Income Inequality And The Politics Of Envy

Readers outside New York may find amusing the current back-and-forth between our mayor and governor over the politics of income inequality. 

New Mayor de Blasio upon his election called income inequality "the defining challenge of our time."   His number one proposal to fix it is to institute a universal pre-K education program, to be funded with a tax increase on "the rich," otherwise known as taxable incomes above $500,000.  Now, am I the only one to whom it seems like universal pre-K is an extremely odd way of addressing income inequality?  Even assuming that the pre-K education transforms large numbers of beneficiaries from non-earners to middle-class earners, that will only happen at a minimum about 20 years from now, and even if existing term limits are lifted, de Blasio will never last that long.  So there's literally no possibility of this program leading to any improvement in the income inequality statistics during his tenure.  Meanwhile, since the program is to be "universal," many of the beneficiaries will not be poor at all.  And at the top end, since taxes don't count in the measures of income inequality, the additional taxes on the high earners won't have any effect either.

But put all that aside.  A few days ago in his state budget proposal, Governor Cuomo comes out and says that he has found the money at the state level to fund the pre-K program without need for the tax increase, and by the way his program for the state is tax cuts (although not to marginal income tax rates) rather than increases.  At this point, you might think that de Blasio would declare victory and go home.  Wrong!  As reported by the New York Post today, de Blasio promptly made a speech pressing forward in his campaign for the tax increase, putting it in these terms:

I think of it in terms of following through on a commitment I made to the people of New York City, that they ratified with great energy and with a huge majority, that they want this to happen and believe this is the right way forward.

So his real "commitment . . . to the people of New York City" is not so much to reduced income inequality, or even to pre-K education, as it is to punish those evil 1 percenters for their apparent success.  It's the politics of envy.  He did make some noises about a more reliable income stream, but that could only be because he remains unaware of the crowding out that is about to occur in his budget from exploding pension and employee health care costs.

Of course, there are actually lots of ways to make more than $500,000 in a year without having it come in a form subject to those premium income tax rates.  For two good examples, we could look to none other than de Blasio himself and also his progressive firebrand City Council speaker Melissa Mark-Viverito.

In de Blasio's case, Crain's New York Business reports here on January 17 that new property assessment figures out from the City show that de Blasio's Brooklyn townhouse increased in value by $725,000 since 2006, of which $225,000 came in the last year alone.  No taxable income there!  I'm not saying there's anything illegitimate about that.  But when the day comes that Bill decides to sell that house, he will likely find himself in the hated one percent by virtue of a capital gain that has built up over many years.  More than a few of the one percent get there by the route of a one time sale of a long-held asset, more often than not a home.  Here is an article that tries to get a handle on how this and other such factors distort the income inequality statistics.

And then, as an even better example of how to get rich as a connected insider by means of income that doesn't count, we have Ms. Mark-Viverito.  Her dad was a well-off hospital executive down in Puerto Rico.  At a time when he had died but his multi-million dollar estate had not been disbursed, MMV was working for an advocacy group called Aspira at a salary of $50,000.  She then applied for a townhouse in Harlem being constructed under one of those "affordable housing" programs for "middle income" people.  According to the Post here, these particular houses were made available to people in the income range of $30,000 to $70,000, and theoretically cost $240,000 (but the government subsidized the loan).  Today, City records show that the house is worth $1.2 million.  She also has a tenant in the house, although rental income has not showed up on her disclosure form when running for office.  Has she reported the income to the IRS and New York State taxing authorities?  Anyway, as you can see, if you have the right connections, you don't really need to have taxable income to become rich in New York.  To me this is just another demonstration of why government subsidized "affordable" housing in Manhattan is about the worst possible public policy.  By the way, the recently-retired State Senator from our high-end Greenwich Village/Chelsea district also lived in publicly-subsidized "middle income" housing.

If you want to get a taste of how far the politics of envy can go, you might enjoy this article from Michael Totten, currently reporting on a trip around the rural parts of Cuba.  Even though nobody but the police in Cuba is armed, there are police checkpoints everywhere.  Why?  To be sure that nobody (except of course the connected elite) can have more than anybody else:

Police officers pull over cars and search the trunk for meat, lobsters, and shrimp. They also search passenger bags on city busses in Havana. Dissident blogger Yoani Sanchez wrote about it sarcastically in her book, Havana Real. “Buses are stopped in the middle of the street and bags inspected to see if we are carrying some cheese, a lobster, or some dangerous shrimp hidden among our personal belongings.”

