The US Economy

I did, Walter; its all at The Bureau of Labor Statistics. Every US labor statistic you could want. You can spend hours there. Go HERE , select the series of data you wish to examine, set the years you wish to see, and have fun.

Thanks, Timber!

I just did a little research on the inequality theme George and I went over a few pages ago. To see how well different economies work for the less fortunate, I went to the 2003 CIA World factbook and compared the incomes and income distributions of the G8 countries. Here's the result.

(Technical note: "$ at PPP" means "Dollars at purchasing power parity". Purchasing power varies across space just as it varies across time. To compare incomes across countries, you have to adjust for that, just as you have to adjust for inflation when comparing incomes across time.)



My interpretation:

1) In terms of average income, the USA win hands down. The conservatives and libertarians are right in pointing that out.

2) Inequality in Canada is about what you would expect from a European country with the same welfare system, and lower than you would expect based on George's regional differences hypothesis. (Regions in Canada are about as far apart from each other as regions in the US.) This suggests that inequality figures fairly reflect the differences in the social fabric of countries.

3) Liberals are right to point out that the welfare state can improve the life of the poor without compromising productivity too much. This is true as long as they don't go all the way to communism, as Russia's example demonstrates. But in the real world, I don't know of any liberal who wants to go that far. This extreme kind only exists in RNC pamphlets.

4) So which economic system is better? It's not a slam dunk either way, and it ultimately depends on what your values are. You can believe, as liberals do and Catholic social teaching does, that extra money buys a lot more happiness for the poor than it does for the rich. If you do, it follows that the American economy should become more like Canada's, Europe's, and (surprisingly) Japan's. (But not like Russia's.) If you believe that the income distribution isn't worth worrying about, you will be most interested in productivity and favor the US model.

Repeat: It's not a slam dunk either way.

(PS: Sorry about all these corrections. After CI's response, I discovered about 6 embarrassing typos I had to correct -- two at a time )

Thomas, That's one of the reasons why I'm a moderate, and believe in many liberal programs such as universal health care and good schools. We are not wealthy, but our 'average' income is better than the national average.

Thomas,

Very Interesting and informative. Thanks.

I understand the PPP GDP statistic and note that GDP data in the 2003 World Factbook is based on it. Where did you find the data on income distribution? (Not challenging you - just curious) If I am interpreting your data correctly, in the U.S. the total PPP income of the bottom decile in our income distribution equals 1.8% of our total GDP, while the corresponding group in Canada gets 2.8% of the total and in Germany, it is 3.8%.

The most prominent conclusion of the statistics you have presented is that the USA, Japan, and Russia are all exceptions to the central tendencies of the other G-8 countries. For each of the three statistics you listed they comprise the whole population lying outside one standard deviation of the respective means. Japan enjoys high income and relatively level distribution at the bottom; Russia, low income on average and at the bottom, but relatively flat distribution; the USA high income and highly unequal distribution, but owing to the income levels, a bottom decile income only slightly below the mean for the G-8 countries.

I agree with all of your inferences, but suggest that static comparisons of the merits of these G-8 countries can easily be misleading. Firstly, the differences among them are very small compared to the differences between them and the rest of the world. The question of how they managed to produce and distribute so much wealth may be more important and relevant than an examination of the relatively small differences among them. Moreover, it is not at all clear that any of the G-8 states could transform itself into a reproduction of another through government tax, economic and social policy. Could the USA raise the income level of its bottom decile by 40% with an attendant 30% reduction in its GDP (thereby mimicking Germany) through any known tool of government policy? I think not, and believe the likelihood of unanticipated side effects dominating the process is very great. Other factors, cultural, historical, geopolitical, and demographic can easily dominate available choices in government policy in this area. Each of the G-8 countries is more or less democratic, and it is fair to say that each represents approximately the wishes of its people. In addition, we are all equally creatures of the historical processes that got us where we are.

