Quotes from Robert Kuttner’s The Economic Illusion

The Economic Illusion: False Choices between Prosperity and Social Justice by Robert Kuttner

NOTE: Dictated from book text (so may have missed some lost in translation phrases) so, unless otherwise noted or in [ ],  all CONTENT is quoted from the book! Bold and caps is my emphasis. HIGHLY RECOMMEND BUYING AND READING THIS BOOK!

EQUALITY AND EFFICIENCY – Beveridge
The initial plans for a full employment – welfare state were drawn up under Winston Churchill’s war cabinet . . . . “The labor market,” he wrote, “should always be a seller’s market rather than a buyer’s market… The reason is that difficulty in selling labor has consequences of a different order of wrongfulness from those associated with difficulty in buying labor. A person who has difficulty finding the labor that he needs suffers inconvenience or reduction of profits. A person who cannot sell his labor is in effect told that he is of no use. The first difficulty causes annoyance or loss. The other is a personal catastrophe.

Beveridge’s logic is impeccable, and to the generation who had experienced the tragedy of depression, followed immediately by full employment in a plan wartime economy, there seemed no practical impediment to carry and vision out. For Beveridge, social insurance against want was necessary, but not sufficient. Unemployment remained a personal catastrophe,

[William Beveridge, a liberal in Churchill’s war cabinet] “. . . even if an adequate income is provided by insurance or otherwise . Idleness, even on an income, corrupts; the feeling of not being wanted demoralizes . . .  As long as there is any long term unemployment not due to personal deficiency, anybody who loses his job fears that he may be one of the unlucky ones who will not get another job quickly. The short-term unemployed do not know that they are short term unemployed until their unemployment is over.” (pp. 32-33)

Conservatives, of course, will insist that the “inconvenience” of “loss of profits” is far more than the minor annoyance that Beveridge would have it be, but a major drag on economic efficiency, and hence a sin against ultimate well-being of all. But Beveridge makes a powerful case that full employment is ultimately the best route to avoid the invidious necessity of having to trade off individual suffering for supposed social well-being. The conservatives have it exactly backwards. Growth is maximized when everybody is working and when the economy operates at full production. There are powerful secondary benefits to this logic, not the least of which is enthusiasm for technical innovation:

[Beveridge] “Only if there is work for all is it fair to expect working people, individually and collectively in trade unions, to cooperate in making the most of all productive resources, including labour, and to forgo restructionist practices. . . [And further, Beveridge explained], Yet another reason is the stimulus to technical advance that is given by shortage of labor. Where men are few, machines are used a man or what men alone can do. When labor is cheap it is often wasted on brainless, unassisted toil. The new lands of men are the homes of invention and business adventure in peace.  Stimulus to labour saving of all kinds is one of the by-products of full employment in war. ” (p. 33-34)

As Beveridge so brilliantly explains the logic of full employment context transforms the supposed equality/efficiency stand-off, in which the pain of unemployment and low wages for some must be traded off against the health and the economy as a whole. If the economy is kept at full employment, both society and worker gain from tight labor markets. Wages rise; employment security is a given. As new labor- saving processes are invented, drudgery is relieved, workers are able to shift to new opportunities, and society benefits from the productivity advances. Absent a full-employment context, of course, the market eventually shifts labor from one sector to another, too, but with far greater loss of output and social dislocation in the meantime. Wages decline; consumption falters. One has only to review the current debate about technological displacement to appreciate Beveridge’s prescience. With unemployment averaging 10% throughout the industrial West, technology suddenly seems a menace again, and tenured $40,000-a-year-economics professors are accusing $18,000-a-year factory workers of Luddism. How much less ambiguous of blessing technology would be against a background of full employment. (p. 34)

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As a Liberal and as the nominal employee of a “grand coalition” Conservative-Liberal-Labor government, Beveridge was sanguine and even blasé about the prospect of socializing income without socializing capital. He wrote,

[Beveridge] “The necessity of socialism, in order to secure full employment, has not yet been demonstrated. This implies no judgment on the general issue between socialism and capitalism, which remains for debate on other grounds. It does not mean that the problem of full employment and the problem of control of industry are in no way connected; they are connected in many ways. It means only a judgment that it would be possible to obtain full productive employment under conditions of private enterprise. “  (p. 34)

The logic of full employment also pushed Beveridge to implications beyond his Whig reformism.  “The essential list of liberties,” he could write in and aside that seems astonishingly casual in this age of the free market redux, “does not include liberty of a citizen to own means of production and to employ other citizens in operating them at a wage. Whether private ownership of means of production is a good economic device or not, it must be judged as a device[italics Kuttner added]. Beveridge, of course, was right. The market system ultimately is a means, not an end. It stands or falls “as a device” and as a device even perfect markets produce imperfect human outcomes. That is why today’s new laissez-faire ideologues struggle so mightily to imbue the crass business of getting and spending with transcendent virtues.

But how brave and simple the post-world war world seems seen in that resolute year 1944! Full employment would come, because it could come. A social safety net would be woven, because it was economically possible, and socially just. Keynes provided the economic theory, Tawney the ethical rationale, and Beveridge the social machinery. Even the most fundamental, ideologically charged issue of all, ownership of the means of production (to coin a phrase!), was reduced to a mere tactical detail. If we can retain private industry, well, fine. If we need to socialize it, well, that’s fine too. (p. 35)

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Welfare Capitalism
The anomaly of safety net entitlements admit persistently high unemployment created a new problem: the welfare trap. Once on the dole, families subsisted on a variety of means tested benefits: (AFDC), Medicaid, various free social services, food stamps, and perhaps public housing as well. If the family was able to regain some earned income, the social benefits declined apace; often the tax on earned income (in the form of benefit reductions) exceeded 100%. In America, the one advanced nation without universal health insurance, going off welfare remember losing Medicaid covered. To break cleanly out of poverty trap and improve one’s real net income required a rate of pay more than twice the minimum wage, at a time when such jobs were seldom available to most people on welfare, least of all to the dependent mothers who made up the bulk of the caseload. Despite 10% unemployment, it became too easy to blame the poor for preferring the welfare existence.

Beveridge might have felt perversely vindicated: without full employment, the whole welfare state system fell apart – morally and politically, as well as fiscally. The necessary solidarity between the non-wealthy middle class,, the working poor, and the needy came unglued; the costs of maintaining the idle produced insupportable taxes or damaging deficits.

