Why Romney's Tax Plan is Mathematically Impossible

Aug 6, 2012Mike Konczal

A quick analysis based on class shows that the math simply doesn't add up, particularly for the poor and middle class.

A quick analysis based on class shows that the math simply doesn't add up, particularly for the poor and middle class.

The big news in campaign trail policy wonkery last week was the Tax Policy Center's white paper by Samuel Brown, William G. Gale, and Adam Looney arguing that it is mathematically impossible for the Romney tax plan to meet its described goals. Ezra Klein has write-ups here and here, and James Pethokoukis has analysis here. Since Romney hasn't released his plan, Brown, Gale, and Looney cleverly put together the best case scenario and crunch the numbers -- and conclude they don't work.

How is that? Romney's plan has three goals. It starts by lowering tax rates by 20 percent. It then seeks to keep raising the same amount of tax revenues as it did before by removing tax expenditures, or the variety of exemptions, deductions, or credits in the tax code that function as government spending. As the wonks would say, it wants to "lower the rates and broaden the base." However, and this will be crucial, it excludes expenditures related to investment income and savings from being available for these cuts. Finally, it wants to maintain the current level of progressivity by making sure that the top one percent pays no less in taxes and everyone else pays no more. The Tax Policy Center analysis shows that it is impossible to do all three: enacting the Romney plan requires cutting taxes on the top one percent and raising them on everyone else.

In order to better understand why this is impossible we need a quick, back-of-the-envelope class and distrbutional analysis of how tax expenditures work in the United States. Tax expenditures are thought to be regressive, benefitting those with more resources. The general argument for why is because tax expenditures are closely linked with employment compensation or spending, so those who have jobs and get paid more or spend more benefit more. Being able to pay less in taxes disproporationately benefits those better off and those with the resources and ability to take advantage of often complicated tax planning. A privatized welfare state administered through these coupon-like mechanisms, compared to public ones, involve less compulsory risk-pooling and more individualized risk-bearing, which tends to benefit those who are better off.

But we can get more granular than that, and we need to in order to understand why Romney's plan fails. Let's take a quick look, using this great New York Times chart based on Tax Policy Center numbers, at who gains from different types of tax expenditures in the United States.

This chart looks at five types of tax expenditures and then at the distributional consequences for each class. Let's grab this stick by the other end and look at what sets of tax expenditures benefit three classes of people.

The first are tax expenditures that go to the working poor. These are focused on refundable credits, where almost 60 percent of them go to the bottom 40 percent of Americans. Low-income workers are, by definition, struggling to find decent wages, and these tax expenditures are meant to help boost wages at the bottom end. The big driver here is the Earned Income Tax Credit, which is a credit for low-income workers. The Tax Policy Center has this "on the table" for being able to be cut under Romney, and it is telling that the GOP hasn't said whether they want to cut it and seem to be dropping hints that they might want to go after these "lucky duckies."

The second are those that go to the middle class and upper-middle class. I don't mean middle class as the median person, but more along the lines of people whose work requires having at least some college education and who often are defined by longer-term attachment to an employer or middle management positions. These are focused on itemized deductions and tax exclusions. As seen in the chart, over 50 percent of these go to those between the 80th and 99th percentile of income. The big drivers here are two goods that are closely associated with middle-class life: health care provided by employers and a home mortgage. Both mortgage interest and employer health care spending are subsidized through tax exemptions.

And the third set are those that go to the top one percent. These are focused on special treatment for capital and dividend income. Dividends and capital income are taxed at a lower rate than wages, and as those incomes are predominately earned by the top one percent, these benefits tend mostly to benefit that group. The top 0.1 percent earn more than half of this expenditure, with the top one percent taking home a total of 75 percent of the benefit. Because of this differential, people working in certain elite financial positions often claim that their wages come from money rather than labor, and thus qualify for this exemption.

Tax policy doesn't create the conditions for each of these groups, but it helps sustain them. Making low-wage work more bearable, keeping the middle class in long-term employment relationships and making sure they are property owning members of their communities, and increasing the financialization of the economy and the explosive wealth of the top one percent all are boosted by the system the government uses to identify and collect taxes.

So with this framework in mind, what's the problem with Romney's plan? What it wants to do is lower taxes on each group and make up that difference by reducing the tax expenditures each group receives. But remember that he doesn't want to touch the tax expenditures in the third set, all the ones for savings, capital gains, and dividends, which go overwhelmingly to the top one percent. So he wants to lower taxes on the one percent, and he has to make the lost revenue up by cutting a set of tax expenditures for them that largely go to either the working poor or the middle class.

Now it is true that the top one percent benefit from exclusions as well, but this is largely a function of tax preferences for retirement savings, which the Tax Policy Center excludes from Romney's plan. The rest of the major exclusions and credits don't do very much and can't make up the shortfall given runaway inequality. Qualified retirement plans have caps on them, and health care premiums do not scale with inequality at the top end. Child tax credits are a fixed amount and don't scale at all with income. There's simply very little in this space that could be done.

So, and I'm not seeing this emphasized enough, if you are going to "lower the rates and broaden the base" for the rich, you need to actually broaden the base of the tax expenditures that the rich receive. This will be true for all of these plans going forward, and especially for Romney's. Otherwise, as the Tax Policy Center found, the exercise can't actually work.

One question I have, and I'm surprised the paper doesn't touch on, is whether the Romney plan is mathematically impossible, period. Would broadening the base on the third set of savings and investment income actually make the plan work? The 99 to 99.9 percent gain an average percent change in after-tax income of 3.5 percent, and the top 0.1 percent gain 4.4 percent, while everyone loses 1.1 percent under the Romney plan.

