What Les Misérables Can Teach Us About Paul Ryan's Poverty Plan

Mar 7, 2014Nell Abernathy

Conservatives who say getting a job is the answer to poverty fail to acknowledge the realities of low-income work.

Conservatives who say getting a job is the answer to poverty fail to acknowledge the realities of low-income work.

Les Misérables returned to Broadway last week, just in time for Victor Hugo’s tale of poverty and redemption to provide some context for thinking about the poverty report Rep. Paul Ryan released Monday. With a history of more than 6,000 Broadway performances and a Hollywood spin-off starring Anne Hathaway, the lavish musical has probably engendered more popular sympathy for the down-and-out than any progressive politician sticking to her talking points ever could.

When the resident villain, Inspector Javert, castigates characters who can’t find jobs, can’t feed children, can’t escape a past mistake, with his motto, “honest work, just rewards,” the American viewing public – conservative and progressive alike – laugh bitterly at his naïveté. “They are trying,” we want to shout at the stage.

But what if you live in a society where honest work doesn’t always lead to just rewards? This question, at the center of upheaval for both the characters and the society Les Mis portrays, is also worth asking in 21st century America.

The central flaw of Ryan’s report is his assumption that a job will lift incomes for poor Americans. Progressives agree that work should provide a path out of poverty, but given the dysfunction of our current labor markets, we know that Ryan's assertions hit the same false notes as Javert’s.

It is impossible to talk about poverty in the U.S. without addressing the fact that today work does not guarantee economic security.

Of the 26 million working-age adults living in poverty in 2012, more than 10 million were working full- or part-time. (This is according to the Official Poverty Measure used by Ryan, though most anti-poverty advocates, including me, prefer the Supplemental Poverty Measure.) Two-thirds of children in poverty live in a household with at least one working adult. But with the minimum wage stagnating at nearly 25 percent below its historical value, and part-time work at historic highs, a job in America no longer means independence. More than half of fast-food workers rely on one of the public assistance programs mentioned in Ryan’s report, according to an analysis from the UC Berkeley Labor Center. Nearly a quarter of the total workforce relies on public programs.

There are 16 million poor adults who aren’t working. Ryan suggests they are stuck in a “poverty trap” of federal programs that create disincentives for work. Incentives aren’t the whole story (there are plenty of Jean Valjeans out there facing structural disconnection from the labor market), but I will concede that incentives are a part of the problem. Indeed, research shows that single mothers must often choose between a bad job with no benefits or a meager government check that at least allows them to care for their children.

The conservative solution has been to cut government support in order to force workers into poverty-level work. This was the philosophy behind the 1996 welfare reform law, which Ryan’s report trumpets as one of the great successes in the war on poverty. Welfare reform did raise incomes for some of the American poor, but as my colleagues Andrea Flynn and Ellen Chesler write in a forthcoming paper, “increases in employment and wages moved many women off welfare, but also failed to enable them to achieve long-term economic independence” because the work they took on did not allow them to complete their education or provide health care benefits.

Progressive solutions to poverty include a range of policies designed to make work a true pathway out of poverty. Raising the minimum wage to $10.10 would lift 900,000 people out of poverty, according to the conservative CBO report, or nearly 6 million, according to Arindrajit Dube’s review of 12 different minimum wage studies. Paid family leave can help single moms stay in the workforce and earn higher wages. Recent reviews of California’s 10-year-old paid leave policy show that women who have paid leave work 16 percent more weekly hours and make 5 percent more in hourly wages than women who don’t. A government-funded work program could reintegrate the 3.8 million adults who have been out of work and looking for more than 27 weeks, and has been supported by conservative economists who understand that sometimes the down-and-out need a hand finding “honest work.” None of these policies were mentioned by Congressman Ryan, nor did he even acknowledge the state of work in America.

I believe Mr. Ryan is sincere in his attempt to propose solutions to poverty. Javert himself is ultimately a sympathetic character, eager to do his duty. The problem with Javert, and some conservative leaders, is that they cannot tolerate a world of nuance and moral ambiguity where truisms like “honest work, just rewards” are insufficient answers to societal challenges.

