How to Make America Stronger

 

Americans are very fortunate indeed to live in such a strong, prosperous and free society.  But not all of us share in this good fortune.  How can we help the less fortunate among us have a better chance to succeed in life?

Here are several things we can do, in rough order of importance:

  • Grow the economy faster than the 2.1% growth rate which has prevailed since the end of the Great Recession in June 2009. Faster growth means more new jobs are created and higher wages are paid for existing jobs. Success in life for most people includes earning an adequate income to live comfortably without major wants. Appropriate deregulation and tax reform are the best ways to speed up growth.
  • Improve basic education so that more people can qualify for rewarding jobs. Right now too many kids from minority and other low-income families are not graduating from high school with the skills they need to succeed in life. Two promising solutions to this problem are more charter schools and expanded early childhood education, both targeted at kids from low-income families.
  • Alleviate poverty in a productive manner by emphasizing work requirements for most, if not all, welfare programs. Higher work force participation and lower poverty rates are strongly correlated. Work not only provides income but also provides dignity and purpose in life.
  • Promote two parent families. Two parent families are much less likely to be poor than single parent families and also more likely to be supportive of their children’s education. Federal tax policy should always encourage child raising by two parent families for this reason.

Conclusion. America will become an even stronger country than it already is if more people, especially from low-income and minority families, have the education, work training and personal qualities to make a positive contribution to society.

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Income Inequality in a Dynamic Economy

 

I have pointed out in a recent post that, not only is the U.S. the world’s most competitive large economy, but also that our per-capita GDP is growing faster than for our nearest rivals.
A particularly vivid example of this dynamism is ecommerce where both the adjusted (gains minus losses) size of the workforce and the average wage are increasing rapidly.
We also know that incomes in the U.S. are rising faster at the high end rather than further down (see chart below).  What to do about this has become a major political issue.


Here are my ideas (in rough order of importance):

  • Economic growth is too slow, averaging just 2% per year since the end of the Great Recession in June 2009. It is reasonable to expect that the regulatory reform already underway and the tax reform under consideration in Congress can increase growth to 2.5% per year.  Together with our low unemployment rate of 4.2%, this is already leading to more and better paying jobs.
  • Improve educational opportunities by, for example, making early childhood education widely available to low-income families and attracting the best teachers to the poorest performing schools with targeted bonus pay.
  • Better vocational and retraining programs to prepare the unemployed and underemployed for the millions of skilled jobs now going begging for a lack of qualified applicants.
  • Attempt to address the social inequality associated with income inequality, see here.  Marriage rates, civic involvement and public trust have all declined significantly in recent years for the lower class. A very difficult problem to solve!

Conclusion.   In a free society like the U.S., providing self-help opportunities for advancement is the natural and preferred way of lifting up people who need assistance. The U.S. does a okay job in this respect but there is plenty of room for improvement.

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Why Racism Exists in America

 

The First Unitarian Church of Omaha, to which I belong, has formed a sister church relationship with a predominantly black church in north Omaha, Clair Memorial Methodist Church. On Saturday we held a joint workshop, “Confronting Racism” at Clair. Several people said that we should “celebrate diversity, transcend race, and hope that things will be better in twenty or thirty years from now.”
I think the problem is much more fundamental and difficult than this. First of all, there are two main reasons why racism is so prevalent in America, one obvious and one perhaps less obvious:

  • The obvious reason is the very different colors of our skin.
  • The other reason, equally important, is that there are huge socio-economic differences between the two races. Whites are, by and large, better educated and more affluent than blacks. They also have a more stable family structure, with far fewer single parent families. People tend to live in homogeneous residential areas and associate with others of similar socio-economic background. All of these social factors serve to separate the races into largely non-interacting groups of people.

How do we confront and attack such deeply entrenched racism in our society? We need an approach which is more fundamental than programs like “welfare to work” or “residential integration.” Even equalizing educational opportunity is not enough. What we need is a long term effort to improve educational outcomes for blacks and other children from low-income families.
Capture9As the above chart of Nebraska data shows, children from low-income families, who thus receive free or reduced price lunch (FRL), are already behind in reading proficiency by third grade and they just keep falling further and further behind in the later grades. This means that they need major intervention before they even get to kindergarten. In fact what they need is early childhood education, beginning no later than age 3.
Conclusion: Racism is deeply embedded in American life and can only be eliminated with a long term fundamental effort to greatly improve educational outcomes for blacks.  I will discuss proof that this can be done in my next post.