If they find a side of beef in the trunk, so I’m told, you’ll go to prison for five years if you tell the police where you got it and ten years if you don’t.

No one is allowed to have lobsters in Cuba. You can’t buy them in stores, and they sure as hell aren’t available on anyone’s ration card. They’re strictly reserved for tourist restaurants owned by the state.

Well, they can all be poor together.  So can we, if we let ourselves succumb to the politics of envy.

Do Government Handouts Necessarily "Help" The Recipients?

For purposes of running a personal life, a very simple rule of thumb is that more money is always better than less.  But does it follow that government handouts always "help" the recipients and therefore that more government handouts to the poor are always better than less?  

At the extreme, I would say it is obvious that a society where government handouts are the main source of income to most people can't work.  Essentially, that's where Rome found itself in the declining days of the empire.  Today, it's North Korea.    

But here's the problem.   There is near unanimous support for some kind of a basic "safety net" for those in genuine need; but there is no agreement on the boundaries of a legitimate "safety net."   Put a "safety net" in place, and the next thing you find is that government programs once in place have an inexorable dynamic of endless expansion.   Government programs also have fierce defenders who will never let go of whatever level of spending has been achieved so far.  Thus, there's an upward ratchet toward an unsustainable position.

An excellent book addressing these issues is Never Enough by William Voegeli.  He makes the point that liberal/statist supporters of government handout programs to alleviate poverty will never specify the level at which the programs have achieved their goals and should stop growing.  So no matter how much in the way of government handouts exists today, there will be advocates for yet more as helping those at the lower end of the income distribution.  I would add that fraudulent government income statistics -- particularly the ridiculous failure to count hundreds of billions of dollars of annual in kind distributions in the measure of "income" --  play a big role in the advocacy for more distributions even as the existing level ought to be far more than enough to eradicate poverty by any legitimate definition.

Examples are everywhere of advocacy for maintaining or increasing government distributions without acknowledgement of the growth dynamic of the programs or of any need for limits.  To take a couple of examples from the last week, on Monday January 13 we have Paul Krugman in the New York Times with a column headlined "Enemies Of The Poor."  Sample quote:

It's not much of an exaggeration to say that right now Republicans are doing all they can to hurt the poor, and they would have inflicted vast additional harm if they had won the 2012 election.

The "harm" to the poor consists of attempts to rein in government spending, with the main programs mentioned being Obamacare, food stamps and Medicaid.  Or in the Wall Street Journal of January 14, we have Alan Blinder with a very similar column headlined "How Government Wages War on the Poor."   Sample quote:

That brief shining moment [Clinton's second term] was followed by the presidency of George W. Bush, who took the country back to Reaganomics: huge tax cuts for the rich, exploding budget deficits and numerous efforts to trim social programs. . . .  Today, President Obama wants to get the federal government back on the side of the poor. 

Blinder seems to be focusing mostly on unemployment insurance extensions and the minimum wage.  

Neither Krugman nor Blinder, nor any of their many co-advocates, ever mentions actual numbers of the growth of distribution programs, or ever suggests the point at which they would agree that the distributions are adequate.  For example, here are government numbers for the food stamp program.  In 2000 (that's Blinder's "brief shining moment") there were 17.2 million recipients of food stamps and the total cost of the program was $17.05 billion.  In 2008, after what Blinder calls Bush's "numerous efforts to trim social programs" (note: can't say I really noticed those; in fact government spending on social programs exploded under Bush) the number of recipients was 28.2 million and the total cost was $37.6 billion.  The 2013 figures, after five years of Obama, are 47.6 million recipients and total cost of $79.6 billion.

So what are the right numbers for food stamps?  If Blinder actually believes that Clinton's second term was the "brief shining moment" of social programs for the poor, should we go back to 17 million or so recipients?  Or maybe 48 million recipients is still not enough.  So should there be 70 million, or 100 million?  Can we agree that limited resources have something to do with the discussion?  And is maintaining the independence of the people from the government a value of any significance? 

