Best and Worst Run States in America

A must read article that discusses the best and worst run state in America. To generate these rankings, they analyzed the level of: debt, unemployment rate, quality of government services, standard of living, crime, educational outcomes, etc.To view the ranking and detailed analysis of your state, click on the following link. Not surprisingly, California and Illinois were at the bottom of the list.

Because economic and social questions involve a multitude of interrelated factors, in which cause, effect and correlation are not always clear, its challenging to determine the more relevant causes of a state's general welfare.But, in general (with some exceptions): the states that fared the best were: low population, northern states with relatively homogeneous (white) populations and fiscally conservative governments. Worth noting is that 8 out of the 10 states were red. Conversely, the states that fared the poorest were (for the most part): southern, ethnically diverse, fiscally imprudent and had experienced the brunt of the rupture of the real estate bubble. I believe that 6 out of the 10 states were solidly blue.

I am inclined to believe that a good portion of a state's general welfare is the product of its people. But, again, it's challenging to determine where people, policy and uncontrollable factors start and end. For example, to what extent are Vermont's impressive (and West Virginia's poor) educational outcomes a result of the predominant culture and values of its people and to what extent have the people been shaped by good (and bad) policies? Comparing these two homogeneous states is already a complex and contentious matter, while exploring the role (if any) that demographic change played in California's notable decline treads upon dangerous taboos that few are willing to discuss.


Best and Worst Run States in America

By Douglas A. McIntyre, Michael B. Sauter, Charles B. Stockdale, Ashley C. Allen | 24/7 Wall St – Fri, Dec 2, 2011 2:00 PM EST

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How well run are America’s 50 states? The answer depends a lot on where you live.

For the second year, 24/7 Wall St. has reviewed data on financial health, standard of living and government services by state to determine how well each state is managed. Based on this data, 24/7 Wall St. ranked the 50 states from the best to worst run. The best-run state is Wyoming. The worst-run state is California.

Comparing the 50 states can be a challenge because they are so different. Some states have abundant natural resources while others rely on service or innovation. State populations also can be more rural or more urban. Some had booming industries that are waning or that have disappeared altogether. Border states with large immigrant communities have populations that are growing rapidly. Many states in the Northeast are not growing at all. All of these factors affect the finances and the living conditions in a state.

Despite these differences, states can do a great deal to control their fate. Well-run states have a great deal in common with well-run corporations. Books are kept balanced. Investment is prudent. Debt is sustainable. Innovation is prized. Workers are well-chosen and well-trained. Executives, including elected and appointed officials, are retained based on merit and not politics.

To determine how well -- or how poorly -- a state is run, 24/7 Wall St. weighed each state’s financial health based on factors including credit score and debt. We also evaluated how a state uses its resources to provide its residents with high living standards, reviewing dimensions such as health insurance, employment rate, low crime and a good education. We considered hundreds of data sets and chose what we considered to be the 10 most important measurements of financial and government management.

This year, as a new component of our analysis, 24/7 Wall St. obtained additional budget data for each state. Examining the state’s revenue and expenditures, and what each government opted to spend money on, allowed us to determine if a state overspent limited resources, failed to devote funds to an urgent need of its citizens or spent a great deal of money but with poor results. While we did not use expenditures or revenue in our ranking, these numbers reflect how a state is managed. Together with other budget data, living standards and government services, it provided a complete picture of the management of each state. A fuller accounting of our methodology can be found at the end of the article.

The 24/7 Wall St. Best and Worst Run States is meant to be an analysis that will focus the debate about state management and financial operations. The analysis should also serve to empower and inform citizens who want who want to better understand the impact government decisions have on each state.

Best Run States: 

1. Wyoming
State debt per capita: $2,452 (18th lowest)
Pct. without health insurance: 14.9% (21st highest)
Pct. below poverty line: 10.3% (7th lowest)
Unemployment: 5.8% (6th lowest)

Wyoming comes in first place in 24/7 Wall St.’s Best Run States for the second year in a row. The state has high marks in many categories including high school graduation rate. A whopping 92.3% of state residents age 25 or older have at least a high school diploma — the highest rate in the country. The state also has the fourth lowest rate of violent crimes and the sixth lowest unemployment rate. Wyoming has the smallest population of any state in the country.

2. Nebraska
State debt per capita: $1,407 (4th lowest)
Pct. without health insurance: 11.5% (14th lowest)
Pct. below poverty line: 11.9% (tied for 14th lowest)
Unemployment: 4.2% (2nd lowest)

The state of Nebraska had the 21st lowest revenue per capita in the country in 2009 yet managed to spend more per capita that year than all but seven states. The state has the fourth lowest debt per capita, and it is one of 13 states with a perfect AAA credit rating. Besides being financially sound, Nebraska also has an unemployment rate of 4.2%, the second lowest rate in the country. The state also has relatively low poverty, high graduation rates and the seventh lowest rate of foreclosures last month.

3. North Dakota
State debt per capita: $2,721 (20th lowest)
Pct. without health insurance: 9.8% (9th lowest)
Pct. below poverty line: 12.3% (17th lowest)
Unemployment:  3.5% (the lowest)

One of the best measures of North Dakota’s success is its unemployment rate of 3.5% — the lowest in the country and one that has n0t been above 5% in over 20 years. While the state has relied on a stable agriculture sector to keep unemployment low, the booming oil industry has created a $1 billion surplus in the past three years. From 2009 to 2011 Montana was the only other state to report a surplus, according to the Center on Budget and Policy Priorities.

4. Minnesota
State debt per capita: $1,790 (8th lowest)
Pct. without health insurance: 9.1% (4th lowest)
Pct. below poverty line: 11.0% (10th lowest)
Unemployment: 6.9% (14th lowest)

Minnesota moved up in the ranking from fifth to fourth due to its improvement in several categories, including violent crime rate and health insurance coverage. In 2010, just 9.1% of state residents were without health insurance coverage — the fourth best rate in the country. The state also continues to excel in the areas it did last year. Some 91.5% of the state’s adult population has graduated high school — the second highest percentage in the country. The state also has the eighth lowest debt per capita.

5. Iowa
State debt per capita: $2,117 (13th lowest)
Pct. without health insurance: 9.3% (6th lowest)
Pct. below poverty line: 11.9% (tied for 14th lowest)
Unemployment: 6% (8th lowest)

Iowa’s greatest assets are its rates of educated and insured residents. Some 90.6% of residents 25 years and older have at least a high school diploma and only 9.3% of residents do not have health insurance. These are among the best rates in the country. Iowa also has an exceptionally lowunemployment rate and the highest credit rating available, demonstrating its healthy economy.

