Category Archive for: Social Insurance [Return to Main]

Wednesday, December 11, 2013

The EITC versus The Minimum Wage

Brad DeLong in 2004:

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

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

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

Arin Dube in 2013:

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

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

They are complements, not substitutes.

Monday, December 09, 2013

Paul Krugman: The Punishment Cure

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

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

Wednesday, December 04, 2013

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

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

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

Here are the facts they discuss:

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

Wednesday, November 27, 2013

'Breadlines Return'

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

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

Friday, November 22, 2013

'A Universal Income is Not Such a Silly Idea'

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

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

Tuesday, November 19, 2013

'The Geezers Are Not Alright'

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

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

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

The Post writes:

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

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

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

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

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

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

Thursday, November 14, 2013

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

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

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

Friday, November 01, 2013

'Slashing the Food Stamps Program'

From the NY Times editorial page:

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

Duncan Black puts it this way:

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

Paul Krugman: A War on the Poor

Why do Republicans treat the poor so poorly?:

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

Saturday, October 26, 2013

Democrats Will Have to Swallow Entitlement Cuts?

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

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

Tuesday, October 15, 2013

'The GOP Tax'

Paul Krugman:

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

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

Monday, October 07, 2013

'Why Isn't Poverty Falling? Weakening of Unemployment Insurance Is a Pivotal Factor'

The social safety net for unemployed workers is weakening:

Why Isn't Poverty Falling? Weakening of Unemployment Insurance Is a Pivotal Factor, by Arloc Sherman, CBPP: The poverty rate remained unchanged at a high 15.0 percent in 2012, the third full year of an economic recovery that officially began in June 2009. One key reason why poverty has remained virtually frozen despite continued economic growth is the weakening of unemployment insurance (UI). ...
UI benefits kept 1.7 million ... jobless workers and their families ... above the poverty line in 2012... This was 600,000 fewer than in 2011 and 1.5 million fewer than in 2010... To be sure, the decline partly reflects a positive development: fewer workers are unemployed, so fewer are eligible for UI benefits. But that explains only a small part of the decline. ...
The chief reason for the decline is the dwindling likelihood that an unemployed worker will receive UI. The number of UI recipients for every 100 unemployed workers fell from 67 in 2010 to 57 in 2011 and 48 in 2012.
In fact, while the number of jobless workers has been falling, the number of jobless workers who receive no UI benefits has been rising and is higher now than at the bottom of the recession in 2009. ...
The share of unemployed workers getting UI fell for several reasons. First, the length and depth of the jobs slump has left many workers unable to find work before their UI benefits run out. Second, several states have cut the number of weeks of regular, state-funded UI benefits. A third and critical reason is that in 2012, Congress provided fewer weeks of federal UI benefits, which go to long-term unemployed workers. ...
What’s left of federal UI (the EUC program) is scheduled to expire at the end of December. If Congress does not extend it, all long-term unemployed workers receiving EUC will be cut off at that point, and other workers who qualify for UI will be limited to whatever their state’s regular UI program provides — 26 weeks in most states.

Sunday, October 06, 2013

'Rich People Just Care Less'

From today's links:

Rich People Just Care Less, by Daniel Goleman, Commentary, NY Times: ...A growing body of recent research shows that people with the most social power pay scant attention to those with little such power. ... Dacher Keltner, a professor of psychology at Berkeley,... finds that the poor, compared with the wealthy, have keenly attuned interpersonal attention in all directions, in general, those with the most power in society seem to pay particularly little attention to those with the least power. To be sure, high-status people do attend to those of equal rank — but not as well as those low of status do.
This has profound implications for societal behavior and government policy. Tuning in to the needs and feelings of another person is a prerequisite to empathy, which in turn can lead to understanding, concern and, if the circumstances are right, compassionate action.
In politics, readily dismissing inconvenient people can easily extend to dismissing inconvenient truths about them. The insistence by some House Republicans in Congress on cutting financing for food stamps and impeding the implementation of Obamacare ... may stem in part from the empathy gap. ...
Social distance makes it all the easier to focus on small differences between groups and to put a negative spin on the ways of others and a positive spin on our own...
Since the 1970s, the gap between the rich and everyone else has skyrocketed. Income inequality is at its highest level in a century. ... I fear the expansion of an entirely different gap, caused by the inability to see oneself in a less advantaged person’s shoes. Reducing the economic gap may be impossible without also addressing the gap in empathy.

Thursday, October 03, 2013

Medicaid Eligibility by Red-Blue State

Wednesday, October 02, 2013

'Health Care Panic, Again'

Paul Krugman says I told you so:

Health Care Panic, Again: Eduardo Porter is getting a lot of attention for his piece in today’s paper suggesting that what Republicans fear most is that Obamacare might succeed. ... I’m surprised that so many people seem to find this a surprising and new insight. I thought it was obvious. Here’s a column I wrote back in July predicting more or less what is now happening, for exactly the reason Porter gives: GOP panic over the prospect of successful health reform.
And let’s be clear: the health reform fight has always been about more than health reform. Liberals have long viewed health reform as the opening wedge, a sort of proof of concept, in a campaign to strengthen the US safety net and reduce income inequality; that was basically what I was urging in Conscience of a Liberal, which gave its title to this blog.
Conversely, the right has long opposed health reform for exactly the same reason: it might, in the public’s mind, legitimate further government intervention to increase economic security.
But let’s also be clear that these positions are not symmetric. Liberals favored health reform both because it would work and because it might enhance their ability to push for other policies; conservatives were and are determined to kill health reform ... precisely because it would work — because it might weaken the rest of their agenda. ...
So my plot is working, mwahahahaha. Although I didn’t consider the side effect — benefit or cost? — that health reform would drive conservatives stark raving mad.

I think the idea that this is about more than just health reform, it's about stopping Democrats from strengthening social insurance protections and reducing inequality more generally, is an important and correct point. If Obamacare did not exist, I'd guess we'd still be having a fight over the funding of other social programs conservatives want to scale back or eliminate. But it's also important to note that, as Paul Krugman recently explained, at the heart of it all is class warfare:

...many of the rich are selective in their opposition to government helping the unlucky. They’re against stuff like food stamps and unemployment benefits; but bailing out Wall Street? Yay!
Seriously. Charlie Munger says that we should “thank God” for the bailouts, but that ordinary people fallen on hard times should “suck it in and cope.” AIG’s CEO — the CEO of a bailed out firm! — says that complaints about bonuses to executives at such firms are just as bad as lynchings (I am not making this up.)
The point is that the superrich have not gone Galt on us — not really, even if they imagine they have. It’s much closer to pure class warfare, a defense of the right of the privileged to keep and extend their privileges. It’s not Ayn Rand, it’s Ancien Régime.

Despite what conservatives want you to believe, this is not a fight about the role of government. Conservatives have no trouble with government interventions they benefit from. But ask them to give up a dollar to help the less fortunate and it's another story.

Monday, September 30, 2013

'Thank the GOP for the Shutdown and Holding the Economy Hostage'

Dean Baker:

Thank the GOP for the shutdown and holding the economy hostage, by Dean Baker, theguardian.com: Here we go again: the GOP is ready to stall the US economy and shut down the government in a crusade to cut government spending. Proponents of austerity both in the United States and Europe are eager to claim success for their policies. In spite of economies that look awful by normal standards, austerity advocates are able to claim victory for their policies by creating a new meaning for the word.
In Europe, we have the bizarre story of both George Osborne ... and Olli Rehn ... claiming success for their austerity policies based on one quarter of growth. ...
In the United States, we were treated to the Wall Street Journal (WSJ) boasting of the success of the 2011 debt ceiling agreement on the eve of another standoff on the budget and the debt ceiling. The measure of success in this case appears to be that the sequester budget cuts put in place by the agreement are still in place and that the economy has not collapsed as a result. ...
First, it is worth noting that many of the disaster warnings about the sequester from President Obama and the Democrats were grossly exaggerated. ...
However, this doesn't mean that the sequester is harmless. ...
We ... know the sequester will give us deteriorating government services, higher unemployment, and slower economic growth. That's the track record which prompts the Wall Street Journal's boasts – and the GOP's misguided actions – in favor of even more austerity.

But if the real goal of the GOP is to reduce the size of government, particularly social insurance, and if the fact that it comes at the expense of the most vulnerable in society is not that great of a concern, then it's not at all clear that austerity has been a failure (and Republicans have also managed to undermine the public's faith in the ability of government to solve important problems whch could also be added to the success side of the ledger). The GOP often argues in terms of jobs and growth, but it is usually cover for a broader agenda.

