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The Unearned Income Tax Credit

It’s that time of the year again when each of us makes the most valiant attempt to eschew the social contract. For some, this means a hefty reward for hiding money in offshore accounts. For the rest of us, it means forking over a portion of our incomes for the sake of the social structures we have collectively agreed to maintain through the public trust. For those outside the United States who don’t know, tomorrow is tax day.

Nearly every year, and certainly every election cycle, there is a national discussion of the tax code. The chorus is always the same: despite nearly all economic reasoning to the contrary, conservatives want a flat tax rate and to eliminate the estate tax (which they call the “death tax,” much to the chagrin of heavy metal bands who totally missed out on that band name). Conspicuously absent from these often grating conversations is the greatest asset to campaign donors to all the party in Congress: The capital gains tax.

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World Protests: Listening to Grievances on a Global Scale

From the Arab Spring to the Occupy Movement and beyond, protests have increased around the world in recent years. One of our colleagues at the New School for Social Research, Mohamed Berrada, has co-authored a paper that highlights exactly this trend. The paper profiles the motivations, participants, tactics, size, and oppositions of protests around the world from January 2006 to July 2013 and urges world leaders to listen to the demands of protestors. In service of this goal, the paper was presented to a selection of delegates working on the post-2015 development goals at the United Nations.

The paper, published by the Initiative for Policy Dialogue at Columbia University and the Friedrich-Ebert-Stiftung New York Office, is available here:

http://policydialogue.org/files/publications/World_Protests_2006-2013-Final.pdf

The executive summary:

http://policydialogue.org/files/publications/World_Protests_2006-2013_Executive_Summary.pdf

About the Authors:
Director of the Global Social Justice Program at the Initiative for Policy Dialogue, Columbia University
Senior Policy Analyst at the Friedrich-Ebert-Stiftung New York Bureau
Mohamed Berrada
Research Assistant at the Initiative for Policy Dialogue
Hernán Cortés
Research Assistant at the Friedrich-Ebert-Stiftung New York Office
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The Conservative Case Against Single Mothers

The rhetoric of the GOP has long focused on disguising policy proposals which are truly aimed at advancing its idealized family values as policy proposals aimed at reducing poverty— without, of course, raising any benefits or cutting any costs for the impoverished. Among the more dastardly of these rhetorical schemes by the party is the push to make “single mother” a pejorative term. According to many, child poverty in the United States is advanced by the growth of single mothers, and, to them, this means we need to do something to reduce the number of single mothers. Marco Rubio, an apparent economic dilettante, said that the most effective tool for reducing childhood poverty is one simple word: marriage. In a January speech, Rubio said, “The truth is, the greatest tool to lift children and families from poverty is one that decreases the probability of child poverty by 82%. But it isn’t a government spending program. It’s called marriage [sic].”

It is undoubtedly true that a child who grows up in a single-parent household is more likely to grow up in poverty than a child growing up in a two-parent household, and these statistics are readily available from many research institutions; but is there a direct causal element, or is it simply a correlation? Perhaps more important is the question of whether or not, if one does subscribe to the belief that the rise in single-motherhood causes a rise in poverty, it is wise to further incentivize humans on this planet to marry one another. What kind of tools could one propose to incentivize marriage, and, if you find them, does this mean you are assuming that the majority of unmarried parents (or prospective parents) are unmarried by choice, and that, with government encouragement, their choice will be affected? According to Gallup, an overwhelming majority of americans prefer to be married, and it is obvious that a low-income, single-parent raising children could definitely use the financial support of spouse. Would incentivizing marriage (that is, more so than it currently is given the tax structure of the United States) even work? It seems quite dubious, as, if we assume most people do indeed wish to marry and raise a family in a two-person household, the likely reason people are unmarried is they haven’t met the right person yet. If that’s the case, should we incentivize them to get married anyway? That is, should we encourage people to get married before they are ready to get married? It seems to me that this would be the only possible outcome, as people already want to get married, but for intimately personal reasons, have not. Encouraging marriage might lead to an even higher divorce rate than the U.S. already sees (between 40 and 50 percent), which would inevitably result in more single-parent households. If love, or simply the desire to spend the rest of your life with one specific person, is the driving force of marriage, then the government ought not intervene for very obvious, ominous reasons.

