Category Archive for: Social Insurance [Return to Main]

Thursday, November 20, 2014

'Encouraging Work: Tax Incentives or Social Support?'

Tim Taylor:

Encouraging Work: Tax Incentives or Social Support?: Consider two approaches to encouraging those with low skills to be fully engaged in the workplace. The American approach focuses on keeping tax rates low and thus providing a greater financial incentive for people to take jobs. The Scandinavian approach focuses on providing a broad range of day care, education, and other services to support working families, but then imposes high tax rates to pay for it all. In the most recent issue of the Journal of Economic Perspectives, Henrik Jacobsen Kleven contrasts these two models in "How Can Scandinavians Tax So Much?" (28:4, 77-98). Kleven is from Denmark, so perhaps his conclusion is predictable. But the analysis along the way is intriguing.
As a starting point, consider what Kleven calls the "participation tax rate." When an average worker in a country takes a job, how much will the money they earn increase their standard of living? The answer will depend on two factors: any taxes imposed on what they earn, including, income, payroll, and sales taxes; and also the loss of any government benefits for which they become less eligible or ineligible because they are working. In the Scandinavian countries of Denmark, Norway, and Sweden, this "participation tax rate" is about double what it is in the United States. ...
A standard American-style prediction would be that countries where gains from working are so low should see a lower level of participation in the workforce. That prediction does not hold true in cross-country data among high-income countries. ...
What explains this pattern? Kleven argues that just looking at the tax rate isn't enough, because it also matters what the tax revenue is spent on. For example, the Scandinavian countries spend a lot of money on universal programs for preschool, child care, and elderly care. Kleven calls these "participation subsidies," because they make it easier for people to work--especially for people who otherwise would need to find a way to cover or pay for child care or elder care. The programs are universal, which means that their value expressed as a share of income earned means much more to a low- or middle-income family than to a high-income family. ...
Any direct comparisons between the United States (population of 316 million) and the Scandinavian countries of Denmark (6 million), Norway,  (5 million) and Sweden (10 million) is of course fraught with peril. Their history, politics, economies, and institutions differ in so many ways. You can't just pick up can't just pick up long-standing policies or institutions in one country, plunk them down in another country, and expect them to work the same way.
That said, Kleven basic conceptual point seems sound. Provision of good-quality preschool, child care and elder care does make it easier for all families, but especially low-income  families with children, to participate in the labor market.   In these three Scandinavian countries, the power of these programs to encourage labor force participation seems to overcome the work disincentives that arise in financing and operating them. This argument has nothing to do with whether preschool and child care programs might help some children to perform better in school--although if they do work in that way, it would strengthen the case for taking this approach.
So here is a hard but intriguing hypothetical question: The U.S. government spends something like $60 billion per year on the Earned Income Tax Credit, which is a refundable tax credit providing income mainly to low-income families with children, and almost as much on the refundable child tax credit. Would low-income families with children be better off, and more attached to the workforce, if a sizeable portion of the 100 billion-plus spent for these tax credits--and aimed at providing financial incentives to work--was instead directed toward universal programs of preschool, child care, and elder care?

Or we could raise taxes on the wealthy, cut defense spending, etc., etc. and then ask which if the two programs it would be better to enhance (or in what proportions), the EITC and other tax credits or the "universal programs of preschool, child care, and elder care." If the programs are complementary and insufficient, as I believe they are, then neither should be cut to enhance the other (though I would choose the Scandinavian model if I had to pick on of the two to augment).

Saturday, October 11, 2014

'Hiatt Hysterical Over Losing His Schtick'

Barkley Rosser feels "sorry for Fred." Sort of:

Hiatt Hysterical Over Losing His Schtick: Poor Fred Hiatt. For years, this Editor of the Editorial page of the Washington Post has made his named appearances on the editorial page (he daily bloviates the main ed lead anonymously) only to call for cutting Social Security, and occasionally Medicare as well. This has been his schtick for many years. Now it is over, but he fails to recognize it. ...
So, I feel sorry for Fred. Beating up on seniors who have paid in their taxes for what they are getting has been the one an only topic that has inspired him to write columns under his own name for many years. The new projections of lower deficits, good news to most of us, simply do not register with him. Actually, they probably do. But Krugman is right. As much as anybody, he is the longstanding VSP in DC who has been whining for years about cutting Social Security and Medicare, whose excuse for this argument has simply disappeared, but he and his pals simply are not willing to face the new facts.

Tuesday, September 30, 2014

'Why Have Policymakers Abandoned the Working Class?'

I have a new column:

Why Have Policymakers Abandoned the Working Class?, by Mark Thoma: The risks associated with a negative economic shock can vary widely depending on the wealth of a household. Wealthy households can, of course, absorb a shock much easier than poorer households. Thus, it’s important to think about how economic downturns impact various groups within the economy, and how policy can be used to offset the problems experienced by the most vulnerable among us.
When thinking about the effects of an increase in the Fed’s target interest rate, for example, it’s important to consider the impacts across income groups. I was very pleased to hear monetary policymakers talk about the asymmetric risks associated with increasing the interest rate too soon and slowing the recovery of employment and output, versus raising rates too late and risking inflation. ...
But there is more to it than this. ...

Friday, September 26, 2014

'Long-term Unemployed Struggle as Economy Improves'

The long-term unemployed need more help than they are getting:

Long-term Unemployed Struggle as Economy Improves: While the unemployment rate for people out of work for six months or less has returned to prerecession levels, the levels of unemployment for workers who remain jobless for more than six months is among the most persistent, negative effects of the Great Recession, according to a new national study at Rutgers. In fact, one in five workers laid off from a job during the last five years are still unemployed and looking for work, researchers from the John J. Heldrich Center for Workforce Development found.

Among the key findings of "Left Behind: The Long-term Unemployed Struggle in an Improving Economy":

  • Approximately half of the laid-off workers who found work were paid less in their new positions; one in four say their new job was only temporary.
  • Only one in five of the long-term unemployed received help from a government agency when looking for a job; only 22 percent enrolled in a training program to develop skills for a new job; and 60 percent received no government assistance beyond unemployment benefits.
  • Nearly two-thirds of Americans support increasing funds for long-term education and training programs, and greater spending on roads and highways in order to assist unemployed workers.

As of last August, 3 million Americans, nearly one in three unemployed workers, have been unemployed for more than six months and more than 2 million Americans have been out of work for more than a year...

This research provides a detailed record of the enduring effects of the Great Recession on the unemployed and long-term unemployed five years after the economy started growing again in June 2009.

The survey also found that:

  • More than seven in 10 long-term unemployed say they have less in savings and income than they did five years ago.
  • More than eight in 10 of the long-term unemployed rate their personal financial situation negatively as only fair or poor.
  • More than six in 10 unemployed and long-term unemployed say they experienced stress in family relationships and close friendships during their time without a job.
  • Fifty-five percent of the long-term unemployed say they will need to retire later than planned because of the recession, while 5 percent say the weak economy forced them into early retirement.
  • Nearly half of the long-term unemployed say it will take three to 10 years for their families to recover financially. Another one in five say it will take longer than that or that they will never recover.

..."These long-term unemployed workers have been left behind to fend for themselves as they struggle to pull their lives back together."

Wednesday, September 24, 2014

'Hungry Children in America'

Tim Taylor:

Hungry Children in America: One child in five in the United States lives in a "food insecure" household. Craig Gundersen and James P. Ziliak lay out the evidence in "Childhood Food Insecurity in the U.S.: Trends, Causes, and Policy Options,"  a Fall 2014 Research Report written for The Future of Children. ...

Unsurprisingly, families that are poor are more likely to experience food insecurity. But perhaps more surprisingly, the connection from poverty to food insecurity is by no means ironclad. After all, the U.S. spends over $100 billion on food-related programs for the poor, including food stamps, school lunches and breakfasts and others. As the authors write:

Clearly, the risk for child food insecurity drops quickly with income. But even at incomes two and three times the poverty level, food insecurity is quite high. Moreover, almost 60 percent of children in households close to the poverty line are in foodsecure households. This suggests that income is only part of the story and that other factors also contribute to children’s food security.

As the authors dig into the data on children living in food-insecure households, the theme that keeps emerging is the quality of parenting the children receive. ...

The takeaway lesson, at least for me, is that food stamps and school lunches do help to reduce food insecurity, as do programs that provide income support to those with low incomes. But when the adults in a household are having trouble managing their own lives, children end up suffering. The answers here are straightforward to name, if not always easy to do, like finding ways to get food to children directly (perhaps by expanding school food programs to the summers and weekends) and to help parents in low-income households learn how to stretch their limited resources.  As I have argued before on this website, for many children, the parenting gap they experience may be limiting their development even from a very young age.

Friday, September 19, 2014

'The Political Economy of a Universal Basic Income'

Since I posted the original, it's only fair to post the response:

The political economy of a universal basic income, by Steve Waldman, Interfluidity: So you should read these two posts by Max Sawicky on proposals for a universal basic income, because you should read everything Max Sawicky writes. (Oh wait. Two more!) Sawicky is a guy I often agree with, but he is my mirror Spock on this issue. I think he is 180° wrong on almost every point. ...

'Home Free?'

James Surowiecki:

Home Free?, by James Surowiecki: In 2005, Utah set out to fix a problem that’s often thought of as unfixable: chronic homelessness. The state had almost two thousand chronically homeless people. Most of them had mental-health or substance-abuse issues, or both. At the time, the standard approach was to try to make homeless people “housing ready”: first, you got people into shelters or halfway houses and put them into treatment; only when they made progress could they get a chance at permanent housing. Utah, though, embraced a different strategy, called Housing First: it started by just giving the homeless homes.
Handing mentally ill substance abusers the keys to a new place may sound like an example of wasteful government spending. But it turned out to be the opposite: over time, Housing First has saved the government money. ...