Thursday, September 26, 2013

'Rage of the Privileged'

Paul Krugman:

Rage of the Privileged: Mark Thoma has an excellent column at the Fiscal Times linking the fight over the debt ceiling to the larger issue of extreme inequality. ... I’d like, however, to suggest that the reality is even worse than Thoma suggests.

Here’s how Thoma puts it:

Rising inequality and differential exposure to economic risk has caused one group to see themselves as the “makers” in society who provide for the rest and pay most of the bills, and the other group as “takers” who get all the benefits. The upper strata wonders, “Why should we pay for social insurance when we get little or none of the benefits?” and this leads to an attack on these programs.

So he links the debt ceiling fight to the influence of the wealthy, who want to dismantle the welfare state because it’s nothing to them, and they want lower taxes. One could add that the very inequality that distances the rich from ordinary concerns gives them increased power, and so makes their anti-welfare-state views far more influential.

How, then, are things even worse than he says? Because many of the rich are selective in their opposition to government helping the unlucky. They’re against stuff like food stamps and unemployment benefits; but bailing out Wall Street? Yay!

Seriously. Charlie Munger says that we should “thank God” for the bailouts, but that ordinary people fallen on hard times should “suck it in and cope.” AIG’s CEO — the CEO of a bailed out firm! — says that complaints about bonuses to executives at such firms are just as bad as lynchings (I am not making this up.)

The point is that the superrich have not gone Galt on us — not really, even if they imagine they have. It’s much closer to pure class warfare, a defense of the right of the privileged to keep and extend their privileges. It’s not Ayn Rand, it’s Ancien Régime.

Tuesday, September 24, 2013

The Real Reason for the Fight over the Debt Limit

This shameful attempt to make life even harder for the unlucky and the unfortunate:

The Real Reason for the Fight over the Debt Limit

I argue that inequality -- our increasingly two-tiered society -- is one of the driving forces behind the attack on social insurance.

Monday, September 23, 2013

Paul Krugman: Free to Be Hungry

Why do conservatives want to reduce funding for the food stamp program?:

Free to Be Hungry, by Paul Krugman, Commentary, NY Times: ...Conservatives ... have just voted to cut sharply ... the food stamp program — or, to use its proper name, the Supplemental Nutritional Assistance Program (SNAP)... Conservatives are deeply committed to the view that the size of government has exploded under President Obama but face the awkward fact that public employment is down sharply, while overall spending has been falling fast as a share of G.D.P. SNAP, however, really has grown a lot,... from 26 million Americans in 2007 to almost 48 million now.
Conservatives look at this and see what, to their great disappointment, they can’t find elsewhere..., explosive growth in a government program. ...
The recent growth of SNAP has indeed been unusual, but then so have the times... Multiple careful economic studies have shown that the economic downturn explains the great bulk of the increase in food stamp use. And ... food stamps have at least mitigated the hardship, keeping millions of Americans out of poverty. ...
But, say the usual suspects, the recession ended in 2009. Why hasn’t recovery brought the SNAP rolls down? The answer is, while ... the income of the top 1 percent rose 31 percent from 2009 to 2012,... the real income of the bottom 40 percent actually fell 6 percent. Why should food stamp usage have gone down?
Still, is SNAP..., as Paul Ryan ... puts it, an example of turning the safety net into “a hammock that lulls able-bodied people to lives of dependency and complacency.”
One answer is, some hammock: last year, average food stamp benefits were $4.45 a day. Also, about those “able-bodied people”: almost two-thirds of SNAP beneficiaries are children, the elderly or the disabled, and most of the rest are adults with children.
Beyond that, however, you might think that ensuring adequate nutrition for children, which is a large part of what SNAP does, actually makes it less, not more likely that those children will be poor and need public assistance when they grow up. And that’s what the evidence shows. ...
SNAP, in short, is public policy at its best. ... So it tells you something that conservatives have singled out this of all programs for special ire.
Even some conservative pundits worry that the war on food stamps, especially combined with the vote to increase farm subsidies, is bad for the G.O.P., because it makes Republicans look like meanspirited class warriors. Indeed it does. And that’s because they are.

Saturday, September 21, 2013

"A Sign of Weakness"

Tyler Cowen:

The food stamps program: In an ideal policy world, would food stamps exist as a program separate from cash transfers? Probably not. But as it stands today, they are still one of the more efficient programs of the welfare state and the means-testing seems to work relatively well. And giving people food stamps — since almost everyone buys food — is almost as flexible as giving them cash. It doesn’t make sense to go after food stamps, and you can read the recent GOP push here as a sign of weakness, namely that they, beyond upholding the sequester, are unwilling to tackle the more important and more wasteful targets...
See Paul Krugman too.

Monday, August 12, 2013

'Social Security is, by Far, the Most Effective Anti-Poverty Program in the United States'

Via Elise Gould at the EPI:

...While the United States is still slowly recovering from the worst recession since the Great Depression, fortunately this time around government safety net programs have been in place to keep more people from falling into poverty. The Supplemental Poverty Measure (SPM) shows the strength of the government to mitigate the incidence of poverty.

As the figure below shows, Social Security is, by far, the most effective anti-poverty program in the United States. Without Social Security, an additional 8.3 percent of Americans, or over 25 million more people, would fall below the SPM poverty threshold. Refundable tax credits, such as the Earned Income Tax Credit, kept 2.5 percent, or nearly 8 million Americans above the SPM poverty threshold. Other programs such as SNAP (food stamps), unemployment insurance, Supplemental Security Income, and housing subsidies also have a significant impact on the ability of families to stay afloat.

SPM-with_out-govprog13.png.536

Source: http://www.census.gov/hhes/povmeas/methodology/supplemental/research/Short_ResearchSPM2011.pdf

Sunday, August 11, 2013

We Need a Bigger Social Security System

One more from Brad DeLong:

Why We Need a Bigger Social Security System with Higher, Not Lower Benefits: Edward Filene's idea from the 1920s of having companies run employer-sponsored defined-benefit plans has, by and large, come a-crashing down. Companies turn out not to be long-lived enough to run pensions with a high enough probability. And when they are there is always the possibility of a Mitt Romney coming in and making his fortune by figuring out how to expropriate the pension via legal and financial process. Since pension recipients are stakeholders without either legal control rights or economic holdup powers, their stake will always be prey to the princes of Wall Street.
That suggests that what we really need is a bigger Social Security system--unless, of course, we can provide incentives and vehicles for people to do their retirement saving on their own. But 401(k)s have turned out to be as big a long-run disaster as employer-sponsored defined-benefit pensions when one assesses their efficiency as pension vehicles.
And so let me turn the mike over to James Kwak: The Problem with 401(k) Plans ...

Monday, August 05, 2013

'Why is Free-Loading Now a Conservative Value?'

Good question:

...all those extra costs for the uninsured drove up premiums for everyone else, drove up hospital costs, giving them a reason to raise prices even further, and played a role in rendering healthcare unaffordable for many others.
What Obamacare does, like Romneycare before it, is end this free-loading.
The law is telling these young adults that if you want to go without insurance, you are not going to make everyone else pay for it if your risk-analysis ends up faulty. You have to exercise a minimum of personal responsibility to pay for your own potential healthcare. In other words, rights come with responsibilities in a liberal democracy. At least that is what I always understood the conservative position to be.
So why is an allegedly conservative organization actively encouraging personal irresponsibility? Why are they encouraging one sector of society – the young and the fearless – to rely on everyone else’s sacrifice to get bailed out if they have an accident, or contract cancer, or need a hospital to deliver a baby? This is not freedom as the Founders understood it; it’s recklessness, irresponsibility and short-sighted selfishness. Now, if the twentysomethings cannot afford it, it’s one thing – and part of our healthcare cost crisis. But now that Obamacare has removed that excuse and demands that every citizen actually contribute to the insurance pool, that completely defensible excuse is over. No more free-loading, in other words.
So I ask again: why is free-loading now a conservative value? ...

Social Security is similar. If people weren't required to contribute, many wouldn't (if for no other reason than the immediate financial demands for many families make it hard to save). But we, as a society, wouldn't let them starve and die when they are no longer able to work, and the rest of us would end up footing the bill. So we require people to contribute to their own retirement through withholding for Social Security. Like health insurance for the young, many people don't need Social Security to retire comfortably, but for those who do it's a lifesaver, one that is at least partially funded through their own contributions.

