Angus Deaton on inequality: ‘The war on poverty has become a war on the poor’
theguardian.com
theguardian.com
One group will claim inequality can be solved by government handouts, another group will claim that government handouts are a major driving factor in said inequality. Both sides have reasonable and logical arguments as well as sufficient evidence to make either side a completely justifiable view. Ask 10 economists to comment on this issue and you'll get 11 different answers!
I enjoy debating such issues, but clearly - some do not!
even that’s a charitable take, there has always been a class system here and generations of people were lied to
> Deaton said the evidence of successful state intervention is all around even if governments sometimes get it wrong. He points to president Lyndon B Johnson’s 1964 “war on poverty” legislation pulling families back from the breadline and improving lives with food stamps, housing assistance, and federal health care for the poor and elderly among other programmes. The way poverty is measured means that the war on poverty can never be won by sending money to the poor. Deaton said {{rightwing}} politicians and economists fixed the numbers so they could claim, in the words of Ronald Reagan, that in the war on poverty, poverty won. Official income statistics left out welfare payments so those receiving them often appeared to still be living below the poverty line when, by other measures, government assistance demonstrably helped. No matter how successful antipoverty cash transfer policies are at reducing want, their effects do not show up in the official counts,” Deaton writes. "The way poverty is measured means that the war on poverty can never be won by sending money to the poor. This statistical stupidity, which the politics makes so hard to fix, is a constant source of mischief and misunderstanding.”
As a libertarian-leaning conservative I agree with literally every word (with {{one}} exception) so far.
> The way poverty is measured means that the war on poverty can never be won by sending money to the poor.
He's referring to the fact that the US Census explicitly excludes the vast majority of welfare transfers. It excludes all in-kind transfers (Housing, Food Stamps, Medicaid, etc) and all de-facto cash transfers (such as "refundable tax credits", which are deemed "negative taxes" and so are not counted as cash income, even if they result in a check in the mail). In other words, if your pre-tax income puts you $1 below the poverty line, the US government announces that you are in poverty--even though you are eligible for (and presumably receive) tens of thousands of dollars in welfare support in the form of free housing, free healthcare, free food, free early education for your kids, free cash through tax credits, and subsidized cell phone and internet access. Which is nuts!
Having made this critical insight, he apparently spins a lottery basket full of random leftist rhetoric and pulls out:
> Put another way, Deaton said, “the war on poverty has become a war on the poor”.
How does one come to this conclusion? The status quo benefits the poor more than an accurate reporting of the numbers would. The over-reporting of the poverty level enables the left to continue to harangue the need to solved a largely-solved problem. How could this possibly be construed as "a war on the poor"? The figures for incomes-by-quintile, once adjusted for wealth transfers and median household size, are not going to help the left. In "The Myth of American Inequality", Gramm et. al. argue that adjusted incomes for the lowest- and second-lowest are higher than the middle quintile, which is absolute insanity when you consider the massive difference in hours worked and taxes paid by the households in each quintile. Shining light on this will not help the left, who are already losing ground with the working class precisely because they have first-hand exposure to the insanity of these wealth transfers.
In my view, the only rational move for the left has already occurred, which is their general transition of their economic rhetoric from one focused on addressing the (actual) problem of poverty to one focused on addressing the (contrived) problem that is wealth inequality.
Probably?
Try definitely.
But that's not the question.
It's because if you cannot solve poverty with wealth transfers or public services, you can only solve it one way, it's by lowering taxes and baseline expenses (like minimum wage) on companies so they can put everyone to work and make the economy run smoothly. You remove job programs, make food stamp, public transit, or free school meals so bad and hard to get it's a 20 hours a week job to get those small benefits, so less people use it, so the overhead on those programs grow and it be unsustainable.
They're doing the same in my country.
It’s a ~300 page book with a very specific thesis. There’s a lot they don’t talk about.
> Also focusing on direct income allows him to count retired people in his statistics, and if you translate a bit what that means, and it's obvious, the book said 'retired people who earn almost no money are in the last income quintile, and after taxes and wealth transfers earn more than people in the 3rd quintile! (no shit Sherlock).
I don’t follow. Why does the distinction between retirement income and work income matter?
> It's a bit worthless imho, and unlike Piketty who, at least in his last book, directly share on a website the raw data he used, data in that book is weirdly hard to find).
