The American Enterprise Institute's really awful new study on income inequality

A new paper from AEI's Kevin Hassett and Aparna Mathur says what you've heard about exploding income inequality in the United States is wrong: It's not really happening, they say, because consumption trends have remained relatively stable—the rich are consuming more, yes, but so are the not as rich.  It's a variation of the old "even poor people have color TVs now!" argument.

This is completely misleading.

Here is how you know it's misleading. Nowhere in the paper do Hassett and Mathur use the word "debt." And nowhere in the paper do the duo use the word "credit."Nor "bankruptcy."

Instead, the two suggest that debt is something kids do and adults pay their way out of: "Individuals are generally assumed to be able to smooth consumption by borrowing in the low-income years and saving in the high-income years."


Only that's not really true, at least not anymore. 


Here's what personal household debt has done during the last 60 years:

Debt is the blue line. It's always been going up, but the pace accelerated after 1980, and then started going nearly straight up during the first decade of the 21st century. That led to....

A big rise in bankruptcies. That big drop in 2006? That wasn't an improvement in American's well-being: That was the result of a new law meant to make it tougher to file for bankruptcy—and make sure that credit card companies could keep collecting fees from tapped-out customers.

And just for kicks, here's what happened to the personal savings rates:

Americans stopped saving.

And incidentally, this wasn't a widespread phenomenon. By 2007--just before the crash--this is what debt and income levels looked like for the various quintiles of American society:

In both charts, you'll note that the debt exceeds income for every income group...except for the top quintile.

Now, you can argue that Americans shouldn't have dug themselves such a deep hole, and that's a great argument to have. What you can't do is argue that everything is fine and dandy because consumption trends were consistent among the various income groups. The devastation of savings and the rise of big borrowing masked the growing inequality and permitted the consumption to continue—and when it became unsustainable, the economy went boom.

It's such an obvious objection, you have to wonder if AEI's economists were even trying. The report shouldn't be taken seriously.

Obama and immigration: A reader responds

A reader of the Reading (Ca.) Record Searchlight does not like my take on the immigration debate. He writes:

You start by saying Obama did a "righteous thing." By whose definition? Is circumventing congress righteous in your opinion? Are constsnt rewards for illegal immigrants a good thing, knowing their presence puts millions of Americans out of work (including minorities, the poor, the young, and blue collar workers) and costing us well over $100 billion per years a righteous thing? I am assuming you are on the liberal side of things. Liberals seem to operate on emotion. I think that they believe that heart-felt emotion trumps reason, logic, and adhearance to the law. You admit that we, as a nation, have the right to defend its borders and enforce our laws, but you just don't want us to do that for "moral" reasons. Huh? is it moral that the people of our country constantly suffer at the hands of of millions of illegals and a federal government that has an agenda of its own that doesn't include keeping our country sovereign? 

Question-If we let the younger illegals stay, will that be enough for you, or do you want amnesty ("comprehensive immigration reform") for the other millions of illegals? I'd like a response to this one, please. Why does my country keep on backing down, backing up, and bending over on this issue? When to we get a president that actually puts Americans first and says, "Illegal immigration is wrong. It is bad for this country. It should never have been allowed to get to this point in the first place and is no longer acceptable. From now on, it will no longer be tolerated, so all those in the country illegally, regardless of race, ethnicity, nation of origin, or income/educational level, will have to leave by a set deadline. Failue to do so will incur severe penalties. The illegal immigration "party is over?" Why are we always pandering to people who have no right to be here? Why is that righteous and moral? ALL illegal immigrants should face the threat of deportation. 

Betraying this country in favor of millions of trespassers is in no way righteous.

My reader and I disagree on just how much America has "suffered" from illegal immigration; I think it's obvious there have also been benefits, to a great many people, or there wouldn't be such market for illegal immigrants to fill. It's also indisputably true that illegal immigrants often pay taxes—particularly Social Security taxes—that they'll never get to benefit from. And a lot of the pain and suffering created by illegal immigration is probably because it's illegal—like Prohibition, we're creating more problems than we solve by criminalizing behavior. So is it a net good or a net negative that there are so many illegal immigrants here? Since I'm a namby-pamby liberal, I suspect it's a net good; and if it is a net bad, it's probably not nearly as bad as what the most ardent opponents (like my reader) believe and would have you believe.

Now, the question: Amnesty?

I don't think that's necessary, but I probably have a narrower idea of what constitutes "amnesty." If it means that we shouldn't deport every last person here illegally...then maybe I believe in amnesty--mostly because I think we can't and won't. The resources simply don't exist. "ALL illegal immigrants should face the threat of deportation?" Good luck with that.