Thursday, July 18, 2013

Where Do Older Workers Work the Most?

7-16-13ss
[via CBPP: "... Elsewhere we’ve noted that our Social Security system pays pretty modest benefits compared with other advanced nations. ..."]

Monday, July 15, 2013

GOP to Taxpayers: We’re Against Subsidies, Except If They’re For Rich Farmers

It feels weird to agree with something at NRO Online:

GOP to Taxpayers: We’re Against Subsidies, Except If They’re For Rich Farmers, by Veronique de Rugy : A few weeks ago, I suggested that splitting the farm bill into two pieces would have the benefits of breaking the alliance between the pro-farm and food-stamp spending lobbies ... and ... would finally put farm subsidies on the path to elimination where they belong. Boy, was I wrong. As it turns out, Republicans are as eager as ever to continue to support a “ag-only bill” that includes indefensible subsidies to farmers, such as sugar-producer programs, and creates new income-entitlement programs, such as the shallow-loss program. ...:

... Every Democrat and 12 brave Republicans voted no for a bill that spends more than the ag-only provisions in the Senate farm bill, saves less than half what Republicans agreed to in their House Budget, and falls short of the cuts called for in the President’s budget request.

To add insult to injury, this move just feeds into the portrait Democrats like to paint of Republican lawmakers: They will support any policies that favor the rich – even if they mean more government spending – and like to oppose policies that would benefit lower-income Americans. In this case, there is some truth to that. Republicans are showing that, while some of them weren’t willing to vote for the farm bill as long as it included food stamps, they will support the outrageous redistribution of income to higher-income Americans when it benefits wealthy farmers. ...

When I was a kid, my mom used to get really mad when my uncle, a fairly well-off farmer and a Republican who took his share from these programs, would complain about welfare. He takes welfare too! she'd tell me on the car ride home ... and he doesn't even need it!

Paul Krugman: Hunger Games, U.S.A.

Remember when conservatives used to talk about a "kinder and gentler" America?:

Hunger Games, U.S.A., by Paul Krugman, Commentary, NY Times: Something terrible has happened to the soul of the Republican Party. We’ve gone beyond bad economic doctrine. We’ve even gone beyond selfishness and special interests. At this point we’re talking about a state of mind that takes positive glee in inflicting further suffering on the already miserable.
The occasion for these observations is  ... the monstrous farm bill the House passed last week. For decades, farm bills have had two major pieces. One piece offers subsidies to farmers; the other offers nutritional aid to Americans in distress, mainly in the form of food stamps...
Long ago, when subsidies helped many poor farmers, you could defend the whole package as a form of support for those in need. Over the years, however,... farm subsidies became a fraud-ridden program that mainly benefits corporations and wealthy individuals. Meanwhile food stamps became a crucial part of the social safety net.
So House Republicans voted to maintain farm subsidies — at a higher level than either the Senate or the White House proposed — while completely eliminating food stamps from the bill. ...
Given this awesome double standard — I don’t think the word “hypocrisy” does it justice — it seems almost anti-climactic to talk about ... the theory, common on the right, that ... we have so much unemployment thanks to government programs that, in effect, pay people not to work? (Soup kitchens caused the Great Depression!) The basic answer is, you have to be kidding. Do you really believe that Americans are living lives of leisure on $134 a month, the average SNAP benefit?
Still, let’s pretend to take this seriously..., what’s going on here? Is it just racism? No doubt the old racist canards — like Ronald Reagan’s image of the “strapping young buck” using food stamps to buy a T-bone steak — still have some traction. But these days almost half of food stamp recipients are non-Hispanic whites... So it’s not all about race.
What is it about, then? Somehow, one of our nation’s two great parties has become infected by an almost pathological meanspiritedness, a contempt for what CNBC’s Rick Santelli, in the famous rant that launched the Tea Party, called “losers.” If you’re an American, and you’re down on your luck, these people don’t want to help; they want to give you an extra kick. I don’t fully understand it, but it’s a terrible thing to behold.

Friday, June 14, 2013

Why Do Disability Filings Rise in Bad Times?

Jesse Rothstein finds that the rise in disability filings in recessions is not due to people "exaggerating real disabilities or through outright fraud":

Are Long-Term Unemployed Taking Refuge in Disability?, by Ben Casselman, WSJ: The sharp rise in federal disability rolls in recent years ... is troubling to economists and policymakers because the program, administered by the Social Security Administration, is expensive, and because once workers go on disability, they rarely come off.
Economists have long known that disability filings go up during recessions, but they aren’t sure why. Perhaps the most worrisome theory is that displaced workers are essentially using disability insurance as a form of extended unemployment benefits, either by exaggerating real disabilities or through outright fraud.
University of California, Berkeley economist Jesse Rothstein set out to test that theory. He reasoned that if the increase is being driven by unemployed workers gaming the system, there ought to be a correlation between expiring jobless benefits rising disability claims. ... When Mr. Rothstein looked at the data, however, he found no such correlation. ... Mr. Rothstein’s findings ... are still preliminary...

Then why do disability rolls rise in bad times?:

A construction worker who hurts his back, for example, might be able to get a desk job during good economic times; when unemployment is high, however, making such a career switch could be much harder. Moreover, companies are much more likely to make accommodations for existing workers who become disabled than to hire a disabled worker — so a person with a disability who loses a job might well struggle to find a new one. ...

Basically, people with disabilities face a choice, apply (and likely get) disability, or continue working in another occupation where the disability is less of (or not) an obstacle. In bad times, alternatives that will allow the disabled to continue working in another occupation dry up, and the first choice -- going on disability -- is more likely. As the article notes, once this (expensive) choice is made it is generally not reversed when the economy improves.

'The Impact of Immigrants'

From OECD Insights:

The impact of immigrants – it’s not what you think, by Brian Keeley: In the land of tabloid terrors, immigrants loom large. Flick through the pages or online comments of some of the racier newspapers, and you’ll see immigrants being accused of stealing jobs or, if not that, of being workshy and “scrounging benefits”.
Such views may be at the extreme end of the spectrum, but they do seem to reflect a degree of public ambivalence, and even hostility, towards immigrants in a number of OECD countries. Anecdotal evidence is not hard to find. ... Surveys offer further evidence...
New research from the OECD indicates that ... across OECD countries, the amount that immigrants pay to the state in the form of taxes is more or less balanced by what they get back in benefits. Even where immigrants do have an impact on the public purse – a “fiscal impact” – it amounts to more than 0.5% of GDP in only ten OECD countries, and in those it’s more likely to be positive than negative. In sum, says the report, when it comes to their fiscal impact, “immigrants are pretty much like the rest of the population”.
The extent to which this finding holds true across OECD countries is striking, although there are naturally some variations. Where these exist, they largely reflect the nature of the immigrants who arrive in each country. ... Indeed, one objection that’s regularly raised to lower-skilled immigrants is the fear that they will live off state benefits.
But, here again, the OECD report offers some perhaps surprising insights. It indicates that low-skilled migrants – like migrants in general – are neither a major drain nor gain on the public purse. Indeed, low-skilled immigrants are less likely to have a negative impact than equivalent locals.

Thursday, June 06, 2013

'The Hidden Jobless Disaster'

Ed Lazear:

The Hidden Jobless Disaster, by Edward Lazear, Commentary, WSJ: The ... unemployment rate is not the best guide to the strength of the labor market, particularly during this recession and recovery. Instead, the Fed and the rest of us should be watching the employment rate. There are two reasons.
First, the better measure of a strong labor market is the proportion of the population that is working, not the proportion that isn't. ... By this measure, the labor market's health has barely changed over the past three years.
Second... Every time the unemployment rate changes, analysts and reporters try to determine whether unemployment changed because more people were actually working or because people simply dropped out of the labor market entirely, reducing the number actively seeking work. The employment rate—that is, the employment-to-population ratio—eliminates this issue by going straight to the bottom line...
While the unemployment rate has fallen over the past 3½ years, the employment-to-population ratio has stayed almost constant at about 58.5%, well below the prerecession peak. ...
The U.S. is not getting back many of the jobs that were lost during the recession. At the present slow pace of job growth, it will require more than a decade to get back to full employment defined by prerecession standards. ...

