Income Disparity

Beth referred me to a Slate article by

This article has a decided “liberal” slant.  The graph showing disparities in income leaves out “transfers of income”.  In July 2010, the BEA reported that transfer payments were 1/6 of total personal income, or about 30% of what people got paid in wages and salaries.  Transfer payments include Social Security, unemployment insurance, back to work welfare programs, pell grants, etc, etc.  There is disparity of income but Paul Krugman and others who have a strong political agenda pick out the data that most strongly shows their case.  Income is income.  In the early part of the 20th century there were no social safety net programs and few transfer payments.  Now, they comprise a significant part of income for a growing part of the population and should be included for comparison.

A final note:  There will always be disparities in income, disparities in circumstance, disparities in ability.  James Madison, the primary architect of the Constitution, was well aware of this and wrote in Federalist #10:

The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests. The protection of these faculties is the first object of government. From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors, ensues a division of the society into different interests and parties.

Those who hold and those who are without property have ever formed distinct interests in society. Those who are creditors, and those who are debtors, fall under a like discrimination. A landed interest, a manufacturing interest, a mercantile interest, a moneyed interest, with many lesser interests, grow up of necessity in civilized nations, and divide them into different classes, actuated by different sentiments and views. The regulation of these various and interfering interests forms the principal task of modern legislation, and involves the spirit of party and faction in the necessary and ordinary operations of the government.

The violence of factions had brought down previous republics like Greece and Rome.  What can remedy this natural tendency of people to form factions?

There are two methods of curing the mischiefs of faction: the one, by removing its causes; the other, by controlling its effects.
There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests.

Realizing that the cures for faction are worse than the disease of faction, Madison constructed a Constitution by which the different factions in this country would push and pull for power.  Unlike utopians who dream of a better world if only people weren’t so self-interested, Madison understood that self-interest was natural to people and developed a legislative structure that could hopefully balance those competing interests.
Today we have become a country of factions fighting for federal largesse:  farmers who want price supports, the unemployed who want benefit extensions, students wanting more generous student loan programs and grants, industrial towns wanting government support to bring businesses to their area, banks and car companies wanting bailouts, consumers wanting ever more protections, seniors wanting generous cost of living adjustments to their pensions, people wanting more regulations, people wanting less regulations, etc, etc.  We are turning into a country of supplicants raising our voices in a cacophony of “Gimme” and “It’s mine.” 
And we call ourselves a great nation.

Health Care Conundrum

In an op-ed in WSJ 10/17/09, Vernon Smith, a Nobel Laureate in economics, explained the problem with health insurance in simple terms that any layperson can understand. Health care provider A recommends to patient B the services that B should buy from A. C, either the government or an insurance company, pays A. “This structure defines an incentive nightmare,” Mr. Smith writes and presents a seemingly unsolvable problem.

The Senate recently passed its version of health care reform. House and Senate committees will meet in January to start reconciling differences in House and Senate versions. During the health care debate this year, and for the past century – Theodore Roosevelt tried to institute a public health care system – the focus has been on solutions to a number of problems: the number of uninsured, ballooning costs, the alarming number of bankruptcies because of medical bills, insured patients who are cut off because their benefits exceeded a lifetime maximum, those people denied affordable coverage because of pre-existing conditions.

Various players in the medical care provider market have voiced objections to proposed solutions when the impact of a solution would be negative on them. Perhaps we should all admit that we will never fix this intractable problem. Like many cancer therapies, the “solution” may be to manage the problem, not solve it. Only when all parties give up the notion of finding a solution will we be able to sit down at the table and come up with a framework for managing this problem.

This idea was first conceived by James Madison, the chief architect of the U.S. Constitution. Unable to resolve the decade old dispute between advocates for a strong federal government and those who championed individual and states’ rights, Madison had the genius to incorporate the struggle between these two ideologies directly into the Constitution, thereby providing a structured debating platform for this continuing argument and struggle for power.