6. Utah
State debt per capita: $2,274 (15th lowest)
Pct. without health insurance: 15.3% (20th highest)
Pct. below poverty line: 11.5% (12th lowest)
Unemployment: 7.4% (17th lowest)

Utah kept the same rank it had in our last survey. The state has the fifth-lowest violent crime rate in the country, as well as the seventh-highest graduation rate in the country. However, Utah had one of the higher foreclosure rates in the country in October, and 15.3% of the population — an above-average rate — is without health insurance.

7. Vermont
State debt per capita: $5,514 (9th highest)
Pct. without health insurance: 8% (3rd lowest)
Pct. below poverty line: 11.7% (13th lowest)
Unemployment: 5.8% (5th lowest)

Vermont does extremely well in a number of areas considered for this list. Residents are highly educated. It has the second lowest rate of violent crime in the country. It has the third lowest percentage of uninsured residents. However, the state has saddled its citizens with debt. Vermont’s debt per capita is more than $5,500, which is the ninth highest in the country.

8. Virginia
State debt per capita: $3,100 (22nd lowest)
Pct. without health insurance: 13.1% (20th lowest)
Pct. below poverty line: 10.7% (8th lowest)
Unemployment: 6.5% (10th lowest)

Virginia is the highest-ranked state in the southern U.S., largely because it does not suffer from many of the problems that plague the rest of the South. The state has a median income of $60,674, the eighth-highest in the country, as well as a poverty rate of 10.7%, which is the eighth lowest. The state also has the sixth-lowest violent crime rate in the country, with just 213 incidents taking place in 2010 for every 100,000 people.

9. Kansas
State debt per capita: $2,086 (10th lowest)
Pct. without health insurance: 13.9% (24th lowest)
Pct. below poverty line: 12.8% (tied for 21st lowest)
Unemployment: 6.7% (12th lowest)

Kansas has the 10th-lowest state debt per capita in the country. However, the state’s ranking may change as its debt grows. According to The Hutchinson News, borrowing by school districts has increased over 800% since 1990. Kansas has a relatively low unemployment rate of 6.7% compared to the national rate of 9.1%.

10. South Dakota
State debt per capita: $4,485 (12th highest)
Pct. without health insurance: 12.4% (18th lowest)
Pct. below poverty line: 13.8% (25th highest)
Unemployment: 4.6% (3rd lowest)

South Dakota rounds out our list of the 10 best-run states in the country. While the state is slightly below average in median income and poverty, otherwise things are going quite well in the state. South Dakota has the third-lowest unemployment rate in the country. It is also one of the few states to truly avoid the worst parts of the housing crisis. Just one in 4,352 homes was foreclosed in October — the fourth lowest rate in the country.

Worst Run States:
50. California
State debt per capita: $3,660 (21st highest)
Pct. without health insurance: 18.5% (8th highest)
Pct. below poverty line: 14.5% (tied for 21st highest)
Unemployment: 11.9% (2nd highest)

California has moved down one slot on from last year to earn the title of the worst-run state in the country. In the fiscal year 2009, the state spent $430 billion, roughly 14% of all the money spent by states in that year. Compared to its revenue, the state spent too much — California had the 10th lowest revenue per person, and spent the 15th most per person. California is the only state in the country to be rated A-, the lowest rating ever given to a state by S&P. Despite the huge amount the state spends each year, conditions remain poor. California has the second-lowest percentage of adults with a high school diploma in the country, the second-highest foreclosure rate and is tied for the second highest unemployment rate in the U.S.

49. Illinois
State debt per capita: $4,424 (13th highest)
Pct. without health insurance: 13.8% (23rd lowest)
Pct. below poverty line: 13.1% (25th lowest)
Unemployment: 10% (10th highest)

Illinois has fallen from 43rd last year to the overall second-worst run state in the country. The state performs poorly in most categories, but is worst when it comes to its credit rating. Illinois has a credit rating of A+, the second worst given to any state, behind only California. The state has been on credit watch since 2008 because of budget shortfalls and legal challenges against then-governor Rod Blagojevich.

48. Michigan
State debt per capita: $2,963 (21st lowest)
Pct. without health insurance: 12.4% (18th lowest)
Pct. below poverty line: 15.7% (15th highest)
Unemployment: 11.1% (3rd highest)

Michigan has arguably suffered more than any state in post-industrial America. The state is one of just four with a credit rating of AA-, although its debt per capita is actually below average. The state ranks among the worst in the country for violent crime, unemployment, foreclosures and home price decline.

47. Arizona
State debt per capita: $1,882 (9th lowest)
Pct. without health insurance: 16.9% (16th highest)
Pct. below poverty line: 16.3% (tied for 13th highest)
Unemployment: 9.1% (18th highest)

Arizona’s housing market was one of the worst hit in the country during the housing crisis. Home values have dropped 28.6% since 2006, the fourth worst rate in the country. In October 2011, one in every 259 housing units were foreclosed upon, which was the third worst rate that month in the U.S. Arizona also has one of the lowest credit scores in the country after its downgrade to AA- in 2009.

46. Nevada
State debt per capita: $1,690 (6th lowest)
Pct. without health insurance: 22.6% (2nd highest)
Pct. below poverty line: 13.0% (24th lowest)
Unemployment: 13.4% (the highest)

Nevada has dropped five places in our rankings. This drop is due primarily to its credit downgrade this year from AA+ to AA. Surprisingly, the state has one of the lowest debts per capita in the country, at just $1,690 per person. However, it has other financial woes that make it a long-term risk. Nevada properties declined 44.5% in value between 2006 and 2010, the worst decline in the country. In October alone, one in every 180 homes was foreclosed upon, easily the worst rate in the country. The state also has the second lowest percentage of residents covered by health insuranceand the highest unemployment rate in the country.

45. South Carolina
State debt per capita: $3,379 (24th highest)
Pct. without health insurance: 17.5% (13th highest)
Pct. below poverty line: 17.1% (8th highest)
Unemployment: 11% (4th highest)

Fiscally speaking, South Carolina is relatively sound. It takes in the 27th most in revenue per capita and spends the 24th most in total expenditures per capita. Its state debt per capita is slightly below average. However, the state has the eighth highest poverty rate and the fourth highestunemployment rate. It also has the fifth highest rate of violent crime, with 597.7 crime committed per 100,000 people. This is actually an improvement from last year when the state’s violent crime rate was 731 per 100,000 -- the worst in the country.

44. Kentucky
State debt per capita: $3,107 (23rd lowest)
Pct. without health insurance: 15.3% (20th highest)
Pct. below poverty line: 18.2% (4th highest)
Unemployment: 9.7% (13th highest)

Last year, 24/7 Wall St. named Kentucky the worst-run state in the country. The state saw slight improvements in the percentage of its population with high school diplomas and poverty rate. Violent crime dropped significantly -- now the 10th-lowest rate in the country, compared to the 17th-lowest last year. Despite these improvements, Kentucky remains one of the poorest states in the country, ranking among the five worst for median income and poverty rate. It is also one of just four states to be awarded an unfavorable AA- credit rating, the third worst score awarded to any state.