According to another Tax Policy Center paper, "Distributional Effects of Individual Income Tax Expenditures: An Update" by Eric Toder and Daniel Baneman (p. 7), eliminating the tax preference for capital gains and dividends would reduce after-tax income by an average of 4.5 percent for the top 1 percent. That would get Romney most of the way there, and perhaps removing exclusions for savings would make the entire plan work. However, if you lower rates while broadening the base, reducing tax expenditures brings in less money. So bringing in the tax expenditures for the top one percent may still not allow the plan to work. It's likely that these exclusions for savings and investments would be expanded, not cut, under the Ryan budget and what Romney eventually ends up doing, but it is worthwhile to see if this plan could work under any set of base broadening.

Mike Konczal is a Fellow at the Roosevelt Institute. Follow or contact the Rortybomb blog:

  
 
Romney image via Shutterstock.com.

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The Aurora Victims (and the Rest of Us) Deserve a Health Care Safety Net

Jul 31, 2012Tim Price

The Aurora shooting has sparked debates over gun control, but health care reform is just as important for the uninsured victims.

The Aurora shooting has sparked debates over gun control, but health care reform is just as important for the uninsured victims.

Just 11 days ago, a shooter opened fire in a movie theater in Aurora, Colorado, killing 12 and injuring 58 others who had gathered for the midnight premiere of The Dark Knight Rises. In the wake of these tragic events, a debate has erupted over gun control. (This happens every now and then when we’re reminded that the authors of the Second Amendment might not have meant for someone to be able to buy 6,000 bullets online with no questions asked.) But as we mourn those who were lost and extend our sympathies to their grieving families, we shouldn’t forget that the suffering continues for many who survived the shooting. As Dashiell Bennett of The Atlantic Wire notes, “Most of the wounded are expected to have medical costs in the hundreds of thousands, if not millions, of dollars and many appear to have inadequate or non-existent coverage.” This burden could add more tragedy to the lives of those who have already experienced too much. But while we may wonder if more sensible gun laws or better mental health care could have prevented the shooter’s rampage, we know for sure that a stronger social safety net could have prevented the financial catastrophe that has followed in its wake.

As hospital bills pile up, uninsured and under-insured survivors of the shooting are being forced to rely on the kindness of strangers. The Associated Press reports that three of the five hospitals treating the Aurora victims are capping their fees or offering them free care. But that still leaves many to bear a heavy financial burden, including Caleb Medley, an uninsured man who was shot in the eye and placed in a medically induced coma. His family is raising private donations to cover what already amounts to over $2 million in medical bills.

The charity of those who have donated is certainly commendable, but while we wish Medley and his family all the best, we have to ask ourselves whether this is any way to run a country. If there’s a crime spree, we don’t pass the hat around to hire a private security firm to defend us. We have the police for that. If our homes catch on fire, we don’t just cross our fingers and hope one of neighbors will be nice enough to lend us their garden hose. We know firefighters will be there to help. So when it comes to medical emergencies, including random events like this one and also the kind that all of us will face at some point in our lives, why should the 50 million uninsured Americans be reduced to begging for help? If the Affordable Care Act is allowed to fully take effect, providing guaranteed coverage, expanded Medicaid coverage, and insurance subsidies for those who need them, that may no longer be the case. But that’s a big “if.”

There’s a story conservatives like to tell about our health care system, and as with so many of their stories, it involves their peculiar definition of personal responsibility. The story goes that if you’re a responsible person, as physically and mentally healthy as you are morally upright, you can obtain health insurance by working hard so that you can either be covered by your employer’s plan or purchase an individual plan. If you don’t have insurance, there are two likely explanations. The first is that you’re an irresponsible bum who wants everyone else to pick up the tab for your medical care. The other is that you’re a Galtian Übermensch who has planned ahead and saved up for your own private medical staff and organ-cloning lab in case of emergency. If you can’t obtain insurance because you’ve been denied due to a preexisting condition or because your employer doesn’t offer it and doesn’t pay you enough to buy it yourself, you don’t fit into this narrative, so please politely excuse yourself and go complain about it in a quiet room.

I last wrote about this argument and the problems with it when I discussed my own brush with death. That experience didn’t just deepen my appreciation for health insurance and my belief that everyone should be guaranteed coverage. It also made me aware of just how flimsy the GOP’s argument is. If I hadn’t had health insurance at the time of my accident, would I have been “responsible” for a driver blowing a red light and running me over as I was crossing the street? Should the firefighters and paramedics who saved me have instead patted me on the (broken) shoulder and said “Good luck with all that”? Are the uninsured victims of the Aurora shooting at fault because they didn’t set aside some rainy day money on the off-chance that a psychopath in SWAT gear would try to murder them while they were enjoying a night out at the movies?

Claims like these clash with common sense and basic human empathy, which is why they’re rarely made explicit. But it may take events like the Aurora shooting to highlight the extent to which they undergird the Republican approach to health care. To be fair, many conservatives would argue that they agree with the principle that everyone should have access to affordable health care but believe the best way to accomplish that is through the free market rather than government mandates. And many on the left would rightly point out that the Affordable Care Act is only a half-measure, a compromise with private insurers that won’t truly guarantee equal access to health care for all. But none of those criticisms are reflected in the policy agenda of the Republican Party, which has now repealed the Affordable Care Act 33 times and offered an alternative proposal zero times. Senate Minority Leader Mitch McConnell has explicitly said that covering the uninsured is “not the issue,” while Senator Orrin Hatch admits that the number of uninsured is disgraceful but maintains that “we cannot succumb to the pressure to argue on the left’s terms.” Indeed, why should the debate about health insurance focus on people who need health insurance? We should talk about something more fun, like our favorite vacation destinations or Mitt Romney’s dancing horse.