But. I think there's a middle ground between "deport them all" and a full-blown path to citizenship. I think most reasonable solutions to solving the immigration issue involve greatly expanding work permits that allow foreign workers to legally enter the country and work here. And by greatly, I mean numbering in the millions. Essentially, we'd tell people who are currently residing here illegally: "You came here the wrong way. That means you forfeited the possibility of becoming a citizen and gaining those benefits. But by registering legally, you'll have permission to work and to go home on occasion without have to make a risky re-entry into the United States."Only workers who'd originally entered the United States through approved means would ever be eligible for citizenship.

What does this accomplish? A few things:

• It relieves the federal government of the strain of trying to chase quite so many illegal immigrants if fewer of them are illegal. That's a money saver.

• It's been documented that many illegal immigrants aren't so much interested in citizenship as they are in work; if they could go home without risking their lives on re-entry, many of them would. Many such folks settle here for no better reason than it's hard to go back home. Giving folks legal status might change that dynamic.

• If immigrants had legal status, it might be more difficult for employers to exploit them, wage-wise, and indirectly suppress wages available for American citizens. 

There would be other benefits, I think, as well.

But yes, I stand by the "righteousness" of Obama's act: Yes, many young people are here illegally, but A) it's not their fault and B) they're not culturally "of" their home countries. Shipping them back to homes they never knew ends up destroying a lot of those lives--without, I think, creating a enough of a deterrent to future offenders to make those destroyed opportunities worth it. They lose more than we as a society lose by letting them stay. Better to use them as a resource for creating a better America. It's not a perfect solution, because it means we have to accept the fruits of illegal immigration. But we're going to do that anyway, so let's at least do it in a productive, positive fashion.

Final thought: I've been at anti-immigration rallies—and yes, they were often more "anti-immigration" than "anti-illegal immigration." It may well be that liberals emote on this issue, but I guarantee we don't have the market cornered.

Of *course* China's economy is slowing down

Chinese Data Said to Be Manipulated, Understating Slowdown - NYTimes.com:

"Record-setting mountains of excess coal have accumulated at the country’s biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. But local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said. 

Electricity production and consumption have been considered a telltale sign of a wide variety of economic activity. "

One quick, obvious thought: Of course China's economy is slowing down. It's an export-based manufacturing economy--and consumers in the rest of the world are either A) holding onto their cash, B) don't have any cash, or C) are paying down old credit cards. We're not buying as much stuff as we used to. That means China can't sell as much as it used to. China may be stronger than a lot of Western nations, but n a globalized economy, nobody gets out alive.

Mitt Romney and the crisis of capitalism

The New York Times reports that even when Mitt Romney lost, he won: "The private equity firm, co-founded and run by Mitt Romney, held a majority stake in more than 40 United States-based companies from its inception in 1984 to early 1999, when Mr. Romney left Bain to lead the Salt Lake City Olympics. Of those companies, at least seven eventually filed for bankruptcy while Bain remained involved, or shortly afterward, according to a review by The New York Times. In some instances, hundreds of employees lost their jobs. In most of those cases, however, records and interviews suggest that Bain and its executives still found a way to make money."

The Times adds: "Bain structured deals so that it was difficult for the firm and its executives to ever really lose, even if practically everyone else involved with the company that Bain owned did, including its employees, creditors and even, at times, investors in Bain’s funds."

If there's a crisis of capitalism these days, it's because it's very much a rigged game: The people at the top can't lose, even when their investments go to hell. The people below them can't really win--again, witness the stagnating middle-class wages of the last 30 years--but they can lose. It's not the old days where the shuttering of a factory meant the devastation of the local family that had owned it for 50 years, and so everybody lost together. These days, the Mitt Romneys of the world dust themselves off, count their piles of cash, and move onto the next town. Of course that's going to breed resentment. And if Romney is saying his business acumen is the reason he should be president, then it's absolutely fair game for criticism. 

More to the point: The other day I mentioned Bill Voegeli and his idea that capitalism might be revived if more people--workers--had skin in the game, in terms of compensation tied to the success or failure of their companies. I like that idea, but workers clearly do have skin in the game: When jobs go away, so does their ability to earn a living. Capitalism might also be improved if private equity firms like Bain also had real skin in the game, if they suffered instead of making profits even as the businesses they buy go under in a sea of Bain-generated debt.

Obama and immigration

Ben and I debate the president's DREAM Act order in this week's column for Scripps. My take:

Obama did a righteous thing. 

Yes, America has a right to defend its borders. And yes, it has the right to deport people who came and lived in our country illegally. 

But it would be morally wrong to deport young people who came to the country as children -- and who, having lived here most of their lives, genuinely understand themselves to be Americans. The sins of the father, after all, should not be visited upon the son. 

In a sane political culture, Congress would have passed a law -- the DREAM Act -- codifying such principles. We do not live in a sane political culture: The last attempt to pass the act, in 2010, won a majority of votes in the Senate, but could not clear a filibuster. (The filibuster is evil, but that's a discussion for another time.) 

