Category Archive for: Social Insurance [Return to Main]

Monday, November 23, 2015

James Poterba Interview

James Poterba is interviewed by the Richmond Fed:

... EF: More recently, one of your areas of research has been retirement finance and the investment decisions of workers thinking about their retirement. In recent decades, we've seen a tremendous shift in the private sector from defined benefit retirement programs to defined contribution programs. Was this mainly a response by firms to the tightening of the regulatory environment for defined benefit plans, to changing demand from workers, or to something else?
Poterba: I think it's a bit of everything. A number of factors came together to create an environment in which firms were more comfortable offering defined contribution plans than defined benefit plans. One factor was that when firms began offering defined benefit plans, in World War II and the years following it, the U.S. economy and its population were growing rapidly. The size of the benefit recipient population from these plans relative to the workforce was small. It was also a time when life expectancy for people who were aged 65 was several years less than it is today. Over time, the financial executives at firms came to a greater recognition of the true cost of defined benefit plans.
I also think the fiduciary responsibilities and the financial burdens that were placed on firms under the Employee Retirement Income Security Act of 1974, or ERISA, have discouraged firms from continuing in the defined benefit sector. ERISA corrected a set of imbalances by requiring firms to take more responsibility for the retirement plans they were offering their workers and to fund those plans so that these were not empty promises. ERISA was enacted in the aftermath of some high-profile bankruptcies of major U.S. firms and the discovery that their defined benefit plans were not well-funded, leaving retirees with virtually no pension income.
But ERISA and the growing recognition of the costs of defined benefit plans are probably not the full story. The U.S. labor market has become more dynamic over time, or at least workers think it has, and that has led to fewer workers being well-suited to defined benefit plans. These plans worked very well for workers who had a long career at a single firm. Today, workers may overestimate the degree of dynamism in the labor market. But if they believe it is dynamic, they may place great value on a portable retirement structure that enables them to move from firm to firm and to take their retirement assets with them.
Most workers who are at large firms, firms that have 500 employees or more, have access to defined contribution plans. Unfortunately, we still don't have great coverage at smaller firms, below, say, 50 employees. For workers who will spend a long career at a small firm, the absence of these employer-based plans can make it harder to save for retirement. A key policy priority is pushing the coverage of defined contribution plans further down the firm size distribution. That's hard, because smaller firms are less likely to have the infrastructure in place in their HR departments or to have the spare resources to be able to learn how to establish a defined contribution plan and how to administer it. They are probably also more reluctant to take on the fiduciary burdens and responsibilities that come with offering these plans.
Another concern, within the defined contribution system, is the significant amount of leakage. Money that was originally contributed for retirement may be pulled out before the worker reaches retirement age.
EF: What is causing that? ...
Poterba: Say you've worked for 10 years at a firm that offers a 401(k) plan and you've been contributing all the way along. You decide to leave that firm. In some cases, the firm you are leaving may encourage you to take the money out of their retirement plan because they may not want to have you around as a legacy participant in their plan. ... Sometimes, the worker may choose to move the funds from the prior 401(k) plan to a retirement plan at their new employer, or to an IRA. Those moves keep the funds in the retirement system. But sometimes, the worker just spends the money. When an individual leaves a job, they may experience a spell of unemployment, or they may have health issues. There may be very good reasons for tapping into the 401(k) accumulation. Using the 401(k) system as a source of emergency cash, sort of as the ATM for these crises, diminishes what gets accumulated for retirement. ...

Inadequate social insurance for workers who lose their jobs leads to inadequate retirement savings. So while there may be a "very good reason" for this from an individual's perspective, from a larger social perspective this is a problem connected to our unwillingness to provide adequate social insurance for those who are the unlucky losers to the dynamism inherent in capitalism that propels us forward. Those who benefit so much from the dynamism could and should do more to help those who pay the costs.

Saturday, November 14, 2015

'The Silver Lining of Unemployment Benefits'

"Does making unemployment benefits more generous keep more people out of work? Ioana Marinescu shares her fascinating discovery that by making the job market more relaxed, they actually help match people with the few available job vacancies."

Monday, November 02, 2015

'A Shocking Rise in White Death Rates in Midlife'

Paul Starr writing at The American Prospect:

A Shocking Rise in White Death Rates in Midlife—and What It Says about American Society: Drugs, alcohol, and suicide have taken an unparalleled toll on middle-aged whites, especially those with a high school degree or less.

In a reversal of earlier trends, death rates among white non-Hispanic Americans in midlife increased sharply between 1999 and 2013, according to a new study by economists Anne Case and Angus Deaton, winner last month of the Nobel Prize for economics. The increased deaths were concentrated among those with the least education and resulted largely from drug and alcohol “poisonings,” suicide, and chronic liver diseases and cirrhosis. This midlife mortality reversal had no parallel in any other industrialized society or in other demographic groups in the United States.

Case and Deaton’s analysis, published today in the Proceedings of the National Academy of Sciences, also shows increased rates of illness, chronic pain, and disability among middle-aged whites. The findings have important implications for American politics and public policy, particularly for debates about economic inequality, public health, drug policy, disability insurance, and retirement income. The data also suggest why much of American politics may be taking on an increasingly harsh and desperate quality. ...

Tuesday, October 27, 2015

'A Strategy to Ignore Poverty'

Eduardo Porter:

A Strategy to Ignore Poverty, NY Times: Arizona, where I was born, in July became the first state to cut poor families’ access to welfare assistance to a maximum of 12 months over a lifetime. That’s a fifth of the time allowed under federal law, and means that 5,000 more people will lose their benefits by next June.
This is only the latest tightening of the screws in Arizona. Last year, about 29,000 poor families received benefits under the Temporary Assistance for Needy Families program, 16,000 fewer than in 2005. In 2009, in the middle of the worst economic downturn since the Depression of the 1930s, benefits were cut by 20 percent.
And if Paul Ryan, the Republican lawmaker from Wisconsin who is expected to become speaker of the House, has his way, poor people in many other states can expect similar treatment in the years ahead. ...

Wednesday, October 21, 2015

'Rising Disability Payments: Are Cuts to Workers’ Compensation Part of the Story?'

A summary of a new paper by Nick Buffie and Dean Baker (as they are careful to note, the results are preliminary):

Executive Summary There has been a large increase in the number of workers receiving Social Security Disability Insurance (DI) over the last quarter century. While most of this increase is explained by well - known demographic factors, such as the growing number of women in the workforce and the aging of the baby boomers, there is considerable concern that workers are increasingly choosing to collect DI benefits as an alternative to working. This concern has figured prominently in the debate over plans to maintain full funding for the DI program beyond the projected DI trust fund depletion date in late 2016.1,2

This paper examines the extent to which cuts in state workers’ compensation (WC) benefits may have contributed to the rise in DI awards. To some extent, these programs may be seen as alternative sources of support for workers with job - related injuries. Insofar as injured workers are less able to receive WC benefits, they may be more likely to turn to the DI program.

At the national level, there is a clear correlation between the sharp decline in WC benefits over the last quarter century and the rise in DI benefits. This paper examines whether there could be a causal relationship between the reduction in WC benefits and the rise in DI benefits by examining state - level data.

It finds:

  • In a variety of specifications , there is a strong relationship between the decline in state - level WC beneficiaries and rise in new DI awards. This suggests that people are turning to DI because they are le ss able to collect WC benefits.
  • A test of whether the rise in DI awards by state can be explained by policy changes to the state WC program found some evidence of a relationship. Given the difficulties in capturing the policy changes in the relevant variable, this is strongly suggestive that the rise in DI benefits was in part the result of state - level policy decisions to make WC programs less generous.
  • These estimates suggest that more than one - fifth of the rise in the number of workers receiving DI awards can be explained by cuts to WC programs. These results are preliminary.

We expect to conduct further tests of the relationship between WC and the DI program, but the results in this analysis strongly suggest that cuts in the former have led to increases in the latter. ...