Or consider Medicaid spending.  That was $209.6 billion in the "bright shining moment" of 2000; $333.2 billion in FY 2007 after two terms of the harsh, harsh Bush cuts; and $415.1 billion in FY 2012.  It's now set to explode under Obamacare.  Again, will Krugman, Blinder, or any of their confreres please enlighten us with what they think is the appropriate level?  Or should this program as well grow at a rate far faster than the economy for the indefinite future until it engulfs the entire economy?

And then there's the question of whether the rapid expansion of the number of recipients of the handouts is good for the recipients themselves.  Here's a quote you may be familiar with:

Dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fibre.  To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.

That's from Franklin Roosevelt's 1935 State of the Union address.

My view would be that the idea behind the safety net should be to minimize it.  Those administering the programs should be commissioned at all times to be on the lookout for those who don't really need the assistance, and trying to figure out ways to get them back to independence.  Instead today, we have government at all levels aggressively promoting dependency and seeking to grow its programs in any way it can.  I would say that that's the real "war on the poor."    

de Blasio: Review Of The First Two Weeks

Frequently noted traits of new Mayor Bill de Blasio are that he gets a lot of sleep and is always very late for everything.   Those may actually be good things, given that probably the best we can hope for from this guy is that he just never does much.  And indeed, the first two weeks of his term have seen remarkably little in the way of actual actions coming out of the mayor's office.  So far, so good.

But can it last?  All indications are negative.

In the area of actual activity from the mayor himself, he showed up today in Queens to give a speech occasioned by the death of an 8-year-old boy hit by a truck.  That was clearly an appropriate activity for the mayor, but being who he is, de Blasio used the moment as usual to demonstrate his complete detachment from reality.  Here's the money quote:

The goal is literally to reduce fatalities on our roadways to zero. That is our singular focus.

Put that one into the same category as eliminating income inequality, making apartments in Manhattan "affordable," and keeping every single broke hospital open indefinitely.   And in typical bad politician fashion, he was completely prepared to use the tragic moment of this boy's death to advance a cynical government-growth initiative, in this case more speed and red light cameras for the city.  ("We're going to fight for the home rule right to install speed cameras and red light cameras . . . .")  Those have been repeatedly shown around the country to be ways to enhance government revenue with no, or even negative, effect on safety.

So far there's been no actual mayoral action on the charter school front, but the talk is ratcheting up to a level such that it's hard to believe that action will not soon come.   Today's Daily News carries a report that makes clear that de Blasio's big pre-K initiative is at least in part about helping his friends in the teachers' union by crowding non-union charter schools out of existing Department of Education real estate.  Here is the Daily News's quote from new schools chancellor Carmen Farina:

I think right now we need space for our own [public school] kids; you're going to have a large pre-K initiative. Where are we going to put some of those kids?

Meanwhile the Daily News also quotes a spokesperson for the Alliance for Quality Education, on the subject of whether de Blasio will hobble the charter schools by squeezing them out of their space, as saying:

"The mayor made it very clear," said Zakiyah Ansari, advocacy director for the Alliance for Quality Education and a member of de Blasio's transition committee. "It's about equity; it's about fairness."

For those who haven't heard of it, AQE is a teachers' union-backed front group that always manages to advocate for the union position by saying it's about "equity" and "fairness."  In fact, the teachers union position is actually about some combination of more money, less work, less accountability, and less competition for unionized teachers, and the kids be damned.  No surprise, then, that Ansari is on de Blasio's transition committee.

In the category of things de Blasio has talked about endlessly but that are not specifically his turf, we have the minimum wage.  Crain's New York Business reports today that a "coalition of leading liberal groups" (they identify the Working Families Party and the SEIU) is starting a push to have the state legislature give authority to raise the minimum to localities.  Presumably that will be the precursor to a push for a minimum wage increase in the City, which would be likely to sail through the City Council and de Blasio.  Hey, guys, if you believe it works to reduce poverty or income inequality, why not raise the minimum wage to $1000 per hour?

For those actually interested in the economics of the minimum wage,  economist David Henderson has some useful data at the econlib blog (relying in part on a study from Sabia and Burkhauser).   One thing that few people realize about the minimum wage is that very few of the workers who earn it live in households categorized as "poor" by the "poverty" data.  The reason is that they are second and third earners in households that may well be quite well-off.   Here is some of the Sabia/Burkhauser data:

• Only 11.3 percent of workers who would gain from the increase live in households officially defined as poor.
• A whopping 63.2 percent of workers who would gain were second or even third earners living in households with incomes equal to twice the poverty line or more.
• Some 42.3 percent of workers who would gain were second or even third earners who live in households that have incomes equal to three times the poverty line or more.

