And it turns out it still is true.  We probably need a more sane immigration policy, but we also need immigrants.  The vast majority come to America looking for a chance to better their lives and the lives of their families.  They send money back to relatives who cannot move to America, thus helping a foreign economy.

They work hard and they are ruthlessly taken advantage of by many corporations–something we should stop.  They volunteer to serve in our military and willingly die to protect our freedoms.

In brief, they behave just as all the waves of immigrants before them.  The waves of immigrants who built America.

‘What effect does immigration have on U.S. job markets? “Data show that, on net, immigrants expand the U.S. economy’s productive capacity, stimulate investment, and promote specialization that in the long run boosts productivity. Consistent with previous research, there is no evidence that these effects take place at the expense of jobs for workers born in the United States” 

That’s the conclusion of a study by economist Giovanni Peri and published in the San Francisco Federal Reserve’s Economic Letter.

Beezer here.  So take a few minutes and read the commentary.  It will make you remember where your roots really are.  Thanks again to economist’s view for bringing this paper to our attention.

And as a result, they are rendered speechless much of the time.

True story.  From a C-Span call in show during the health care reform debate.

The caller complained about ‘socialist’ medicine and all the perceived evils of socialism in general and socialism in medicine in particular.  The caller was asked how he got his medical treatment.  His answer?  The Veterans Administration, possible the most purely socialised medical system on the planet.

When asked why he didn’t avail himself of private insurance his answer was “I can’t afford it.”

Liberals listening to this exchange probably didn’t get their jaws off the ground for several minutes.  They were rendered speechless.  No wonder they often lose an argument:  They can’t talk!

And this from a post by economist Maxine Udall that appeared on economist’s view:

“…[T]he spectre of “socialized medicine” prevents us moving to single payer, where the incentives for prudent life cycle management of risk across all age and income groups would be better aligned. Why, when we already have what is in effect single payer for the elderly and the poor, do some believe that single payer is “socialized medicine” and why do they fear it so?

I gained some insight into this recently when an elderly relative started complaining about “Obamacare” and how it would lead to “socialized medicine.” Knowing the person had heart surgery courtesy of Medicare and was receiving ongoing monitoring and care, I said, “I didn’t realize you were so unhappy with Medicare.” To which I received the reply: “I’m not talking about Medicare, I’m talking about socialized medicine.”

“How is Medicare different from socialized medicine?” I asked.

“Medicare isn’t socialized,” came the reply. “I pay for it. I pay every month and when I’ve had surgery, I’ve had to pay some of it. Medicare is like any other insurance.”

“Well,” I said, “I know you’re paying a premium for Part B and I know there are copayments and deductibles, but Medicare is a government run health insurance program.”

To which the reply was: “But I’m talking about socialized medicine. You know that whenever the government gets involved in anything, it never does a good job.”

“I had no idea you were having problems with Medicare.” said I. “I always had the impression you were pretty satisfied with it. And with the VA, too. I know you’ve used the VA for some care recently. What problems have you had with Medicare or the VA?”

“Well, none with Medicare or the VA, but I’m not talking about Medicare. I’m talking about socialized medicine.”

“So you’re happy with Medicare?”

“Yes.”

“Would you mind if your [adult] children could buy into it? Your son is unemployed. Would it be OK if he could buy into Medicare?”

“Well, sure. As long as he has to pay like I do.”

You were all wondering how someone could say, “Keep your government hands off my Medicare?” Well, there you have it. Now that I’ve told you, I’m still not sure I understand it. It was one of the most frustrating and at the same time enlightening conversations I have had in a long time. The person with whom I was conversing is intelligent, educated, and not senile.

I’m just not sure how to use the above information. I was unable to persuade my elderly relative. I confess that since the conversation, I have despaired that the national conversation will ever be much better.”

Beezer.  And so it goes.  Our jaws are constantly resting on the floor from our astonishment.  Liberals need to get used to the American public’s propensity to stab itself repeatedly. 

Over at economist’s view, Oregon Professor Mark Thoma’s blog, there’s a discussion about whether the unemployment we have is run of the mill cyclical unemployment, or something more sinister: Structural unemployment.

The nation has lost almost 8 million jobs in total the past three years.  During the same time frame 6 million adults entered the workforce.  Thoma presents an argument from another economics professor, Brad DeLong, that what we have is cyclical, not structural.