Tuesday, October 20, 2015

'The Myth of Welfare’s Corrupting Influence on the Poor'

Eduardo Porter tries to set the record straight on welfare's influence on behavior:

The Myth of Welfare’s Corrupting Influence on the Poor: ...Few ideas are so deeply ingrained in the American popular imagination as the belief that government aid for poor people will just encourage bad behavior.
The proposition is particularly cherished on the conservative end of the spectrum... But even Franklin Delano Roosevelt, the father of the New Deal, called welfare “a narcotic, a subtle destroyer of the human spirit.” And it was President Bill Clinton, a Democrat, who put an end to “welfare as we know it.” ...
And yet, to a significant degree, it is wrong. Actual experience, from the richest country in the world to some of the poorest places on the planet, suggests that cash assistance can be of enormous help for the poor. And freeing them from what President Ronald Reagan memorably termed the “spider’s web of dependency” — also known as forcing the poor to swim or sink — is not the cure-all....
Abhijit Banerjee ... released a paper with three colleagues last week that carefully assessed the effects of seven cash-transfer programs in Mexico, Morocco, Honduras, Nicaragua, the Philippines and Indonesia. It found “no systematic evidence that cash transfer programs discourage work.” ...
Still, Professor Banerjee observed, in many countries, “we encounter the idea that handouts will make people lazy.”
Professor Banerjee suggests the spread of welfare aversion around the world might be an American confection. “Many governments have economic advisers with degrees from the United States who share the same ideology,” he said. “Ideology is much more pervasive than the facts.”
What is most perplexing is that the United States’ own experience with both welfare and its “reform” does not really support the charges. ...

Monday, October 19, 2015

Paul Krugman: Something Not Rotten in Denmark

The important lessons we can learn from Denmark:

Something Not Rotten in Denmark, by Paul Krugman, Commentary, NY Times: No doubt surprising many of the people watching the Democratic presidential debate, Bernie Sanders cited Denmark as a role model for how to help working people. Hillary Clinton demurred slightly, declaring that “we are not Denmark,” but agreed that Denmark is an inspiring example. ... But how great are the Danes, really? ...
Denmark maintains a welfare state ... that is beyond the wildest dreams of American liberals. ... To pay for these programs, Denmark collects a lot of taxes..., almost half of national income, compared with 25 percent in the United States. Describe these policies to any American conservative, and he would predict ruin. Surely those generous benefits must destroy the incentive to work, while those high taxes drive job creators into hiding or exile.
Strange to say, however, Denmark ... a prosperous nation that does quite well on job creation. ... It’s hard to imagine a better refutation of anti-tax, anti-government economic doctrine...
But ... is everything copacetic in Copenhagen? Actually, no..., its ... recovery from the global financial crisis has been slow and incomplete. ...
What explains this poor recent performance? The answer, mainly, is bad monetary and fiscal policy. Denmark hasn’t adopted the euro, but it manages its currency as if it had... And while the country has faced no market pressure to slash spending ... it has adopted fiscal austerity anyway.
The result is a sharp contrast with neighboring Sweden, which doesn’t shadow the euro (although it has made some mistakes on its own), hasn’t done much austerity, and has seen real G.D.P. per capita rise while Denmark’s falls.
But Denmark’s monetary and fiscal errors don’t say anything about the sustainability of a strong welfare state. In fact, people who denounce things like universal health coverage and subsidized child care tend also to be people who demand higher interest rates and spending cuts in a depressed economy. (Remember all the talk about “debasing” the dollar?) That is, U.S. conservatives actually approve of some Danish policies — but only the ones that have proved to be badly misguided.
So yes, we can learn a lot from Denmark, both its successes and its failures. And let me say that it was both a pleasure and a relief to hear people who might become president talk seriously about how we can learn from the experience of other countries, as opposed to just chanting “U.S.A.! U.S.A.! U.S.A.!”

Thursday, October 08, 2015

'We All Get ‘Free Stuff’ From the Government'

Bryce Covert:

We All Get ‘Free Stuff’ From the Government: ...Jeb Bush got caught sounding like a Mitt Romney rerun recently: He told a mostly white audience that he could attract black voters because his campaign “isn’t one of ... we’ll take care of you with free stuff.” ...
But the shorthand of “free stuff” also takes an incredibly narrow, and therefore misleading, view of government benefits. There’s a whole treasure trove of government handouts that aren’t dispensed through spending, but rather through the tax code. That doesn’t make them any less “free” than a rent voucher or an Electronic Benefit Transfer card. ...
What the government loses to tax expenditures dwarfs spending on welfare programs. ... These facts are obscured for most people. While those who get government benefits through spending programs are often aware — and too frequently ashamed — of that fact, those who get them through the tax system usually don’t realize they’ve received a handout. ...
Jeb Bush ,,, has saved at least $241,000 since 1981 through the mortgage interest deduction. ... Just days before he vowed not to promise voters more free stuff, he put out a tax plan that would give out a whole lot more of it. ...
Every four years, politicians stigmatize “free stuff” like food stamps and welfare while courting votes — and gloss over tax breaks. ... We turn a blind eye to giving out more and more tax breaks but balk at actually spending enough on welfare to truly help the most vulnerable among us.

Wednesday, October 07, 2015

The Welfare State and Economic Growth

Support for the point I was making in my column yesterday:

Rethinking Parameters of the US Welfare State, by Tim Taylor: ...The ... question ... was about whether the welfare state undermines productivity and growth. Garfinkel and Smeeding point out that in the big picture, all the high-income and high-productivity nations of the world have large welfare states; indeed, one can argue that growth rates for many high-income nations were higher in the mid- and late 20th century, when the welfare state was comparatively larger, than back in the 19th century when the welfare state was smaller. Indeed, improved levels of education and health are widely recognized as important components of improved productivity. As they write: "Furthermore, by reducing economic insecurity, social insurance and safety nets make people more willing to take economic risks."

One can make any number of arguments for improving the design of the various aspects of the welfare state, or to point to certain countries where aspects of the welfare state became overbearing or dysfunctional. But from a big-picture viewpoint, it's hard to make the case that a large welfare state has been a drag on growth. Garfinkel and Smeeding write:

"Of course, many other factors besides social welfare spending have changed in the past 150 years. But, as we have seen, welfare state spending is now very large relative to the total production of goods and services in all advanced industrialized nations. If such spending had large adverse effects, it is doubtful that growth rates would have been so large in the last 30 years. The crude historical relationship suggests, at a minimum, no great ill effects and, more likely, a positive effect. The burden of proof clearly lies on the side of those who claim that welfare state programs are strangling productivity and growth. If they are right, they need to explain not only why all rich nations have large welfare states, but more importantly why growth rates have grown in most rich nations as their welfare states have grown larger."

Saturday, September 19, 2015

Unemployment Insurance and Progressive Taxation as Automatic Stabilizers

Some preliminary results from a working paper by Alisdair Mckay and Ricardo Reis:

Optimal Automatic Stabilizers, by Alisdair McKay and Ricardo Reis: 1 Introduction How generous should the unemployment insurance system be? How progressive should the tax system be? These questions have been studied extensively and there are well-known trade-offs between social insurance and incentives. Typically these issues are explored in the context of a stationary economy. These policies, however, also serve as automatic stabilizers that alter the dynamics of the business cycle. The purpose of this paper is to ask how and when aggregate stabilization objectives call for, say, more generous unemployment benefits or a more progressive tax system than would be desirable in a stationary economy. ...
We consider two classic automatic stabilizers: unemployment benefits and progressive taxation. Both of these policies have roles in redistributing income and in providing social insurance. Redistribution affects aggregate demand in our model because households differ in their marginal propensities to consume. Social insurance affects aggregate demand through precautionary savings decisions because markets are incomplete. In addition to unemployment insurance and progressive taxation, we also consider a fiscal rule that makes government spending respond automatically to the state of the economy.
Our focus is on the manner in which the optimal fiscal structure of the economy is altered by aggregate stabilization concerns. Increasing the scope of the automatic stabilizers can lead to welfare gains if they raise equilibrium output when it would otherwise be inefficiently low and vice versa. Therefore, it is not stabilization per se that is the objective but rather eliminating inefficient fluctuations. An important aspect of the model specification is therefore the extent of inefficient business cycle fluctuations. Our model generates inefficient fluctuations because prices are sticky and monetary policy cannot fully eliminate the distortions. We show that in a reasonable calibration, more generous unemployment benefits and more progressive taxation are helpful in reducing these inefficiencies. Simply put, if unemployment is high when there is a negative output gap, a larger unemployment benefit will stimulate aggregate demand when it is inefficiently low thereby raising welfare. Similarly, if idiosyncratic risk is high when there is a negative output gap,1 providing social insurance through more progressive taxation will also increase welfare....

