Working-Class Conservatism

June 5, 2017

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Like so many others who have been closely following current events, I can easily be caught up in the outrage over President Trump’s latest tweet or poorly thought-out policy proposal. Nevertheless, I do try to stay focused on issues that transcend any one personality, no matter how–um–large. Even if Donald Trump were to be impeached, the wave of popular anger that helped elect him would not entirely subside. The fact that so many of his supporters keep sticking by him, almost without regard to what he does, indicates that he has tapped into a strong current of public opinion that will continue to shape our politics. The country will have to come to grips with what Trump represents to people, even if his own presidency is a colossal failure.

In some of my earlier posts, such as “A Leap into the Dark” just after the election, I acknowledged Trump’s general appeal to conservative voters (using that term rather broadly), but questioned his authenticity as a champion of the working class. He did, in the end, get the support of most Republicans across the socioeconomic spectrum, and much of what he is trying to do has the support of the Republican establishment. Now however, having recently read Michael Lind’s article on “The New Class War,” I want to ask if there is a distinctly working-class brand of conservatism, even if Donald Trump represents it rather inconsistently. I want to explore how the interests of working-class Trump supporters and establishment Republicans may diverge on certain issues, even as they converge on others. An angrier and more outspoken working-class conservatism could be helping the G.O.P. win elections, but it could also prove to be a divisive force that could weaken the party and create opportunities for Democrats.

Convergent interests

Climate change is a good example of an issue where the interests of many blue-collar workers seem to converge with those of the Republican establishment. Even as the scientific consensus on climate change  grows stronger, and more and more Democrats support action to control carbon emissions, most Republican leaders support President Trump’s withdrawal from the Paris Accord and his renunciation of President Obama’s Clean Power Plan. In this respect, the Republican establishment most represents the interests of fossil-fuel industry executives and shareholders. Led by Americans for Prosperity, a group financed by the Koch brothers, the industry has poured millions of dollars into the effort to influence–perhaps I should say mislead–public opinion, support its political allies, and defeat its political opponents.

Almost by definition, the main concern of working-class conservatives is saving jobs in those established industries. For Republican leaders like Mitch McConnell of Kentucky, constituent pressures combine with fundraising incentives to motivate conservative environmental policy. Of course, those leaders almost always frame the issue as opposing “job-killing” regulation, not preserving corporate profits.

Continuing to do what one has always done, whether or not it makes sense to do it, is a simple conservative impulse that cuts across class lines. Conservative columnist Ross Douthat, who has voiced skepticism about climate change, now admits that “in actual right wing politics no serious assessment of the science and the risks is taking place….Instead there’s just a mix of business-class and blue-collar self-interest and a trollish, ‘If liberals are for it, we’re against it’ anti-intellectualism.”

Without sacrificing their environmental concerns, Democrats who wish to appeal to working-class voters need to emphasize the ways that government can promote job creation in clean-energy industries, as well as facilitate the retraining of displaced workers for new jobs. Just talking about the potential dire consequences of future climate change may not impress someone trying to make ends meet right now.

Divergent interests

Global trade and immigration are issues where working-class interests diverge in many ways from the traditional positions of the Republican establishment. In the recent past, Republicans have been the biggest advocates for free trade, consistent with the belief that unrestricted markets can best create wealth for all. They have been less united on immigration, but advocates of global free markets often welcome the flow of labor across borders to supply the labor needs of expanding industries. Cultural conservatives may worry about the threat to American culture from “alien” ideas or practices, worries enhanced by the threat of terrorism. Donald Trump’s proposals to build a wall between the U.S. and Mexico and ban travel from Muslim countries appeal especially to cultural conservatives.

If there is a distinctly working-class position on globalism, it is based again on concerns about jobs and incomes. The free flow of capital and labor across borders has enabled corporations to profit by seeking out cheaper labor, but a lot of that has come at the expense of  workers born in the United States. That is one reason why labor’s share of national income growth has been falling. (Another is replacement of human labor through automation.) This strengthens the anti-trade, anti-immigrant sentiment within the Republican Party. It is a kind of conservatism, but not the pro-capital kind that has dominated the party in the Reagan-Bush era.