DeLong cites the following statistics, which we find helpful.

“Well, over the past three years…

• employment in logging and mining has risen by 11 thousand
• employment in construction has fallen by 2.1 million
• employment in manufacturing has shrunk by 2.4 million
• employment in wholesale trade has fallen by 437 thousand
• employment in retail trade has fallen by 912 thousand
• employment in transportation and warehousing is down by 333 thousand
• employment in publishing, except internet is down by 147 thousand
• employment in motion picture and sound recording is down by 34 thousand
• employment in broadcasting, except internet is down by 41 thousand
• employment in telecommunications is down by 54 thousand
• employment in financial activities is down by 921 thousand
• employment in professional and business services is down by 1.3 million
• employment in educational services is up by 197 thousand
• employment in health care is up by 789 thousand
• employment in leisure and hospitality is down by 467 thousand
• employment in other services is down by 32 thousand
• employment by the federal government is down by 330 thousand
• employment by state and local governments is down by 127 thousand.”

While the stats are dispiriting, there doesn’t appear to be a total collapse in a few industries, and a corresponding (though smaller) surge in a few different industries that would indicate something structural is going on.  Which is DeLong’s point.

Beezer is a little concerned these statistics may not yet be showing something that is structural and will become apparent going forward.  What if the ‘structural’ adjustment that’s needed is crossing across almost all industries?  What if a snapshot in time, which is what DeLong cites, doesn’t reveal an underlying correction?

What if the adjustments needed are so widespread that the job markets will be roiling for a decade as the fundamental adjustments are made, part by part, rather than in one easily identifiable wrench?

America faces challenges on multiple fronts right now.  Manufacturing jobs and capacity have declined for more than 30 years.  Multinational US corporations have built manufacturing facilities overseas rather than at home.  At the same time, the domestic economy became more and more dominated by consumption and service related industries.   Going into the current recession those industries constituted 70 percent of the nation’s Gross Domestic Product.

Not coincidentally, the nation’s trade deficit expanded during this time as manufactured goods needed to be bought from foreign sources due to America’s dwindling capacity to make the goods for itself. 

Maintenance and upgrading of vital public infrastructure has been almost completely ignored over the same time period.  The American Society of Civil Engineers estimates the national backlog of work that needs doing during the next three years is $2.2 trillion.

And of course, during this 30 year period America’s dependence on fossil fuel energy became a public concern.  From the OPEC embargo of the 1970s, to the recent spike, collapse and rebound of petroleum prices, American anxiety over this problem has only increased.  No simple solution is apparent.  The necessity of replacing fossil fuel energy is obvious, but how to do it is not.

When you take all these challenges together, it’s easy to believe the sum total equals structural change.  It may come about by a series of cyclical upheavals but the end result will be structural.

And that will take time.  There will likely be periods of relative prosperity, but they will be sandwiched by uneasy periods where unemployment will spike (a series of ‘cyclical’ challenges).

This transition would be be politically difficult even under the best of circumstances.   But almost no one thinks the ‘best of circumstances’ is likely because the Democrats and the Republicans have embraced what appear to be mutually exclusive philosophies.

Republicans simply don’t think government action beyond basic defense and a few other necessary public services is warranted.  Asking the government to help is simply wasting time and money, this philosophy maintains.  If left unencumbered by taxes and regulation, private industry would naturally solve these issues, Republicans say.  

Democrats, on the other hand, are not so trusting of unencumbered private industry.  And they believe, as a result, that government needs to be part of the solution.  Given the current recession and all its components, each side has blamed the other for the malaise. 

One side fights government involvement.  The other wants government help.  So far the government has become more involved (it had to, the private forces rushed to the sidelines) but it’s been an uneasy involvement because neither side believes the government should run the economy.

As a Democrat, and a liberal, Beezer has little faith all these challenges can be met by the private sector alone.  The federal government can be a forceful enabler of private economic expansion by putting its considerable weight to the wheels of commerce.  Without that directed force, so-called free markets (an oxymoron in Beezer’s opinion), will steadily lose ground globally under the onslaught of state capitalism.

