Thursday, February 20, 2014

Americans and Equal Opportunity

For a long time, I accepted, without really thinking about it, the common view that most Americans support equal opportunity.  But I have turned my mind to it recently, and now I think the common view is wrong.  As I discussed in a earlier post, Americans don't regard it as particularly unjust that rich people can buy a better education for their children.    And as I discussed in my last post, most Americans think that the inheritance tax should be reduced or eliminated, even though a steep inheritance tax is a prerequisite for equal opportunity:  if one person inherits a lot of money and a lot of other people don't, you don't have a  "level playing field."  I'm not certain, but I recall hearing that even Herbert Spencer, who opposed pretty much all taxes and spending, favored an inheritance tax for that reason.  So it's hard to maintain that Americans are keen on equal opportunity given the lack of support for the inheritance tax.

Aside from the survey evidence, general observation doesn't suggest much support for equal opportunity.  Most people try to ensure that their children have whatever advantages they can give them.  I suspect that few middle-class people, even those who are generally egalitarian, would want a society in which their children had a substantial chance of winding up at the bottom.   Although poor parents can't give their children many advantages, they generally accept it as fair that more affluent people try to do so:  in effect, they figure that if they were rich, they'd want their children to inherit their money.

This isn't a lot of evidence, but when I try to think of positive evidence that Americans support equal opportunity, nothing comes to mind.  People talk about "opportunity," or "equal opportunity" all the time, but if you look more closely that usually amounts to saying that it would be good if we could get something for nothing:  if the poor could move up but no one moved down.  (Marco Rubio's recent speech on poverty was a good example of that).

Sunday, February 16, 2014

Death tax, where is thy sting?

Congress recently passed a debt ceiling increase with less drama than we've become accustomed to.  On NPR the other day, they were interviewing someone from a communications consulting firm who said that the Democrats had won over public opinion by talking about "avoiding default" rather than "increasing the debt limit."  They asked him if there were other cases in which a change in language had swung public opinion.  As I expected, he named the Republicans' use of "death tax" in the debate over the Bush tax cuts.    I've often heard this cited as an example of the power of rhetoric (or "framing"), but I haven't seen much evidence.  A search of the New York Times showed that "death tax" started to appear regularly in 2002, although it had been used occasionally for a century before then.  So I looked for survey questions on estate/inheritance taxes asked in 2001 or earlier.  There weren't many, but here is a sampling:

2001 "As you may know, federal inheritance taxes currently apply only to estates valued at more than $1 million. Which of the following would you prefer to see Congress do this year--change the laws to eliminate all inheritance taxes on all estates, eliminate inheritance taxes on small businesses and family farms but otherwise leave the taxes unchanged, or leave inheritance tax laws unchanged?"
 39%:  eliminate all
30%:  eliminate on small businesses and farms
25%:  leave unchanged

2000: "I'd like your opinion on some programs and proposals being discussed in the world today. . . . eliminating the inheritance tax"
43%:  strongly favor
28%:  favor
15%:  oppose
8%:  strongly oppose

2000:  "Thinking about the federal inheritance tax, do you consider this tax too high, about right, too low, or don't you know enough to say?"
41%:  too high
5%:  about right
1%:  too low
53%:  don't know enough to say

1997:  "The recently passed tax cut bill also phases out the inheritance tax, which is a tax as high as 55% that the government levies on money, farms, businesses, and other capital items passed along when someone dies.  Do you favor or oppose phasing out the inheritance tax?"
50%:  strongly favor
20%:  somewhat favor
12%:  somewhat oppose
15%:  strongly oppose

1997:  "Do you think the inheritance tax on estates worth $600,000 or more should be reduced, or not?"
43%:  should be reduced
44%:  should not

In 1984, a survey told people that the Reagan administration and Congress were considering raising some taxes in order to reduce budget deficits.  They listed eight possibilities, including "gift or inheritance taxes" and asked people for their first and second choices on which to raise.  The percent choosing each one as first or second:

54%:  luxury items like jewels or furs
46%:  corporate and business taxes
30%:  excise taxes on items like tobacco, alcohol, gasoline, airline tickets, and phone calls
15%:  user fees for those who use federal programs and services
13%:  place a tax on imported oil
4%:  increase federal income taxes
6%:  increase gift or inheritance taxes
6%:  establish a value-added tax

An increase in gift or inheritance taxes was one of the least popular items--well behind a tax on oil or excise taxes on items used by most people.

Despite the differences in the questions, the general picture is clear:  there was never much public support for the inheritance tax, even before Republicans started calling it the "death tax."