The G.O.P. is unlikely to renounce its support for globalism anytime soon. Although the United States is now a debtor nation with an embarrassingly large trade deficit, trade is still a two-way street. American companies want foreign buyers and American consumers like inexpensive foreign goods. Powerful retailers like Walmart oppose new taxes on imports.

Some new policies might benefit American workers, but Democrats are at least as likely to propose them as Republicans. International trade agreements could include stronger protections for workers. Displaced workers could have more opportunities for education or retraining. American industries could compete globally on the basis of quality–more like the Germans do–rather than on cost-cutting.

Another area in which working-class interests diverge from Republican establishment interests is taxation and spending. Wealthy Republicans have the most to gain from tax cuts and the least to lose from cuts in social spending. Working-class people have less to gain from tax cuts, since they are taxed at a lower rate already, and more to lose from cuts in social programs on which they increasingly rely.

The current debate over repealing and replacing Obamacare has dramatized this difference. Establishment Republicans have long advocated repeal, while giving little thought to replacement. Their main aim was to eliminate the new taxes on the wealthy that financed the new insurance subsidies. Trump supporters apparently believed him when he promised better health insurance coverage at lower cost. Then he double-crossed them by endorsing a House Republican bill that accomplished no such thing.  Similarly, the President’s tax “reform” bill turns out to be mainly a huge tax cut for the rich. His budget proposal includes not only that tax cut, but extreme cuts in programs that benefit many of his own supporters.

Working-class attitudes toward social spending are a little complicated, however. The American Dream is having a good enough job so that you don’t have to rely on any government programs. You want to get good health benefits at work, so you don’t need to obtain insurance from a government exchange or an expansion of Medicaid. Working-class conservatism often takes the form of anger that so many Americans do rely on Medicaid, or food stamps, or housing subsidies. In many ways, a vote for the Republican Party is a vote for a mythical America in which everybody is successful and nobody needs such things. Just as a vote against a clean energy policy is a vote for a mythical planet where human activity has little impact on the weather.

That gives the Democratic Party the opportunity and the challenge of presenting itself as the party of the real America. That’s the America where rapid economic change creates the need for a stronger safety net, since working-class incomes have become less reliable. It’s the America where enhanced threats from foreign competition and automation force us to create new and better jobs by investing more in the talents of our own people.

In short, the Democratic Party does not have to become the party of some “liberal elite” consisting of upper-middle-class professionals. It does not have to cede working-class voters to the more conservative party, where their interests are often overshadowed by those of the wealthy. Donald Trump may have gotten a lot of their votes this time, but they are very much up for grabs if he and his party let them down.

The complexities of race and class

In many of the discussions about how the Democratic Party is losing the middle class, it’s the white working class that is the focus. That raises the question of whether the attitudes of working-class voters have a racial–or even racist–component that attracts those voters to the more conservative party. That’s true to a degree, but any such conclusion has to be carefully qualified.

Much has been written about how the Republican Party–the party of Lincoln and in many respects the liberal party of the nineteenth century–became the more conservative party on racial issues. To make a long story short, the Democratic Party outraged much of its base in the “Solid South” by aligning itself with the Civil Rights Movement from the 1940s on. Then the conservative movement that captured the Republican Party in the 1960s and 70s built its majority largely by relying on a “Southern strategy.”

As with the immigration issue, establishment Republicans often take a free-market position on race. That view treats racial discrimination as an anachronism that free-market competition and equal opportunity should eliminate. Rational employers have an interest in hiring the best person for the job, and workers can succeed if they do the right things, like work hard, stay in school, and avoid having children before getting married (without the help of Planned Parenthood, of course!). The G.O.P. is also home to some cultural conservatives who believe, deep in their hearts, in a predominantly white, Christian society. But most Republicans just tend to minimize the problem of racial discrimination and prefer to solve it more by individual changes of attitudes than by government mandates.

White working-class attitudes about race tend to be conservative for at least two reasons. First, less educated people tend to be less enlightened about race. They are less aware of how systematic and enduring racial discrimination has been in American history. They are more likely to attribute the present condition of Black Americans to defects of character like lack of will power. But in addition, they do not have the greater economic security that comes with solid job credentials. Whites who cannot claim high status on the basis of educational attainment or income may take pride in being white, just as lower-achieving men may take pride in being real men, whatever they think that is. Putting down non-whites or women is one way of bolstering one’s own status. People who feel that way, whether they consciously articulate it or not, are more likely to be drawn to the political party that is less associated with movements for racial or gender equality, and less supportive of government assistance to the “undeserving” poor.