Our competitors have no illusions about how government power can lift private economic ships.  The growth of their ‘national champions’ the past 10 years is astonishing.  Yet the American government has been hobbled by Republican disbelief government can help in any real way.

Matters will probably get worse before the American public realizes the nation is losing a very large, complex battle against its economic rivals.  What will happen when that realization finally sinks right down to the neighborhoods is anyone’s guess.

One can only hope Democracy can survive the inevitable reaction.

There are many problems we face.  That’s a given.  But our ability to coalesce around a common goal, or goals, seems to have disappeared of late.

And as a result we seem to have become everyone else’s chump.  We allowed our manufacturing base to decline precipitously under pressure from aggressive foreign exporters who manipulated their currencies, thus imposing de facto import tariffs on our goods and subsidies on theirs.

We allowed unscrupulous lenders to laden mortgage and credit card contracts with hidden fees that helped make debt unmanageable, even as they increased their profits.  We allowed wild west style investment banking to infect the more staid commercial banks, thus turning our financial system into a rigged, casino-like free for all.

We stood by as income inequality climbed and climbed, beggering labor and the middle class as the wealthiest among us enjoyed special tax shelters and tax breaks.

Maxinne Udall (girl economist) writes cleanly, and in my opinion, with great insight.  Recently she posted a nice article where she wonders what has happened to America’s sense of being the United States of America. 

Entitled ‘The Road To Serfdom Is Gravel,” professor Udall uses the history of roads, and their impact on economies.  She starts by pointing out that, in order to not raise taxes, several communities in America are allowing some roads to degrade back to their gravel state.

She points out how ‘plank’ roads and bad weather affected Civil War battle outcomes.  And how the Roman road system was integral to the Empire’s health.  She cites the 1950 Interstate highway system in America, begun under the leadership of President Dwight Eisonhower, and how it boosted economic growth.

But the road history is really a way of asking why we don’t do these things anymore?  We’ve lost something along the road, it seems.  Udall doesn’t provide any answers.  But she does ask a  very important question.  Beezer’s often argued that we need to frame the right questions, in order to develop the right answers.  Udall’s small post asks the same question, but in a different, very creative way.

She concludes with this paragraph:

“What passes for discussion about social choice and taxation in this country has become the sound of one hand clapping. The divisions in discourse have been strategically engineered by interests whose objectives I do not understand, but that I am sure are not the commonweal. The divisions are fueled by oblique appeals to base sentiments about race, class, and sexual preference that all of us harbor to a greater or lesser extent. They drive wedges on issues on which most would otherwise agree and from which most would benefit near equally from the same solution. While sentiments are used to divide us, a nation founded on the idea of a government of, by and for the people lists dangerously toward income inequality and its bedfellow, concentrated economic and political power, while we bequeath to our grandchildren a world in which they travel a network of gravel roads with barely a high school education, they live in cities and towns with failing sewers and water systems, and risk their and our great grandchildren’s lives crossing crumbling bridges and overpasses.

But their taxes will be low. I wonder if they’ll thank us?”

Once again, thanks to economist’s view for highlighting Udall’s post.

Former Federal Reserve Bank Chairman Alan Greenspan, in a Financial Times interview, reveals that he believes the Bush tax cuts should be allowed to expire as planned.

Greenspan, still referred to as “the Chairman,” is still the same laissez faire advocate familiar to those who take the time to watch the Federal Reserve.  Although his sterling reputation has been seriously damaged by the financial collapse of 2008, he seems unconcerned about that in this interview — at 84 years of age such setbacks apparently dim in importance.

Here’s the relevant quote in the FT article:

“The other part of his record seized on by critics, especially Democrats, is his support for two rounds of tax cuts. One came in 2001 at the beginning of the administration of President George W Bush and one two years later. The week before we met, with an eye to the US’s huge fiscal deficit, he told an interviewer that he supported reversing those tax cuts, a remark seized on by his detractors to argue that he was irresponsible to have backed them in the first place. Here, too, he has a carefully worked-out response. One, both administration and congressional forecasts back then predicted huge fiscal surpluses, so a tax cut was quite sensible. Two, he argued at the time that a second round of cuts should be made conditional on how the economy and the public finances developed, which they were not. Three, he underestimated how his words would be seized on to justify reducing taxes willy-nilly, and he has already admitted that mistake in his 2007 memoirs, The Age of Turbulence. “Criticisms are wholly deserved when you’ve done something wrong, I grant you,” he says. “But I still prefer when I’m criticised that it be accurate.”