The impasse of the advanced welfare state is multidimensional. Not only does the welfare state seem to encroach on the efficiency of markets, but the market keeps encroaching on state objectives, leaving the state to take the blame. The need to deal in or buy off private interests corrupts public purposes. In America, we build public housing by creating lucrative inducements to private developers, and then wax indignant at the public waste. The inducements, naturally, reflect the persistent influence of the same developers. A still powerful market economy keeps trying to duplicate itself inside the nominally public sector. In the same manner, and for the same political reasons, we invite profit motivated nursing-home operators to serve the elderly poor; we socialize the expense of Medicare medical care for the aged, but leave the provision of care to profit maximizing market forces. (p. 37)

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In a purely market transaction, the entrepreneur maximizes profits by minimizing costs:; that is one of the authentic virtues of a market system. But in the United States, private entrepreneurs dependent on state reimbursements to maximize their returns by maximizing costs. In effect, they are a lobby on behalf of inefficiency. This, of course, is not a necessary outcome. One could imagine a political system where doctors, private nursing home operators, and housing developers had less political power to enforce of fiscal bargain damaging to the efficiency of the state. But that is not the political system we have. In many respects, the American system of welfare capitalism marries the most inefficient aspects of the public sector to the most inefficient aspects of the private

These contradictions are less extreme in the nations of northern Europe, where there is ideological sufferance for public performance of public functions. Nonetheless, as we shall see, there are other fault lines where state and market mesh imperfectly, common to most of the industrial nations. (p. 38)

Redistribution resisted
Throughout the industrial West, the welfare state has attempted to redistribute income to the needy, while leaving the market system essentially intact as the source of wealth. This particular compromise has its virtues, but it has made redistribution of income very costly and conducive to fiscal excesses. Although the details vary, the pattern is common to all advanced welfare state. The one notable exception to the rule is Social Security retirement, which pays disproportionately generous benefits to low-paid workers once they retire, and contributes significantly to the reduction of poverty among the elderly. The stubborn failure of all public spending to accomplish much redistribution is a puzzle which will be addressed more fully in Chapter 5.

In most Western nations, the final distribution of private income in the late 1970s was little different from what it had been in the late 1940s. It was not substantially different under the application of taxing and spending than before. The technical explanation for this paradox lies on both sides of the tax and spending ledger.

As more income is distributed through the state, a progressive tax system becomes harder to maintain. When the state spends only 10 percent of total national income, most of that can be obtained from the rich. But when 50 percent of the GNP flows through the public sector, even 100 percent tax rates on rich people would not raise enough revenue; tax rates on the middle class and even the poor tend to rise steeply. For example, in 1960, a British family with two thirds the average income paid no taxes. Today, such a family pays 20 percent of its income to the government. Even the nominal elements of progressivity in the income tax are effectively washed out by tax shelters that benefit the affluent.

In the 1960s and 1970s, as the income tax reach top marginal rates of 80 and 90 percent which truly did begin to encroach on economic incentives, governments turned more and more to regressive payroll and consumption taxes. As a whole, most Western tax systems today are not redistributive, except at the very top and the very bottom, where they redistribute only slightly. Under the Thatcher and Reagan governments, tax incidence became substantially more regressive after 1980.

Interestingly, too, there is scant redistribution even on the spending side of the ledger, though there is some “leveling up” when truly universal social services are available. To a large extent, public spending, tends to reflect, and often to reinforce, market determined patterns of inequality. In the area of public education, for example, rich school districts with substantial property wealth are able to spend more money per pupil than poor districts can. In housing policy, the tax subsidy to the middle class via the mortgage interest deduction is worth about ten times the direct subsidy to the poor on public housing. Even in nonfederalist countries, where the ability to spend is  less constrained by the tax base of local government, the same stubborn patterns persist.

The upper-middle-class makes more use of free medical care because they have more sophistication and more leisure than working poor. Subsidized mass transit and commuter rail services heavily benefit the already affluent. The upper-middle-class takes disproportionate advantage of subsidized cultural activities. When federal law required local school districts to pay educational costs of “special needs” children with physical or mental handicaps, it was the suburban middle class that took disproportionate advantage of the entitlement. The affluent and the educated tend to send their children disproportionately to universities; where universities are state subsidized (in most nations) this represents yet one more redistribution from the general population to the already privileged. A very careful study by the English sociologist Julian Le Grand, found that average expenditure by the British National Health service per ill person was more or less equal across class lines, but since poor people suffer more ill health than do rich people, the intensiveness of medical care relative to need remained maldistributed in favor of the rich, by about two to one. Le Grand concluded that, of all the British social service outlays, only rent subsidies and public housing expenditures represented net redistribution to the poor; all other outlays were either neutral, or pro-rich.

A defender of the national health system might point out, of course, that poor people still got much more health care than they otherwise would have in the absence of the system, that leaving medical treatment to the vagaries of the market-determined income would produce far worse disparities; and therefore, that free healthcare nonetheless produced an important relative gain for the poor. And this observation goes to the heart of the political and fiscal paradox of the liberal welfare state: the principle of universal entitlement, though very costly fiscally, is necessary on both political and programmatic grounds.

To win broad popular support, social programs must be of high quality and must serve the middle class as well as poor. It is axiomatic that “programs limited to the poor are poor programs.” But when programs serve everybody, they accomplish little redistribution, and then tend to outrun their fiscal constraints. Further, the public expense of paying for them with broad-based taxes makes the tax system less redistributive as well. As Arthur Okun was wont to observe, the welfare state redistributes with a leaky bucket. To that extent, social programs are “inefficient” if the sole criterion of efficiency goal is economically measurable redistribution. But clearly, there are equity gains simply having the poor and the non-poor treated in the same hospitals, educated in the same school system, and subjected to the same rules when income supports may be necessary.

Not only is the “leak” of benefits to the nonpoor socially desirable; it is politically indispensable. Clearly, means-tested programs with target more income to the genuinely needy and therefore accomplish more redistribution, in the literal sense. As Christopher Jencks has written, “If we want to redistribute income, the most effective strategy is probably still to redistribute income.” However, most forms of means testing, though administratively efficient, are politically doomed. Income-support programs narrowly targeted to the poor are notoriously unpopular politically, as well as destructive of social citizenship. Means-tested programs tend to be stigmatizing, invasive, and shabby around the edges, especially when times are hard and the fiscal mood is testy. One has only to consider the visual and procedural differences between a local welfare office and a local social security office to appreciate that the recipients of middle-class social entitlements are treated as citizens, while welfare clients are presumed chiselers until proven otherwise.