That, however, is not an unmixed blessing for the Republican Party. Racial and gender attitudes have changed so much in this country that no major party wants to be known as the party of white or male supremacy. The party establishment has to walk a fine line, tolerating some unenlightened attitudes without fully embracing them. The Democrats, on the other hand, will remain–and should remain–the party identified with the struggle for equality. Their best hope for winning over working-class voters is to try to alleviate the causes of working-class status anxiety. Again, promote investments in education and job creation, so that working people of all races and ethnicities can get ahead without having to be afraid of one another.

Although I thought that Donald Trump was going to lose the election because of his own failings, I did not agree with Hillary Clinton’s campaign strategy of attacking him and his followers instead of focusing primarily on economic issues. I thought it was a big mistake to describe his followers as “deplorable” racists and other kinds of bigots. Racial attitudes are now too complex and subtle for such a large segment of the population to be characterized that way. Economic insecurity and class tensions are no doubt complicated by the country’s unfortunate racial history. But I think that the best course for the more liberal party is to address the economic concerns that working families of all races have in common. Reject outright bigotry where it does exist, for sure, but do your best to convince people that a flourishing society has no need for it.


Trump Rejects Global Cooperation on Climate Change

June 2, 2017

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Yesterday, President Trump announced his attention to withdraw from the Paris Accord on Climate Change. In doing so, he carried his nationalist, “America First” thinking to a new extreme.

The Paris Accord represented a breakthrough in international cooperation to address the most pressing global issue of our time, dramatic climate change due mainly to the buildup of greenhouse gases in the atmosphere. Countries can continue to argue and negotiate over their relative contributions to a solution. But the important thing is that almost every country–Syria and Nicaragua were the exceptions–agreed to join in the effort, each setting targets for the reduction in fossil fuel emissions. Even if some of the targets were more ambitious than others, and some will not be met, the world will be better off because of the agreement. The United States can be proud of its leadership in bringing the nations of the world together in this cause.

Donald Trump views such agreements through the eyes of a businessman accustomed to driving hard bargains. Each deal is a zero-sum game, where each side’s gain is the other side’s loss. Trump’s speech reveals that he is narrowly focused on the costs to the American fossil fuel industry, not the benefits of controlling climate change or creating cleaner energy industries. That makes his economic analysis flawed from the start. He counts only jobs lost but not new jobs to be created. He claims that our large fossil fuel reserves are “sufficient to lift millions of America’s poorest workers out of poverty,” but fails to mention that developing those reserves would, according to scientists, send climate change out of control and produce dire economic consequences. New York’s attorney general is currently investigating the possibility that Exxon Mobil may be defrauding its investors by placing a higher public value on its reserves than it knows to be realistic.

Because he looks at the world from a narrow “America First” point of view, President Trump tries to minimize the American responsibility for the problem while placing as much blame as possible on poorer countries, especially China. True, China is currently the world biggest emitter of greenhouse gases, but that’s partly because it’s so big, and it has only recently been developing its fossil fuels. China is only sixth in per-capita emissions, and it is now making large investments in clean energy. The United States is still first in per-capita emissions, and “with just over 4% of the world’s population, is responsible for almost a third of the excess carbon dioxide that is heating the planet” (New York Times). Developed areas like North America and Europe have been filling up the atmosphere with carbon emissions for a long time, while poorer countries have only joined them recently. It’s only fair that developed countries should lead the way in energy transformation, and they are starting to do so. But one reason they have been reducing emissions is that they have been exporting their problem by offshoring a lot of their manufacturing operations to poorer countries.

Trump claims that even without the accord, “the United States…will continue to be the cleanest and most environmentally-friendly country on earth,” That is simply not true. An Environmental Performance Index developed at Yale ranks the United States 43rd in air quality, 22nd in clean water, and 44th in climate and energy policies. The Trump administration’s efforts to roll back environmental regulation certainly won’t help. But by denying we have a problem, Trump can claim that we have nothing to gain and everything to lose from the proposed solution. “The Paris Climate Accord is simply the latest example of Washington entering into an agreement that disadvantages the United States, to the exclusive benefit of other countries.” One could argue the opposite, that Trump is disadvantaging the U.S. by withdrawing from the fight for clean energy, which may allow countries like China to assume leadership in developing the industries of the future.

