the economist

AS COLORADO grapples with the logistics of legalising marijuana, lessons are being drawn from the medical-marijuana industry

ACCORDING to political scientists, Americans tend to think that the grass is always greener on the other side of the aisle. Going back at least to Eisenhower, American attitudes about economic policy have become more conservative under Democratic presidents and more liberal under Republican presidents. Consider what has happened during Barack Obama's presidency. Just a few years ago there was a great deal of support for government programmes, but since Mr Obama took office, that support has dropped dramatically.

In this sense, American opinion acts like a thermostat. "When government spending and activism increases, the public says 'too hot' and demands less," explains John Sides, a professor at George Washington University. "When spending and activism decreases, the public says 'too cold' and demands more." Popular opinion constantly pressures political actors to move toward the centre of the electorate.

By most measures Mr Obama's positions have been rather moderate, but he is still more liberal than the American public as a whole. For the past two decades Americans have been almost twice as likely to describe themselves as conservative than as liberal. Take the current debate over fiscal policy. The argument is over whether to cut spending and increase taxes. The conservative idea that spending must be cut is taken for granted, even though government spending is already lower in America than in most advanced economies.

If what seems like the centre in Washington has moved to the right, that probably has more to do with the increasing conservatism of the Republican Party than with any fundamental change in the electorate. Polls show that the public generally favours the Democratic Party's platform, which shouldn't be surprising considering the Democrats' broad victory in the recent election.

Political analysts often conclude that decisive elections represent a permanent realignment of the electorate. And as America becomes less white, less religious and less rural, the political balance of power may indeed be shifting to a degree. But there’s little evidence that recent changes in attitude represent any kind of long-term trend. Americans may be in a liberal mood now, but the pendulum has already begun to swing back in the other direction.

This is why it's hard for one political party to hold on to the presidency for 12 years in a row. That has happened only once since 1952, when the elder George Bush succeeded Ronald Reagan in 1988. It could happen again in 2016, if the Democrats field a strong candidate. Like Reagan, Mr Obama entered office with strong ideological support. The next Democratic nominee will hope to hang onto enough of that support to win as the electorate moves back to the right.

For its part, the Republican Party will probably have to make its platform appeal to a more diverse electorate if it is going to win back the presidency. But its basic governing philosophy is going to return to favour sooner than most people realise. And in a few years the chances are good that we will be talking about the Republican Party’s surprising resurgence.

WITH Republican control of state government now firmly consolidated, Mississippi is poised for wholesale education reform. In his state-of-the-state address in January, Governor Phil Bryant proposed a robust, if rather familiar, basket of reforms: expansion of the state’s current (and highly restrictive) charter-school laws, merit pay for teachers, and higher standards for teacher training. More controversially, Mr Bryant proposed allowing students to enroll in schools outside of the district in which they live (so-called open enrollment), as well as privately-funded scholarships for students to attend private schools. With the exception of these last, the proposals have been enthusiastically embraced by the state legislature.

The question is whether they will work. Some charter schools have proven successful and the much-touted KIPP programme has produced marked improvement in test scores for low-income children. The worst fears of sceptics (that charter schools would siphon better teachers and better prepared students away from traditional public schools; that the result would intensify economic and ethnic segregation) have not been realised. But taken as a whole, school choice has failed to produce across-the-board improvements in student learning.

So why does school choice retain such widespread, and fairly bipartisan, support? One reason is that charter schools are more cost effective than public schools: that is, they produce about the same results for less. That helps state governments deal with harsh budget environments. But it also undermines the effectiveness of the schools themselves. Charter schools are often funded at lower levels than traditional public schools, they hire younger, less qualified, and less experienced teachers, and they suffer from much higher turnover rates.

Under these conditions, charter-school performance is impressive, but points to a failing in the original conception of school choice. Milton Friedman, the Nobel-winning economist, sought to limit the role of government and introduce market-based reforms to the public-school system. By increasing the choices of parents, Friedman no doubt expected to see improvements in outcomes. But his focus was on how education is administered and financed, not on how it is delivered. And the basic fact about all education is that it is teachers who teach.

The gap in Friedman’s thinking (he did not claim expertise in education) has been filled with a woeful misconception: that innovation and creativity are the product of fear and insecurity. Education reformers attend to the discipline of the market, imposed by school choice, and the necessity of firing failing teachers and closing failing schools. While this makes sense, market mechanisms tell us only what worked—we have to dig deeper to find out why or how.

In the business world, we look at how companies innovate to meet the preferences of consumers. The following quote, describing innovation at Apple, is suggestive:

The designers at Apple are paid 50% more than their counterparts at other organizations. These designers aren’t working at Apple simply because they’re paid more. They stay at Apple because of the amazing things they get to do there. Rewards are about salary and benefits, but they are also about recognition and being able to do satisfying work that challenges the mind and allows the creative muscles to stretch.

Designers at Apple are held to high standards. Certainly school teachers should be too. But education reformers would do well to consider how Apple treats its innovative designers (the treatment of factory workers is another matter): higher salaries and benefits, recognition, a degree of self-direction, and active engagement in creative, challenging work.

Turnover in charter schools represents, partly, a failure to attract and retain more experienced and qualified teachers (one study found a close association with low unionisation). Such teachers prefer the higher salary and greater job security traditional public schools and unions provide, even though their ability to innovate is severely hampered by administrative oversight and the demands of testing. School choice, therefore, provides the mechanisms for rewarding innovation, but without the conditions for fostering it.

We desperately need a broad conversation about the purpose of education in American society, about how to judge desired outcomes, and about how to administer and finance schools. But producing more creative and innovative teaching requires improving the profession of teaching itself.

MATTHEW YGLESIAS has a counterintuitive take that the sequester is good policy for liberals, because most of the cuts are to defence spending, which is so grossly overdeveloped at this point that its top layer is, to a first approximation, completely useless.

Long story short, if you're a defense dove like me and have a nonutopian view of the domestic discretionary budget, then this looks like we're mostly talking about harmless spending cuts. It is very true that the current moment is not an optimal time to cut wasteful government spending. Given the high unemployment rate, the low and stable inflation rate, the low cost of federal borrowing, and the weird dynamics of "Evans Rule" monetary policy, I would say that 2013 is an excellent time for the federal government to waste some money on make-work military contracting gigs. But in the grand scheme of things, wasting resources on low-value programs is not a great idea, and there's more to life than timing.

A counter-counterintuitive take on this would start from that last interesting sentence. Is there actually more to life than timing? What if there isn't?