There are several demographic factors, which are both easily measured and illustrative. For example, of all the G-8 states Japan and Germany stand out in that they have the highest median ages, the lowest % of population under 15 years, and the most level distributions of income. In stark contrast the USA has the lowest median age, the highest % of population under 15 years, and the most unequal distribution of income. The differences in these parameters are quite large - about 6 years in median age and 6% in the populations under 15 years. It is likely that this difference plays some role in both income distribution and in the relative abilities of these countries to sustain their social welfare systems.

The much greater cultural homogeneity of Japan, and to a lesser degree Germany, Italy, and France, compared to the United States also likely plays a role here. We have fewer cultural features uniting us and, as a result, depend more on raw economic incentives to elicit desired social behavior than others.

The comparison you suggested between the USA and Canada may well be the most interesting feature of all this. While today Canada receives more (legal) immigration than the USA, that has not been the case for most of the last century - we have a good deal less cultural homogeneity. The demographics and GDP per capita of Canada are at a point between those of the USA and Europe, while the income of the bottom decile is 25% - 50% higher (depending on which statistic you consider) than in the USA. What lessons does Canada offer the USA in social & economic policy? While I am personally disinclined to consider the comparison, I do recognize there may well be some instructive lessons there. (Emphasis on the subjunctive)

The only point I made with respect to broad regional differences was that one cannot apply arbitrary definitions of poverty levels and minimum wage with equal relevance to all regions. One must instead adopt something like the PPP that you have correctly suggested.

Very interesting questions, and as you said, not a slam dunk in any direction. I do think that many of us (myself included) do often make a virtue of necessity (or mere fact) in our rhetoric.

Facts can be put together to concoct the biggest lies.

george, I agree with the thesis of your last post.

c.i., taken by itself, a statistic is merely a number. What Thomas and George are doing is applying statistical analysis; considering the larger picture derived through the examination of a spectrum of statistics, their relationships to one another, and their contextual meaning. The more statistics one looks at, the more tests to which one puts them, the more meaningful become one's conclusions.
In context of The US Economy, for instance, any one indicator is merely an indicator. The overall direction of The Economy is revealed only by examing all the indicators, and their trending, which is what I've been saying here for well over a year, and my application of that regimen is what occasions my optimistic outlook. Far more is going well than is going poorly, and even the negative indicators are showing positive trending, and doing so at a steadily increasing pace.

timber, I really don't need you to teach me economics or how to interpret statistics. Thanks, but no thanks.

Ain't tryin' to teach a thing, C.I., just sayin' why I feel the way I do. Your mileage may vary.

Correct.

The income inequality data also comes from the CIA World factbook, which is itself based on World Bank data. It has to be taken with a grain of salt because most of the inequality data is less recent than the GDP data. (Their GDP data is typically 1 year old, the inequality data about 5.) By the way, it turns out I was wrong about the direction of the change inflicted by the adjustment for purchasing power. European GDPs look larger without the adjustment, so the adjustment turns out to be a change that makes the US look better.


It's not clear to me either. But I frequently run into American conservatives who tell me that higher taxes and a more generous welfare state must, as a matter of principle, hurt everyone. It's still possible that this would not work in the US, but I think the comparison does refute the "must" part. The debate about higher taxes and higher spending versus lower taxes and lower spending is about a real tradeoff, not about the free lunch which the pundids on both sides are promising us. (The current policy of taxing like Republicans and spending like Democrats, on the other hand, is the opposite of a free lunch. It's just plain irresponsible.)


I don't think it could change it in a year. But policies like expanding the earned income tax credit, better schools in poor neighborhoods, and universal health care would work, after some time. Throwing more money at such projects would be a good investment in my opinion. It would also help to declare victory in the war on drugs and go home. That way, at least drug dealers would stop shooting each other and spend more time creating value for their customers.

Timber, is it possible that you meant to respond to lightwizard in your post defending statistical analysis? It might explain CI's irritation.

