Christopher DeMuth is President of the American Enterprise Institute for Public Policy Research. He is a former editor of Deregulation. He is Adminstrator for Regulatory Affairs at the Office of Management and Budget, 1981 to 1984.
He is a co-editor of The Neoconservative Imagination: Essays in Honor of Irving Kristol.
New River Media Interview with: Christopher DeMuth
QUESTION: What was the Moynihan Report of 1965 saying and what kind of reaction did it generate?
CHRISTOPHER DEMUTH: When Senator Moynihan wrote the report he was an assistant secretary at the Labor Department in the Johnson administration. And the report came on the cusp of the great victories of civil rights movement. The Civil Rights Act of 1964, the Voting Rights Act of 1965 was in this period. Moynihan, who had played an important role in the civil rights movement itself, prepared this research within the Johnson administration, calling attention to alarming problems in the state of the black family, specifically very high, alarmingly high and increasing rates of illegitimate births and other evidence of family breakdown.
The report, when it came out, was wildly controversial. And I think looking back from the vantage point of 2000, one has to recall that there was still a great deal of overt racial discrimination in the United States and civil rights. Dealing with social and legally sanctioned discrimination was still very much on the conscience of America. And for Pat to call attention to problems internal to the black community seemed to many people to be, as I think we came to say later, blaming the victim. He was anathematized by many people in the civil rights movement. And the situation for him within his party, the Democratic Party, became extremely uncomfortable.
As discrimination has receded in the decades since 1965, we can argue about how much is left. But I think any reasonable person would agree that it is radically less, that poverty problems, not confined by any means to the black community, but disproportionate still within the African American community in the United States, is closely related to the lack of fathers, young males growing up in neighborhoods, in some cases where there are essentially no fathers around. And the problems of socialization of teenagers become acute in such circumstances.
Today if you look at the important anti-poverty programs, proposals, ideas, initiatives coming out from both liberals and conservatives, they're much more focused on the cultural problems. Senator Moynihan was the pioneer, and pioneers are often treated badly, but I think that he's clearly been vindicated in the decades since he wrote.
QUESTION: Would you say that the nature of poverty today is related to material problems or other problems?
CHRISTOPHER DEMUTH: America has become a very, very rich society in the past 100 years, and especially in the last 50 years. The wealth of American households increased in the fourth quarter of 1999 more than it did in the entire decade of the 1960s. In a society that is as wealthy as ours, it is sometimes hard to remember that until very recently there were substantial problems of poverty within the United States that really were problems of material deprivation.
And one never wants to appear to be cold-hearted about genuine material problems that remain. But America as a whole possesses the resources to deal with the poverty problem to the extent it is simply a material problem through redistribution programs, welfare programs very easily. We could eliminate poverty through income transfers that would not be heavy burdens on wealthier taxpayers or on American corporations. But we seem to be moving in the opposite direction. There's much less emphasis today on direct income transfers to the poor, and much more emphasis on things such as correcting the terrible state of inner city schools, rebuilding the family, finding men such as urban preachers who can be surrogates for the absent fathers in the lives of so many young people who are growing up in circumstances of poverty.
I think that there is a message to that, that we have discovered that in our society today the dominant problems are cultural and behavioral, as opposed to strictly material. That doesn't make them any less serious. In some respects it makes them more difficult, and it makes them pull on the conscience of people who are well off, even more than before. But certainly if we're looking over the course of the last 50 or 100 years, the poverty problem has become a smaller one, in some respects a more intractable one, but certainly one that is less the result of a scarcity of resources.
QUESTION: How much would you credit social security for reducing poverty among senior citizens?
CHRISTOPHER DEMUTH: Social security has been the major policy that has affected the level of poverty among elderly people, and certainly in the elderly population social security should be credited with essentially eliminating poverty.