With so many Americans living in poverty, including 22 percent of our children (the highest child poverty rate among rich countries), we should have an honest debate about which policy responses are effective and which are not. The reality of low-income work must be part of that debate.

Nell Abernathy is the Program Manager for the Roosevelt Institute's Bernard L. Schwartz Rediscovering Government Initiative.

 

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Daily Digest - March 7: Holding Banks to a Higher Standard

Mar 7, 2014Rachel Goldfarb

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What's the Deal: How to Make the Financial System Safer for Everyone with Mike Konczal (YouTube)

Click here to receive the Daily Digest via email.

What's the Deal: How to Make the Financial System Safer for Everyone with Mike Konczal (YouTube)

Roosevelt Institute Fellow Mike Konczal explains why banks need higher capital standards to prevent another collapse and discusses the economic reform issues that the Roosevelt Institute will be working on throughout 2014.

Obama's Budget and the Politics of Poverty (To The Point)

Mike Konczal speaks with Warren Olney about how the parties aim to split the budget for anti-poverty programs. The GOP would increase funding for some programs, but at the cost of others.

Paul Ryan Accidentally Makes the Case Against Means-Testing (MSNBC)

When Paul Ryan brings up a child who feels unloved because he gets free lunch instead of a brown-bag lunch, Ned Resnikoff sees an opening for giving all students free lunch.

Together, New Haven Activists and Leaders Strike Back Against Wage Theft (In These Times)

For the first time, local police brought larceny charges against an employer who shortchanged his workers. Melinda Tuhus says these steps will help to protect low-wage workers, including undocumented workers.

Unions and Job Security (PolicyShop)

Matt Bruenig counters a recent argument that unions can't provide real job security anymore. He says the point isn't absolute job security anyway, but safety from firing without cause.

The Foreclosure Nightmare Isn’t Over Yet (MSNBC)

Suzy Khimm reports on one family's five-year fight against foreclosure in Maryland. Policies requiring mediation have kept them in limbo, as have the mortgage servicer's repeated runarounds.

Democrat Says CFTC's Low Budget 'Sucks' (The Hill)

Rep. Sam Farr (D-CA) says that the Commodity Futures Trading Commission's lack of sufficient funding could be very dangerous if it handicaps enforcement, reports Tim Devaney.

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Daily Digest - March 6: Washington State Points the Way on Wages

Mar 6, 2014Rachel Goldfarb

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Highest Minimum-Wage State Washington Beats U.S. Job Growth (Bloomberg)

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Highest Minimum-Wage State Washington Beats U.S. Job Growth (Bloomberg)

Victoria Stilwell, Peter Robison, and William Selway report that Washington hasn't just shown higher job growth – it also has lower poverty rates, and the supposedly vulnerable service industry is growing.

Minimum Wage Raise Would Reduce Food Stamp Spending By $46 Billion Over Decade: Report (HuffPo)

A new report from the Center for American Progress analyzes how higher wages would reduce need, writes Dave Jamieson. Raising the minimum wage would decrease the "culture of dependency" that Republicans decry.

The U.S. Economy's Big Baby Problem (The Atlantic)

The American birthrate has hit a new record low. That wouldn't be a big deal, writes Derek Thompson, if our economy didn't rely so heavily on families' consumer spending.

Over 2 Million People Now Without Unemployment Benefits (MSNBC)

The number of long-term unemployed workers in the U.S. keeps growing, and Ned Resnikoff says it's looking less and less likely that Congress will reauthorize their extended unemployment insurance.

When Regulation Threatens, Bankers Predict Doom For Main Street (ProPublica)

Jesse Eisinger explains how banks are trying to chip away at financial reform by negotiating behind the scenes on little-known issues. Going after collateralized loan obligation rules doesn't get much public scrutiny.

Does America Need a Robin Hood Tax? (Pacific Standard)

Kyle Chayka says a financial transactions tax could raise enough money to fight many social problems. Focusing such a tax on high-frequency trading would also curtail the banks' worst excesses.

It’s Still Paul Ryan’s Party (WaPo)

Greg Sargent calls out Ryan's hypocrisy in claiming the president's budget contains no attempt at compromise. Ryan's budget seeks even less common ground, with absolutely no funds for Democratic priorities.