Thursday, September 17, 2015

'The Implications of Growing Gap in Life Span by Income for Entitlement Programs'

On raising the retirement age for Social Security (and other social insurance programs):

New report examines implications of growing gap in life span by income for entitlement programs, National Academy of Sciences, EurekAlert!: As the gap in life expectancy between the highest and lowest earners in the U.S. has widened over time, high earners have disproportionately received larger lifetime benefits from government programs such as Social Security and Medicare, says a new congressionally mandated report from the National Academies of Sciences, Engineering, and Medicine. The report looked at life expectancy patterns among a group of Americans born in 1930 and compared those with projections for a group born in 1960.

"Life expectancy has risen significantly in the U.S. over the past century, and it has long been the case that people who are better-educated and earn higher incomes live longer, on average, than those with less education and lower incomes," said Peter Orszag, co-chair of the committee that carried out the study and wrote the report, and vice chairman of Citigroup in New York City. "What has changed is that the life expectancy gap across different income groups has become so much bigger."

Men born in 1930 in the highest of five earnings levels who survived to age 50 could expect to live to be about 82 years old, on average, while men born in 1960 in the same earnings bracket are projected to live an average of 89 years - a substantial gain. In contrast, life expectancy for men with the lowest earnings was found to decline slightly, from 77 years old on average for men born in 1930 to 76 years old on average for men born in 1960. The projections for women show a similar pattern, in that life expectancy gains have been larger for higher earners than lower earners. ...

"The increasing gap in longevity by socio-economic status is important in itself, but it also means that high earners will increasingly collect some government benefits over more years than will lower earners," said committee co-chair Ronald Lee, professor of demography and economics at the University of California, Berkeley. "Policymakers considering changes to put entitlement programs on firmer financial footing should take into account how such policy changes interact with these differential trends in life expectancy." ...

[They go on to evaluate various changes in eligibility for Social Security and Medicare, and how the changes would impact low and high income households. For example, "Increasing the earliest eligibility age for Social Security from 62 to 64 would not generate significant savings for the Social Security system and would slightly widen the gap in benefits received between high earners and low earners."]

Tuesday, September 08, 2015

'Disability Claims are not Skyrocketing'

From the last of several points on disability claims from Teresa Tritch at the NY Times:

Busting the Myths About Disability Fraud: ... Disability claims are not skyrocketing. Rather, the population most likely to go on disability, those aged 50 to 64, is growing. The potential disability population is also larger now than in the past because today’s older women are more likely to have worked enough to qualify for disability than in earlier generations. In any event, demographic pressures have already begun to subside. Adjusted for demographic factors, the share of workers on disability has gone from slightly below 4 percent in 2000 to slightly above 4 percent in 2014.
The solution to fraud in the disability system is not to make it more difficult to qualify for disability or to question the usefulness of the system itself. The United States already has stricter eligibility requirements and stingier benefits than in almost all other advanced economies, according to the Organization for Economic Cooperation and Development.
The solution to fraud is to prevent and detect it. So what has Congress done? It has refused to give the Social Security Administration the money it needs to keep up with fraud detection and maintain customer service. Since 2010, the agency’s resources have declined in real terms, even as claims have increased due to the aging of the population. ...

Saturday, August 22, 2015

'The Voluntarism Fantasy'

This is part of the introduction to an essay by Mike Konczal on how to "insure people against the hardships of life..., accident, illness, old age, and loss of a job." Should we rely mostly upon government social insurance programs such as Medicare and Social Security, or would a system that relies upon private charity be better? History provides a very clear answer:

The Voluntarism Fantasy: 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. ...
The state does many things, but this essay will focus specifically on its role in providing social insurance against the risks we face. Specifically, we’ll look at what the progressive economist and actuary I.M. Rubinow described in 1934 as the Four Horsemen of the Apocalypse: “accident, illness, old age, loss of a job. These are the four horsemen that ride roughshod over lives and fortunes of millions of wage workers of every modern industrial community.” These were the same evils that Truman singled out in his speech. And these are the ills that Social Security, Medicare, Medicaid, food assistance, and our other public systems of social insurance set out to combat in the New Deal and Great Society.
Over the past 30 years the public role in social insurance has taken a backseat to the idea that private institutions will expand to cover these risks. Yet our current system of workplace private insurance is rapidly falling apart. In its wake, we’ll need to make a choice between an expanded role for the state or a fantasy of voluntary protection instead. We need to understand why this voluntary system didn’t work in the first place to make the case for the state’s role in fighting the Four Horsemen. ...

Monday, August 17, 2015

Paul Krugman: Republicans Against Retirement

Why do Republicans want to get rid of Social Security?:

Republicans Against Retirement, by Paul Krugman, Commentary, NY Times: Something strange is happening in the Republican primary — something strange, that is, besides the Trump phenomenon. For some reason, just about all the leading candidates other than The Donald have taken a deeply unpopular position, a known political loser, on a major domestic policy issue. And it’s interesting to ask why.
The issue in question is the future of Social Security... The retirement program is, of course, both extremely popular and a long-term target of conservatives, who want to kill it precisely because its popularity helps legitimize government action in general. ...
What’s puzzling about the renewed Republican assault on Social Security is that it looks like bad politics as well as bad policy. Americans love Social Security, so why aren’t the candidates at least pretending to share that sentiment?
The answer, I’d suggest, is that it’s all about the big money.
Wealthy individuals have long played a disproportionate role in politics, but we’ve never seen anything like what’s happening now: domination of campaign finance, especially on the Republican side, by a tiny group of immensely wealthy donors. Indeed, more than half the funds raised by Republican candidates through June came from just 130 families.
And while most Americans love Social Security, the wealthy don’t. ... By a very wide margin, ordinary Americans want to see Social Security expanded. But by an even wider margin, Americans in the top 1 percent want to see it cut. And guess whose preferences are prevailing among Republican candidates.
You often see political analyses pointing out, rightly, that voting in actual primaries is preceded by an “invisible primary” in which candidates compete for the support of crucial elites. But who are these elites? In the past, it might have been members of the political establishment and other opinion leaders. But what the new attack on Social Security tells us is that the rules have changed. Nowadays, at least on the Republican side, the invisible primary has been reduced to a stark competition for the affections and, of course, the money of a few dozen plutocrats.
What this means, in turn, is that the eventual Republican nominee — assuming that it’s not Mr. Trump —will be committed not just to a renewed attack on Social Security but to a broader plutocratic agenda. Whatever the rhetoric, the GOP is on track to nominate someone who has won over the big money by promising government by the 1 percent, for the 1 percent.