Friday, September 12, 2014

'In Defense of Social Insurance'


In defense of social insurance: On Twitter I said: “The basic income movement is an attack on the strongest political pillar of social-democracy: social insurance.” I’ve inveighed against the Universal Basic Income in the past, so here I go again. Another edition of old man yelling at clouds.
Throughout history, in certain communal settings some variant of the Marxian “From each according to his abilities, to each according to his needs,” has applied. In a naive sense, the UBI is not far off from that ideal. What economists call a demogrant* — a fixed, unrestricted, unconditional transfer payment to every individual (to each according to his needs**) — would presumably be financed by some kind of progressive tax (from each according to his abilities). I have no quarrel with the ideal. The problem is that it’s an utter fantasy that beclouds thinking about more plausible social policies. It’s a distraction from the need to defend really-existing social insurance and to attack the devolution of the safety net (about which a bit more below). ...

Wednesday, August 13, 2014

'Cutting Jobless Benefits Did Not Boost Employment'

It's okay to help people:

EPI and AEI Agree: Cutting Jobless Benefits Did Not Boost Employment, by Joshua Smith, EPI: Perhaps Hell has not frozen over, but it appears that someone down there may have leaned on the thermostat. That’s right, the Economic Policy Institute and the American Enterprise Institute are in lock-step agreement on an important fiscal policy matter.
During the Great Recession and its aftermath, the federal government acted to help victims of the severe downturn by funding programs that extended unemployment benefits—to up to 99 weeks in some cases, up from the standard 26 weeks. As the economic recovery continued, weak as it was for many in the working class, many lawmakers on the right began to believe that these extended benefits were a drag on employment—the theory being that government checks reduced the incentive for recipients to find a job, and that cutting off this lifeline would compel unemployed workers to look harder for work and perhaps take jobs they may not have accepted if the benefits had continued. Relying on this premise, Congress allowed the federally-funded Emergency Unemployment Compensation program to lapse last December.
Now, more than seven months later, data are available to test this idea. Coming from perspectives that diverge greatly along the ideological spectrum, scholars at both AEI and EPI have come to the conclusion that this “bootstraps” theory is incorrect—curtailing jobless benefits did not boost employment. ...

Saturday, July 26, 2014

'Are the Rich Coldhearted?'

Why are so many of the rich and powerful so callous and indifferent to the struggles of those who aren't so fortunate?:

Are the Rich Coldhearted?, by Michael Inzlicht and Sukhvinder Obhi, NY Times: ... Can people in high positions of power — presidents, bosses, celebrities, even dominant spouses — easily empathize with those beneath them?
Psychological research suggests the answer is no. ...
Why does power leave people seemingly coldhearted? Some, like the Princeton psychologist Susan Fiske, have suggested that powerful people don’t attend well to others around them because they don’t need them in order to access important resources; as powerful people, they already have plentiful access to those.
We suggest a different, albeit complementary, reason from cognitive neuroscience. On the basis of a study we recently published with the researcher Jeremy Hogeveen, in the Journal of Experimental Psychology: General, we contend that when people experience power, their brains fundamentally change how sensitive they are to the actions of others. ...
Does this mean that the powerful are heartless beings incapable of empathy? Hardly..., the bad news is that the powerful are, by default and at a neurological level, simply not motivated to care. But the good news is that they are, in theory, redeemable.

Friday, July 25, 2014

'Devolution Number Nine'

In case you missed this in today's links, it's worth noting explicitly:

Devolution Number Nine, by MaxSpeak: Rep. Paul Ryan (R-Crazy) has a new plan to fight poverty..., the common theme throughout the report is to convert Federal programs into block grants. A block grant is a fixed pot of money provided to a state or local government for broadly-defined purposes. Ryan’s report is at pains to assert that the conversion would not entail spending cuts. This could not be further from the truth.
The story goes back to the days of Richard Nixon. I told it here. ... The short version is that a program or programs converted to a block grant is being set up to wither away. Block grants are designed through formulas to grow slowly or not at all, despite the likelihood that whatever the included programs were aimed at typically costs more to deal with every year. There are also two malignant political dynamics at work. One is that ... block grants transfer control to state governments. They have the fun of spending the money, Congress has the fun of raising the taxes to pay for it. The other is that the more vague — “flexible” — the purposes of the grant, the less focused is its political support. ...
The transfer of program responsibility from the Federal government to the states is known as devolution. It is the standard way of attacking domestic spending for social purposes, going back to Richard Nixon’s dismantling of the original, more interesting War on Poverty launched by Lyndon Johnson. ...

Tuesday, July 15, 2014

Improving Social Insurance Can Narrow the 'Opportunity Gap'

I have a new column:

Improving Social Insurance Can Narrow the “Opportunity Gap”: The justification for social insurance programs that protect workers is usually based upon the fact that employment in capitalist economies is subject to substantial variation due to cyclical fluctuations and structural change. Economic systems such as socialism have much less variation in employment since everyone, pretty much, is guaranteed a job. But the growth rate of output in those systems is not as high as it is in capitalist economies, and that leads to a lower average standard of living. 
Why not enjoy the benefits of a capitalist system while minimizing its costs through the use of social insurance programs that insulate workers from harm when they lose their jobs for one of these reasons? ...
We don’t do enough to insulate workers from the fluctuations in employment inherent in capitalist economies. ...
Doing more to help workers affected by economic downturns and structural change is not the only way in which social insurance could be improved. There other risks, in particular the risk of unequal opportunity, that are baked into capitalist systems. ...

Does Extending Unemployment Benefits Raise Joblessness?

Me, at MoneyWatch:

Can unemployment benefits raise joblessness?: Did the extension of unemployment compensation during the Great Recession cause joblessness to go up? ...

The latest research on this topic from Katharine Bradbury of the Federal Reserve Bank of Boston ... finds that unemployment does go up when unemployment benefits are extended, but the question is why. Does it discourage workers from taking jobs, or discourage them from leaving the labor force?

Bradbury pointed out that the earlier research shows it's mostly the latter, that extending unemployment benefits causes workers to stay in the labor force longer before dropping out. No notable impact was found on their willingness to take available jobs. ...

Sunday, June 29, 2014

'The Prospects for Egalitarian Capitalism'

Dan Little:

Thelen on the prospects for egalitarian capitalism:
source: Kathleen Thelen, Varieties of Liberalization (kl 3310)
There is a version of economic historical thinking that we might label as "capitalist triumphalism" -- the idea that the institutions of a capitalist economy drive out all other economic forms, and that they tend towards an ever-more pure form of unconstrained market society. "Liberalization," deregulation, and reduction of social rights are seen as economically inevitable. On this view, the various ways in which some countries have tried to ameliorate the harsh consequences of unconstrained capitalism on the least well off in society are doomed -- the welfare state, social democracy, extensive labor rights, or universal basic income (link). Through a race to the bottom, any institutional reforms that impede the freedom and mobility of capital will be forced out by a combination of economic and political pressures.
The graphs above demonstrate the current structural differences among Denmark, Sweden, Germany, Netherlands, and USA when it comes to training and income support for the unemployed and underemployed. It is visible that the four European economies devote substantially greater resources to support for the unemployed than the United States. And on the triumphalist view, the states demonstrating more generous benefits for the less-well-off will inevitably converge towards the profile represented by the fifth panel, the United States.
Kathleen Thelen is a gifted historical sociologist who has studied the institutions of labor education and training throughout the past twenty years. Her book How Institutions Evolve: The Political Economy of Skills in Germany, Britain, the United States, and Japan is an important contribution to our understanding of these basic economic institutions, and it also sheds important light on the meta-issues of stability and change in important social institutions. With James Mahoney she also edited the valuable collection Explaining Institutional Change: Ambiguity, Agency, and Power on this topic.
Thelen's most recent book, Varieties of Liberalization and the New Politics of Social Solidarity addresses the question of capitalist triumphalism. (That isn't a term that she uses, but it seems descriptive.) She locates her analysis within the "varieties of capitalism" field of scholarship, which maintains that there is not a single pathway of development for capitalist systems. "Coordinated" capitalism and neoliberal capitalism represent two poles of the space considered by the VofC literature.
From the beginning, the VofC literature challenged the idea that contemporary market pressures would drive a convergence on a single best or most efficient model of capitalism. (kl 228)
Thelen is interested in assessing the prospects for what she calls "egalitarian" capitalism -- the variants of capitalist political economy that feature redistribution, social welfare, and significant policy support for the less-well-off. She focuses on several key institutions -- industrial relations, vocational education and training, and labor market institutions, and she argues that these are particularly central for the historical issue of the development of capitalism towards harsher or gentler versions.
Different varieties of liberalization occur under the auspices of different social coalitions, and this has huge implications for the distributive outcomes in which many of us are ultimately interested. (kl 243)
This point is key to her view of the plasticity and path-dependency of basic economic institutions: these institutions change as a result of economic imperatives and the strength of various social groups who are in a position to influence the form that change takes. "The conclusions I reach here are based on a view of institutions that emphasizes the political-coalitional basis on which they rest" (kl 259). But there is no simple calculus proceeding from power group to institutional outcome; instead, the results for institutional change are a dynamic consequence of strategy, coalition, and constraint.
I suggest that the institutions of egalitarian capitalism survive best not when they stably reproduce the politics and patterns of the Golden Era, but rather when they are reconfigured -- in both form and function -- on the basis of significantly new political support coalitions. (kl 330)
A key finding in Thelen's analysis is that "coordinated" capitalism and "egalitarian" capitalism are not the same. Coordinated capitalism corresponds to the models associated with social democracies of the 1950s and 1960s, the "Nordic" model. But Thelen holds that egalitarian capitalism can take more innovative and flexible forms and may be a more durable alternative to neoliberal capitalism.