Put it this way: what's uniquely bad about the cuts in the sequester? What's bad about them, as Josh Barro writes, is that, because they fall abruptly and without logic, they destroy people's plans for the future. Scientists who've just completed PhDs in research-oriented disciplines on the basis of expectations about reasonably predictable levels of funding for those fields discover there'll be nothing for them to do with their degrees. People who've moved back to their homes after hurricanes, thinking they can restart their businesses, find they can't because there's no money to repair the bridges since FEMA funding was cut. The Pentagon suddenly has to figure out how to cut a fixed percentage out of every individual procurement contract, which is going to mean a lot of bizarre, fundamentally senseless last-minute craziness. And so forth. Most economic disappointments can be coped with, given time and a reasonable degree of predictability. But arbitrary cuts that fall suddenly give people no chance to adjust.

To stretch the point, there's a reason why hipster local labour exchanges use the unit of "hours" as currency, a move that actually goes back to Robert Owen's National Equitable Labour Exchange in the 1830s, and why sci-fi plots like that of "Time Out" envisage the possibility of substituting time for money entirely. Or why Taylorism was seen as the apotheosis of the industrial revolution, and why "just-in-time" delivery is such a big deal in modern manufacturing. At some level raising productivity is nothing more or less than improved timing. Time is the one resource of which we have an absolutely finite amount, and people who suddenly and unpredictably break promises, undo plans, and scramble schedules are screwing up our lives in the most fundamental way possible: they are wasting our time.

This doesn't entirely bear on what Mr Yglesias was saying; he was just saying that if you want big defence cuts, the sequester delivers that, even though this may not be the best time for those cuts to happen in view of the weak economy. But I think it's useful to be reminded of why cutting in an abrupt, arbitrary fashion is so much worse than cutting in a planned fashion. Life is about using your time well. Chaos is the enemy.

MOST of the fiscal skirmishes in Washington over the past two years have ended in a last-minute reprieve. Not this time: the sequester, cuts of $1.2 trillion to various parts of the federal budget over the next ten years, including $85 billion by October, has gone into effect. Indeed, Barack Obama and his Republican adversaries in Congress scarcely seemed to try to find a way out. Neither the Senate nor the House of Representatives has passed any measure to undo the sequester in this Congress (two bills to that end ran aground in the Senate this week). Mr Obama, meanwhile, did not even summon the leaders of Congress to the White House to discuss the issue until the day the sequester took effect. The meeting lasted less than an hour.

The sequester has been on the cards since August 2011. Back then, the near-universal assumption was that it would never be invoked. It was seen as a sort of metaphor, the legislative expression of Republicans’ and Democrats’ shared desire to rein in the deficit, but complete disagreement over how to do it. Like most metaphors, it was only supposed to be taken so far.

Indeed, Congress gave itself several chances to renege. First, there was the “supercommittee”, a crack squad of senior senators and representatives from both parties, charged with finding a substitute, and endowed with special procedure-busting powers to ensure it went to a vote. It, too, was a metaphor of a sort, a reflection of the view that it was petty parliamentary posturing, rather than deep-seated philosophical differences, that was preventing a breakthrough. Alas, procedure, it turned out, was not the root of the problem: the supercommittee could not even agree on a plan, let alone get Congress to approve it.

In private, most congressmen had always been sceptical. After all, the two sides had already been served up exactly the sort of bipartisan deficit-reduction plan the supercommittee was designed to reach, by an even-handed presidential commission, only to turn up their noses. Instead, politicians saw last year’s elections as the way out of the sequester. Let the public decide whether it was keener on higher taxes, as the Democrats proposed, or on the big spending cuts the Republicans advocated.

That, too, proved a vain hope. The voters, unhelpfully, plumped for the status quo, with Democrats still in charge of the presidency and the Senate, and Republicans running the House of Representatives. Even if one side had done a bit better, it was always naïve to imagine that either party would end up with unfettered control of both halves of Congress and the White House. Voters had tried that in 2008, after all, and swiftly regretted it.

Even after the inconclusive election, however, there was one more failsafe intended to avert the activation of the sequester: the barminess of its design. The two most obvious ways to restore the country’s fiscal health were deliberately excluded, because Democrats do not like one (cuts to government-funded health care and pensions) and Republicans do not like the other (higher taxes). So instead, the axe is falling on areas which are not really the problem in the first place, and are already being cut: defence spending and other “discretionary” programmes, meaning everything else the government does. Worse, because no one expected the cuts to take place, they were not spelt out in any detail; instead, the affected programmes are simply cut across-the-board, with a few exceptions.

All this did seem foolhardy enough that Congress delayed the start of the sequester by two months in January, to March 1st. But in the intervening time, no magic formula has been found to overcome Washington’s partisan divisions. Another fiscal deadline is looming, on March 27th, when the government’s authority to pay for anything “discretionary” runs out. Both sides seem to have decided to roll the haggling about the sequester into the broader negotiations over the budget.

The consequences of not reaching a deal then—the suspension of all but the most urgent functions of government—are dire enough that some kind of short-term substitute will probably be found. Some observers predict that the unfolding of the sequester over the next three weeks will prove decisive. Either it will cause widespread misery and outrage, forcing the Republicans to accept the president’s demand for tax increases, or it won’t, vindicating the Republican contention that there’s plenty of fiscal fat still to be cut. Don’t count on it. Over the past two years America’s politicians seem to be reconciling themselves to nibbling away at the deficit in fits and starts. There will not be a grand bargain, to use another metaphor popular in Washington, but plenty more petty bargaining.

(Photo credit: AFP)

"THERE is probably no city that is more financially challenged in the entire United States." So says Rick Snyder, the Republican governor of Michigan, in reference to Detroit. Today Mr Snyder announced plans to have an emergency manager take over the city.

Detroit can appeal, but on March 12th the governor is likely to appoint a new boss who will supersede the city’s elected officials (their authority will be suspended). He will have the power to cut spending, alter labour contracts and sell city assets. This is nothing new for Michigan—five cities are already under state oversight. Detroit, though, would be the largest.

In his announcement Mr Snyder called for unity, but even before he spoke the city council said it would fight the decision. Legal challenges are likely. John Pottow, a law professor at the University of Michigan, predicts a "shit storm of litigation" if a manager is appointed.

Delaying the city's restructuring will only cause more pain. The city’s financials are morbidly compelling reading. Its general fund has not been in the black at the end of a fiscal year since 2004. The city relies on debt to pay for day-to-day operations. Without those loans, Detroit's deficit would have been almost $1 billion in 2012. Long-term liabilities add up to around $14 billion. (See our report for more dreary details.)

If an emergency manager cannot restructure the city—bringing creditors to the table and renegotiating payments—a messy and unpredictable bankruptcy is inevitable. It would be the largest municipal bankruptcy in American history. The governor would like to see the city avoid that fate. But if the state steps in, the battles being waged in the city are more likely to be re-directed than halted.