No problems so far, but  the next part goes off the rails:

Why have so many workers dropped out of the labor force and stopped actively seeking work? Partly this is due to sluggish economic growth. But research by the University of Chicago's Casey Mulligan has suggested that because government benefits are lost when income rises, some people forgo poor jobs in lieu of government benefits—unemployment insurance, food stamps and disability benefits among the most obvious. ...
These disincentives to seek work may also help explain the unusually high proportion of the unemployed who have been out of work for more than 26 weeks. ...

If the Mulligan story doesn't hold, then the conclusion about QE below doesn't hold either (notice the qualifier "may" in Lazear's statement "disincentives to seek work may also help explain the unusually high proportion of the unemployed")

The Fed may draw two inferences from the experience of the past few years. The first is that it may be a very long time before the labor market strengthens enough to declare that the slump is over. The lackluster job creation and hiring that is reflected in the low employment-to-population ratio has persisted for three years and shows no clear signs of improving.
The second is that the various programs of quantitative easing (and other fiscal and monetary policies) have not been particularly effective at stimulating job growth. Consequently, the Fed may want to reconsider its decision to maintain a loose-money policy until the unemployment rate dips to 6.5%.

We don't know what job growth would have been without fiscal policy and QE -- it could have been even worse (as many econometric examinations imply).

Why am I skeptical about the claim above? There's no evidence that I'm aware of that shows conclusively (or at all) that the supply of workers rather than the demand for workers is the problem. That is, with the ratio of the number of people seeking jobs to the number of available jobs so high, how is it that jobs are going unfilled due to social insurance programs? Do we see, for example, wages rising as firms have trouble finding workers (because they are all enjoying the meager benefits they get so much that there is a shortage)?

Maybe I'm missing something, but if no jobs are going unfilled, then how are social insurance programs holding back the recovery rather than making life a bit less miserable for those who cannot find work?

Wednesday, June 05, 2013

'Welfare for the Wealthy'

Deficit reduction as a "sacred excuse for ... cruelty":

Welfare for the Wealthy, by Mark Bittman, Commentary, NY Times: The critically important Farm Bill is impenetrably arcane, yet as it worms its way through Congress, Americans who care about justice ... can parse enough of it to become outraged. The legislation costs around $100 billion annually, determining policies on matters that are strikingly diverse...
The current versions of the Farm Bill in ... the House ... is proposing $20 billion in cuts to SNAP — equivalent ... to “almost half of all the charitable food assistance that food banks and food charities provide to people in need.”
Deficit reduction is the sacred excuse for such cruelty, but the first could be achieved without the second. Two of the most expensive programs are food stamps, the cost of which has justifiably soared since the beginning of the Great Recession, and direct subsidy payments.
This pits the ability of poor people to eat — not well, but sort of enough — against the production of agricultural commodities. That would be a difficult choice if the subsidies were going to farmers who could be crushed by failure, but in reality most direct payments go to those who need them least.
Among them is Congressman Stephen Fincher, Republican of Tennessee, who justifies SNAP cuts by quoting 2 Thessalonians 3:10:  “For even when we were with you, we gave you this command: Anyone unwilling to work should not eat.”
Even if this quote were not taken out of context... [there is no need] to break a sweat countering his “argument”... 45 percent of food stamp recipients are children, and in 2010, the U.S.D.A. reported that as many as 41 percent are working poor. ... Fincher himself [is] a hypocrite.
For the God-fearing Fincher is one of the largest recipients of U.S.D.A. farm subsidies in Tennessee history; he raked in $3.48 million in taxpayer cash from 1999 to 2012, $70,574 last year alone. The average SNAP recipient in Tennessee gets $132.20 in food aid a month; Fincher received $193 a day. ...
Fincher is not alone in disgrace, even among his Congressional colleagues, but he makes a lovely poster boy for a policy that steals taxpayer money from the poor and so-called middle class to pay the rich...

Monday, June 03, 2013

Paul Krugman: The Geezers Are All Right

All the hand-wringing you hear over the cost of social insurance programs such as Medicare and Social Security is a ploy from the right designed to get you to support cuts -- don't fall for it:

The Geezers Are All Right, by Paul Krugman, Commentary, NY Times: Last month the Congressional Budget Office released its much-anticipated projections for debt and deficits, and there were cries of lamentation from the deficit scolds who have had so much influence on our policy discourse. The problem, you see, was that the budget office numbers looked, well, O.K... But if you’ve built your career around proclamations of imminent fiscal doom, this definitely wasn’t the report you wanted to see.
Still... Doesn’t the rising tide of retirees mean that Social Security and Medicare are doomed unless we radically change those programs now now now?
Maybe not.
To be fair, the reports of the Social Security and Medicare trustees released Friday do suggest that America’s retirement system needs some significant work. The ratio of Americans over 65 to those of working age will rise inexorably over the decades ahead, and this will translate into rising spending on Social Security and Medicare as a share of national income.
But the numbers aren’t nearly as overwhelming as you might have imagined,... the data suggest that we can, if we choose, maintain social insurance as we know it with only modest adjustments. ...
So what are we looking at here? The latest projections show the combined cost of Social Security and Medicare rising by a bit more than 3 percent of G.D.P. between now and 2035, and that number could easily come down with more effort on the health care front. Now, 3 percent of G.D.P. is a big number, but it’s not an economy-crushing number. The United States could, for example, close that gap entirely through tax increases, with no reduction in benefits at all, and still have one of the lowest overall tax rates in the advanced world.
But haven’t all the great and the good been telling us that Social Security and Medicare ... are unsustainable, that they must be totally revamped — and made much less generous? Why yes, they have; they’ve also been telling us that we must slash spending right away or we’ll face a Greek-style fiscal crisis. They were wrong about that, and they’re wrong about the longer run, too.
The truth is that the long-term outlook for Social Security and Medicare, while not great, actually isn’t all that bad. It’s time to stop obsessing about how we’ll pay benefits to retirees in 2035 and focus instead on how we’re going to provide jobs to unemployed Americans in the here and now.

 

Friday, May 31, 2013

Paul Krugman: From the Mouths of Babes

The "ugly, destructive war against food stamps":

From the Mouths of Babes, by Paul Krugman, Commentary, NY Times: ...I usually read reports about political goings-on with a sort of weary cynicism. Every once in a while, however, politicians do something so wrong, substantively and morally, that cynicism just won’t cut it; it’s time to get really angry instead. So it is with the ugly, destructive war against food stamps. ...
Food stamps have played an especially useful — indeed, almost heroic — role in recent years. In fact, they have done triple duty. First, as millions of workers lost their jobs..., food stamps ... did significantly mitigate their misery. Food stamps were especially helpful to children...
But there’s more. ... We desperately needed (and still need) public policies to promote higher spending on a temporary basis — and the expansion of food stamps ... is just such a policy. Indeed, estimates from ... Moody’s Analytics suggest that each dollar spent on food stamps in a depressed economy raises G.D.P. by about $1.70...
Wait, we’re not done yet. Food stamps greatly reduce food insecurity among low-income children, which, in turn, greatly enhances their chances of ... growing up to be successful, productive adults. So food stamps are ... an investment in the nation’s future...
So what do Republicans want to do with this paragon of programs? First, shrink it; then, effectively kill it.
The shrinking part comes from the latest farm bill released by the House Agriculture Committee... That bill would push about two million people off the program. ...
These cuts are, however, just the beginning... Remember,... Paul Ryan’s budget is still the official G.O.P. position..., and that budget calls for converting food stamps into a block grant program with sharply reduced spending. If this proposal had been in effect when the Great Recession struck,... it ... would have meant vastly more hardship, including a lot of outright hunger, for millions of Americans, and for children in particular.
Look, I understand the supposed rationale: We’re becoming a nation of takers, and doing stuff like feeding poor children and giving them adequate health care are just creating a culture of dependency — and that culture of dependency, not runaway bankers, somehow caused our economic crisis.
But I wonder whether even Republicans really believe that story — or at least are confident enough in their diagnosis to justify policies that more or less literally take food from the mouths of hungry children. As I said, there are times when cynicism just doesn’t cut it; this is a time to get really, really angry.

