Monthly Archives: January 2011

Compromise in Politics

You hear about it all the time: Americans, left and right, are concerned with the efficiency of government. They are frustrated by the near-constant government gridlocks, whether on the state or federal level, and they feel that their positions are not represented through legislation. I too have felt this on a few occasions, and like many Americans, have also felt an accompanying sense of betrayal. Some may complain that their vote doesn’t count, others may say the system is broken, but most people eventually resort to the blame game: “if only such-and-such a party would stop being so stubborn and work with the other party, they could reach a compromise and actually accomplish something!”

Compromise has become a golden mean of sorts in the realm of political rhetoric. Almost every politician that has ever campaigned has advocated bipartisanship and compromise.  But perhaps we need to step back and ask ourselves why this is the case, and whether or not compromise is even desirable. In doing so we find that there are a number reasons why compromise is impractical. Specifically, it is unattainable in any homogeneous way, it decreases voter efficacy, and it distances politicians from their principles and temporarily subscribes them to opposing principles. Because of these factors, compromise is something that should generally be avoided.

Who advocates compromise most often in legislative politics? It’s usually not the majority party, unless they do so as a game of political quid pro quo. Rather, compromise is generally pushed by those in the minority party. The reason for this is simple: compromise is a tool of the minority party to regain power lost at the ballot box. It gives the purveyors of unpopular positions the ability to influence policy, even when they have no mandate to do so. Many Americans forget that we do not have systems of proportional representation in this country, and that the winner-take-all plurality systems we employ create no obligation to honor the viewpoints of every constituent. Nevertheless, compromise is designed to do just that. It makes the losers happy.

The problem is that even in compromise there are going to be winners and losers.  By definition, compromise can never make anyone or everyone completely happy, unless compromise in itself is your goal. But by not compromising, you can make the majority of people completely happy. This seems like the much better option, given that this is what a winner-take-all system is designed to do in the first place.

Compromise is often touted as a remedy for the feelings of voter inefficacy felt by the losers of an election, and it seems that for this reason, Republicans and Democrats alike often claim to be open to compromise. However, it’s unclear as to whether they or their constituents actually understand what that entails, so let’s think a little more deeply about the mechanics of the compromise we like to demand from our representative officials. We know that politicians are the public conveyors of ideals, and that legislatures are the forum by which politicians can encapsulate their ideals in legal construction. These ideals represent the sides of a given issue, and to hold an ideal means to have taken a position on an issue. Now, a law can only have one outcome–which is decided by the ideals encapsulated therein. Whatever effect a law based on one ideal has is reduced or nullified by the injection of any opposing ideal(s), which is what occurs during a compromise. Likewise, since the ideals of politicians mirror the ideals held by the majority of their constituency, any reduction or nullification of those ideals through compromise is a slight to the majority of the people. To compromise the principles which the people have publicly supported through their votes is to render the entire election a pointless exercise. When this happens, there is a loss in voter efficacy even greater than the loss felt by a minority party after an unsuccessful election.

The last, and probably most detrimental effect of compromise is that it distances politicians from their principles, and temporarily subscribes them to opposing principles. This confuses voters and distorts the credibility of legislators. When politicians subject themselves to the pursuit of compromise in the debate of a bill, they inevitably allow more into a bill than what they would normally like, and likewise more than what the majority of voters would like. Sometimes politicians sign on to a compromise bill because they feel there is no other way to pass what they see as beneficial. Other times, however, politicians vie for compromise in order to force the hand of their opponents. Those in the minority party know that their positions are unlikely to pass by themselves, so they actively look for opportunities to tack their ideals onto a more popular bill. This puts majority politicians in a bind: they can either pass the unpopular ideal along with the popular ideal, or they can pass nothing at all. This complicates future elections, since it is no longer clear whether or not a representative’s vote on a bill can be considered reprehensible. Therefore, instead of compromise, strictly partisan bills should be the goal. This not only allows the majority party to pass what it considers to be beneficial, but also allows voters a clear picture of who to oust in the next election should the law have detrimental consequences.

Compromise as an Unavoidable Political Phenomenon

There are a couple reasons why compromise can be considered inevitable, and in some cases, beneficial. First, representatives sometimes have great differences in political ideology, and they don’t always vote along party lines. In situations such as this, like factions from opposing parties often unite to pass a recently popularized ideal. Another way compromise may be useful is if there is a fifty-fifty split among representatives in any one chamber. In such a case, both political parties would have equal power to influence policy, and it would be impossible not to compromise in order to accomplish anything.

