Monday Morning Links

Miscellaneous material for your Monday reading.

- Robert Reich writes about the basic economic lessons the U.S. has forgotten since its postwar boom:

First, America’s real job creators are consumers, whose rising wages generate jobs and growth. If average people don’t have decent wages there can be no real recovery and no sustained growth.

In those years, business boomed because American workers were getting raises, and had enough purchasing power to buy what expanding businesses had to offer. Strong labor unions ensured American workers got a fair share of the economy’s gains. It was a virtuous cycle.

Second, the rich do better with a smaller share of a rapidly-growing economy than they do with a large share of an economy that’s barely growing at all.

Between 1946 and 1974, the economy grew faster than it’s grown since, on average, because the nation was creating the largest middle class in history. The overall size of the economy doubled, as did the earnings of almost everyone. CEOs rarely took home more than forty times the average worker’s wage, yet were riding high.

Third, higher taxes on the wealthy to finance public investments — better roads, bridges, public transportation, basic research, world-class K-12 education, and affordable higher education — improve the future productivity of America. All of us gain from these investments, including the wealthy.

In those years, the top marginal tax rate on America’s highest earners never fell below 70 percent. Under Republican President Dwight Eisenhower the tax rate was 91 percent. Combined with tax revenues from a growing middle class, these were enough to build the Interstate Highway system, dramatically expand public higher education, and make American public education the envy of the world.

We learned, in other words, that broadly-shared prosperity isn’t just compatible with a healthy economy that benefits everyone — it’s essential to it.

- Meanwhile, Marilyn Reid offers a reminder that free trade agreements have more to do with entrenching existing privilege than any interest in trade. Gaius Publius notes that any recovery since the 2008 economic meltdown has been enjoyed solely by a wealthy few. And Tom Tomorrow nicely summarizes where the combination of economic and political forces being marshalled solely for the benefit of those with the most wealth and power ultimately leads:

- Karl Nerenberg and Witold Walczak (via Alexander Panetta) both discuss the anti-democratic direction taken in the Cons' election legislation. Tonda MacCharles analyzes how the torquing of elections rules fits into the Cons' broader strategy for 2015 - while still offering no guarantee of success. And Pierre Poilievre's claim that we shouldn't worry about unlimited election spending because the party manipulating the system for its own advantage won't admit that its legislation means anything hardly offers comfort to voters looking for a free and fair election.

- Meanwhile, if the Cons indeed face an uphill battle in trying to cling to power, the combination of disastrous policy choices and a profound distaste for reality offers an important part of the explanation.

- Finally, John MacInnes and Jeroen Spijker discuss what an aging population really means:

[An increase in Remaining Life Expectancy (RLE)] is crucial because many behaviours and attitudes are more strongly linked to that than to age. Most acute health care (hospital treatment) costs are incurred at the very end of a person’s life, irrespective of their age. Population ageing has no direct impact. The pattern for social and long term care costs turns on what is happening to morbidity. Improvements in public health (especially the increase in levels of education and decline of smoking) are driving down age specific disability and morbidity rates: people are staying healthier longer. We do not know clearly (because consistent longitudinal data are scarce) whether the rise in life expectancy is pulling up the absolute average time older people spend in care or with chronic health conditions. However we can say one thing with certainty: as life expectancies increase it is systematically misleading to assume that tomorrow’s 65 or 80 years olds will have the same health profile as today’s. As RLE increases, people of the same age get ‘younger’: people with the same years lived as their counterparts in earlier cohorts, have more years left. Paradoxically popular jargon understands this very well: ‘50 is the new 40’.

The standard indicator of population ageing is the Old Age Dependency Ratio (OADR). It takes those aged 65+ and divides by the number of working age (16/20-64 years). It is not fit for purpose. Most people aged 65+ are not ‘dependent’. A million are employed (three times the number in care or nursing homes). Grandparents are the most important source of childcare after parents themselves. Many do voluntary work. Their consumer power is large and growing. It makes little sense to count everyone of working age when we can count those actually working. In fact, there are more ‘working age’ dependents - people not at work - (9.5 million) than there are people of state pension age in Britain.

We therefore recently proposed an alternative measure, the Real Elderly Dependency Ratio (REDR), which counts men and women with a RLE of ≤15 years divided by the number employment, irrespective of their age. In contrast to the inexorable rise of the OADR, we find that the REDR has fallen over recent decades in affluent countries, has stabilized now and is likely to increase only slowly over the next couple of decades.