Guaranteed Income for the 21st Century Aims to End Poverty As We Know It

In a promising contribution to the debate over poverty policy, the Institute on Race and Political Economy at the New School has released a major welfare reform proposal that it calls a Guaranteed Income for the 21st Century. Details of the proposal (abbreviated GI21 in what follows) are set out in a report written by Naomi Zewde, Kyle Strickland, Kelly Capatosto, Ari Glogower, and Darrick Hamilton. The proposal makes a full-scale assault on America’s social protection gap. It includes several features that the Niskanen Center has long championed, such as an emphasis on cash assistance, broad eligibility, and payment in monthly installments with appropriate provisions for the unbanked. Although the proposal is not budget-neutral, its estimated cost of $876 billion per year is considerably less than that of several other proposals for a universal basic income.

All proposed reforms of the social safety net face a set of tradeoffs among the goals of income security, affordability, and work incentives. This commentary will examine how GI21 deals with those tradeoffs, beginning with the areas where it is strongest and then turning to aspects of the plan that could benefit from some further thought.

Is the Phillips Curve Back?

Anyone who has been following the U.S. monthly economic data lately has noticed that the rate of inflation has been rising over the past year as the unemployment rate has fallen. Figure 1 shows the numbers: 

To those old enough to remember, this chart looks ominously like the first inflationary surge of the Kennedy-Johnson years: 

Or even more ominously, Figure 1 looks a bit like this chart from a 1958 article by A. W. Phillips, which later became famous as the “Phillips curve.”

So, are we in for runaway inflation unless we slam on the brakes and send unemployment soaring again? You might think so from the headlines inspired by recent CPI reports, but the answer is “no,” or at least, “no time soon.” 

To see why, we need to understand just what the dreaded Phillips curve is, why falling unemployment brought soaring inflation in the 1960s and 1970s, and why it is far less likely to do so now. That will require a detour into a bit of economic theory, then a review of the history of inflation and unemployment over the past six decades, and then an analysis of the psychological underpinnings of economic behavior. Here we go.

America's Social Protection Gap and What to Do About It

Around the world, liberal democracies take pride in the freedom and prosperity of their citizens. And not just prosperity for the prosperous. They also pursue social protection policies that guarantee a minimum standard of prosperity for even the most disadvantaged. In previous writings, I have focused on quality of government in liberal democracies and on policies that engender social and political trust. This commentary turns to social protection policies, entering an area in which the United States struggles to keep up with the standards set by its liberal-democratic peers. 

The first section discusses just which countries can be counted among that peer group. The second explores three quantitative indicators of social protection and shows the degree to which the United States lags behind. A conclusion argues that a policy of faster and fairer growth could allow the United States to close its social protection gap.

Who are our liberal democratic peers?

My starting point in classifying countries by their degree of liberal democracy, as in earlier work, is the concept of liberal rights practices. In his book, Trust in a Polarized Age, Kevin Vallier defines liberal rights practices as rights that are “recognized in constitutional law, exercised regularly by the people, and embodied in public policy.” That approach makes it possible to treat liberal rights practices not just as values or aspirations, but as observable characteristics of public policy to which it is possible to assign numerical scores. 

Vallier lists five liberal rights practices, namely, democratic constitutionalism, markets and private property rights, freedom of association, electoral democracy, and social protection policies. My approach covers a conceptually similar range of practices, but with modifications to terminology and content as needed to better fit the data. Full definitions and data are presented in an online appendix.

• Quality of governance focuses on government institutions rather than policy outcomes. It includes measures of executive constraints, government integrity, rule of law, and government effectiveness.
• Quality of market institutions covers property rights, contract enforcement, investor protections, and quality of regulation.
• Personal freedoms pertain to policies and institutions that guarantee freedom of association, freedom of speech, freedom from discrimination, and agency, a term that Legatum uses to the ability of people to act in accordance with their own desires, based on indicators such as freedom of movement, women’s rights, and due process in criminal law.
• Procedural democracy is democracy in the narrow sense of regular and fair elections with open participation. Procedural democracy is often associated with personal freedoms and quality government, but those outcomes are not part of the definition of democracy in this sense.
• Social protection policies are government policies that ensure that basic needs are met, including cash support and other policies, both on-budget and off-budget, that mitigate extreme inequality and ensure acceptable minimum levels of food, shelter, medical care, and communications.