Is a more "egalitarian" capitalism possible? The data on labor markets that Thelen presents shows that there are major differences across OECD economies when it comes to wage inequality. Here is a striking chart:
Source: Thelen, Figure 3.3. Share of Employees in Low-Wage Work, 2010
Fully a quarter of US workers are employed in low-wage work in 2010. This is about double the rate of Denmark and quadruple the rate of low-wage workers in Sweden. Plainly this reflects a US economy that is creating substantially greater numbers of low-income people than any other OECD country. And yet all of these countries are capitalist economies, some with rates of growth that are higher than the United States. This demonstrates that there are institutional and policy choices available that are consistent with the imperatives of a capitalist market economy and yet that give rise to more egalitarian outcomes than we observe in the US, Canada, and the UK.
A key element in common among the more egalitarian labor outcomes that Thelen studies (Netherlands, Denmark, Sweden, Germany) is the expansion of part-time work, mini-jobs, and "flexi-curity". This phenomenon reflects a combination of liberalization (relaxation of work rules and requirements of long labor contracts), with a set of arrangements that allows a smoother allocation of labor to jobs and an improvement in income and security for the lower end of the labor market. This trend is part of what Thelen calls a strategy of "embedded flexibilization", which she regards as the best hope for a pathway towards equitable capitalism.
Thelen closes with a realistic observation about the uncertain coalitional basis that is available in support of the policies of embedded flexibilization. Xenophobic tendencies in countries like the Netherlands and Denmark have the potential for destroying the social consensus that currently exists for this model, and the leaders of nationalistic anti-immigrant parties have made this a key to their efforts at political mobilization (kl 5541). Maintenance of these policies will require strong political efforts on the part of progressive coalitions in those countries, and organized labor is key to those efforts.
This analysis is deeply international and comparative, but it has an important consequence for the political economy of the United States: where are the coalitions that can help steer our economy towards a more egalitarian form of capitalism?
(Readers may be interested in an earlier discussion of the Nordic model; link.)

Thursday, June 12, 2014

'The Social Impact of Fiscal Policy Responses to Crises'

Contractionary fiscal policy in recessions is contractionary (contrary to those who advocate "expansionary austerity). It also worsens social indicators (though for some undermining the social safety net is one of the goals of austerity):

The social impact of fiscal policy responses to crises, by Carlos A. Vegh and Guillermo Vuletin, Vox EU: Fiscal policy in many developing countries is typically procyclical. Expansionary in good times and contractionary in bad times, these policies often amplify business cycles. The most convincing explanations for such practices seem to be limited access to international credit markets during bad times and political pressures that tend to encourage too much public spending during boom periods (Calderon and Schmidt-Hebbel 2008). Whatever the reason, the pattern is well documented (see Frankel, Vegh, and Vuletin 2011 on the spending side and Vegh and Vuletin 2013a on the tax side). In particular, contractionary fiscal policy in bad times seems to have increased the severity and duration of crises (Vegh and Vuletin 2013b).

Ironically, the procyclicality of fiscal policy has also become a hotly debated issue in the context of the current crises in Europe, with influential economists such as Olivier Blanchard (IMF Chief Economist) arguing that fiscal multipliers in the Eurozone have been underestimated by the IMF and others and thus that the contractionary effects of fiscal austerity have been considerably higher than typically believed (Blanchard and Leigh 2013).

Counting the social impact

Lost in much of the discussion on fiscal-policy procyclicality has been the social impact of contractionary fiscal policy during recessions – things such as:

  • the poverty rate,
  • income inequality,
  • the unemployment rate, and
  • domestic conflict.

In a recent research paper we look at how the fiscal-policy responses to GDP crises have affected social indicators such as those listed above (Vegh and Vuletin 2014). We find that contractionary fiscal policy during crises has tended to worsen social indicators both in Latin America and, more recently, in the Eurozone, which calls into question recent claims on ‘expansionary fiscal austerity.’ ...

Policy conclusions

While many Latin American countries have ‘graduated’ from procyclical to countercyclical fiscal responses to GDP crises, many industrial economies (like Greece, Ireland, Italy, and Portugal) followed contractionary fiscal policies in the aftermath of the Global Crisis. Our work finds that countercyclical fiscal policies tend to soften the undesirable effects of GDP crises on social indicators such as poverty, income inequality, unemployment, and domestic conflict. On the other hand, austerity policies tend to worsen all of these social indicators.

This evidence supports the desirability of pursuing expansionary fiscal policies in times of distress – which may mean postponing for some time needed structural fiscal adjustment – rather than embarking on fiscal austerity in the midst of a recession. ...

Wednesday, May 28, 2014

'Unemployment Insurance and Disability Insurance in the Great Recession'

From the NBER Digest:

Unemployment Insurance and Disability Insurance in the Great Recession: At the end of 2012, 8.8 million American adults were receiving Social Security Disability Insurance (SSDI) benefits. The share of the American public receiving SSDI has more than doubled since 1990. This rapid growth has prompted concerns about SSDI's sustainability: recent projections suggest that the SSDI trust fund will be exhausted in 2016.
SSDI recipients tend to remain in the program, and out of the labor market, from the time they are approved for benefits until they reach retirement age. This means that if unemployed individuals turn to disability insurance as a source of benefits when they exhaust their unemployment insurance (UI), the long-term program costs can be substantial. Some have suggested that the savings from avoided SSDI cases could help to finance the cost of extending UI benefits, but little is known about the interaction between SSDI and UI.
In Unemployment Insurance and Disability Insurance in the Great Recession, (NBER Working Paper No. 19672), Andreas Mueller, Jesse Rothstein, and Till von Wachter use data from the last decade to investigate the relationship between UI exhaustion and SSDI applications. They take advantage of the variability of UI benefit durations during the recent economic downturn. The duration of these benefits was as long as 99 weeks in 2009, remained protracted for several years, then was shortened substantially in 2012. The authors focus on the uneven extension of UI benefits during and after the Great Recession to isolate variation in the duration of these benefits that is not confounded by variation in economic conditions more broadly.
The authors find very little interaction between UI benefit eligibility and SSDI applications, and conclude that SSDI applications do not appear to respond to UI exhaustion. While the authors cannot rule out small effects, they conclude that SSDI applications do not respond strongly enough to contribute meaningfully to a cost-benefit analysis of UI extensions or to account for the cyclical behavior of SSDI applications.
The authors suggest that the tendency for the number of SSDI applications to grow when the economy is weak may reflect variation in the potential reemployment wages of displaced workers, or changes in the employment opportunities of the marginally disabled that influence the evaluation of an SSDI applicant's employability. These channels are not linked to the generosity or duration of UI benefits, and they imply that more stringent functional capacity reviews of SSDI applicants may not reduce recession-induced SSDI claims if these claims reflect examiners' judgments that the applicants are truly not employable in the existing labor market.

Monday, May 26, 2014

Paul Krugman: Europe’s Secret Success

Europe's social safety net is doing its job:

Europe’s Secret Success , by Paul Krugman, Commentary, NY Times: ...Europe’s financial and macroeconomic woes have overshadowed its remarkable, unheralded longer-term success in an area in which it used to lag: job creation.
What? You haven’t heard about that? Well, that’s not too surprising. European economies, France in particular, get very bad press in America. Our political discourse is dominated by reverse Robin-Hoodism — the belief that economic success depends on being nice to the rich, who won’t create jobs if they are heavily taxed, and nasty to ordinary workers, who won’t accept jobs unless they have no alternative. And according to this ideology, Europe — with its high taxes and generous welfare states — does everything wrong. So Europe’s economic system must be collapsing, and a lot of reporting simply states the postulated collapse as a fact.
The reality, however, is very different. Yes, Southern Europe is experiencing an economic crisis... But Northern European nations, France included, have done far better than most Americans realize. In particular, here’s a startling, little-known fact: French adults in their prime working years (25 to 54) are substantially more likely to have jobs than their U.S. counterparts. ... Other European nations with big welfare states, like Sweden and the Netherlands, do even better. ...
Oh, and for those who believe that out-of-work Americans, coddled by government benefits, just aren’t trying to find jobs, we’ve just performed a cruel experiment using the worst victims of our job crisis as subjects. At the end of last year Congress refused to renew extended jobless benefits... Did the long-term unemployed who were thereby placed in dire straits start finding jobs more rapidly than before? No — not at all. Somehow, it seems, the only thing we achieved by making the unemployed more desperate was deepening their desperation.
I’m sure that many people will simply refuse to believe what I’m saying about European strengths. After all, ever since the euro crisis broke out there has been a relentless campaign by American conservatives (and quite a few Europeans too) to portray it as a story of collapsing welfare states, brought low by misguided concerns about social justice. And they keep saying that even though some of the strongest economies in Europe, like Germany, have welfare states whose generosity exceeds the wildest dreams of U.S. liberals. ...
The truth is that European-style welfare states have proved more resilient, more successful at job creation, than is allowed for in America’s prevailing economic philosophy.

Tuesday, May 20, 2014

'Taking Away Unemployment Benefits Doesn’t Make People Get Jobs'


No, Taking Away Unemployment Benefits Doesn’t Make People Get Jobs, by Bryce Covert: When 1.3 million long-term unemployed people lost benefits because Congress let the program lapse, some claimed that taking away the checks would encourage people to go out and get a job. That isn’t panning out for the 74,000 people who are no longer getting checks in Illinois.
In January, one month after they lost benefits, 64,000 of them, or 86 percent, were still unemployed, according to an analysis of wage records by the Illinois Department of Employment Security (IDES). February was similar: 61,3000 people were still unemployed, or 82.7 percent of the original group. That means two months later, four out of five people who were cut off from benefits still weren’t bringing in wages.
“This notion that temporary unemployment benefits provide people a reason not to return to work really needs to end because it is not supported by the data,” IDES Director Jay Rowell said.
Other natural experiments have shown that, rather than spurring a flurry of hiring, cutting off benefits can have disastrous consequences. ...