 

Wednesday, May 29, 2013

'No One Really Believes in Equality of Opportunity'

Ezra Klein on the equality of opportunity:

No one really believes in ‘equality of opportunity’, by Ezra Klein: ...Everyone in American life professes to believe in equality of opportunity. But nobody really believes in it. ... You can’t have real equality of opportunity without equality of outcome. A rich parent can purchase test prep a poor parent can’t. A rich parent can usher their children into social networks a poor parent can’t. A rich parent can make donations to Harvard that a poor parent can’t. ...
When people say they believe in “equality of opportunity,” they really mean they believe in “sufficiency of opportunity.” They don’t believe all children should start from the same place. But they believe all children should start from a good enough place. They believe they should have decent nutrition and functioning schools and a safe community and loving parents. They believe they should have a chance.
The question is what they’re willing to do about that belief. Democrats who believe in sufficiency of opportunity tend to want to spend more on health care and education for the poor. ... They believe that the less children or their parents need to worry about staying afloat, the more they’ll be free to work to get ahead.
On the Republican side, Rep. Paul Ryan (Wis.) has taken the lead in arguing that conservatives should focus on opportunity. But his approach largely consists of cuts to the safety net. ... These are not policies required by the finances of government. ... Rather, they’re required by Ryan’s theory of opportunity, which is that a key problem for the poor is the transformation of “our social safety net into a hammock, which lulls able-bodied people into lives of complacency and dependency.” His budget reflects this theory. According to the Center on Budget and Policy Priorities, almost two-thirds of his cuts come from programs that serve the poor.

Helping the poor by cutting the programs they rely on is, to say the least, a risky theory of uplift. It’s easier to see what Ryan’s plan does to impede sufficiency of opportunity than to spread it. ...

I don't see how we can achieve equality of opportunity without some degree of income redistribution. Republicans, of course, generally oppose income redistribution.

I've obscured the point of Ezra Klein's post in the extract above, it's mostly about whether "conservative reformers" who profess to believe in equal opportunity are serious, or simply using the mantra of "equal opportunity" to defend the same old policies that favor key constituencies. There are certainly people in the Republican Party who truly believe that government intervention harms the poor, but for the most part this looks like an excuse to pursue "you're on your own" polices that lower taxes and favor those at the top.

[Note: I have been battling an allergic reaction for the last several days, nothing serious but it is a big annoyance and distraction (the itchiest hives you can imagine from head to toe along with scary tongue swelling, hands a bit swollen, etc., no idea what causes it but Benadryl in large doses provides relief). I'm hoping it will be over soon, in the past it has never lasted this long and I'm "itching" for it to end, but in the meantime it's been hard to focus on blogging (or anything else) -- hence the mostly "echo blogging" the last few days.]

Sunday, May 26, 2013

'The Left-Right Divide in U.S. Politics'

Dean Baker:

Krugman Misrepresents the Left-Right Divide in U.S. Politics: In his contribution to the debate over whether there is a group of open-minded "reformed" conservatives, Paul Krugman misrepresents the central focus of the left-right divide in national politics. He tells readers:
"Start with the proposition that there is a legitimate left-right divide in U.S. politics, built around a real issue: how extensive should be make our social safety net, and (hence) how much do we need to raise in taxes? This is ultimately a values issue, with no right answer."
This is not an accurate characterization of the left-right divide in U.S. politics since there is actually little difference between Republicans and Democrats or self-described conservatives and liberals in their support of the key components of the social safety net: Social Security, Medicare, Medicaid, and even unemployment insurance. Polls consistently show that the overwhelming majority of people across the political spectrum strongly support keeping these programs at their current level or even expanding them. The main impulse for cutting back these programs comes from elites of both political parties who would like to pay less in taxes....

I think there is a distinction here after all. Republicans who support these programs do so because (often based upon a misunderstanding of how these programs are funded) they believe it is their money. Each month they contribute to Social Security, Medicare, and Unemployment Compensation, the government keeps it safe for them somewhere, and then at some future date they will spend the money they contributed. It's their money. They don't want the programs eliminated, but they do want to stop the "underserving" from spending the money they contributed. Democrats, on the other hand, are much more likely to support these programs as a means of lifting the unfortunate -- i.e. as a social insurance transfer from those who had good luck with where they were born, family wealth, education, health, and so on to those who had bad luck of one type or another. To put this another way, I don't think the elites in the Democratic Party mind paying higher taxes to support these programs even if it means that there are transfers from the fortunate to the not so fortunate (but they are naive with their "we need to save the programs through cuts now to avoid cuts later" arguments). Republicans mind quite a bit.

We can see this distinction more clearly through another point Dean makes:

There are much smaller programs that are designed primarily to help the poor or near poor where there is a clearer partisan divide (e.g. TANF, SSI, WIC). While it may be more accurate to describe the debate over these programs as a values issue (with a strong racial component), they amount to a relatively small portion of government budgets. These programs may be important to the people directly affected, but they are not central to debates over the budget.
It is plausible to argue that these anti-poverty programs have taken an outsize role in national debates, but this is largely because the electorate is poorly informed about their size. In that case the debate is not over values (I would be for cutting back TANF too if I thought it was one-third of the federal budget), but simple an issue of misinformation.

Another way to say this is that as soon as many conservatives think their money might go to someone else, the underserving poor in particular, they object.

I don't mean to imply that there are no Republicans using the ideological issue of smaller, less intrusive government as a cover for policies that serve special interests (businesses, the wealthy). Many do. I just don't think the statement that "there is actually little difference between Republicans and Democrats or self-described conservatives and liberals in their support of the key components of the social safety net: Social Security, Medicare, Medicaid, and even unemployment insurance" is fully accurate. There's an important distinction that underlies the concept of social insurance, the distinction between a society where risks that individuals cannot control are shared broadly or felt individually, and it's important to recognize this difference between the two political parties.

Monday, May 20, 2013

Vintage Krugman: Stating the Obvious

Don't say you weren't warned. This is Paul Krugman, just a few days under 10 years ago:

Stating the Obvious, by Paul Krugman, Commentary, NY Times, May 27, 2003: "The lunatics are now in charge of the asylum." So wrote the normally staid Financial Times, traditionally the voice of solid British business opinion, when surveying last week's tax bill. Indeed, the legislation is doubly absurd: the gimmicks used to make an $800-billion-plus tax cut carry an official price tag of only $320 billion are a joke, yet the cost without the gimmicks is so large that the nation can't possibly afford it while keeping its other promises.
But then maybe that's the point. The Financial Times suggests that "more extreme Republicans" actually want a fiscal train wreck: "Proposing to slash federal spending, particularly on social programs, is a tricky electoral proposition, but a fiscal crisis offers the tantalizing prospect of forcing such cuts through the back door."
Good for The Financial Times. It seems that stating the obvious has now, finally, become respectable.
It's no secret that right-wing ideologues want to abolish programs Americans take for granted. But not long ago, to suggest that the Bush administration's policies might actually be driven by those ideologues — that the administration was deliberately setting the country up for a fiscal crisis in which popular social programs could be sharply cut — was to be accused of spouting conspiracy theories.
Yet by pushing through another huge tax cut in the face of record deficits, the administration clearly demonstrates either that it is completely feckless, or that it actually wants a fiscal crisis. (Or maybe both.)
Here's one way to look at the situation: Although you wouldn't know it from the rhetoric, federal taxes are already historically low as a share of G.D.P. Once the new round of cuts takes effect, federal taxes will be lower than their average during the Eisenhower administration. How, then, can the government pay for Medicare and Medicaid — which didn't exist in the 1950's — and Social Security, which will become far more expensive as the population ages? (Defense spending has fallen compared with the economy, but not that much, and it's on the rise again.)
The answer is that it can't. The government can borrow to make up the difference as long as investors remain in denial, unable to believe that the world's only superpower is turning into a banana republic. But at some point bond markets will balk — they won't lend money to a government, even that of the United States, if that government's debt is growing faster than its revenues and there is no plausible story about how the budget will eventually come under control.
At that point, either taxes will go up again, or programs that have become fundamental to the American way of life will be gutted. We can be sure that the right will do whatever it takes to preserve the Bush tax cuts — right now the administration is even skimping on homeland security to save a few dollars here and there. But balancing the books without tax increases will require deep cuts where the money is: that is, in Medicaid, Medicare and Social Security.
The pain of these benefit cuts will fall on the middle class and the poor, while the tax cuts overwhelmingly favor the rich. For example, the tax cut passed last week will raise the after-tax income of most people by less than 1 percent — not nearly enough to compensate them for the loss of benefits. But people with incomes over $1 million per year will, on average, see their after-tax income rise 4.4 percent.
The Financial Times suggests this is deliberate (and I agree): "For them," it says of those extreme Republicans, "undermining the multilateral international order is not enough; long-held views on income distribution also require radical revision."
How can this be happening? Most people, even most liberals, are complacent. They don't realize how dire the fiscal outlook really is, and they don't read what the ideologues write. They imagine that the Bush administration, like the Reagan administration, will modify our system only at the edges, that it won't destroy the social safety net built up over the past 70 years.
But the people now running America aren't conservatives: they're radicals who want to do away with the social and economic system we have, and the fiscal crisis they are concocting may give them the excuse they need. The Financial Times, it seems, now understands what's going on, but when will the public wake up?

