Topic: General

The Middle Class Shrinks as the Number of High Income Households Grows

The day before yesterday, The Washington Post ran a piece with the alarming headline, “The middle class is shrinking just about everywhere in America.” Although you wouldn’t know it from the first few paragraphs, a shrinking middle class isn’t necessarily a bad thing. As HumanProgress.org Advisory Board member Mark Perry has pointed out, America’s middle class is disappearing primarily because people are moving into higher income groups, not falling into poverty. label Data from the U.S. Census Bureau shows that after adjusting for inflation, households with an annual income of $100,000 or more rose from a mere 8% of households in 1967 to a quarter of households in 2014.

According to the Pew Research Center, 11% fewer Americans were middle class in 2015 than in 1971, because 7% moved into higher income groups and 4% moved into lower income groups. The share of Americans in the upper middle and highest income tiers rose from 14% in 1971 to 21% in 2015. 

One has to read fairly far into the Washington Post’s coverage before seeing any mention of the fact that a shrinking middle class can mean growing incomes: 

“[In many] places, the shrinking middle class is actually a sign of economic gains, as more people who were once middle class have joined the ranks at the top. [For example, in] the Washington, D.C. metropolitan area, the share of adults living in lower-income households has actually held steady [from 2000 to 2014]. The households disappearing from the middle-class, rather, are reflected in the growing numbers at the top.”

Other cities with a shrinking middle class, a growing upper class and very little change in the lower class include New York, San Francisco and New Orleans. So the next time you hear someone bemoan the “shrinking middle class,” take a closer look at the data and keep in mind that it may actually be a sign of growing prosperity. 

Topics:

The Necessary and Valuable Economic Role of Tax Havens

Economists certainly don’t speak with one voice, but there’s a general consensus on two principles of public finance that will lead to a more competitive and prosperous economy.

To be sure, some economists will say that high tax rates and more double taxation are nonetheless okay because they believe there is an “equity vs. efficiency” tradeoff and they are willing to sacrifice some prosperity in hopes of achieving more equality.

I disagree, mostly because there’s compelling evidence that this approach ultimately leads to less income for the poor, but this is a fair and honest debate. Both sides agree that lower rates and less double taxation will produce more growth (though they’ll disagree on how much growth) and both sides agree that a low-tax/faster-growth economy will produce more inequality (though they’ll disagree on whether the goal is to reduce inequality or reduce poverty).

Since I’m on the low-tax/faster-growth side of the debate, this is one of the reasons why I’m a big fan of tax competition and tax havens.

Bathroom Battles: Why We Need School Choice

North Carolina governor Pat McCrory (R) has just responded to the federal government’s threat to punish the state over its law prohibiting local governments from allowing transgendered people to choose their bathrooms: We’re suing!

Central to the nation’s bathroom war – which is one among sundry, seemingly endless culture wars – are the public schools. They are mentioned specifically in the Tar Heel State’s embattled law, and schools have been the sites of several lawsuits across the country over who gets to decide where students go to the bathroom or change their clothes. Of course, as Cato’s Public Schooling Battle Map reveals in stark detail, just like the nation, our schools are constant battlegrounds in the culture wars, and our children are essentially innocent civilians with political, social, and cultural bombs going off all around them.

At issue in North Carolina are really two things directly applicable to education: level of public school control, and private rights.

The immediate issue is whether a state should be able to make its own laws without the federal government overruling them. The feds have a legitimate claim, under the Fourteenth Amendment, to do what they are doing – attempting to prevent discrimination by state or local governments – but there is also a good case to be made that there are competing rights at stake – privacy versus nondiscrimination – and perhaps neither should take clear-cut precedence. Moreover, even if it has the authority to intervene, it may be best if Washington allowed social evolution to occur gradually rather than imposing it as people deal with what is, it seems, a pretty new idea: a person should choose which restroom or locker room to use. Of course, North Carolina’s law applies one rule to all municipalities, also potentially curbing natural societal evolution.

Set Fixed Judicial Terms for Supreme Court Justices

Contrary to the judiciary’s reputation as the least dangerous branch, judges exercise almost every executive and legislative power other than going to war. This is why the battle over Antonin Scalia’s successor is so bitter.

That wasn’t the Constitution’s original plan. The courts were important but were not to supplant the other branches. Rather, judges were expected to constrain the executive and legislative branches.

Alexander Hamilton expected the judiciary to play a “peculiarly essential” role to safeguard liberties and act as an “excellent barrier to the encroachments and oppressions of the representative body.” Judges were to “guard the Constitution and the rights of individuals” from “the people themselves.”

James Madison, intimately involved in drafting the Constitution, explained that: “independent tribunals of justice will consider themselves in a peculiar manner the guardians of [Bill of Rights guarantees]; they will be an impenetrable bulwark against every assumption of power in the legislative or executive; they are will be naturally led to resist every encroachment upon rights expressly stipulated for in the constitution by the declaration of rights.”