There are resolutions Judy’s quandaries, to be addressed throughout this book. As we shall see in Chapter 6, the Northern European model of the welfare state manages to operate entitlement programs that serve entire populations according to need – the sick, the old, the jobless, and large families – without stigmatizing on the basis of need. Emphatically, the remedies do not lie in conventional equality/efficiency trade-offs, or in a return to the primitive discipline of market consequences and private charity. They require all politics, as we shall see, which is difficult anywhere but most of all in the American context. (p. 38-41)

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Ideological Consequences

… it is no surprise that welfare capitalism cannot work; it is axiomatic. (p. 41)

Interestingly enough, critics working in the neo-Marxist tradition have made many of the same points. In their view, the welfare state does not represent so much a concession to social justice wrested by democrats and trade unionists, as it does a quite rational device by owners of capital to make the system run more smoothly. Thus public education serves capital by training and socializing workers; unemployment insurance, workmen’s compensation, and subsidized retraining help market systems rationalize their work forces without sowing the seeds of open labor unrest. By the same token, social welfare programs help to maintain harmony that would otherwise be undermined by the brutality of pure market dynamics; welfare outlays server to pacify the reserve labor army.

The best and one of the American Marxist welfare state critics, James O’Connor, calls this function “legitimation” – state social outlays help win public acceptance of the capitalist economy; they serve to “legitimize” it, without altering any of its fundamentals. We misunderstand the dynamics of the welfare state utterly, say the neo-Marxists if we are believe that its true purpose is redistribution. The two most prominent Americans exponents of this view, Richard Cloward and Frances Fox Piven, argued persuasively that the apparent irrationalities of programs like Aid to Families with Dependent Children become much easier to stab them when they are understood as purposive.

Since, in the Marxian view, capitalism itself is a bundle of contradictions it is hardly surprising that welfare capitalism produces fiscal contradictions. Because advanced capitalism keeps generating social catastrophes, the cost of maintaining social peace steadily increases. This will continue as long as ownership of productive wealth remains private, because the underlying relations of production have not changed. Deeper realities must corrupt ostensibly benign purposes.

This Marxist “functional” interpretation of the welfare state is provocative, but like all tautological analyses it also runs up against awkward evidence. How to explain trade unions? Were they just a capitalist device to maintain labor peace? And what about social security, and health insurance? In their latest book, Cloward and Piven decided that most American social programs in fact represented real political gains after all, which should be defended at all costs. . . .

Which is it, Gough asks: Capitalist fraud or working class victory? This is not a question that need be resolved definitively. Surely, some social programs like social security and social medicine represent genuine gains for the have-nots, while others have as their primary goal social control. Many programs reflect both goals at once. This ambiguity indeed goes back to the English poor laws, where the charitable purpose of keeping people from starving collided with the concerned that any relief about their subsistence would encourage people to choose idleness over work. As Beveridge and Keynes might have pointed out, the dilemma is most acute when work is scarce. When work at decent wages is broadly available, the conflict subsides; for most people who can work preferred to work. When 10 million able people are involuntarily idle, the “truly needy” are rather harder to delimit. Unless one has a very mechanistic view of history, it should be clear that the welfare state is bogging down precisely because it is having difficulty serving multiple and often contradictory goals. (p. 41-44)

Welfare Capitalism Reconsidered
One needn’t be a Marxist or a follower of Milton Friedman to agree that the welfare capitalism compromise has reached its fiscal limits. The essence of postwar social democratic compromise was substantial socialization of income, but surprisingly little socialization of productive capital and individual fortunes. The dynamics of the market system and the concentrations of political power available to the wealthy were left untouched, except in three or four Western nations with very strong and cohesive labor movements. This bargain is desirable in theory, because it preserves the competitive discipline of the market, which serves as its main claim to social legitimacy, while ameliorating the market’s unfortunate side effects. Moreover, for those who believe that private property is a necessary bulwark of liberty, the social democratic compromise has the further virtue of leaving private property essentially intact.

But socializing income went out socializing wealth indeed creates a tendency to “fiscal overload” because the market-determined distribution of income continues to recapitulate the gross maldistribution of private wealth. The more that the sphere of social citizenship is broadened, the more mightily the welfare state must labor to overcome this disparity, and at ever greater strain to itself and to the market system.

Moreover, there is an unfortunate feedback loop between maldistributed wealth and maldistributed power. In the political arena the owners of wealth are not the exactly neutral spectators. Arthur Okun, with the political innocence that economics seem to cherish, would write, “There is no obvious and natural mechanism that conveys extra  helpings of votes to the wealthy . . .” Okun conceded that some abuses existed, but he concluded that the remedy lay in “specific aids and  sanctions rather than general efforts to curb bigness and wealth.” In his own work addressing the political feedback problem, Charles Lindblom, though no more of a radical than Okun, disagrees. For Lindblom, “the privileged position of business” in democratic capitalism introduces gross imbalances that are seldom fully calculated by political scientists or economists. “In short,” Lindblom writes, “in any free enterprise system, a large category of major decisions is turned over to businessmen, large and small. They are taken off the agenda of government. Businessmen thus become a kind of public official and exercise what, on a broad view of their role, are public functions.” And at another point, Lindblom comments, “In their pursuit of a definitive list of market shortcomings, economists do not include adverse effects of market systems on governments and politics. It is a blind spot in their analysis.”

Lindblom, I think, has the better of the argument. The main obstacle to Okun-style-reforms – “special aids and sanctions” to keep money from corrupting the democratic process – is precisely the entrenched power of the rich, who would lose from permanent procedural reforms. The history of American democracy is one of episodic bursts of reform, which temporarily curb the political power of wealth, and longer periods of normalcy, in which the wealthy exercise immense political influence. The case for redistribution of wealth as a necessary concomitant to political democracy is persuasive to me, on grounds of efficiency as well as equity. Expanding on Lindblom, one might add another side effect of maldistributed wealth on welfare capitalism: the well-off do not have sufficient power to block social programs, but they have ample influence to attach conditions that raise their costs and blunt their effectiveness. The American health-care system is the most telling example. Government underwrites the cost of some medical care, but under terms heavily influenced by for-profit medicine.

Thus, particularly where the market ideology is strong and the offsetting influence of trade unions and social democratic parties is weak, the welfare-capitalism compromise is sufficient to leaven capitalism slightly but also to hobble it. Where I differ from both the Marxists and the free-market celebrants is that I do not believe this is an inevitable outcome. Egalitarianism need not come to a bad end.