The Aurora victims may have been gathered to watch a movie about a benevolent billionaire who dedicates his life and fortune to righting society’s wrongs, but there’s a reason such stories are best left to fiction, and it’s not just that Warren Buffett wouldn’t look good in a bat costume. In the real world, we understand that there are vast and complex problems that we can’t solve through private charity alone, and for those problems we require strong public institutions and a reliable social safety net. People shouldn’t have to fear that they’ll be shot dead when they walk into a movie theater, but neither should they have to fear that they won’t be able to afford the cost of survival.

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter at @txprice.

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The Republicans’ Medicaid Cruelty

Jul 30, 2012Jeff Madrick

This piece originally appeared in The New York Review of Books.

“The essential American soul,” claimed D.H. Lawrence, “is hard, isolate, stoic, and a killer.” While the rejection by five state governments of the Affordable Care Act’s Medicaid expansion may not precisely illustrate Lawrence’s heated observation, it does suggest a contemporary vein of cruelty in America that is deeply disturbing.

This piece originally appeared in The New York Review of Books.

“The essential American soul,” claimed D.H. Lawrence, “is hard, isolate, stoic, and a killer.” While the rejection by five state governments of the Affordable Care Act’s Medicaid expansion may not precisely illustrate Lawrence’s heated observation, it does suggest a contemporary vein of cruelty in America that is deeply disturbing.

A new study published in The New England Journal of Medicine shows that providing greater medical insurance coverage for the poor has saved lives. Moreover, the ACA’s expansion of Medicaid requires little state money, since the federal government will pick up more than 90 percent of the costs over time, and 100 percent of the costs for the first few years. Yet Texas, Florida, Louisiana, South Carolina, and Mississippi—which together account for more than a sixth of the overall US population—have already rejected the plan, and as many as twenty other states, including New Jersey, Missouri, Iowa, Nebraska, and Nevada, have indicated they may follow suit.

Furthermore, these states already have among the highest numbers of citizens with no health insurance. Twenty-five percent of non-elderly Texans have no health insurance, for example, compared to the national average of about 18 percent. If the Obama Medicaid reforms were fully implemented, 15 to 17 million of the nation’s 50 million without health insurance would be covered. In a report just issued in late July, however, the non-partisan Congressional Budget Office estimates that the Medicaid expansion will only cover some ten million more, or a full third fewer than anticipated, because of the rejection of the plan by large states like Florida and Texas and others who have not yet formally announced their intentions.

This is particularly troubling in view of how important the Medicaid expansion is to low-income Americans. The two Harvard economists who authored the NEJMstudy have found that there are 6 percent fewer deaths in several states that had expanded Medicaid in earlier years compared to nearly contiguous states that did not. Fortunately, according to the recent CBO report, three million of those who will not be covered in states that reject the Medicaid expansion will qualify for and probably buy insurance through another provision in the ACA—a program that provides subsidies to buy insurance for those who earn between 100 and 400 percent of the federal poverty level, which is $22,350 for a family of four.

What has enabled states to reject the expansion is the curveball thrown by the Supreme Court in its decision in June to uphold President Obama’s Affordable Care Act: not only did the court argue that the states need not participate in the new expansion, which the Obama administration had intended to be mandatory; it also said that the federal government could not withhold Medicaid payments for states that decide not to participate. Thus, the court created a way to undermine one of the most admirable achievements of the ACA, a sweeping expansion of a medical safety net for the neediest.

Read the full article here. 

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Three Reasons the GOP Should Have No Beef With Meatless Mondays

Jul 30, 2012Nick Santos

Cutting back on meat is healthier for us and for the environment, but Republicans are more concerned about the health of corporate profits.

Cutting back on meat is healthier for us and for the environment, but Republicans are more concerned about the health of corporate profits.

Not content to keep Congress from doing anything about climate change, the GOP showed last week that it will also go out of its way to keep anyone else from taking action. The USDA sent a tip to employees to take the Meatless Monday challenge, a one-day-a-week commitment to forgo meat. They explained that cutting back on meat is more healthy (true) and more environmentally friendly (also true) than the large quantities of meat Americans regularly eat. In no time at all, this newsletter was picked up by the National Cattlemen’s Beef Association, which stated that the claims about cutting back on meat are false. And from there, the Republican spin machine kicked into high gear.

The NCBA release made it to Senator Jim Moran of Kansas and into a speech by Senator John Barasso of Wyoming. It even found its way into one of Iowa Senator Chuck Grassley’s more comprehensible tweets, in which he pledges to eat more meat to make up for “stupid USDA recommendation abt (sic) a meatless Monday.” They all claim it’s an attack on the rancher’s way of life, and disappointingly, the USDA backpedaled. To their credit, they kept it simple and only said that “USDA does not endorse Meatless Monday.”

This is an absurd controvery over such a small issue, but it highlights a larger problem: Republicans are once again burying their heads in the sand on science and health. So let’s start with the facts.

 Fact #1: Meat production emits an outsize amount of greenhouse gases compared with crop production. In short, meat and dairy are, as a whole, a larger climate problem than other foods. Red meat in particular has a significant impact, followed by dairy. Switching a little bit of meat for a bit more grains, fruits, and vegetables will reduce the climate impact of anyone who participates.

(Graph from “Food-Miles and the Relative Climate Impacts of Food Choices in the United States” – Weber and Matthews, 2008.)

