Kausfiles: A mostly political weblog.

Obama and Inequality: Do You Believe in Nudges?

Day at the Circus: St. Elizabeth's Larry King interview sets HuffPo's Lee Stranahan off: "Enough already, Mr. Edwards ... You could end this stupidity fairly quickly by simply telling the truth and clearing up all the lies you've told already." ... 12:51 A.M.

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Tuesday, May 12, 2009 

Do You Believe in Nudges? When Democrats talk about "reducing inequality," they typically mean more than simply providing universal health care. They mean reshaping a national income distribution that has gotten significantly more unequal in the past several decades. Quintile tables and Gini coefficients are rolled out, along with comparisons to the Gilded Age. Recently, TNR's Franklin Foer and Noam Scheiber proclaimed that Obama was going to

"synthesize the New Democratic faith in the utility of markets with the Old Democratic emphasis on reducing inequality,"

but their article (on the president's reliance on incentives and regulatory "nudges") was missing any discussion of what his actual "nudge" plan for "reducing inequality" was. Noam Scheiber has recently attempted to fill in the hole. The arsenal of new policies is not impressive. True, there's an old standby, training, which a) last time I checked had way too slow a payoff to actually reverse historic inequality trends and b) would push workers into skilled professions where income inequalities tend to run riot (think Hollywood) and where the social inequalities that accompany those inequalities tend to be maximized (smarter people on top, slow learners below). There's traditional social insurance (e.g., social security). And then there are the Obama innovations! Here are two of them:    

Two more nudge-ocracy ideas Obama has signed onto with an eye toward reducing inequality: 1.) More generous retirement saving incentives for working-class families. (Families who currently make less than $50,000 are eligible for a refundable 50 percent tax credit on up to $1,000 of savings; Obama wants to raise the income cutoff to $65,000.) 2.) Automatically enrolling workers in 401(k)s and (for those whose employers don't offer them) IRA accounts. This disproporationately benefits the working-class, who tend to leave a lot of retirement money on the table (via unclaimed matches and tax incentives, to say nothing of their not saving enough for retirement in the first place). 

They're going to raise the income cutoff of a refundable $500 tax credit from $50,000 to $65,000. That'll do it!  It's an insult to small potatoes. My colleague Matthew Yglesias had a phrase for it. ... Update: Sorry, forgot about "expanding rural broadband access"! .... 5:50 P.M.

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Gawker, reporting. That can't be in the business plan. ... 5:49 P.M.

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Developing: Should the editor of kausfiles ever come close to attaining a position of actual public influence, such as a "real" MSM job, kf interns have devised a "doomsday" strategy of sorts to immediately sabotage his career. According to sources in the inner circle, it could involve distributing the text of his unpublished novel about welfare reform. ... Update: "Ibrahim," cashier at a Venice, California 7-11, claims the so-called doomsday strategy is "complete BS."  "I don't think there is an hour Kaus isn't in here," he says. "If there was a doomsday plan, I guarantee you we would know about it." ...  5:48 P.M.

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The Hole in TNR's Big Obama Theory

Friday, April 24, 2009 

Plot Holes: In their New Republic cover story divining Obama's "new theory of the state"--which turns out to be "Nudge-o-cracy," or having the state "monkey around with the choices people face, seeking to influence decision-making rather than mandate decisions"--Franklin Foer and Noam Scheiber declare that:

Obama has set out to synthesize the New Democratic faith in the utility of markets with the Old Democratic emphasis on reducing inequality. [E.A.]

They go on to describe Obama policymakers' shift in attitude since the Clinton administration: 

In recent months, several of the architects of Clintonomics--Larry Summers, Gene Sperling, Rahm Emanuel--have reassembled to take another crack at creating broad-based prosperity. What's striking is the change in their thinking about how to pull it off.

In fact, the center-left had revised its economic theories while the bubble was still inflating. Beginning in 2004, the data gradually began to undermine the Clintonites' central assumption: that the benefits of growth would accrue to the poor and middle class. Their policies, it turns out, had only temporarily tamped down the income inequality that had been rising since the 1970s. Workers' wages had once tracked productivity growth. Now workers were producing more, but only the wealthy were reaping the rewards; everyone else's income had basically flattened out.[E.A.]

But Foer and Scheiber's description of Obama's attempt, in the face of these realities, to restore "the old Democratic emphasis" on reducing income inequality never gets around to giving us Obama's nudge-o-cracy plan for reducing income inequality. Just thought I would point that out! I suspect it's because there is no Obama nudge-o-cracy plan for reducing income inequality--which, I suspect, is because there is no conceivable nudge-o-cracy plan that could reduce income inequality in the face of the global economic forces of trade and increasing returns to skilled labor.

Obama at least claims to have a non-nudgeocratic plan, based on restoring the power of labor unions through the Employee Free Choice Act ("card check"). But a) the Employee Free Choice Act is dead in the water, for now, b) Obama doesn't seem to be pushing it very hard; c) the idea that signing up more workers in labor unions will reverse growing inequality (at least while maintaining prosperity) is wishful thinking untested. The backup EFCA mechanism for propping up middle class incomes--mandatory arbitration--is pretty much the opposite of mere "nudging." It's the direct mandating of wages by federal mediators. ... 4:08 P.M.

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