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Daily Digest - March 5: Are the GOP's Plans Anti-Poverty or Anti-Poor?

Mar 5, 2014Rachel Goldfarb

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The New GOP Poverty Efforts Are Impractical, Incoherent, and Inhumane (TNR)

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The New GOP Poverty Efforts Are Impractical, Incoherent, and Inhumane (TNR)

Roosevelt Institute Fellow Mike Konczal explains the problems with the Republican focus on cutting costs and eliminating government programs. The president’s anti-poverty plan, while flawed, makes more sense.

The Partisan Divide Over the Earned Income Tax Credit (MSNBC)

Timothy Noah writes that the GOP now classifies any kind of government aid as “dependence,” even the EITC. That means the working poor can no longer count on any bipartisan support.

Obama's Budget: Help for Workers, Taxes for the Rich (CNNMoney)

Jeanne Sahadi says the president's budget proposal centers on tax reforms that help low- and middle-income workers. She lays out the minor changes this would mean for the wealthiest Americans.

Budget Day and Why That Matters–A Lot! (On The Economy)

It's true that many of the top-line budget numbers were set by the Murray/Ryan plan that ended the shutdown, but Jared Bernstein says the president's budget is about political aspirations.

The Real Poverty Trap (NYT)

Paul Krugman counters an assumption from Paul Ryan's poverty report, explaining that work effort doesn't guarantee social mobility. But reducing inequality increases mobility, so social safety net programs remain key.

Exclusive: Report Finds Taking A Paid Day Off When Sick Is A Privilege Of The Wealthy (ThinkProgress)

Bryce Covert looks at a new report from the Institute for Women's Policy Research, which shows the vast gap in access to paid sick leave between low-income workers and wealthier workers.

New on Next New Deal

Prevention Over Punishment: The Push to Reduce Gun Violence in Chicago

Focusing on strengthening neighborhoods and healing communities is a far more effective solution than sentencing minimums, write Roosevelt Institute | Pipeline Chicago City Network members Janaè Bonsu and Johnaè Strong

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Prevention Over Punishment: The Push to Reduce Gun Violence in Chicago

Mar 4, 2014Janaè BonsuJohnaè Strong

Chicago should seek new methods of violence prevention that strengthen neighborhoods and focus on healing, because these methods are more effective and more cost-effective.

Chicago should seek new methods of violence prevention that strengthen neighborhoods and focus on healing, because these methods are more effective and more cost-effective.

It’s no secret that gun violence has long been a major problem in Chicago. An astronomical number of lives have been lost, the social fabric of communities has been compromised, and as a result, both morgues and prisons have continued to fill up. That gun violence is a problem is something on which everyone – liberals and conservatives alike – can agree. The grounds get muddy, however, in identifying and implementing an effective solution.

Mayor Rahm Emanuel and his administration have been pushing for a more “tough on crime” strategy to reduce gun violence in Chicago, with mandatory minimum sentencing for illegal gun possession. The original proposed Senate Bill 1342 (now House Bill 5672) included a minimum sentence of one to three years for any person caught with an illegal weapon. ‘Gang affiliation’ – which is determined at the discretion of a judge – would lead to an escalated minimum. In addition, there are currently five new bills (HB 3770 - 3774) that have been introduced by Rep. Michael J. Zalewski (D) to the Illinois General Assembly that may very well have been drafted and introduced with good intentions to deter gun violence and other crime, and keep those who engage in it off of the street. However, components of the House package are unduly punitive. For example, HB 3770 raises the Unlawful Use of a Weapon (UUW) charge to an Aggravated UUW for an individual who has committed a forcible felony as a juvenile. Thus, instead of facing a misdemeanor charge with up to one year of jail time, a defendant faces a class 4 felony that carries a sentence of up to three years of prison time, plus a fine of up to $25,000, because of a crime committed in their youth. Taken together, HB 5672 and similar legislation pose a mirrored threat that will disproportionately affect communities of color and further depress local and state budgets by funneling much needed resources into the city jails and state prisons.