What would Marco Rubio do? Rubio would take the Earned Income Tax Credit (EITC), which currently offers relatively more assistance to a single-parent household than to a two-parent household, and turn it into a “federal wage enhancement” which increases the beneficial impact for marriage-based households. To be clear, this actually removes the relative advantage single-parent households have, so if the argument is that single mothers and the children of single-mother households face more adversity than the rest, the proposition would make it relatively easier for married couples, and, thus, relatively harder for single-parent households. Wait, what? Exactly. As far as I can conceive, this is not incentivizing marriage, the posited answer to all things poverty, it is simply helping out already married couples.

Somehow I’ve gotten this far without comprehensively lambasting the idea that single-motherhood, and not poverty itself, is the actual issue. Again, I’m not disagreeing with the fact that a child is statistically better off in a two-parent household, but is that because of the two-parent part, or is it because of the simple fact that a household headed by two adults is likely to have more money than a household headed by one? I’m inclined to believe the latter. If your inclination tends to the former, then it might be pertinent to inform you that an adult mother is 2.5 times more likely to to live in poverty had she grown in up in a poor, two-parent household than she is had she grown up in a not-poor, single-mother household. It is not marriage that staunches poverty; it’s higher incomes.

A lot of my animosity towards the conservative argument, aside from its lacking in methodological rigor (i.e. its inability to distinguish between correlation and causation), stems from the singling-out of single-mothers, or, rather, the singling out of women in general. Why doesn’t Marco Rubio (or Ted Cruz, The Heritage Foundation, or Fox News) ever use the term “single-parent” in lieu of “single-mother”? To be sure, single-father households are much less likely to be of an impoverished status than a single-mother household, so the statistical correlation rings true more specifically with females. The reason for this is because single-motherhood is on the rise, and conservatives yearn for a world in which everyone is married to a member of the opposite sex—and, if someone is single, successful, and raising a child, it better be a man.

Ted Cruz talks about single mothers at the diner. A lot.

According to Ted Cruz, single mothers are necessarily waitresses (necessarily at a diner), which perpetuates the conservative argument that single-motherhood is awful, and that no one wants it. What does that mean for a successful women who would like to raise a child but has not found the right partner yet, or better yet, does not wish to marry at all? Is there anything wrong with her having a child? Obviously for me the answer is no. The underlying problem is that women earn less than men, they face greater adversity than men, and if there is a bad relationship resulting in an unintended child, they are likely to be the one raising him or her. This is not a problem of marriage; it’s a problem of social and cultural biases which make life easier for men, and it’s a problem of humans in the U.S. not being able to earn enough to support children. If conservatives want to end single-motherhood, then, unless someone can tell me how this would work in a way that doesn’t escalate the problem, or that it is definitively part of the problem, I refuse to believe that they are doing so for the sake of reducing poverty instead of simply promoting their idealized values. The real solutions involve financial support to lower income households, regardless of relationship status, but the GOP doesn’t like redistribution of wealth, so they’ll continue singling out women instead.

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William Easterly and “The Myths of Development”

Monday March 3rd Bill Easterly launched his new book “The Tyranny of Experts” at NYU. Economists and development practitioners in the New York area filled the seats of the auditorium, eager to hear what the famous aid critic had to say.

His presentation is excellent. Lightheartedly, he delivers a clear and appealing message, intertwined with carefully planned and well executed jokes. He even has a separate joke slide in his power point, much to the audience´s amusement.