Sunday, February 9, 2014

Mobility in the mind

A number of studies showing that the United States has county less social mobility than most other affluent nations.  These studies, which are mostly by economists, measure mobility in terms of income:  do people who grew up in low/high income families have low/high incomes themselves when they are adults.  There's also a long tradition of studies of occupational mobility, carried out mostly by sociologists, which finds that it's pretty similar in different countries.  I don't know of any efforts to reconcile these discrepant findings, and I hope to look at that issue sometime, but now I'll add another kind of social mobility:  where people think they are. The 2009 International Social Survey Programme asked:  "In our society there are groups which tend to be towards the top and groups which tend to be towards the bottom. Below is a scale that runs from top [10] to bottom [1].  Where would you put yourself now on this scale?"  Then they asked "And if you think about the family that you grew up in, where did they fit in then?"

My measure of mobility is the correlation between these perceived ranks.  A lower correlation means a weaker connection between position growing up and position today:  that is, more mobility.  I'll say "high mobility" rather than "low correlation" because it seems easier to keep things straight that way.  

The United States ranks tenth in perceived mobility, with a correlation of .431.  Most of the countries that have the highest perceived rates have made a transition from Communism:  the top three are Latvia, Croatia, and Ukraine.  New Zealand is just ahead of the United States, and Austria is just behind.  

The lowest two are South Africa and Israel.  Portugal, Italy, Finland, and Great Britain also rank low.  

Note that the correlation just doesn't involve changes in the averages.  For example, Ukraine and South Korea have similar correlations (.347 and .360).  But in Ukraine, the average current position is 3.54 and the average position when growing up is 4.59; in South Korea, the averages are 4.51 and 4.27.  That is, most Ukrainians think they have moved down, while most South Koreans think they have moved up.  The United States is is the middle here:  the average for today is a little higher than the average when growing up.  

Saturday, February 1, 2014

Public opinion and budget deficits

Paul Krugman says "the public doesn’t 'get' macroeconomics," meaning the Keynesian idea that a budget deficit is desirable during recessions.  He cites a Gallup poll from 1936, in which 65% said "yes" when asked "do you think it necessary for  the new administration to balance the budget?"  More recent surveys bear him out.  In 2002 and twice in 2009, surveys asked "which of the following comes closer to your view of the budget deficit--the government should run a deficit if necessary when the country is in a recession and is at war, or the government should balance the budget even when the country is in a recession and is at war?"  The results:

            Deficit  Balance
Jan 2002      51%    46%
Jan 2009      33%    65%
Nov 2009      30%    67%

A slight majority favored the "run a deficit if necessary" option in January 2002, but that was only a few months after 9/11, so my guess is that the possibility of war was more prominent in people's minds.  The January 2009 results are striking--we definitely were in a recession then, and the survey was taken before Obama's inauguration, so the opposition wasn't a reaction to his policies or Republican opposition to his policies.

However, there was a survey back in 1958 (when the US was in a recession) that asked "Some people say that it is always a bad idea for the government to spend more money in a year than it collects in taxes--that is, to have an unbalanced budget.  Others say that in times of recession or depression it can actually help the country's economy for the government to spend more than it takes in in a year.  Do you feel an unbalanced budget is always a bad idea or do you feel it can sometimes help the country's economy?"  Only 33% said it was always a bad idea and 56% said it could help (10% were not sure).

I'm not sure why the results were so different.  The wording for the 1958 question seems pretty neutral, so I'm inclined to think it reflects a real change of opinion.  Keynesian theory was dominant in macroeconomics at that time, and maybe that indirectly influenced the public.  There was also recent historical experience--the country had run up a huge deficit during World War II, but then had avoided a major postwar depression and the economy had been going along pretty well until the 1958 recession.  Maybe the experience of the 1970s soured people on deficits.

The 1958 survey also asked people "buying things like refrigerators, washing machines, and vacuum cleaners on the instalment [sic] plan is the most sensible way to buy, or that it is all right if it's the only way you can manage it, or do you feel that instalment buying is almost always a bad idea?"  This is interesting, because an obvious explanation for public opposition to deficits is that they draw on their experience with household finances.  There is a relation, although not as strong as I would have expected.
                 Deficits bad    Deficits       DK      Total
                                 can help

Sensible            30%             59%         10%     28%
if the only way     31%             59%         10%     49% 
bad idea            44%             47%          9%     21%

Even among the people who rejected installment buying, a plurality thought that deficits could help the country.