Trump is especially critical of the Green Climate Fund, the United Nations fund through which richer countries help poorer countries transition to cleaner energy. Without it, very poor countries like India say they cannot afford to leave their coal in the ground. Trump claims that the fund “is costing the United States a vast fortune.” In fact, we have pledged only $3 billion, about $10 for each American, which Trump now refuses to pay. But 5.5 trillion in proposed tax cuts? No problem.

Most experts believe that the world will continue to progress toward cleaner energy with or without the support of the U.S. government. But the pace of change is already too slow, and may now slow further. The world needs every country doing as much as it can to avoid a costly environmental disaster. The last thing it needs is the withdrawal of the United States from its longstanding role of international leader at this critical time.

 


The New Class War

May 30, 2017

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Michael Lind, “The New Class War.” American Affairs, May 20, 2017.

Having just read Martin Ford’s The Rise of the Robots, with its very pessimistic outlook for American workers, I found Lind’s perspective to be an intriguing alternative. His article comes from what is for me an unlikely source. American Affairs is a new journal devoted to rethinking conservatism in the light of the Trump ascendancy. The way things are going, we may need another journal to make sense of a Trump descendancy. But let’s assume that at least some of what Trump represents may survive his mess of a presidency–in particular, his nationalistic concern about saving American jobs in an era of global competition. How will that impact the prevailing political ideologies?

Social class in the Cold War era

Unlike many mainstream conservatives, Lind is willing to acknowledge the reality of social class. Following scholars like James Burnham and John Kenneth Galbraith, Lind describes a “managerial elite” consisting of “private and public bureaucrats who run large national and global corporations and exercise disproportionate influence in politics and society.” This is a “mostly hereditary” class, since it draws its membership primarily from the children of the previous generation of the same elite. The class system has a semblance of meritocracy, since educational credentials are an important means of success, but access to the “right” education is itself very unevenly distributed.

As Galbraith argued, “countervailing power” can keep an elite from entirely having its way. This was especially true in the “golden age of capitalism from the 1940s to the 1970s, combining high growth with a more equal distribution of its rewards than has ever existed before or since.” In Lind’s view, the desire for national unity in the face of foreign threats was a major motivation for reaching a reasonable “settlement” of management and labor differences. Workers won the right to organize, more favorable wages and working conditions, and a stronger social safety net. The bargaining power of labor was strengthened by factors that kept the labor market tight, such as the immigration restrictions that had been passed in the 1920s, and the withdrawal of many women from the labor force at the end of World War II.

Multinational oligarchy and popular discontent

All of this changed after the breakup of the Soviet Union and the end of the Cold War. A new pattern of global production and corporate organization destroyed the existing accommodations between business and labor.

Through the empowerment of multinational corporations and the creation of transnational supply chains, managerial elites disempowered national labor and national governments and transferred political power from national legislatures to executive agencies, transnational bureaucracies, and treaty organizations. Freed from older constraints, the managerial minorities of Western nations have predictably run amok, using their near-monopoly of power and influence in all sectors–private, public, and nonprofit–to enact policies that advantage their members to the detriment of their fellow citizens.

Developed countries had long been accustomed to concentrations of economic power within domestic industries. Now those concentrations became more international, so that in many industries, a handful of giant companies controlled over half of the global market. While profits and managerial compensation soared, productivity slowed and wages stagnated. Lind believes that this was because transnational companies had other ways to pursue profits besides technology-driven productivity growth. It was easier to move factories from high-wage areas to lower-wage areas, or to take advantage of favorable tax policies. Apple not only made its iPhones in China, but channeled profits through Irish shell companies to shield billions from taxation. Transnational companies also worked to harmonize national laws in ways that favored capital, especially free trade agreements, while resisting efforts to set international standards for wages and working conditions or environmental protection.