Fact #2: Meat in moderation is far more healthy than the amount of meat typically associated with the American diet. Research continually confirms this. Cutting back on meat provides numerous health benefits, including a longer lifespan and reduced risk of illnesses like cancer, heart disease, and diabetes.

Fact #3: Skipping meat is not an attack on rural America as Cattlemen’s Beef Association is claiming. People don’t just stop eating entirely if they skip meat. Is my home garden an attack on ranchers? No. If we’re going to talk about rural America, then let’s note that, according to the Bureau of Labor Statistics, crop production generates more economic output than livestock production. And while we’re at it, we might also note that crop production creates more jobs than livestock production. It’s not that one is better than the other, but by skipping meat, people are only switching from one very significant economic sector to another.

This attack on the USDA and Meatless Monday is ridiculous on every level. The recommendation appeared in a relatively small, internal newsletter for employees – they weren’t exactly screaming it to the world through a megaphone. What’s especially disappointing is that Meatless Monday is an apolitical organization. They aren’t advocating policy or suggesting that any of their recommendations be legislated. They make sensible recommendations for people’s health. They are not extreme in the least bit; they’re the very definition of moderation and are now being attacked by groups with extreme agendas.

One last thing – the cherry on top of this little manufactured controversy. Four United States presidents, including Franklin Roosevelt and others from both parties, observed meatless Mondays and encouraged the rest of the country to do so as well. It was seen as a sign of patriotism for all Americans to do their part. So when and how did we lose our pride and unity in the name of excess and industry profit?

Nick Santos is a Roosevelt Institute | Pipeline Fellow working on climate change education. He runs Environmental Consumer, a nonprofit, and works with the UC Davis Center for Watershed Sciences.

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New Deal Numerology: Makers and Takers

Jul 26, 2012Tim Price

This week's numbers: $1.8 million; $560,000; $1.5 billion; $1.1 billion; $1 billion

$1.8 million... is a self-made number. That’s how much government aid has been given to Gilchrist Metal, a company highlighted in Romney ads as an independent success. The owner says he was just reclaiming his own tax money, which the government must have socked away in a special Gilchrist-only fund.

This week's numbers: $1.8 million; $560,000; $1.5 billion; $1.1 billion; $1 billion

$1.8 million... is a self-made number. That’s how much government aid has been given to Gilchrist Metal, a company highlighted in Romney ads as an independent success. The owner says he was just reclaiming his own tax money, which the government must have socked away in a special Gilchrist-only fund.

$560,000... is a patronized number. That’s how much Brian Maloney, another small business owner who criticized Obama’s comments, received from a federal contract on top of a preferential loan. Nearing retirement, Maloney is also deeply concerned about keeping the government’s hands off his Medicare.

$1.5 billion... is a chilling number. That’s how much taxpayer money went to support the 2002 Winter Olympics in Salt Lake City. If Romney has to distance himself from that like he did with Bain and his governorship, all he'll have left to brag about are his five World’s Greatest Dad mugs.

$1.1 billion... is a devious number. That’s the size of Obama's proposed 2013 budget for the Small Business Administration. This is all part of his secret plan to destroy the private sector by bribing the ownership class to convert to socialism and overthrow itself.

$1 billion... is a capitalizing number. That’s how much additional funding President Obama wants to give Small Business Investment Companies. Next he’ll be handing out free bootstraps instead of letting people pull themselves up by the ones they inherited from their dad, the governor of Michigan.

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter @txprice.

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The Conservative War on Single Mothers Like Jessica Schairer

Jul 19, 2012June CarboneNaomi Cahn

Conservatives want to have their cake and eat it too: decry the rise in nonmarital births but make life even harder for women facing single motherhood.

Conservatives want to have their cake and eat it too: decry the rise in nonmarital births but make life even harder for women facing single motherhood.

Ever wonder what the “war on women” is really about? An article in the New York Times, “Two Classes, Divided by ‘I Do’: For Richer Marriage, for Poorer, Single Motherhood,” provides some clues. The article documents the growing class divide in family form. College graduates like Chris and Kevin Faulkner, who were profiled in the article, postpone starting families, produce marriages with lower divorce rates than a generation ago, and reap the rewards in terms of greater time and resources to invest in children. In the meantime, women like Jessica Schairer who do not graduate from college, also profiled in the article, are increasingly raising children on their own. These women often give up on the men in their lives and struggle to balance the demands of low-paying jobs with the attention their children need.

The article presents a compelling portrait of the causes and the effects, but not of the partisan divide over the potential solutions. That divide can be summed up by a struggle over a simple question: are women like the single mother, Jessica Schairer, the victims of our economy or the problem? Those who see them as the problem are setting forth proposals to make their lives (and their children’s lives) worse. Those of us who see Jessica Schairer as a victim of increasing economic inequality recognize that supporting her ability to care for her children is critical to the strength of the country’s next generation. The political war for the future of Jessica Schairer is under way.

The change in family structure is a consequence of growing economic inequality that further increases inequality in the next generation of children. The most startling change is the increase in non-marital births. In 1990, just 10 percent of white women with some college education had a birth outside of marriage; today the figure is 30 percent, compared to 8 percent of whites with a college degree and 40 percent for the country as a whole. Meanwhile, 86 percent of black high school dropouts have children outside of marriage. The likelihood that a child will be raised in a two-parent family has become a marker of class.

The Times article documents the consequences of this change, as it describes the limited ability of single parents to pay for sports participation, attend school events, stay on top of homework, and provide adequate role models. Harvard’s Robert Putnam adds that the growing class gap in childrearing affects everything from the time parents spend playing patty-cake with their pre-schoolers to the likelihood that a high school senior will be the captain of a sports team.