Then, of course, there are the people who lose their jobs when the minimum wage rises, and turn into zero earners.  Sabia/Burkhauser use estimates of 468,000 to 1.4 million fewer jobs (nationwide) if the minimum wage goes up by $2 per hour.  Combine the two phenomena of few minimum wage workers living in poverty to begin with and of minimum wage increases adding new people to poverty by zeroing out their income, and you are left not even knowing whether an increase in the minimum wage will increase or decrease measured poverty or income inequality.   But get ready for minority-youth unemployment rates in the range of 40-50%.

Meanwhile, how is de Blasio doing at delivering basic city services?  You would think that two weeks is not enough for things to start falling apart.  But there is a very odd phenomenon going on around our Manhattan neighborhood: nobody is picking up the discarded Christmas trees.  The drill here to get rid of a Christmas tree has been that you just put it out on the sidewalk, and (at least during the Bloomberg years) the Sanitation Department comes around every couple of days and picks up the trees to take them away for mulching.  This year suddenly nobody is picking up the trees, and hundreds of them have accumulated on the streets of our neighborhood over the past couple of weeks.  Somehow this seems ominous.

Government Pensions: Who Will Go Broke First?

In terms of major issues to which not nearly enough attention gets paid, state and local government employee pensions are right at the top of the list.  Nationwide the potential unrecognized and/or unfunded cost of these pensions is probably around $3 trillion.  That may sound like chump change compared to the $17 trillion bonded debt of the federal government, let alone the perhaps $80 trillion of unfunded entitlement obligations of the federal government.  But this $3 trillion is not uniformly distributed around the country, and instead is concentrated in a few places, particularly the largest cites in the big blue states, that is, New York, Chicago and Los Angeles.  Also, the Feds can borrow and pay bills in currency that they themselves issue, and can hyperinflate the currency to get out of a deep enough hole; but the states and cities don't have those options.  Several California cities (Vallejo, Stockton, San Bernardino), along with (of course) Detroit, have already been pushed to the wall and filed for bankruptcy as a result of unsustainable pension obligations.

All three of the big three cities have outstanding pension promises that I would say are obviously unsustainable.  Terms of each pension plan differ, but the problems lie in some combination of youthful retirement ages, uncapped cost of living adjustments, "spiking" of pensions with overtime in final years, and "disability" systems subject to rampant systematic abuse.  The result is that pension costs soar relative to salary costs of active employees, until pension costs equal or exceed, and sometimes far exceed, the costs of the workers who are actually doing the work.  At that point, necessary services get squeezed out of the budget, and something has to give.  But the pension costs are back-loaded, and creep up gradually, often long after the promises are agreed to.  Nobody notices or talks about the problem until a city is very deep in a hole.

Thus, as an example, going back to the 90s and even earlier, New York City has set retirement ages based on 25 and even 20 year working careers, whereby many people can take their full pensions in their 50s, or even their 40s.  As recently as 2001 they were kidding themselves that all this could be paid for by the continuation of the big stock market run-up of the 90s.  But since 2001 the stock market has not cooperated, and has reverted to a more normal pattern of ups and downs, so New York City's required pension contributions have gone from $1.5 billion per year (about 4% of the budget) to over $8 billion (about 12% of the budget, and almost 15% of the city-funded portion).

Here is my big question:  Which one of the big blue cities will get taken under first by its pension promises? (Note:  In my opinion, it is nearly inevitable that one or all of them will be bankrupted by these promises within about 10 to 20 years, perhaps sooner.)   To some degree the answer to that question turns on how well-funded the plans are currently, but actually the more important issue is whether promises themselves can be brought back to a reasonable level.  And it turns out that that is much harder than you might think.

Here is an issue that you are almost certainly not aware of and that has something like $2 trillion riding on it for the citizens of these big cities:  When your city finally recognizes that its pension commitments are unsustainable, and wants to get them back in line, can it reduce its promises for all pension accruals going forward from that day, or can it only reduce its promises as to new employees who have not yet been hired at the time of the change?  In other words, must a city maintain its pension promises, no matter how unsustainably generous, for all current employees, even those who have worked for the city for as little as one day, throughout their entire career and their retirement; or can the city reduce the promises for everybody going forward from today, honoring all pension accruals made to this point but not committing to new accruals, even for long-term active employees?