Now that the postwar social democratic compromise has reached its fiscal and political limits, several alternative courses are possible. One is a return to laissez-faire, which has such strong ideological appeal at present [1984]. That would produce obvious costs to both economic performance and social justice, if history is any guide. Another is totalitarian socialism, with intolerable costs to personal liberty and to economic efficiency. But within the broad middle way, there are other approaches, which indeed maximize both efficiency and the quality and preserve political democracy and personal freedom from either too much market work too much state. (pp. 44-46)

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CAPITAL (p. 50)
Nothing is more powerful than an idea whose time has come because it happens to serve the self-interest of immensely powerful people. At the center of the resurgence of the laissez-faire economics is the claim that the supply of capital is the key determinant of economic growth. Since savings is the source of investment and investment is the source of growth, rewarding the process of capital accumulation is deemed paramount. In a capitalist economy, presumably, the prime source of capital is capitalists. Therefore, the contention that taxation and redistribution must be bad for capital formation enjoys a certain appeal to common sense. Where the Keynesian paradox held that redistribution is good for producers, the supply -side paradox holds that any inequality is good for everyone.

In the more extreme fever of supply-side economics, some theorists, such as the economist Arthur Laffer, went so far as to claim that incentive effects on suppliers of capital are so potent that lower tax rates will actually increase tax collections, so efficiently, will they stimulate investment and economic growth. That claim was never accepted by most economists, and it stands quite discredited by events, notably by President Reagan’s $200 billion supply-side deficit. A more modest version of the supply side idea, however, retains a quite tenacious hold on the popular imagination. [of Republicans and conservatives, not rational thinking human beings]

Buried in the argument lies series of fallacies that merit careful dissection. The central fallacy is the assumption that since the rich are the people with riches, redistributing some of those riches will necessarily lead society with less wealth to invest. But that, of course, depends on how the rich would spend their riches if left alone, and how the laissez-faire pattern of investment compares with one that obtains after redistribution takes place. A related mistake, raised pointedly by Thorstein Veblen against the supply-side sybarites of his day, is the presumption that financial holdings necessarily equal productive investment. The rich have no rival at innovative consumption. More surprisingly, the most important single source of capital is no longer private capitalists. It is pension funds, which represent the deferred wages and future nest eggs of wage earners.

In reality, capital supply is only one of many determinants of growth. The others include aggregate demand, technological dynamism, and the productivity of the workforce. Pioneering work by the economist Edward Denison disaggregated the sources of productivity growth and found that skills and educational levels of workers, money allocated to research and development, and a variety of other factors were more important than capital supply. And although there is indeed a relationship between capital supply and growth, it is not at all clear that a less equal distribution of wealth enhances the accumulation of capital or its useful investment. [Tax havens and shelters mean they don’t actually invest it back into business or to pay higher wages, or anything other than hoard their wealth.]

I will suggest in this chapter that a much broader distribution of wealth and income than the one we now have is fully compatible with high rates of savings, investment, and growth, even within a system that continues to rely substantially on market signals to allocate investment. Before pursuing that discussion, however, the recent ideological arrival of the “capital-formation” cause is worth a moment’s reflection.

It is more than a little ironic that “capital accumulation,” once a rather tendentious Marxian view of a supposed capitalist obsession, should have, become – of all things – Wall Street’s own slogan. Worry about capital supply first entered the American policy debate only about a decade ago. In the 1974 – 75 recession, federal tax receipts fell well below projections, leaving a deficit in the then-astronomical range of $50 billion. (pp. 50-52) [n.b. now in the trillions, thanks to unpaid for wars and tax breaks for wealthy by George W. Bush et al]

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FROM ME: There is much more complicated stuff in the capital chapter but basically, the takeaway is We the People got screwed by a coterie of a tiny minority of economists that persuaded Reagan to alter tax policy to provide exception favoritism to businesses and fool the public along the way.

Much as the critics warned, the supply-side medicine did not work miracles. THE REAL FUNCTION OF THE TAX CUTS SERVED A DOUBLE-BARRELED IDEOLOGICAL PURPOSE. It starved government for revenues, which served the crusade against the public sector. [cut program money and then say, see government doesn’t work] And it shifted the distribution of taxes away from the RICH. What it did not do was promote capital supply. . . . The affluent 6 percent [1984] of the public fortunate enough to have capital gains is enjoying substantially lower tax rates. “Business savings” — profits — are up; but for the economy as a whole the public deficit, which consumes capital, has more than canceled out any increases in private savings. (p. 53-54)

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FROM ME: There is a whole chapter on trade that is very informative, especially since we are now post NAFTA and open China and looking down the gun of the TPP. (Transpacific Partnership Plan) This international treaty, that corporations got together to write, allows MULTI-NATIONAL CORPORATIONS to SUE the United States Government if ANY of our laws COST THEM PROFIT. For example, the Clean Air Act, the Clean Water Act, and anything else they decide to pursue. This means that the United States would no longer be a sovereign nation because the corporations would no longer be bound by our laws or regulations.

LABOR – Productivity and Progress (p. 178+)
Despite the welfare state, the overwhelming determinant of social status and economic well-being remains one’s job. In America, the working-age population gets fully 85 percent of its income from wages and salaries. As the society becomes more productive, and less human labor is required to produce more physical output, distribution rather than production re-emerges as the key economic issue. Since jobs remain the principal source of income and status, jobs are central to the issue of distributive fairness. How are they defined? How wide are wage disparities? [!!!!] How are work and income allocated when market demand for workers is declining?

Wassily Leontief, the Nobel laureate in economics, argues [presciently] that the loss of purchasing power from the decline in wages brought about by automation could doom the economy to a paradoxical state of rising productivity and rising DESTITUTION — an economy in which the shelves are loaded with goods, but there is not enough money in the HANDS OF CONSUMERS to buy them. Ample supply, by itself does not assure adequate demand. . . .

Unlike the era when farm labor became higher-paid industrial labor, production workers dislocated into the SERVICE economy are not necessarily guaranteed a better economic life — not unless there are more creative social interventions to assure that the service jobs are good jobs. Leontief offers a parable of Adam and Eve, in which the new Paradise is a society where production is totally automated:

Adam and Eve enjoyed, before they were expelled from Paradise, a high standard of living without working. After their expulsion they and their successors were condemned to eke out a miserable existence, working from dawn to dusk. The history of technological progress over the past 200 years is essentially the story of the human species working its way slowly and steadily back into Paradise. What would happen, however, if we suddenly found ourselves in it?

With all goods and services provided without work, no on would be gainfully employed. Being unemployed means receiving no wages. As a result, until new income policies were formulated to fit changed technological conditions, everyone would starve in Paradise [his italics added].

To prevent “starvation in Paradise,” Leontief proposes an ever-shorter workweek as a means of redistributing available jobs and a greater reliance on government transfer payments to distribute non-wage income, create new jobs, and maintain consumer purchasing power. These remedies, of course, depend heavily on the sort of brokering institutions that ARE NOT WELL DEVELOPED IN THE UNITED STATES.

