Looking Harder at Greenspan on Inequality

In previous posts (here, here, here, here, here, here) I think I've at least convinced myself that "inequality" as currently discussed is (at least) two different "problems", each spurred by different and incompatible visions. The first, exemplified by Paul Krugman, et. al. is all about the very tippy-top of the income/wealth distribution: one percent of the population or less. This view is seemingly fueled entirely by resentment of the "rich", relies on fallacies for argument, and can't point convincingly to any specific social ills caused by having a relative handful of people at high income levels. Adherents offer no "solution" other than taking (more of) the income/wealth of "the rich" via taxation. This is often termed "redistribution", but generally there's more interest in the taking part; the arguments showing how "redistribution" will help the non-"rich" are weak to non-existent.

The second vision is typified by Alan Greenspan's Senate testimony last year. I briefly discussed the testimony a couple days back, mainly to argue that Krugman (et. al.) took Greenspan's "inequality" concerns out of context to bless their vision. But I'd like to look at Greenspan's comments on their own here.

[F]or the past twenty years, the supply of skilled, particularly highly skilled, workers has failed to keep up with a persistent rise in the demand for such skills. Conversely, the demand for lesser-skilled workers has declined, especially in response to growing international competition. The failure of our society to enhance the skills of a significant segment of our workforce has left a disproportionate share with lesser skills. The effect, of course, is to widen the wage gap between the skilled and the lesser skilled.
Greenspan makes it clear (well, as clear as he ever does) that his vision of the "inequality" problem is about large population segments, not a mere percent or fraction thereof.

In a democratic society, such a stark bifurcation of wealth and income trends among large segments of the population can fuel resentment and political polarization. These social developments can lead to political clashes and misguided economic policies that work to the detriment of the economy and society as a whole.
This is superficially reasonable, especially given the tentative phrasing about what "can" happen. But (wait a minute, Al), are we really seeing that much resentment now? Dan Drezner says "there is surprisingly little grumbling about [about inequality] within the mainstream political discourse". This repeats a point he made nearly three years ago, where he drew supporting arguments from David Brooks (here and here).

How about political polarization? Everyone says there's a lot of these days; is it due to the wage gap between high- and low-skilled workers? I think that's a tough argument to make. For example, here's a Brookings Institution "Policy Brief" by Pietro Nivola that examines a number of likely causes of current polarization; economic factors don't make his list.

Are "misguided economic policies" in the offing as a result of inequality? Professor Drezner mentions protectionism as a possible candidate. Fine; but I'd tend to vote for simple xenophobia as a more likely cause of increased protectionist sentiment over inequality.

So I don't find Greenspan's claims for the baleful effects of the wage gap too convincing. But that's OK; surely a workforce which (on average) is skilled below its potential is a Bad Thing on its face; we don't really need to make indirect arguments about its further effects on resentment, polarization, etc.

So how to fix that? Greenspan again:

[S]trengthening elementary and secondary schooling in the United States--especially in the core disciplines of math, science, and written and verbal communications--is one crucial element in avoiding such outcomes. We need to reduce the relative excess of lesser-skilled workers and enhance the number of skilled workers by expediting the acquisition of skills by all students, both through formal education and on-the-job training.
Appealing to improved education is an obvious choice. It's a no-brainer! (Heh.) Krugman, however, is scornful about this sort of thing:
The notion that it's all about returns to education suggests that nobody is to blame for rising inequality, that it's just a case of supply and demand at work. And it also suggests that the way to mitigate inequality is to improve our educational system - and better education is a value to which just about every politician in America pays at least lip service.
In short: if there's nobody to blame, and it can't be used as a partisan issue, I'm not very interested!

For more reasonable folks, Greenspan's education solution is at least better than redistributionist schemes. In a certain sense, we "know" how to teach skills to willing learners. And all we have to do is to implement that through the current schooling system. Easy!

But it's not a quick fix, is it? Years elapse before any additional educational magic at the elementary level works its way into the workforce.

My guess would be that plain old market forces would be a better bet than yet another educational reform. Not very sexy. The most efficacious role for the state might be simple and similarly non-sexy: to get out of the way.

Mail from Walter Soehnge

I previously blogged about Walter Soehnge here and here; it was widely alleged a few weeks back that his $6,522 payment to his JCPenney Platinum MasterCard was reported to the Department of Homeland Security because this payment was "a certain percentage higher" than his normal payment. This became a minor cause célèbre, as it was considered yet another harbinger of the impending long fascist night in Bush's Amerikkka. I was skeptical.