43. Rhode Island
State debt per capita: $8,716 (3rd highest)
Pct. without health insurance: 12.2% (16th lowest)
Pct. below poverty line: 12.8% (tied for 21st lowest)
Unemployment: 10.5% (7th highest)

Rhode Island has many positive attributes, including low violent crime rate and a relatively lowpoverty rate. However, the state’s spending is exceptionally high, and it has accumulated $8,716 in debt per capita. Nearly 20% of expenditures are for public education, yet compared with other states it has the 10th lowest percentage of adults who have graduated from high school.

42. Louisiana
State debt per capita: $3,914 (17th highest)
Pct. without health insurance: 17.8% (10th highest)
Pct. below poverty line: 17.8% (5th highest)
Unemployment: 6.9% (13th lowest)

Louisiana remains in our bottom 10 again this year, although it has improved since last year, primarily because of decreases in unemployment and violent crime rate. In all, however, the state ranks poorly in most of the metrics we considered. Louisiana has the fifth-highest poverty rate in the country, the 10th-highest percentage of residents without health insurance coverage and the fifth lowest percentage of adults with a high school diploma.

41. New Mexico
State debt per capita: $4,004 (16th highest)
Pct. without health insurance: 19.6% (6th highest)
Pct. below poverty line: 18.7% (12th highest)
Unemployment: 6.6% (11th lowest)

New Mexico has a relatively low unemployment rate of 6.6% compared with the national average of 9.1%. This is down from 8.6% one year ago. Other statistics are not as promising. At 18.7%, the state has the second highest poverty rate in the country. Worst still, almost 20% of New Mexicans do not have health insurance. The state also has the highest rate of violent crime in the country.

Methodology

24/7 Wall St. considered data from a number of sources, including Standard & Poor’s, the Bureau of Labor and Statistics, the U.S. Census Bureau, the Tax Foundation, Realty Trac, The Federal Bureau of Investigation and the National Conference of State Legislators. The Bureau of Labor Statistics provided unemployment data, Credit rating agency Standard & Poor’s provided credit ratings for all 50 states.  The Tax Foundation provided state debt per capita for the fiscal year 2009. The FBI’s Uniform Crime Report provided violent crime rates by state. Realty Trac provided foreclosure rates. A significant amount of the data we used came from the U.S. Census Bureau’s American Community Survey. Data from ACS included percentage below the poverty line, high school completion for those 25 and older, median household income, percentage of the population without health insurance and the change in occupied home values from 2006 to 2010. These are the values we used in our survey.  Once we reviewed the sources and compiled the final metrics, we ranked each state based on its performance in all the categories.

Netflix: An Engine of Economic Inequality?

Progressive are correct that we should be troubled by growing economic inequality and unemployment, but they mistakenly present government policies as the primary culprits. Their narratives usually attribute the GW Bush Tax Cuts and "anti-union policies," whereas I believe that globalization and technological innovation play a much larger role in the increasingly skewed distribution of wealth.

One sector of the economy that offers insight into this phenomena is the video rentals industry. Growing up, I recall there were quite a few smaller, independently owned video stores. So, we can presume that the distribution of the AIE (aggregate industry earnings) was fairly equitable. In the late 1980's, Blockbuster Videos rapidly expanded, becoming a multi-billion dollar national chain. Because of its scale of production, it was able to offer lower prices, a larger selection and more extensive marketing than its competitors, which drove most of them out of business. In addition, they expanded into music and video game rentals. This resulted in a less equitable AIE, with a greater share of "video rental wealth" being concentrated in the hands of Blockbuster.

Out of nowhere, Netflix blazed onto the scene and in a remarkably short time tore into Blockbuster's market share. I am quite certain that this was a major factor in Blockbuster's recent declaration of bankruptcy. And with each store closure, the AIE are concentrated in fewer hands and employment opportunities are at least nominally diminished for low skill workers. Conversely the growth of Netflix generated employment opportunities mostly for highly skilled, highly paid workers, such as network architects, web designers and data analysts. We see that an industry that once required (let's say) 100,000 workers is now able to provide consumers better service, greater selection and lower costs with 1/5 the workers.

Although most Americans are not pleased with shifts in the income distribution, I don't know a single person who is willing to leave Netflix and support Blockbuster via their own consumer or tax dollars. In the end, the best we can do is provide greater educational opportunities for those who wish to develop the skills necessary to fill or (better yet) create high tech, high paying jobs. For companies and individuals unwilling or unable to evolve, there is little we can do.



http://en.wikipedia.org/wiki/Blockbuster_Inc.

http://en.wikipedia.org/wiki/Netflix

http://en.wikipedia.org/wiki/Netflix

Where are the Pakistani Kings (part III)?

In our previous posts we discussed the effect of an individual immigrant's education level in determining their economic and social output. The good news is that poverty and prosperity levels of immigrants and native born Americans alike are virtually identical once we factor in their educational levels. The bad news is that an increasingly large number of immigrants possess educational levels far below the national mean. So, when we look beyond romantic rhetoric and analyze the raw numbers, it becomes clear that we are importing poverty in general and increasing Hispanic poverty in particular, both in absolute numbers and as a percentage. Here are a few statistics that highlight this reality:

According to Robert J. Samuelson, "from 1990 to 2006, the number of poor Hispanics increased 3.2 million, from 6 million to 9.2 million. Meanwhile, the number of non-Hispanic whites in poverty fell from 16.6 million (poverty rate: 8.8 percent) in 1990 to 16 million (8.2 percent) in 2006. Among blacks, there was a decline from 9.8 million in 1990 (poverty rate: 31.9 percent) to 9 million (24.3 percent) in 2006. White and black poverty has risen somewhat since 2000 but is down over longer periods."

One important factor that explains how Hispanic poverty could grown during a prolonged economic boom is that the increase in the supply of labor (via high levels of immigration) was concentrated in fields which Hispanic immigrants predominate, such as construction. And if Hispanic poverty rose during an economic boom, I dread to think what this sharp economic downturn will mean for Latinos.

Most troubling is the fact that this phenomena is most strongly felt among children. And among the children of Hispanic immigrants the poverty rate is 32.9%, which is nearly 3 times the national average. The end result is that although children in first-generation His­panic immigrant families comprised 11.0 percent of all children in the U.S., they were 20.4 percent of all poor chil­dren. And drop out rates for Hispanics are double the national average.

These statistics are troubling for progressives and conservatives alike, but where they diverge is their interpretation of and solutions to the growing socio-economic gap between European and Asian Americans on one hand and Hispanics and African Americans on the other hand. Progressives narratives focus on on external factors, such as: racism, discrimination and "economic injustice" as the causes of this gap. So, they are likely to look at the growing level of Latino poverty as an avoidable that can be remedied through government intervention.