Put that way, you may say that it is obvious that a pension sponsor such as a city must honor pensions earned to date, but should be able to cut back on its promises, and accruals resulting from those promises, starting from now.  In the world of private pensions, regulated by the federal government under ERISA, this is exactly how it works.  And as it has become increasingly obvious that defined benefit pensions lead to burgeoning and uncontrollable liabilities, many and even most private pension plan sponsors have reacted by what is called "freezing" their pension plans, meaning that all past accruals are honored but going forward all accruals cease.  It is a clear line that is easy to draw.

But none of the states of New York, Illinois and California has recognized this rule.  Here is the status of the law:

New York.  New York has a provision in its state Constitution, Article VII, Section 5, that provides that "membership in any pension or retirement system of the state or [city] shall be a contractual relationship, the benefits of which shall not be diminished or impaired."  Does that mean that pension accruals cannot be reduced even on a prospective-only basis?  I would argue that the constitutional provision does not mean that at all; but in a series of relatively old court decisions (pre-dating the federal ERISA statute) where the issue was not squarely presented or focused on, New York's highest court has rendered decisions seemingly standing for the proposition that any government employee with a pension promise is entitled to have that promise, and accruals arising from it, continued without diminution for his entire career.  For example, in Birnbaum v. New York State Teachers Retirement System, 5 N.Y.2d 1 (1958) the Court of Appeals determined that the pension plan could adopt a new mortality table (that had the effect of reducing monthly pension checks) for "only such persons as enter the system thereafter."  And in Kranker v. Levitt, 30 N.Y.2d 574 (1972) the same court invalidated, as to all current employees, a statute that would have removed pension credit for unused vacation time.  Nobody in these or other similar cases seems to have pointed out to the court the difference between pension benefits already accrued and those not yet accrued, a question of multi-hundreds of billions of dollars interest to the taxpayers. 

Today, given what might be seen as strong headwinds from the courts, nobody in New York seems to have the appetite to take on this issue.  In a major pension reform of the state employee pension funds enacted in 2012, changes were made as to new employees only.  That means that it will take 30 years for meaningful savings to be realized, as new employees gradually work their way through the system.  Meanwhile, New York City has not really tackled this issue at all, although to be fair to outgoing Mayor Bloomberg, the issue is controlled by the state legislature rather than by bargaining between the city and its workers.  Bloomberg has made multiple speeches warning incoming Mayor de Blasio that he must pay attention to this, but, to all observation, de Blasio continues to ignore the issue completely.

California.  California does not have a state constitutional provision analogous to the one in New York.   Nevertheless, California's Supreme Court has adopted a judge-made rule of "vested rights" that has been found to protect pension plan obligations to state employees.  A fair description of the California case law is that it is highly protective of employee pensions without ever making the critical distinction between already-accrued and yet-to-be-accrued benefits.   In 2012 the citizens of San Jose (third largest city in California and 10th largest in the U.S.) passed, by a 70-30 margin, a ballot proposition called "Measure B."  That Measure had the effect of immediately reducing ongoing pension accruals for city employee pensions, while preserving pension obligations accrued to date.  Many of the city unions immediately challenged the Measure.  In a Tentative Decision on December 19, 2013 (follow link here for a copy of the opinion), Judge Patricia Lucas of the Santa Clara County Superior Court would invalidate much of Measure B.  In its decision, the court would find that the employees have a "vested right" in the city's obligation to pay "unfunded actuarially accrued liabilities" of the plans -- a concept that includes both already-accrued and to-be-accrued benefits.  The court also would find a "vested right" in future cost-of-living adjustments.  This decision is subject to change before becoming final, and then to appeal.

Meanwhile the backers of the San Jose ballot measure, led by San Jose Mayor Chuck Reed, now have underway an effort to get a measure on the statewide ballot to make clear that "changes in the future pension benefits of current public employees" are allowed.  A dispute has now erupted because the Attorney General of California, Kamala Harris (thought to be closely allied with state employee unions) has produced the summary of the initiative to appear on the ballot, and it characterizes the initiative as "eliminat[ing] constitutional protections for vested pension and retiree healthcare benefits for current public employees . . . ."  I guess for the unions, it helps to have friends in high places.  So California cities and towns, let alone the state itself, have some very serious problems trying to get these costs under control.