In what follows, I refer to the first four of these categories as basic liberal rights practices. Each country is assigned a score, LRP*, which is an equally weighted average of the standardized scores for quality of governance, quality of market institutions, personal freedoms, and procedural democracy. Vallier includes the fifth item, social protection policies, in his definition of liberal rights practices, for reasons discussed below. However, this commentary turns his definition into a question: To what extent is it actually true that governments that are liberal democracies in other respects also have strong social protection policies? 

What Does Vaccination Have To Do with Freedom?

How did getting vaccinated for Covid-19 get mixed up with freedom? I was pondering that as I read a piece in The Hill about Trump’s recent interview on Fox News. “I would recommend it to a lot of people that don't want to get it. And a lot of those people voted for me, frankly,” Trump said, before going on to add, “We have our freedoms, and we have to live by that. And I agree with that also.”

The Hill went on to quote Rep. Andy Biggs (R-Ariz.), chairman of the House Freedom Caucus, as saying “As long as we still live in a free country, then we can make those individual decisions.”

But, while some people insist on their fundamental freedom to refuse vaccination, others answer, “You might have the freedom to get your bad knee replaced or not, but you don’t have the freedom to refuse the Covid vaccine because you don’t have the freedom to infect me.” Seems like there are two completely different ideas of freedom here, no? How does that work?

Part of the problem, I think, is the English language’s inadequate vocabulary of freedom. While I was thinking about this, another item popped up in my inbox – a link to an article from the Russian opposition news outlet Meduza. Written by the philosopher Nikolai Plotnikov, it bore the title “How Russians See ‘Freedom’ Differently.”

Russians, as Plotnikov pointed out, have two words for freedom, volya and svoboda. Having lived several years in Russia myself, I was aware that those two words existed, but I had never thought much about their political implications. Volya, the older of the two words, means roughly “free will.” It calls to mind an unconstrained life on the open steppe, perhaps the image of the folk hero Stenka Razin, leader of a seventeenth century Cossack uprising against the Russian nobility. In Plotnikov’s view, whereas volya is something inherently Russian, svoboda is something Western, a concept of civic freedom. Svoboda, he says, “is inconceivable without respect for others’ freedom.”

In Russian popular usage, volya and svoboda don’t always quite line up with Plotnikov’s somewhat academic version of their meanings. You have, for example, svobodny clothing, meaning comfortable, and volny clothing, meaning a bid indecent. But this isn’t a Russian language lesson. What matters here is the usefulness of Plotnikov’s distinction for understanding the American vaccination debate. When an American like Rep. Biggs asserts his freedom to remain unvaccinated, he is thinking volya. His neighbor who says, “No, you don’t have the freedom to infect me,” is thinking svoboda.

To be sure, English also has two words, but our “freedom” and “liberty” don’t line up like that. As far as I can see, they are synonyms that both mean svoboda. When Americans need to make Plotnikov’s distinction, they either have to use circumlocutions or risk being imperfectly understood.

I’ve seen American libertarians struggle with this problem, hampered by the limits of our language. Orthodox libertarians definitely think in terms of civic freedom, svoboda. Their touchstone is the nonaggression principle – the maxim that it is impermissible to initiate physical harm against another person. Use of force is permissible only in self-defense. To refuse the vaccine and then sneeze in your neighbor’s face is clearly a violation of the nonaggression principle. Yet, others who call themselves libertarians glory in the right to be rude and crude, the right to hate, the right to do whatever they want whatever social standards say. Some of them don’t scruple at embracing Naziism, white supremacy, and other unsavory ideologies that, historically, are anything but nonviolent. Writing for the orthodox libertarian Foundation for Economic Education a few years ago, Jeffrey Tucker struggled for a term and came up with “brutalist libertarianism” – a good try, although it never caught on. Plotnikov makes it clear, though, that Tucker’s brutalist libertarians differ from the orthodox in that they think in terms of volya more than svoboda.