On the other hand, conservatives are far more likely to focus on internal factors, such as the level of human capital and a cultural affinity (or lack of) towards education and social mobility. So, most conservatives would view the surge in Hispanic poverty as the predictable outcome of immigration policies that paid little heed to the educational level of immigrants.

Based on their world view, most progressives look at this socio-economic gap as an opportunity to expand the size and scope of government. To bridge the socio-economic gap, numerous programs have been implemented from: educational programs specifically geared towards raising academic performance of (non-Asian) minorities, affirmative action and expanded health and housing entitlements. On an even broader level, the gap affirms the needs of progressives to implement "redistributive justice" via increased government intervention in economic and social spheres of American life.

To this, most conservatives affirm the need to focus on the facts on the ground. In other words, it would be wonderful if progressive programs could remedy troubling socio-economic gaps, but realism dictates that we must base our immigration policies on the assumption that they won't. Policies must be based on the assumption that given our continued shift towards an economy that offers decreasing returns for low skilled workers, the socio-economic output of uneducated immigrants and their descendants will not significantly improve. Accordingly, the only logical response to the growth in Hispanic poverty is to shift our immigration policies away from the importation of low skill labor, towards one that is focused on importing highly skilled and highly educated workers, regardless of race.

In the mind of many, such talk would come dangerously close to violating the three great progressives commandments: thou shall not discriminate, thou shall not disparage diversity and thou shall not blame blame the victims. Unfortunately, noble intentions do not address social and economic ills and many self proclaimed "pro-immigrants" pursue policies that have and will continue to increase poverty among immigrants and their descendants.

http://www.prb.org/Articles/2008/uschildpovertyrates.aspx

http://www.heritage.org/Research/Reports/2006/10/Importing-Poverty-Immigration-and-Poverty-in-the-United-States-A-Book-of-Charts

Clash of Goods: Diversity & Economic Equality (part II)

A More Appropriate Sign Would Be: Adios Middle Class


Interesting article that documents the growing educational and economical inequality in California, which is well above the national average in post doctorates, as well as high school dropouts. Needless to say the educational bifurcation is strongly connected to growing economic inequality. The growing economic inequality has a strong ethnic component, because:

1) Approximately 65% of California's Mexican immigrants have not completed high school, which means that the large growth in the said population has swelled the number of low skill, low income workers.

2) A disproportionate number of California's Asian immigrants are high skill, high income workers.

3) And as California has greatly raised taxes and spending to expand costly entitlement programs to address this growing economic inequality, which has accelerated the exodus of middle class, mostly white Californians.

The end result is that California is becoming an increasingly diverse and unequal state. And surely this phenomena has increased since the publication of the article in 2001. But, unfortunately few progressives are willing to reconcile, yet alone acknowledge this clash between two social goods: diversity & economic equality.

2001

Analysis: California's new education gap

By STEVE SAILER,

http://www.vny.com/cf/news/upidetail.cfm?QID=210220

LOS ANGELES, Aug. 9 (UPI) -- New Census Bureau figures show that California,traditionally America's trendsetter, is pioneering a new kind of class structure, one somewhat reminiscent of highly unequal Latin American countries such as Brazil or Mexico.

Although California was long viewed as the promised land of the American middle class, it is slowly developing a novel U-shaped social system featuring relatively large numbers of both the well-educated and the badly educated sandwiching a shrinking middle.

Although this trend toward greater inequality would seem to be at odds with the ideals of the Democratic Party, it might bode well for Democrats' success in the voting booth, if results from 2000 prove an adequate guide to the future. California, the state that bequeathed Richard Nixon and Ronald Reagan to the Republican Party, gave Al Gore an impressive 54 percent to 41 percent victory over George W. Bush last November.

According to a Census Bureau Supplementary Survey of 700,000 households across the country, California boasts 2 million recipients of graduate degrees (master's or Ph.D. or professional diplomas such as M.D. or J.D.).Yet this sophisticated state also is home to 2.2 million adults who never even attended high school. Their ranks are up 7 percent from 1990. By contrast, in the rest of America, the number of adults who had never seen the inside of a high school dropped by 30 percent over the past decade.

In California, 10.7 percent of grownups have no more than elementary schooling, compared to only 6.4 percent in the other 49 states. Of all the states in the Union, California now has the lowest percentage of its population with a midle level education consisting of at least a high school diploma or some college, but not a bachelor's degree from a four-year college. Further, the Golden State is now one of only three states with above average percentages of people who never got past elementary school and of holders of graduate degrees. The other two are New Mexico and Rhode Island.

California's educational inequality is driven by both foreign immigration and domestic migration. The state has attracted the top and the bottom of the schooling pyramid, while repelling the middle.Silicon Valley and other technology centers attract the highly educated from Asia and across America. More surprisingly, a prestigious degree is now often expected in Hollywood.A veteran sitcom writer who worked for years on "Married with Children"complained privately about the "Harvard mafia" that she feels increasingly has controlled TV joke writing ever since the Harvard Lampoon-laden screenwriting staff of "The Simpsons" emerged in 1990.

California's upper-middle-class newcomers tend to be liberal, especially on cultural issues. In contrast, Mexican immigrants comprise much of California's huge number of less-educated people. According to a 2000 Census Bureau survey, 65 percent of America's Mexican immigrants never finished high school versus only 9.6 percent of natives. According to the Voter News Service exit poll, California's Hispanics voted 68 percent to 29 percent for Gore.Meanwhile, as immigrants move in, native-born Americans leave California.

From 1990 to 1999, according to University of Michigan demographer William H. Frey, 2.2 million more California residents moved to other states than other Americans moved to California. Frey, who is also with the Milken Institute in Santa Monica, Calif., pointed out, "Another cause of the rise of the California Democrats is selective out-migration of the more rock-ribbed Republicans. The folks who have been leaving California's suburbs for other states have the white, middle-class demographic profiles of Republican voters. California's middle-class families are being squeezed out by real estate prices. And Republicans are heading for whiter states where they won't have to pay taxes for so many social programs for the poor.

"What's at work in New Mexico and Rhode Island, the other two states that are above average in both graduate degrees and adults who've never been to high school? Ever since the Manhattan Project built the atomic bomb during World War II,New Mexico has had a social chasm with Los Alamos physicists and Santa Feglitterati on one side, and poor Mexican-Americans and American Indians on the other. Rhode Island is demographically split between the workers in New England's intellectual-industrial complex and the state's many blue-collar immigrants from the Portuguese-speaking world, most notably the very poor Cape Verde Islands off the coast of West Africa.

California's "education gap" also shows up in income statistics. In California, 6.8 percent of all households make more than $150,000 per year versus 4.1 percent elsewhere. In contrast, 14 percent of California households are poor compared to only12.3 percent of households in the other 49 states. And this measure actually underestimates California's poverty problem, because the federal government uses the same poverty level nationwide, despite California having a higher cost of living. For example, the state's median rent is 30 percent greater than elsewhere.