Corporations that had to operate domestically were not as free to search the world for the cheapest labor or lowest taxes. But they did benefit from looser immigration policies that kept labor supply up and wages down in some markets. Marx had already argued in the nineteenth century that ethnic conflict divided labor and strengthened capital: “The ordinary English worker hates the Irish worker as a competitor who lowers his standard of life….His attitude towards him is much the same as that of the “poor whites” to the Negroes in the former slave states of the U.S.A….This antagonism is the secret by which the capitalist class maintains its power.”

As the income gap between the managerial class and the working class has widened, popular discontent has increased. But Lind does not think that populist movements alone will bring about very much change. Historically, oligarchies have usually been able to survive populist challenges. The populists have usually had to give up or sell out. In some places, such as the Deep South and much of Latin America, this pattern has repeated itself for a long time:

Most of the time, coteries within a nepotistic elite run things for the benefit of their class. Now and then, a charismatic populist arises, only to fail, sell out to the establishment, or establish a personal or dynastic political-economic racket. Formal democracy may survive, but its spirit has fled. No matter who wins, the insiders or outsiders, the majority will lose.

It is sobering to think that if we keep on as we are going, the country could deteriorate into a kind of banana republic with chronic and perhaps violent unrest and political repression.

Managerial elites are bound to dominate the economy and society of every modern nation. But if they are not checked, they will overreach and produce a populist backlash in proportion to their excess. By a misguided policy of suppressing wages and thus throttling mass consumption, unchecked managerial elites may inadvertently cripple the technology-driven productivity growth responsible for their rise….

This could even result in a more feudal type of society, in which the rich live off the “rents” from their accumulated wealth rather than creating new wealth by investing in higher productivity.

The multipolar challenge

So what would counteract the drift toward global oligarchy? Lind believes that peace among the international powers has been a necessary condition for managerial globalism. This has been the case “only in the decades immediately following the Cold War, when the United States was the ‘sole superpower’ and no credible ‘peer competitor’ had yet emerged.” But now, the rise of China and other powerful players may be a game-changer. Americans may have to rethink the idea that international boundaries no longer matter, and that the global economy benefits everybody in some kind of classless meritocracy. We must now ask tough questions about whether the cumulative effects of transnational capitalism on the United States are really in our national interest.

Lind sees the world becoming not borderless but multipolar, divided into several “great-power blocs,” most likely China, India, the US and Europe. Within each bloc, countries may trade very freely, but each bloc will need to be careful about giving up too much of its industrial capacity. On that may depend its ability not only to create new jobs and income, but to wage war. Strength, unity and internal harmony could become more prominent national values, as they were during the Cold War.

The elites may be too powerful to have much to fear from populism, but their division into competing power blocs may force them to fear one another. Policies that promote the wellbeing of business and labor as members of the same national team could have broad political appeal.

Unsatisfactory alternatives

Lind accepts part of Donald Trump’s critique of the United States, that we have let other countries produce too much of what we could have produced at home, creating unnecessary hardships for American workers. Our chronic trade deficit with countries like China and Germany is indeed a weakness, and their “parasitic export-oriented strategy” of development is better for them than it is for their debtors. Unlike Trump, however, he rejects the most conservative response, which he calls “radical renationalization” or “radical de-globalization.” He sees it as neither feasible nor desirable to retreat from the world by restricting the entry of foreign goods and forcing consumers to buy only what is produced at home. That would sacrifice the benefits of “supra-national economies of scale,” the efficiencies to be achieved by producing things for the largest possible market.

At the other extreme, Lind also rejects the idea that the ill effects of oligarchic globalization can be corrected by countervailing power exerted by global government, global labor unions, or other transnational institutions. He just doesn’t think that a multipolar world will produce the necessary degree of international cooperation. I thought that Lind was a little too dismissive there, since global agreements like the Paris Climate Accord may be needed, at least to address global emergencies.

A third unsatisfactory alternative is “neoliberalism plus”:

Neoliberalism plus, also called “inclusive capitalism,” is the preferred response of the transatlantic managerial class to the populist revolts in Europe and America. Essentially, neoliberalism plus is Reagan-Thatcher-Clinton-Blair neoliberalism with more subsidies to the “losers” of globalization. The disempowerment of non-elite citizens by the oligarchic capture of politics and the destruction of unions would not be altered. But the masses would be bribed into acquiescence by means of higher wage subsidies, like the Earned Income Tax Credit (EITC) in the United States, or perhaps a universal basic income providing every citizen a poverty wage.