(Photo credit: AFP)

"AT A certain point I've just concluded that, for me personally, it is important for me to go ahead and affirm that I think same-sex couples should be able to get married." Thus spake Barack Obama last May, concluding, in slightly mealy-mouthed fashion, his "evolution" on gay marriage. Since then his support has grown rather more full-throated. In his second inaugural address, for instance, the president declared that "Our journey is not complete until our gay brothers and sisters are treated like anyone else under the law." To the immense satisfaction of campaigners, Mr Obama now seems to accept that the fight for gay rights deserves its place in the pantheon of great American civil-rights struggles.

Just like so many of those battles, the fight for gay marriage will soon have its day in court. Later this month the Supreme Court will hear arguments on two gay-marriage laws: Section 3 of the federal Defence of Marriage Act, which among other things denies various federal benefits and tax breaks to married same-sex couples, and California's Proposition 8, a 2008 ballot measure that banned gay marriage in the state. (Prop 8 has already been struck down in two lower courts, but has remained in force as the case worked its way up the judicial system.)

All week various parties have been filing amicus ("friend of the court") briefs with the court, urging the nine justices to vote this way and that. Notable pro-marriage arguments came from a set of Republicans, some of them repentant, and a collection of 278 businesses and organisations who find it a real drag to maintain separate tax records under DOMA. But most significant was a brief from the White House calling for the court to ditch Prop 8 (last week it issued a separate brief on DOMA).

The issue is not an unwrinkly one for Mr Obama. It is one thing to issue righteous proclamations from the steps of the Capitol; it is quite another to navigate the legal complexities of American federalism. Mr Obama is on record supporting the right of individual states to determine their own marriage laws (nine states plus Washington, DC allow gay marriage; 38 have Prop 8-style bans; details here). This has formed part of the basis of the White House's argument against DOMA, which was passed in 1996 but that Mr Obama's administration has refused to defend since 2011: the federal government should not be in the business of passing laws on matters that are reserved to the states.

But Proposition 8 looks very much like a legitimate state choice. It was a straightforward ballot measure, of the sort Californians are so fond of, and passed with 52% of the vote. (Today polling suggests that the state would almost certainly vote a different way were it given another chance, but that's another story.) Prop 8 supporters say they want to know exactly which element of this exercise of democracy is supposed to be unlawful.

One answer to that is provided by campaigners who believe that all gay-marriage bans violate the equal-protection clause of the 14th amendment of the constitution. They want the Supreme Court to strike down Prop 8 on those grounds, thereby guaranteeing same-sex marriage rights across the land. The California state government, which also opposes Prop 8, took a different tack yesterday, advancing (among other arguments) in its own amicus brief the technical point that the defenders of Prop 8 do not have legal "standing" to argue their case, and that the court should therefore refuse to hear them. (If the justices agreed, the lower-court rulings would stand and gay marriage would return to California.)

Neither of these arguments would have looked compelling to the White House: the first would have violated Mr Obama's stated belief that this is a matter best left to states; the second probably seemed a little close to legal sophistry.

There was another option. One of the lower courts that struck down Prop 8 left open a promising argument. Prop 8 struck down a gay-marriage law that had been in force in California for five months, following a state supreme court verdict. The ninth circuit court ruled that by removing a right that had previously been granted to homosexuals, "Proposition 8 serves no purpose, and has no effect, other than to lessen the status and human dignity of gay men and lesbians in California." It was on these grounds that the court, by, 2-1, struck down the law. The argument had the useful feature of not applying to any other state with a gay-marriage ban.

But the White House appears to have gone further than this reasoning, without going so far as to call for a constitutional right to same-sex marriage. Its Prop 8 brief argues that by denying marriage rights to couples who enjoy other forms of recognition, such as domestic partnerships, California violated the equal-protection clause. Although the brief refers to the specific instance of California and the wording of Prop 8, it is difficult to see how this reasoning could be restricted to California alone.

Why? Because, as the brief points out, seven other states have laws that recognise same-sex unions but fall short of marriage. If my reading of the brief is right, it seems to argue that states must either allow gay marriage or provide no formal recognition of same-sex unions at all. Forget civil unions and domestic partnerships, in other words. (In the final analysis, as SCOTUS blog points out, it's also hard to see how the logic of the White House's case would not ultimately extend to all other states with gay-marriage bans.)

Of course, the Supreme Court may well ignore the pleas from the White House, as well as the various other filers of amicus briefs. It may follow the reasoning of the lower courts, it may find other grounds to strike down Prop 8, or it may uphold the law. On balance, the arguments presented this week seem unlikely to do much to change the balance of opinion among the nine; the view of many SCOTUS-watchers that Justice Anthony Kennedy, whose opinions were quoted extensively in the White House's brief, will be the crucial swing vote still looks robust. But just as rapidly growing public support for gay marriage helped campaigners to their first four ballot-box victories last November, the White House's decision to weigh in so heavily on these two cases is a sign of just how quickly America has changed on this issue.

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Our correspondents dissect America's latest public-spending calamity as the sequester takes effect

 

REGARDING yesterday's controversy over Gene Sperling's allegedly threatening, actually non-threatening email to Bob Woodward about whether Barack Obama is really actually responsible for inventing the sequester: others have spoken of these things, that we need not. However, putting the non-existent threat issue aside, the exchange detailed in the emails is actually pretty interesting. Mr Woodward, we recall, wrote last weekend that Mr Obama was "moving the goalposts" by proposing that a replacement for the sequester include both revenue and spending cuts. Mr Sperling says that it's very important to understand that this isn't so:

The idea that the sequester was to force both sides to go back to try at a big or grand bargain with a mix of entitlements and revenues (even if there were serious disagreements on composition) was part of the DNA of the thing from the start. It was an accepted part of the understanding—from the start. Really. It was assumed by the Rs on the Supercommittee that came right after: it was assumed in the November-December 2012 negotiations. There may have been big disagreements over rates and ratios—but that it was supposed to be replaced by entitlements and revenues of some form is not controversial.

The argument over who was responsible for coming up with the initial idea for the sequester really isn't very productive. The argument over who is "moving the goalposts" in their proposals is pretty useless, too. What we do know is that the theory of the sequester, that it would be so distasteful as to "force both sides to go back to try at a big or grand bargain", didn't work. The rather S&M-themed scenario in which Congress tries to force itself into behaving with the spectre of whips and cattle prods ends with the US economy handcuffed to the bed and no immediate prospect of escape. Why is that?

The fact that Washington is so interested in Mr Woodward's noodling about who proposed what when two years ago helps explain why the sequester didn't work. To wit: today, when catastrophe looms in Washington, rather than try to avert catastrophe, politicians gin up arguments over who is to blame. Republicans have spent the past few weeks in a weirdly peripheral effort to persuade the world that Barack Obama and his administration came up with the idea for the sequester—as if this would pin blame for the cuts on the administration, even though the point behind the sequester was precisely that it was supposed to be something nobody would want to allow to happen. Democrats, seeing that Republicans appear willing to let the cuts fall, have not backed down; they've started thinking about the political uses of the fact that most of the public blames the budget impasse on the GOP.

