Category Archive for: Social Insurance [Return to Main]

Monday, February 10, 2014

Paul Krugman: Writing Off the Unemployed

Why have politicians turned their backs on the unemployed?:

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

Sunday, February 09, 2014

Who Benefits from Benefits?

Chris Dillow:

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

Wednesday, January 22, 2014

'The Political Economy of Populism'

Paul Krugman:

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

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

'Brookings EITC Proposal Mostly Moves in the Wrong Direction'

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sunday, January 19, 2014

'What Happens When the Poor Receive a Stipend?'

The benefits of income supplements for the poor:

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

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

Monday, January 13, 2014

Paul Krugman: Enemies of the Poor

Will Republicans ever care about the poor?:

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

Friday, January 10, 2014

Paul Krugman: The War Over Poverty

The changing politics of poverty:

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

Thursday, January 09, 2014

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

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

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

Tuesday, December 17, 2013

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

My latest column:

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

[Traveling today, will post as I can.]

Wednesday, December 11, 2013

The EITC versus The Minimum Wage

Brad DeLong in 2004:

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

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

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

Arin Dube in 2013:

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

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

They are complements, not substitutes.

Monday, December 09, 2013

Paul Krugman: The Punishment Cure

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

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

Wednesday, December 04, 2013

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

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

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

Here are the facts they discuss:

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

Wednesday, November 27, 2013

'Breadlines Return'

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

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

Friday, November 22, 2013

'A Universal Income is Not Such a Silly Idea'

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

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

Tuesday, November 19, 2013

'The Geezers Are Not Alright'

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

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

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

The Post writes:

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

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

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

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

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

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

Thursday, November 14, 2013

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

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

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

Friday, November 01, 2013

'Slashing the Food Stamps Program'

From the NY Times editorial page:

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

Duncan Black puts it this way:

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

Paul Krugman: A War on the Poor

Why do Republicans treat the poor so poorly?:

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

Saturday, October 26, 2013

Democrats Will Have to Swallow Entitlement Cuts?

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

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

Tuesday, October 15, 2013

'The GOP Tax'

Paul Krugman:

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

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

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. ...