So, next time you are confused when some of your neighbors assert their right to forego vaccination in the name of freedom, while others, also invoking freedom, insist that everyone has a duty to be vaccinated, you can blame it on our English language. Even though, by some counts, English has more words than any other language, it lacks a clear distinction between volya and svoboda. But then, English is a free language in that, unlike French, has no Académie anglaise to tell us what words we can and cannot use. Who knows, maybe volya and svoboda will catch on yet, as have other Russian terms like sputnik and kompromat.

Previously posted at Ordinary Times. Reposted by permission.

The Best Opening for a New Third Party is the Liberal Center

 

Writing for the New York Times, Bret Stephens tells us  why the new party that 62 percent of Americans say we need must be a centrist one, and why it must be liberal. Not “liberal” as used in the United States to describe progressive populism, but liberal in the classical sense of support for democracy, the rule of law, and the Bill of Rights. That, he says, is the neglected territory of American politics. It’s the place he thinks most Americans still are, temperamentally and morally, and might yet return to if given the choice.

He is right about all that. But then he almost spoils it with one churlish phrase: “By ‘liberal,’” he says, “I don’t mean big-state welfarism.” Perhaps that is just a sop to his conservative fans, but to me it suggests a misunderstanding of the type of governments and social policies that underpin the freedom and prosperity of the world’s other liberal democracies.

If you favor liberal democracy, focus on the quality, not the size of government

Stevens yearns for a party anchored in the liberal values of freedom, democracy, and the rule of law. The best book about liberalism that I have read recently is Kevin Vallier’s Trust in a Polarized Age. Vallier is a pragmatist, less interested in ideology than in what he calls liberal rights practices, the actual nuts and bolts that make freedom and democracy work. He identifies five of these: freedom of association, markets and private property rights, democratic constitutionalism, electoral democracy, and social welfare programs. Setting social welfare programs aside for a moment, let’s look at the relationship between the size of government and Vallier’s other four liberal rights practices in countries around the world. 

Carbon Pricing and its Green Critics

Carbon pricing is firmly entrenched as the go-to climate policy for economists, yet many with training in other sciences and social sciences remain skeptical. As one critic puts it, “Of the policy tools in the carbon toolbox, carbon pricing is the tiny flathead screwdriver used to fix glasses.” 

In my view, the skeptics have the wrong analogy. Instead of a tiny screwdriver, I like to think of carbon pricing as the drip irrigation of climate policy. Israeli farmers have shown how drip irrigation, used together with a suite of other policies, such as reusing treated sewage, finding and fixing leaks early, and engineering crops for harsh conditions, can make the desert bloom. Similarly, carbon pricing, although working quietly and largely out of sight, can serve as an integral part of a whole set of measures, such as performance standards, regulatory reform, and green industrial policy, which together can achieve the goal of deep decarbonization.

So why all the skepticism? Here are what I see as the main points at issue between the proponents of carbon pricing and their critics.

Economic and Personal Freedom: Test Driving Cato's Human Freedom Index

December saw the release of the 2020 edition of the Human Freedom Index, published jointly by the Cato Institute and the Fraser Institute. The index is a massive effort that combines an Economic Freedom Index developed by the Fraser Institute with a separate index of personal freedom compiled by Cato. The freedom indexes and the data behind them are a treasure trove for data junkies like me. This commentary takes the data for a test drive by exploring a key finding of the Cato-Fraser report: that economic freedom and personal freedom go hand in hand.

Economic and personal freedom: A first look

The Human Freedom Index comprises 76 individual indicators, divided into 12 groups. Five of the groups cover economic freedom: Size of government; legal system and property rights (LSPR); sound money; freedom of trade; and regulation. The remaining seven groups cover personal freedom, including rule of law; safety and security; freedom of movement; religion; association, assembly, and civil society; expression and information; and identity and relationships. 