Illinois.  Illinois and its big city Chicago together have the worst current pension funding problem of all the states and cities, much of it stemming from simply not making actuarially required pension payments for many years.  According to data from Moody's reported here by Reuters, Chicago currently spends about 9% of revenues on pensions, but it would be about 28% if they made the actuarially-required contributions.  A contribution at that level would squeeze out huge amounts of other spending.

In early December 2013 the Illinois legislature, after years of wrangling and delay, passed a major pension reform measure that claims to save some $160 billion over 30 years.  The changes are mainly to retirement ages and cost of living adjustments.   The changes apply only to the state pension systems, not to the city of Chicago.

Illinois has a state constitutional provision (Article XIII, Section 5) almost identical to New York's:  "Membership in any pension or retirement system of the State [or any city] shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."   According to this article from the Springfield State Journal-Register on December 27, a group of school administrators and teachers immediately filed suit to invalidate the state pension changes.  Meanwhile, the situation in the case law in Illinois is more ambiguous than in the other states, leading to dueling opinions from the Illinois legislature and from a major Chicago law firm (both available here) as to whether pension accruals can be changed prospectively under the Illinois constitution.

Since the lawsuit has just been filed, it will be a while before there is a decision, and even longer before appeals are resolved.  Meanwhile, Chicago, which has the worst problems of all, hasn't yet started to address its problems.  Although any fix requires action from the Illinois legislature, this Reuters article is highly critical, and in my view rightly so, of the failure of Mayor Rahm Emanuel to even try to address the problem:

This is a picture of a politician too timid to address a core issue that faces his city. . . . Pension problems will not fix themselves, especially when the black hole is as big as Chicago’s.

Same is true as to de Blasio in New York, until we see any evidence to the contrary.  Anyway, given the huge hole they have already dug for themselves, and the complete refusal of their Mayor to address the issue, I say that Chicago will be the first of the big three cities to be brought down by its pension promises.

Funny how the so-called "progressives" talk a good game about helping the poor and disadvantaged, but when you look at what they actually do, it is to pass out the big money to their union friends who helped put them in office, while using the pension mechanism to hide the problem from the taxpayers and voters as long as possible. 

The New York Times Spouts Nonsense On "Poverty"

A big source of the Manhattan conventional ignorance is that most all members of the professional class read the New York Times and somehow think that because the Times has such a condescending high-brow tone it must know what it is talking about.  Big mistake.  Sorry, but a very high percentage of what masquerades as news in the Times is just naked advocacy for government spending as the solution to all human problems.

A good example among many is a front page article from Sunday's print edition, "50 Years Later, War on Poverty Is a Mixed Bag," by Annie Lowrey.   As readers here know, one of my persistent themes is that government "poverty" statistics are deliberately misleading.  They deem to be "poverty" things that have nothing to do with physical deprivation in order to wildly inflate the numbers, and are designed specifically so that no amount of increased government spending can ever eliminate or even reduce the "poverty."   Thus they are used to justify unending pleas for more ineffectual spending.  For a few of my prior articles, see here, here, and here. 

In her piece Ms. Lowrey demonstrates both an appalling ignorance of the scam and an adamant refusal to apply any critical thinking to the subject matter.   The basic idea of the article is to bemoan the fact that after five decades of vast spending in a supposed "War on Poverty," the rate of "poverty" as measured by the government has barely budged.  Ms. Lowrey goes looking for the reasons in deep social science doublethink without ever considering the extent to which the government actually measures what it claims to measure.

Here are a few basics that are necessary for any discussion of U.S. "poverty" statistics:  (1) The amount of needs-tested benefits passed out per year from all levels of government, which is over $900 billion, is far more than enough to remove every person in "poverty" from that status if the money were simply passed out in cash. (2) Instead of being passed out in cash, the large majority of the benefits are passed out in-kind (e.g., food stamps, Medicaid, housing assistance, WIC and other "nutrition" programs, etc.) and then counted at zero in determining "income" for purposes of the poverty statistics.  Given the vast amounts that are spent without being allowed to count in the measure of "poverty," the official statistics long since ceased to have any meaning and instead are just a tool cynically used by the government to defraud the public into acquiescing in continuing government growth.