A substantial body of research shows that mandatory minimums have little to no effect on crime, which even its proponents seem to accept: they expect these laws to reduce arrest rates for violent crime by only 0.6%. Aside from that, more incarceration could produce more problems than it actually solves. Many Chicago communities of color grapple with high unemployment and neighborhood instability. More incarceration would further exacerbate these issues at a steep price. In Illinois, if mandatory minimum legislation such as HB 5672 does pass, it will likely cost Illinois close to $2 billion over 10 years, and add to an overcrowded prison system. And more money for “corrections” leaves less for interventions that actually work.

In Chicago, community members and activist organizations that are no longer willing to watch the silent war against minority communities are contesting these bills through direct action campaigns and policy advocacy. These organizations include, but are not limited to the Black Youth Project 100 (BYP100), Community Renewal Society, and Project Nia. Mirroring the progressive direction of the Obama Administration and other politicians including Senators Patrick Leahy (D-VT) and Rand Paul (R-KY) by moving away from mandatory minimums, these organizations are advocating for funds allocated to subtractive policies to instead be used for empirically based preventative solutions to violence in Chicago communities. Two major initiatives in the works to prevent violence are 1) the expansion of youth employment in communities especially affected by violence as a preventive measure and 2) the implementation of restorative justice peace hubs as an alternative to incarceration.

BYP100 and Project Nia are working towards proposing a youth jobs bill that may look similar to the National Youth Administration (part of the Works Progress Administration during the New Deal). The bill will focus on scaling up existing employment and training programs that have been proven effective such as One Summer Chicago Plus as well as dropout and violence prevention programs such as Becoming A Man (BAM). The bill will push for the reallocation of resources to help communities most impacted by violence implement various proven and promising employment and mentoring interventions across the entire state of Illinois. These programs reduce gun violence and strengthen communities economically and socially.

In addition to the push for youth employment, Community Renewal Society is currently spearheading the Reclaim Campaign, an initiative that urges the Cook County justice system to fund community based restorative justice hubs and mental health and drug rehabilitation programs through money saved from the release of Cook County nonviolent detainees. The campaign advocates alleviating jail overcrowding and reversing the trend of warehousing individuals who pose little threat to public safety by relying more on release with personal recognizance and electronic monitoring. Less bodies in the jails can free up dollars to fund the peace hubs, which are proposed to act as a coordinating referral center in the community where offenders, victims of crime, family members, and other impacted residents can appropriately handle conflict without further violence. The restorative justice approach offers a promising alternative to retributive justice that we have seen fail us for decades.

These solutions outline a need for economically just measures and attention to community healing and restoration over imprisonment. Most importantly, these solutions begin by looking within the community and empower people to change the policies governing their homes and neighborhoods, which is the best way to achieve real social change.

Janaè Bonsu is a Lead Coordinator for the Chicago City Network of Roosevelt Institute | Pipeline and a Master’s student at the University of Chicago’s School of Social Service Administration.

Johnaè Strong is a Master’s student in the University of Chicago Urban Teacher Education Program (UTEP) and Lead Facilitator of the Chicago City Network of Roosevelt Institute | Pipeline. 

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Daily Digest - March 4: Want a Reason to Raise Wages? Here Are Seven.

Mar 4, 2014Rachel Goldfarb

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7 Bi-Partisan Reasons to Raise the Minimum Wage (Boston Review)

Roosevelt Institute Fellow Mike Konczal explains the most compelling reasons to increase the minimum wage, from poverty alleviation to civic republicanism. He says the political fight will center on fairness.

Click here to receive the Daily Digest via email.

7 Bi-Partisan Reasons to Raise the Minimum Wage (Boston Review)

Roosevelt Institute Fellow Mike Konczal explains the most compelling reasons to increase the minimum wage, from poverty alleviation to civic republicanism. He says the political fight will center on fairness.

A Public Option for Banking (AJAM)

Mike Konczal says that postal banking could function as a public option on the model of the Treasury Department's Direct Express program, which provides debit cards to Social Security recipients.

You Call This a Middle Class? “I’m trying not to lose my house” (Salon)

Conservatives spin poverty as a personal failing caused by lack of education or skills, writes Edward McClelland, but for many Americans, even education and experience aren't enough to make ends meet.