Figure 4 in the freedom report is a scatter plot that shows a strong correlation between economic and personal freedom. My version of the chart looks like this:

The points in the diagram cluster around a positively sloping trendline, showing that countries with freer economies, by and large, tend also to enjoy greater personal freedom. Statistically, differences in economic freedom account for just over half of the variance in personal freedom.[1] Sweden has the highest personal freedom score, while Hong Kong has the highest economic freedom score.[2]

The analysis section that follows explores what goes on behind the scenes to produce the striking relationship between economic and personal freedom. In a concluding section, I make several suggestions for strengthening the economic freedom portion of the index. Readers who are willing to take my conclusions at face value without examining the statistical details of how I reach them can skip the analysis section and go directly to the conclusions.

The Case Against Premature Fiscal Austerity

 

A new Congress has convened. Soon the battle of the budget will begin. On one side will be the advocates of stimulus, who think the economy needs help to recover fully from the damage done by the pandemic. On the other side will be the deficit hawks, refreshed after their long slumber during the Trump administration. 

The case for a sharp turn toward fiscal austerity rests in large part on the idea that we are at the edge of a precipice, poised for a plunge into insolvency, default, hyperinflation, and who knows what other disasters. A new book from the Cato Institute, A Fiscal Cliff conveniently gathers the views of fiscal conservatives into a single volume. This commentary reviews some of the most common arguments for fiscal austerity and explains why they don’t hold up. 

Trust and Quality of Government in a Polarized Age

Kevin Vallier’s new book, Trust in a Polarized Age, has a clear message: Trust matters. If we want to combat the increasing political polarization that is bane of our times, we need to tend to the institutions on which trust depends, and which themselves, in turn, depend on trust. 

By trust, Vallier means two things: Social trust, “that trust which each member of a society has that other members of her society will generally follow publicly recognized moral rules,” and political trust, “that trust which each member of a society has that governmental institutions will follow fair procedures and produce positive results.” (p. 6) He sees the two as joined in a virtuous circle through the intermediary of good government: “Since social trust creates good governance and good governance creates political trust, social trust creates political trust by proxy.” And to close the circle, he maintains that institutions of good government, by enforcing trustworthy behavior, create conditions that favor political trust and build general social trust. (p. 214) 

By good governance, Vallier means liberal governance – in the sense of classical liberalism, not the American usage that makes liberalism a synonym for the political left. Yet, Vallier does not defend liberalism as an ideology. He focuses more pragmatically on five key liberal rights practices: freedom of association, markets and private property rights, social welfare programs, democratic constitutionalism, and electoral democracy. (p 277) His message is that if we embed these liberal rights practices in our institutions, trust will follow, polarization will recede, and a world in which politics is not war will become possible.

As someone engaged in empirical research on the quality of government, I found this all intensely interesting. Although Vallier’s book is primarily a work of political philosophy, I could hardly wait to fire up my spreadsheets to investigate the many hypotheses he suggests. Do trust, quality of government, and liberal rights practices really matter? Do they matter everywhere, or only in countries that are already liberal? The answer is that trust and good governance do matter, but the story is not always a simple one. Some of the patterns are quite complex, so the results reported in this commentary should be considered preliminary.

Why Libertarian Environmentalists Should Take Locke Seriously

 

In an well-argued essay, Jonathan Adler argues that libertarian environmentalists ought to take property rights seriously. No writer has had a greater impact on classical liberal and libertarian thinking about property than John Locke. It follows that any would-be free market environmentalist must take Locke seriously. And not just Locke’s theory of property. His theory of government, as laid out in his 1690 Second Treatise, is equally important. In what follows, I will argue that considering Locke’s ideas on both property and government leads to conclusions that justify even stronger policy actions that Adler advocates.

Locke on property

Locke states the essence of his theory of property in this famous passage:

Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature hath placed it in, it hath by this labour something annexed to it, that excludes the common right of other men: for this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others.” (Chap. 5, sec. 27)

A few pages later, Locke makes it clear that the principle for acquiring property applies not just to acorns gathered in the woods, but to the land itself: 

As much land as a man tills, plants, improves, cultivates, and can use the product of, so much is his property. He by his labour does, as it were, inclose it from the common. (Chap. 5, sec. 32)

What's Wrong with Libertarian Environmentalism

In an essay in Critical Review a few years back, Jeffrey Friedman had a go at explaining what’s wrong with libertarianism. His sixty-page argument can be summed up in a single sentence: “Philosophical libertarianism,” he wrote, “founders on internal contradictions that render it unfit to make libertarians out of anyone who does not have strong consequentialist reasons for libertarian belief.”