Clearly, if we're looking for an incentive that will drive politicians with deep disagreements over the role of government to compromise on a budget, an artificial catastrophic budget deadline isn't it. The sequester, after all, doesn't punish politicians; it punishes the voters. Voters will be unable to do anything in response for another two years, and when they do, their reactions will depend on who they blame, which means politicians will spend their time making accusations. What we need here is a negative incentive that punishes politicians directly. And what do politicians seek to avoid?

Unfortunately it's probably not possible or desirable to craft a deal under which every sitting congressman and senator pledges to resign if they haven't agreed to a budget deal by a date certain. Throwing all the bums out at once appears attractive, but in fact a lot of useful and hard-won information about our elected officials generated over their years of campaigning and service would get thrown away; the public would be forced to elect a complete slate of unknowns, and that's actually very costly and inefficient. An alternative might be a one-time federal election fund, kicking in if Congress hadn't approved a budget by a certain date, that would dole out large matching grants to all challengers in every congressional district in the country. Maybe that would be a prospect that would strike fear into the hearts of representatives and party organisations. In any case, what we need are political disincentives that punish politicians for failing to govern, not budget disincentives that punish the country for having a dysfunctional government. We've suffered enough for that already.

WEDNESDAY’S oral argument at the Supreme Court on the constitutionality of Section 5 of the Voting Rights Act of 1965 brought an extraordinary piece of analysis from Justice Antonin Scalia—a comment that drew gasps from the audience. The law’s utility as a shield against voting practices that discriminate based on race, Mr Scalia suggested, had evaporated. He argued that requiring nine Southern states and sections of seven others, all with a history of discrimination, to “pre-clear” changes to voting procedures with the Justice Department is now needless interference with “state sovereignty”.

Analysing the most recent reauthorisation of the act in 2006, Mr Scalia explained away its lopsided support in the Senate (98-0) and House of Representatives (390-33):

And this last enactment, not a single vote in the Senate against it. And the House is pretty much the same....I think it is attributable, very likely attributable, to a phenomenon that is called perpetuation of racial entitlement. It's been written about. Whenever a society adopts racial entitlements, it is very difficult to get out of them through the normal political processes.

After his comment caused a minor stir in the courtroom, Mr Scalia added:

I don't think there is anything to be gained by any Senator to vote against continuation of this act. And I am fairly confident it will be reenacted in perpetuity unless—unless a court can say it does not comport with the Constitution... [T]his is not the kind of a question you can leave to Congress....Even the name of it is wonderful: The Voting Rights Act. Who is going to vote against that in the future?

This is not Mr Scalia's first impolitic outburst. But for a justice who stakes his jurisprudence on deferring to the democratically elected branches of government, it is a stunning line of reasoning. Consider, by comparison, Mr Scalia’s endorsement of Justice Benjamin Cordozo’s 1933 statement decrying judicial second-guessing of legislative acts:

We do not pause to consider whether a statute differently conceived and framed would yield results more consonant with fairness and reason. We take the statute as we find it.

And recall Mr Scalia’s claim in the 1990 euthanasia case Cruzan v Missouri that it is not for judges to decide when a patient’s life is “worthless”, but “it is up to the citizens of Missouri to decide, through their elected representatives, whether that wish [to end a life] will be honored.”

So why not let the people’s elected representatives handle the matter of racial discrimination and voting? Why, in this case, does Mr Scalia believe he should substitute his views for those of legislators? Members of Congress, after all, considered 12,000 pages worth of testimony in 2006, which showed "pervasive discrimination" in the covered districts. As Justice Elena Kagan said yesterday to Burt Rein, the attorney for the petitioner, “that’s a big, new power that you are giving us...the power now to decide whether racial discrimination has been solved. I did not think that that fell within our bailiwick.”

For a justice who sniffs out closet activism even in his fellow conservative justices—in 2007 he criticised Chief Justice John Roberts for exercising "faux judicial restraint"—Mr Scalia apparently finds the Voting Rights Act to be a uniquely egregious specimen of legislative incompetence. While Mr Scalia has voted to overturn congressional laws from time to time, such as in City of Boerne v Flores (which got a brief mention during Wednesday’s argument), never has he couched his judicial activism in such cynical terms. We cannot trust the Congress to legislate earnestly on questions of race, Mr Scalia implied, because senators and representatives feel bound to uphold “racial entitlements” that their forebears have enacted. Political correctness rules.

Let us posit for the sake of argument that Mr Scalia’s cynicism is on target: American senators voted unanimously to extend the law in 2006 not because they found merit in its provisions but because they feared that a "no" vote would earn them condemnation as racists. What then? Should America trust its Supreme Court to bring a more careful, measured eye to the question? The tenor of the comments from the conservative justices suggests the answer is no. Consider the simplistic suggestion from the chief justice that because “the citizens in the South are [no] more racist than citizens in the North” we can safely ignore evidence that Southern states still systematically discriminate against minorities. Consider the ease with which Mr Scalia equated the guarantee of an equal right to vote with the concept of “racial entitlement”. And consider the failure of any justice to mention efforts in many of the covered states to depress voter turnout among minority voters in 2012. It remains highly questionable whether a majority of the Supreme Court is up to the task of diagnosing America's racial challenges.

(Photo credit: AFP)

THE debate over the minimum wage, which, thanks to Barack Obama's state-of-the-union address, we appear to be having again, is a debate over the question of whether raising the price of something—low-skilled labour, in this case—will reduce demand for that thing. That is to say, it is a debate over the relevance of the law of demand, an enormously robust generalisation about human behaviour confirmed and re-confirmed each day by billions of individual decisions.

Which is not to say that economic "laws" capture strict relations of physical necessity. Economics is not physics. Demand does not have to go down, by dint of creation's quiddity, when price goes up. Economics, like psychology, trucks in propositions that hold other things being equal. Steady or rising demand in the face of rising prices does not flout the law of the conservation of mass, or any such strict basic rule of the universe, but it does call for an explanation of the nature of the exception to the rule. What, exactly, is supposed not to be equal, such that in this case, applying the law of demand will mislead us about the expected effect of raising a price floor?

There are conditions under which raising the minimum wage will increase demand, as well as economic efficiency. According to one story, monopsony conditions for low-wage labour, ie, imperfectly competitive labour-market conditions in which there is but a single buyer of low-wage labour (or a colluding band of buyers) that is able to set wages at a level workers have little choice but to accept. Good old Econ 101 shows that under such conditions, a bump in the minimum wage, within a certain range, can boost employment and enhance efficiency. So there's that. And such conditions no doubt exist in some sectors at some places at some times. One famous, and egregiously misused, study suggests that monopsony-like conditions applied to fast-food restaurants in Pennsylvania and New Jersey in the mid-1990s. But there is basically no reason whatsoever to think that such conditions apply generally, across all sector and regions of the American labour market.