The Business Case for Paying Service Workers More (Atlantic Cities)

Richard Florida speaks to Zeynep Ton about her research, which links higher pay for employees to higher profits in the service industry. She says service-sector workers perform better when paid better.

We Do Not Have to Live with the Scourge of Inequality (FT)

Jonathan Ostry writes that according to his recent research, redistribution creates more equality and stimulates economic growth. That means it shouldn't be considered a dirty word in policy.

New on Next New Deal

The Simple Solution to Obamacare's Employer Mandate Problems

Roosevelt Institute Senior Fellow Richard Kirsch suggests employers should be offered a choice between providing health insurance for all employees or paying an additional payroll tax to cover the costs.

The Congressional Budget Office Should Serve the People, Not Politics

Roosevelt Institute Senior Fellow Jeff Madrick writes that when the CBO provides single numbers instead of ranges, it gives politicians what they want. But it shouldn't treat lawmakers as clients.

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The Simple Solution to Obamacare's Employer Mandate Problems

Mar 3, 2014Richard Kirsch

Requiring employers to offer insurance to all employees or pay an additional payroll tax would eliminate the problems with the employer mandate, and start a shift toward broad tax-based coverage.

Requiring employers to offer insurance to all employees or pay an additional payroll tax would eliminate the problems with the employer mandate, and start a shift toward broad tax-based coverage.

In the last month, two more misleading headlines – one on lost jobs and the other on premiums for small businesses – have further roiled the overheated debate about the impact of the Affordable Care Act (ACA) on business and jobs. The question of how to deal with our employer-based health system continues to provide fodder for attacks on Obamacare. And it has proven to be  – and promises to continue to be – the basis for the most potent attacks against Republican proposals to replace the ACA. But in terms of policy, there is a simple solution, which would rationalize the contradictions in the Affordable Care Act and ease the way for the long-term goal shared on the left and right of separating health coverage from employment.

The general approach taken in the Affordable Care Act was to require most employers to provide coverage. The specific proposal in the final legislation, shaped by compromises with and pressure from both small and big business lobbying groups, required employers with more than the equivalent of 50 full-time workers to pay a portion of health coverage for employees who work 30 hours a week, or pay a fine. This is the employer mandate, which was delayed a year by the Obama administration and will be phased in starting in 2015.

The employer mandate does accomplish much of the prime goal of reform. Most employers have incentives to continue to provide coverage, or expand coverage. New coverage options are available for most people who do not get coverage at work, which was virtually all of the 50 million people who were uninsured when the ACA became law in 2010. People are not locked into jobs just because of health coverage, which was the real finding of the Congressional Budget Office report projecting 2.3 million people would retire or reduce their hours of work. Ending job lock opens up those hours to people who want to work and is a huge boon to entrepreneurship.

But the problems with the structure of the employer mandate are obvious. The law creates incentives for employers to keep workers’ hours under 30. It also establishes the potential for a business with a growing number of employees, when it exceeds the 50-employee threshold, to suddenly have to pay for health coverage.

The existence of incentives to cut hours or limit employees does not at all mean that employers will adjust for them. The accusations that the ACA is creating a part-time economy are belied by the facts: part-time employment is going down as the economy accelerates. In addition, employers that are adding workers rapidly as their businesses grow are not going to stop expanding  – or establish dozens of very small corporations – to avoid paying for health coverage. Still, we are seeing examples of some employers, including public employers and universities, limiting workers’ hours to less than 30. Others, like Trader Joe’s, are establishing different employment tracks for part and full time employees, with health care as a key factor. As this is all new – with the mandate not yet in effect – it is impossible to measure the future impact, but the incentives are certain to shape some business decisions.

There is a simple solution, one that was included in the version of the ACA enacted by the House in 2009. Employers that decide not to provide health coverage for their employees would be required to pay a percentage of payroll as a tax to cover health care, just like employers do now for FICA (Social Security and Medicare). Instantly, the cliff impact is gone, both in terms of hours and number of employees. Employers could either provide coverage to all employees, or pay for health coverage in the same manner as FICA, a regular cost of adding an employee, with a marginal increase in cost for each hour someone works. There is no advantage to hiring someone for less than 30 hours or keeping under 50 employees.