The evidence from the 2000 election suggests that inequality might be good for the Democratic Party. Gore carried California, New Mexico and Rhode Island. In fact, New Mexico was one of only two states that Gore carried west of the Mississippi River and east of the Pacific Coast states.A plausible consensus has emerged that the 2000 election offers abundant insights into long-term political trends. That's because both parties ran fairly generic candidates and no major crises or issues roiled the race. This allowed underlying regional and class differences to emerge in sharp relief.The Voter News Service exit poll showed Gore carrying the educational extremes.
Nationally, the former vice president won 59 percent to 39 percent among voters without high school degrees. Similarly, he beat Bush 52 per cent to 44 percent among those with postgraduate degrees. In contrast, Bush carried the middle. He beat Gore 49 percent to 48 percent among high school graduates and 51 percent to 45 percent among both those with only some college and those with a bachelor's degree. Strikingly, the percentage of residents with graduate degrees proved one of the strongest predictors of whether a state would vote Republican or Democrat. Gore won only three of the 25 states with the fewest graduate degree holders, but 17 of the 25 highest states. Utah, the destination of so many disgruntled ex-Californians, is emerging as the anti-California. It leads the country with only 2.4 percent of its residents never having attended high school.Paradoxically, this staunchly Republican state, where Gore won only 25 percent of the vote, exemplifies some of the traditional egalitarian ideals of the Democratic Party. A 2000 study by the Economic Policy Institute found Utah to have the most equal income distribution of any state. Still, Utah is more likely to be the anomaly and California the harbinger of the United States' future. If so, this suggests that the Democratic Party's politicians will be better served than the party's ideals of educational and economic equality.


-- Copyright 2001 by United Press International. All rights reserved. --

Clash of Goods: Diversity & Economic Equality

Lucid and honest observers of life cannot escape the ever present clash between competing goods. Pursue the noble benefit of economic equality and you will be burdened by the cost of diminished economic freedom. Pursue the noble goal of unbound individualist and social autonomy and you will face the cost of diminished community. Or, at the risk of engaging in dualistic thinking: move to Manhattan and few will care of comment on how you conduct yourself, but don't expect anyone to help you when you are being robbed. Equally, you can choose to enjoy the strong sense of community inherent in being the member of a traditional religious community, but be prepared to pay the cost of diminished social autonomy. In other words, your Amish brothers and sisters will help you build your barn and visit you when you're sick, but you certainly won't be welcome if you choose to express yourself by piercing your nose and take up break dancing. So, unless we are willing to fanatically pursue a single good at the cost of other goods, we must constantly struggle to achieve dynamic balance.

One of the problems I have with many progressive thinkers is there inability to acknowledge the clash between competing goods. Many will boldly pursue social and economic policies without acknowledging that their goals may not be compatible.

No where is this more apparent than in issues involving diversity. The reverence for and pursuit of ethnic and cultural diversity are central goods in the progressive worldview and very few are willing to explore the possibility that costs accompany these goods. For example, during his study of hundreds of towns and cities throughout the nation, Dr. Robert Putnam discovered that there is a negative correlation between the progressive goods of diversity and the strength of community. http://chicago-freedom-forum.blogspot.com/2009/08/downside-of-diversity.html
And in the article which I have featured in this blog, Steve Sailer demonstrated that there is also a negative correlation between the progressive goods of economic equality and diversity. Without acknowledging the clash between competing goods, the chances of creating policies that strike a healthy balance are slim to none.

Inequality: The Immigration Dimension

By Steve Sailer

Near Monument Valley, site of so many John Wayne westerns, the borders of Arizona, New Mexico, Utah, and Colorado come together at Four Corners. These adjoining states all share similar mountains and deserts. Yet the southern tier of Arizona and New Mexico displays practically Latin American levels of income inequality, while the northern tier of Utah and Colorado are almost Scandinavian in their economic egalitarianism.

The seldom-remarked links between economic equality (Liberals Like) and ethnic homogeneity (Liberals No Like) are made clear by the data displayed in a recent study (http://www.cbpp.org/1-18-00sfp.htm) by two left-of-center think tanks, the Economic Policy Institute and the Center on Budget and Policy Priorities. For all 50 states, they divided the average household income of the top 20% of the population to that of the bottom 20%. Utah is the most equal state in the union, with Colorado fifth. In contrast, Arizona and New Mexico are 48th and 49th.

Distance from Mexico appears to be the determining factor. According to Census Bureau projections for the year 2000, Hispanics make up about 29% of the combined population of the two states adjoining Mexico, versus only 12% of the two northern states. (Total minorities make up about 42% of Arizona and New Mexico's population, versus only 19% of Utah and Colorado's.)
And this pattern will only grow more distinct, since per capita legal immigration from Mexico to the two southerly states was running 165% higher than to their northern neighbors. (No estimate was available on illegal immigration, but Arizona has become notorious for the porousness of its border, as Pat Buchanan recently demonstrated by strolling back and forth across the Arizona-Mexico border unaccosted.)

This pattern of the whitest states being the most equal is seen across the land. The rest of the Egalitarian Top Twelve consists of Indiana, Iowa, North Dakota, Alaska, Maine, Wisconsin, Wyoming, Nebraska, Vermont, and Idaho. In pointed contrast, the most Brazilian states are primarily those with the most Hispanic immigrants. Besides Arizona and New Mexico, the most Latin American-like states include New York (50th most equal), California (46th), and Texas (44th). These immigrant destination states tend to be even more unequal than the Old South states with large numbers of rural blacks.

Apparently, states like New York, Arizona, California, and Texas are exacerbating their inequality both by importing poor foreigners and by impoverishing their underskilled, native-born citizens with more wage competition for the lousiest jobs.

Another way to look at this issue is to not worry about relative inequality, but to just consider the income of the lowest 20%. Personally, it's fine with me if the rich get richer, but it's the poor getting poorer part I'm not crazy about.

In the Four Corners states, the impact of ethnic diversity is obvious. The poorest poor in the country are in New Mexico, where the average income of the bottom fifth is only $8,700. The quite expensive state of Arizona, spiritual home of the $150 golf greens fee, has the eighth poorest poor people in America at $10,800. (But at least they make more than the bottom rung in immensely costly New York). In contrast, the wealthiest bottom fifth is in Colorado where they average $18,500 per year. Probably even more impressive, however, is the $18,200 average in Utah, since its cost of living is quite low.

Now, it's important to note that the Hispanics of New Mexico are by no means all recent immigrants: the conquistadors founded Santa Fe in 1609. Their descendants have been part of the U.S. since 1848. And these Hispanics have exerted more political power and for longer than Hispanics in any other state. For example, one of the two statues representing New Mexico in the Capitol Rotunda is of a Hispanic grandee who served as U.S. Senator from New Mexico for much of the first half of the 20th century.