In considering the causes of class divergence, the Times articles documents a negative spiral. It observes that economic woes speed marital decline “as women see fewer marriageable men.” Women do not commit to men without steady employment, and a shortage of “good men” encourages the employed to play the field. A long list of academic studies demonstrates that when marriageable women outnumber the men, everyone’s norms change and marriage rates decline. For single mom Jessica Schairer, as for many other women today, there was no point to marrying the father of her three children. Instead, for her the issue is “why she stayed so long with a man who she said earned so little, berated her often and did no parenting.” On the other hand, marriage also encourages men to shape up. Kevin Faulkner, the married father in the story, explained that he returned to college because he wanted to get married. Other studies show that not only has the premium for college graduates increased over the last generation, but the job stability of less educated men has fallen more than for other parts of the population and male layoffs often break up relationships and discourage marriage.

While the documentation of these differences is now well established, the solutions are not. Yet there are two obvious ones, rarely discussed in explicit terms. The first recreates the links between stable jobs and stable families. This requires greater economic equality, more opportunities for blue-collar men, more family-friendly workplaces, greater support for higher education and job training, and better access to contraception and other supports for delaying family formation. A growing literature suggests that greater equality itself creates virtuous cycles that deter teen births and encourage longer lasting family relationships.

The alternative? Bring back patriarchy. Conservatives like Charles Murray blame changing values, charging that the men have gotten lazy because women no longer depend on them or fail to sleep with them until they shape up. The secret to bringing back female dependence and male virtue? Make the women desperate. Murray has made a career of blaming government programs such as welfare for the destruction of the American family because such programs cushion the impact of single parenthood. For conservatives who see single mothers like Jessica Schairer as the problem and who refuse to see inequality itself as the explanation, the result is a war on women.

Virtually every conservative Republican, from Paul Ryan’s budget to Mitt Romney’s platform, would cut the benefits on which single mothers like Jessica Schairer currently depend. Indeed, shortly after Romney’s NAACP speech, he commented, “Remind them of this: If they want more free stuff from government, tell them to go vote for the other guy.” What could Romney have meant by “free stuff?”

First, start with food stamps. They are an important part of Jessica Schairer’s ability to feed three children on an income of $25,000 a year. Romney’s proposals would either force 13 million people off of food stamps entirely or cut benefits by $2000 per year per family.

Second, Romney’s budget would produce massive cuts in Medicaid programs that serve as the most important source of health care for working mothers without adequate benefits. 

Third, Romney’s tax proposals would raise Jessica Schairer’s taxes while providing for massive cuts for those with high incomes. 

Whether or not Romney specifically intends to make the lives of single mothers more perilous, his policies would do exactly that.

Social conservatives, in the meantime, have taken aim at the reproductive rights that make it possible for women to avoid inopportune births. The class divide in access to contraception and abortion is wide and growing. The Guttmacher Institute reports that between 1994 and 2006, the unintended pregnancy rate grew by 50 percent for women below the poverty line. During the same period, it fell by 29 percent for higher income women. Yet those who share Charles Murray’s sentiments about single mothers have done their best to make it worse.

For many of us, this is the most perplexing part of the war on Jessica Schairer, and it rests on conservatives’ analysis that the key to reforming the family is to deny men sex rather than prevent births. Indeed, Republican candidate Rick Santorum linked the increase in non-marital births to the “dangers of contraception,” which he categorized as "a license to do things in a sexual realm that is counter to how things are supposed to be."

We noted in Red Families v. Blue Families that most conservatives do not oppose contraception per se, but they remain resolutely against the implied approval of non-marital sex that would accompany explicit support and the government subsidies necessary to make access more universal. In the name of religious liberty, they accordingly raised a furor over President Obama’s recent proposal to mandate employer coverage of contraception as preventive health care. With less publicity, they blocked inclusion of proposals to increase contraceptive access in the stimulus bill. And they defeated efforts to include contraception in any form as part of the health care package. Yet poor women’s lack of health care coverage is a major factor in the unplanned pregnancy rate.

If contraceptive access is controversial, abortion is off the table. Ms. Schairer considered one in response to the unplanned pregnancy that derailed her college education, but the father of her children opposed it. The Guttmacher Institute notes that the women most likely to end an unintended pregnancy by abortion are those who, like Ms. Schairer, are in college at the time of the pregnancy. Had Ms. Schairer not given birth when she did, she would have been much more likely to graduate, to avoid a non-marital birth, and to be able to secure a better job. But at the same time conservatives work to make life more difficult for mothers like Jessica Schairer, they argue that having the child is the only acceptable moral option.

For a generation now, Murray, the editorial pages of the Wall Street Journal, and many other conservatives have denied that inequality has anything to do with the changing family. Romney has joined the chorus, dismissing any discussion of inequality as “envy” and “class warfare.” It is time to recognize the truth. The policies they have championed are responsible for the class-based division in family form. The war on Jessica Schairer is claiming an increasing number of victims. 

June Carbone is the Edward A. Smith/Missouri Chair of Law, the Constitution and Society at the University of Missouri-Kansas City.

Naomi Cahn is the John Theodore Fey Research Professor of Law at George Washington University Law School. She is the author of numerous books and law review articles on gender and family law.

Cahn and Carbone are the co-authors of Red Families v. Blue Families.

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Searching for an Honest Debate on Economics

Jul 18, 2012Jeff Madrick

Glen Hubbard's column in today's Financial Times detracts from meaningful academic debate by ignoring counter-arguments and citing discredited research (when he cites evidence at all). 