Tuesday, May 07, 2013

'Extended Benefits Didn’t Keep People From Taking Jobs'

We can be "kinder and gentler" without destroying (or even much affecting) the job market:

Extended Benefits Didn’t Keep People From Taking Jobs, by Amy Schatz, WSJ: Extended unemployment insurance benefits in the most recent recession prompted some people who would otherwise have dropped out of the workforce to stay in a little longer, but didn’t encourage people to reject jobs, according to new research recently released by the Federal Reserve Bank of San Francisco [by] Robert Valletta, a San Francisco Fed economist and Henry Farber, a Princeton University economist...

Sunday, May 05, 2013

'Does Immigration Hurt Support for the Welfare State?'

Does immigration undermine support for social insurance programs?:

Does immigration hurt support for the welfare state?, by Dan Hopkins: ... there is a ... concern about immigration ... that you are more likely to hear from the European left than the American right: that immigration undermines the social welfare state by making voters less supportive of public spending. ...
The striking thing about the United States, though, is that increasing ethnic and racial diversity hasn’t dampened our public investments.
We can study this by looking at U.S. cities. American municipalities vary markedly in their ethnic and racial demographics, and they routinely make decisions about how to allocate scarce dollars. But when we examine cities’ spending patterns in recent decades, we see that growing diversity has done little to change public good provision. Your public library is likely to have seen cutbacks, but it’s probably not because of your neighbors’ backgrounds. ...

He goes onto provide evidence that a 1999 paper by Alberto Alesina, Reza Baqir, and William Easterly that came to the opposite conclusion had causality backwards. Correcting for this, he finds that "Among the 1,000 largest U.S. cities, those that rapidly diversified saw the same changes in their spending on those categories as did cities that did not diversify."

Monday, April 29, 2013

'The Welfare Queen of Denmark'

[Listening to Nouriel Roubini's pessimism about the future during the lunch panel as I do this -- the video of the panel discussing the state of the global economy should be available later today.]

Nancy Folbre objects to the "gendered language" used in the debate over social insurance programs, and to the conclusion that "cuddly" capitalism is bad for innovation:

The Welfare Queen of Denmark, by Nancy Folbre, Commentary, NY Times: ...In short, the Danish record offers no support for the social-spending-hurts-growth position. That doesn’t mean that some economists can’t figure out a way to make that argument anyway. For instance, Daron Acemoglu, James A. Robinson and Thierry Verdier have devised a theoretical model to show why what they term “cuddly” capitalism of the Danish sort may just be free-riding on the “cutthroat” capitalism of the United States sort.
The model posits that cutthroat levels of inequality, as in the United States, promote high levels of technological innovation. The benefits of these innovations cross national borders to help Danes and other Scandinavians achieve growth. In other words, they may be able to get away with being “cuddly,” but some country (like the United States) just has to be tough enough to reward risk-taking, even if it leads to hurt feelings.
The gendered language deployed in this model echoes a general tendency to view social spending in feminine terms: women like to cuddle and are often described as more risk-averse than men. It’s not uncommon to see the term “nanny state” used as a synonym for the welfare state.
Call the Scandinavians sissies if you like, but plenty of evidence in the latest World Competitiveness Report testifies to high levels of overall innovation there — as you might expect in economies even more export-oriented than our own. Danes are world leaders in renewable energy technology, especially wind power. ...

As I've noted before, "an enhanced safety net -- a backup if things go wrong -- can give people the security they need to take a chance on pursuing an innovative idea that might die otherwise, or opening a small business. So it may be that an expanded social safety net encourages innovation."

Sunday, April 21, 2013

Danes Aren't Working???

Josh Barro tweets:

As @DeanBaker13 points out, that NYT story on Danish welfare didn't really make the case that Danes aren't working.

Here's Dean:

NYT Uses News Story to Express Dislike of Danish Welfare State, by Dean Baker: The NYT ... features a diatribe against the Danish welfare state that is headlined, "Danes Rethink a Welfare State Ample to a Fault." There's not much ambiguity in that one. The piece then proceeds to present a state of statistics that are grossly misleading and excluding other data points that are highly relevant. ...
The piece ... goes on to describe the extent of the Danish welfare state with its 56 percent top marginal income tax rate, telling readers:
"But few experts here believe that Denmark can long afford the current perks. So Denmark is retooling itself, tinkering with corporate tax rates, considering new public sector investments and, for the long term, trying to wean more people — the young and the old — off government benefits."
Hmmm, it would be interesting to know what data the experts are looking at. According to the IMF, Denmark had a ratio of net debt to GDP at the end of 2012 of 7.6 percent. This compared to 87.8 percent in the United States. Its deficit in 2012 was 4.3 percent of GDP, but almost all of this was do the downturn. The IMF estimated its structural deficit (the deficit the country would face if the economy was at full employment) at just 1.1 percent of GDP. Furthermore, the country had a huge current account surplus of 5.3 percent of GDP in 2012... This means that Denmark is buying up foreign assets at a rapid rate. ...
If there is something unsustainable in this picture, it is not the sort of data that economists usually look at. Is marijuana legal in Denmark?
Then we find the real problem is that no one in Denmark is working:
"In 2012, a little over 2.6 million people between the ages of 15 and 64 were working in Denmark, 47 percent of the total population and 73 percent of the 15- to 64-year-olds.
"While only about 65 percent of working age adults are employed in the United States, comparisons are misleading, since many Danes work short hours and all enjoy perks like long vacations and lengthy paid maternity leaves, not to speak of a de facto minimum wage approaching $20 an hour. Danes would rank much lower in terms of hours worked per year."
So in spite of the generous Danish welfare state a higher percentage of its working age population works than in the United States. (Actually Denmark ranks near the top of the world in employment to population ratios.) Yet, somehow this doesn't really count because people in Denmark get vacations, work shorter hours, and have a higher effective minimum wage.
This ranks pretty high in the non sequitur category, apparently when you want to bash the welfare state, the rules of logic apparently do not apply. Danes, like most Europeans, have opted to take much of the gains in productivity growth over the last three decades in the form of shorter work years rather than higher income. (One interesting result of this practice is that we have some hope to save the planet from global warming -- greenhouse gas emissions are highly correlated with income.) Of course Danes still work about 8 percent more hours on average than hard-working Germans, according to the OECD. If there is a problem in this picture, the NYT might want to devote a few paragraphs to telling readers what it is.
As far as the $20 an hour effective minimum wage, isn't the problem of a high minimum wage supposed to be that it creates unemployment. But the NYT just told us that Denmark has higher employment... (My brain hurts.)
Okay, we get it. The NYT doesn't like Denmark's welfare state. It doesn't really have any data to make the case that Denmark's welfare state is falling apart and leading to all sorts of bad outcomes, but they can wave their arms really fast and hey, they are the New York Times.

Tuesday, April 09, 2013

'We're Free Up Here Too, Eh?'

Frances Woolley:

We're free up here too, eh?: Paul Krugman has recently taken aim at the rhetoric of the US right:

From the enthusiastic reception American conservatives gave Friedrich Hayek’s “Road to Serfdom,” to Reagan, to the governors now standing in the way of Medicaid expansion, the U.S. right has sought to portray its position not as a matter of comforting the comfortable while afflicting the afflicted, but as a courageous defense of freedom.

That got me to thinking. When I read or watch the US media, I hear lots of talk about freedom - much more than in Europe, say. But do Americans actually feel freer than people elsewhere?

The World Values Survey regularly polls people from around the globe, and asks them about their attitudes, their values, and how much freedom of choice and control they feel they have over their lives. 

I don't know if Americans actually do have more freedom than other people - they aren't allowed to import Kinder Eggs, for example, or eat authentic haggis. But I would have thought that, given that the US is supposed to be the land of the free, Americans would at least think that they have control over their lives. As it turns out, however, there isn't much difference between the average American and the average Canadian in the self-reported freedom stakes. As for socialism killing freedom - the Swedish report just as much freedom as Americans do. ...