Monday, July 27, 2015

Paul Krugman: Zombies Against Medicare

Despite what you might hear from conservatives, Medicare is "eminently sustainable":

Zombies Against Medicare, by Paul Krugman, Commentary, NY Times: Medicare turns 50 this week, and it has been a very good half-century. Before the program went into effect, Ronald Reagan warned that it would destroy American freedom; it didn’t, as far as anyone can tell. What it did do was provide a huge improvement in financial security for seniors and their families, and in many cases it has literally been a lifesaver as well.
But the right has never abandoned its dream of killing the program. So it’s really no surprise that Jeb Bush recently declared that while he wants to let those already on Medicare keep their benefits, “We need to figure out a way to phase out this program for others.” ...
The ... reason conservatives want to do away with Medicare has always been political: It’s the very idea of the government providing a universal safety net that they hate, and they hate it even more when such programs are successful. But ... they usually shy away from making their real case...
What Medicare’s would-be killers usually argue, instead, is that the program as we know it is unaffordable — that we must destroy the system in order to save it... And the new system they usually advocate is ... vouchers that can be applied to the purchase of private insurance.
The underlying premise here is that Medicare as we know it is incapable of controlling costs, that only the only way to keep health care affordable going forward is to rely on the magic of privatization.
Now, this was always a dubious claim. .... In fact, Medicare costs per beneficiary have consistently grown more slowly than private insurance premiums... Indeed, Medicare spending keeps coming in ever further below expectations...
Right now is, in other words, a very odd time to be going on about the impossibility of preserving Medicare, a program whose finances will be strained by an aging population but no longer look disastrous. One can only guess that Mr. Bush is unaware of all this, that he’s living inside the conservative information bubble, whose impervious shield blocks all positive news about health reform.
Meanwhile, what the rest of us need to know is that Medicare at 50 still looks very good. It needs to keep working on costs, it will need some additional resources, but it looks eminently sustainable. The only real threat it faces is that of attack by right-wing zombies.

Monday, July 13, 2015

Paul Krugman: The Laziness Dogma

The economy is no longer providing "good jobs to ordinary workers". Jeb Bush thinks that means workers are lazy:

The Laziness Dogma, by Paul Krugman, Commentary, NY Times: Americans work longer hours than their counterparts in just about every other wealthy country... Not surprisingly, work-life balance is a big problem for many people.
But Jeb Bush — who is still attempting to justify his ludicrous claim that he can double our rate of economic growth — says that Americans “need to work longer hours and through their productivity gain more income for their families.”
Mr. Bush’s aides have tried to spin away his remark... It’s obvious from the context, however, that ... he was talking about ... the “nation of takers” dogma... — the insistence that a large number of Americans, white as well as black, are choosing not to work, because they can live lives of leisure thanks to government programs. ...
Where does Jeb Bush fit into this story? Well before his “longer hours” gaffe, he had professed himself a great admirer of the work of Charles Murray, a conservative social analyst most famous for his 1994 book “The Bell Curve,” which claimed that blacks are genetically inferior to whites. What Mr. Bush seems to admire most, however, is a more recent book, “Coming Apart,” which notes that over the past few decades working-class white families have been changing in much the same way that African-American families changed in the 1950s and 1960s, with declining rates of marriage and labor force participation.
Some of us look at these changes and see them as consequences of an economy that no longer offers good jobs to ordinary workers. This happened to African-Americans first, as blue-collar jobs disappeared from inner cities, but has now become a much wider phenomenon thanks to soaring income inequality. Mr. Murray, however, sees the changes as the consequence of a mysterious decline in traditional values, enabled by government programs which mean that men no longer “need to work to survive.” And Mr. Bush presumably shares that view. ...
There’s now an effective consensus among Democrats ... that workers need more help... Republicans, however, believe that American workers just aren’t trying hard enough..., and that the way to change that is to strip away the safety net while cutting taxes on wealthy “job creators.”
And while Jeb Bush may sometimes sound like a moderate, he’s very much in line with the party consensus. If he makes it to the White House, the laziness dogma will rule public policy.

Saturday, July 11, 2015

'Jeb and the Nation of Takers'

Paul Krugman:

Jeb and the Nation of Takers: Maybe we were unfair to Mitt Romney; Jeb “people should work longer hours” Bush is making him look like a model of empathy for the less fortunate. ...
But I think it’s also important to understand where this is coming from. Partly it’s Bush trying to defend his foolish 4 percent growth claim; but it’s also, I’m almost certain, coming out of the “nation of takers” dogma that completely dominates America’s right wing.
At my adventure in Las Vegas, one of the questions posed by the moderator was, if I remember it correctly, “What would you do about America’s growing underclass living off welfare?” When I said that the premise was wrong, that this isn’t actually happening, there was general incredulity — this is part of what the right knows is happening. ...
As I asked a few months ago, where are these welfare programs people are supposedly living off? TANF is tiny;... overall spending on “income security” has shown no trend at all as a share of GDP, with all the supposed growth in means-tested programs coming from Medicaid...
But isn’t there an epidemic of people declaring themselves disabled? Actually, no..., if you look at age-adjusted disability rates, they have been flat or even declining...
But none of this will, of course, make any dent in the right-wing narrative: they just know that the rising number of bums on welfare is a problem, even though there basically isn’t any welfare and there are no more bums than there ever were.

Friday, July 10, 2015

'Unemployment Benefits and Job Match Quality'

From Vox EU:

Unemployment benefits and job match quality, by Arash Nekoei and Andrea Weber: The generosity of unemployment insurance is often cited as a reason for long spells of joblessness. But this view neglects other important, and potentially positive, economic aspects of such programs. Using Austrian data, this column presents evidence that unemployment insurance has a positive effect on the quality of jobs that recipients find. This can in turn have a positive effect on future tax revenues, and has implications for the debate on optimal insurance generosity. ...

Sunday, July 05, 2015

'De-Industrialisation, 'New Speenhamland' and Neo-Liberalism'

Via Vox EU:

De-industrialisation, ‘new Speenhamland’ and neo-liberalism, by Jim Tomlinson: In the run-up to the recent general election, 65 Social Policy professors wrote to the Guardian in the following terms:
"Now the majority of children and working-age adults in poverty live in working, not workless, households. In other words – and ironically in view of the coalition’s rhetoric – many of those forced to claim the working-age benefits targeted for further cuts are not what the prime minister calls ‘shirkers’ but, in fact, ‘hard working families’" (5th May).
Plainly, the authors were concerned to make an immediate political point about the government’s austerity policies. But the sentences cited above, I suggest, indicate a profound, long-term shift in the social security system and beneath that, a shift of the British economy.
To indicate the significance of this shift we need to go back to two key moments in Britain’s modern history. First is 1795, when the Speenhamland system was introduced in a parish of that name near Newbury in the South of England. Under this system, wages deemed to be below those sufficient for subsistence were subsidized through the Poor Law out of taxes (local poor rates). This system was not actually new, nor did it become universal, but it has been widely recognized as symbolizing the rejection of a crucial principle of liberal political economy (Polanyi 1947). The principle is that wages should be determined in a market, and should not be subsidized out of the public purse. Hostility to Speenhamland was widespread amongst the governing class of the time and especially amongst political economists, who argued that such a system created no incentives for the workers to maximize their wages, nor for employers to pay what was affordable to them. These perverse consequences were held-up as the typical result of well-intentioned but misguided intervention in the labor market. Eventually, at another key moment, under the Poor Law Amendment Act of 1834, such subsidies were outlawed, and liberal political economy emerged triumphant.
Another component of this political economy was the assumption that wages would not need to be subsidized to provide adequate wages; that waged work would be an effective route out of poverty. Of course, this principle was breached at the margins by such mechanisms as Wages Boards (later Councils) which imposed minimum pay on certain sectors of the economy. But here, of course, there was no state subsidy; the state just insisted that employers pay the minimum wage.  
The classic mid-20th century Beveridge analysis of the sources of poverty suggested the problem lay fundamentally in ‘interruption to earnings’ (by unemployment, sickness, or age) along with large numbers of children, the latter to be addressed by ‘Family Allowances’ (Cutler et al 1987). While this analysis always misrepresented the labor market, not least in its barely-qualified notion of the ‘male-breadwinner household’, its fundamental idea that normally paid work would provide a route out of poverty has underpinned most modern understandings of how society works down to the present day.
But as the social policy professors’ letter indicates, we have come a long way from a Beveridgean world. My argument is that structural changes in the labor market have brought about profound changes in the social security system. What has changed in the period of de-industrialization has been the numbers earning poverty wages, and being supported by in-work benefits. Effectively we have moved towards a huge ‘new Speenhamland’ system of ‘outdoor relief’ of the employed; or, viewed differently, large subsidies to employers, which has mitigated, but not cured the problem of poverty-level wages (Farnsworth 2012). ...