Tuesday, May 13, 2014

'What Is Social Insurance? Take Two'

James Kwak:

What Is Social Insurance? Take Two: More than a year ago I wrote a post titled “What Is Social Insurance?”... In that post, I more or less took the mainstream progressive view: programs like Social Security are risk-spreading programs that provide insurance against common risks like disability, living too long, poor health in old age, and so on....
I still think that social insurance programs ... provide risk-spreading insurance when viewed over a long time horizon. So from a lifetime perspective, the insurance function means that most people are made better off, even though a program as a whole may be a zero-sum game in dollar terms. But ... a crucial feature of social insurance is that it is redistributive in the short term (in an ex ante sense, not the trivial ex post sense that is true of all insurance) but risk-spreading in the long term. I happen to think that the world would be a better place if we considered the long term and, therefore, decided to maintain these programs. But I don’t think it’s obviously true that a lifetime perspective is correct and a one-year perspective is incorrect.
In particular, if you think that Social Security won’t be around when you retire, then you would logically take a short-term perspective in which you pay taxes but never receive benefits (unless you go on disability, or you die while Social Security still exists). Then you should rationally want to eliminate Social Security as soon as possible. Conversely, if you believe that Social Security will be around when you retire, then you will evaluate the whole thing, including its insurance value, which will make you more likely to vote for it. So it’s not surprising that a major component of the anti-Social Security campaign consists of trying to convince young people (who ordinarily gain the most from insurance, since they face the most uncertainty) that Social Security cannot exist when they retire.
If you want to read more, the draft chapter is up on SSRN. Enjoy.

Just one comment. I wish he'd made it clear that the worries about Social Security not being there for the young of today are unfounded.

Wednesday, April 16, 2014

'Supply, Demand, and Unemployment Benefits'

When in need of a quick post, Paul Krugman is always a good source:

Supply, Demand, and Unemployment Benefits: Ben Casselman points out that we’ve had a sort of natural experiment in the alleged effects of unemployment benefits in reducing employment. Extended benefits were cancelled at the beginning of this year; have the long-term unemployed shown any tendency to find jobs faster? And the answer is no.
Let me ... ask, how was it, exactly, that reduced benefits were supposed to encourage employment in the first place?
Making the unemployed miserable arguably increases labor supply, as workers become ... more willing to take whatever job they can find. But the US labor market in 2014 isn’t constrained by supply, it’s constrained by demand: ...firms ... have no need for as many hours of work as workers are willing to give.
So make the long-term unemployed more desperate; so what? They can’t do anything to increase the amount of work demanded, and in fact their reduced purchasing power reduces labor demand.
You might imagine that the long-term unemployed, through their desperation, might take jobs away from existing workers — but ... there’s no evidence that this is happening. ...

Wednesday, April 09, 2014

'Long-Term Unemployment Is Elevated Across All Education, Age, Occupation, Industry, Gender, And Racial And Ethnic Groups'

Who are the long-term unemployed? From Heidi Shierholz at the EPI:

Long-Term Unemployment Is Elevated Across All Education, Age, Occupation, Industry, Gender, And Racial And Ethnic Groups, by Heidi Shierholz: Today’s Economic Snapshot shows that long-term unemployment is elevated for workers at every education level. ... The long-term unemployment rate is between 2.9 and 4.3 times as high now as it was six years ago for all age, education, occupation, industry, gender, and racial and ethnic groups. Today’s long-term unemployment crisis is not at all confined to unlucky or inflexible workers who happen to be looking for work in specific occupations or industries where jobs aren’t available. Long-term unemployment is elevated in every group, in every occupation, in every industry, at all levels of education.
Elevated long-term unemployment for all groups, like we see today, means that today’s long-term unemployment crisis is not due to something wrong with these workers, it is due to the fact that businesses across the board simply haven’t needed to significantly increase hiring because they haven’t seen demand for their goods and services pick up enough to warrant it.
Nevertheless, Congress allowed federal unemployment insurance to expire at the end of 2013, and over two million workers have lost their unemployment benefits since then. In the first sign of progress in months, yesterday the Senate reinstated a temporary five-month extension of federal unemployment insurance. It will, however, face an uphill battle in the House. In considering this measure, the House should not ignore the fact that our long-term unemployment crisis is not the fault of individual unemployed workers failing to exert enough effort or flexibility in their job search. It is instead due to more than six years of weak hiring on the part of businesses, who simply don’t need more workers because they don’t have enough demand for their products.

Wednesday, March 26, 2014

'The EITC Is No Substitute for the Safety Net'

From the CBPP:

Why the EITC Is No Substitute for the Safety Net, CBPP: The Earned Income Tax Credit is a critically important and highly effective part of the safety net, but it can’t — and wasn’t meant to — stand alone as our answer to poverty, according to our new commentary.  Here’s the opening:

House Budget Committee Chair Paul Ryan’s recent report on safety net programs rightly praised the Earned Income Tax Credit (EITC) for reducing poverty and promoting work.  But, Ryan’s report criticizes much of the rest of the safety net.  And, over the past several years, Chairman Ryan’s budget plans have targeted low-income programs such as SNAP (formerly food stamps) and Medicaid for extremely deep cuts.  While it’s heartening to hear Chairman Ryan trumpet the EITC’s success, the EITC alone can’t do what’s needed to ameliorate poverty and hardship./p>

The things that the EITC — and its sibling the Child Tax Credit, which helps offset the cost of raising children — can’t do without other safety net programs include:

  • help people who are out of work or can’t work;
  • help families get health care;
  • help families on a monthly basis;
  • serve as an effective automatic stabilizer for the economy in recessions; and
  • keep large numbers of people out of “deep poverty,” or above half the poverty line.


Wednesday, March 19, 2014

'The Voluntarism Fantasy'

In case you missed this in the daily links, a topic that comes up here often, the need for government sponsored social insurance:

The Voluntarism Fantasy, by Mike Konczal: Ideology is as much about understanding the past as shaping the future. And conservatives tell themselves a story, a fairy tale really, about the past, about the way the world was and can be again under Republican policies. This story is about the way people were able to insure themselves against the risks inherent in modern life. Back before the Great Society, before the New Deal, and even before the Progressive Era, things were better. Before government took on the role of providing social insurance, individuals and private charity did everything needed to insure people against the hardships of life; given the chance, they could do it again.
This vision has always been implicit in the conservative ascendancy. It existed in the 1980s, when President Reagan announced, “The size of the federal budget is not an appropriate barometer of social conscience or charitable concern,” and called for voluntarism to fill in the yawning gaps in the social safety net. It was made explicit in the 1990s, notably through Marvin Olasky’s The Tragedy of American Compassion, a treatise hailed by the likes of Newt Gingrich and William Bennett, which argued that a purely private nineteenth-century system of charitable and voluntary organizations did a better job providing for the common good than the twentieth-century welfare state. This idea is also the basis of Paul Ryan’s budget, which seeks to devolve and shrink the federal government at a rapid pace, lest the safety net turn “into a hammock that lulls able-bodied people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.” It’s what Utah Senator Mike Lee references when he says that the “alternative to big government is not small government” but instead “a voluntary civil society.” As conservatives face the possibility of a permanent Democratic majority fueled by changing demographics, they understand that time is running out on their cherished project to dismantle the federal welfare state.
But this conservative vision of social insurance is wrong. It’s incorrect as a matter of history; it ignores the complex interaction between public and private social insurance that has always existed in the United States. It completely misses why the old system collapsed and why a new one was put in its place. It fails to understand how the Great Recession displayed the welfare state at its most necessary and that a voluntary system would have failed under the same circumstances. Most importantly, it points us in the wrong direction. The last 30 years have seen effort after effort to try and push the policy agenda away from the state’s capabilities and toward private mechanisms for mitigating the risks we face in the world. This effort is exhausted, and future endeavors will require a greater, not lesser, role for the public. ...[continue]...

Monday, March 17, 2014

Paul Krugman: That Old-Time Whistle

Conservatives "can’t bring themselves to acknowledge the reality of what’s happening to opportunity in America":

That Old-Time Whistle, by Paul Krugman, Commentary, NY Times: ...Paul Ryan, chairman of the House Budget Committee and the G.O.P.’s de facto intellectual leader ... attributed persistent poverty to a “culture, in our inner cities in particular, of men not working and just generations of men not even thinking about working.” He was, he says, simply being “inarticulate.” How could anyone suggest that it was a racial dog-whistle? Why, he even cited the work of serious scholars — people like Charles Murray, most famous for arguing that blacks are genetically inferior to whites. Oh, wait.
Just to be clear, there’s no evidence that Mr. Ryan is personally a racist, and his dog-whistle may not even have been deliberate. But it doesn’t matter. He said what he said because that’s the kind of thing conservatives say to each other all the time. And why do they say such things? Because American conservatism is still, after all these years, largely driven by claims that liberals are taking away your hard-earned money and giving it to Those People.
Indeed, race is the Rosetta Stone that makes sense of many otherwise incomprehensible aspects of U.S. politics. ...
One odd consequence of our still-racialized politics is that conservatives are still, in effect, mobilizing against the bums on welfare even though both the bums and the welfare are long gone or never existed. Mr. Santelli’s fury was directed against mortgage relief that never actually happened. Right-wingers rage against tales of food stamp abuse that almost always turn out to be false or at least greatly exaggerated. And Mr. Ryan’s black-men-don’t-want-to-work theory of poverty is decades out of date. ...
The ... sociologist William Julius Wilson has documented, the flight of industry from urban centers meant that minority workers literally couldn’t get to those good jobs, and the supposed cultural causes of poverty were actually effects of that lack of opportunity. Still, you could understand why many observers failed to see this.
But over the past 40 years good jobs for ordinary workers have disappeared, not just from inner cities but everywhere: adjusted for inflation, wages have fallen for 60 percent of working American men. ...
These awkward facts have not, however, penetrated the world of conservative ideology. ... And since conservatives can’t bring themselves to acknowledge the reality of what’s happening to opportunity in America, they’re left with nothing but that old-time dog whistle. Mr. Ryan wasn’t being inarticulate — he said what he said because it’s all that he’s got.