But again you have to be careful. When social security began, the notion of retirement, so conventional to us today, barely existed. Most men worked about until they dropped. They often left behind widows, but even they lived much less long than the women do today, so that poverty is of a very different nature. We now have extended periods of retirement. Most Americans retire from the workforce and have lives of well over a decade. Poverty is much less pronounced because of social security transfers. But if you look at the general state of people that are retired, the increase in personal savings, the great advances that we have made in biology and medical technology have probably done more than simple income transfers to make life and retirement far better as well as far longer than it was relatively recently.
QUESTION: Could you talk a little more about the sort of how this extension of retirement affects Americans culturally as well?
CHRISTOPHER DEMUTH: That we have so many more retirees, that the age profile of the population is increasing and is set to increase even more as folks like myself get up into their sixties, seventies; some of us we hope eighties and nineties in the coming decades, America will become an older society, and what the cultural and social consequences of that may be frankly is something that I can only speculate on. But we've already seen in American politics a trend toward a much more conservative politics. I'm not so much describing that in the conventional ideological terms, but the fact that the social radicalism, parties with large followings that wanted in some way or another to turn society upside down, whether it was the radicalism of the 1930s or the radicalism of the 1960s has receded. Part of that is certainly due to the fact of our great prosperity, to the collapse of international communism and the various utopian ideologies of the past, but certainly part of it has to because of the fact that we are simply a much older population and older people are more averse to risk, they're likely to think that new ideas have been tried before and failed and less likely to take them on. I think that one can predict with some confidence that as the society becomes older, it will become more culturally, socially and political conservative.
QUESTION: What would you say to people who say that income inequality in America has risen along with its prosperity?
CHRISTOPHER DEMUTH: The question of income inequality has to be addressed at two levels. The first is to look over a broader time span than simply the last decade or two. And if we look over the past century, we find that there has been an enormous leveling of social circumstances. If you look at such measures of real personal and material circumstances as longevity, health status, height, you find that in 1900 there were very substantial differences. Wealthier people lived many, many years longer than poorer people. They were much taller. They were generally in much better health. Due to improvements in public health, sanitation, clean water, good nutrition, all of which had relatively greater effects on less well off people than on richer people, we find that life span is about the same for people that are very rich and very poor in the United States. You can still see a difference, but it is much more likely to be measured in months than in years. And people's nutritional status is not particularly related to income anymore. So there has been a spectacular equalization of real-life circumstances over the past century.
If we look at the past 20 or 30 years, you will hear many people say that that trend has changed, and we now see divergence rather than convergence, that wealthy people are still doing better and better off, but poorer people are doing less well off, and that economic equality is becoming worse in America, Americans are becoming unequal. And there's a lively debate about that. My view is that it is wrong, and I believe it is clearly wrong, and that the trend toward social equality has, if anything, accelerated dramatically in the last 20 or 30 years.
I know that people think of the many new billionaires that have been created in the new economy, but if you look not at the tales of the social distribution, not the super rich and not the people who are very poor, but the large mass of Americans, most of the evidence that we have points to a dramatic increase in social and economic equality continuing right up through the end of the century and something that is likely to increase over time. Many of the statistics that you read about in the newspapers that talk about increasing income inequality are flawed simply as a statistical matter that is very well known to experts in the field.
QUESTION: Explain how the income statistics don't take into account benefits and government transfers.
CHRISTOPHER DEMUTH: The income distribution statistics that one reads about in the newspapers, headlines decrying increasing income inequality in America are in many cases seriously flawed simply as a statistical matter. For example, we know now that for many decades we have been overstating inflation in the government's basic measure of inflation. The income statistics that you read about in the newspapers that are the source of so many headlines about increasing economic inequality in America are in almost all cases deeply flawed simply as a matter of statistical measurement. For example, we know now that for many decades the government's measure of annual inflation, the Consumer Price Index has overstated real inflation by on average more than 1 percent every year. The result is that the adjustment of wages in the economic statistics has been overdone. It's made wages appear that they were going down in some cases, when in fact they were going up in real terms.
The government's wage statistics do not include the benefits that most Americans now receive as part of their employment contract: health insurance, pension contributions and other important parts, and the fastest growing parts of compensation. So we're actually measuring in these statistics what is relatively a less important, although still the majority part of compensation that people have.