In the absence of special conditions, we have every reason to expect the law of demand to hold, such that raising the minimum wage will make it harder for inexperienced workers—workers whose output is worth less to employers than the mandated wage, and especially teenagers from low-income families looking to get a first footing in the labour market—to find work. And this is, in fact, what empirical studies tend to conclude. A comprehensive 2008 survey of the empirical literature from David Neumark, a professor of economics at the University of California, Irvine, and William Wascher, an economist for the Federal Reserve, found that, as one would expect, "[M]inimum wages reduce employment opportunities for less-skilled workers, especially those who are most directly affected by the minimum wage.”

Again, it doesn't have to work this way. Employers can cut hours rather than hiring fewer workers. They can turn down the air-conditioner, strictly police the length of breaks, and otherwise reduce the cost of amenities previously enjoyed by employees. They can shift to off-the-books employees willing to work for less than the legally-mandated minimum. They can raise prices, passing on increased labour costs to consumers. It's conceivable that the only consequence would be that a larger share of profits gets distributed to low-wage workers. Conceivable and exceedingly unlikely. In reality, we probably get small adjustments along each of these dimensions.

Of course, there is some newish empirical research contesting the disemployment effect of increases in the minimum wage, and then there is even newer research debunking it. I'm not about to offer a blow-by-blow of this tedious and technical debate for the same reason I'm not inclined to delve into the "debate" over the reality of global warming. The basic science is sound, and I don't think it is at this juncture especially fruitful to "teach the debate" when deliberating about policy.

I suspect that the reason left-leaning academics and journalists are so ready to tout research shooting holes in the law of demand has more to do with politics than a dogged commitment to truth in economic science. Raising the minimum wage is a very popular policy. It's smart for the Democratic Party to get behind it. So Democratic opinion leaders will be inclined to provide intellectual cover, either by soft-pedaling the downside of the policy, or by selflessly making their minds available to believe whatever most benefits their party. Democratic journalists may find themselves eager to talk about the fascinating new research that contests the conventional wisdom about the effects of raising the minimum wage. None of this is especially surprising or scandalous, and it's naive to think public intellectual life in a closely-divided democracy will ever be much different. Still, it's a tonic to square up now and again to the way things work, and it's worth taking note when Democrats, who are in my opinion generally less prone than Republicans to baldly wishful and/or strategic cognition, behave like thoroughly political animals.

Perhaps it's wishful on my part to think, as I do, that most economically literate observers really do understand that raising the minimum wage will screw up the prospects of a fair number of poor young workers. Those who favour raising the minimum wage anyway just think that, all things considered, that's a price we ought to be willing to pay. But they can't say that, just as second-amendment enthusiasts can't say that an occasional grim harvest of kindergartners is a price we ought to be willing to pay for the freedom to own guns. One of the most maddening things about political debate is that it's rhetorical suicide to accept tragic trade-offs. So one must deny that there are trade-offs. It's got to be all benefit, no cost. And that's why we find so few willing to step forward and say, yes, "minimum wages pose a tradeoff of higher wages for some against job losses for others", but let's raise the minimum wage anyway, because, in the final analysis, the benefit to those who enjoy higher wages will be greater than the cost suffered by those put out of work, and this distribution of burdens and benefits is not too unfair to stomach.

I dearly wish somebody would say this, because then we could go on to have a useful, meaty debate about the mix of policies most likely to succeed in helping low-wage workers. My sense is that we'd do best with no minimum wage, wage subsidies, and transfers to low-income households that phase out in a way that does not tax small increases in income at absurdly punitive rates. As it is, we're left wasting our time debating the minutiae of conditions under which we can expect stones to float.

(Photo credit: AFP)

MOST people would not pay two cents for something worth one. But America’s government spent $116m last year doing just that. The money-losing purchase was money itself: the penny, which has cost more than a cent to produce since 2006, due mainly to the price of zinc, the coin’s primary ingredient.

Steel is hardly better, as Canada has learned. The government there recently ditched its steel-based penny. American politicians, while loth to take lessons from their northern neighbours, may have noticed. In an online forum on February 14th Barack Obama intimated that the penny was no longer change he believes in.

Fifty years ago a handful of pennies would buy a hamburger at McDonald’s, but inflation means the coin won’t even get you a French fry today. Relegated to jars and lost in seat cushions, the near-worthless penny is failing to perform its primary function: to facilitate commerce. Vending machines and parking meters don’t accept it. Penny scourges note that fiddling with them adds some two seconds to each transaction, costing the economy many millions of dollars a year.

Penny lovers and zinc-industry lobbyists counter that the coin’s demise would cost consumers, as merchants would round their prices up to the nearest nickel. But some economists disagree, suggesting that shop keepers might well round down in order to avoid moving from a price of, say, $9.99 to $10. Americans anyway seem willing to accept a fee for penny removal, as evidenced by the self-imposed cost of leaving them idle and the success of coin-counting machines, which take a cut when turning them into bills.

Other countries have eliminated low-value coins with less-than-dire results, and indeed, so has America. In 1857 it ditched the half-cent, which was then worth nearly as much in real terms as today’s dime. This has led some to suggest killing the nickel, which costs about ten cents to make, as well as the penny.

Congress has not authorised coin culling as yet, so the Mint is studying ways to make coins more cheaply. Mr Obama, meanwhile, is finding value in the penny’s symbolism. “One of the things you see chronically in government is it’s very hard to get rid of things that don’t work so that we can then invest in the things that do,” said the president. “The penny, I think, ends up being a good metaphor for some of the larger problems we got.”

AN INSURANCE company with an army. That is how some have described the American government. And for good reason.

In 2012, about 20% of federal outlays—not counting interest payments on the debt—were for national defence. The $716 billion that America spent on its armed forces probably accounted for about 40% of world military spending. That’s far more than any other country and about five times as much as China, which has the second largest military budget. So America certainly has an army.

But insurance, really, is the federal government’s "core business". In 2012, by my count, about 65% of federal non-interest spending went to health care, income security and pension programmes. The bulk of it, of course, went to Social Security, Medicare and Medicaid. Altogether, in 2012 the federal government spent some $2.3 trillion on what amounts to a gigantic social safety net. That’s 15% of the nation’s GDP, and it doesn’t include what the states spend on similar programmes. With 64% of federal non-interest spending going to insurance programmes and 20% going to the military, that leaves just 16% for all the other, discretionary functions of the federal government, like running the judicial system, building infrastructure, financing education, and so on.

Pooling risk in this way is arguably the most important function of the modern welfare state, which began to emerge in America in the 1930s in response to the Great Depression. In times of crisis, social insurance functions as a kind of disaster relief. Private insurers have neither deep enough pockets nor the administrative apparatus to insure the population as a whole against disruptions on this scale. And while it’s easy to say our neighbours should be responsible for themselves, it’s hard on society when a large number of citizens fall sick or lose their jobs. Keeping the general population healthy and able to provide for itself is clearly a public good in the sense that it increases productivity, lowers crime, and so on.