Nonetheless, the Mexican-Americans of New Mexico have yet to assimilate well. An Albuquerque rocket scientist asks, "Does this tell us anything about how likely Hispanics in general are to catch up academically and economically with people of North European descent? Yes, indeed. It never has to happen at all, and even if it does, it might take more than 150 years."

New Mexico's population has increasingly split into an overclass of Santa Fe's glitterati and Los Alamos' H-bomb designers, whose lawns are mowed and children baby-sat by a Mexican lowerclass, who are sullenly watched by an impoverished and alcoholic Native American underclass. It's not a pretty sight, but it might be the future of the U.S., with native-born African-Americans playing the underclass role in most localities.

This obvious correlation between immigration and inequality is little remarked upon in the press, for various reasons. One big one is that polite society has decreed that since Equality and Diversity are both Good Things, they must therefore be synonyms rather than what they are: antonyms.

Distribution of Wealth (Part X)

In the prior posts we explored the forces that have contributed to the increasingly inequitable distribution of wealth. So, the questions remains, what can be done to improve the distribution of wealth that will avoid the negative consequences of our current redistributive policies?

1. Eliminate disincentives for job creation: there is zero doubt that businesses and the jobs that they create flee areas (cities, states and entire countries) in which the tax, regulatory burden and legal liability are too heavy. Any policy that makes it more expensive to create or run a business will limit job creation. This does not mean that we should eliminate all taxes and regulation, merely that we must be certain that their benefits outweigh their costs. Addressing government policies that drive up costs will aid American companies in their drive to increase their international competitiveness, which is a vital component in wealth and job creation.

2. Reduce incentives that encourage an irrational allocations of capital: for example, a myriad of subsidies and policies exist that encouraged Americans to over-invest in the housing market, which strongly encouraged a disastrous housing boom and bust. On the other hand anyone wishing to create industrial ventures in the United States would face a myriad of tax and regulatory hurdles. In theory the government could subsidize productive ventures for the benefit of the public, but experience clearly indicates that political connections rather than economic logic dictate the vast majority of subsidies. So, the most beneficial policy would be to create a level playing field in which no company would be unduly benefited or burdened by their relationship (or lack of relationship) to the state.

3. Encourage public school systems to develop curricula that place a far greater emphasis on preparing students to participate in a highly competitive global market. A competitive voucher system would grant greater choice to families, put pressure on public schools to improve.

4. Avoid policies that increase the supply of low-skill labor: a tight labor market places upward pressure on wages which encourages employers to pursue technological and organizational innovation. The present policy of seeking a competitive advantage through lowering wages is doomed to failure, because we can never match the rock-bottom wages of China and India. Our only possible competitive advantage is through a highly skilled and highly productive work force. And nations raise living standards by shifting towards higher level production.

What has most contributed to an expansion in the supply of low-skilled labor are immigration policy that emphasizes chain-immigration and a diversity lottery over the selection of skilled and educated immigrants. Accordingly a point system which seeks to synchronize the selection of immigrants to the changing needs of the labor force.

5. Reduce subsidies that encourage the importation of and use of cheap labor: we should conceptualize welfare benefits as subsidies that allows businesses to enjoy cheap (relative to the cost of living) labor. Without this subsidy immigrants who were unable to attain wages that provided for the basic needs of their family would return to their countries of origin, as they did before the onset of a massive welfare state.

Subsidizing cheap labor discourages employers from technological and organizational advancement. In addition, it discourages workers from developing the skills and strategies necessary to increase their productivity and wages.

A practical measure would be to charge businesses for the welfare benefits that their immigrant employees consume. Beyond an alleviation of the financial burden that the public faces, the benefits of this policy would be as follows:

-Without welfare benefits, the worker would quickly determine if the wages provided were sufficient to meet their basic needs. If the wages were insufficient they would encounter a powerful incentive to seek higher wages within their place of employment.

-This would force the employer to determine if their employee added sufficient value to their enterprise to justify the real cost (wages + welfare benefits) of their labor.

-If the employer determined that the worker added sufficient value, they would be forced to increase their wages. If not, the employer would have to let the worker go. The increased cost of labor that the first scenario entails and the shortage of labor that the second scenario entails would encourage the employer to increase the productivity of their enterprises through the pursuit of technological and organizational innovation.

-Under this scenario, workers would be limited in their ability to utilize an acceptance of low wages and poor working conditions (that welfare allows for) as their competitive advantage over their non-subsidized counterparts. The only manner for a worker to increase their competitive advantage over other workers would be through increasing their productivity.

-A worker who could not obtain higher wages from their employer or in their field of employment would be provided with tremendous incentives to develop the skills and education level necessary to shift a sector of the economy that offers higher wages. On an aggregate level this of course encourages greater upward economic and social mobility.

-Those who were unable to achieve economic self sufficiency would most likely self-deport, which is more humane, less demoralizing and more cost effective than heartless immigration raids and deportations.

-A huge added benefit would be that the American public would be far less reserved about granting amnesty to workers who offered net economic benefits and did not serve as a means for businesses to lower wages and working conditions.

6. Reduce subsidies that encourage single-motherhood and welfare dependency: To start off with schools should educate students about the economic and social costs of single-motherhood. Then, the state could mandate that welfare recipients use birth control and also provide larger payments to those who avoid getting pregnant. To avoid fostering long term dependency, the government could incrementally reduce welfare benefits while increasing educational subsidies and job training.

In a society that is increasingly oriented towards quick solutions and intellectual dishonesty brought on by politically correct dogma, these solutions would not be popular, but they are surely preferable to redistributive policies that are economically and socially bankrupting our nation.

Distribution of Wealth (Part IX)

Pictured Above: The Cost Of Government Cheese

I came across an interesting article (scroll to the bottom and click on the link to view it in its entirety) that discusses issues of wealth distribution and the growing class of Americans who receive far more in government services than they pay in taxes.

The figures provided state that a two-parent household on average faces an $8,801 tax burden and a single-parent-household enjoys a $4,141 subsidy. These figures are from 1999 and I am quite certain that they have become more dramatic since then, because of the growth of entitlements coupled with a notable increase in the number of single-parent-households. And if we continue on the current trajectory,

The author shows in clear numbers that the largest factor in determining if a household is of the funding class or the recipient class is if it is headed by a single parent. He makes a compelling argument that the rate of single-parenthood among Asians, Whites, Hispanics and African-Americans is a major factor in the different rates of inclusion of each of the said groups in the recipient class.

He presents the brutally honest assessment that given the rising rate of single-parenthood among Latinos (from 36.7% to nearly 50% in only 10 years), the projected increase in the Latino population will equal an increase in the recipient class. And as the recipient class grows in size, so will it grow in political power, which makes it extremely likely that entitlements and the transference of wealth will only grow.