Tuesday, March 11, 2014

Inequality in Capitalist Systems

New column:

Inequality in Capitalist Systems Is Not Inevitable, by Mark Thoma: Capitalism is the best economic system yet discovered for giving people the goods and services they desire at the lowest possible price, and for producing innovative economic growth. But there is a cost associated with these benefits, the boom and bust cycles inherent in capitalist systems, and those costs hit working class households – who have done nothing to deserve such a fate – very hard. Protecting innocent households from the costs of recessions is an important basis for our social insurance programs.
It is becoming more and more evident that there is another cost of capitalist systems, the inevitable rising inequality documented by Thomas Piketty in “Capital in the Twenty-First Century, that our social insurance system will need to confront. ...

Friday, March 07, 2014

Paul Krugman: The Hammock Fallacy

We don't do enough to help people escape poverty:

The Hammock Fallacy, by Paul Krugman, Commentary, NY Times: Hypocrisy is the tribute vice pays to virtue. So when you see something like the current scramble by Republicans to declare their deep concern for America’s poor, it’s a good sign, indicating a positive change in social norms. Goodbye, sneering at the 47 percent; hello, fake compassion.
And the big new poverty report from the House Budget Committee, led by Representative Paul Ryan, offers additional reasons for optimism. Mr. Ryan used to rely on “scholarship” from places like the Heritage Foundation. ... This time, however, Mr. Ryan is citing a lot of actual social science research.
Unfortunately, the research he cites doesn’t actually support his assertions. Even more important, his whole premise about why poverty persists is demonstrably wrong.
To understand where the new report is coming from,... recall something Mr. Ryan said two years ago: “We don’t want to turn the safety net into a hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.” ...
What does scholarly research on antipoverty programs actually say? ... Mr. Ryan would have us believe that the “hammock” created by the social safety net is the reason so many Americans remain trapped in poverty. But the evidence says nothing of the kind.
After all, if generous aid ... perpetuates poverty, the United States — which treats its poor far more harshly than other rich countries, and induces them to work much longer hours — should lead the West in social mobility... In fact,... America has less social mobility...
And there’s no puzzle why: it’s hard for young people to get ahead when they suffer from poor nutrition, inadequate medical care, and lack of access to good education. The antipoverty programs that we have actually do a lot to help people rise. For example, Americans who received early access to food stamps were healthier and more productive... But we don’t do enough... The reason so many Americans remain trapped in poverty isn’t that the government helps them too much; it’s that it helps them too little.
Which brings us back to the hypocrisy issue. It is, in a way, nice to see the likes of Mr. Ryan at least talking about the need to help the poor. But somehow their notion of aiding the poor involves slashing benefits while cutting taxes on the rich. Funny how that works.

Wednesday, March 05, 2014

'The New Paul Ryan Report on Poverty and Safety Net Programs'

What do you think of Tyler Cowen's comments on the Ryan poverty report?

The new Paul Ryan report on poverty and safety net programs: I read much of the document last night, here are a few comments...

I found myself in agreement with much of what he says.

Thursday, February 20, 2014

'How Well Did Social Security Mitigate the Effects of the Great Recession?'

I started blogging during the Social Security wars of the Bush administration. Looks like it's a good thing reason prevailed:

How Well Did Social Security Mitigate the Effects of the Great Recession?, by William B. Peterman and Kamila Sommer: Abstract: This paper quantifies the welfare implications of the U.S. Social Security program during the Great Recession. We find that the average welfare losses due to the Great Recession for agents alive at the time of the shock are notably smaller in an economy with Social Security relative to an economy without a Social Security program. Moreover, Social Security is particularly effective at mitigating the welfare losses for agents who are poorer, less productive, or older at the time of the shock. Importantly, in addition to mitigating the welfare losses for these potentially more vulnerable agents, we do not find any specific age, income, wealth or ability group for which Social Security substantially exacerbates the welfare consequences of the Great Recession. Taken as a whole, our results indicate that the U.S. Social Security program is particularly effective at providing insurance against business cycle episodes like the Great Recession.

Tuesday, February 18, 2014

'Families Need Insurance for Wages and for Family Responsibilities'

Miles Corak:

... Wage inequality and stagnant earnings are issues firmly stapled to the political agenda. But lack of stability and predictability in incomes and other resources matters too, and the last few decades—and especially the last few years—of the US labor market and family life have been marked by increased risk and turbulence.

Public policy for social mobility needs to support not just the adequacy of incomes, but also their volatility, and fill a need for both wage insurance and family responsibility insurance. ...

More here.

Tuesday, February 11, 2014

'Inequality and Indignity'

Paul Krugman:

Inequality and Indignity: ... Let’s talk ... about dignity.
It’s all very well to talk vaguely about the dignity of work; but the idea that all workers can regard themselves as equal in dignity despite huge disparities in income is just foolish. When you’re in a world where 40 money managers make as much as 300,000 high school teachers, it’s just silly to imagine that there will be any sense, on either side, of equal dignity in work. ...
Now, one way to enhance the dignity of ordinary workers is through, yes, entitlements: make it part of their birthright, as American citizens, that they get certain basics such as a minimal income in retirement, support in times of unemployment, and essential health care.
But the Republican position is that none of these things should be provided, and that if somehow they do get provided, they should come only at the price of massive government intrusion into the recipient’s personal lives — making sure that you don’t take advantage of health reform to work less, requiring that you undergo drug tests to receive unemployment benefits or food stamps, and so on.
In short, while conservatives may preach the dignity of work, their actual agenda is to deny lower-income workers as much dignity — and personal freedom — as possible.

Monday, February 10, 2014

Paul Krugman: Writing Off the Unemployed

Why have politicians turned their backs on the unemployed?:

Writing Off the Unemployed, by Paul Krugman, Commentary, NY Times: Back in 1987 my Princeton colleague Alan Blinder published a very good book titled “Hard Heads, Soft Hearts.” It was, as you might guess, a call for tough-minded but compassionate economic policy. Unfortunately, what we actually got — especially, although not only, from Republicans — was the opposite. And it’s difficult to find a better example of the hardhearted, softheaded nature of today’s G.O.P. than ... the filibuster to block aid to the long-term unemployed.
What do we know about long-term unemployment in America?
First, it’s still at near-record levels. ... Yet extended unemployment benefits, which went into effect in 2008, have now been allowed to lapse. As a result, few of the long-term unemployed are receiving any kind of support.
Second, if you think the typical long-term unemployed American is one of Those People — nonwhite, poorly educated, etc. — you’re wrong... College graduates ... are actually a bit more likely than others to join the ranks of the long-term unemployed. ...
Third, in a weak job market long-term unemployment tends to be self-perpetuating, because employers in effect discriminate against the jobless. ...
What all of this suggests is that the long-term unemployed are mainly ... ordinary American workers who had the bad luck to lose their jobs ... at a time of extraordinary labor market weakness...
So how can politicians justify cutting off modest financial aid to their unlucky fellow citizens?
Some Republicans justified last week’s filibuster with the tired old argument that we can’t afford to increase the deficit. Actually, Democrats paired the benefits extension with measures to increase tax receipts. But in any case this is a bizarre objection at a time when federal deficits are not just falling, but clearly falling too fast, holding back economic recovery.
For the most part, however, Republicans justify refusal to help the unemployed by asserting that ... people aren’t trying hard enough to find jobs, and that extended benefits are part of the reason..., a fantasy at odds with all the evidence. ...
And this imperviousness to evidence goes along with a stunning lack of compassion. .... Being unemployed is always presented as a choice, as something that only happens to losers who don’t really want to work. ...
The result is that millions of Americans have in effect been written off — rejected by potential employers, abandoned by politicians whose fuzzy-mindedness is matched only by the hardness of their hearts.

Sunday, February 09, 2014

Who Benefits from Benefits?

Chris Dillow:

Who benefits from benefits?: In the "debate" about welfare benefits, there's one point which is underweighted but so obvious that I'm embarrassed to mention it - that some form of welfare is beneficial not just to its recipients, but to capitalists.
Rightists like to point out - correctly - that the burden of taxes doesn't necessarily fall upon those who nominally pay it: corporation tax, for example, is paid by workers and not just capitalists.
But just as there's tax incidence, so there is benefit incidence; the benefits of benefits don't flow merely to their nominal recipients. ...

Wednesday, January 22, 2014

'The Political Economy of Populism'

Paul Krugman:

A Note on the Political Economy of Populism: All indications are that President Obama will make inequality the central theme of his State of the Union address. Assuming he does, he will face two different kinds of sniping. One will come from the usual suspects on the right, shrieking “class warfare”. The other will come from a variety of people, some of them well-intentioned, arguing that while sure, inequality is an issue, the crucial thing now is to get the economy growing and create more jobs; these people will argue that populism is a diversion from the main issue.
Here’s why they’re wrong.
First of all, even on the straight economics inequality and job creation aren’t completely separable issues. ...
Beyond that, there’s the political economy.
It has been painfully obvious, to anyone willing to see (a group that unfortunately doesn’t include a large part of the press corps) that deficit obsession hasn’t really been about deficits — it has been about using deficits as a club with which to smash to welfare state, and hence increase inequality. ...
Conversely, talking about the need to help struggling families is ... a way to shift the focus away from deficit obsession, and pave the way at least for a relaxation of austerity, if not actual stimulus.
And I think we also have to face up to an awkward political reality: moderate populism has a broad popular constituency, Keynesian macroeconomics doesn’t..., the public doesn’t “get” macroeconomics; lines like “American families are having to tighten their belts, so the government should too” still resonate. You could blame Obama for not using the bully pulpit to teach the nation why this is wrong, and I wish he had made more of a stand. Still, the fact is that this is just a hard story to get across...
So if I were Obama, I’d do what he’s apparently doing: focus on inequality, which is a valid and popular issue, and use it indirectly to move macro policy in the right direction too.

To follow up on the previous post, capitalism is the best economic system yet discovered for producing economic growth, but it also concentrates risk and causes people to face hardship through no fault of their own (e.g. a recession that puts someone out of work, someone who shows up for work everyday and does their job well). The solution to this is for either the private sector or the government to provide insurance against these risks -- and market failures mean it is generally the government that must step in. Yes, that means transfers from the winners to the less fortunate, much as those with fire insurance who have good outcomes -- no fire -- find their insurance premiums transferred to those who do have the bad luck to experience a fire. But the risks inherent in the system that makes those at the top so wealthy, and those at the bottom so miserable must be attenuated through government provided insurance. Unemployment insurance is a good example of this, but more social insurance is needed to protect the vulnerable from risks they had no hand in creating (e.g. the financial crisis caused great pain for workers who had nothing at all to do with creating the problems that caused the Great Recession, while those who benefitted from the lead up to the crisis and had a hand in causing it, those who are doing very well now, whine incessantly if they are asked to help to reduce the hardship of the innocent).

'Brookings EITC Proposal Mostly Moves in the Wrong Direction'

As a follow-up to my recent article arguing that a combination of the minimum wage and EITC is the best approach to helping low income households:

Brookings EITC Proposal Mostly Moves in the Wrong Direction, by Shawn Fremstad, CEPR: [Shared via Creative Commons]: Isabel Sawhill and Quentin Karpilow of the Center on Children and Families at the Brookings Institution recently proposed what they call a “no-cost” way to reduce poverty and inequality. The proposal combines an increase in the minimum wage with some fairly radical and mostly unwise changes to the Earned Income Tax Credit.

It certainly makes sense to increase the minimum wage substantially. As economist Arindrajit Dube estimates in a new and very thorough working paper, such an increase would “reduce the number of non-elderly living in poverty by around 4.6 million, or by 6.8 million when longer term effects are accounted for.” It also makes sense to combine a minimum wage with increased social insurance. As Dube notes: “in the presence of [negative] incidence effects [of the EITC on wages] due to increased labor supply, the optimal policy calls for combining tax and transfers like the EITC with a minimum wage.”

At first glance, it may seem like the Brookings proposal follows Dube’s prescription, combining a minimum wage increase with expanded EITC benefits for certain workers, particularly:

  1. young adults (ages 21 to 39) who do not have dependent children and are working at least 1,500 hours a year (around 29 hours a week if working all 52 weeks),
  2. married couples that include two workers as long as the lower-earning spouse works at least 1000 hours a year (just under 20 hours a week if working all 52 weeks), and
  3. certain families with very young children.

At the same time, however, the proposal would cut EITC benefits for many workers in certain groups, including:

  1. those with more than one child,
  2. those with older children, and
  3. childless workers who are over age 39 or work less than 1,500 hours a year.

Although Sawhill and Karpilow aren’t as explicit as they should be about the extent of EITC cuts in their plan, they do acknowledge that it: “prioritizes full-time work over part-time employment, young children over big families, and young single adults over older ones.” It would be helpful for them to be even more transparent and explicitly quantify the distributional effects of their redesign. How many workers would see their EITC benefits cut and by how much, and how many would see increases?

The Sawhill/Karpilow proposal has a number of moving parts, but in the remainder of this post I’m just going to focus on the changes they propose to the childless worker credit. It would be a very good idea to increase the childless worker EITC (in conjunction with increasing the minimum wage and tying it to inflation or some other index). ...

But it would be a very bad idea to make the childless worker EITC, as well as the separate spousal credit Sawhill and Karpilow propose, contingent on working nearly 30 hours a week year-round (or nearly 20 hours a week for spouses). Given how far we are from full employment (current U-6 unemployment is 13.1 percent) and the extent of the decline in labor force participation over the last five years, it makes little sense to redesign the EITC in a way that (theoretically) increases incentives for workers to go from part-time to near-full-time employment, but reduces incentives for going from no employment to at least some employment.

Moreover, it makes little sense to penalize the many part-time workers who are working part-time for reasons that are quite sound and have positive externalities (caring for a family member with a disability or a child, going to school part-time, etc.) or for reasons beyond their control, such as a disability, illness, lack of available full-time work, etc. ...

Sawhill/Karpilow would also change age eligibility for the childless worker EITC (currently ages 25-64) by extending eligibility to workers age 21-24, but eliminating it for those age 40-64. They don’t provide any rationale for this cut, despite the extraordinary inequities it would create. A personal example: when my mother became a "childless worker" in her late 40s after the last of her children left the nest, she completed an A.A. degree with straight A’s, and then went on to work in a series of poorly compensated, dead-end jobs at K-Mart and in home health care, until serious health issues made even half-time work impossible. If the Sawhill/Karpilow proposal had been in place when she was still alive and working in her late 40s and early 50s, she would have lost eligibility for the modest EITC she received, while a 20-something worker doing the same work as her would have a received credit of around $1,600. 

Finally, while “target efficiency” isn't a particularly big concern of mine ... it should be noted that the ... target efficiency of the Sawhill/Karpilow EITC proposal is unclear. They say that the combination of raising the minimum wage and their EITC proposal would lift 3.4 million people out of poverty, but they don’t explain how much of this is due to the EITC proposal by itself. The Dube estimate I noted about suggests that the vast majority of the anti-poverty effect could be due to increasing the minimum wage. And various elements of the Sawhill/Kapilow proposal would cut EITC benefits for workers with below-poverty income..., while increasing them for other workers. 

We should increase the EITC, especially for workers without dependent children, and the minimum wage as a way to reduce poverty and inequality. But the Brookings plan is not the way to do it.

Sunday, January 19, 2014

'What Happens When the Poor Receive a Stipend?'

The benefits of income supplements for the poor:

What Happens When the Poor Receive a Stipend?, by Moises Velasquez-Manoff, Commentary, NY Times: 1996, the Eastern Band of Cherokee Indians in North Carolina’s Great Smoky Mountains opened a casino, Jane Costello, an epidemiologist at Duke University Medical School, saw an opportunity. The tribe elected to distribute a proportion of the profits equally among its 8,000 members. Professor Costello wondered whether the extra money would change psychiatric outcomes among poor Cherokee families. ...
The poorest children tended to have the greatest risk of psychiatric disorders, including emotional and behavioral problems. But just four years after the supplements began, Professor Costello observed marked improvements among those who moved out of poverty. The frequency of behavioral problems declined by 40 percent, nearly reaching the risk of children who had never been poor. Already well-off Cherokee children, on the other hand, showed no improvement. ...
 Minor crimes committed by Cherokee youth declined. On-time high school graduation rates improved. ... The earlier the supplements arrived in a child’s life, the better that child’s mental health in early adulthood. ...
Randall Akee, an economist at the University of California, Los Angeles, and a collaborator of Professor Costello’s, argues that the supplements actually save money in the long run. ... But contrary to the prevailing emphasis on interventions in infancy, Professor Akee’s analysis suggests that even help that comes later — at age 12, in this case — can pay for itself by early adulthood.  ...
[I]f giving poor families with children a little extra cash not only helps them, but also saves society money in the long run, then, says Professor Costello, withholding the help is something other than rational. ...

[There's quite a bit more in the article.]

Monday, January 13, 2014

Paul Krugman: Enemies of the Poor

Will Republicans ever care about the poor?:

Enemies of the Poor, by Paul Krugman, Commentary, NY Times: Suddenly it’s O.K., even mandatory, for politicians with national ambitions to talk about helping the poor. This is easy for Democrats, who can go back to being the party of F.D.R. and L.B.J. It’s much more difficult for Republicans, who are having a hard time shaking their reputation for reverse Robin-Hoodism, for being the party that takes from the poor and gives to the rich.
And the reason that reputation is so hard to shake is that it’s justified. It’s not much of an exaggeration to say that right now Republicans are doing all they can to hurt the poor, and they would have inflicted vast additional harm if they had won the 2012 election. Moreover, G.O.P. harshness toward the less fortunate isn’t just a matter of spite...; it’s deeply rooted in the party’s ideology...
Let’s start with the recent Republican track record.
The most important current policy development in America is the rollout of the Affordable Care Act, a k a Obamacare. Most Republican-controlled states are, however, refusing to implement a key part of the act, the expansion of Medicaid, thereby denying health coverage to almost five million low-income Americans. And the amazing thing is that ... the aid through would cost almost nothing; nearly all the costs ... would be paid by Washington.
Meanwhile, those Republican-controlled states are slashing unemployment benefits, education financing and more. As I said, it’s not much of an exaggeration to say that the G.O.P. is hurting the poor as much as it can.
What would Republicans have done if they had won the White House in 2012? Much more of the same. Bear in mind that every budget the G.O.P. has offered since it took over the House in 2010 involves savage cuts in Medicaid, food stamps and other antipoverty programs. ...
The point is that a party committed to small government and low taxes on the rich is, more or less necessarily, a party committed to hurting, not helping, the poor. ...
Republicans weren’t always like this. In fact, all of our major antipoverty programs — Medicaid, food stamps, the earned-income tax credit — used to have bipartisan support. And maybe someday moderation will return to the G.O.P.
For now, however, Republicans are in a deep sense enemies of America’s poor. And that will remain true no matter how hard the likes of Paul Ryan and Marco Rubio try to convince us otherwise.