Beezer’s long argued that the obsession over tax cuts, and truthfully over monetary tools in general, has prohibited public discourse about other more important dynamics for maintaining robust economies.   Sensible, progressive tax tables that are kept unchanged, provide an all important stability in planning and additionally help pay down government debt accumulated in recessions, while providing surpluses when times are good.  Constant fiddleing with tax rates are a waste of time, in other words.  The more important issues are balanced trade, tariffs, currency manipulation, industrial policies aimed at full employment, innovation and capital investment, among many others.

That Greenspan, the icon of regulatory forebearance (blind regulation), thinks a return to the Clinton tax tables is interesting.  What’s amazing is that the media completely ignores his viewpoint now.  Republicans, to a man and woman, still maintain tax cuts are the cure to all evils.  Despite their guru acknowledging they aren’t.

No wonder we can’t get out of our own way.

As per usual, thanks to Mark Thoma’s economist’s view blog for highlighting this interview.

From a recent study by three economics students; Sreedhari Desai of Harvard, Arthur Brief of the University of Utah and Jennifer George of Rice University.  The title is “When Executives Rake in Millions:  Meanness in Organizations.”

“The topic of executive compensation has received tremendous attention over the years from both the research community and popular media. In this paper, we examine a heretofore ignored consequence of rising executive compensation. Specifically, we claim that higher income inequality between executives and ordinary workers results in executives perceiving themselves as being all-powerful and this perception of power leads them to maltreat rank and file workers. We present findings from two studies – an archival study and a laboratory experiment – that show that increasing executive compensation results in executives behaving meanly toward those lower down the hierarchy. We discuss the implications of our findings for organizations and offer some solutions to the problem.”

Beezer here.  This basic concern is a long considered one in economics and the related considerations of ethics and morality.  Even the great Adam Smith wrote about this.

From economist Maxine Udall (girl economist) blog, the following.

Adam Smith wrote about the influence of prevailing custom and fashion on moral sentiments in Theory of Moral Sentiments.

The different situations of different ages and countries are apt, in the same manner, to give different characters to the generality of those who live in them, and their sentiments concerning the particular degree of each quality, that is either blamable or praise-worthy, vary, according to that degree which is usual in their own country, and in their own times. 

Nowadays, most of us would object to what appears to be cultural or ethnic stereotyping in some of what Smith wrote. I am unable to say to what extent Smith’s views reflected then existing national and cultural heterogeneity that will have no doubt been rendered by economic development more homogeneous over time. Smith was a sound thinker and critical observer, which causes me to attribute his generalizations about different nationalities somewhat to Scots-Anglo ethnocentrism and somewhat to possible real national differences. Nevertheless, his main point seems valid: that what is “either blamable or praiseworthy” varies “according to that degree which is usual” in our own country and own times, that our moral sentiments and behavior are shaped to some extent by the culture in which we dwell.

Smith goes on to discuss “customary characters” of professions and stages of life, conjecturing that they are shaped by the moral sentiments that accompany and promote the duties of a given profession or of a specific stage in the life cycle. Thus, some professions and life stages are more reticent or staid than others. But, while Smith sees custom in the form of social and professional norms reinforcing good moral sentiments and behavior, he also sees it as something that can erode the same.

It is not therefore in the general style of conduct or behaviour that custom authorises the widest departure from what is the natural propriety of action. With regard to particular usages, its influence is often much more destructive of good morals, and it is capable of establishing, as lawful and blameless, particular actions, which shock the plainest principles of right and wrong.

His point being that just as self-interest can prevent us seeing impropriety and injustice, so too can culture and custom. A slave holder in the antebellum US South had self-interested reasons for believing slavery to be morally acceptable. A poor white worker whose wages were depressed by the availability of slave labor might still find slavery acceptable and worth fighting to preserve because the norms and customs of his culture find no impropriety in slavery.”

Beezer again.  An earlier Beezernotes post  highlighted the work of behavioural scientist Sam Bowles of the Santa Fe Institute.  Bowles has concentrated his study on the causes and effects of inequality in general and income disparity in particular.  From that article: