Monthly Archives: November 2010

Community types and economic hardship

Patchworknation.org is a website that defines, identifies, and analyzes a number of different “community types”. Based on the economics and demographics of a particular area, it classifies communities as “Boom Towns”, “Military Bastions”, “Tractor Country”, “Immigration Nation”, etc. You can type in your zipcode and find out which community type you live in.

Incidentally, Boyle County, Kentucky, where Centre College is located, is an “Evangelical Epicenter” which is defined as community with “a high proportion of evangelical Christians, found mostly in small towns and suburbs; slightly older than the U.S. average; loyal Republican voters”.

The website also provides an average “hardship index” measure for each different type of community in the U.S. This measure includes an index based on gas prices, unemployment, and foreclosures. Here is the index as of September:


I will admit I am somewhat surprised to see “Mormon Outposts” with the highest degree of economic hardship, even more so than “Boom Towns” or “Industrial Metropoli”. I wonder what it is about the culture in the Rocky Mountain west that leads to a higher incidence of unemployment and foreclosures.

American political polarization

These last two weeks my GOV 330 class has been examining the issue of political polarization in the United States. We looked at public opinion surveys, congressional voting patterns, and a number of studies on the subject. We learned that:

  • Congress is very polarized. Voting along party lines is at its highest level in several decades.
  • Americans are polarized in their views of the political parties and political candidates. Republicans don’t like the Democratic Party or Democratic candidates and Democrats don’t much care for the Republican Party or Republican candidates.
  • Interestingly, Americans are not very polarized in terms of their policy preferences. That is, the average Democrat and the average Republican in the U.S. are much closer to each other in terms of their stands on issues than they might suspect. They agree more often than they disagree and there is more common ground between them than distant chasms.
  • American are better sorted than they used to be. Through the 1950s-1980s, it was common to find liberal Republicans and conservative Democrats. Through the 1990s and 2000s, however, most liberal Republicans became Democrats and most conservative Democrats became Republicans. Thus it appears that polarization has increased simply because Democrats and Republicans are now more ideologically homogenous than they used to be, even though individual-level policy preference changes have been on a much smaller scale. 
  • This party sorting likely occurred in response to cues taken from polarized political elites and elected officials who took increasingly distinct and distant policy stands on a particular set of issues through the 1990s and 2000s. These issues were the visceral “gut-level” issues like terrorism, race, marriage, and alike. This has led to increased polarization in the public on these issues, but not on most others.

The tough choices

This is why our national deficit is so large:

http://i2.cdn.turner.com/cnn/2010/images/11/18/rel16g.pdf

Everyone, in principle, wants to balance the budget and cut the deficit, but no one wants to actually make any of the tough choices necessary to accomplish it.

By and large, a majority of Americans would rather keep spending at current levels for a wide range of programs: Medicare, Medicaid, Social Security, agricultural subsidies, unemployment assistance, etc. This same survey shows that a majority of Americans are opposed to eliminating various tax deductions, increasing the retirement age, or increasing taxes on gasoline.

As a nation, we want to have our cake and eat it, too. One can only imagine the tough spot this puts our elected officials in, as many of them are sent to Washington with the conflicting messages of: “Reduce the deficit!” and “Don’t raise my taxes or cut my government benefits!”

In a democracy, our elected officials are theoretically supposed to represent the priorities and views of their constituents. It’s easy to blame them for our nation’s problems, but ultimately they do only what they’re incentivized to do by their constituents: us. Once we’re willing to make the hard choices (i.e. pay more taxes AND cut government services) our elected officials will follow as they seek for us to reelect them.

Democracy is a system ensuring that the people are governed no better than they deserve.” – George Bernard Shaw

Where did the deficit come from?