If we instead permit MARKET FORCES to determine all of these outcomes, there is a likelihood of dualism: polarized job opportunities, persistently high unemployment, pressure on workers generally to lower wages, resistance to occupations or technological change by working people located in occupations that happen to have high wages. Unions come to be seen as islands of privilege rather than champions of the underprivileged. The irony is that an economic good — productivity — is turning into A SOCIAL BAD — unemployment and inequality. The market, left to its own devices, doesn’t seem to point a way out. Luddism — smashing the machines — is surely the wrong response, for it is the machines that make the whole economy more productive and thus wealthier. The issue is how to reconcile an efficiency gain with an equity gain.

FROM ME: There is much more sensible discussion in this chapter, especially given where we are now contrasted to 1984. So with the benefit of hindsight, I can say that a fault is his discussion is the ASSUMPTION that RICH PEOPLE want equity. I am pretty confident when I say they don’t. Between the Panama Papers, and all the chicanery of 2008 to present, apart from the reign of terror under George W. Bush and his puppet masters, Wal-Mart paying so little that we taxpayers are paying the cost of the social services to make sure they can feed their families, it is pretty evident that the hoarder rich people, like the Koch brothers et all, WANT TO BE KINGs and have us all be their serfs. They despoil the land and water and kill off wildlife and believe people should work or die while they inherited their wealth and simply obsessively competed to accumulate more by any means necessary. Imagine what social good could be done if they (a) gave 50 billion to reduce the deficit (so at least it’s not a hand-out to we lazy people, (b) gave all their employees a home to call their own, (c) paid everyone a better than living wage and paid tuition for families and maybe even offered daycare, paid family leave, and a month-long paid vacation. That would be pretty close to paradise for many people! However, they don’t think anyone deserves a dime for any reason. Just like in the good old days when a coal miner was injured on the job because of no safety regulations and with no unemployment or worker’s compensation, the miner was simply cast out to die or be a burden on a family with no other source of income, since limited options for women, and without birth control they were constantly pregnant and taking care of the children. But I guess that is the Koch brothers’ idea of paradise.

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Spreading Work, Creating Jobs (p. 184+)
The last time American society systematically attempted to reduce working time was in the 1930s, when social security legislation was passed. One objective was to protect the living standards of the nonrich elderly. But a key goal was to make it economically possible for older citizens to leave the work force, in order to open up jobs for younger workers. The New Deal also reduced the standard work week through wages-and-hours legislation. But there has been very little reduction of working time since then. On the contrary, the work week has stabilized at 40 hours, and the percentage of total population in the labor force has increased.

Rather than waste over $20 billion a year paying unemployment compensation, one could imagine a variety of devices to shorten working time and spread available work. Although millions of workers are involuntarily unemployed, millions more are working long hours than they wish. The two obvious categories are people near retirement age and WORKING PARENTS. It should be possible to extend the social security retirement concept and have either the state or a prepaid supplemental retirement scheme partially compensate people who voluntarily drop to a 20-hour work week at age sixty. This would be good social policy — it would temper the sudden shift from full-time work to no work at all, which is typical of U.S. retirement. It would open new jobs to younger workers. Sweden has had such a program since 1973. Workers who drop to part time after age 60 collect a partial pension equal to 65 percent of the income lost by working reduced hours. When you add the paycheck to the partial pension, a “partial pensioner” takes home 85-90 percent of his or her previous full-time wage.

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TAXES (Chapter 5 p. 187+)
It is an article of faith to the laissez-faire mind that high taxes are bad for economic growth. If heavy taxation is used as the instrument of egalitarian policies, productive investment declines; once again, equality is the enemy of efficiency. To the extent that taxes are necessary at all, one especially should shun taxation of CAPITAL — for that depresses the incentive to accumulate and reinvest wealth. So said David Ricardo, and so say Ronald Reagan, Margaret Thatcher, Milton Friedman, and George Gilder. [but of course, they are/were wrong]

It therefore becomes awkward for modern conservatives to explain why the industrial nations with the highest postwar growth rates include several with relatively heave tax burdens and more redistributive social policies. Even more surprising, from the perspective of classical economics, the two worst performers, the United States and the United Kingdom, place relatively low tax burdens on capital; while the top two performers, Japan and West Germany, have the highest and second highest reliance on capital taxes, respectively. . . .

. . . In the United States, tax preferences (loopholes) on individual and corporate income taxes now equal about 87 percent [1984] of tax collections. That is we Americans (and the British) have tax systems with more liberal tax preferences, but substantially higher nominal tax rates. These two characteristics go together; the many loopholes require that the remaining tax base be taxed a a high rate. This is fine for the investor who finds a shelter but not so good for the investor who pays the full official rate. Not surprisingly, extensive effort in  Britain and America goes into finding tax shelter. The system is “efficient” for the shelter industry, NOT FOR THE ECONOMY. [!!!!]

. . .But in the United States, the multiple tax loopholes do not reflect a coherent program to target investment to the most productive uses; rather, they reflect which business lobby had the most influence in Congress in a given legislative year. Many, if not most, of the preferences, in fact steer capital into uses that NOBODY COULD DEFEND AS PRODUCTIVE. [!!!!]

This characteristic of the British and American tax systems — high nominal rates [pretend] and almost RANDOM DISTRIBUTION  of COSTLY TAX PREFERENCES [loopholes] — was COMPOUNDED by the Thatcher and Reagan tax programs. The post-1978 changes in British and American tax law provide a useful lesson in how INEQUITY and INEFFICIENCY can be mutually reinforcing. Since it is owners of substantial wealth who benefit disproportionately from tax preferences on capital, it follows that such preference make the tax system LESS EGALITARIAN. Even worse, the particular preferences wrought by Reagan and Thatcher also managed to AGGRAVATE the distortion of capital investment, at a cost to economic efficiency.

Taxes in the United States (p. 191+)

The American tax system, pre-Reagan, consumed a lower fraction of total GNP than in any other large industrial country save Japan. America had the slowest rate of public-sector growth of any nation, including Japan. Before the Reagan revolution, our tax system was hardly punitive to the rich. Though the nominal rate schedule of the personal income tax was steeply graduated, the progressivity was largely undermined by the extensive tax preferences [loopholes]. For the well-to-do, capital gains were taxed at preferential rates as well. For LOW-INCOME people, REGRESSIVE SALES TAXES and SOCIAL SECURITY TAXES added up to surprisingly high rates. [especially since the cap of social security taxes is $110,000 now maybe lower then? meaning the rich only pay social security tax on their first $110 k and everything else is tax-free.] Taking the tax system as a whole, despite nominal elements of progressivity, the effective tax burden was roughly proportional to income for about 80 percent of the population. That is, it scarcely redistributed income at all. . . . The system [in the 1970s] was inequitable and inefficient. And the remedy worsened the malady.