Friday, June 26, 2015

'Most of America's Poor Have Jobs'

I want to highlight this article in today's links:

Most of America's poor have jobs, study finds, EurekAlert!: The majority of the United States' poor aren't sitting on street corners. They're employed at low-paying jobs, struggling to support themselves and a family.
In the past, differing definitions of employment and poverty prevented researchers from agreeing on who and how many constitute the "working poor."
But a new study by sociologists at BYU, Cornell and LSU provides a rigorous new estimate. Their work suggests about 10 percent of working households are poor. Additionally, households led by women, minorities or individuals with low education are more likely to be poor, but employed. ...
BYU professor Scott Sanders says the findings dispel the notion that most impoverished Americans don't work so they can rely on government handouts.
"The toxic idea is if we clump all those people together and treat them as the same people, then we don't solve the real problem that the majority of people in poverty are working, trying to improve their lives, and we treat them all as deadbeats,"...
"It's been the push, that if we can get people working, then they'll get out of poverty," Sanders said. "But we have millions of Americans working, playing by the rules, and they're still trapped in poverty."

Friday, June 19, 2015

'Shared Security, Shared Growth'

The last paragraph of a long essay by Nick Hanauer & David Rolf on Shared Security, Shared Growth:

... We must do more than just offer voters a new economic theory—we must draw a sharp contrast with conservatives by proposing bold new policies predicated on the economic primacy of the middle class. The Shared Security System is one such proposal. But more than just demonstrating an innovative solution to providing economic security that is adapted to the sharing economy, a bold new proposal like the Shared Security System would demonstrate progressives’ unwavering and unequivocal commitment to the middle class—to the proposition that growth and prosperity come not from tax cuts for the rich, but from inclusive policies focused on creating a secure middle class. By establishing our twenty-first-century Shared Security System, we will usher in a new era of middle-class economic security, and by so doing also provide American businesses with the economic stability and certainty that they demand.

Thursday, June 18, 2015

Blow Up the Tax Code and Start Over???

Here we go again with the flat tax proposals. This time it's Rand Paul:

Blow Up the Tax Code and Start Over, by Rand Paul: Some of my fellow Republican candidates for the presidency have proposed plans to fix the tax system. These proposals are a step in the right direction, but the tax code has grown so corrupt, complicated, intrusive and antigrowth that I’ve concluded the system isn’t fixable.
So on Thursday I am announcing an over $2 trillion tax cut that would repeal the entire IRS tax code—more than 70,000 pages—and replace it with a low, broad-based tax of 14.5% on individuals and businesses. I would eliminate nearly every special-interest loophole. The plan also eliminates the payroll tax on workers and several federal taxes outright, including gift and estate taxes, telephone taxes, and all duties and tariffs. I call this “The Fair and Flat Tax.” ...

He might call it that, but even he admits the rich will pay a lower rate:

The left will argue that the plan is a tax cut for the wealthy. But most of the loopholes in the tax code were designed by the rich and politically connected. Though the rich will pay a lower rate along with everyone else, they won’t have special provisions to avoid paying lower than 14.5%.

Why not just get rid of the special provisions? Why is a flat tax more equitable than taxes based upon ability to pay (i.e. a progressive structure)?

And, of course, this won't provide enough revenue to fund government. How does he solve this? With two pieces of magic. First, magic budget cuts that he leaves unspecified (because proposing what it would actually take to close the budget gap would require severe cuts to social programs that people want to retain), and second, magic economic growth.

On the budget cuts, we get: 

my plan would actually reduce the national debt by trillions of dollars over time when combined with my package of spending cuts.

That's it. Somehow, the spending cuts will magically occur (and since we are imagining, guess who they would fall on?). But the biggest magic is the effect on the economy. It's an "economic steroid injection"!!!:

As a senator, I have proposed balanced budgets and I pledge to balance the budget as president.
Here’s why this plan would balance the budget: We asked the experts at the nonpartisan Tax Foundation to estimate what this plan would mean for jobs, and whether we are raising enough money to fund the government. The analysis is positive news: The plan is an economic steroid injection. Because the Fair and Flat Tax rewards work, saving, investment and small business creation, the Tax Foundation estimates that in 10 years it will increase gross domestic product by about 10%, and create at least 1.4 million new jobs.
And because the best way to balance the budget and pay down government debt is to put Americans back to work, my plan would actually reduce the national debt by trillions of dollars over time when combined with my package of spending cuts.

I bet it would almost be as good for the economy as the Bush tax cuts. Oh wait...

Thursday, May 14, 2015

'Defend Workers and the Environment Before Voting Fast Track'

Jeff Sachs weighs in on the TPP, TTIP, and TPA:

Defend Workers and the Environment Before Voting Fast Track: President Barack Obama is making a full-court press for two new international business agreements, one with Asian-Pacific countries known as Trans-Pacific Partnership (TPP) and the other with European countries known as the Trans-Atlantic Trade and Investment Partnership (TTIP). To secure these, he is calling on Congress to pass Trade Promotion Authority (TPA), also known as "fast track," so that when TPP and TTIP come up for a Congressional vote, they can only be voted up or down, without amendments. ...
The president portrays TPP and TTIP as part of an overall program of "middle-class economics" in which "everybody gets a fair shot, everyone does his fair share, and everybody plays by the same set of rules." That means "making sure that everybody has got a good education," "women are getting paid the same as men for doing the same work," "making sure that folks have to have sick leave and family leave," and "increasing the minimum wage across the country." It means pushing for investments in infrastructure and faster Internet.
The problem, however, is that the president has not succeeded in getting any of those middle-class policies in place. ...
If the U.S. were a fairer society, in which Obama's vision of everybody getting a fair shot truly applied, then TPP and TTIP would be much easier calls. The losers from trade and offshoring would reliably get help from the winners; workers hit by the agreements would have a clear path to new skills, re-training, family support, adjustment assistance, a higher minimum wage, and all of the other protections that the president rightly seeks but can't secure. Yet America today is not that kind of society. The TPP and TTIP would hand another gift to the multinational companies that are lobbying so hard for the two agreements without providing real protections for workers (and for the environment as well). ...
Obama and the Republicans in Congress have not made the case to American workers that trade policies under TPP and TTIP will be part of a fair, middle-class, and environmentally sustainable economy.

Friday, May 08, 2015

'Childhood Medicaid Coverage Improves Adult Earning and Health'

I highlighted the second article below, and many others reaching similar conclusions, in my last column:

Childhood Medicaid Coverage Improves Adult Earning and Health, NBER Digest: Medicaid today covers more Americans than any other public health insurance program. Introduced in 1965, its coverage was expanded substantially, particularly to low-income children, during the 1980s and the early 1990s.
Throughout Medicaid's history, there has been debate over whether the program improves health outcomes. Two new NBER studies exploit variation in children's eligibility for Medicaid, across birth cohorts and across states with different Medicaid programs, along with rich longitudinal data on health care utilization and earnings, to estimate the long-run effects of Medicaid eligibility on health, earnings, and transfer program participation.
In Childhood Medicaid Coverage and Later Life Health Care Utilization (NBER Working Paper No. 20929), Laura R. Wherry, Sarah Miller, Robert Kaestner, and Bruce D. Meyer find that among individuals who grew up in low-income families, rates of hospitalizations and emergency department visits in adulthood are negatively related to the number of years of Medicaid eligibility in childhood. The authors exploit the fact that one of the substantial expansions of Medicaid eligibility applied only to children who were born after September 30, 1983. This resulted in a large discontinuity in the lifetime years of Medicaid eligibility for children born before and after this birthdate cutoff. Children in families with incomes between 75 and 100 percent of the poverty line experienced about 4.5 more years of Medicaid eligibility if they were born just after the September 1983 cutoff than if they were born just before, with the gain occurring between the ages of 8 and 14. The authors compare children who they estimate were in low-income families, and otherwise similar circumstances, who were born just before or just after this date, to determine how the number of years of childhood Medicaid eligibility is related to health in early adulthood. Their finding of reduced health care utilization among adults who had more years of childhood Medicaid eligibility is concentrated among African Americans, those with chronic illness conditions, and those living in low-income zip codes. The authors calculate that reduced health care utilization during one year in adulthood offsets between 3 and 5 percent of the costs of extending Medicaid coverage to a child.
In Medicaid as an Investment in Children: What is the Long-Term Impact on Tax Receipts? (NBER Working Paper No. 20835), David W. Brown, Amanda E. Kowalski, and Ithai Z. Lurie conclude that each additional year of childhood Medicaid eligibility increases cumulative federal tax payments by age 28 by $247 for women, and $127 for men. Their empirical strategy for evaluating the impact of Medicaid relies on variation in program eligibility during childhood that is associated with both birth cohort and state of residence. The authors study longitudinal data on actual tax payments until individuals are in their late 20s, and they extrapolate this information to make projections for these individuals at older ages. When they compare the incremental discounted value of lifetime tax payments with the cost of additional Medicaid coverage, they conclude that "the government will recoup 56 cents of each dollar spent on childhood Medicaid by the time these children reach age 60." This calculation is based on federal tax receipts alone, and does not consider state tax receipts or potential reductions in the use of transfer payments in adulthood.
Both studies use large databases of administrative records to analyze the long-term effects of Medicaid. The first study measures health utilization using the Healthcare Cost and Utilization Project (HCUP) State Inpatient Databases for Arizona, Iowa, New York, Oregon, and Wisconsin in 1999, and those states plus Maryland and New Jersey in 2009. State hospital discharge data were also available from Texas and California. Data on all outpatient emergency department visits were available for six states in 2009. The second study examines data on federal tax payments and constructs longitudinal earnings histories for individuals who were born between 1981 and 1984. It also analyzes administrative records on Medicaid eligibility of children in this cohort.

Tuesday, May 05, 2015

Supply-Side Social Insurance

I have a new column:

Supply-Side Social Insurance: David Brooks’ claim that “the federal government spent nearly $14,000 per poor person” in 2013 and his claim that “over the last 30 years the poverty rate has scarcely changed” have both been thoroughly debunked. The responses show very clearly that spending is nowhere near as large as Brooks claims, and that using a measure of poverty that overcomes some of the problems with the standard measure shows a decline in the poverty rate, though the decline has been slower than we’d prefer. ...
Even if the number had been calculated correctly, it would overstate the true cost of social insurance programs due to the failure to consider “dynamic effects.” That is, these programs don’t just provide income to struggling households in times of need, income that can have a valuable stimulative effect during economic downturns; social insurance programs are also an investment in our future. ...

Not sure why "Doesn't Work" was added to the title -- my point is that it does, if only Republicans would support it.

Tuesday, April 28, 2015

Why Trade Deals Don't Get More Public Support

At MoneyWatch:

Why trade deals don't get more public support, by Mark Thoma: Although President Obama supports the Trans-Pacific Partnership (TPP) trade agreement, he's running into resistance from many progressives. Why are they opposed to a deal that negotiators have worked on for years, includes the U.S. and 11 Pacific Rim nations (but not yet China) and accounts for 40 percent of the global economy? ...

Update: See also Americans Get Free Trade's Dark Side - Noah Smith.

Tuesday, March 31, 2015

'Generous Welfare Benefits Make People More Likely To Want to Work, Not Less'

Not so sure this is conclusive -- it seems like the survey question could have been sharpened:

Generous welfare benefits make people more likely to want to work, not less: Survey responses from 19,000 people in 18 European countries, including the UK, showed that "the notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support."
Sociologists Dr Kjetil van der Wel and Dr Knut Halvorsen examined responses to the statement 'I would enjoy having a paid job even if I did not need the money' put to the interviewees for the European Social Survey in 2010.
In a paper published in the journal Work, employment and society they compare this response with the amount the country spent on welfare benefits and employment schemes, while taking into account the population differences between states.
The researchers, of Oslo and Akershus University College, Norway, found that the more a country paid to the unemployed or sick, and invested in employment schemes, the more its likely people were likely to agree with the statement, whether employed or not. ...
The researchers also found that government programmes that intervene in the labour market to help the unemployed find work made people in general more likely to agree that they wanted work even if they didn't need the money. In the more active countries around 80% agreed with the statement and in the least around 45%. ...
"This article concludes that there are few signs that groups with traditionally weaker bonds to the labour market are less motivated to work if they live in generous and activating welfare states.
"The notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support.
"On the contrary, employment commitment was much higher in all the studied groups in bigger welfare states. ..."

Thursday, March 26, 2015

Social Insurance Makes America More Entrepreneurial

I've made this point several times myself, i.e. that social insurance can promote entrepreneurship, but it's worth making again:

Welfare Makes America More Entrepreneurial: ... Pundits and researchers often note the negative correlation between government spending and entrepreneurship, both within the U.S. and internationally, and conclude that growth requires trimming social welfare programs. Jim Manzi of the National Review, for example, a thoughtful commenter on economic policy, wrote last year that, “we must accept some amount of social dislocation in return for innovation.” But correlations can be misleading. A series of more recent studies challenge the view that larger or more activist government necessarily threatens entrepreneurship. In fact, that may get the relationship precisely backwards.
Entrepreneurs are actually more likely than other Americans to receive public benefits, after accounting for income, as Harvard Business School’s Gareth Olds has documented. And in many cases, expanding benefit programs helps spur new business creation. ...
Take food stamps. ... It seems that expanding the availability of food stamps increased business formation by making it less risky for entrepreneurs to strike out on their own. Simply knowing that they could fall back on food stamps if their venture failed was enough to make them more likely to take risks.
Food stamps are not an isolated case. ...

The mechanism in each case is the same: publicly funded insurance lowers the risk of starting a business, since entrepreneurs needn’t fear financial ruin. ...

Monday, March 23, 2015

'Congressional Budget Plans Get Two-Thirds of Cuts From Programs for People With Low or Moderate Incomes'

The true goal of Republican's "deficit fetishism":

Congressional Budget Plans Get Two-Thirds of Cuts From Programs for People With Low or Moderate Incomes, by Richard Kogan and Isaac Shapiro, CBPP: The budgets adopted on March 19 by the House Budget Committee and the Senate Budget Committee each cut more than $3 trillion over ten years (2016-2025) from programs that serve people of limited means. These deep reductions amount to 69 percent of the cuts to non-defense spending in both the House and Senate plans.
Each budget plan derives more than two-thirds of its non-defense budget cuts from programs for people with low or modest incomes even though these programs constitute less than one-quarter of federal program costs. Moreover, spending on these programs is already scheduled to decline as a share of the economy between now and 2025.[1]
The bipartisan deficit reduction plan that Alan Simpson and Erskine Bowles (co-chairs of the National Commission on Federal Policy) issued in 2010 adhered to the basic principle that deficit reduction should not increase poverty or widen inequality. The new Congressional plans chart a radically different course, imposing their most severe cuts on people on the lower rungs of the economic ladder. ...