This helpful graphic from the NYTimes shows how we went from 800 billion dollar surpluses turned into trillion dollar deficits in less than ten years.

http://www.nytimes.com/interactive/2009/06/09/business/economy/20090610-leonhardt-graphic.html

The bottom line:

  • 37% of the deficit is a result of the economic downturn and global financial crisis.
  • 33% of the deficit is a result of the Bush tax cuts and Medicare plan.
  • 20% of the deficit is a result of President Obama continuing the Iraq war, extending the Bush tax cuts on the middle class, and the “bail-out” TARP plan.
  • 7% of the deficit comes from Obama’s economic stimulus plan.
  • 3% of the deficit comes from Obama’s policies on health care, education, energy, and others.

Source: http://www.nytimes.com/2009/06/10/business/economy/10leonhardt.html?_r=1

Your Turn: Fix the National Deficit

The national debt currently stands at about $13.8 trillion dollars. I’ve recently become more interested in the topic of the deficit after learning about how European countries are dealing with their budget woes: they are cutting spending and raising taxes. Here in the U.S., however, we seem to think that we can eliminate a deficit by increasing spending (Obama’s preference) and cutting taxes (Congressional Republican preferences).

Everyone seems to think they know how to balance the federal budget. This interactive tool from the NYTimes gives you the chance to take a crack at it:

http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

Go ahead – give it a shot! The tool allows you to select among a wide variety of spending cuts and tax increases in an effort to eliminate the national deficit. I think this is extremely instructive because it allows you to see the relative effect of various proposals. For example, the big talk in Washington this week is to pass a ban on congressional earmarks. While this is a step in the right direction… this tool also demonstrates that eliminating earmarks will reduce the short-term deficit only by about 3.3%. What really makes a difference is tinkering with the retirement age and letting some or all of the Bush tax cuts expire.

For those who are interested, here is my proposed plan to fix the deficit:

http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=81bndbr3

I propose to eliminate the deficit by: eliminating earmarks, reducing (but not eliminating) our military presence around the world, raise the age eligibility for Medicare and Social Security, enacting medical malpractice reform, letting the Bush tax cuts expire on those making more than $250,000/year (while keeping the tax cuts in place for those making less), implementing a “carbon tax” on pollution, and enacting the Bowles-Simpson plan for reducing tax deductions and simplifying the tax code.

2010 midterm results: policies or the economy?

One more quick note on the results of the 2010 elections. A recent New York Times article explains how the Republicans are interpreting the election results as a “mandate” to pursue their policy platform (i.e. cutting taxes, repealing health care reform, etc.) while Democrats are interpreting the results as a “referendum on the economy” and not on President Obama’s policies.

Who’s correct? They both are. But this time, the Democrats are more correct.

The bottom-line question is what people were thinking when they went into the voting booth and voted Republican. Were they thinking 1) “I want to lower taxes and repeal health care reform, therefore I will vote for the congressional representative that best matches these policies preferences”, or were they thinking 2) “the economy stinks, I’m still out of a job, and thus I’ll vote for the other guys this time around”?

Undoubtedly there are some in each camp. Recent political science research, however, shows that while some people vote based on the issues (those who were thinking #1 above), most people vote based on governmental performance and the condition of the economy (#2 above).

This is simply because most Americans aren’t familiar with the ins and outs of public policy issues and related political ideologies, so it’s hard for most Americans to accurately vote based on issues. More than four decades of research has convincingly shown that the economy is the single largest factor in driving American national election results. That’s why President Obama won in 2008: the economy tanked. Interestingly, the “average American” in 2008 was closer to McCain’s than Obama on the issues, but the “average American” usually doesn’t “issue vote”.

Thus, Republicans are partially correct to interpret the results of the election as a mandate to pursue their policy agenda, because there are some out there who voted for the Republicans for this reason (the research suggests somewhere between 5-15%). However, President Obama and fellow Democrats are more correct in their interpretation of the election results because the majority of Americans turns the Democrats out of the House because unemployment is still high and the economy hasn’t recovered quickly enough. 

Immigrants and “American” jobs

As a quick follow-up to my previous post on the economic effects of immigration in the U.S., a recent economics paper by Ottaviano, Peri, and Wright (2010) provides evidence that, because of the “positive productivity effect” that immigrants provide to local and state economies, higher levels of immigration actually increases the amount of jobs available for native workers.

Just food for thought.