Glen Hubbard's column in today's Financial Times detracts from meaningful academic debate by ignoring counter-arguments and citing discredited research (when he cites evidence at all). 

Glenn Hubbard, an economic adviser to Mitt Romney, and more relevant to this commentary, dean of the Columbia Business School, has published a column in today’s Financial Times so devoid of basic academic credibility that it is fair to call it disingenuous.  Hubbard claims research shows that reducing debt levels will create more rapid growth. Any such research is highly controversial. You wouldn’t know it to read Hubbard.  He does not deal with counter-arguments at all.

He cites Harvard economist Alberto Alesina who claims that the way to get debt-to-GDP ratios down is to reduce social transfer spending.  He does not note how profoundly the Alesina research has been discredited by researchers at the decidedly neo-classical IMF. Austerity has rarely - if ever - worked to generate growth

He cites work by the conservative Hoover Institution that reducing federal spending to GDP to pre-crisis rates would increase GDP.  The crisis was caused by a collapse in tax revenues - not by too much spending. Few would agree that reducing such spending so drastically in the near- or medium-term would generate growth. Again, austerity.  And the economy performed poorly at those debt levels anway, failing to create adequate jobs or raise wages.

He claims that the tax system discourages work. One would have liked more detail here, but he wants reduced marginal tax rates.  The evidence is abundantly clear that there is no serious academic evidence to support his claim.

On our website, you can find work by Peter Lindert and Jon Bakija, which thoroughly refute these claims. But more to the point, Lindert and Bakija, both serious academics, look at the research of others, they just don’t ignore it, as does Hubbard in this FT piece.  They confront it and  show where the research fails. 

Is this the job of academics? Is this what Hubbard teaches his students?  Small-government economists might counter that public economists must be given more leeway.  But in truth, Pauk Krugman, the focus of so much right wing criticism,  usually deals explicitly with counter-arguments in his blog and often in his column; he does not simply does cite evidence to support his case without a broader context.

We intend our web site to offer broad, honest argument, to enrich the public discussion, not to narrow it.

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The Opposite of Obama's "You Didn't Build That" Comment: Mythological Job Creators

Jul 18, 2012Mike Konczal

Conservatives are in a rage after Obama suggested we add value to the economy together. In their version, only the rich do.

Conservatives are in a rage after Obama suggested we add value to the economy together. In their version, only the rich do.

"If you’ve been successful, you didn’t get there on your own... If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive... If you’ve got a business -- you didn’t build that... The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together."

- President Barack Obama, Roanoke Fire Station #1, Roanoke, Virginia, July 13th, 2012

"The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contribute nothing to those above him, but receives the bonus of all their brains.”

- Ayn Rand, Atlas Shrugged, required reading for Representative Paul Ryan's (R-WI) staff.

"The Zambrellis scoffed at attempts by the Democrats...to wage class warfare... 'It's not helping the economy to pit the people who are the engine of the economy against the people who rely on that engine.'"

- Michael Zambrelli, Mitt Romney fundraiser, East Hampton, New York, July 8th, 2012, Quoted in the LA Times

What's the opposite of President Obama's view that the rich have become rich thanks to the American system that we've created together? President Obama's speech has sent the right into a furor, with Rush Limbaugh telling his audience, "I think it can now be said, without equivocation—without equivocation—that this man hates this country." But if expressing the opinion that the value of the economy is something that is created together is enough to hate America, what would it mean to have a vision of wealth creation that loves America?

Some political commentators have treated this comment and its reaction either as part of the presidential noise machine or as the dreamscape projections of the conservative id. Will Wilkinson at Democracy in America has written a post, "Taxes and the rich," addressing this. There are some problematic issues with the post [1] [2], but he describes Rush Limbaugh's reaction as being bound up in an absurd myth. He says, "Mr Obama's in-it-together point is mildly offensive in context because it is used to imply that top-earners who resist paying an even larger portion of America's tab do so only because they are in the grip of an absurd myth of self-reliance."

I'd argue that instead of self-reliance, the real idea the right is appealing to here is the idea of the "job creator." It goes beyond the person who gets by on his own without any help from the government or the public at large. It's the idea that the rich create all the value of the economy. They are, as John Paul Rollert put it in a great post wondering what Adam Smith would think of "job creators," the visible hand of the economy. The rich are, as people at the Mitt Romney fundraiser put it, "the engine of the economy" who all the other people "rely" on for their survival. (I'm assuming. I would have meant it the other way around, but I wasn't at that fundraiser.) The economy isn't something we create together. It is something the rich create for everyone else.

And, crucially, rather than being a myth or a fairy tale conservatives tell themselves, this idea of the "job creator" is the basis for current policy-making on the right. As Texas Governor Rick Perry put it during the primary, “America is not going to move forward until we remove restrictions of over-taxation, over-regulation and over-litigation on the job creators and free them so the jobs can be created.” Charles Krauthammer argues on TV that we have a capital strike that's holding back the economy. John Boehner gives speeches where he argues "private-sector job creators in particular — are rattled by what they’ve seen out of this town over the last few years. My worry is that for American job creators, all the uncertainty is turning to fear that this toxic environment for job creation is a permanent state. Job creators in America are essentially on strike."