'Let the Punishment Fit the Crime of the Recession'

We are, as they say, live:

Let the Punishment Fit the Crime of the Recession, by Mark Thoma: As Paul Krugman observed recently,  “the urge to see depression as a necessary and somehow even desirable punishment for past sins, while inveighing against any attempt to mitigate suffering — is as strong as ever.”  Many of those who see our economic problems in these terms believe the sin we committed is too much debt fueled consumption and government spending. According to this view punishments such as austerity and high levels of unemployment provide a moral lesson that helps to prevent us from making the same mistakes again.
This is bad economics and it has the moral lesson all wrong. ...

Monday, April 08, 2013

'Scrap the Cap'

Nancy Folbre:

The People’s Choice for the People’s Pension, by Nancy Folbre: Social Security, the most transparently self-financed program of the federal government, is not increasing our budget deficit. The most recent trustees’ report shows sufficient funds to pay full benefits until 2033.
No one is making out like a bandit: Social Security beneficiaries who retired in 2010 are expected to get back approximately what they paid in.
If we wanted to adopt a cautious policy measure that would eliminate the shortfalls predicted 20 years down the road, we could eliminate the cap on earned income subject to Social Security taxes, currently set at $113,700. Such a measure would lead to increased payments by about the top 5.2 percent of wage earners.
Legislation designed to “scrap the cap” has been introduced in Congress. ... But as Thomas B. Edsall pointed out in a recent commentary, “scrap the cap” has apparently been taken off the table, despite evidence of considerable public support for it. ...

It's not hard to guess why, but as she goes on to explain, "lobbying efforts and misinformation campaigns aimed at bringing the program down" are a big part of the "history of class warfare over social insurance."

Paul Krugman: Insurance and Freedom

Social insurance does not undermine free societies:

Insurance and Freedom, by Paul Krugman, Commentary, NY Times: ...How many Americans will be denied essential health care in the name of freedom?
I’m referring, of course, to the question of how many Republican governors will reject the Medicaid expansion that is a key part of Obamacare. What does that have to do with freedom? In reality, nothing. But when it comes to politics, it’s a different story. ... From the enthusiastic reception American conservatives gave Friedrich Hayek’s “Road to Serfdom,” to Reagan, to the governors now standing in the way of Medicaid expansion, the U.S. right has sought to portray its position not as a matter of comforting the comfortable while afflicting the afflicted, but as a courageous defense of freedom. ...
These days, conservatives make very similar arguments against Obamacare. For example, Senator Ron Johnson of Wisconsin has called it the “greatest assault on freedom in our lifetime.” And this kind of rhetoric matters, because when it comes to the main obstacle now remaining to more or less universal health coverage — the reluctance of Republican governors to allow the Medicaid expansion that is a key part of reform — it’s pretty much all the right has. ...
[However], Medicaid enjoys remarkably strong public support. And now that health reform is the law of the land, the economic and fiscal case for individual states to accept Medicaid expansion is overwhelming. ... But such practical concerns can be set aside if you can successfully argue that insurance is slavery.
Of course, it isn’t. In fact, it’s hard to think of a proposition that has been more thoroughly refuted by history than the notion that social insurance undermines a free society. ...
In fact, the real, lived experience of Obamacare is likely to be one of significantly increased individual freedom. For all our talk of being the land of liberty, those holding one of the dwindling number of jobs that carry decent health benefits often feel anything but free, knowing that if they leave or lose their job, for whatever reason, they may not be able to regain the coverage they need. Over time, as people come to realize that affordable coverage is now guaranteed, it will have a powerful liberating effect.
But what we still don’t know is how many Americans will be denied that kind of liberation — a denial all the crueler because it will be imposed in the name of freedom.

Wednesday, March 27, 2013

'Declining Wealth Brings a Rising Retirement Risk'

The "news isn’t good" about the shift from defined-benefit to defined-contribution pension plans:

Declining Wealth Brings a Rising Retirement Risk, by Bruce Bartlett, Commentary, NY Times: ...[In] defined-benefit ... pension plans..., workers are promised a specific income at retirement, which the employer provides. The employer bears all the risk of market fluctuations. Under a defined contribution scheme, such as a 401(k) plan, the worker and the employer jointly contribute to a tax-deductible and tax-deferred account from which the worker will finance retirement. ...
Now the first generation of workers who have virtually all their pension saving in defined-contribution plans is nearing retirement, and the news isn’t good. According to a March 19 report from the Employee Benefit Research Institute, only about half of workers nearing retirement have confidence that they have enough money saved for an adequate retirement.
Not surprisingly, retirement saving has taken a back seat to more pressing concerns – coping with unemployment, maintaining standards of living during an era of slow wage growth, putting children through increasingly expensive colleges and so on. ...
This problem is much more severe for black Americans. ... The wealth gap isn’t only racial, it’s generational...
What’s really depressing about these studies is the lack of solutions and the likelihood that the problem will only get worse.
Republicans in Congress have pressed for years to convert Social Security, a classic defined-benefit pension, into a defined contribution plan, and also to convert Medicare into a voucher program. These changes would shift even more of the financial risk in retirement onto families that have yet to adapt to fundamental changes in employer pensions and the economy over the last 30 years. The future doesn’t look pretty.

Members of Congress appear to be eager to cut retirement benefits even further to show they can make the hard choices (and the president seems to be on board). They should raise the payroll cap instead, but the "hard choice" that would hit the people who can afford it isn't under consideration. It's not hard to imagine why.

Monday, March 25, 2013

'For 'Faster Growth,' Soak the Poor?'

Glad to see someone (Josh Barro) trying to counter the latest nonsense from George Shultz, Gary Becker, Michael Boskin, John Cogan, Allan Meltzer, and John Taylor:

For 'Faster Growth,' Soak the Poor?, by By Josh Barro: This weekend, the Wall Street Journal assembled a redoubtable list of conservative heavies in economics (George Schulz! Gary Becker! John Taylor!) to produce a completely insane account of what is wrong with America's economy and how to fix it. The upshot of the piece is that the U.S. economy is in the tank because the government gives too much money to poor people, and so it should stop. ...
The article is another great example of conservatives' empathy gap on economic issues. The authors emphasize that entitlement cuts must be done in a "humane" way. But they do not stop and think about whether a one-third reduction in Social Security benefits would seem humane to a middle-class person who depends on Social Security as his largest source of income in retirement, as most do. They don't reckon with the possibility that capping the federal commitment to Medicaid would have not just fiscal effects but also human ones: denying health care to people who need it and cannot afford it. ...
So why respond to the poverty-trap problem by calling for big cuts to benefits? The answer, of course, is that every economic ill must be shoehorned into an argument for lower taxes and less government spending. If a proposed solution to an economic problem doesn't involve taking benefits away from poor people, then it's not a solution at all -- at least by the logic that prevails on the Wall Street Journal editorial page.

Monday, March 18, 2013

'How Did Once-Respectable Conservative Economists Get Swept Up in Moocher Class Mania?'

Brad DeLong: reviews Nicholas Eberstadt's "A Nation of Takers":

... If there was a single moment when Mitt Romney lost the 2012 presidential election, it was in May when he stood in front of the $50,000-a-plate audience at Sun Capital honcho Marc Leder’s home in Boca Raton and spoke his soon-to-be-infamous words:

There are 47 percent of the people who will vote for the President no matter what…. There are 47 percent who are with him, who are dependent upon government…who believe that government has a responsibility to care for them, who believe that they’re entitled to health care, to food, to housing, you name it…. These are people who pay no income tax…. My job is not to worry about those people—I’ll never convince them that they should take personal responsibility and care for their lives…

This is what Mark Schmitt of the Roosevelt Institute calls “the theory of the moocher class.” And Romney is all in with it. ...

Those of us who know the numbers, or who simply live in America and look around, know that the 47 percent who aren’t paying federal income taxes this year are by and large not “moochers.” About a fifth are elderly retired. About two-thirds are in households with incomes of less than $20,000 a year—definitely not living high. And nearly one-third owe no income taxes because of the earned-income and child tax credits, which both became law with bipartisan support.

As a group, the 47 percent who pay no income taxes do not lack work ethic. They do take personal responsibility for their lives. They may not pay federal income taxes this year, but they pay plenty of sales, property, and payroll taxes. For the most part, they do not constitute the Democratic base. More than half of the 47 percent are the elderly white and Southern white voters who voted for Romney by substantial margins.

So how does someone like Romney, along with his peers and all their staffs and everyone else in that Boca Raton room, become convinced that 47 percent of Americans are the moochers, the takers, dependent on “free gifts” from the government, lacking work ethic, lacking personal responsibility?