Friday, January 10, 2014

Paul Krugman: The War Over Poverty

The changing politics of poverty:

The War Over Poverty, by Paul Krugman, Commentary, NY Times: Fifty years have passed since Lyndon Johnson declared war on poverty. ... For a long time, everyone ... “knew” that the war on poverty had been an abject failure. And they knew why: It was the fault of the poor themselves. But what everyone knew wasn’t true, and the public seems to have caught on.
The narrative went like this: ...poverty ... was basically a social problem — a problem of broken families, crime and a culture of dependence that was only reinforced by government aid. And because this narrative was so widely accepted, bashing the poor was good politics...
Yet this view of poverty, which may have had some truth to it in the 1970s, bears no resemblance to anything that has happened since.
For one thing, the war on poverty has, in fact, achieved quite a lot..., evidence ... points to a big improvement in the lives of America’s poor...
And if progress against poverty has nonetheless been disappointingly slow ... blame rests not with the poor..., the problem of poverty has become part of the broader problem of rising income inequality...
So how should we respond to this reality?
The conservative position, essentially, is that we shouldn’t respond. Conservatives ... treat every beneficiary of a safety-net program as if he or she were “a Cadillac-driving welfare queen.” And why not? After all, for decades their position was a political winner, because middle-class Americans saw “welfare” as something that Those People got but they didn’t.
But that was then. At this point, the rise of the 1 percent at the expense of everyone else is so obvious that it’s no longer possible to shut down any discussion of rising inequality with cries of “class warfare.” Meanwhile, hard times have forced many more Americans to turn to safety-net programs. And as conservatives have responded by defining an ever-growing fraction of the population as morally unworthy “takers” ... they have made themselves look callous and meanspirited. ...
Meanwhile, progressives are on offense. They have decided that inequality is a winning political issue. They see war-on-poverty programs like food stamps, Medicaid, and the earned-income tax credit as success stories... And if these programs enroll a growing number of Americans ... so what?
So guess what: On its 50th birthday, the war on poverty no longer looks like a failure. It looks, instead, like a template for a rising, increasingly confident progressive movement.

Thursday, January 09, 2014

'Why The Republican’s Old Divide-and-Conquer Strategy Is Backfiring'

It's been awhile since we've checked in with Robert Reich:

Why The Republican’s Old Divide-and-Conquer Strategy — Setting Working Class Against the Poor — Is Backfiring, by Robert Reich: For almost forty years Republicans have pursued a divide-and-conquer strategy intended to convince ... the working class that its hard-earned tax dollars were being siphoned off to pay for “welfare queens” ... and other nefarious loafers. The poor were “them” — lazy, dependent on government handouts, and overwhelmingly black — in sharp contrast to “us,” who were working ever harder, proudly independent..., and white.  
It was a cunning strategy designed to split the broad Democratic coalition that had supported the New Deal and Great Society, by using the cleavers of racial prejudice and economic anxiety. It also conveniently fueled resentment of government taxes and spending. 
The strategy also served to distract attention from the real cause of the working class’s shrinking paychecks — corporations that were busily busting unions, outsourcing abroad, and replacing jobs with automated equipment and, subsequently, computers and robotics.  
But the divide-and-conquer strategy is no longer convincing because the dividing line between poor and middle class has all but disappeared. “They” are fast becoming “us.”... Three decades of flattening wages and declining economic security have taken a broader toll..., unexpected poverty has become a real possibility for almost everyone these days. And there’s little margin of safety. ... 
Race is no longer a dividing line, either. ... Most people are now on the same losing side of the divide. ...
Which means Republican opposition to extended unemployment insurance, food stamps, jobs programs, and a higher minimum wage pose a real danger of backfiring on the GOP. ... It’s not hard to imagine a new political coalition of America’s poor and working middle class, bent not only on repairing the nation’s frayed safety nets but also on getting a fair share of the economies’ gains.

Tuesday, December 17, 2013

Of Course the Safety Net Redistributes Income…That’s Why It Works

My latest column:

Of Course the Safety Net Redistributes Income…That’s Why It Works: Many conservatives have attacked social insurance programs such as Social Security and Obamacare because they redistribute income from the rich to the poor, the young to the old, or from makers to takers. But there is nothing unusual about the fact that insurance programs redistribute income among participants. If they didn’t, it wouldn’t be insurance.
Consider, for example, a case you may not think of as insurance at first, risk pooling in financial markets. ...

[Traveling today, will post as I can.]

Wednesday, December 11, 2013

The EITC versus The Minimum Wage

Brad DeLong in 2004:

... I like the EITC. Come the Day of Wrath, my best pleading will be the role I played in 1993 in the Clinton administration in expanding the EITC. But the EITC is a program that uses the IRS to write lots of relatively small checks to tens of millions of relatively poor people who satisfy picky eligibility rules. This is not the IRS's comparative advantage. The IRS's comparative advantage is using random terror to elicit voluntary compliance with the tax code on the part of relatively rich people. The EITC is a good program, but it a costly program to administer, and it is administered imperfectly to say the least.

The minimum wage, on the other hand, is nearly self-enforcing: its administrative costs are nearly nil, for workers (legal workers, at least) have a very strong incentive to drop a dime on bosses who violate it. From a government-administrative and error-rate perspective, it's a very cost-effective program.

The right solution, of course, is balance: use the minimum wage as one part of your program of boosting the incomes of the working poor, and use the EITC as the other part. try not to push either one to the point where its drawbacks (disemployment on the one hand, and administrative error on the other) grow large. Balance things at the margin.

Arin Dube in 2013:

7) The best evidence suggests that minimum wage increases lead to moderate reductions in the poverty rate, especially together with the Earned Income Tax Credit.

  • There are strong theoretical rationales—and empirical confirmation—that minimum wages and EITC are complementary policies when it comes to helping low-income families.
  • A high minimum wage prevents wage reductions that can result from an EITC.
  • Since the EITC is indexed to the CPI, minimum wage indexation will prevent erosion of EITC benefits for minimum wage workers.

They are complements, not substitutes.

Monday, December 09, 2013

Paul Krugman: The Punishment Cure

Letting unemployment benefits expire is bad economics and shows "a complete lack of empathy for the unfortunate":

The Punishment Cure, by Paul Krugman, Commentary, NY Times: Six years have passed since the United States economy entered the Great Recession, four and a half since it officially began to recover, but long-term unemployment remains disastrously high.
And Republicans have a theory about why this is happening. ...: Unemployment insurance, which generally pays eligible workers between 40 and 50 percent of their previous pay, reduces the incentive to search for a new job. As a result, the story goes, workers stay unemployed longer. In particular, it’s claimed that the Emergency Unemployment Compensation program, which lets workers collect benefits beyond the usual limit of 26 weeks, explains why there are four million long-term unemployed workers in America today, up from just one million in 2007.
Correspondingly, the G.O.P. answer to the problem of long-term unemployment is to increase the pain of the long-term unemployed: Cut off their benefits, and they’ll go out and find jobs. How, exactly, will they find jobs when there are three times as many job-seekers as job vacancies? Details, details. ...
The view of most labor economists now is that unemployment benefits have only a modest negative effect on job search — and in today’s economy have no negative effect at all on overall employment. On the contrary, unemployment benefits help create jobs, and ... slashing unemployment benefits — which would have the side effect of reducing incomes and hence consumer spending — would just make the situation worse.
Still, don’t expect prominent Republicans to change their views, except maybe to come up with additional reasons to punish the unemployed. For example, Senator Rand Paul recently cited research suggesting that the long-term unemployed have a hard time re-entering the work force as a reason to, you guessed it, cut off long-term unemployment benefits. You see, those benefits are actually a “disservice” to the unemployed.
The good news, such as it is, is that the White House and Senate Democrats are trying to make an issue of expiring unemployment benefits. The bad news is that they don’t sound willing to make extending benefits a precondition for a budget deal, which means that they aren’t really willing to make a stand.
So the odds, I’m sorry to say, are that the long-term unemployed will be cut off, thanks to a perfect marriage of callousness — a complete lack of empathy for the unfortunate — with bad economics. But then, hasn’t that been the story of just about everything lately?

Wednesday, December 04, 2013

'A Dozen Facts about America’s Struggling Lower-Middle-Class'

Benjamin H. Harris and Melissa S. Kearney at Brookings:

A Dozen Facts about America’s Struggling Lower-Middle-Class, by Benjamin H. Harris and Melissa S. Kearney: This Hamilton Project policy paper provides a dozen facts on struggling lower-middle-class families focusing on two key challenges: food insecurity, and the low return to work for struggling lower-middle-class families who lose tax and transfer benefits as their earnings increase. These facts highlight the critical role of federal tax and transfer programs in providing income support to families struggling to remain out of poverty. ...

Here are the facts they discuss:

  1. More than half of families in the United States earn $60,000 or less per year.
  2. Nearly half of families in the United States live below 250 percent of the federal poverty level.
  3. Struggling lower-middle-class families are almost equally headed by single parents and married couples.
  4. Nearly one out of two families in the struggling lower-middle class is headed by an adult who has attended college.
  5. Nearly one-third of struggling lower-middle-class families rely on income support from a government program.
  6. Roughly 40 percent of children in the struggling lower-middle class experience food insecurity or obesity, or both.
  7. More than one in five children faces food insecurity in thirty-seven states and the District of Columbia.
  8. Nearly 90 percent of Supplemental Nutritional Assistance Program (SNAP) recipients live in a household with at least one child, one disabled individual, or one elderly individual.
  9. America’s tax and transfer system expands the middle class.
  10. Struggling lower-middle-class families depend on an array of tax and transfer benefits.
  11. A low-income, single parent can face a marginal tax rate as high as 95 percent.
  12. The highest marginal tax rates tend to fall on the struggling lower-middle class.

Wednesday, November 27, 2013

'Breadlines Return'

Sending people to food kitchens is not cool, especially with the labor market so far from full recovery and there aren't enough jobs for the unemployed:

Breadlines Return, by Teresa Tritch, NY Times: ...The Times’s Patrick McGeehan described a line snaking down Fulton Street in Brooklyn last week, with people waiting to enter a food pantry run by the Bed-Stuy Campaign Against Hunger. The line was not an anomaly. Demand at all of New York City’s food pantries and soup kitchens has spiked since federal food stamps were cut on Nov. 1. ...
The Great Recession was the worst downturn since the Great Depression.  And yet,... food stamp cuts are occurring even though need is still high and opportunity low. ...
And there are more food-stamp cuts to come. House Republicans have proposed to cut the program by $40 billion over 10 years...; the Senate has proposed a $4 billion reduction. ...
If the current downturn has not mirrored the Great Depression, that’s thanks to safety net programs... Breadlines have, by and large, been replaced by food stamp... Now is not the time to cut back. Now is the time to provide.