And finally there are many idiosyncratic aspects of Labor Department statistical collections that have made them move more and more to collections of data on low wage occupational categories, so that the statistics really are not measuring what is happening to real individuals over time. They're simply measuring a shrinking category of a shrinking share of the workforce.
I want to emphasize that with the proper statistical adjustments, proper measures can show that there has been some increase in income inequality in America in recent decades, but first of all it is nothing close to what some of the headlines and the numbers bandied about in the newspaper editorials would lead you to believe. It's much lesser change.
And secondly and much more important much of the inequality properly measured that we see in America today is, in fact, a result of our great wealth and our ability to make annual income almost discretionary for many people to a far greater degree than we did in the past.
We're finding that at the close of the twentieth century, while there are still important differences in people's economic circumstances, some people have much bigger bank accounts than others, compared to any time in our past, any time in human history. The real material circumstances of people's lives and how they spend their time is more equal up and down the economic spectrum than it has ever been before.
QUESTION: What are some of the impacts of the changes in the distribution of consumer goods to more levels of society?
CHRISTOPHER DEMUTH: One of the reasons that redistribution has receded from our politics is that the material necessities of life, and even things that were until fairly recently considered the material luxuries of life have become so ubiquitous. For a good part of this century national politics has been dominated by issues of income redistribution, management versus the working man, and those issues have surprisingly receded in the past 20 years.
And certainly one of the reasons is that so many - is that not merely the necessities - housing, good clothing, nutritious food has become so widespread, and within essentially everyone's means, but that many one time luxuries - long-distance travel - when I was a young man only a very rich person would imagine flying from the East Coast to Chicago for the weekend. That is now a mass-market economy. If you fly to Chicago to go to a Chicago Bulls basketball game, the big component of the price of the weekend will be the Bulls ticket, not the airline ticket.
The fact that entertainment and sports have benefited so much from technological change, improvements in parks - golf, for example, used to be the province of the rich. It is now a thoroughly middle class and even to some extent working class game. The distribution of the good things in life has become so much more widespread that class contention and economic contention are nowhere near what they once were. They haven't disappeared altogether, but it is quite surprising.
QUESTION: Could you talk about Alfred Kahn's role in airline deregulation both as a scholar and as someone involved in the public policy arena?
CHRISTOPHER DEMUTH: Well, Alfred Kahn was the man who took an enormous amount of research about the regulation of the airlines, which when he was doing his work in the 1960s and 1970s had been around for many, many decades, and seeing a political opening made it happen as chairman of the old and unlamented Civil Aeronautics Board. There were some precursors to that. My institute, the American Enterprise Institute, the Brookings Institution had done some very good research, suggesting that if we eliminated airline regulation service would improve, prices would fall. Kahn knew of that research. He'd contributed it himself. President Ford had made some very substantial contributions in appointing John Robson and others to the Civil Aeronautics Board and the Transportation Department.
But it was when Fred Kahn was appointed Chairman by Jimmy Carter that he really seized the opportunity. And he could take the academic research and bring it down to practical facts in a way that resonated with the general public. In those days interstate airline transportation was controlled by Washington, but we had many big states, including importantly California, where there was no regulation of entry or of prices within the state. So you could compare, for example, the ticket for a plane flight from San Francisco to Los Angeles with the price of a ticket from New York to Washington. Guess what, the regulated fares, which were supposed to be protecting the consumer, were higher fares than the unregulated fares. And the reason was that there was much more competition in the California market. He was able to take examples like that and working with another prominent Democrat, Senator Edward Kennedy, and his chief staffer, Stephen Breyer - now a Justice of the Supreme Court - was able to take these facts and present a very persuasive case that the airlines should be deregulated.