In addition he points out that as the ration of the providing to the recipient class grows, we will simultaneously face an increase demand for welfare with a decrease in our capacity to fund it. The author expresses this in the following paragraph:

"Will we be able to support the recipient class when they are the majority? Will the recipient class tolerate any discussion of reducing payouts or the need for payouts when they are in control? Latin American countries provide almost no welfare benefits. The ratio between the likely provider and the likely recipients is so large in these countries that U.S. style welfare payments are unthinkable. As America becomes more Latin American, we will also be faced with the need to become more Latin American in our welfare policy, with the inevitable spectacle of destitution which overwhelms Latin America."

http://www.success-and-culture.net/articles/recip.shtml

Distribution of Wealth (Part VIII)

A key component in the discussion on the distribution of wealth is the tax burden. Many "progressives" speak about the wealth not paying their fair share of taxes, especially after the Bush tax cuts. The numbers (see below) paint a very different picture. For various reasons, income distribution is skewed towards the wealthy, but the tax burden is even more skewed. For example, the top 10% may earn 35.75% of the national income, but they bear more than 59.67% of the tax burden. And as previously discussed 42% of the nation now pays no federal income taxes.

Even as the tax rate has fallen, for the wealthy, the ratio of taxes paid to income has risen for the top 5% and 10%. For example, in 1980, the top 10 percent earned 32 percent of the income and paid 44 percent of the taxes—a ratio of 1.4. In 2004, this group earned more of the income (44 percent) but paid a lot more of the taxes (68 percent)—a ratio of 1.6. In other words, progressivity—in terms of share of total taxes paid—has risen.

My concern is not for the "suffering of the rich," but for the economic effects of the growing and increasingly skewed tax burden that will only rise under Obama.

1. A very successful developer that I know stated "why should I bust my ass and take on risk if the government will seize my income..." In other words, the growing tax and regulatory burden that entrepreneurs face provides disincentives to invest in productive ventures, which means less jobs for the community and lower net tax revenue for the state...sorry progressives!

2. Individuals who do not undertake the efforts to improve themselves economically enjoy a zero tax burden, as well as a host of government subsidies for food, housing, medicine and education.

And Individuals who invest their time and energy to raise their income will face an increased tax burden, as well as a loss of government assistance. The end results is a more static and less economically mobile society, which I suspect will further aggravate the inequitable distribution of wealth.

Top 1% (above $364,657) earns 21.20% of national income and pays 39.38% of taxes.

Top 5% (above $145,283) earns 35.75% of national income and pays 59.67% of taxes.

Top 10% (above $103,912) earns 46.44% of national income and pays 70.30% of taxes.

Top 25% (above $62,068) earns 67.52% of national income and pays 85.99% of taxes.

Top 50% (above $30,881) earns 87.17% of national income and pays 96.93% of taxes.

Bottow 50% (below $30,881) earns 12.83% of national income and pays 3.07% of taxes.

http://www.taxfoundation.org/press/show/22652.html

http://www.american.com/archive/2007/november-december-magazine-contents/guess-who-really-pays-the-taxes

Distribution of Wealth (Part VII)

Here are some miscellaneous points to consider on the distribution of wealth that emphasize the state's role in encouraging an increasingly inequitable distribution of wealth:

1. In addition to creating general monetary inflation, the state has undertaken policies that has encouraged the rise in prices in several key sectors. For example, most economists and hunger-advocates are in agreement that ethanol subsidies has contributed to a rise in food prices that have been most heavily felt by the poor.

2. Many government subsidies accelerate the process of concentrating wealth in fewer hands. For example, agricultural subsidies overwhelmingly go to larger corporate farms, which has aided them in buying out smaller family farms.

3. The recent Bushbama bailouts - they most definitely equalled a transference of wealth from productive smaller businesses and families to connected corporate interests.

4. Historically, many larger corporate interests have supported increased regulation, because they realize that many of their smaller competitors will not be able to bear the cost of regulatory compliance.

5. It appears as if the sectors of the economy that the state has most heavily intervened in, such as housing, health care and higher education, have seen the highest rises in cost, much to the detriment of the public. I am not an economist, so I cannot fully explain the mechanisms at work, but I am certain that as the state presence has increased so has the costs.

Distribution of Wealth (Part VI)

One factor that I have neglected to mention is inflation.

Over time wages have risen, but the problem for many workers is that wages increases have not kept up with the rise in prices. Milton Friedman and many other economist are correct that the burden of inflation usually falls heaviest on the poor and middle class. Furthermore, inflation discourages savings and production and encourages people to place their capital in high return, speculative ventures, all of which contributes to the increasingly unequal distribution of wealth.

Without a doubt the main culprit of inflation is the federal government via the expansive monetary policy it uses to fund its massive growth.

Distribution of Wealth (Part IV)

In her book "Marriage and Caste in America," Kay Hymowitz makes a very compelling argument that the growing divide in family structure seen between different segments of the United States is a major factor in the increase in economic equality. Most "progressives" will recoil at me "blaming the victim," so I will break this down to the simplest facts:

1. The majority of households headed by single mother has one income and the majority of households with two parents have dual incomes.

2. If a single mother was wealthy and educated, this would not be as much of an economic issue. But, single mothers are far more likely to be poor and uneducated.

3. Together these two factors dramatically increase the probability that a single parent household will be low income and economically immobile.

4. There has been a tremendous growth in single motherhood. Since 1980 the number has risen from 18% to nearly 40%. Among African-Americans it has surpassed 70%, among Hispanics it has surpassed 50% and among whites it has risen to 28%.

5. Conversely households headed by two parents are far less likely to be poor and tend to advance economically and socially relative to their single parent counterparts.

6. In addition, traditional families generally are better equipped to provide their children an upbrining and environment that will help them advance educationally and economically.

7. Clearly these socio-economic developments are contributing to the growing economic inequality among American families.

8. Without a debt welfare in its present form has subsidized pathological behaviors such as having children out of wedlock.

9. So, paradoxically welfare has indirectly contributed to the growing economic inequality.

http://chicago-freedom-forum.blogspot.com/2009/02/can-anyone-explain.html

Distribution of Wealth (part III)

Wages are not arbitrary and have little to do with "social justice." Wages are essential market signals and the most important factor in determining wages in any given time, place and professional is supply-and-demand.

In Chicago, most non-union electricians that I know earn $40 an hour, which reflect the high demand (relative to the available supply) for electricians. We can conceptualize high wages as market signals that indicates the relative need for a particular service and offers incentives to supply that need. Without the incentives of higher wages, it is extremely doubtful that a sufficient number of workers would invest their time and resources to develop the necessary skills to fill that position.