But here we have Ms. Lowrey spouting the usual statistics as if they mean something:

But high rates of poverty — measured by both the official government yardstick and the alternatives that many economists prefer — have remained a remarkably persistent feature of American society. About four in 10 black children live in poverty; for Hispanic children, that figure is about three in 10.

The "four in ten" and "three in ten" figures for black and Hispanic children are completely the result of failing to count the in-kind benefits in the statistics.  What are the real numbers after the benefits are counted?  The government won't say, and Ms. Lowrey is not curious (or intelligent) enough to ask.  There is nothing "remarkable" about the persistence of "poverty" in the United States in the face of spending that would long ago have eliminated it under honest measurement.  The whole idea is to spend the money in ways that don't count in order to have a reason to advocate for yet more spending.

Then we have this howler:

According to one recent study, as of mid-2011, in any given month, 1.7 million households were living on cash income of less than $2 a person a day, with the prevalence of the kind of deep poverty commonly associated with developing nations increasing since the mid-1990s.

Please, Ms. Lowrey, how does "living on cash income of less than $2 a person a day" equate with the "deep poverty" of "developing nations"?  She is just completely omitting that people in the United States may have lots of reasons to have little or no "cash income" in a given year, but still have plenty of resources to live on.  Who are these people in "deep poverty" living on less than $2 per day?  Just give it a moment's thought (something Ms. Lowrey appears incapable of) and you will realize that you know lots of them and you had no idea that they were in "deep poverty."  Examples:

(1) Students, particularly students in graduate and professional school who are over 21, live apart from their parents, and for whatever reason do not take a paying job during the year.  They live off (a) scholarships (don't count as "cash income"), (b) student loans (don't count as "cash income"), and (c) support from the parents or other family members (doesn't count as "cash income").  In lieu of a summer job, perhaps they think it is to their advantage to take that unpaid internship this year.

(2) Early retirees who live for a few years by consuming savings before taking their social security.  Consuming savings does not count as "cash income."  Also in this category are those who have large equity in a home and take a reverse mortgage to get a monthly check.  That also does not count as "cash income."

(3) Small business owners who have a losing year.  Oddly enough (given all the other arbitrary exclusions), losing money in a business actually does count as "cash income."  Yes, it is entirely possible to have "cash income" that is negative.  In fact, if you have a large enough business, you can have a very large negative cash income, even millions of dollars.  Is that what they mean by "deep poverty"?  Of course, people who have a business large enough to lose millions of dollars in a year are likely in real life to be "rich" by any normal definition of the term, although not by the absurd definitions that the government uses to measure "poverty."

(4) Young people out of school who take a year or two to enjoy themselves before starting work.  Maybe they travel in Europe.  Maybe they hike the Appalachian Trail.

And I haven't even gotten to people who make their money off the books where the government doesn't count it, like drug dealers and many casual construction workers.

When you think about it, you will realize that in the context of today's United States, going a year without any meaningful "cash income" is far more likely to be a luxury than a hardship.  (Clearly I am not saying that no one in the United States lives in conditions of hardship.  Undoubtedly there are many.  It's just that the government statistics do not give us any meaningful information on how many, nor does the "cash income" measure give any meaningful indication of which people are the ones in real hardship.) 

Given the many reasons why a person may go a year without earning money, it is actually surprising that the government statistics only come up with 1.7 million people reported as living in families with "less than $2 per day per person" cash income.  In my own circle of extended family, friends and acquaintances, there are multiple people who likely fit this definition.  If you met any of them, you would think that they were upper middle class, or even wealthy in some cases.  It would never occur to you that they are what the government -- and Ms. Lowrey -- mean by "deep poverty."

And I have only scratched the surface of the flaws in this preposterous article. 

Another Nomination For The Worst Possible Public Policy

Back on September 16 I made a nomination for the worst possible public policy, namely "affordable housing" in Manhattan.  I described it as "the most expensive possible way to help the smallest number of people."  Actually that's a charitable description.  Large numbers of the beneficiaries of "affordable housing" in Manhattan don't have any credible claim to being poor, and many of the affordable housing programs explicitly use scarce government funds to benefit the middle and even upper middle classes to the tune of $40,000 and up per family per year.  Is it really possible for any public policy to be worse than that?

Well, I have another nomination: beach restoration on the Long Island oceanfront.  This time we are not talking about just benefiting the middle and upper middle classes with government handouts; no, this is the very richest of the rich.