Friday, November 22, 2013

'A Universal Income is Not Such a Silly Idea'

Tim Harford argues that "A universal income is not such a silly idea". His argument ends with:

... There is an alternative way to look at all this: an increasing number of economists are beginning to worry that technological change may make large numbers of people completely unemployable. In short, the robots are coming to take our jobs. These concerns have been wrong before, but perhaps this time really is different. If so, we’ll need an economic system that can cope when lots of people have no way to making a living. I wonder if everyone has a basic income in Star Trek.

Tuesday, November 19, 2013

'The Geezers Are Not Alright'

This editorial in the Washington Post really irritated me when I read it, so this response is nice to see:

The Geezers Are Not Alright: The Washington Post editorial board wants to cut Medicare and Social Security. That has been its consistent position as long as I can remember. And what it advocates, always, are cuts in benefits, not costs..., things like a rise in the Medicare age. These are the kind of moves that are considered serious inside the Beltway. And as you might imagine, the Post has gone wild over recent suggestions that Social Security should be expanded, not cut.

But perceived seriousness is not the same as actual seriousness, which depends on the facts. We now know that raising the Medicare age is a truly terrible idea, which would create a lot of hardship while making next to no dent in the budget deficit. And the central premise of the latest editorial — that the elderly are doing fine — just isn’t true.

The Post writes:

The bill’s authors warn of a looming “retirement crisis” because of low savings rates and disappearing private-sector pensions. In fact, the poverty rate among the elderly is 9.1 percent, lower than the national rate of 15 percent — and much lower than the 21.8 percent rate among children.

This suggests that Social Security is doing a good job of fighting poverty as is and that those gains could be preserved in any attempt to trim the program.

Guys, you have to keep up here. It’s well-known that the official poverty measure is quite flawed... — and it’s especially flawed when it comes to the elderly... The Census Supplemental Poverty Measure puts senior poverty at 14.8 percent, only slightly lower than the rate for younger adults.

And some of today’s seniors are still benefiting from traditional defined-benefit retirement plans. In the future, income other than from Social Security will depend almost entirely on defined-contribution plans — basically 401(k)s. And 401(k)s are basically an experiment that failed, except for the already affluent.

Maybe you don’t believe that the failure of defined-contribution plans is a reason to expand the one major defined-benefit plan we have, aka Social Security. But don’t make that argument by claiming that all is well with America’s seniors. The geezers are not alright.

And even if the poverty rate among the elderly is tolerable as it is -- I'm not making that claim, but suppose it is -- the reason why advocates want to increase benefits is the fear that things will get worse in the future. Today's poverty rate doesn't tell us much about the "looming 'retirement crisis.'" Whether or not today's rate is in the tolerable range, should accept more poverty without trying to do something about it? Should we be happy about a large increase in the percentage that are in poverty just because we start from a tolerable figure? And what if today's figure isn't tolerable after all? In any case, this is about the rate of change in poverty among the elderly in the future, not the level now.

Thursday, November 14, 2013

'What are Some of the Biggest Problems with a Guaranteed Annual Income?'

Busy with the conference, so I'll toss this out to you: any comments on this post from Tyler Cowen?:

What are some of the biggest problems with a guaranteed annual income?: Maybe this isn’t the biggest problem, but it’s been my worry as of late.  Must a guaranteed income truly be unconditional?  Might there be circumstances when we would want to pay some individuals more than others?  Many critics for instance worry that a guaranteed income would excessively reduce the incentive to work.  So it might be proposed that the payment be somewhat higher if low income individuals go get a job.  That also will make the system more financially sustainable.  But wait — that’s the Earned Income Tax Credit, albeit with modifications.
Might we also wish to pay more to some individuals with disabilities, perhaps say to help them afford expensive wheelchairs?  Maybe so.  But wait — that’s called disability insurance (modified, again) and it is run through the Social Security Administration.
As long as we are moving toward more cash transfers, why don’t we substitute cash transfers for some or all of Medicare and Medicaid health insurance coverage benefits, especially for lower-value ailments?  But then we are paying more cash to the sick individuals.  That doesn’t have to be a mistake, but it does mean that an initially simple, “dogmatic” payment scheme now has multiplied into a rather complex form of social welfare assistance, contingent on just about every relevant factor one might care to cite.
You can see the issue. ...[continue]...

Friday, November 01, 2013

'Slashing the Food Stamps Program'

From the NY Times editorial page:

Slashing the Food Stamps Program, by Dorothy Samuels: Even as negotiations proceed in Congress over a new farm bill likely to contain a large cut in food stamps, needy Americans who rely on the program are confronting an immediate drop in benefits.
As of today, the boost to the federal food stamps program included in the 2009 Economic Recovery Act expires, abruptly slashing benefit levels that were already inadequate for millions of poor children and their families, as well as impoverished disabled and elderly people, who will now find it significantly harder to afford adequate food.
The callous Republican obsession with eviscerating the program is only partly to blame. Today’s cut is the product of a shabby deal Democrats made in December 2010, which accelerated the sunset of the benefit increase contained in the economic stimulus plan.  Essentially, Congressional Democrats, cajoled by the Obama White House, gambled that they could restore the lost money before the cut became effective — a convenient but unrealistic bet given that Republicans were about to take control of the House. Anti-hunger advocates expressed concern at the time about the bargain and its potential to seriously hurt food-stamp recipients not too far down the road — a worry, unfortunately, that has now become reality. ...

Duncan Black puts it this way:

Happy Food Stamp Cuts Day: We should all congratulate ourselves on our success in kicking the poors. Go team!

Paul Krugman: A War on the Poor

Why do Republicans treat the poor so poorly?:

A War on the Poor, by Paul Krigman, Commentary, NY Times: ...Republican hostility toward the poor and unfortunate has now reached such a fever pitch that the party doesn’t really stand for anything else — and only willfully blind observers can fail to see that reality.
The big question is why. But, first, let’s talk a bit more about what’s eating the right.
I still sometimes see pundits claiming that the Tea Party movement is basically driven by concerns about budget deficits. That’s delusional. Read the founding rant by Rick Santelli of CNBC: There’s nary a mention of deficits. Instead, it’s a tirade against the possibility that the government might help “losers” avoid foreclosure. Or read transcripts from Rush Limbaugh or other right-wing talk radio hosts. There’s not much about fiscal responsibility, but there’s a lot about how the government is rewarding the lazy and undeserving.
Republicans in leadership positions try to modulate their language a bit, but it’s a matter more of tone than substance. They’re still clearly passionate about making sure that the poor and unlucky get as little help as possible, that — as Representative Paul Ryan ... put it — the safety net is becoming “a hammock that lulls able-bodied people to lives of dependency and complacency.” ...
The thing is, it wasn’t always this way. ...
So what’s this all about? One reason..., Daniel Little suggested in a recent essay, is market ideology: If the market is always right, then people who end up poor must deserve to be poor. I’d add that some leading Republicans are, in their minds, acting out adolescent libertarian fantasies. “It’s as if we’re living in an Ayn Rand novel right now,” declared Paul Ryan in 2009.
But there’s also, as Mr. Little says, the stain that won’t go away: race.
In a much-cited recent memo, Democracy Corps ... reported on the results of focus groups held with members of various Republican factions. They found the Republican base “very conscious of being white in a country that is increasingly minority” — and seeing the social safety net both as something that helps Those People, not people like themselves, and binds the rising nonwhite population to the Democratic Party. And, yes, the Medicaid expansion many states are rejecting would disproportionately have helped poor blacks.
So there is indeed a war on the poor, coinciding with and deepening the pain from a troubled economy. And that war is now the central, defining issue of American politics.

Saturday, October 26, 2013

Democrats Will Have to Swallow Entitlement Cuts?

I honestly can't remember if I voted for Obama or Hillary in the primary, but if I voted for Obama, it was a mistake:

Obama's Top Economic Adviser Tells Democrats They'll Have to Swallow Entitlement Cuts, by Joshua Green: This morning, Gene Sperling, director of the White House’s National Economic Council, appeared before a Democratic business group for what was billed as a speech about the economy after the shutdown, followed by a Q&A session. The White House didn’t push this as a newsmaking event, so it didn’t get much billing. But I went anyway, and I was struck by what Sperling had to say, especially about the upcoming budget negotiations that are a product of the deal to reopen the government.
In his usual elliptical and prolix way, Sperling seemed to be laying out the contours of a bargain with Republicans that’s quite a bit different that what most Democrats seem prepared to accept. What stood out to me was how he kept winding back around to the importance of entitlement cuts as part of a deal, as if he were laying the groundwork to blunt liberal anger. Right now, the official Democratic position is that they’ll accept entitlement cuts only in exchange for new revenue—something most Republicans reject. If Sperling mentioned revenue at all, I missed it.
But he dwelt at length—and with some passion—on the need for more stimulus, though he avoided using that dreaded word. He seemed to hint at a budget deal that would trade near-term “investment” (the preferred euphemism for “stimulus’) for long-term entitlement reform. That would be an important shift and one that would certainly upset many Democrats. ...

Tuesday, October 15, 2013

'The GOP Tax'

Paul Krugman:

The GOP Tax: Macroeconomic Advisers has a new report out about the effects of bad fiscal policy since 2010 — that is, since the GOP takeover of the House. ... They say that combined effects of uncertainty in the bond market and cuts in discretionary spending have subtracted 1% from GDP growth. That’s not 1% off GDP — it’s the annualized rate of growth, so that we’re talking about almost 3% of GDP at this point; cumulatively, the losses come to around $700 billion of wasted economic potential. This is in the same ballpark as my own estimates.
And they also estimate that the current unemployment rate is 1.4 points higher than it would have been without those policies (a number consistent with almost 3% lower GDP); so, we’d have unemployment below 6% if not for these people.
Great work all around, guys.

But the master's of the universe -- the wealthy supporters of the GOP and a driving force behind the push for austerity -- are doing great. If they get lower taxes as a result of all this, that's allthat matter, right? Who cares about all the other people who are struggling as a result of cuts to social services, higher unemployment rates, and the like?