But Americans have a poor understanding of how this core business works, and how they benefit. Instead of thinking about entitlement programmes as insurance against economic hardship, they think of them as a kind of charity that goes to other people. They are quick to scold others for taking "handouts", unaware that they are stretching out their own hands. In 2008 a Cornell Survey Research Institute poll found that 57% of Americans said that they had never used a “government social program”. But when those respondents were asked about specific programmes—like Social Security, unemployment insurance, student loans and the home-mortgage interest deduction—94% had used at least one. On average, in fact, they had used four different social programmes over the course of their lifetimes. A more recent Census Bureau survey found that nearly half of Americans received direct benefits in 2011.

The problem is that America cannot make meaningful cuts to federal spending without hacking away at some of its core insurance business. That's easier said than done. Since most Americans benefit directly from some form of social insurance, politicians go to great lengths to avoid proposing specific cuts. Instead, they focus on attacking discretionary spending, where there are few savings to be had. That won't work. The truth is that ultimately Americans have a choice: raise taxes or lose some of their benefits.

EVERYONE agrees that America spends too much on health care (17.9% of GDP, at last count). Everyone agrees that the health system is bogged down by waste. No one agrees on what to cut. One obvious candidate would be medical treatments that don’t do any good or that do active harm. Even this, however, has been the subject of fierce debate.

Last week 17 medical societies, such as the American Academy of Family Physicians and the American Urological Association, presented a list of unnecessary and possibly harmful procedures. The list is the second such announcement from the “Choosing Wisely” campaign, launched by the American Board of Internal Medicine last year.

The goal is to “spark conversations between patients and physicians about what care is really necessary.” Among their recommendations: don’t perform yearly Pap tests in women aged 30-65, don’t use feeding tubes in patients with advanced dementia and don’t prescribe antibiotics for viral illnesses. The Robert Wood Johnson Foundation has given $2.5m to help Choosing Wisely spread the word. The question is whether it will do much good.

As I’ve written before, America’s health system has a unique aversion to evidence. We favour procedures even when they are expensive and mediocre. (See, for example, a new study on the popularity of robotic hysterectomies, which cost more than laparoscopic surgeries but provide no added benefit.) To say a treatment might be wasteful is to suggest that it might not be available, which sends us into violent spasms of fury. Paranoia of rationing and death panels reigns supreme.

Health officials are trying to inject evidence into American health care, but it is a struggle. The ridiculously titled Patient-Centred Outcome Research Institute (PCORI), created by Obamacare, is charged with evaluating the efficacy of different treatments. But PCORI is forbidden from considering treatments’ costs. Presumably PCORI will still provide some useful information, but the health secretary is barred from using it: she may not use PCORI’s findings to deny coverage for a given treatment under Medicare, the health programme for the old.

Equally absurd is the mission of the United States Preventative Services Task Force (USPSTF). This independent body reviews evidence, then makes recommendations to guide medical care. Thanks to the new health law, insurers must cover treatments recommended by the USPSTF. Though there is a requirement to cover good procedures, however, there is no requirement not to cover crummy ones. Nevertheless, recommendations against procedures inspire political furore. When the USPSTF came out against routine prostate-specific antigen tests for prostate cancer, it was dubbed a death panel. The health department quickly promised that Medicare would continue to pay for the screenings.

The Choosing Wisely campaign is bravely entering the fray, but its ambition is modest. It hopes to convey that not all care is good care. Slowly, the culture among physicians and patients may change. But the campaign has no teeth. Its suggestions are phrased in the gentlest possible manner, listing treatments that “patients and physicians should question”. In the tradition of PCORI and USPSTF, the campaign does not suggest limiting reimbursement for useless care.

This may begin to shift the conversation. But it will do no more. Cutting health spending is hard. If we can’t even agree to cut useless treatments, we are doomed. The only way to cut waste is for insurers and taxpayers to stop paying for it. It is too much to expect that doctors, on their own, will simply stop offering unnecessary care. Doctors would like to do the “right” thing. But they also like to get paid.

AMERICA is four days away from a bad dream coming true: $85 billion of cuts in defence and discretionary spending. Trying to force a last-minute compromise, the White House is warning of disruptions to the lives of millions of Americans—including the loss of nutrition support for 600,000 disadvantaged women and children, delayed disability payments and "cascading flight delays and closed towers"—if the sequester comes to pass.

The decision to set the sequester in July 2011 was an effort to push off an intractable dispute between the Republicans and Democrats over spending cuts and tax increases. Putting off conflict can be the right tack when tempers are flaring and a cooling-off period would lessen the chances of an all-out conflagration. Machiavelli, though he usually suggests striking opponents early, describes the circumstances in which a more circumspect approach is advisable in chapter 33 of his “Discourses on Livy”:

I say, then, that...the wiser course is to temporize with such evils when they are recognized, instead of violently attacking them; for by temporizing with them they will either die out of themselves, or at least their worst results will be long deferred. And princes or magistrates who wish to destroy such evils must watch all points, and must be careful in attacking them not to increase instead of diminishing them, for they must not believe that a fire can be extinguished by blowing upon it.

When aggression promises to heighten rather than resolve a confrontation, a little restraint is advisable. But even in their restraint, America's political parties have managed to stoke the fire. Since July 2011, relations between the parties have become more hostile and divisions have grown. Though Barack Obama seems to be surprised by the impasse, he should have anticipated it. Mr Obama wagered that the ideological conflicts over spending and taxation would “die out of themselves”, or at least die down in the aftermath of the 2012 election. But presidential mandates are ineffable, indeterminate entities, and Republicans are tax-weary after agreeing to a modest increase in rates for earners over $400,000 in the fiscal-cliff negotiations that added a scent of the apocalypse to the Christmas season.

The parties (blame who you like) thought the sequester would force cooperation. But polls show that Americans aren’t tuning in to the sequester debate, with nearly half of the populace clueless to its details. So even though 49% of Americans polled hold the Republicans responsible for the squabble (compared to 31% blaming Mr Obama), there is little popular pressure on anyone to resolve the dispute this week. This dearth of outrage from the public, coupled with the fact that the sequester’s consequences would be significant but hardly the end of the world, is not a recipe for striking a compromise that has eluded legislators in Washington for nearly two years.

So the sequester will likely hit on March 1st, causing some damage. It will further erode Americans’ confidence in the federal government. And it will disabuse politicians of the illusion that forcing difficult disputes down the road is a reliable strategy for governing. That bit of advice now seems unsuited to this era of unprecedented partisan polarisation. But perhaps another tip from Machiavelli will resonate with today's politicians, who are about to arbitrarily inflict pain on their constituents. "No prince is ever benefited by making himself hated", wrote the wise Italian.