In Summary

Compromise may ultimately be seen as a necessary evil. Ideally, we should refrain from chasing after virtually unattainable satisfactory agreements, we should respect the sense of political efficacy to be gained from a winner-take-all election system, and we should be able to hold representative officials one-hundred percent responsible for every vote they make. But in the real world, the legislative process can never be so cut-and-dry. We can always expect to see issues on which politicians of the same party differ in positions. But even though no structural change to the legislative process seems imminent, perhaps this can be taken as a lesson to lessen our reliance on the crutch that is compromise, and to quell the rhetoric designed to legitimize its use at every turn.

December 2010: Unemployment Statistics Explained

The Bureau of Labor Statistics recently reported a decrease in the unemployment rate by four points during the month of December of 2010–from 9.8 percent to 9.4 percent. This would seem like good news, since the unemployment rate has been hovering at around 9.8 percent for many months. But when we look at the raw data, we see that the situation isn’t as optimistic as first indicated, and that the reasons for the drop in unemployment are far more insidious than we’d like.

For the month of December, the BLS reported a growth in the number of employed by 297,000 people. However, the number of unemployed decreased by 556,000 people. If you find these numbers a bit puzzling, you’re not alone. Where did those remaining 259,000 unemployed people go? It turns out that the civilian labor force, the total number of people currently either working or looking for work, decreased. The BLS refers to those people who left the labor force as either “marginally attached workers,” people who had looked for a job within the last 12 months but had stopped within the last four weeks, or “discouraged workers,” who have been without work for so long that they no longer believe there to be any jobs in the market. These people are not counted in the labor force, and their exodus from the labor force allows for the four point drop in the unemployment rate with only a surprisingly slight increase in the number of employed.

At the same time, the Civilian Non-institutional Population (anyone 16 or older and not in an institution such as a prison) increased by 174,000, offsetting the growth in employment so that the employment-population ratio only increased by a tenth of a percentage point. We can assume that none of these newcomers to the population actually joined the labor force, because the labor force decreased by 434,000–almost an exact sum of those who left, and those making up the population increase.

All this goes to show that we shouldn’t take all statistics at face value. The news media out there generally only report on the unemployment rate. Even though that rate went down, which is good, we shouldn’t lose sight of the story behind it. The rate would drop to zero if everyone simply left the labor force, but that wouldn’t solve the problem of unemployment. All this means is that we have a lot more work to do in terms of consistent job creation in this country.

A Leftist Misconception: Income Inequality

One of the most important issues to Americans is the economy. The state of the economy is something all Americans have a stake in, and there are a number of indicators we use to know how it’s fairing. GDP, unemployment rates, income, interest rates, and stock market returns are probably the most well-known indicators used by economists today. But there’s one lesser known indicator that leftists prefer to use for measuring the health of the economy: income inequality. While the previously mentioned indicators all measure efficiency in the economy, income inequality measures its equity. In other words, it’s a measure of one person or group’s economic welfare in relation to another. Leftists believe that the income divide between the rich and the poor in America has been widening. This is the misconception.

The main reason for the propagation of this misconception is a misreading of data from the U.S. Census Bureau. The Current Population Survey, the Bureau’s monthly survey of demographic information on roughly 50,000 people, has facilitated the collection of labor statistics for over 50 years. In the year 2000, the Census Bureau published a report summarizing the survey’s findings on income statistics over that time period, with special attention given to the disparity between the concentrations of household income within certain arbitrary statistical ranges. In order to quantify disparity, the report used the Gini Coefficient: a point on a 0 to 1 scale, where at 0 income is equally shared among all people, and at 1 all income resides with one person. According to the report, the Gini coefficient has been increasing steadily from 1968 to 1998, meaning that America has been becoming more unequal. Leftists like to take these data at face value because it justifies their egalitarian tendencies.

Unfortunately, there are some problems with measuring inequality this way. The first is the use of household incomes instead of individual incomes. The average household size for all Americans, according to Current Population Survey, has been steadily decreasing since before 1968, and that downward trajectory continues to this day. As we would expect, this has allowed the concentration of income in each quintile of households to change despite contradictory changes in median individual income over the same time period. Unfortunately, individual incomes cannot be effectively used to calculate the Gini Coefficient because of factors like unearned income, the earned income tax credit, government in-kind transfers, and countless other variables which can only be measured individually.

The main problem with the Gini Coefficient, however, is that it relies on measuring the concentration of incomes within statistical ranges. When you do this, income stops being a characteristic of a person, and starts being a characteristic of a given statistical range. Statistical ranges such as quintiles only outline boundaries, however, which are superimposed onto an income scale to capture multiple units of data. Looking only at these boundaries instead of looking at the people within them is going to give us a distorted view of the economy. The simple reason for this is that the statistical ranges of income on which the Gini Coefficient relies do not change: the bottom income quintile will always be the bottom income quintile, no matter how much income the people within that quintile individually earn over time.