That last measure is exactly what Martin Ford recommends in order to maintain the workers’ purchasing power as the robots take more and more of their jobs. Lind believes that such strategies will fail. As long as companies can rely on cheap labor at home or abroad, they do not need to invest much in new technologies. The full potential of those technologies cannot be realized, and the economy cannot generate the economic growth needed to pay for any new “bribes” for the masses.

I would only add that if “neoliberalism plus” is an inadequate solution, then “neoliberalism minus” is even worse. That may be a good term for the Congressional Republican agenda of more freedom and lower taxes for the elite, but benefit cuts for the struggling working class. That the President goes along with that strategy while claiming to champion the workers puts his presidency on very thin ice.

A “new developmentalism”

What Lind would like to see is a different strategy for national progress that he calls a “new developmentalism.” He describes it only in very general terms in this article. It would require new checks on the freedom of managerial elites, as well as a new “settlement” between business and labor for the sake of economic cooperation and national unity.

Lind wants great powers to compete in the global arena, but do it differently. I would describe what he wants as a “race to the top” instead of a “race to the bottom.” Public policy would discourage corporations engaged in international trade from seeking profits through lower wages and tax avoidance. For companies that operate domestically, it would encourage “tight labor markets for domestic service workers, achieved by immigration restriction, work-sharing, shorter workweeks, or other means.” High wages could boost productivity in two ways, by supporting the mass market for large-scale industries and encouraging labor-saving technologies, which themselves could be dynamic new industries. “If high wages lead to the replacement of fast-food workers by kiosks, the manufacture of the kiosks could become a new, capital-intensive, high-technology industry.”

Keeping labor markets tight and wages up, while at the same time investing in labor-saving technologies, sounds like a contradiction, and it requires a difficult balancing act. The key is productivity–using new technology not just to unemploy labor but to employ it more productively, so as to justify higher pay. That relates to what I wrote previously about favoring human-machine collaboration over the human replacement expected by Martin Ford. Replacement alone could destroy the working class and send the economy into a downward spiral.

The heart of Lind’s argument is perhaps best captured by this statement:

Great-power competition, even in the form of limited cold wars, is likely to reward nations whose economic model is based on developing productive technology and raising the incomes of domestic worker-consumers….In cold wars and trade wars, even if no blood is shed by the contenders, countries and blocs with empowered and patriotic workers are likely to do better than rival nations crippled by immiserated workforces and selfish, nepotistic, oligarchic elites.

The future may depend on how many of our leaders can figure this out.


CBO Evaluates Amended Health Care Bill

May 25, 2017

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In an earlier post, I summarized the Congressional Budget Office’s “scoring” of the American Health Care Act proposed by House Republicans. After that analysis revealed how many people would lose their insurance under the House plan, House Republicans amended the bill and quickly passed it, without waiting for the CBO to evaluate the new version. Yesterday, the CBO released its revised report, which for the most part reinforces the objections that made the bill so unpopular in the first place.

The amended bill differs from the original mainly in allowing the states to obtain waivers releasing them from certain provisions of the law. According to the CBO,

One type of waiver would allow states to modify the requirements governing essential health benefits (EHBs), which set minimum standards for the benefits that insurance in the nongroup and small-group markets must cover. A second type of waiver would allow insurers to set premiums on the basis of an individual’s health status if the person had no demonstrated continuous coverage.

In other words, people would still be entitled to health insurance, but it might not provide the benefits previously regarded as essential. In particular, “out-of-pocket spending on maternity care and mental health and substance abuse services could increase by thousands of dollars in a given year….” In addition, even insurers who did provide such benefits would now be allowed to put a lifetime cap on how much they would pay out for them. The second type of waiver would allow insurers to charge much higher premiums for people with preexisting conditions, unless they were already covered for them and never experienced a break in coverage.

Effects on insurance coverage

The previous CBO estimate was that the number of uninsured Americans would rise by 24 million over ten years if the House bill became law. For the amended version, the estimate is now 23 million. Some of the uninsured would be healthy people who voluntarily gave up health insurance because the law eliminated the penalties for not carrying it. Others would be forced out of the market because they found insurance less affordable. That could be because policies became too expensive for people with a certain health condition or need, or because they lost more in Obamacare subsidies than they gained from the new law’s tax credits.