(Painting credit: Santi di Tito)

OUR correspondents discuss Barack Obama's latest attempt to reduce his country's vast quantity of nuclear warheads

DOUGLAS HOLTZ-EAKIN and Avik Roy have penned an op-ed arguing that America should reform Obamacare so that it more closely resembles the Swiss private-sector universal health-insurance system. We should tame Obamacare's ruinous regulations, they write:

“Community rating,” for example, will dramatically increase premiums for young people, a counterproductive approach when one considers that most uninsured Americans are in their 20s and 30s.

Switzerland has community rating. True, it's different from Obamacare: the Swiss version is much more strict. Obamacare allows insurers to charge old people up to several times what they charge young people. In Switzerland they have to charge exactly the same premium regardless of age.

Aaron Carroll explains that, in general, the Swiss system is more heavily regulated than Obamacare. The government sets health-care prices. Subsidies ensure that nobody pays more than 8% of income for health insurance, a level much lower than Obamacare. And there's this interesting wrinkle:

In some important respects, the Swiss law is less market-oriented than ACA. For example, LAMal forbids health insurers from earning profits on their sales of social health insurance.

We look forward to Messrs Holtz-Eakin and Roy's next article calling for eliminating the profit incentive in the health-insurance industry.

You can make this story as long as you want to. But the short version is that there's no such thing as a square wheel. Even in Switzerland.

IN THE hierarchy of Obamacare haters, Rick Scott, the Republican governor of Florida, ranked near the top. In 2009 the former hospital executive bankrolled ads warning of government-run health care, with horror stories from Canada and Britain. In 2010 Mr Scott campaigned with the promise to scuttle the health law. Florida led states’ efforts to challenge Obamacare in court. When the Supreme Court upheld the law in June, Mr Scott declared, “This is just another burden the federal government has put on American families and small businesses.”

Though conservatives despaired over the ruling, some took comfort in the fact that it gave states the option of rejecting a major part of the law: the expansion of Medicaid, which funds health care for the poor. Given the choice, Mr Scott declared that Florida would opt out of the Medicaid expansion. He even wrote a column titled, "More Medicaid? No Thanks."

So Mr Scott's announcement on February 20th that he would, after all, expand Medicaid is, to say the least, a blow to conservatives. “He has squandered his credibility as an opponent of Obamacare”, wrote Cato’s Michael Cannon, who served on Mr Scott’s gubernatorial transition team. The move is “a huge threat to Florida's financial future”, declared Americans for Prosperity. "Terribly disappointed" is how Erick Erickson summed up his reaction. Conservatives are displeased, but they should not be surprised.

The maths are too obvious to ignore. Mr Scott will expand Medicaid for only three years (he says), when the federal government will cover the full bill. So in 2016, for example, Washington will pump an extra $6.7 billion into Florida’s Medicaid programme, 49% more than would've been spent had Florida not expanded the programme, while the state's tab will increase by less than 1%.

Florida has 1.3m uninsured adults who will be newly eligible for Medicaid, according to the Urban Institute. Without an expansion, 995,000 would be without insurance, eligible for neither Medicaid nor the subsidies to buy insurance on a federal exchange. (Mr Scott has drawn the line at creating his own health exchange.) “While the federal government is committed to paying 100% of the cost of new people in Medicaid,” Mr Scott explained, “I cannot, in good conscience, deny the uninsured access to care.”

The politics are obvious, too. Barack Obama won Florida in November, and Mr Scott is up for re-election next year. His tea-party inspired governing has so far led to dismal approval ratings, so he has begun to reverse course in some areas. In the case of Medicaid expansion, the governor was lobbied hard by the state's hospitals.

During the debate over health reform, hospitals agreed to payment cuts in exchange for the promise of more insured patients. But without a Medicaid expansion, this is a bum deal. Florida’s hospitals, in particular, stand to benefit from a bigger Medicaid programme—Medicaid payments to hospitals would jump by $33.6 billion from 2013 to 2022. This 31% increase is larger than that of any other state.

Though it is unlikely to quiet his conservative critics, Mr Scott can at least claim to have gotten something in return for his reversal—a waiver from the feds allowing him to privatise the management of Medicaid. This may not have been an explicit trade, but the timing of the two announcements certainly makes it seem that way. In a sop to conservatives, Mr Scott also declared that Medicaid expansion would expire after three years. But this seems unlikely to happen. Whoever is governor of Florida in 2017 will not want to yank insurance away from 1m people.

Mr Scott is not the only Republican to support Medicaid’s expansion. The governors of Arizona, Michigan, Nevada, New Mexico, North Dakota and Ohio have said they will expand Medicaid, too. As more of them come around, the pressure mounts on hold-outs to get their slice of the pie. When such a sweet deal is on offer, it is tough to resist.

(Photo credit: AFP)

FIRST there was the “open mic” incident last March when Barack Obama assured his Russian opposite number, Dmitry Medvedev, that after his election he would have “flexibility” on the subject of missile defence. Then came the briefest of sentences, in his state-of-the-union address on February 12th, on the need to engage Russia in further reductions to both sides’ nuclear arsenals. But together they give a clue to what could become a lasting legacy of Mr Obama’s two terms in office: a serious attempt to realise the commitment he made in Prague four years ago when he promised to take “concrete steps towards a world without nuclear weapons”.

Those for whom the Prague speech was a rallying call have found Mr Obama, so far, a bit of disappointment. True enough, he succeeded in getting the Senate to ratify the important but relatively unambitious “New START” strategic arms-reduction treaty with Russia in 2010. The treaty restored on-site inspections while limiting the number of deployed strategic nuclear warheads on each side to 1,550 by 2018—a figure that Russia is already slightly below and which America, with 1,720, is close to achieving ahead of time. It deals neither with non-deployed strategic warheads (America is reckoned to have 2,800 and Russia 1,000) nor tactical warheads (America has around 500 and Russia more than 2,000) stockpiled by both sides.

And not much has happened since. After the quadrennial “Nuclear Posture Review” in 2010, which narrowed the declared role of nuclear weapons in American strategy, the administration has dragged its feet over explaining how it would put it into practice. In 2011 it launched what was meant to be a 90-day implementation study (NPRIS) that would determine how many weapons and of which types America would need to deter attack on itself and its allies in the light of the changed relationship with Russia since the end of the cold war. But when the NPRIS subsequently leaked, it was temporarily shelved to prevent it becoming a stick for Republicans to beat Mr Obama with during his re-election campaign.

According to Daryl Kimball of the Washington-based Arms Control Association, the NPRIS will be discussed at Mr Obama’s first post-election security cabinet meeting next month. The president is wary of trying to get another treaty through the Senate, so he is contemplating both accelerating the New START reductions and, if agreement can be secured with Russia, moving below the ceiling, perhaps to 1,000 warheads—a figure that the joint chiefs of staff have recently agreed would not put deterrence at any risk.

