral fitness inequality is unacceptable. It is out of bounds to boast of your superior chastity, integrity, honor or honesty. Instead, one must respect the fact that we are all morally equal, though our behavior and ethical tastes may differ.

Sports inequality is acceptable. It is normal to wear a Yankees jersey, an L.S.U. T-shirt or the emblem of any big budget team. The fact that your favorite sports franchise regularly grounds opponents into dust is a signal of your overall prowess.

Church inequality is unacceptable. It would be uncouth to wear a Baptist or Catholic or Jewish jersey to signal that people of your faith are closer to God. It is wrong to look down on other faiths on the grounds that their creeds are erroneous.

Income inequality is acceptable. If you are a star baseball player, it is socially acceptable to sell your services for $25 million per year (after all, you have to do what’s best for your family). If you are a star C.E.O., it’s no longer quite polite to receive an $18 million compensation package, but everybody who can still does it

Spending inequality is less acceptable. If you make $1 billion, it helps to go to work in jeans and black T-shirts. It helps to live in Omaha and eat in diners. If you make $200,000 a year, it is acceptable to spend money on any room previously used by servants, like the kitchen, but it is vulgar to spend on any adult toy that might give superficial pleasure, like a Maserati.

Technological inequality is acceptable. If you are the sort of person who understands the latest hardware and software advances, who knows the latest apps, it is acceptable to lord your superior connoisseurship over the aged relics who do not understand these things.

Cultural inequality is unacceptable. If you are the sort of person who attends opera or enjoys Ibsen plays, it is not acceptable to believe that you have a more refined sensibility than people who like Lady Gaga, Ke$ha or graffiti.

Status inequality is acceptable for college teachers. Universities exist within a finely gradated status structure, with certain schools like Brown clearly more elite than other schools. University departments are carefully ranked and compete for superiority.

Status inequality is unacceptable for high school teachers. Teachers at this level strongly resist being ranked. It would be loathsome to have one’s department competing with other departments in nearby schools.

Beer inequality is on the way down. There used to be a high status difference between microbrews and regular old Budweiser. In academic jargon, beer had a high Gini Coefficient. But as microbrews went mainstream, these status differences diminished.

Cupcake inequality is on the way up. People will stand for hours outside of gourmet cupcake stores even though there are other adequate cupcakes on offer with no waiting at nearby Safeways.

Travel inequality is acceptable. It is perfectly normal to have separate check-in lines and boarding procedures for airline patrons who have achieved Gold, Platinum, Double Ruby or Sun God status.

Supermarket inequality is unacceptable. It would not be permissible to have separate checkout lines at the grocery store for obese frequent buyers who consume a lot of Twinkies.

Jock inequality is unacceptable if your kid is an average performer on his or her youth soccer team. If your kid is a star, then his or her accomplishments validate your entire existence.

Vocation inequality is acceptable so long as you don’t talk about it. Surgeons have more prestige than valet parkers, but we do not acknowledge this. On the other hand, ethnic inequality — believing one group is better than another — is unacceptable (this is one of our culture’s highest achievements).

Dear visitor, we are a democratic, egalitarian people who spend our days desperately trying to climb over each other. Have a nice stay.

Friday, November 4, 2011

What I Read Today - Friday November 4, 2011

From: The New York Times (published November 3, 2011)

Shale Gas Revolution

By DAVID BROOKS


The United States is a country that has received many blessings, and once upon a time you could assume that Americans would come together to take advantage of them. But you can no longer make that assumption. The country is more divided and more clogged by special interests. Now we groan to absorb even the most wondrous gifts.



A few years ago, a business genius named George P. Mitchell helped offer such a gift. As Daniel Yergin writes in “The Quest,” his gripping history of energy innovation, Mitchell fought through waves of skepticism and opposition to extract natural gas from shale. The method he and his team used to release the trapped gas, called fracking, has paid off in the most immense way. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is 30 percent and rising.

John Rowe, the chief executive of the utility Exelon, which derives almost all its power from nuclear plants, says that shale gas is one of the most important energy revolutions of his lifetime. It’s a cliché word, Yergin told me, but the fracking innovation is game-changing. It transforms the energy marketplace.

The U.S. now seems to possess a 100-year supply of natural gas, which is the cleanest of the fossil fuels. This cleaner, cheaper energy source is already replacing dirtier coal-fired plants. It could serve as the ideal bridge, Amy Jaffe of Rice University says, until renewable sources like wind and solar mature.

Already shale gas has produced more than half a million new jobs, not only in traditional areas like Texas but also in economically wounded places like western Pennsylvania and, soon, Ohio. If current trends continue, there are hundreds of thousands of new jobs to come.

Chemical companies rely heavily on natural gas, and the abundance of this new source has induced companies like Dow Chemical to invest in the U.S. rather than abroad. The French company Vallourec is building a $650 million plant in Youngstown, Ohio, to make steel tubes for the wells. States like Pennsylvania, Ohio and New York will reap billions in additional revenue. Consumers also benefit. Today, natural gas prices are less than half of what they were three years ago, lowering electricity prices. Meanwhile, America is less reliant on foreign suppliers.

All of this is tremendously good news, but, of course, nothing is that simple. The U.S. is polarized between “drill, baby, drill” conservatives, who seem suspicious of most regulation, and some environmentalists, who seem to regard fossil fuels as morally corrupt and imagine we can switch to wind and solar overnight.

The shale gas revolution challenges the coal industry, renders new nuclear plants uneconomic and changes the economics for the renewable energy companies, which are now much further from viability. So forces have gathered against shale gas, with predictable results.