My interest got piqued when I read in the Real Estate section of today's NYT that Billy Joel's oceanfront estate on the beach in Sagaponack has recently gone back on the market with a new asking price of $23.5 million, up from a recent asking price of $16.75 million.  Here is a picture of the estate from the Times article:

Among reasons given for the price increase were the following:

Also factoring into the higher price is a $26 million beach-nourishment project underway in Sagaponack, Water Mill and the Town of Southampton to help buffer homes from future storms.

It can't possibly be that the government is making that kind of giveaway to a handful of the super rich like Billy Joel, can it?  Well, thankfully, it's not quite that bad.  But almost.

Long Islanders have been working for decades to get the Feds to put up big money to maintain their beaches, but thankfully the Feds have pushed back at least a little.  Notably, the Clinton administration, to its credit, would have none of it.  But Hurricane Sandy in 2012 gave the Long Islanders their opening.  After Hurricane Sandy, at the end of 2012, Congress appropriated some $3.5 billion for construction projects to restore areas impacted by Sandy.  Most of that money remains unallocated.  But according to this from the East Hampton Patch in June 2013, OMB has approved release of $700 million out of the $3.5 billion, and one of the first beneficiaries has been Montauk, the farthest-east hamlet on Long Island.

The specifics have not yet determined, but detailed planning and design of the Montauk beach re-nourishment project can begin with 100 percent federal expense, [Congressman Tim] Bishop's office said in a statement.

Montauk is not as super-rich as Sagaponack, but still, this is pretty over the top.  And how about that project over at Sagaponack?  It turns out that the $26 million beach restoration currently going on is actually funded, at least for the moment, by the super-rich homeowners themselves.  According to Sag Harbor Online on February 6:

Oceanfront property owners in Sagaponack, Bridgehampton and Water Mill approved a referendum on Saturday night that will allow homeowners and the Town of Southampton to spend $24 million to replenish eroded beachfront. A beachfront only made worse by Hurricane Sandy’s impact this October.

But will that stick, with billions of federal funds sitting out there for the asking?  Don't count on it.  From the same article in Sag Harbor Online: 

Whether or not this [Sagaponack] project will benefit from Federal Emergency Management Agency (FEMA) funding for those impacted by Hurricane Sandy remains unclear. Beaches in both Bridgehampton and Sagaponack, having already contended with significant beach erosion, were hammered by the fall storm, whole stretches of beach literally washed away.  “We are pursuing that and the town is pursuing that very aggressively,” said Terchunian.

I think it is virtually certain that the Feds will put up the money as soon as everyone's back is turned.

Meanwhile, Billy Joel is taking no chances, making himself a fixture on the Democratic Party fundraising circuit.  He played at Andrew Cuomo's birthday fundraiser on December 4.   On the federal front, here is Joel palling around with Senator Schumer on September 16, 2013.  

Whether or not the Feds ultimately put up the money for the restoration of beach on the super-rich stretch of Sagaponack, the whole idea of multi hundreds of millions of federal money for Long Island beach restoration is very, very hard to top as bad public policy.

UPDATE, January 8, 2013:  Not wasting any time in fulfilling my prediction above, Gov. Cuomo issued a big press release yesterday, January 7, setting forth his program to "strengthen New York's communities against extreme weather."  The "strategy" is a list of all kinds of projects, with an overall price tag of $17 billion stated on the first line of the release.  Who's paying for it?  Well, it's some indication that VP Biden was there at the announcement along with Cuomo, although the numbers in the release don't have any breakdown between state, federal and (maybe?) local share.  There's also no time line for when all this will happen.  If you scroll down a ways, you will find this as one of the projects:

Coastal Protection - $1,794,461,757

The US Army Corps of Engineers, in concert with NYS Department of Environmental Protection, and the NYS Department of Parks and Historic Preservation, is embarking on a long-term program to protect 83 miles of exposed coastline.

That 83 miles of "exposed coastline" would look to correspond more or less to the large majority of the south shore of Long Island.  In fact, you can't really get to 83 miles without including most or all of the super-rich areas like Westhampton, Bridgehampton, Southampton, Sagaponack, East Hampton, and Amagansett (that stretch is over 40 miles), as well as the not exactly poor Fire Island (another 32 miles).  So, too bad taxpayers, you are going to pay at a minimum hundreds of millions to "protect" the ocean-front homes of the richest of the rich.