Capital Gains (p. 192)
The biggest tax preference [loophole] benefiting the WEALTHY is the tax treatment of capital gains. Until 1978, half of “realized” capital gains (e.g. the gain on the sale of stock) was exempted from taxation. “Unrealized” capital gains (the increase in the value of a stock that is held) were SUBJECT TO NO TAX AT ALL. For business groups worried about capital formation, this was plainly inefficient; tax-avoidance strategy locked the investor into his current portfolio, while more deserving uses of capital went begging. If you keep your moldering shares of AT&T, you never have to pay tax on your capital gain, no matter how high their paper value rises. Sell them to invest in something else, and you are socked with a big capital-gains tax. The system invited tax-free accumulation of wealth in a manner that gummed up the free flow of investment capital.

But people nonetheless sold stock; and when they did, the IRS taxed only 50 percent of the capital gain. For tax reformers, the 50 percent exclusion of capital gains was a long-standing target, since it sheltered a substantial portion of the income of the wealthy from taxation and allowed many wealthy people to enjoy tax rates lower than those of wage earners. For a high-income earner, in the 40 percent income tax bracket, capital gains were effectively taxed at only 20 percent — less than the income-tax rate on the factory worker. The capital-gains preference is heavily skewed to the VERY WEALTHY. This year, it will save taxpayers about $26 billion, with about 60 percent of the savings going to taxpayers with more than $100,000 of reported income.

FROM ME: He goes on to detail the horrific Reagan slashing of capital gains and other treats for the wealthy. I particularly liked The Parable of the Racquetball Club (p. 203-204).

—-

Death and Taxes (p. 204+)
None of the industrialized democracies, not even Sweden, has high levels of taxation on wealth (as opposed to income). In the United States, the main form of wealth taxation is the property tax. . . .

A property tax, in theory, could be a progressive tax, since wealthy people tend to be the owners of lavish property wealth. But in fact, the nonwealthy tend to spend a higher portion of their earnings on housing, which makes the property tax effectively regressive. Moreover, because the property tax is collected locally, poor communities with relatively low per-capita property wealth are forced to tax themselves at a higher rate in order to obtain comparable per-capita revenues for public services. So the property tax is doubly regressive. . . . The main form of wealth taxation employed by most nations is the taxation of large inheritances. Interestingly, however, the vast bulk of inherited wealth escapes taxation in every single industrial democracy.

—-

WELFARE (chapter 6, p.229+
The evolution of the welfare state reflects an ongoing conflict between two incompatible systems for distributing income: need and market. Socialism is based on the distributive principle “to each according to his needs.” Market capitalism distributes according to wage income and private property — to each according to initiative, inheritance, and luck. The social democratic welfare state that has developed since the 1930s represents an uneasy compromise between the distributive criteria of market economics and those of socialism. Most personal income and nearly all private wealth are still allocated according to market principles. Whatever prices one can gain from the market system through wage income and property wealth largely determines one’s social status and personal well-being. But the modern state tempers the market’s extremes in several respects — through taxation, income transfers, and social services. In at least some spheres of human life, the criteria of need and citizen entitlement have substantial replace the criterion of private means. Thus, in most of Europe, one has a right to medical treatment based on one’s medical needs, not one’s private purse. In Europe and America, children have a citizen entitlement to public education, even if their parents have not paid a penny in property taxes.

Need , of course, is a very slippery concept. If nothing else, cash-in-hand has the virtue of being unambiguous. When private purchasing power dictates what commodities and services are provided, no other criteria are necessary. The market simply creates supplies of services or goods in response to the demand. But if “need” is the determinant, all sorts of difficult issues arise. Who decides what needs are to be served and according to what standards? Everyone “needs” a nice place to live, but what is a reasonable social minimum? Everyone can benefit from a college education, but how many shall receive one, and at whose expense? Need is also relative. Conservatives NEVER TIRE OF POINTING OUT the America’s working “poor,” with their TELEVISIONS, private autos, and Big Macs, would be rich indeed in the America of a century ago, or in much of the world today. But that insight isn’t very useful, for a democratic society requires a COMMON POLITICAL COMMUNITY; and despite its mass consumption our society remains one of vast extremes.

Welfare and efficiency (p 230)
The idea of having the government provide income support to the “needy” is not an innovation of the welfare state. Ever since the Elizabethan poor laws, governments have made special provision for the destitute. Before the modern welfare state, however, poor-relief typically erected an inferior class of citizenship. Those who sought relief found themselves stigmatized, pauperized, and with fewer rights than others. They flung themselves on the mercy of the state — and wound up in the workhouse. Today’s welfare mothers, who are increasingly subjected to investigations and “workfare” requirements, would recognize the dilemma.

In theory at least the welfare state, unlike the English poorhouse, considers the social safety net a RIGHT OF CITIZENSHIP, not of pauperism [I’m not so sure!]. But the state still looks largely to the market as the engine of growth. Democratic welfare capitalism therefore, finds itself having to reconcile two irreconcilables: how to provide for special needs without isolating or stigmatizing the needy; and how to assure freedom from want, without excessively encouraging FREEDOM FROM WORK or otherwise WRECKING THE MARKET SYSTEM. [fuck the market system, fuck the belief that freedom from work is necessarily a bad thing, imagine a future where people are not CHAINED TO A PARTICULAR JOB but are free to choose a job they like or have an aptitude for or a talent for like art or music.] The most “efficient” solution — means-tested public assistance — is in practice inequitable if not iniquitous .[iniquitous=grossly unfair or MORALLY WRONG?!!! Not sure I agree with this word choice. Maybe he’s modified his position in subsequent books I will also be including on this site.] Targeting aid to the “truly needy” tends to isolate the poor in separate programs and erodes the political constituency for equality. It creates a welfare-state culture that is not just means-tested, but mean-spirited. But the more equitable solution — broad citizen-entitlement programs — is expensive and in some respects inefficient. [He really needs to assess cost-benefit of universal basic income (UBI) versus the mishmash of programs today plus the drug testing millions wasted and bed checks, and regulation of what foods aid recipients can buy — no steak or seafood for you — yes that is iniquitous but surely not less expensive? and I am not entirely clear what he means when he consistently uses “efficient” as the standard to aspire to, because what does efficiency cost in other terms, like feeding children only at schools so the government can be sure the $ only goes to meals and not dad’s beer intake?]