The conflict between the philosophical and consequentialist sides of libertarianism is nowhere more sharply on display than when applied to environmental issues. This commentary explores the dilemma of libertarian environmentalism and the ways–none of them entirely successful–in which its practitioners try to escape it.

Bipartisan Rules to Meet the Coming Fiscal Policy Challenge

President-elect Joe Biden will face serious fiscal policy challenges as soon as he takes office. A hoped-for V-shaped recovery from the Covid-19 pandemic has turned into a something that looks more like a long-tailed Nike swoosh. Business closings, mostly classed as temporary back in March and April, are, increasingly, proving to be permanent. Short-term unemployment is falling, but long-term unemployment and involuntary part-time work are increasing. Evictions and foreclosures loom over cash-poor working-classfamilies, who are estimated to have accumulated as much as $70 billion in back rent owed. Meanwhile, state and local governments, whose spending is constrained by balanced-budget rules, are laying off teachers and fire fighters. The trade deficit remains high and the Fed has no room left to cut rates to stimulate investment.

In a normal world, such a situation would cry out for fiscal stimulus. Ominously, however, the deficit hawks of the Republican party, who slept through the badly timed and budget-busting Tax Cuts and Jobs Act of 2017, are starting to stir. They said “No” to any last-minute stimulus before the 2020 election, and their appetite for austerity will be ravenous once they are fully awake. If Republicans hold their majority in Congress, they will have a major role in determining policy in 2021, so little is going to get done without at least a scintilla of bipartisanship.

“But,” you say … “Aren’t the budget hawks right this time? Just look at the numbers!”

Yes, they are right to point out that under current policies, as measured by the Congressional Budget Office, the federal debt is rising fast. It is about to exceed its previous record as a percentage of GDP and it is projected to go on rising for the next 30 years. But those raw numbers tell us little of use for fiscal policy. A rational set of budget rules neither automatically precludes nor condones large budget deficits or a debt ratio that rises over time. To understand what a rational set of budget rules would actually look like, read on.

A CBO Roadmap to Near-Universal Healthcare

 

On October 1, the Congressional Budget Office released a detailed report, Policies to Achieve Near-Universal Health Insurance Coverage. The report outlines four broad approaches to the long-sought goal of universal, affordable access to healthcare for all Americans. The CBO cautiously aims only for near-universal coverage, which it defines as coverage for at least 99 percent of the population. The report argues that 100 percent coverage is unattainable, since some people would inevitably decline to participate–even if they were eligible at no cost–on religious grounds or because they did not want to bring themselves to the attention of authorities, among other reasons.

Each of the four approaches offers potential improvements over what we now have under the ACA, and ways out of the unthinkable chaos of a court-ordered end to the ACA, with no viable replacement. The alternatives range from a Sanders-like single-payer plan bold enough to appeal to the most progressive Democrats, to others that are sufficiently market-oriented to pass judgement with any but the most curmudgeonly Republicans. One of the CBO’s alternatives squarely hits the sweet spot of radical moderation– the Niskanen Center’s hallmark.

Here is a brief outline of the four approaches, with some pros and cons of each. 

Quality of Government: A Statistical Portrait

In a recent three-part essay, the Niskanen Center’s Brink Lindsey acknowledges all that the modern market system has done to incentivize innovation and coordinate the production and distribution of goods and services. He is concerned, though, that the economists who have assumed leadership of the free-market intellectual movement sometimes take the existence of markets themselves for granted. He adds a vital qualification: 

A well-functioning market system is neither self-executing nor self-sustaining. To achieve what they are capable of, markets need to be embedded in and supplemented by supportive legal, political, and social institutions. 

The idea that institutions are important to the proper functioning of a market economy is hardly new. Harold Demsetz’s work on property rights and Douglass North’s writings on institutions and transaction costs are well-known landmarks in the literature. The question of quality of government (QoG) is a somewhat narrower, but still broad question within the study of economic institutions. Bo Rothstein’s 2011 book on QoG provides an excellent overview of the literature and many original contributions. 