1. The Myth of Technical Solutions
Bill centers his presentation on three development myths. The first one is The Myth of Technical Solutions. All too often, experts recommend solutions that fix immediate problems without addressing the systemic political factors that created them in the first place. This is important criticism that is hard to disagree with.

Scientific approach
Bill shows striking similarities between Lord Hailey’s Africa Survey from 1938 and a UN report on development from 2005.

Through time, it has not only been dictators and colonialists that have ascribed to the idea of technical, small-scale solutions as the road to development, but also philanthropists and development workers around the world. Bill is probably right in arguing that this idea, although faulty, has been accepted partly because people truly believe in it and it is a dominant discourse. More importantly, however, it conveniently gives aid workers a central role to play and provides donor governments with a distraction from more sensitive macroeconomic and political issues. The audience gets another laugh when Bill admits that he was one of these blind technocrats when he himself worked at the World Bank. Now he is reformed.

2. The Myth of the Blank Slate
The second myth is the concept of a blank slate, a view that has endured since the “beginning of development” six decades ago. The common perception is that countries begin with a blank slate and that development happens when today’s leaders decide that they want to execute developmental policies. Also, Bill adds, development did not really even begin in 1949 when Truman announced that “humanity for the first time possesses the knowledge and skill to relieve suffering of these people”.

In fact, thirty years earlier, Woodrow Wilson declared to the League of Nations: “For the first time in history the counsels of mankind are to be drawn together for the purpose of improving the conditions of working people”. Sound familiar? If so, that may be because you heard the same thing from World Bank president Jim Yong Kim last year, when he announced that ending poverty is finally an achievable goal and that we can be the generation to end poverty.

3. The Myth of Authoritarian Growth Miracles

Bill’s points so far are important. There are a lot of misconceptions about development out there that can lead to destructive policy prescriptions. However, Bill’s third myth, the myth of authoritarian growth miracles, reveals some fundamental flaws in his argument. Bill argues that it is in fact not authoritarianism that has spurred growth in China and the East Asian Miracle (EAM) countries of Singapore, South Korea, Taiwan and Hong Kong, but an increase in personal freedom.

Freedom equals growth
Bill makes it clear what he believes to be the cause of “development” (economic growth).

This is a popular argument among economists, championed by Daron Acemoglu and others, but there is little evidence to support it. In fact, economic historians who have carefully studied development trajectories of the West and of the EAM countries find that personal rights came into place after the countries reached a certain level of development (see Ha Joon Chang’s work on this for more details). In fact, rich countries did not become rich by offering their people freedoms, but by stimulating development through context-specific government interventions such as active industrial policies, trade policies and “governing the market.” Individual freedom and individual property rights came later. This is not to say that political and economic freedoms are not valuable in their own right. But there is no evidence suggesting that these freedoms cause development.

Strikingly, by seemingly busting the myth that authoritarianism induces growth, Bill is leading people to believe that this is in fact a common perception. He is clearly building a straw man argument here, as those who point to the EAM countries as “success stories” (e.g. Alice Amsden, Robert Wade, Ha-Joon Chang) do not attribute their success to authoritarianism, but to the active industrial policies pursued by their governments. Democratic governments might just as well pursue such policies.

Although Bill Easterly might like to portray himself as being outside the mainstream by criticizing Jeff Sachs, the World Bank and big aid projects, this last myth exposes his allegiance with mainstream economics and ignorance of economic history. Indeed, a more pressing myth to bust would be the Myth of Private Property Rights.

What we have learned and what you can do
Pedagogically, Bill summarizes the talk with a “what we have learned and what you can do” section. He says we have learned that authoritarianism is not the solution. It is highly doubtful, however, that anyone came into the talk believing that authoritarianism is the key to development. More importantly, he says that what you can do to make a difference is it to join the debate. So let the debate begin!

The Tyranny of Experts

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Dismal, But Not Yet Science

When I was growing up, I had a fierce propensity for mansplaining. This might have had something to do with everyone around me (particularly my parents) insisting I was smart, likely due to my knack for filling in the correct combination of bubbles on standardized tests in elementary school.

