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Saturday, December 27, 2003

 

what about the poor and working class? http://dean2004.blogspot.com/2003_12_21_cardinalcollective_archive.html#107246899810866176

posted by Aziz P. at Saturday, December 27, 2003 permalink View blog reactions
A few weeks ago, Matthew Yglesias had a devastatingly accurate critical observation about the economic platforms of all the presidential candidates, including Dean:

All campaigns, whether funded on the Bush model or the Dean model or something in between, must place more value on supporters who give money and votes than to supporters who have merely votes to offer. Hence, the interests of people with money to spare -- not "the rich" necessarily, but the upper middle class, at least -- will be represented out of proportion to their numbers. One will note that none of the Democrats has what one would call an ambitious anti-poverty agenda at the heart of his domestic policy proposals. This is not a coincidence.


and looking at Dean's economic proposals, one is indeed struck by the lack of policy devoted to issues of addressing outright poverty - the emphasis is entirely upon the middle class.

This is not a new critique. Jerome Armstrong posted on Dean Nation back in June about how a cut in the payroll tax would be a major political and economic coup:

This economic agenda doesn't have to be that complicated:

Candidate A, a Democrat, pledges to cut the payroll taxes of all individuals earning under $110k, and all married couples both working and earning under $220k.

Candidate B, a Republican, claims that 90% of the people don't deserve a tax-cut, defends the elite, the rich, and... loses.

I confess, I've taken Reich's idea and dumbed it down (heaven forbid), but that doesn't matter, you get the point.


Dean alluded to the idea in his famous MTP brusing with Tim Russert, but stopped halfway. Dean has emphasised the need to increase the amount of wages that can be taxed - in essence, a rising tide that floats all boats. But he stopped short of arguing for the immediate benefits that a cut in the payroll tax would provide in terms of a massive economic boost to the people who really do need it most. Compard to the Republicans, who think that tax havens for the super wealthy cloaked as giveaways to the middle class are what are needed, this is a political winner. But the campaign remains deaf to these issues.

And you can't stop there. What about people with poverty-level incomes? Selling a solution to poverty puts Democrats (like Kucinich) in direct conflict with moderates, as they are stuck in the same welfare-spending-hole paradigm. But Bob McGrew explains a fascinating solution to poverty that appeals to both my social liberalism and my fiscal conservatism - wage subsidies:

Suppose you want every worker to be paid at least $10/hour. A minimum wage would just destroy jobs for people with productivity less than $10/hour. Wage subsidies won't, because the government pays the difference between the market wage and $10/hour.

The idea of a wage subsidy is that if an employer pays a worker a $5/hour salary, the government will give that employer a $5/hour subsidy which it would then pass on to the worker. The worker ends up making $10/hour, but the employer pays only $5/hour, so that it's still worth it to the employer to hire the worker and the job is not destroyed. The wage subsidies are phased out on a sliding scale, so that there's no cut-off effects.

In other words, this seems like a way to implement the goal of living-wage campaigns, without destroying jobs or economic efficiency. And, in a way, it's fair: if there are social benefits from higher wages, it makes sense that society as a whole should have to pay them (through taxes), rather than private companies. This is the best way to help the poor that I have heard of yet. It provides a basic minimum while encouraging work (which is the only way to end poverty) and making crime not pay.


The counterargument to the idea is that employers could simply drop the wages they pay to their workers by the amount of the subsidy, essentially turning it into an employer subsidy. Bob addresses this:

Basically, the market will bid up the worker's wage to whatever an employer can gain by employing him. If a worker's productivity is $10/hour and his wage subsidy at $10/hour is $3, an employer can get $13/hour from employing him. So the market will bid his wages up to $13/hour and the employers won't benefit from the subsidies - it will all be passed through to the worker.


As Bob notes, the plan will have significant cost. But the point here is that wage subsidies rae designed to supplant standard welfare payments and the Earned Income Tax Credit. Much of the cost could theoretically be covered by reducing (but not eliminating!) these as well as housing assistance, food stamps, etc.

The main reason this idea has merit is because it encourages both a work-based solution to poverty as well as a decent living wage. The idea isn't to argue about what the living wage should be, but rather to raise the overall standard of living in a more effecient and long-term beneficial way than simply spending money on welfare payments. Again, if this idea could be adopted by the Dean campaign, it would have appeal across the aisle. Maybe not at the federal level, but the federal government could sponsor this at the state level to see how it works out.


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Nation-Building was founded by Aziz Poonawalla in August 2002 under the name Dean Nation. Dean Nation was the very first weblog devoted to a presidential candidate, Howard Dean, and became the vanguard of the Dean netroot phenomenon, raising over $40,000 for the Dean campaign, pioneering the use of Meetup, and enjoying the attention of the campaign itself, with Joe Trippi a regular reader (and sometime commentor). Howard Dean himself even left a comment once. Dean Nation was a group weblog effort and counts among its alumni many of the progressive blogsphere's leading talent including Jerome Armstrong, Matthew Yglesias, and Ezra Klein. After the election in 2004, the blog refocused onto the theme of "purple politics", formally changing its name to Nation-Building in June 2006. The primary focus of the blog is on articulating purple-state policy at home and pragmatic liberal interventionism abroad.