Paying a percentage of payroll also has another huge advantage over both the ACA and the current system of employer-provided coverage. Right now, the cost of health insurance premiums does not vary with an employee’s income. This creates a much bigger disincentive to hiring lower-wage workers. For example, a $6,000-a-year policy is 20% of the wages of a $30,000 a year employee but only 5% of the pay of a $120,000 a year employee. Paying a percentage of payroll instead would make it much more affordable to hire low-and-middle income wage earners than it is now. And while it would make it more expensive to employ higher-wage workers, most employers with high-wage workforces already provide health coverage and would be likely to continue to do so, rather than pay the payroll tax. If they did choose to pay, the cost is more easily absorbed for high-wage employees. Besides, that is not where we have an employment problem in the U.S.

This solution mimics the structure of union-employer benefit funds, which are typically found in industries where workers have fluctuating hours. Under these “Taft-Hartley” funds, employers and workers pay into the fund based on the number of hours an employee works. The loudest opponents from the left of the employer mandate in the ACA have been unions whose members get health coverage through such funds now. The unions have said that the ACA encourages employers to stop paying into the funds, now that government will provide subsidies for many workers. But if the current employer mandate were replaced by a payroll tax, the status quo that has worked well for these funds would be maintained.

Historically, the biggest opponent of a payroll tax for coverage has been the small business lobby, which is why the ACA does not require small employers to provide coverage. That is why the House version of the ACA phased in the payroll contribution based on payroll size, with no contributions required for payrolls under $500,000, increasing gradually to an 8% contribution for payrolls over $750,000.  This eases the burden on small employers.

Slowly, the employer-based health coverage system in the United States is dissolving. Over the past 30 years, the share of workers with ESI has shrunk from 70% to 57%. Recently we have seen employers who traditionally have wanted to take responsibility for structuring employee coverage begin to use private exchanges, in which their workers get a fixed amount of money to choose from a choice of health plans. These trends hasten the broadly shared goal of separating employment from health coverage.

As the debate over the ACA turns from repeal to fixing the law, progressives should make the payroll contribution proposal a central focus, our response to problems with the employer mandate. If enacted, as more employers choose to pay into the fund rather than provide their own coverage, we would move closer to ideal of a broad-based tax for coverage, not tied to an individual employer. And while a payroll tax is not progressive – it is proportional – it is much more progressive than the very regressive system we have now of fixed premiums regardless of income. The result would be evolution toward a relatively broadly based tax for health coverage, a key to making health coverage a right. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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The Diversity of Arguments for a Higher Minimum Wage

Mar 3, 2014Mike Konczal

I have a piece in the new Boston Review on seven ways of looking at a higher minimum wage increase. I wanted to step back from the denser statistical arguments (though those are included) and get a sense of why the minimum wage is popular and an important feature of our economy. The diversity of reasons is remarkable. The seven ways I focus on are inequality, poverty, policy, feminism, conservatism, republicanism, and Catholicism's living wage. I hope you check it out.

I have a piece in the new Boston Review on seven ways of looking at a higher minimum wage increase. I wanted to step back from the denser statistical arguments (though those are included) and get a sense of why the minimum wage is popular and an important feature of our economy. The diversity of reasons is remarkable. The seven ways I focus on are inequality, poverty, policy, feminism, conservatism, republicanism, and Catholicism's living wage. I hope you check it out.

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The Congressional Budget Office Should Serve the People, Not Politics

Mar 3, 2014Jeff Madrick

The CBO's projections often miss the mark, but its mandate is to produce a politically useful number.

The CBO's projections often miss the mark, but its mandate is to produce a politically useful number.

The admirable Jared Bernstein entirely misses the point in his post about recent critiques of the Congressional Budget Office. Floyd Norris, Zachary Karabell, and Dean Baker have noted how often the CBO gets it wrong, and how it influences policy in damaging ways. I wrote last March in Harper’s Magazine that there should be a shadow CBO to correct and decipher CBO pronouncements.