Growing up, most of the statements I made were qualified with the word “probably.” It got so bad, that by the time I got to middle school, my parents would interrupt me mid-sentence to echo “probably” in unison.  It wouldn’t be until much later that I would discover that, more often than not, “probably” is the best that we can do in science.

Eventually, I let go of “probably,” and began presenting these assertions – supported only by my ability to reason from axioms of conventional wisdom – as immutable fact.  Three or four centuries prior, I might have been regarded as a cutting edge scientist.  However, in the early 21st century, I was just another white boy using white boy logic to say white boy things.

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The Long Winter: Economics at the Margins

Last weekend, the New School for Social Research Economics department held a student-run conference entitled The State of Worldly Philosophy. The conference was a fantastic opportunity to hear from voices of friends, professors, and students of our department on our impact in the wider economics community and to consider our approaches to the discipline in general. A vast collection of histories, perspectives, and knowledge was presented. I was fortunate enough to provide closing remarks. Videos of the conference proceedings will be available online in the near future. Posted here is the script of my closing remarks. These remarks reflect my experience and, of course, may not represent the feelings of others in our department or tradition.

Thank you everyone, participants and speakers. I am really very happy and honored to say a few words as we close today following the wealth of thought and information that has been shared today.

Two years ago, Professor Ali Khan taught me to be very careful with words and to never rely on “well, you know what I mean…” in order to be understood. But allow me to eschew this important advice just long enough to say that our department, departments like ours, and the approaches we pursue (you know what I mean) have been, with respect to the public eye and economics at large, through a very long Winter.

Winters can be harsh. Some plants whither; we struggle to protect our roots; the sun is reluctant to grace us with its presence. For us, this has meant that our faculty is small; our student aid is weak; we can’t get our papers published in most journals; and civilians are being taught one bunk neoclassical bastard Keynesian course in economics and then voting for libertarians. Times are tough.

But winters are also a blessing. It is easy to flourish in the sun but it is also easy to get lazy and lose sight of your foundations as the sunning orthodoxy has done. Hidden in the harsh conditions of Winter are the opportunities to build strength. Winters offer us opportunities to look inward and consider our outlooks, tend to our projects, and build the foundations and relationships we need to get nourishment from ourselves and our community when we can’t rely upon the weather. It is not easy work but this is the kind of work we can do in settings like these.

Yes, winters also make us vulnerable but when we treat ourselves and each other, in our infinite* diversity, with meaningful respect, kindness, and support while engaging in critiques and debates, we strengthen our foundations and resolve.

It is hard to remember that this time for internal reflection is a blessing when the winters are so long. We get anxious for the season to change, looking to the future for more hospitable climate.

But winters are a blessing because, when we emerge into spring, our roots will grow stronger, our blossoms will bloom larger, and our offerings to the world will be more expansive and complete. As the sun begins to rise more willingly (as it did today), it is the work we do in Winter that will grant us a beautiful Spring. It was encouraging to see this work being done today.

 

*perhaps, better, countable diversity

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The State of Worldly Philosophy Colloquium Tomorrow!

The State of Worldly Philosophy at The New School in 2014 colloquium is tomorrow at 6 E 16 St, starting at 10 am! The goal of the Economics Student Union-organized colloquium is to bring together alumni with current students, faculty, and friends of the graduate program to discusses the potential vision of our department informed by accounts of its history and input by its alums in policy and academia about their work and experience.

If you’re attending, please join us in live-tweeting all three sessions to #NSSRecon. If you are unfortunately unable to attend, tune in to #NSSRecon to see developments in conversations as the colloquium continues.

The event is free and open to the public.  We hope to welcome many of you, whether current students, professors, alums, or friends of the department for an engaging and fruitful discussion.