Friday, March 20, 2015

Paul Krugman: Trillion Dollar Fraudsters

Why do Republicans use "magic asterisks" in their budget proposals?:

Trillion Dollar Fraudsters, by Paul Krugman, Commentary, NY Times: By now it’s a Republican Party tradition: Every year the party produces a budget that allegedly slashes deficits, but which turns out to contain a trillion-dollar “magic asterisk” — a line that promises huge spending cuts and/or revenue increases, but without explaining where the money is supposed to come from.
But the just-released budgets from the House and Senate majorities break new ground. Each contains not one but two trillion-dollar magic asterisks: one on spending, one on revenue. And that’s actually an understatement. If either budget were to become law, it would leave the federal government several trillion dollars deeper in debt than claimed, and that’s just in the first decade. ...
The modern G.O.P.’s raw fiscal dishonesty is something new in American politics... And the question we should ask is why.
One answer you sometimes hear is that what Republicans really believe is that tax cuts for the rich would generate a huge boom and a surge in revenue, but they’re afraid that the public won’t find such claims credible. So magic asterisks are really stand-ins for their belief in the magic of supply-side economics, a belief that remains intact even though proponents in that doctrine have been wrong about everything for decades.
But I’m partial to a more cynical explanation. Think about what these budgets would do if you ignore the mysterious trillions in unspecified spending cuts and revenue enhancements. What you’re left with is huge transfers of income from the poor and the working class, who would see severe benefit cuts, to the rich, who would see big tax cuts. And the simplest way to understand these budgets is surely to suppose that they are intended to do what they would, in fact, actually do: make the rich richer and ordinary families poorer.
But this is, of course, not a policy direction the public would support... So the budgets must be sold as courageous efforts to eliminate deficits and pay down debt — which means that they must include trillions in imaginary, unexplained savings.
Does this mean that all those politicians declaiming about the evils of budget deficits and their determination to end the scourge of debt were never sincere? Yes, it does.
Look, I know that it’s hard to keep up the outrage after so many years of fiscal fraudulence. But please try. We’re looking at an enormous, destructive con job, and you should be very, very angry.

Thursday, March 12, 2015

'The Truth About Entitlements'

Projections of budget problems in the future are about health care costs, and there is improvement on that front:

The Truth About Entitlements, by Paul Krugman: As part of another project, I was looking at CBO historical budget data, and realized that you can summarize a lot about all those much-denounced “entitlements” with this figure:

Credit: Congressional Budget Office

Here, income security is mainly EITC, food stamps, and unemployment benefits, plus a few other means-tested aid programs. Health is all major programs — Medicare, Medicaid/CHIP, and at the very end the exchange subsidies.
What this chart tells you right away:
1. The “nation of takers” stuff is deeply misleading. Until the economic crisis, income security had no trend at all. ...
2. When people claimed that spending was exploding under Obama, the only thing actually happening was a surge in income-support programs at a time of genuine distress. People smirked knowingly and declared that everyone knew that the bump in spending would become permanent; it didn’t.
3. If there is a long-run spending problem, it’s overwhelmingly about health care. And we have lately been making remarkable progress on that front.

More on the same topic from the CBPP:

Low-Income Programs Not Driving Nation’s Long-Term Fiscal Problem, by Robert Greenstein, Isaac Shapiro, and Richard Kogan: Low-income programs are not driving the nation’s long-term fiscal problems, contrary to the impression that a narrow look at federal spending during the Great Recession and the years that immediately followed might leave. Lawmakers should bear this in mind as they consider proposals that may emerge in coming weeks for deep cuts in this part of the budget.

Figure 1

Low-income program spending grew significantly between 2007 and 2010 in response to the severe economic downturn, helping to mitigate its worst effects. Since peaking in 2010 and 2011, federal spending on low-income programs other than health care has fallen considerably and will continue to fall as a percent of gross domestic product (GDP) as the economy more fully recovers. By 2018, it will — based on Congressional Budget Office estimates — drop below its average over the past 40 years, (from 1975 to 2014) and continue declining as a share of GDP after that. [1]  (See Figure 1.)
As a result, these programs do not contribute to the nation’s long-term fiscal problems. ...

Tuesday, February 24, 2015

'Disability Insurance: An Essential Part of Social Security'

Kathy Ruffing at the CBPP:

Disability Insurance: An Essential Part of Social Security: With a House subcommittee holding a hearing tomorrow on the future of Disability Insurance (DI), policymakers need to understand that DI is an essential part of Social Security.
Social Security is much more than a retirement program.  It pays modest but guaranteed benefits when someone with a steady work history dies, retires, or becomes severely disabled. Although nobody likes to think that serious sickness or injury might knock them out of the workforce, a young person starting a career today has a one-third chance of dying or qualifying for DI before reaching Social Security’s full retirement age. ...
DI’s eligibility criteria are strict (...most applications are denied) and its benefits modest..., on average, only about half of their lost earnings... DI beneficiaries are far likelier to be poor or near-poor than other Americans. ...  And at age 66, DI beneficiaries are seamlessly switched to retirement benefits without filing a fresh application. ...
Despite ... close links, the disability program’s trust fund is separate from the retirement and survivor program.  There’s no longer any good reason for that — the 1979 Advisory Council recommended a merger of the trust funds — but lawmakers instead have relied on periodic reallocations of tax revenue between the two programs to shore up whichever trust fund needed it.  They need to do so again to prevent a sudden, 20-percent cut in payments to vulnerable DI beneficiaries in 2016.
The need to replenish DI isn’t a crisis, nor would reallocating simply “kick the can down the road” as some contend.  Instead it’d allow lawmakers to focus on the real task:  assembling a package of revenue increases and modest benefit reforms to preserve long-term solvency for all of Social Security.  Americans of all ages and incomes support Social Security and are willing to pay for it.

Monday, February 23, 2015

'Even Better Than a Tax Cut'

Larry Mishel:

Even Better Than a Tax Cut: With the early stages of the 2016 presidential campaign underway and millions of Americans still hurting financially, both parties are looking for ways to address wage stagnation. That’s the good news. The bad news is that both parties are offering tax cuts as a solution. What has hurt workers’ paychecks is not what the government takes out, but what their employers no longer put in — a dynamic that tax cuts cannot eliminate. ...
Yes, a one-time reduction in taxes through, say, expanded child care credits or a secondary earner tax break, as Democrats propose, could help families. But as wages continue to stagnate, it is impossible to continuously cut taxes and still pay for things like education and social programs for the growing population of older Americans. ...
Contrary to conventional wisdom, wage stagnation is not a result of forces beyond our control. It is a result of a policy regime that has undercut the individual and collective bargaining power of most workers. Because wage stagnation was caused by policy, it can be reversed by policy, too.

Wednesday, February 11, 2015

'The Disability Insurance Non-Crisis'

Republicans and misguided centrist Democrats are coming after Social Security. One target is disability insurance. However:

The Disability Insurance Non-Crisis, CBPP: Although the Senate Budget Committee will hold a hearing tomorrow titled “The Coming Crisis: Social Security Disability Trust Fund Insolvency,” Disability Insurance (DI) is not, in fact, in crisis.
Here, briefly, are the facts...

Tuesday, February 10, 2015

Why Social Insurance Is a Necessary Part of Capitalism

I have a new column:

Why Social Insurance Is a Necessary Part of Capitalism:

It's a defense of social insurance against Republican attempts to dismantle it.

Thursday, February 05, 2015

How Many of the Unemployed Receive Unemployment Compensation?

The percentage may not be as high as you think, and is currently at the lowest level since at least 1972 (click on the figure for a larger, clearer version):

Nelp 1
[More here.]

Friday, January 23, 2015

'Who is Moving Out of the U.S. Labor Force?'

Tyler Cowen:

Who is moving out of the U.S. labor force?: Read the recent testimony of Robert E. Hall (pdf):

Most of the decline in participation occurred among teenagers and young adults. The finding that these effects tend to be larger in more prosperous families points strongly away from much of a role for rising influence of benefit programs, because these programs, especially food stamps, are only available to families with incomes well below the median.

So what is going on here? Could it be “culture”? Hall cites, suggestively, time use surveys showing that sleep and personal consumption of video are up strongly.

Wednesday, January 07, 2015

'Getting It Wrong on Disability Insurance'

It didn't take Republicans long to begin their assault on Social Security:

Getting It Wrong on Disability Insurance, by Kathy Ruffing, CBPP: I’ve explained that a new House rule will make it harder to reapportion payroll taxes between Social Security’s retirement and Disability Insurance (DI) trust funds to avert a one-fifth cut in benefits to severely impaired DI recipients in late 2016.  In a revealing statement, co-sponsor Representative Tom Reed (R-NY) says the change is designed to prevent Congress from “raiding Social Security to bail out a failing federal program.”  He’s doubly wrong.
First, far from “failing,” DI has grown mostly in response to well-understood demographic and program factors like the aging of the baby boom, and the program’s trustees have long anticipated the need to replenish the trust fund next year...  Second, DI isn’t distinct from Social Security; it’s an essential part of Social Security.
Social Security is much more than a retirement program.  It pays modest but guaranteed benefits when someone with a steady work history dies, retires, or becomes severely disabled. ...
Statements like Representative Reed’s implicitly attempt to pit Social Security retirement and disability beneficiaries against each other. ...