The Ideal of Universalism (p. 231)
Welfare states, particularly those of Northern Europe, have gone a substantial way toward establishing need as a distributive criterion, by providing for certain needs as entitlements of citizenship. Minimum pensions provide a social guarantee against poverty i old age. The state furnishes cash family allowances based on the size of the family. Medical care is made available throughout Western Europe as a CITIZENSHIP RIGHT, [reminds me of the FDR dream of a second bill of rights of citizens including freedom from want] for citizens of ALL AGES. Education in most of Europe is free, from primary school through graduate school. None of these benefits requires the recipient TO HUMBLE HIMSELF BEFORE THE STATE or to PROVE DIRE DISTRESS.

. . .

But the welfare state is a kind of sand castle. As the benefits are piled higher, it continuously erodes. As the welfare state becomes larger and more universal, it become less redistributive. Admittedly, it redistribute from workers to pensioners and from childless couples to large families and from the healthy to the sick, but when everybody is paying high tax rates to support all of these services, the welfare state doesn’t accomplish much redistribution from RICH to POOR. a BASIC FAMILY ALLOWANCE that gives everybody a thousand dollars per child is expensive for society, but fit fails to eliminate poverty. Beyond a certain point, it is not possible to have both universalism based on citizenship and also redistribution based on need. Moreover, as long as private income and wealth are initially created and distributed by market criteria, the better-off will keep trying to defend their relative status. The welfare state can provide public education, basic pensions, and basic health care, but the well-to-do can use their private resources to purchase private education, private cosmetic surge, private psychoanalysis, private pension plans. More and more benefits are job-related, which means that the better-off receive better benefits. In most of the West, the “private welfare state” is heavily tax-deductible; so in effect, the public welfare state is subsidizing its own erosion. The dilemma is political as well as fiscal: If the state prohibits private competition for certain basic services, then it stands accused of interfering with personal liberty. But if it encourages privatization of welfare, then the constituency of comprehensive public services steadily erodes.

In sum, the welfare states is always playing catch-up. In the social democratic compromise, the market keeps generating inequalities, and the welfare state keeps trying to compensate after the fact. As one Swedish observer graphically puts it, social policy is the  “char woman” [of the capitalist system – the author] who sweeps aside or looks after the human waste that the economic system itself is constantly generating. (p. 232)

Roots of Inefficiency (p 232+)
For CONSERVATIVES, of course, it is not the market system that causes the waste, but the welfare-state appendage. According to the conservative critique, social welfare is a drag on economic efficiency in two distinct respects. First, it allows people the LUXURY of NOT HAVING TO PROVIDE FOR THEIR OWN ECONOMIC NEEDS; thus, it misallocates resources and BREEDS IMPROVIDENCE. [I would say the improvident among us are the rich living off dividends from inherited wealth!!!!] Second, because politicians pander to electoral majorities, the welfare state grow ineluctably [inescapably], eventually overburdening the private economy, the ultimate source of real wealth.

A survey of the different models of the welfare state suggests that the conservative claims are at best too sweeping. The argument that socialization of welfare necessarily leads to waste and improvidence is the easier claim to refute. There is very little practical evidence that free medical care or free public education or even social provision of old-age pensions leads to a squandering of the service or a slackening of personal effort. . . .

One’s basic place in society continues to be determined primarily by one’s private resources. The welfare state may make it possible to subsist as a VAGRANT — or a poet — without quite starving, but a doctor or a lawyer continues to enjoy far more income and status; if we believe, with the economists that economic “maximization” is a primary determinant of human motivation, homo economicus continues to strive for relative well-being and status beyond the social minimum, even in the welfare state.

FROM ME: I was amused to see this nomenclature used here because another book I am reading (listening too) has an extensive discussion of homo economicus and altruism and debunks the concept of homo economicus pretty thoroughly.

FROM WORKHOUSE TO SOCIAL CITIZENSHIP (p. 234+)
The idea of universal citizen entitlements is a fairly recent one. Before the 1930s, two older traditions governed the state’s relationship with social needs: poor relief for the destitute; and later, social insurance for the middle class.

Poor Relief
The poor laws of Elizabethan England differentiated between the “deserving poor” (widows, orphans, cripples) who were worthy of CHRISTIAN CHARITY — and able-bodied vagrants. In the evolution of relief schemes, the charitable impulse clashed with society’s need to DISCIPLINE LABOR. [!!!!] If poor relief offered ANYTHING more generous than the BAREST SUBSISTENCE, why should the laboring classes continue to work? [And enrich the ownership class!!!] Laborers, warned Bernard Mandeville in his famous Fable of the Bees, “have nothing to stir them up to be serviceable but their wants, which it is prudence to relieve but folly to cure.” [!!!!! talk about a conflict of interests, if the owners want to encourage people to work, they could just PAY THEM A LIVING WAGE rather than pay them shit and then worry that social programs won’t leave workers “hungry” literally enough to work in unsafe conditions, for unreasonable hours, no benefits, and a pittance!] The original Poor Law of 1601 required each parish to provide for its poor. As Britain industrialized and social dislocation swelled, the DISCIPLINARY ASPECT become more explicit in the new poor laws of the nineteenth century. Cash aid to the poor gave way to “indoor relief” — service in a WORKHOUSE — deliberately designed to be UNPLEASANT and STIGMATIZING in order to discourage DEPENDENCE and ENFORCE WAGE LABOR. “I wish to see the Poor House looked to with dread by our labouring class,” wrote one member of the Poor Law Commission, “and the reproach for being an INMATE in it EXTEND DOWNWARD from FATHER to SON. . . .”

Social Insurance (p. 235)
In the late nineteenth century, as organized society took more responsibility for individual misfortune, the model of poor relief was complemented by new systems of social insurance. As SUFFRAGE was broadened to the industrial working class in the late nineteenth and early twentieth centuries, the first stirrings of modern welfare statism continued to serve MANIFESTLY CONTRADICTORY purposes. In the design of social insurance for industrial workers (pensions, workmen’s compensation, health insurance), the motivation was partly charitable, partly a desire to rationalize [?] labor markets, and partly a PLAIN NEED TO COMPETE with the APPEAL OF SOCIALISTS. . . .

MODELS OF THE WELFARE STATE (p. 238+)
In a comparison of advanced welfare states, we find the United States at one extreme and the more social democratic nations of Northern Europe at the other. In the United States, the very term welfare is associated with WASTEFUL AID for the (UNDESERVING) POOR. Opinion polls consistently show “welfare” as our least popular public program. The United States has a less universalistic model in two key respects. It spends less on social aid — about 12 percent of GNP compared with over 20 percent in Northern Europe; but overall SPENDING LEVELS are NOT the test of an efficient welfare state. More important, poor relief in the American system is fragmented and isolated. The social benefits that do reach the poor in the United States are more heavily MEANS-TESTED — and America’s version of means testing is more ADVERSARY, ISOLATING, and PUNITIVE. [!!!!]