So it's disingenuous of people like Rubio to suggest that the president's act made it "harder to find a balanced and responsible long-term solution" about how to let such young people legally live and work here. There has been little indication the Senate was headed toward such a solution, which is one reason why Obama acted. 

Without Congress' stamp of approval, however, Obama's action is imperfect. The next president can reverse it. (Presumed GOP nominee Mitt Romney has not said if he would do so.) So it only amounts to a temporary reprieve from the threat of deportation faced by young immigrants. And it does nothing to create a path to citizenship for them. At best, the Obama administration has only made limbo a bit more comfortable for such young folks. 

Congress can still act. It can still permanently resolve the status of young immigrants. Until that happens, the Obama administration's decision not to deport is the best of a bunch of bad options. Better than that: It's righteous.

Ben counters that Obama's act is an "usurpation of congressional authority. Congress makes the rules on immigration and naturalization. Not the president. On that point, the Constitution is clear." Ben is right, and I'm also not sure I care.

Congress also has the power to declare war and to make "make Rules concerning Captures on Land and Water;" but the last 12 years or so—under both Obama and his predecessor—have seen the executive branch essentially claim those powers as its own, ignoring many of the rules that Congress had already put in place. And Congress didn't really see fit to do anything about it.

So if that's the kind of government we've got—and I'm not really happy about that—then let's use that usurped power for good now and again, why don't we? What the president did was, to my mind, unambiguously good. I'd feel worse about the means of getting there if I thought that we'd get restraint in other important areas.

On being a stay-at-home dad

I wrote about it for The Philly Post. A taste:

"At times, I wonder if I’m ruining him. 

Why? Because writing takes sustained thought. And sustained thought is hard to come by when your kid needs clothes, needs to go outside, needs to go inside, needs something to eat, needs something to drink—”I’m so very hungry and firsty” are words he utters a dozen times a day—needs boo-boos kissed, needs a book read, needs a hug, needs to interrupt me when I’m on the phone, needs, needs, needs, needs everything but to take a goddamned nap once in awhile. 

Sometimes I give him my iPad and send him off to watch Thomas The Tank Engine for a couple of hours—just so I can get some work done. Great parenting, right?"

Dear Stu Bykofsky: Please never write about Asian women ever again

It's been less than a year after Stu Bykofsky creeped out Philadelphia with his wink-wink did-he-or-didn't-he? column about his trip to Thailand and the easy availability of sex with prostitutes there. Today, he's writing—again—about Asian women and sex. To be fair, the topic is at least newsworthy: Philadelphia Housing Authority director Michael Kelly resigned last week and admitted an affair with Audrey Lim, a Singapore native who also got the job of PHA's human resources director under Kelly. Bizarrely, though, Kelly—who comprised one-half of the affair and who was, after all, the person who apparently abused his authority in this case—gets only a passing mention in Byko's column. Instead, Stu weaves a tale in which Lim spins a web with her dragon lady wiles:

Her name is Audrey Lim and she is from Singapore. She did the right things to prepare herself for success. She earned a master's degree in occupational therapy, a master's in government administration and then a doctorate in industrial/organizational psychology (whatever that means). Like you, she worked hard. Unlike you, perhaps, she met her future boss — PHA Executive Director Carl Greene — in a bar, according to PHA sources. Where better to discuss Community Development Block Grants? Before you could say, "Fill it again, Joe," she was hired as a "senior adviser" for $95,000. See that, kids? You don't need to pound on doors or fire off resumes on the Internet. If you are shapely and well-spoken, just sip a Singapore Sling in a bar and let the PHA job offers come to you. This isn't exclusive to the PHA. Younger and prettier and thinner Americans get paid more, it has been shown many times. Instead of a postgraduate degree, I'd suggest you grads invest in cosmetic surgery or a stomach bypass. This is not to denigrate Dr. Lim, who resigned last month, reportedly to return to Singapore to minister to a sick relative. Greene hired her — no information about how much senior advice she gave him — and when he was sent packing for sexual improprieties, reform PHA Executive Director Michael Kelly hiked her salary to $125,000 and put her in charge of PHA's human resources, which is what she became. Nine months later they were doing the housing hoochie koochie. I don't have to say allegedly because the married Kelly admitted the affair.

In Byko's telling, the story of the PHA isn't one in which a series of men took advantage of their power to get their jollies—but rather one in which those powerful men found themselves helpless before a "shapely" woman sipping "Singapore Slings" in a bar. Given what we've learned about Byko over the last year, it's hard not to read this column as speaking to some of his increasingly weird hangups—particularly when it comes to Asian women. But the whole thing comes off creepy and slut-shaming, while essentially giving the boys a pass. The man has editors, doesn't he? Maybe they should encourage him not to write about Asian women and sex anymore. They'd be doing us all a favor.