Sunday, January 04, 2015

'Who Bears Risk?'

Chris Dillow:

Who bears risk?: There's one aspect of the collapse of City Link that deserves more attention than it gets - that it undermines the conventional idea that firms' owners are risk-takers.
Better Capital's stake in the firm took the firm of a secured loan, which means they'll get first dibs on its residual value. Thanks to this, Jon Moulton, Better Capital's manager claims to stand to lose only £2m - which is a tiny fraction of his £170m wealth.
By contrast, many of City Link's drivers had to supply capital to the firm in the form of paying for uniforms and van livery, and are unsecured creditors who might not get back what they are owed. Many thus face a bigger loss as a share of their wealth than Mr Moulton. In this sense, it is workers rather than capitalists who are risk-takers. This point is not, of course, specific to City Link. ...
There are two implications of all this. First, it means that the idea that capitalists are brave entrepreneurs who deserve big rewards for taking risk is just rubbish. ... Secondly, it suggests that ownership might in some cases lie in the wrong hands. ... This is yet another case for worker ownership.
This in turn reminds us of a cost of inequality; sometimes, ownership is in the wrong hands simply because the most efficient owners can't afford to buy the firm.
All this poses the question: are there policy measures, other than worker ownership, which could ensure a more equitable bearing of risk? One answer would be policies to achieve serious full employment. Full employment would allow workers to reject job offers which expose them to excessive risk....
Secondly, we need a more redistributive welfare state. The welfare state is not a scheme whereby "we" pay for "scroungers". It is instead an insurance mechanism. It is a means of pooling human capital risk... The fact that many workers suffer a massive drop in income when they lose their jobs suggests the welfare state isn't providing enough insurance.
Of course, all these ways of improving risk-bearing fall outside the Overton window. 

Wednesday, December 17, 2014

A Big Safety Net and Strong Job Market Can Co-Exist. Just Ask Scandinavia.

Neil Irwin:

A Big Safety Net and Strong Job Market Can Co-Exist. Just Ask Scandinavia: It is a simple idea supported by both economic theory and most people’s intuition: If welfare benefits are generous and taxes high, fewer people will work. ... Here’s the rub, though: The idea may be backward.
Some of the highest employment rates in the advanced world are in places with the highest taxes and most generous welfare systems, namely Scandinavian countries. The United States and many other nations with relatively low taxes and a smaller social safety net actually have substantially lower rates of employment. ...
In short, more people may work when countries offer public services that directly make working easier, such as subsidized care for children and the old; generous sick leave policies; and cheap and accessible transportation. ...
And this analysis may leave out some other factors... Robert Greenstein, the president of the Center on Budget and Policy Priorities, notes that wages for entry-level work are much higher in the Nordic countries than in the United States, reflecting a higher minimum wage, stronger labor unions and cultural norms that lead to higher pay. ... Perhaps more Americans would enter the labor force if even basic jobs paid that well, regardless of whether the United States provided better child care and other services. ...

Wednesday, December 03, 2014

Social Insurance Guaranteed

I was looking for an old post of mine on social insurance and entrepreneurship to complement this post today from Nick Bunker when I came across this from September of 2005 (slightly edited). Maybe I wasn't one of the people yelling loudly that the Great Recession was about to hit, but I did warn that "Things happen," so be ready when they do:

...The discussion concerning Social Security has, in my view, largely underplayed the role the government has to play in guaranteeing the social insurance aspect of the system, particularly from those in favor of private accounts. When all shocks that hit people are individual so that there are winners and losers, but overall the winners and losers balance, then it is possible for people to voluntarily enter into arrangements where the individual risks are shared and thus largely eliminated (abstracting for the moment from market failure problems in social insurance markets). Conversely, if people want to bear the risks individually, they can. This system works fine for time periods when shocks are small and idiosyncratic. But what about large disasters such as a hurricane that floods New Orleans, or a Great Depression that guts an entire economy?

The Social Security program grew out of a time when there was a large aggregate shock, a shock that resulted in the Great Depression. The Great Depression affected people collectively, it wasn’t just a few unlucky individuals balanced somewhere else by winners. It’s been hard for me to see how private accounts would help when stock market values fall, as they did after the crash of 1929, to one sixth their pre-crash values. Without some sort of social support from the government, such as it is, people would be much worse off after such events. How will personal accounts and individual accountability rebuild schools or bridges in New Orleans? How will private accounts or even the private sector rescue the elderly from rooftops or provide security against looters? They won’t. For large collective shocks the government, not the private sector induced purely by profit, must stand ready to act as the "insurer of last resort."

To have a social security system that falls apart when you most need it, when there are large disasters affecting entire regions or economies, is not optimal. Personal accounts would not have withstood the stock market crash associated with the Great Depression. Why do we want to implement a social support system that fails when it is needed the most? I don’t think any of us believes we should leave it to individuals to bear the full cost of the disaster caused by Hurricane Katrina, i.e. that government should not be involved at all. We all know that government has a role to play in this disaster, the cry from all sides is that the government is doing too little, not that it is doing too much. Things may not be perfect with government involved, and there is certainly room for improvement, but things would be even worse if government did not get involved at all. And just as the government has an essential role to play in this disaster, it will also have an essential role to play when the next big shock, whether it’s financial, natural, or human induced, hits us in the future. Social insurance systems aren’t just for the next few years, they must survive as long as the country does. Social insurance must survive the big shocks, and for that to happen the government must, in the end, provide the insurance.

If you think such large shocks cannot happen again, that big shocks such as a Great Depression will never, ever happen again to anyone ever, think about the events in any one hundred year time period. Things happen.

'Entrepreneurship, Down-Side Risks, and Social Insurance'

In 2009 I argued:

...A more extensive social safety net can reduce the risk of attempts at entrepreneurship. If there is an extensive social safety net to fall back upon if things don't work out, you might be more willing to quit the job you hate (the one with health insurance for the kids) and sink everything you have into a small business that you've always wanted to run. But I'm not sure the data above support this interpretation, i.e. that there is an obvious positive association between the strength of social insurance and the prevalence of small business. But it is highly suggestive, and regressions that control for other cross-country differences could help to settle the issue.

Nick Bunker discusses a paper that provides supporting evidence:

Entrepreneurship, down-side risks, and social insurance, Washington Center for Equitable Growth: When Americans talk about entrepreneurs, or at least the reasons for becoming one, the possibility of great success is most often the first topic of discussion. The great wealth that company founders such as Bill Gates or Mark Zuckerberg amassed certainly make the idea of starting a business more attractive to potential entrepreneurs. But according to a new National Bureau of Economic Research working paper, we should be paying more attend to the down-side risks when it comes to fostering entrepreneurship.
The new paper, by economists John Hombert and David Thesmar of HEC Paris, David Sraer of the University of California-Berkeley, and Antoinette Schoar of the Massachusetts Institute of Technology, looks at a reform in the French unemployment insurance system enacted in 2002. The reform allowed unemployed workers who start a new business to keep the right to their unemployment benefits for up to three years. They could use the accrued benefits to make up the difference between their business’s revenue and the level of benefits they would have otherwise received.
The four researchers find that the policy change acted as a sort of entrepreneurship insurance. Workers who before would have been hesitant to start a business may be more likely to do so now that they had some protection against downside risk. The new paper documents that the rate at which firms were created increased by 25 percent after the 2002 reform....
They also find that ... the evidence points toward these new entrepreneurs being capable businesspeople who just needed a safety net before starting a business. What’s more, these new firms had a positive impact on the overall economy. ...
Many U.S. policymakers and economists are worried about the decline in entrepreneurship and business creation. They might want to consider investigating whether alleviating the down-side risks to starting a company can help solve that problem.

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). ...