Job growth doing just fine?... http://www.salon.com/opinion/feature/2004/01/19/no_jobs/

That shoulda been directed both to LW and c. i. , Thomas; my response addressed the point LW made and c. i.'s agreement. I suspect that what occasions most of c.i.'s irritation with me is the way events have tended to reflect on our respective positions vis a vis The Economy since this thread started.

But CI's agreement was with georgeob1, not lightwizard, and George had said nothing negative about statistics. I suspect what occasions most of his irritation is his disappointed expectation that you would respond to what he actually wrote, which was:

Thomas,



Possibly true. However you didn't address the likely effects of the other cultural and demographic factors I suggested influence both the appeal and effectiveness of such policies.



You may be right, but I hope not. I do know the Republicans are convinced, after their experiences in the 1980s & 1990s, that temporary deficits don't matter much. Economic growth can wash them out and the underlying political/social programs that sustain them can be better addressed during good times. I assume, but don't know that they plan to curtail spending during the next administration. I do know that the promises of continuing surplus along with even greater new spending offered by the Democrats made even less sense, both long and short term.



Not so sure about the Earned Income Tax credit - our tax code is already complex enough. I note that the Bush Tax reductions did make the tax structure a bit more progressive than before, Democrat rhetoric notwithstanding. I would favor some reduction of the payroll/Medicare tax, which hits everyone on an almost equal basis, and partly funding these programs from general revenues.

Everyone agrees about needed improvements in public schools everywhere - for both rich and poor. Not nearly so much agreement on how to do this. Democrats and the education establishment favor more funding generally and much more Federal funding and control of what here has been a local government institution. Republicans favor breaking the monopoly of the education unions & bureaucracy, and increased local control and accountability. A complex problem.

The worst performing public school system in the country, Washington DC. also has the highest per capita student cost (sadly this is more the rule than the exception, and nationwide the correlation between cost and performance is negative.) The Washington school system also, by a wide margin, has the highest ratio of non-teacher administrative staff to students. Despite this they recently laid off 900 teachers (and zero administrators) in a budget containment exercise. The past president and a few officers of the local teachers union are under indictment for embezzling several millions from the union. The national union explained away its failure to conduct any financial audits of the local over a seven-year period, despite its charter requirement for annual audits, by claiming there was no legal requirement for them.

The National Education association, teacher's unions and textbook publishers work together to declare obsolete textbooks on reading, arithmetic, history and other elementary subjects, recycling them every two years to reflect the latest nuances of "education science" and the current dictates of political correctitude. No surprise that there is a revolving door of employment of education professionals among these institutions.

I find it difficult to rationalize the notion that more funding of such a beast could yield a good result for anyone except the operators of this failed system. I strongly believe that the best way to quickly get better schools in poor neighborhoods is to give the parents of children there more direct control through vouchers.

We may well be headed for a national health care system. Certainly our increasingly complex and authoritarian insurance-based systems are frustrating many of their customers. However I am even more skeptical of anything directly run by the government. I fear the result would be uniform (except for those with good political connections) mediocrity and poor service, rationing of access, and stagnation.

The notion of liberating us from ?'The War on Drugs' is frequently advanced, but I doubt that those who advocate this have thought through all its implications, ranging from environmental and product liability law, to the political consequences in other countries. There are interesting examples out there, the Netherlands for example. However I do not believe that we would get similar results from such policies in this country. To me this one remains a tantalizing but murky question.

When you get here, you will likely have lots of opportunity to observe these issues directly, and consider the tradeoffs.

Cicerone is not at all shy about disagreeing with and rejecting much of what I write here. In that light his terse statement of agreement above was both meaningful (to me) and much appreciated.

Looking back, I gotta admit to embarrassment and error here ... I mistook c.i.'s agreement with George for an affirmation of LW's immediately preceeding post. I screwed up. Sorry all around.

I do that all the time too. No biggie as far as I am concerned.

Timber,

Nice response. Errors and testiness infect us all.