Jared counters that CBO economists are simply following ”state of the art” economics most of the time. What state of the art? Hasn’t confidence in “economic science” been sorely tested by the 2008 crash? It should have been tested long before that tragic event. In 2003, Robert Lucas said that we had solved the problems of depression. In 2005, Milton Friedman said that he wondered why so many people were worried about the economy because to him it appeared so stable—this at the height of the subprime mortgage boom. In 2008, Olivier Blanchard said macro was in good shape.

Jared notes that the CBO assumes public spending will crowd out private spending as an example of how it follows textbook economics. That’s right, it does, and often entirely incorrectly. Textbook economics is getting a grilling by many macroeconomists these days.

The point is that the CBO’s mission is all wrong. Jared kind of acknowledges this; he adds in parentheses they should give ranges, not single-point forecasts. But that is not a parenthetical point. It is the heart of the matter. 

CBO economists can’t make single-point projections with any confidence, so why do they? These forecasts are often terribly misleading. The recent minimum wage report, as I noted on Next New Deal, is a perfect example. Everyone took the CBO's midpoint number as an actual projection. Why? Because the CBO said it was in just those words. That is its mandate. In addition, the CBO's “non-partisan” label is taken to mean "objective," and to non-practitioners, its projections simply reflect some hard, politically unbiased analysis.

Just like Wall Street bankers, politicians want a forecast that is a single number they can use. A range of projections does not have as much political force as a single number with the authority of the “non-partisan” CBO. In other words, the CBO is meeting the needs of its clients, not the needs of the nation.

It’s time to change the CBO's mandate fundamentally. These economists should produce ranges, they should explain as much as the project, and they should get over their habit of hiding the most important qualifications of their analysis in footnotes and appendices, thereby covering themselves (and perhaps relieving their guilt).

The state of economics simply doesn’t warrant the certitude that the CBO almost always implies—and then qualifies, as I say, in the footnotes. It would be very useful if Jared himself led a charge in reforming the CBO's mission. That doesn’t mean firing the economists there. It means having them do what economists can do, and not do what they can’t.

Jeff Madrick is a Senior Fellow at the Roosevelt Institute and Director of the Bernard L. Schwartz Rediscovering Government Initiative.

 

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Daily Digest - March 3: Will New York Fight for the People's Trust?

Mar 2, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

The Future is Public Financing of Elections (Times Union)

Roosevelt Institute Board Chair Anna Eleanor Roosevelt, granddaughter of FDR and Eleanor, calls on New York Governor Andrew Cuomo to fight for public campaign financing in the state for the sake of trust in democracy.

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The Future is Public Financing of Elections (Times Union)

Roosevelt Institute Board Chair Anna Eleanor Roosevelt, granddaughter of FDR and Eleanor, calls on New York Governor Andrew Cuomo to fight for public campaign financing in the state for the sake of trust in democracy.

IBM Fires Small-Town Workers for Wall Street Numbers. That’s the Good Part (The Guardian)

Heidi Moore ties layoffs at IBM to the company's goal of $20 earnings per share by 2015. Layoffs cut costs, an easy way to get closer to this arbitrary target.

The Real Job Killers (Robert Reich)

We could create jobs by eliminating the minimum wage, safety regulations, and such – but that wouldn't create progress, which requires safe jobs that pay well, writes Robert Reich.

College, the Great Unleveler (NYT)

Reforms to federal student aid, increased state funding for public universities, and tighter regulation of for-profit schools are all needed to maintain the American Dream of upward mobility, writes Suzanne Mettler.

Amidst Camp Tax Plan Debate, D.C. Needs to Close the Reality Gap (WaPo)

The real problem in Washington, writes E.J. Dionne, is the gap between the real-life issues that American voters worry about and the abstractions, like the deficit, that get all of Congress's focus, as in Senator Camp's tax reform plan.

The Progressives' Image Problem (Washington Monthly)

When progressives take over, as in New York City Mayor Bill de Blasio's administration, their leadership experience is often criticized. Martin Longman says that's because managing activist groups is counted against them.

New on Next New Deal

Venezuela: The Crisis We Fuel With Our Apathy

Leslie Bull, former Roosevelt Institute | Campus Network Senior Fellow for Defense and Diplomacy, writes that when the American media ignores international crises, it only causes them to become more urgent.

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