The scope of this commentary is much less ambitious than any of these classic works. As a “statistical portrait,” it is more descriptive and exploratory than a rigorous exercise in hypothesis testing. Still, by highlighting some key relationships, I hope to point the way to potentially fruitful topics for further research. And even with these disclaimers, the findings reported here shed light on important questions regarding the relationship of QoG to democracy, personal freedom, and the satisfaction of basic human needs.

New Research Boosts Our Understanding of the Effective Marginal Tax Rates for the Poor

Does the American welfare system adequately encourage the poor to achieve self-sufficiency, or is it a “poverty trap” that locks welfare beneficiaries into a lifetime of dependency? The question has been debated endlessly with no clear win for either side. 

In large part, the dispute turns on a concept known as the effective marginal tax rate (EMTR) faced by poor and near-poor households. The EMTR is the percentage of any additional earned income that a household pays in taxes or loses in government benefits. Critics argue that high EMTRs leave little incentive to work, and even for those who do work, they mean that their efforts do little to help them to lift their disposable incomes above the poverty level. What is the point of getting a job if taxes and benefit reductions are going to eat up 75 percent or more of your earnings, even without figuring in expenses like child care, commuting, or work clothes? Supporters of the existing welfare system argue that punitively high EMTRs are rare. They emphasize that the current welfare system, despite its flaws, does raise millions of families out of poverty.

Recent research revives the longstanding debate over EMTRs. This commentary reviews studies that suggest that despite some changes for the better, critical segments of the low-income population, especially those with incomes close to and just above the poverty line, continue to face weak work incentives. Simply expanding eligibility for existing welfare programs will not fix the problem. As explained in the conclusion, a more effective approach to mitigating the poverty trap would be to cash out and consolidate current welfare programs, replacing them with a combination of universal income supports, universal child benefits, and wage subsidies for the lowest-paid workers.

It's Time to End the Preference and Tax Capital Gains as Ordinary Income

The United States entered the COVID-19 crisis with an unusually large budget deficit for an economy at or close to full employment. Even if employment, output, and growth were to recover quickly to where they were at the end of 2019 (something that is far from certain), the deficit, under current law, will remain large.

The good news is that interest rates are likely to remain well below the rate of GDP growth for the foreseeable future, as they have since the beginning of the century. As long as that remains the case, there is no danger of an “exploding debt” scenario in which a large but constant federal deficit causes debt to grow without limit as a share of GDP. At this point, the greatest danger to the recovery is premature austerity. Still, as the recovery proceeds, we are sure to hear it argued on both economic and political grounds that the deficit should be reduced.

At that point, the search will be on for ways to close the budget gap. Although everyone will roll out their favorite spending cuts, much of the heavy lifting is going to have to come on the revenue side of the budget. As former Trump adviser Gary Cohn put it recently, talking to CNN’s Fareed Zakaria,

Our next Congress, the Congress that sits down in 2021, almost has to sit down and look at our spending and our revenue side. … How we spend money? There are a lot of places where we could cut back. In addition to that, I think they have to look at our tax system and think of ways that we raise revenue.

No area of the tax code is more ripe for reform than the preferential treatment given to capital gains. While incomes from wages and salaries face a maximum tax rate of 37 percent, capital gains on assets held for more than a year, in most cases, are taxed at a maximum rate of just 20 percent.

The benefits of the capital gains tax preference flow predominantly to the rich. Some 70 percent of the benefits go to taxpayers with annual incomes of $1 million or more, who enjoy annual benefits of $145,000 each. Benefits for households with incomes of $50,000 or less average about $10. For years, backers have tried to find broader justifications for this tax break, contending that benefits to the few somehow trickle down to the rest, but their efforts are less than convincing.

Here are some of the many issues raised by the capital gains tax preference, and the many reasons why its elimination should be at the top of the list in the search for additional sources of federal revenue.

How Household Debt Threatens the Recovery

The COVID-19 pandemic is having a disproportionate impact on the health of low-income Americans, but even those low-wage workers who avoid the disease itself are likely to suffer grave economic distress. 