See the original announcement here and the conference proceedings below:

9:30 am Arrival and Coffee (Room 1103, Wolff Conference Room)

10:00 am Welcome by Dean Will Milberg and Gregor Semieniuk

10:20 am Session I: Past Visions of New School Economics
Chair: Isabella Weber
Speakers: David Howell, New School
Mark Larrimore, New School
Edward Nell, New School
Anwar Shaikh, New School

12:30 pm Lunch Break

1:30 pm Session II a: Present: New School Economics’ Role in Academia (Room 1106, classroom)
Chair: Rishabh Kumar
Moderators: Rajiv Sethi, Barnard College, Columbia University
Ramaa Vasudevan, Colorado State University
Matias Vernengo, Bucknell University

1:30 pm Session II b: Present: New School Economics’ Role in Policy (Room 1107, classroom)
Chair: Lauren Schmitz
Moderators: Heather Boushey, Washington Center for Equitable
Growth and Center for American Progress
Massimiliano La Marca, Int’l Labor Organization
Richard McGahey, New School

3:00 pm Coffee Break

3:30 pm Session III: Future Vision for New School Economics
Chair: Michael Isaacson
Panelists: Duncan Foley, New School
Teresa Ghilarducci, New School
Ali Khan, Johns Hopkins University
Ellen Mutari, Richard Stockton College
Ramaa Vasudevan, Colorado State University

5:30 pm Closing Remarks Chair Teresa Ghilarducci and Daniele Tavani

Followed by a reception

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Yeah, Those Long-Term Unemployment Benefits Are Still Expired.

A dastardly Republican filibuster thwarted a vote earlier this month which would extend unemployment benefits for millions of Americans who have been long-term unemployed—that is, people who have been unemployed for more than six months. In December of last year, Rand Paul said that extending long-term jobless benefits would be a “disservice to workers, causing them to become a part of this perpetually unemployed group.” Here, Paul is suggesting, as Republicans are want to do, that the disincentive to work, brought about by the “free money” that is unemployment benefits, would disappear if said benefits are allowed to expire—i.e. that people would choose not to stay unemployed if they weren’t being paid to stay unemployed.

Paul’s specious argument relies on the tacit assumption that those who have been unemployed for more than six months are making enough money from unemployment benefits to live somewhat comfortably. I used the term “specious” because, for a lot of people, unemployment benefits cannot provide comfortable living—in fact, they don’t even come close. It is important to keep in mind that were are referring to long-term unemployment partially resulting from a long, unforgiving recession. The reason this is worth mentioning is that America has a lot of people who had successful, lucrative jobs, and lived lives, along with their families, accordingly. The recession which ensued brought about an immediate loss of income and savings to many, turning an upper-middle-class household into a bankrupt household. If you believe that measly unemployment benefits, and they are indeed measly, disincentivize an unemployed, previously successful mother and father of, say, four kids (the kids, perhaps, on their way to college) to find work, then I suppose we have reached an intellectual impasse, as I refuse to subscribe to the notion that they do. In this case, the unemployment benefits give them time. Perhaps they still have to sell their family home for a small apartment, but it provides them with at least some support to take care of themselves while they struggle to find adequate work. If you went from a lot to a little (or from a lot to nothing at all), and you still haven’t found vocational salvation after more than six months, what’s there to hope for? More importantly, what’s there to hope for if the American political system has given up on you? What about if society has given up on you?

In our capitalistic economy, these tragedies can happen even if not resulting from a recession. A recent article form the New York Times by James Stewart tells the story of Gregory M. Owens, a lawyer and partner who lost his job because of his firm’s bankruptcy. His termination, legal fees from a rough divorce, and subsequent alimony payments rendered his checking account with a balance of $400 and his savings account with the same. Sometimes people find themselves in rough situations, and sometimes these are simply a result of bad timing and general bad luck. It would be amazing if there were some sort of safety net to provide these people in their darkest hours with minimal support from taxpayer dollars. Oh, wait, there is, but not if your struggling lasts more than six months.