Seven Reforms to Confront the Populist Wave in America and Europe

Donald Trump keeps winning Republican Party primaries. He could be America’s next president. It’s a sobering thought.

But Trump is not alone. Europe is filled with populist parties, old and new.

It’s too simple to decry a proto-fascist wave, as feared by some alarmists. In fact, most of his Republican competitors were far more aggressive and irresponsible on foreign policy than Trump. Normal folks simply are tired of being viewed as problems to be solved rather than citizens to be engaged.

In the U.S. it doesn’t much matter who people vote for. Government will expand. New regulations will be issued. More tax dollars will be spent. Additional wars will be started. The only certainty is that the views of those who vote will be ignored. Much the same governing consensus dominates Europe.

At the same time, the governing class protects itself. The response of this ruling class to public challenge only increases popular anger and frustration.

WSJ Reports on Canadian Air Traffic Control

In today’s Wall Street Journal, Scott McCartney reports on the superior air traffic control (ATC) system north of the border. American aviation is suffering from a bureaucratic government-run ATC, while Canada’s privatized system is moving ahead with new technologies that reduce delays and congestion.

Showing leadership and boldness, House Transportation Committee chairman Bill Shuster managed to get reforms along Canadian lines passed out of his committee. Unfortunately, Senate Republicans have thus far been too timid to move ahead with restructuring. The flying public may have to wait until a reform-minded president can push an overhaul through Congress.

Here’s some of McCartney’s reporting:   

Flying over the U.S.-Canadian border is like time travel for pilots. Going north to south, you leave a modern air-traffic control system run by a company and enter one run by the government struggling to catch up.

The model is Nav Canada, the world’s second-largest air-traffic control agency, after the U.S. Canada handles a huge volume of traffic between the U.S. and both Asia and Europe. Airlines praise its advanced technology that results in shorter and smoother flights with less fuel burn.

In Canada, pilots and controllers send text messages back and forth, reducing errors from misunderstood radio transmissions. Requests for altitude changes are automatically checked for conflicts before they even pop up on controllers’ screens. Computers look 20 minutes ahead for any planes potentially getting too close to each other. Flights are monitored by a system more accurate than radar, allowing them to be safely spaced closer together to add capacity and reduce delays.

And when flights enter U.S. airspace, pilots switch back to the old way of doing things.

The key, Nav Canada says, is its nongovernmental structure. Technology, critical to efficient airspace use these days, gets developed faster than if a government agency were trying to do it, officials say. Critics say slow technology development has been the FAA’s Achilles’ heel.

… Another innovation adopted around the world is electronic flight strips—critical information about each flight that gets changed on touch screens and passed from one controller to another electronically. Nav Canada has used them for more than 13 years. Many U.S. air controllers still use paper printouts placed in plastic carriers about the size of a 6-inch ruler that controllers scribble on.

For more on ATC, see here.

Napoleon and Trump, Advancing on the Capital

It is said, perhaps not reliably, that the following headlines appeared in a Paris newspaper, perhaps Le Moniteur Universel, in 1815 as Napoleon escaped from exile on Elba and advanced through France:

March 9

THE ANTHROPOPHAGUS HAS QUITTED HIS DEN

March 10

THE CORSICAN OGRE HAS LANDED AT CAPE JUAN

March 11

THE TIGER HAS ARRIVED AT CAP

March 12

THE MONSTER SLEPT AT GRENOBLE

March 13

THE TYRANT HAS PASSED THOUGH LYONS

March 14

THE USURPER IS DIRECTING HIS STEPS TOWARDS DIJON

March 18

BONAPARTE IS ONLY SIXTY LEAGUES FROM THE CAPITAL

He has been fortunate enough to escape his pursuers

March 19

BONAPARTE IS ADVANCING WITH RAPID STEPS, BUT HE WILL NEVER ENTER PARIS

March 20

NAPOLEON WILL, TOMORROW, BE UNDER OUR RAMPARTS

March 21

THE EMPEROR IS AT FONTAINEBLEAU

March 22

HIS IMPERIAL AND ROYAL MAJESTY arrived yesterday evening at the Tuileries, amid the joyful acclamation of his devoted and faithful subjects

And I think about that story whenever I see articles like this one in this morning’s Washington Post:

GOP elites are now resigned to Donald Trump as their nominee

Philip Rucker writes:

An aura of inevitability is now forming around the controversial mogul. Trump smothered his opponents in six straight primaries in the Northeast and vacuumed up more delegates than even the most generous predictions foresaw. He is gaining high-profile ­endorsements by the day — a legendary Indiana basketball coach Wednesday, two House committee chairmen Thursday.