The clashes between the industry and the environmentalists are now becoming brutal and totalistic, dehumanizing each side. Not-in-my-backyard activists are organizing to prevent exploration. Environmentalists and their publicists wax apocalyptic.

Like every energy source, fracking has its dangers. The process involves injecting large amounts of water and chemicals deep underground. If done right, this should not contaminate freshwater supplies, but rogue companies have screwed up and there have been instances of contamination.

The wells, which are sometimes beneath residential areas, are serviced by big trucks that damage the roads and alter the atmosphere in neighborhoods. A few sloppy companies could discredit the whole sector.

These problems are real, but not insurmountable. An exhaustive study from the Massachusetts Institute of Technology concluded, “With 20,000 shale wells drilled in the last 10 years, the environmental record of shale-gas development is for the most part a good one.” In other words, the inherent risks can be managed if there is a reasonable regulatory regime, and if the general public has a balanced and realistic sense of the costs and benefits.

This kind of balance is exactly what our political system doesn’t deliver. So far, the Obama administration has done a good job of trying to promote fracking while investigating the downsides. But the general public seems to be largely uninterested in the breakthrough (even though it could have a major impact on the 21st-century economy). The discussion is dominated by vested interests and the extremes. It’s becoming another weapon in the political wars, with Republicans swinging behind fracking and Democrats being pressured to come out against. Especially in the Northeast, the gas companies are demonized as Satan in corporate form.

A few weeks ago, I sat around with John Rowe, one of the most trusted people in the energy business, and listened to him talk enthusiastically about this windfall. He has no vested interest in this; indeed, his company might be hurt. But he knows how much shale gas could mean to America. It would be a crime if we squandered this blessing.

Tuesday, November 1, 2011

What I Read Today - Tuesday November 1, 2011

From:  The New York Times (published October 31, 2011)

The Wrong Inequality

By DAVID BROOKS


We live in a polarizing society, so perhaps it’s inevitable that our experience of inequality should be polarized, too.

In the first place, there is what you might call Blue Inequality. This is the kind experienced in New York City, Los Angeles, Boston, San Francisco, Seattle, Dallas, Houston and the District of Columbia. In these places, you see the top 1 percent of earners zooming upward, amassing more income and wealth. The economists Jon Bakija, Adam Cole and Bradley Heim have done the most authoritative research on who these top 1 percenters are.

Roughly 31 percent started or manage nonfinancial businesses. About 16 percent are doctors, 14 percent are in finance, 8 percent are lawyers, 5 percent are engineers and about 2 percent are in sports, entertainment or the media.

If you live in or around these big cities, you see stores and entire neighborhoods catering to the top 1 percent. You see a shift in social norms. Up until 1970 or so, a chief executive would have been embarrassed to take home more than $20 million. But now there is no shame, and top compensation zooms upward.

You also see the superstar effect that economists have noticed in the income data. Within each profession, the top performers are now paid much better than the merely good or average performers.

If you live in these big cities, you see people similar to yourself, who may have gone to the same college, who are earning much more while benefiting from low tax rates, wielding disproportionate political power, gaining in prestige and contributing seemingly little to the social good. That is the experience of Blue Inequality.

Then there is what you might call Red Inequality. This is the kind experienced in Scranton, Des Moines, Naperville, Macon, Fresno, and almost everywhere else. In these places, the crucial inequality is not between the top 1 percent and the bottom 99 percent. It’s between those with a college degree and those without. Over the past several decades, the economic benefits of education have steadily risen. In 1979, the average college graduate made 38 percent more than the average high school graduate, according to the Fed chairman, Ben Bernanke. Now the average college graduate makes more than 75 percent more.

Moreover, college graduates have become good at passing down advantages to their children. If you are born with parents who are college graduates, your odds of getting through college are excellent. If you are born to high school grads, your odds are terrible.

In fact, the income differentials understate the chasm between college and high school grads. In the 1970s, high school and college grads had very similar family structures. Today, college grads are much more likely to get married, they are much less likely to get divorced and they are much, much less likely to have a child out of wedlock.

Today, college grads are much less likely to smoke than high school grads, they are less likely to be obese, they are more likely to be active in their communities, they have much more social trust, they speak many more words to their children at home.

Some research suggests that college grads have much bigger friendship networks than high school grads. The social divide is even starker than the income divide.

These two forms of inequality exist in modern America. They are related but different. Over the past few months, attention has shifted almost exclusively to Blue Inequality.

That’s because the protesters and media people who cover them tend to live in or near the big cities, where the top 1 percent is so evident. That’s because the liberal arts majors like to express their disdain for the shallow business and finance majors who make all the money. That’s because it is easier to talk about the inequality of stock options than it is to talk about inequalities of family structure, child rearing patterns and educational attainment. That’s because many people are wedded to the notion that our problems are caused by an oppressive privileged class that perpetually keeps its boot stomped on the neck of the common man.

But the fact is that Red Inequality is much more important. The zooming wealth of the top 1 percent is a problem, but it’s not nearly as big a problem as the tens of millions of Americans who have dropped out of high school or college. It’s not nearly as big a problem as the 40 percent of children who are born out of wedlock. It’s not nearly as big a problem as the nation’s stagnant human capital, its stagnant social mobility and the disorganized social fabric for the bottom 50 percent.

If your ultimate goal is to reduce inequality, then you should be furious at the doctors, bankers and C.E.O.’s. If your goal is to expand opportunity, then you have a much bigger and different agenda.