I'm gonna have to agree with my fellow economist on this one.
Mark Thoma's
patience and good humor has been rewarded with a well deserved flurry of links. Also he linked to me once. The problem is that he is discussing one of the few issues where I buy into the economics profession orthodoxy -- free trade. I must stress that I think rich countries should not protect because I care about workers in poor countries, so I may not be totally convinced that free trade is part of an optimal set of policies for every country.
However, Thoma uses the magic acronym EITC
Thoma "Here's what I mean. We say we need to use some of the gains from trade to help workers hurt by globalization, but beyond the broad acknowledgment of that point, we don't have much specific to offer. There's the usual list, unemployment insurance, wage insurance, job retraining, help with relocation, food stamps, minimum wage, EITC, etc., etc., but most of these have been around for awhile and don't generate much excitement or interest."
Guy saying economists suck (GSES) "That's because things like job retraining don't work, though they seem to make people who still have jobs feel better, and the rest of the things on the list just help you put off taking a worse job than you had before."
Wrong. GSES you were doing OK with the bit about economists, but you are clueless about the EITC. In addition to being a transfer to the poor it encourages people to not put off taking a job they can get.
Thoma goes on the explain that what this country needs is a balanced tax program, that is soak the rich and spread it out thin. He does have very odd views on politics however.
"Most of the ways we've dealt with this in the past have, as I talked about before, been targeted at groups of people demonstrably hurt by globalization. That has two advantages. First, when you can point your finger at a particular person it draws sympathy and support. Help is easier to get when there's an identifiable victim. But when the effect is, say, to lower the wages of low-skilled workers generally by, say, 5% or 10%, it's harder to find that particular group or person to single out as an example of the harm from globalization. The politics behind the problem are very different. In addition, there is a second advantage to targeted help. When help is given to specific groups of individuals, those getting the help understand what the help is for and those giving the help can see that it is going to the affected parties. This is different from, say, increasing taxes to transfer money from higher to lower income individuals. The reason for the income transfer may be to compensate the losers from globalization, but the disconnection between the income transfer policy and the reasons for it - compensation for the costs of globalization - will make such a policy difficult to implement and sustain."
Huh ? Why ? Taxing the rich and sending the cash to US workers will be a very very popular policy. People demand it whenever they are polled. It is a political mystery that the rich have managed politically so far. I think it has more to do with Democrats fearing the disapproval of pundits than any Rovian political genius.
I'm sure it is only a matter of time. I would guess about 2 years till the President signs the bill.