Speeches like these diagnose the problem, and then it turns into policy. Presidential candidate Mitt Romney's policy plans for job creation operate under the assumption that those at the top of the economic pyramid are being held in check. His Day One proposals include “the elimination of Obama-era regulations that unduly burden the economy or job creation," “revers[ing] the executive orders issued by President Obama that tilt the playing field in favor of organized labor," cutting corporate taxes, eliminating the estate tax, and a variety of other policy designed to give the "job creators" a firmer hand in controlling the economy. His education policy includes putting private actors in charge of everything, especially putting commercial banks back into the sweet spot of collecting government-insured money and expanding how easy it is for for-profit colleges to qualify for federal money. Presumably he does this because the private is always superior to the public, regardless of how much the business model appears to be a vacuum for subsidies. His tax and social safety net policy focus on boosting the earnings of those at the top of the pyramid on the backs of those at the bottom.

These policies include no hint that the economy is stuck due to inadequate demand or the weak purchasing power of the middle and working classes and the delinking of wages and productivity. There's no mention of the need to expand education and infrastructure to create the economy of the 21st century. There's absolutely no sense that the economy encourages the most innovative or entrepreneurial when there is full employment and a portable social safety net that provides economic security. And it is light-years away from the observation that society is a system of cooperation in which the value in the economy is created together.

 

[1] Wilkinson doesn't say it outright, but it seems that he is in favor of a flat, proportional tax on fairness grounds: "the facts about the portion of tax revenue contributed by the rich plausibly suggest that they pay more than their fair share for the infrastructure of capitalism..the class of people Mr Obama wants to 'give back' has already paid most of the tab, and continues to pay most of the tab, for the tax-financed public goods upon which they, and the rest of us, so crucially depend."

Why do we assume that a flat tax is fair? Given that Wilkinson's theory is about how public goods benefit society, presumably he thinks taxes should be the shadow price of purchasing those goods if they were available in a market. A flat tax would be the philosophically coherent answer for how to raise funds to pay for these benefits if and only if benefits consumed rise proportionately to income. If someone is 10^4 times as rich as I am, they need 10^4 times more garbage collected, breathe 10^4 times more clean air, require 10^4 more police protection and functioning courts, etc. That strikes me as dubious.

The best Milton Friedman could do was "proportional flat-rate-tax would involve higher absolute payments by persons with higher incomes for governmental services, which is not clearly inappropriate on grounds of benefit conferred." Not clearly inappropriate indeed. Taxes should be highly regressive in Wilkinsons' view, converging to a head tax, unless we are talking about utility gained from society, or unless we believe tax policy is a function of making the basic structures of society serve goals like benefitting the worse off, under which the progressive taxation case makes much more sense. See Barbara Fried's fantastic "The Puzzling Case for Proportionate Taxation" for more.

[2] Wilkinson: "[I]n 2008...[t]he top 5 percent earned 31.7 percent of the nation's adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes. If that's not giving something back, what is?" These numbers are juked in part due to the Earned Income Tax Credit (EITC), which is kind of like a negative tax with a work requirement. Given that all the rage in Bleeding Heart Libertarian circles is a universal basic income (UBI) delivered through a negative tax, wouldn't that number be significantly higher under such a system? This is why some people think that libertarians wouldn't really pull the trigger on a UBI...

Mike Konczal is a Fellow at the Roosevelt Institute.

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While the House Deadlocks Over the Food Bill, Millennials Offer Up Ideas for Food and Farming

Jul 18, 2012Rajiv Narayan

Republicans are bickering over how much to cut from the program, while Millennials want to make food accessibility a right for every American.

Republicans are bickering over how much to cut from the program, while Millennials want to make food accessibility a right for every American.

Last week, House Republicans voted to repeal the Patient Protection and Affordable Care Act for the 33rd time. Yet it seems they can’t be bothered to take on a hugely important bill waiting for their attention. While the Senate voted a surprisingly bipartisan 64-35 in favor of the 2012 Food Bill on June 21st, it is unclear whether the House version will now make it to the floor.

When the House Agriculture Committee returned from recess to release the draft version of the nearly 600-page bill, its cuts predictably outshone the Senate version. Where the Senate voted to cut $23 billion over 10 years of the omnibus bill, the House version would slash $35 billion, nearly quadrupling the Senate's $4.5 billion cut to food stamps in the process. This is despite the fact that the Supplemental Nutrition Assistance Program (SNAP) is now helping more Americans than ever to put food on the table. Nearly one in seven Americans—over 46 million people—receive aid from SNAP. 

The House may be having trouble starting the conversation, but students at the Roosevelt Institute | Campus Network are already well underway. Millennials care deeply about our agriculture and nutrition systems and are taking measures to make their voices heard.

Since the beginning of June, we've been passing around a survey that elicits policy values and priorities from young people all over the country on this issue. We've gotten over a hundred responses, many of which strongly contrast with the likely platitudes from floor discussions on legislation worth nearly a trillion dollars

The current discourse is marked by legislative inertia. On food stamps, for example, legislators are stuck on the binary of cutting the program and keeping it intact. The respondents to our survey see things differently. They see food accessibility not as a privilege, but as one comment noted, a “caloric right.” Therefore, discussions about food accessibility move beyond keeping SNAP from getting cut, and instead focus on how to optimize the dollars we assign to the program for health and wellness. One frustrated millennial writes, “The nutrition title has nothing to do with real nutrition. It is about getting people calories. Big difference. That needs to be changed.”

Writing on other issues, a student from Williams College calls for “diversifying food production to help include more regions of the United States and utilize land better suited to particular crops.” Another student from Appalachian State wants to invest in “food literacy.” A recent alumni of Linfield College ties together the disaster preparedness title of the bill to its subsidies title, arguing that it's important to "maintain a safety net so that our farmers feel secure and supported, but also train them so they can avoid loss to as great a degree as possible." We want your input next.