In Chicago most fast food workers earn minimum wage, which reflects the surplus of and low demand for unskilled labor. Most activists who push for a "living wage" for low skilled retail positions fail to take into account the economic law that when wages are raised beyond that which is dictated by market forces greater unemployment will occur. In addition to raising unemployment it lowers incentives for the said individuals to develop greater human capital that will allow them to increase their income and on an aggregate level to foster a more productive, dynamic economy. This is especially true in an economy that increasingly rewards skilled workers and penalizes low skilled workers.

As with any commodity, increasing the the supply of unskilled workers has lowered wages in key sectors of the economy and contributed to the increasingly unequal income distribution. Several government policies have contributed to the increase in the supply of low skilled workers:

1. Unlike New Zealand, the driving force of our immigration policy is not to attract highly skilled, highly educated immigrants. Whereas their criteria for accepting immigrants is a point system that focuses on bringing in workers that meet the needs of an increasingly high tech economy, ours is based on family reunification and a diversity lottery. Coupled with our almost complete lack of internal enforcement, the end result has been the influx of millions of workers who on average possess educational and skill levels considerably below those of native born workers. Predictably the results of this increase in the supply of labor has lowered the cost of labor in key sectors of the economy, which translates to a shift of income towards the wealthier Americans who consume these goods and services. And predictably the growth in economic inequality has been most pronounced in areas that have seen an influx of low skilled immigrants (such as California & Arizona) and less pronounced in areas that have remained more homogeneous (such as Utah and Iowa). So, it seems as if the progressive goals of equality and diversity may be somewhat incompatible.

2. In the past over 1/3 of immigrants returned to their nations of origin. A large segment of this group was composed of individuals who were unable to economically advance. This equalled a self selection system in which the most productive, adaptive immigrants remained, which encouraged upward economic and social movement. But, the expansion of the welfare state greatly diminished this self section system, allowing for unproductive individuals to remain. This further increased the supply of low skilled workers.

3. Even as school funding has surged, many public schools have done very little to prepare students to partake in a dynamic global economy. Their inability to assist more students in the development of the skills necessary to seize the opportunities that high-tech, creative sectors of the economy has doomed them to low pay jobs. The end result has been a less productive economy and a more skewed distribution of wealth.

http://www.carseyinstitute.unh.edu/images/photos/US_income_Inequal_5-15-2006_rev.jpg

Distribution of Wealth (part II)

The competitiveness of a nation's firms effects the wages, welfare and distribution of wealth that its citizens face. For example, after the second world war, American automakers held a near monopoly on car sales and accordingly were immensely profitable. The productivity of workers and companies alike allowed for an impressive growth in wages and benefits that allowed automobile workers to attain a comfortable middle class lifestyle. A strong industrial sector with high paying jobs naturally contributed to a more equitable distribution of wealth.

But an increase in competition from car makers from Japan, Germany, Korea and a host of other companies, led to a decline in the market share and profitability of American auto makers. Even with automation and outsourcing, operating expenses outstripped income, culminating in the much publicized bankruptcy of GM and several other firms. Clearly under these circumstances, it became impossible to sustain the level of workers compensation, as well as the number of autoworkers. Unfortunately this pattern of industrial decline was repeated across multiple industries, leading to industrial decline, substantial job losses and a decline in wages and benefits. All but the most radical analysts acknowledge that the welfare of workers is fundamentally connected to the health, competitiveness and profitability of companies and industries.

The decline in manufacturing was accompanied by growth in two sectors:

-retail and service industries that required low skill, low wage workers.

-high tech industries (like bio-tech) and high end services (like financial consulting) which required highly educated and highly compensated workers.

The end result was a job market that increasingly rewarded skilled, educated workers and offered diminishing returns for low skilled, uneducated workers. Needless to say this further skewed the distribution of wealth.

The only questions that remain are - what government policies contributed to the industrial decline and what can be done (if anything) to reverse it? There is a great deal of debate on this topic, but some key factors worth considering are:

1. The persistent failure of large segments of the country to consider the competitive costs imposed on American firms by numerous political mandates. For example, any company that south to set up a factory in Chicago would face costly permits, regulations, hiring mandates, taxes and outright corruption. And let's not forget the constant liability they would face with the constant threat of frivolous and fraudulent lawsuits. To protect itself, the hypothetical company would spend enormously on legal and insurance services, which greatly adds to the cost of their operating expenses.

This is not to say that we do not need health and environmental regulation and that citizens should not be able to sue corporations, rather we must carefully weigh the costs and benefits of each policies And we must always be aware that we are in a highly competitive global market in which capital and production are increasingly mobile.

2. The many sub-par public schools that do little to prepare American students for an increasingly competitive labor market that requires skilled, adaptive workers.

Why these schools perform so poorly is a topic that merits a long and separate debate.

3. A tax system that provides net disincentives for industrial investments and other productive enterprises.

4. A political system in which government intervention in the private sector and corporate influence of government policies has pathologically grown. As seen through the very selective distribution of bailouts, subsidies and selective regulation to connected financial and automotive firms, favor with the federal government is playing a dangerously large role in the success or failure of corporations. Clearly ever subsidy offered to a politically connected firm increases the tax burden on non-connected firms. Needless to say, this creates an environment that discourages private investment and innovation and encourages rent seeking.

http://en.wikipedia.org/wiki/Rent_seeking

Distribution of Wealth (part I)

Pictured Above: Capitalism,

The Goose ThatLays The Golden Egg

The left is correct in their concern about the increasingly ill distribution of wealth in the United States. I actually share his concern, because a highly skewed distribution of wealth does not bode well for American Democracy or society. But, on two points I strongly diverge from the left: the causes of and solutions to this problem.

The distribution of wealth is the product of complex economic and social forces, each of which could merit a dozen posts. Once we delineate these factors, we can better understand and address the issue of wealth distribution.

In determining the living standards of a nation, the creation of wealth is usually a more important factor than the distribution of wealth. For example, the income distribution of the Soviet Union was fairly equitable, but compared to the United States, living standard was appallingly low. Consumer items (such as cars, TVs, phones and even fresh fruit and vegetables) that were reserved for the Soviet elite are ready accessible to the majority of American households. Across the globe there are countless other examples of nations that lowered the living standards of most of their citizens, by limiting the creation of wealth through aggressive redistributive policies.

On the other hand the economic dynamism of capitalism has raised the living standards of hundreds of millions of people across the globe. The best example being South Korea, a nation that radically raised the living standards of its citizens through the aggressive pursuit of education, economic growth and productivity. This path was also seen in Japan, Taiwan, Singapore and to a lesser extent Vietnam and Malaysia. In cases like China, the increasingly skewed income distribution does not represent a drop in living standards for the working class, but simply the greater pace of income growth among the middle and upper classes.

This does not inherently mean that the US government should not pursue redistributive policies. But, it means that when formulating and enacting these policies we should be extremely cautious about undermining incentives for wealth creation or "killing the goose that lays the golden eggs."