Enter Nicholas Eberstadt of the American Enterprise Institute (AEI), with his contribution to the think tank’s “New Threats to Freedom” series. We need venture no further into A Nation of Takers than the bottom of the second page…

As I noted yesterday, conservatives are still blaming their loss in the presidential election on the idea that Democrats are "giving away free stuff" to their constituents. I think this passage highlights the mistake they are making:

The truth is that the American government spends much of its money transferring resources from some members of the broad middle class to others in the same class: unemployment insurance, Social Security, Medicare, and increasingly Medicaid (which every day shifts more from a program focused on the nonelderly poor to one spending a greater share on the disabled and on the elderly who can no longer make their Medicare co-payments). The recipients of these social-insurance benefits do not think of themselves as moochers. They paid into these systems. They believe that they earned those benefits—and in large part they did.
Eberstadt sees things differently...

The good thing -- for Democrats -- is that the more that conservatives are criticized over this, the more they seem to dig in their heels.

Sunday, March 17, 2013

Clawing Back 'Free Stuff for the Wealthy'

Conservatives are still blaming their loss in the presidential election on "giving away free stuff":

Today on CNN, president of the American Conservative Union Al Cardenas offered an explanation for conservatives’ defeat in November: They weren’t giving away free stuff. He said, “plenty of people have asked me what happened after the 2012 election. . . . Well, look, we were selling broccoli to 70 percent of the American electorate, and they were giving away cheesecake to 100 percent of the electorate.”

They call most everyone who isn't white and rich moochers, and then whine about losing.

But who are the real recipients of income they did not earn? Over the last several decades, almost all of the gains from economic growth have gone to the top. Income flowing to lower income levels has not kept up with changes in worker productivity, and that means members of some group -- guess which one -- received income that exceeds their productivity growth, i.e. in excess of their contribution to national output.

Clawing some of that income back through taxes or other means is far from mooching. In fact, it supports a core conservative idea, making sure that people receive the income that they've earned (or, the flip-side which is being pitched above -- please excuse the double negative -- the conservative obsession with making sure that people don't get income they do not deserve).

Thursday, March 14, 2013

'Steve Rattner: Stop Stealing from Our Kids!'

Dean Baker is tired of the wealthy and powerful using scare stories about social insurance programs to keep the spotlight off of the real issue:

Steve Rattner: Stop Stealing from Our Kids!, by Dean Baker: Steve Rattner wants someone to stop stealing from our kids according to the headline of his blogpost in the NYT. The finger should be pointed backwards in Rattner's case because if anyone is going to jeopardize the living standards of our kids it is wealthy people like Mr. Rattner.
We have seen an enormous upward redistribution of income over the last three decades. As a result most workers have seen little of the benefits of economic growth. If this upward redistribution continues, then our children are unlikely to see much of the gains of growth in the future.
Rather than have people focus on the policies that have led to this upward redistribution..., wealthy people like Rattner use their money and power to try to divert attention to the cost of Social Security and Medicare. They have thrown enormous resources into trying to scare people with the prospective burdens posed by these programs. For example, Rattner today tells us that with Social Security:
"The present value of the unfunded liability is 'only' $9 trillion."
Are you scared yet? After all, it's "only" $9 trillion. Didn't you love that sarcasm? Yes, $9 trillion is a lot of money... But if we are having a serious discussion, we would talk about this as a share of future income. It's about 0.7 percent of future GDP. Does that scare you?
That's a bit less than half of the cost of the wars in Afghanistan and Iraq over the last decade, that's hardly trivial, but that expense would not impoverish our kids. Medicare and Medicaid are projected to cost more but that has nothing to do with the old stealing from the young, their higher costs are the result of doctors, drug companies, medical supply companies and other providers in the industry charging us two to three times as much as their counterparts in other wealthy countries. If we paid the same amount per person for our health care as people in other wealthy countries then we would be looking at long-term budget surpluses rather than deficits.
The reality is that the hit to future living standards from demographics is relatively modest. It is easily dwarfed by the gains from projected productivity growth even under very pessimistic assumptions. Even if productivity just grows at the same rate as it did in the slowdown era from 1973-1995 the gains from productivity growth through 2035 would be more than three times the potential hit that our children would face from supporting a larger population of retirees. And after 2035 productivity continues to grow, even as the demographics barely change. ...
But this story depends on our children being able to capture the gains of productivity growth rather than seeing them all go to the top. That requires a reversal of the policies of the last three decades. But rather than having people talk about the policies that are causing this massive upward redistribution, Rattner is trying to set children against their parents and grandparents. And the NYT is apparently happy to give him the space to do so.

If we could correct the "mal-distribution" of income so that income growth does a better job of tracking the productivity growth of workers and other groups (worker's incomes have not kept pace with their increased productivity in recent decades, evidence of distortion in the distribution of income with too much to the top, not enough to the middle and bottom), many of our worries about funding social programs would evaporate (and if the distorted distrubution had been corrected in the past instead of being exacerbated through tax cuts and other means, we'd be in much, much better shape today).

Thursday, March 07, 2013

'The War On Entitlements'

Dean Baker's blog is called "Beat the Press," but he praised this effort (the original is quite a bit longer, and makes additional points):

The War On Entitlements, by Thomas Edsall, Commentary, NY Times: ...Currently, earned income in excess of $113,700 is entirely exempt from the 6.2 percent payroll tax that funds Social Security benefits... Simply by eliminating the payroll tax earnings cap — and thus ending this regressive exemption for the top 5.2 percent of earners — would, according to the Congressional Budget Office, solve the financial crisis facing the Social Security system.
So why don’t we talk about raising or eliminating the cap – a measure that has strong popular, though not elite, support? ... The Washington cognoscenti are more inclined to discuss two main approaches...: means-testing of benefits and raising the age of eligibility for Social Security and Medicare. ... Means-testing and raising the age of eligibility as methods of cutting spending appeal to ideological conservatives for a number of reasons.
First, insofar as benefits for the affluent are reduced or eliminated under means-testing, social insurance programs are no longer universal and are seen, instead, as a form of welfare. Public support would almost certainly decline, encouraging further cuts in the future. Second, the focus on means-testing and raising the age of eligibility diverts attention from a much simpler and more equitable approach: raising the payroll tax to apply to the earnings of the well-to-do, a step strongly opposed by the ideological right. ... Third, and most important in terms of the policy debate, while both means-testing and eliminating the $113,700 cap on earnings subject to the payroll tax hurt the affluent, the latter would inflict twice as much pain. ...
Theda Skocpol ... of ... Harvard and an authority on the history of the American welfare state contended ... that policy elites avoid addressing the sharply regressive nature of social welfare taxes because, “at one level, it’s very, very privileged people wanting to make sure they cut spending on everybody else” while “holding down their own taxes.” ...

Monday, February 25, 2013

'Fix the Economy, Not the Deficit'

Dean Baker:

Fix the Economy, Not the Deficit, by Dean Baker, The American Prospect: It’s hard to be happy about the prospect of the sequester ... going into effect at the end of the week. Not only will it will mean substantial cuts to important programs; it will be a further drag on an already weak economy, shaving 0.6 percentage points off our growth rate. ...
Of course, it could be worse. Half of the cuts are on the military side. This will help to bring our bloated military sector closer to its pre-September 11 share of the economy, and going forward, the principle that domestic cuts be matched by cuts in defense spending is certainly better than the idea of attacking domestic spending alone. In addition, the most important programs in the budget—Social Security, Medicare, and Medicaid—have been largely spared the ax—an important victory in the 2011 negotiations. ...
The next step at that point is unclear. President Obama has explicitly offered cuts in Social Security and Medicare if the Republicans will go along with higher taxes. For those who oppose cuts to these programs, the generous view of this maneuver is that he knows that the Republicans won’t budge on taxes; by offering a compromise, he is simply making them look unreasonable. The less  generous view is that he is actually willing to make cuts in these programs, sharing the view of Washington Post-centrist types that seniors are living too high on the hog. 
While the odds are against a “grand bargain” that couples tax increases with cuts to Medicare, Medicaid, and Social Security, it remains a possibility. However, it’s more likely that President Obama and Congress will agree to some scaled-down version of the sequester... This will have the deficit hawks yelling and screaming, but that would be the best plausible outcome from the standpoint of the economy. ...

My view is of the less generous variety. I think Obama is quite willing to make these cuts.