The biggest reason the law would insure fewer people is because it dramatically cuts spending on Medicaid. That accounts for 14 billion of the 23 billion who would no longer be covered. Cutting Medicaid or Medicare is something that candidate Trump promised not to do, but he has enthusiastically embraced the House bill anyway.

Effects on premiums

The effects of the legislation on insurance premiums is now harder to project, since it depends on whether states seek and are granted the waivers described above. For states that do not, the effects would remain essentially as the CBO described them before. Premiums would be expected to rise for older people and fall for younger people, since the law allows insurers to use a 5-to-1 rather than a 3-to-1 ratio between the two. Average premiums would probably rise for the first few years, since the elimination of the individual mandate would allow younger, healthier people to drop out of the market, forcing insurers to raise premiums on the older, less healthy people who remained. In later years, insurers might lower premiums, as older people who cannot afford the high cost are the ones to drop out. Average premiums could also fall because policies are no longer required to cover 60% or more of health care costs. Advocates of the bill like to talk about how premiums could fall, but not how out-of-pocket expenses could rise.

In states that take the waivers, opting out of the mandatory coverage for preexisting conditions and/or the essential health benefits, the effects would be more dramatic. Average premiums could fall more, since the policies cover less. But premiums and benefits would vary widely, since people with particular health needs could face much higher premiums and/or out-of-pocket costs. If large numbers of people with health problems were priced out of the market, insurers could lower premiums for the healthy who remained. But low premiums would be achieved at the cost of excluding from health insurance the people who need it most.

Giving states the “flexibility” to go their own way really means letting them return to something like the situation before Obamacare, when good health insurance was much less affordable for the poor and the sick.

Effects on the federal budget

The CBO’s previous estimate was that the American Health Care Act would cut health care spending by $1.2 trillion dollars, but that would be offset by $883 billion in lost revenue, due to elimination of Obamacare taxes and penalties. The result was a $337 billion reduction in federal deficits over the next ten years. The Republicans wanted that reduction not just because they would like to move toward a balanced budget, but because they would like to justify additional tax cuts later.

The CBO’s new estimate is that the legislation would cut spending by $1.1 trillion dollars, and revenue by $992 billion, resulting in only a $119 billion saving.

In either case, the Republican repeal and replacement of Obamacare represents a big gain for the rich and a big loss for the poor. The Obamacare taxes fell heavily on the wealthy, but the Republican cuts in health care spending will fall heavily on the poor, since they are the ones who depend on Obamacare to make insurance affordable. So the bill as amended remains consistent with the Republican agenda of reducing taxes on the wealthy while reducing benefits for the needy.


Rise of the Robots (part 3)

May 24, 2017

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Because Ford’s book is focused on the loss of human jobs to robots, he has next to nothing to say about job creation. If, however, a higher level of intelligence enables human beings to do things that machines cannot, as Ford himself admits, maybe we can do more of those things as we turn over the narrower thinking tasks to the machines.

The personalized service frontier

If there is any new frontier in job creation that can escape the rise of the robots, I think it would be in the realm of personalized services, the least routine and predictable things we do. In fact, when a service professional is helping a client, the problem of predictability is compounded.  If you’re a legal professional, artificial intelligence systems that process information about laws, cases and legal documents will be a great help. But lawyers still have to apply the law to the unique circumstances of the client’s case, and that is a more creative task.

Similarly, thousands of students can listen to the same lecture online, but they need a creative teacher to engage with their particular thought processes as they struggle to reconcile new ideas with what they already think. That’s why many educators are talking about “flipping the classroom”–letting students gather more information online while changing the classroom from a lecture hall into a setting for more creative collaboration. If all that students know how to do is take in lectures and cough up the material for the test, they will be at risk of being replaced by a machine. We can give in to the machines, or accept the invitation to take education to a new level that requires smaller classes and more teachers.

In so many areas, people need more personalized services than they are getting. In addition to teachers and financial planners, they need mental health services, legal services, job training, drug treatment programs, child care, and of course affordable health care. The question is whether these services will remain scarce and expensive, or whether we can expand the market for them in the information economy.