I would argue that discontinuing long-term unemployment benefits would produce an effect identical to the main criticism conservatives have against the declining unemployment rate under Obama—that the unemployment rate has dropped, but only while the labor force itself has diminished. I would argue this for the simple reason that unemployment benefits provide people with help, which fosters hope. With help stripped away during the direst times, people will inevitably lose hope, and that’s when people drop out of the labor force, so I would go as far as to argue that long-term unemployment benefits keep the labor force higher.

The San Francisco Fed concluded that unemployment indeed increases by about 0.4 percent due to extended benefits, but as Derek Thompson of The Atlantic explains, this is due to the fact that people are staying in the labour force, rather than becoming discouraged and dropping out. Matthew O’Brien, also of The Atlantic, explains further that “extended unemployment benefits haven’t kept people from trying; they’ve kept people from giving up.”

Worth noting from Thompson’s article is that over 4 million Americans currently face long-term unemployment, and that does not include those who have found temporary work or a part-time job recently. For the record, the survey used in determining unemployment will consider you employed if you recently worked for a wage, regardless of whether or not it was just for one day, and regardless of the amount of payment received. There is also the concept that people who face long-term unemployment find it much more difficult to get a job because of the residual loss of experience. As O’Brien writes, “Firms often won’t even look at the resumes of the long-term jobless. So it seems unlikely that many of the 900,000 people who were long-term unemployed last year but aren’t this year actually got jobs. They probably gave up looking.” Thompson added in his article that Rand Ghayad, a visiting scholar at the Boston Fed, conducted an experiment in which he sent out thousands of nearly-identical, fake resumes with various unemployment durations, and firms ignored the people who fell under unemployment durations longer than six months (remember, this is the duration that defines someone as long-term unemployed), even when they had better credentials.

When times are tough, what always stands out the most is people helping people. Here, Washington was given a direct opportunity to help, and it failed miserably. The people who have trudged their way through the depths of long-term joblessness to the edge of all hope, only to be subdued by the GOP’s lack of compassion, have been completely abandoned by people who in all likelihood will never know such despair, because they are millionaire politicians.

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New School Economic Review 6 Published – Heterodoxy: Which Way Now?

The outgoing New School Economic Review staff is happy to present the 6th Volume of the New School Journal! This edition, Heterodoxy: Which Way Now?, was published to the New School community at the beginning of the year and is now available to the public, just in time for the student-led conference, The State of World Philosophy, later this month.

Heterodoxy: Which Way Now? includes proceedings from the student-led conferences over the past two years and seeks to highlight the ongoing discussion about the work we do at NSSR Economics and at other like-minded institutions. Please enjoy and share widely!

Best,

Alexandria Eisenbarth and Brandt Weathers

NSER Volume 6

Economist Said With a Silent T

In its third week back since the start of the new year, the 113th Congress has left the Employment Non-Discrimination Act (ENDA) still languishing in house committee. ENDA, which passed in the Senate last year with a nearly 2:1 vote for the first time since its perennial introduction in 1994, would provide employment protections on the basis of gender identity and sexual orientation in a manner similar to the 1964 civil rights act.

Plenty of journalists have come out in support of and in opposition to ENDA. The Senate Democratic majority has rekindled its fight to pass the law.  The House Republican Majority were last heard making the same tired anti-civil rights arguments now directed against the queer community.  It’s patently obvious that the bill can only serve to benefit homeless queer youth who want to have a job free from homophobic and transphobic harassment.

While a number of professional economists have a substantial body of work in feminist and heterodox journals, the number of economists publicly commenting on this particular piece of legislation is fairly abysmal.  Among mainstream economists, the number of articles published on their (our?) shout-y blogs is 33 less than the number of state constitutions that ban same sex marriage. The number is 4 less than the number of openly gay members of the House and 1 less and then the number of openly gay members of the Senate.

The number of professional economists blogging about ENDA is zero.

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