Andrew Johnston | Missing spots in Occupy’s vision


Guest Column | Thoughts on the Occupy Wall Street movement




Never before has my generation engaged so impressively for what it believes is fair. What I’m disappointed in is its lack of common sense, realism and economics. I’ve heard some of the concerns of the protesters affiliated with the Occupy movement on campus and in a new ad they’ve made, and I’d like to respond to what seems to be missing spots in their vision.

1. Banks and employers made me poor.

The sentiment goes that banks lured people into loans they could not afford and that the rich have generally colluded to reduce wages, employment and well-being of workers. These both have narrative appeal.

I fail to understand (a) why banks would lure people into loans the bank can’t profit from. And (b) why people blame the banks for loans they pursued and entered. If a loan isn’t good for you, don’t get one.

Regarding employment and benefits, if an employer foresees that new employees can improve her business, she will hire those employees whose benefit to the company exceeds the cost of employment. Certainly a long list of important and unimportant regulations and taxes increase the cost of employment, reducing both the amount the employer is able to pay and how many she can employ.

2. Forgive my student debt.

I am growingly of the opinion that fewer people need to go to college — both among the elite and individuals looking for economic mobility. Here at Penn, students pay upward of $50,000 each year for tuition, fees and room and board.

Most of college, for most people, is an expensive social excursion in which students do very little studying and a lot of YouTube, alcohol and sexual experimentation. It’s unclear to me whether the gains from college (especially in majors like sociology, gender studies and art history) justify the massive requisite expenditure and foregone work experience for most people.

Moreover, it’s difficult for me to sympathize with students who chose to go into debt — only to claim they were cheated when the bill comes due.

3. The wealthy need to pay more taxes.

I think that this is the most interesting complaint. Let’s look at how much the wealthy pay.

The top 10 percent of earners pay 71.2 percent of all income taxes while earning 48 percent of income. The top 5 percent of earners pay 60.6 percent of all income taxes and earn 37.4 percent of income. And the top 1 percent pay 40.4 percent of income taxes and earn 22.8 percent of income.

What seems fair to you? Should the top 1 percent pay 50 percent of all income taxes on 22.8 percent of income? 60?

If someone hadn’t seen these figures they would have no sense that corporations and wealthy individuals already pay more than 70 percent of federal revenues. They pay a larger percent of the taxes than they receive in income. And the richer they are, the more they pay.

One of the dangers of democracy, mourned from almost the very moment it was imagined, is that the majority can extort from the minority without constraint. Currently 48 percent of Americans pay no income taxes. By Occupy’s logic, they also pay no corporate taxes, tariffs or capital gains. Especially due to their flawed belief that they don’t bear these taxes, what incentive do they have to restrain what they demand from government? Perverse incentives.

The question becomes: once people discover that they can vote themselves other people’s money, how long can an innovative meritocracy survive?

4. Health care should be free.

Healthcare costs someone something. And I understand people don’t want to pay for their medicine or surgery. I understand because I don’t want to pay for mine either.

But until we get serious about making health care act like a market, we’ll have little success taming our outrageous healthcare inflation. The interesting thing is that in health fields that are not covered by insurance, prices have fallen while quality has lurched upward.

When people bear the cost, they search for the best price. In response, doctors, developers and providers have incentive to (1) reduce their profit margins and (2) look for lower-cost ways of providing care. As new technologies, designs and methods become available, providers implement these as quickly as they can. In addition, redundant tests and questionable remedies are pressured out. The point isn’t that we need poor people to be excluded from health care, we would like to include them in smarter ways. Give them a Health Savings Account (pure $2,000 gift) with subsidized catastrophic health insurance.

Overall, the sentiment I’d echo is that of liberal economist Alan Blinder at Princeton University. We must have “hard heads” (be sensible and wise) and “soft hearts” (striving for a just society). I think that the culture of Occupy is already selected and difficult to change. What we need is their dose of passion and another spoonful of common sense.

Andrew Johnston is a Ph.D. student of economics at Wharton.

Read The Daily Pennsylvanian’s complete coverage of the Occupy movement at theDP.com/occupy.

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