In part, that is because workers with lower incomes have been more likely to lose their jobs than those who are better paid. The Pew Research Center reports that 32 percent of upper-income adults say that someone in their family has lost a job or taken a pay cut due to the outbreak. That compares with 42 percent of middle-income households who report lost jobs or pay cuts, and 52 percent of low-income households.

But pay is only part of the story. To fully understand the disparate economic impact of the pandemic, we need to look also at household wealth, or more exactly, net worth. The margin by which assets exceed household liabilities is crucial to a household’s ability to weather a job loss or a pay cut without catastrophic effects. And household net worth is not only less equally distributed than income — it is also frighteningly fragile for those in the bottom half of the population. That fragility is a major threat to hopes for a speedy economic recovery, as we will see.

COVID Pandemic Highlights Need for Reform of US Healthcare

The COVID-19 pandemic has highlighted longstanding weaknesses of the U.S. healthcare system. In a May 20 webinar sponsored by the Niskanen Center, I examined three key issues:

• Where has our healthcare system failed?
• What can be done to make it work better?
• Is healthcare reform as we know it even relevant any more?

By "healthcare reform as we know it," I mean the kinds of reforms discussed endlessly during 2019 Democratic primary campaign and before that, during Republican efforts to "repeal and replace" the Affordable Care Act. I highlight three reform models:

• Democratic candidate Joe Biden's proposal to expand Obamacare
• Republican Representative Bruce Westerman's Fair Care Act
• Universal catastrophic coverage, a nonpartisan alternative put forth by Niskanen Center.

I explain how each of these can at least partially address problems raised by the pandemic, including loss of employer-sponsored coverage by tens of millions of job-losers and inadequate provision for testing, treatment, and supported isolation. I also discuss some problems that existing reforms do not adequately address.

My slideshow from the webinar is available here. A link to the complete video, including comments by Jeff Flier and additional Q&A by participants, will be available soon. 

v

A Social Safety Net for the Pandemic and Beyond

America's social safety net has been severely strained by the COVID-19 pandemic. Although the virus has affected people in all walks of life, the burden of illness and lost jobs has fallen most heavily on people in the lower half of the income distribution.

As the chart shows, those in the bottom half are the households whose financial condition is most fragile. They suffered the greatest economic harm in the 2008 financial crisis. Unlike their wealthier peers, they have not yet recovered, and they will experience even greater financial stress this time.

To cope with the economic effects of the pandemic, we need a social safety net that is fast, fair, and work-friendly. Federal efforts to provide income support in this crisis are commendable, but they have not reached everyone in timely fashion, and they have often been poorly targeted.

The safety net needs top-to-bottom reform. A reformed system would place more emphasis on cash assistance, with less in-kind and means-tested welfare. It would be "always on" in the sense that everyone would be automatically pre-enrolled for the minimum level of support needed in good times, so that aid could be quickly ramped up when a crisis strikes. It would provide adequate pay for essential workers and encourage others to return to work when the crisis has passed.

All of this and more was discussed in a webinar presented jointly by the Niskanen Center and the Center for Ethics, Economics, and Public Policy at the University of San Diego on May 14, 2020. You can view a slideshow presented during the webinar at this link or watch a complete video of the webinar, including Q&A, here.

Ozzie Zehner is at it again: Green Illusions, and Planet of the Humans

Are solar, wind, and other alternatives the magic bullets that will solve the world’s environmental and energy problems? Take a closer look, wrote Ozzie Zehner in his 2012 book,  Green Illusions. He is still saying much the same thing, in a new movie, Planet of the Humans, despite the great strides renewables have made in the past eight years.

My Niskanen Center colleague Nader Sobhani has reviewed the movie, and finds it wanting. I'll let you read his movie review. Here is a repost my own 2012 review of the book:

Zehner not only argues that green energy has technological, environmental and economic limits, but also that without an appropriate policy context, some forms of alternative energy could do more harm than good.

The dirty secrets of clean energy

The first part of Zehner’s book—by far the best—is devoted to explaining why neither photovoltaic, nor wind, nor biomass, nor any of the other alternatives to fossil fuels will be able to deliver a future of abundant, cheap, clean energy. Chapter by chapter, he brings out the environmental and economic limitations of each technology. Among the highlights—