It was also the case that the 1970s were very hard economic times. Inflation was very high and unemployment was high. And there's reason to think that the bad economic times were unsettling the old airline cartel. The airlines themselves, which had supported regulation ever since the New Deal, why shouldn't they have? The CAB had not permitted a single new firm to enter the market since its creation in the 1930s. But despite the advantages that they received from regulation, in an environment of very high inflation, it's likely that they were getting fewer and fewer benefits. And they fought harder than I think they would have in earlier days to maintain the CAB. So there were some neutral economic circumstances. But Fred Kahn was the man who understood the arguments, who saw the opportunity and rushed in and seized it with brilliant effect.
QUESTION: Why was deregulation so important?
CHRISTOPHER DEMUTH: Economic deregulation in the past 30 years has made enormous contributions to our current welfare. And there have really been two sorts of it. One was the removal of controls over transportation industries, such as airlines, motor carriers - and that is, trucking, railroads and others - important deregulation of financial services, some deregulation of communications. And these have all provided benefits, which have probably been significantly greater for people of lesser economic means than for wealthier people.
Economic deregulation over the past 30 years has made enormous contributions to the welfare of the economy in general. And it has probably made particularly important contributions to the welfare of people of more modest incomes.
I'm thinking here of the deregulation of the airlines, which has democratized air travel. The business executive was always there in comfort on half-filled planes, and now has to share the planes with weekend vacationers of all kinds. And flying on an airline from coast to coast is not that much different than taking a Greyhound Bus from coast to coast sociologically. And airline deregulation did that. It not only lowered prices, but it made it possible for airlines to experiment with new innovations in types of services that hugely expanded the market, so that millions of people that never traveled by airline before now do so routinely.
There are many, many other examples. In addition, probably just as important we have until relatively recently abstained from regulating many new and dynamic markets. Our Federal Communications Commission tried for three times in the 1970s to extend its regulatory controls to the computer industry. If they had done so, I think it is safe to say that we'd have had nothing like the growth of computers in schools, in homes, in businesses, nothing like the innovations that we've seen in terms of the Internet, if it was still an old fashioned regulated industry.
QUESTION: What has been the influence of James Q. Wilson and the theory of "broken windows" on fighting crime?
CHRISTOPHER DEMUTH: Well, the answer is Mayor Giuliani. When he came to office in New York City the conventional, indeed almost universal wisdom was that the problems of crime, public disorder in the streets of New York City could not be solved - coped with a little bit at the margin, but not fundamentally changed. The only ray of hope was James Q. Wilson's work, which is now called "Broken Windows", which emphasized that if one does little things right in improving public decorum, that that can have a very deep influence on larger problems, such as outright violence, personal crime, property crime.
And Mayor Giuliani began with smaller symbolic things: going after loiterers and the squeegee men at the entrances to the tunnel. Cleaning up Times Square, moving the pornography out of Times Square. And the result has been a tremendous revival in the life of the city. Good old fashion police work has also made a difference on rates of violent crime in the city, but I think no one doubts that the message that average people could take back the streets was one that changed every aspect of life in the city.
Jim Wilson is the political scientist whose research and writing has had the deepest effect on practical policy of any scholar of the past half-century. He's best known for his work on crime and policing, but, in fact, it covers the spectrum. He's done very important work on deregulation, for example. For many years he was head of the Harvard-MIT joint center on urban studies, which investigated issues such as what we now call sprawl and the logic of urban development and what sorts of city policies led to urban revival and what sorts led to decline. He has done very important work recently on problems of illegitimacy, family structure. His book The Moral Sense will probably be regarded as the most important contribution of his lifetime of work. He still has a ways to go and there may be something even greater.
But there has been a general trend in policy thinking over the past 20 years to emphasize issues of culture and ethics and family structure over more conventional issues of economics and incentives. I am a great believer in good economic policy and the importance of incentives, but Jim Wilson probably more than any other scholar has made the case that serious people, whether they are politicians, staffers in government agencies, citizens who are trying to decide between right and wrong policy, had better pay close attention to questions of culture if we want to try to get these things right. And recent experiences such as in New York City are a great vindication of Wilson's approach.