Making services more economical

We can be fairly sure that many menial service jobs will eventually be more economically performed by robots than by humans. The days of supermarket checkout clerks are numbered. The problem for aspiring professors, counselors, financial planners, and so forth is a little different. It is not so much that robots will replace them, but that too few people will be able to afford their services, or that they themselves will not be able to afford the price of admission to their desired profession.

I can think of several ways that the information revolution could help. As automation lowers the cost of producing goods and routine services, people can spend a larger portion of their income on personalized services. And information technology should also save labor in the personalized services themselves, bringing costs down there as well. A lawyer assisted by artificial intelligence shouldn’t have to spend as long preparing a case. I know that as a financial planner assisted by sophisticated software, I was able to prepare a financial plan in a very reasonable amount of time and at a very modest cost. My plans always had a human element, with personalized commentary as well as machine-generated tables and charts, but the human-machine collaboration made the service more affordable for my clients.

The technology was also very affordable for me. I did have to rely on a financial software company that no doubt made more money than I did. Ford emphasizes the centralization of information capital, a situation in which a few companies controlling software and Big Data can dominate markets while employing very few workers. But there is another side to that. Information can be duplicated at a very low marginal cost. Software development may be costly, but as the cost is spread over more and more copies, the unit cost keeps shrinking. An aspiring financial planner or other service provider can subscribe to software support for a very modest annual fee. Such easy access to information capital should make it easier to create personalized service jobs.

A big price of admission to many service professions is the cost of education. Education is such a public good that its cost should be widely spread throughout society. Making students go heavily into debt in order to learn what they need in order to be contributing members of society is not a very sensible policy. Ford agrees, and he hopes that new technologies can reduce the cost of instruction. He seems less interested in expanding higher education, since he expects people at all levels of education to have trouble finding jobs. I am more interested in such expansion, because I believe that the jobs we can create will usually require more education than the jobs we destroy.

The role of the public sector

If we agree that education is a public good whose cost should be widely spread throughout society, that suggests a major role for the public sphere in making it more accessible and affordable. The same logic could be extended to other services. Services that contribute to the general health, education and welfare of the population constitute public goods that are worthy of some public funding. Not only do such services create jobs in themselves, but they can help people build their human capital and meet the demands of the advanced economy, keeping them one step ahead of the robots.

Ford isn’t very supportive of this kind of public funding. Here’s what he has to say about elder-care:

The main problem with elder-care robots as they exist today is that they really don’t do a whole lot….The realization of an affordable, multitasking elder-care robot that can autonomously assist people who are almost completely dependent on others probably remains far in the future….It might seem reasonable to expect that the looming shortage of nursing home workers and home health aids will, to a significant extent, offset any technology-driven job losses that occur in other sectors of the economy….[But] by the time the majority of older people reach the point where they need personal, daily assistance, relatively few are likely to have the private means to hire home health aids, even if the wages for these jobs continue to be very low. As a result, these will probably be quasi-government jobs funded by programs like Medicare or Medicaid and will therefore be viewed as more of a problem than a solution.

So here we have a valuable service that isn’t being provided either by robots or enough human workers, and yet Ford rejects the expenditure of more public money to fund it. Once again, that reveals his narrow focus on his recommended basic income guarantee to support consumption. In effect, he would rather have government pay people not to work than to work. We can find more work for robots, but not create more jobs for humans.

Public funding requires some form of taxation. Conservatives often oppose higher taxes, especially on the wealthy, on the grounds that they will interfere with investments by the “job creators” in economic growth. If capital should become as self-serving as Ford expects, with businesses increasing profits by destroying jobs rather than creating them, that argument should become less convincing. One wonders how high unemployment will have to go before people turn to the public sector for job creation, as they did in the 1930s.

A broader moral argument

Ford is concerned about growing inequality, and he does make the argument that as taxpayers who have supported basic technological research, people have a legitimate claim on technology’s benefits. I agree, but I would also ground popular rights in a more basic principle, the dignity of human labor. Let the machines do the work they can do better than people can. But respect people as more than just purchasers of what the machines provide. Help people be as creative as they can be as producers–paid and unpaid–as well as consumers.