Tom Donilon, the White House national security adviser, is due to go to Moscow later this month to discuss the proposal. To smooth the rough patches in the present relationship, Mr Donilon may offer to delay the development of new high-speed interceptors in the fourth phase of the European ballistic-missile defence system due for deployment in 2021. Mr Obama is also believed to be keen to “de-alert” his nuclear forces from the hair-trigger, launch-on-warning doctrine that still endures—something he could do with a stroke of the pen.

Bruce Blair, co-founder of the Global Zero movement which campaigns for reducing and eventually eliminating nuclear weapons, believes that Mr Obama could set in train a process that would in time also lead to big cuts in the stockpiles of non-strategic and non-deployed nukes. Neither has any military usefulness, but nobody pretends getting there would be easy, particularly as tactical weapons remain more important to Russia—with its comparatively weak conventional forces—than to America. But the prize for reducing stockpiles would be the chance to draw other nuclear states with much smaller arsenals, such as China, into a multilateral negotiation. That “holy grail”, as Mr Blair calls it, will not be reached, if ever, until well after Mr Obama has left office. But if he could claim at least to have started the quest, it might be just the legacy he yearns for.

LAST week’s state-of-the-union address received unexpectedly low marks from some commentators. For Paul Krugman, it was “not very interesting”. For countless other observers, it was a mere “laundry list” of proposals that have no chance of passing the Republican-led House of Representatives. Leaving aside the obvious questions (does anyone make actual laundry lists anymore? is a pair of dirty socks really the right metaphor for, say, universal pre-school?), another one strikes me: if Mr Obama's speech did not fit the bill for an admirable state-of-the-union address for a recently re-elected president who campaigned on fiscal responsibility coupled with fairness in healing America's vast inequalities, what would?

In our live-blog of the speech, I summed up the evening this way:

This was a good night for Mr Obama. The speech communicated with passion and swagger his administration's priorities in his second term: a mixture of proposals that will appeal to both parties (immigration reform and spending cuts, most notably) and some that are a lot more controversial (further tax increases, gun control, climate-change policy). That's an appropriately audacious agenda. Perhaps he overreached a bit at times in setting goals to end AIDS and world hunger, but drawing Americans' attention to the globe's neediest human beings seems appropriate in this forum. The first state-of-the-union address of a president's second term is no time to be timid, and it was an admirable choice to bookend his proposals with appeals to good citizenship and a call to civic duty and reciprocity.

Looking at the speech a week later, I am even more convinced Mr Obama hit it out of the park. Yes, he presented a grand vision with a lot of policy proposals. But on the other hand: he presented a grand vision with a lot of policy proposals! Who else is advancing a legislative vision for the coming year? Marco Rubio, in rebuttal, offered a pitch that was identical to Mitt Romney’s platform in last year’s losing effort to take the White House. The would-be emperor had new clothes, a surprisingly irrepressible thirst and convincing anti-plutocrat credibility, but he had nothing new to add to the Republicans' electoral platform of 2012. Let's hear it for some new ideas!

And Mr Obama’s ideas—expanding public pre-school, raising the minimum wage, means-testing Medicare, raising taxes on the wealthy, creating more jobs for the middle class, making college more affordable, finding a humane path to citizenship for illegal immigrants—fit together as a coherent response to the increasingly yawning inequalities in America. As Emmanuel Saez, an economist at Berkeley, recently showed, the economic recovery has thus far benefited only the wealthiest Americans:

The numbers...show overall income growing by just 1.7 percent over the period. But there was a wide gap between the top 1 percent, whose earnings rose by 11.2 percent, and the other 99 percent, whose earnings declined by 0.4 percent.

Mr Saez, a winner of the John Bates Clark Medal, an economic laurel considered second only to the Nobel, concluded that “the Great Recession has only depressed top income shares temporarily and will not undo any of the dramatic increase in top income shares that has taken place since the 1970s.”

There is a lot to clarify and squabble about in Mr Obama's proposals to reverse the trend Mr Saez identifies: research supporting the president's proposal to expand pre-school is not unambiguous, as my colleague pointed out; an increase in the minimum wage, some say, may come with a price tag of higher unemployment; higher tax rates for the wealthy may not go far enough. These are all issues on which serious debate is needed, and one virtue of laying out a broad, bold agenda is to let a thousand debates bloom over the details.

Another virtue of this approach is to provide an overarching vision for the republic. The narrative Mr Obama articulates to frame the debates seems to flow directly from the pages of John Rawls’s "A Theory of Justice". In that 1971 masterwork and in "Justice as Fairness" (2001), Rawls developed a political philosophy of liberalism that puts a premium on the value of equality. Though he was no strict egalitarian (Derek Parfit argues that his theory is better construed as "prioritarian"), Rawls hoped to identify the principles of justice that hold for a democracy where people cooperate productively and see each other as moral equals. Rawls's first principle of justice, calling for "equal political liberties", takes precedence over efforts to ease socioeconomic inequalities. But within these bounds, Rawls tried to identify and account for the “social, natural and fortuitous contingencies” that help shape “inequalities in citizens’ life-prospects”.

Boosting the chances of children whose life-prospects are otherwise hampered by their social class is precisely the the case the president made for expanding public pre-school:

Study after study shows that the sooner a child begins learning, the better he or she does down the road. But today, fewer than 3 in 10 four year-olds are enrolled in a high-quality preschool program. Most middle-class parents can’t afford a few hundred bucks a week for a private preschool. And for poor kids who need help the most, this lack of access to preschool education can shadow them for the rest of their lives.

Enhancing what Rawls calls “background justice”—the fair functioning of social institutions necessary for true equality of opportunity—is the moral impetus behind Mr Obama’s proposal. As Joseph Stiglitz pointed out in the New York Times over the weekend, this is exactly what America needs right now. It is also the essence of the justification behind the proposal to increase the minimum wage modestly (E.J. Dionne thinks too modestly) to $9.00 from its current rate of $7.25. In one of the most effective lines all night, Mr Obama coupled a Rawlsian defence of a livable income floor with a paean to the American work ethic: “[L]et’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty.”

One of the most controversial elements of Rawls's theory is the so-called "difference principle" according to which inequalities are only justified insofar as they serve to maximise the position of the least well-off members of society. Income disparities are not inherently problematic, for Rawls or for Mr Obama; they are unjust only when they come at the expense of the poor. Recent research from Mr Saez shows this is exactly what is happening: as the pie is expanding, only the rich are getting an extra slice while the poor and middle class are stuck with the same portion, or less. Rawls's principle may be too demanding, but its gist provides an excellent heuristic for policymakers. Whether Mr Obama's myriad policy suggestions fit the bill is for Congress to decide, but the vision he heralded in his speech—the imperative to build real equality of opportunity for all Americans—has never been more apt.

(Photo credit: AFP)