This fact approaches the heart of the problem. What if a person within one income quintile begins to make so much money that he/she moves to a higher quintile? Likewise, what if a person takes such a sharp pay cut that he/she moves to a lower one?

The Gini Coefficient cannot measure these occurrences. In other words, the Gini Coefficient cannot measure income mobility.  We should all be concerned with the phenomenon of income mobility (the ease with which one can change their own income) because it is the free-market remedy for inequality, and it is one of our most important traditional values as Americans. It can be contrasted with redistribution, which is the leftist remedy for inequality.

We’ve now established that the Gini coefficient is inadequate for ascertaining the state of income mobility, so we need another measurement to use in its stead. What happens when we abandon the Gini Coefficient’s reliance on measuring household income concentrations within quintiles, and focus instead on the changes in individual incomes over time? Do we still see the growing disparity between the rich and poor in this country like the Census would suggest is occurring? No! In fact, the opposite has been occurring! In 2007, the U.S. Department of the Treasury published a report of trends in income mobility in the decade of 1996 to 2005. Using data from a sample of tax returns for over one-hundred and sixty thousand primary and secondary taxpayers, the Treasury finds that

There is considerable income mobility of individuals in the U.S. economy over the 1996 through 2005 period. More than half of taxpayers (56 percent by one measure and 55 percent by another measure) moved to a different income quintile between 1996 and 2005. About half (58 percent by one measure and 45 percent by another measure) of those in the bottom income quintile in 1996 moved to a higher income group by 2005.

In addition to reporting on income mobility, the report offers some insight on the overall strength of the economy. Also, the poor benefited more from income mobility than did the rich:

Median incomes of taxpayers in the sample increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. Further, the median incomes of those initially in the lowest income groups increased more in percentage terms than the median incomes of those in the higher income groups. The median inflation-adjusted incomes of the taxpayers who were in the very highest income groups in 1996 declined by 2005.

The composition of the very top income groups changes dramatically over time. Less than half (40 percent or 43 percent depending on the measure) of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about 25 percent of the individuals in the top 1/100th percent in 1996 remained in the top 1/100th percent in 2005.

The report also comments that

The degree of relative income mobility among income groups over the 1996 to 2005 period is very similar to that over the prior decade (1987 to 1996). To the extent that increasing income inequality widened income gaps, this was offset by increased absolute income mobility so that relative income mobility has neither increased nor decreased over the past 20 years.

Referenced in the study is a litany of prior research on income mobility dating back to the 1960s, all of which indicates that there was a large amount of mobility within past decades as well, especially in the decade of 1979-1988, where by one measurement, “86 percent of taxpayers in the lowest income quintile in 1979 had moved to a higher quintile by 1988 and 15 percent of them had moved all the way to the top quintile.”

Leftists and others looking at the Current Population Survey might suggest that more government regulation and more progressive tax policies are needed to improve equity in the economy, but if we’ve learned anything here, it’s that liberty and opportunity are the greatest equalizers. If we wish to promote equality of opportunity, we should ensure a free market economy, of which economic freedom and mobility is a central component. We should accordingly dismiss the policies that, in an effort to achieve equality of outcomes, must necessarily destroy that freedom and mobility.

Mandating Failure

The recent decision by U.S. District Court Judge Henry Hudson striking down the “individual mandate” component of the Patient Protection and Affordable Care Act poses an interesting question regarding access to affordable health care in America which has generally gone overlooked: do we even want everyone to be covered under health insurance?

In a segment for ABC’s show 20/20, John Stossel exposes some of the lesser known costs incurred by consumers and health care providers as a result of health insurance.

Insurance is effective when it protects patients from unforeseeable, catastrophic illness or injury. It’s a voluntary pooling of wealth against the risk of such events occurring. It isn’t designed to pay for predictable, and often unneeded, day-to-day care. Unfortunately, the latter has over time become the paradigm regarding health insurance, and this taking for granted of mundane care has caused an unnecessary increase in the demand for said care, which in turn has been increasing its price well beyond the rate of inflation.

Given what we know now, what could be the result of a law mandating the purchase of health insurance? We can most likely expect people to demand more health care. After all, insurance allows them to get it virtually “for free.” This will either intensify the trend of growing health care costs, create shortages, or both. It would also likely lead to higher insurance premiums, deductibles and co-payments.

The example of LASIK also brings up an important point. Obviously, it’s not feasible to shop around for the cheapest emergency/urgent care when you’ve had a heart attack or accidentally chopped off your finger, and insurance is necessary as a safety net for procedures dealing with those and similarly immediate problems. But what if insurance paid for only those procedures, and nothing else–what if we paid out of our own pockets for every other thing? Consumers would no longer be insulated from the true cost of their care. They’d shop around for the best deals, and hold health care providers accountable for their own costs as well. If nothing else, it would create more incentive for people to engage in healthy living and preventative care.