This was a beef of mine as well. But then, we’re in a thread about about an article quoting a renowned economist who agrees with their thesis on income inequality, so it’s obviously a stretch to say it’s “worthless” for reasons that have nothing to do with their actual argument.
> It's because if you cannot solve poverty with wealth transfers or public services…
But you can. We already have. That’s the whole point! For the most part, poverty only exists on paper. All the left has to do is push for an honest reporting of poverty statistics—-one which takes their hard-earned transfer programs into account! They refuse to do this because they understand that the working class in America would revolt if they knew that their taxes were being used to gift the (largely idle) poor a standard of living that’s higher than the one they work for! There is no “war on the poor”. The poor have the highest ratio of dollars-spent:dollars-earned ratio of any class, second only to a tiny cadre of idle rich. If our poor are oppressed, they are surely the first people in history whose oppression has taken the form of a never-ending torrent of other people’s money.
lol. Imagine being a person who says such things. To the press. To sell your book. And people buy it!
The best I can come up with is that plenty of companies right now have horse blinders on and suicidally seek an always growing profit margin. If something can't continue forever, then it won't.
Inflationary monetary policy enriches debt holders who are leveraged into assets with said debt.
The amount of debt rich people have comparable to the rest per capita means the rich will get richer when money is printed.
Printing money transfers wealth from the poor to the rich, and exacerbates wealth inequality. This is basic fucking math.
To clarify: by this guy, do you mean the Nobel Prize winner in economics?
In theory you're correct, in practice, delusional.
So if I have to go between someone who can explain things that are happening and point at things that have just been observed in the real world and fancy credentials and unclear ideas, well, the credentials and $5 will buy you less than they did a few years ago.
Secondly, I don't want to engage in a discussion where an internet rando throws around vague but strong statements, leaving it up to me to dig up the details. This is no different from people claiming a proof of the Riemann hypothesis or going against climate science.
It would be a different story if it was phrased more humbly or as a question, then maybe a meaningful discussion could take place.
Now, imagine if I even worded that in a way of saying how stupid all the Fields medalists are for not figuring this out, since it only uses basic math..
Your comment has no substance. It's absurd. You're a random internet commenter claiming that an economics professor and Nobel Prize winner doesn't know basic math.
Moreover, the article never mentioned "printing money". You seem to have made that up too.
You're misusing the concept of appeal to authority. I'm not claiming that the Nobel Prize proves that all of his theories are correct. However, literally every economics professor in the world knows basic math. It's impossible to become an economics professor, much less a Nobel Prize winner in economics, if you don't know basic math. You're just barking up the wrong tree here.
It’s absurd to point out that increasing M2 contributes to inequality? This is so simple, surely you could take the time to refute it instead of trying to discredit me.
>You’re a random internet commenter
Well, one who is employed by one of the most valuable companies in the world to find flaws in systems designed by “experts” with PhDs and way more credentials than I have.
I’m likely paid more than 99% of economic professors as well; not sure why I should be impressed by the title of “economist professor” any more than you being impressed by my credentials.
> It's impossible to become an economics professor, much less a Nobel Prize winner in economics, if you don't know basic math.
I didn't say they didn't know basic math, I said they're 'failing' at it, as in, they're currently making a mistake. It should be quite obvious to everyone that yes, Nobel Prize winning Economics PhDs do make (very public) math errors....
easier monetary policy creates bubbly valuations and probably increases wealth inequality.
but inflation is complicated. a decent number of not-that-rich people are 80+% levered and see debts evaporate, and not that many really rich people are that levered. on the other hand a decent number of not-that-rich people have fixed-income type assets and receivables, pensions etc., rich people tend to have more equity. unexpected inflation increases the risk premium and term premium and tends to reduce real asset values. things like startups and risk equities and long bonds are a bet on a distant future and people don't like to take those big risks when financial conditions are in turmoil. inflation might increase wealth inequality because there are big winners and losers but it might penalize capital so much that it might reduce overall inequality. in a way inflation negates easy monetary policy by canceling its real boost and making it only illusory nominal growth, and plants the seed for higher interest rates and risk premia. big inflationary surprise years like 73-74 and 78-79 were big interest rate surprise years and pretty catastrophic for stocks. capital kind of hates inflation so it's probably not that great for capital. there's also the taxation issue, a lot of inflation gets recognized as income when it's just nominal and not real gains.
Rich people are levered by proxy through equities.