Mr. Soehnge has sent me mail (and I have no reason to doubt that it is Mr. Soehnge, not some hoaxster.) I'll reproduce it here, unedited save for HTMLizing:

I am sending you this document because one of my friends read your site and sent the link to me. The chronology and content are correct. I hope the info clears up some things for you. Google hits have not been checked since 10March06. Exercising what I considered to be a right;let the genie out of the bottle. My very conservative friends think I am unpatriotic. My liberal friends think I am a crusader for personal freedoms. I thought I was saying, "Hey guys some unusual stuff is going on out there. Be aware of it...get active...stand-up and be counted".
The Homeland Security/J C Penny MasterCard (JCPMC) Fiasco: A Sequence of Events

01/17/06 -
Payment made on internet
01/20/06 -
Money cleared bank
01/25/06 -
Card refused and D'Anna is told by J C Penny MasterCard (JCPMC):
  • (1st person spoken to) Check had to clear bank
  • (2nd person spoken to) Took 10 days or more before posting could be done - both things had occurred
  • (3rd person spoken to) The reason was due to a Homeland Security regulation(s). Customers were not notified so they could not find a way around the regulation(s). (Latter and former responses to direct questions)
01/28/06 -
D'Anna checks account via internet and speaks to three persons by telephone at JCPMC
  • Balance marked paid
  • Credit limit/cash advance level same as before $6,520 payment
  • (3rd person spoken to) Reiterates that money is being held due to Homeland Security regulation(s)
  • Money would be released in 10-14 days from date of payment
  • Would transfer to someone who would set her up with a different account that she could use
02/01/06 -
Walter calls JCPMC to follow-up the above information
  • Three persons reaffirm Homeland Security regulation(s) is reason money is stalled
  • Asks for copy of regulation(s) constraining J C Penny MasterCard
  • Told it would be sent
  • Contacted ACLU, Channe1 12 and Bob Kerr of the Providence Journal and attorney
02/07/06 -
Walter calls JCPMC to follow-up on promised letter and is told Letter sent on 02/02/06 arriving by 02/15/06 - it is yet to arrive
02/24/06 -
Bob Kerr article in Providence Journal
02/28/06 -
Article in Scripps Howard News Service
03/08/06 -
Walter Jay Fitzgerald of Boston Herald have telephone interview
03/08 or 03/09/06 -
Fitzgerald speaks to Jim Ulseth, JCPMC Credit Services/Customer Affairs (813) 969-1209
03/10/06 -
Boston Herald article comes out
03/10/06 -
Walter calls JCPMC offering them choice: give over regulation(s) or the affair is put in the hands of an attorney. Assurances are given JCPMC that money will not be the focus of any legal action taken
03/10/06 -
Jim Ulseth (a well spoken professional) calls the Soehnge home and says the following things
  • The seven persons referring to Homeland Security Regulation(s) had misspoken
  • The problem was a misunderstanding on the part of those seven people
  • An internal investigation was under way
  • Homeland Security had not been given any of our personal information
  • JCPMC internal security decided the payment was suspicious
  • He would send a letter ("perhaps by registered mail") fully explaining the issue
  • That our card was fully usable with maximum balances available
03/10/06
Walter reiterated that balance/availability was not the issue. At issue was the Federal Government's interest in my finances and whether JCPMC had given that information to some unregulated and insidious bureaucracy.

Some Google Miscellany to Which to Go H-m-m?
Banking Secrecy Act, 31 U.S.C. 5312(a) (2) (A) through (X) - 244 hits
Walter Soehnge - 13,300 hits

Mr. Soehnge seems like a straight shooter, I've got no reason to doubt his patriotism, and I'm sure the above account is accurate, at least within the usual uncertainties introduced by recalling the details of phone conversations after the fact.

But it's worth pointing out:

  • Absent is any actual statement that any information whatsoever about the Soehnges or this transaction were provided by JCPenney to the Department of Homeland Security. (Or any other governmental agency, for that matter.) At least one JCPenney spokesmodel denies that DHS was given any "personal information."

  • Also absent is any indication that this had anything to do with a terrorism investigation. DHS (as seemingly few realize) is tasked with emitting regulations and undertaking investigations in the credit card crimes area, even if they are non-terror related.

  • Also absent is any indication that this happened due to new regulations issued under authorization of the Patriot Act.

I'm not saying that any of those things aren't true, just that there seems to be remarkably little support for the assumption by so many people in the MSM and on the Web that they are true. See, for a reminder: Andrew Sullivan; J. Francis Lehman; Bob Kerr of the Providence Journal; Bruce Schneier; and Slashdot.

Also, for that matter, see the Boston Herald story referred to in the timeline above. The author, Jay Fitzgerald, confidently states (without any supporting evidence provided) that Mr. Soehnge's payment "set off an anti-terrorism alarm." To his credit, Fitzgerald actually did some calling. Oddly, instead of calling the DHS, he called the Department of the Treasury. Their spokeswoman "could not verify Soehnge's particular claims." Fitzgerald also called JCPenney and spoke to a "spokeswoman", who is quoted only as saying "We're trying to figure out why that happened." Missing, as usual, is any verification of what specifically happened vis-a-vis reporting to DHS.

So I'm still skeptical. I've seen nothing to dissuade me from my original notion that peoples' political preconceptions are causing them to lower their shields, skepticism-wise.

But I've asked Mr. Soehnge to send along any additional information he receives from JCPenney or anyone else. And, if he does, you'll probably see it here.

Update: changed some stuff to reflect Walter Soehnge's corrections.


Last Modified 2006-03-16 8:59 PM EST