Friday, November 14, 2014

Every Story Has Two Sides (Earned Income Tax Credit Edition)

America's favorite welfare policy is the Earned Income Tax Credit (commonly referred to as the EITC). I can't verify this, but I'm sure a good poll would back up the assertion. The basics of the credit are that low-income earners receive additional money from the government to match wages on a sliding scale. The lower your income, the greater the match (if you're interested yet unfamiliar, the left-leaning Tax Policy Center breaks it down here). The larger question is if this policy is more important to poor people, or corporations.

That seems to be a weird question at first blush - why would a welfare program that costs money (and therefore requires higher taxes) be such a benefit to McDonald's? After all, the primary reason Republicans and Democrats get behind it is that it incentivizes work (you're not eligible for the matching credit if you're not earning wages to match) and the lowest earners get the biggest benefit by ratio (the most goes to those who are the most in need).

But the part that makes the tax credit great is the part that makes it the biggest corporate giveaway. Minimum wage earners are more satisfied with their low wages if the government provides a bit of extra cheddar to supplement income. Remove this subsidy, and earners will either pursue more leisure (following our Econ 102 work/leisure charts) or demand higher wages. And while workers eligible for the EITC have very low bargaining power, the fact remains that money is money. As long as a worker earns X, they're willing to provide Y amount of labor. Take away this government policy (X becomes X - EITC), and Y goes down correspondingly.

Following this line, the government is paying to subsidize willingness to work. Without the EITC, companies would be forced to pay higher wages to receive the same work. In times of high unemployment like 2008 this wouldn't be a concern, but in 2014 unemployment is dropping like a piece of paper (slowly but surely, while floating back and forth in an unpredictable pattern). People are happy working now, but maybe a minimum wage isn't enough in a world without this corporate subsidy. At least when there is greater demand for labor.

None of this is to suggest the EITC is a big corporate giveaway that should be scrapped - indeed, it serves a valuable purpose for people in need. And I'm not singling out big corporations - the small business owner with two low-wage employers struggling to stay open benefits just the same as Subway does. To characterize it as a corporate subsidy is misleading as it's more of an employer subsidy. But it's safe to assume the fast food industry is a lobbyist for the credit; I'm sure that makes for interesting bedfellows.

Every story has two sides.

Friday, October 31, 2014

On Elections

It's reportedly the most boring midterm season the US has seen in a long time. 2010 had the Obamacare backlash and subsequent Tea Party insurrection. 2006 was the beginning of the Dem wave that swept Obama into office (the financial collapse didn't hurt) after everyone who was in favor of invading Iraq suddenly decided they never actually wanted to go to war, while 2002 was a Republican rock concert highlighting the drumbeat of that war. Even 1998 offered the opportunity for the public to respond to the government shutdown and provided referendum on the case against Bill Clinton's transgressions. I don't remember 1994, but I'm sure people wanted to vote on the Clinton ambitions of an energy tax and universal healthcare. In 2014, we're voting on whether nobody dying from the Ebola virus is considered failing the American people. Truly exciting times.

That's someone else's observation though; I'm just regurgitating what I hear on Grist with a bit of color. Here are my unplagiarized thoughts (which are brilliantly brought full-circle with this last sentence):

1. Interest and participation in elections is inversely proportional to how much voting matters. Everyone follows presidential elections and they enjoy the highest participation rates. What's the likelihood your determines the outcome? As x approaches zero...

Bump the office down a couple pegs now - how many follow the gubernatorial races? Fewer. Here your vote is still too marginal to matter, yet it climbs the ladder. State Senate? Even fewer people know what's going on here, but the NY Senate 46th was determined by 18 votes in 2012. And State Senators can pass real legislation that you feel the impact of; tax cuts and stimulus at the federal level have a nebulous effect as people credit the power of the presidency for way more power over the economy than is actually possesses.

Now drill down two more levels. City Council. Who knows who their city councilperson is? No one. We just vote party line. If we vote at all. Yet these are the people that have the most direct impact on our lives. Look at Albany's horrible zoning practices, carte blanche opposition to development, and other issues. These are things that limit my job prospects, make my city less safe, and drive people to live elsewhere because they can't afford their property taxes/rent. And the low overall number of voters in local elections exponentially increases the likelihood that a couple votes can swing an outcome. So there are direct impacts, there's a chance your vote counts, and no one pays attention. Over 50 percent of Americans take the time to vote for their preferred presidential candidate, and it really doesn't matter.

2. Books. All presidential candidates write a book. It's like a requirement for the office. It's obvious why they do it: there's always a nice cash advance tied to the release of 500 pages of self-adulation that was actually penned by a ghostwriter. Plus the media coverage enhances name recognition. But Cuomo's All Things Possible sold just 945 copies its first week and 535 the second week on the shelves. That's not a typo - the two-week numbers are under 1,500 copies. Amazon has already dropped the suggested price from $30 to $20. Yet Cuomo's book deal was worth over $700,000, with advance royalties of at least $150,000. Sounds like this should go in HarperCollins' "Bad Deals Hame of Fame," eh?

That's the prima facie reading of the situation, but there could be more at play. Sure, HarperCollins was probably banking on Cuomo enjoying greater popularity and better sales when this deal was originally done. But Cuomo is also a potential presidential candidate. And in this, he's an investment. I don't think HarperCollins makes this deal because Governor Cuomo's book is worth a $700,000 deal. But President Cuomo's book is. Yet President Cuomo needs, say, a cool five million for the book that will sell 500,000 copies (I'm making up numbers here. For reference, Bill Clinton's My Life incurred a $15 million advance and moved 2.3 million copies).

HarperCollins hopes to break even on All Things Possible under the status quo, but the real ambition is the gamble that Cuomo makes his way into the Oval Office and the publisher nets a brilliant return. So book deals with presidential candidates may be premised on the chance they go from state/regional personalities to national celebrities. This isn't to suggest HarperCollins believes in a Cuomo presidency - indeed, it likely hopes to sign a couple of likely prospects from both parties for the same purpose. Just maybe not Rand Paul.

Wednesday, April 9, 2014

Night of the Living Homeless

Watched a homeless man carried out of Grand Central during a trip to the City this weekend. Homeless policy in America is interesting.

We criminalize homelessness, ticketing those who dare panhandle or sleep in public places. We also underfund shelters; some combination of perverse thoughts on moral hazard and simply not giving a shit.

Heard a stat this week; more homeless kids in the City than there are people in Madison Square Garden  during a sellout crowd. Winners and losers and social opportunity. We can safely assume most of these kids experience a similar lifestyle in adulthood. We don't want to house them, but punish them for not being housed. I suppose the hope is that you make conditions so unbearable that they migrate. Because that classic homeless zombies episode of South Park said it could work. As much as we profess to care, it sure seems easy turning a blind eye.

Thursday, April 3, 2014

Steps To Getting Back On Track

Reach down deep and pull your head out of the clouds. Daydreaming is only ok on a moonlighting basis.

Sunday, March 2, 2014

The City Is No Place To Retire

Your mind stays sharp through employment. There are daily tasks and challenges to maintain one's mental faculties. Aging deteriorates these faculties, and retirement often serves as a catalyst, removing workers from daily mental tasks.

Everyone should retire in a house they own, no matter how small. With a backyard. Gardening, woodworking, space to construct things, as well as just the ability to sit outside in the sun with a cup of coffee and cigarette to start the day. These aren't just hobbiest undertakings - they're vital to the physical and mental well-being of our elderly population. Space is key. Space allows you to move around. Makes you move. Space provides an area to do something other than waste away in front of the tv.

I should also get outside more.