Welfare USA [1984 remember, pre-Clinton workfare]
Our two principal programs aimed at relieving poverty — Aid to Families with Dependent Children [AFDC] and food stamps [SNAP] — are means-tested [and too often urine-tested] programs. Our Medicaid program, also means-tested, is the only such SEPARATE MEDICAL PROGRAM FOR THE POOR IN THE INDUSTRIALIZED WEST. . . .

Family Allowances  . . . (p. 245)
The value of a family allowance is that it comes as a matter of right, whether there is one parent in the home or two, and whether or not he head of the household works. This provision actually encourages a single mother to work if she can, for by working she does not lose her benefits and can increase her real income. AFDC, on the other hand, operates perversely. It is usually available only when the female head of household does not work: this creates an incentive for AFDC recipients to stay out of the work force as long as possible. [Especially since half their wages go for child care and they earn less than a man, and the available jobs are not necessarily attractive or paths to advancement. And they may well lose medical insurance, or not have a car to drive to work, or accessible public transportation.] It also creates an incentive for bureaucrats to coerce them into the work force in order to save the state money. Moreover, since AFDC is generally available only when THE FATHER IS ABSENT, it also serves to break up families.

Until the Reagan administration, the perverse aspects of AFDC were somewhat mitigated by an “income-disregard” formula, which allowed recipients to take jobs and lose only a portion of their welfare grants. Welfare recipients could keep the first thrity dollars a week of earned income and one third of the remainder [probably before taxes]. This enabled the working poor with very low incomes to qualify for partial welfare benefits, and it also gave welfare recipients incentives to find part- or full-time jobs. IN 1981, THE REAGAN ADMINISTRATION REPEALED THE PROVISION as a cost-cutting measure. . . .

. . . Throughout the industrialized West, the two-income household has become the norm for the middle-class family. Yet at that same time, the incidence of divorce and single parenthood has risen dramatically. Most of the increase in poverty in the past decade, in the United States and elsewhere, has been in FEMALE-HEADED households. Given the need for two incomes to provide decent living standards, the difficulty of RAISING A FAMILY ALONE, and the CONCENTRATION OF WOMEN in lower-wage occupations [COMPARABLE WORTH!!!], families headed by women are likely to be SUBSTANTIALLY POORER than two-income households. Universal family allowances are very useful for equalizing income of “traditional” large families. But female-headed households present income insufficiency of a different order of MAGNITUDE.

[!!!! yet the conservatives keep wanting to deny reproductive rights to contraception, abortion, and sex education and then damn the women who are left by the fathers, raped, or abused and require bed checks and urine tests and now workfare with no childcare support, or for that matter paid maternity leave much less paid sick or vacation time.]

Housing Allowances (p. 246)
. . . .A single parent with no job in France collects a combined family allowance and housing allowance package equal to about 79 percent of the AVERAGE WORKER’S WAGE. [And that could be higher than a woman-based wage since presumably they combine men and women wages to determine the average!] In Sweden, the figure is 94 percent. . . .

Universalism and Ideology (p. 252)
. . . .When George McGovern, in his hapless 1972 presidential campaign, proposed a “demogrant” of $1,000 per person per year as a kind of universal family allowance, he was ridiculed; the proposal did more to discredit his candidacy than any other single campaign theme.

A 1971 bill providing a universalistic and comprehensive system of child-care centers aimed at enrichment rather than mere custodial care was vetoed by PRESIDENT NIXON as wasteful and ANTIFAMILY. [!!!!] Said Nixon in his veto message,

For the Federal government to plunge headlong into supporting child development would commit the vast moral authority of the national government to the side of communal approaches to children over against the family-centered approach.”

Instead, Congress legislated a tax incentive — an individualistic (and fragmented) alternative that permitted middle-class people to make private child-care arrangements and take a tax credit for them, while the poor were left with largely unsubsidized makeshift arrangements. The idea that there might be something INHERENTLY VALUABLE about having children from different social classes in the same system had little appeal. That idea is at the very center of the European social democratic welfare state.


FROM ME: The author touches briefly on privatization and refutes the conservative and Republican myth that competition is better (i.e. the market system) for EVERYTHING because it leads to “more freedom of choice”  for example, the Obamacare fight where they just wanted to make it a more complicated mess of private insurers across state lines.

And more “efficiency” — the dream and myth that in pursuit of profit, private interests will keep costs low – i.e. cheat their workers and their suppliers and collude with competitors to price-fix or otherwise distort the market.

The fact that unregulated capitalism actually moves toward monopolies, not more choice, is a pesky fact that conservatives choose to ignore. That multiple insurers across the country making up variable coverage plans and changing them annually would be seen as efficient is simply preposterous. Duplication of effort at every level, especially for the actual doctors and hospitals, who have to maintain a huge staff just to process insurance claims (kind of surprised they haven’t gotten together an said screw you to patients, get your money back from the insurance companies yourself). Plus of course, the insurers are NOT INTERESTED IN YOUR WELL-BEING, it is a conflict of interest to them to spend money on your healthcare since it reduces profits. That is why one feature of Obamacare was an improvement of sorts, by mandating that 80 percent of premiums must go directly to paying for medical expenses, rather than CEO pay for example. Of course, they’ll just find other ways to cheat and deny and exclude anything deemed “not medically necessary” for patients.

And the fact is, insurance for healthcare is a PROFIT making business, and it is not appropriate to medical care. But of course, the privatizers see NOTHING as exempt from the benefits of privatization, not WATER not AIR (polluting both as well as trying to charge for it if they can). They even are trying to take the money you earn from solar panels by being a net producer when you give back to the grid. As Kuttner says on p. 258:

This remedy [privatization] contains one part ideological faith in market solutions, and one part cynicism. In many areas, such as health care, the market is an inappropriate and inefficient means of providing service. At best, leaving social services to the market will produce very different DISTRIBUTIVE outcomes. Those with private resource will get services, and those without the means to pay will simply do without.

The idea that the certified poor could be given vouchers is fine in theory [God knows we must not give them cash], but in practice the isolation of the poor into a separate category undermines the willingness of the middle class to pay for the program. For every principled conservative who consistently supports vouchers for the poor as an alternative to public social programs, the right has ten David Stockmans warning that the idea is unfortunately too expensive. That is why universalistic public programs aimed at all income groups are the best guarantee of high quality, egalitarian services based on need.

In his conclusion, the author makes the point that “injustice is not necessary economics. . . . The politics of equality — that’s a little harder.”

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