The responses we’re receiving reflect the range of experiences with food and farming in this country. Some have no background in farming; they come from urban or suburban areas removed from the realities of food production. Many of their responses move toward closing the gap by way of local food sourcing, amplified farmers markets, and food as a pillar of health education. Other respondents are steeped deeply in agriculture, many of them hailing from farming communities, some even desiring to go into farming themselves. These responses signal a sober pragmatism for the future of farming for a country of massive population and salvaging arable land from decades of agribusiness.

With ideas like these, how can our representatives manage to be so tongue-tied?

Rajiv Narayan is the Senior Fellow for Health Care Policy at the Roosevelt Institute | Campus Network.

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Is Obama Using FDR's Playbook in Attacking Mitt Romney With Bain Capital?

Jul 16, 2012David Woolner

Obama's attacks on Bain follow in FDR's 1936 re-election footsteps except for one key aspect: a full-throated case for government.

Yes, there are still determined groups…[who would]…steal the livery of great national constitutional ideals to serve discredited special interests. As guardians and trustees for great groups of individual stockholders they wrongfully seek to carry the property and the interests entrusted to them into the arena of partisan politics…

Obama's attacks on Bain follow in FDR's 1936 re-election footsteps except for one key aspect: a full-throated case for government.

Yes, there are still determined groups…[who would]…steal the livery of great national constitutional ideals to serve discredited special interests. As guardians and trustees for great groups of individual stockholders they wrongfully seek to carry the property and the interests entrusted to them into the arena of partisan politics…

The principle that they would instill into government if they succeed in seizing power is well shown by the principles which many of them have instilled into their own affairs: autocracy toward labor, toward stockholders, toward consumers, toward public sentiment. Autocrats in smaller things, they seek autocracy in bigger things. “By their fruits ye shall know them.” - Franklin D. Roosevelt, 1936

In seeking to identify Republican presidential hopeful Mitt Romney as an unfeeling member of the nation’s wealthy elite, President Obama is using tactics reminiscent of those used by Franklin Roosevelt in his own bid for re-election in 1936. In that campaign, FDR sought to draw a clear distinction between what he and his Democratic colleagues represented—the interests of the average working American—versus what he saw as the Republican promotion of a return to the economic status quo. But unlike FDR, President Obama is shying away the argument that government must be the countervailing force against entrenched financial interests.

By 1936, conservative critics of the New Deal had launched a persistent and hard-hitting campaign against FDR's policies, labeling them un-American and contrary to the Constitution. At the forefront of this effort was the American Liberty League, a privately funded anti-government organization that ruthlessly attacked his economic policies as little more than a drive to usurp the constitution and take the United States down the path toward socialism. But thanks to the fact that the Liberty League was never a truly populist movement (although it tried to portray itself as such), as well as the fact that it was financed by some of the most powerful business interests in the county, including the leaders of the DuPont Company, Chase National Bank, Standard Oil, and a number of other wealthy individuals and corporations, FDR was able to discredit its efforts as little more than a poorly concealed attempt to restore the country to the laissez-faire economic policies of the past.

In doing so, FDR reminded the American people again and again that the rightwing drive to restore these policies was not based on the elite’s desire to protect and promote free enterprise, but rather based on their unabashed desire to protect and promote their own wealth and power. Under such an economic system, which had been in place during the 1920s, the “savings of the average family, the capital of the small-businessmen, the investments set aside for old age,” what FDR rightly called “other people’s money,” were the tools with which the economic elite dug itself in. Indeed, as he went on in perhaps his most famous 1936 campaign address, it was critical not to forget how:

Throughout the nation, opportunity was limited by monopoly. Individual initiative was crushed in the cogs of a great machine. The field open for free business was more and more restricted. Private enterprise, indeed, became too private. It became privileged enterprise, not free enterprise.

In our own era marked by declining wages, the outsourcing of jobs, and an ever-increasing share of the nation’s wealth residing in the hands of the financial barons of Wall Street—whose willingness to risk “other people’s money” has hardly diminished—FDR’s assault on what he identified as “the privileged princes of these new economic dynasties” rings as true today as it did in the mid 1930s.

It is for this reason that President Obama’s attacks on Mitt Romney’s record as the head of Bain Capital have proven so effective. Having been burned in the 2007-2008 financial collapse that led to the worst economic crisis since the Great Depression, the American people still harbor a good deal of hostility towards the bonus- and bailout-receiving bank executives whose reckless behavior brought the nation and the rest of the world to the brink of economic ruin. Based on the response to the president’s efforts to paint Romney as one of these elite, it also appears that they remain skeptical of the financial titans' ability to pull us out of the Great Recession. What is missing from the president's attacks, however, is the one key element that FDR used in convincing the American people that they should support his re-election in 1936: the clear and unequivocal case for government.

In the wake of the more than 30-year assault on government launched by Ronald Reagan in 1980, President Obama and the Democratic Party may be loath to use the case for government as part of their strategy to win the 2012 election. But as FDR pointed out in the mid 1930s, we have now reached a point like the 1920s where for too many of us “the political equality we once had won” has become “meaningless in the face of economic inequality.” Why? Because, as was the case in America’s gilded age, “a small group” has “concentrated into their own hands an almost complete control over other people's property, other people's money, other  people's labor—other people's lives.”  As a consequence, we also find, as FDR did, that “for too many of us life…[is] no longer free; liberty no longer real; men…[can] no longer follow the pursuit of happiness.”

To counter such entrenched economic interests, FDR insisted that “the American citizen could appeal only to the organized power of government,” and he urged his fellow citizens to vote for him and his party as the best means to ensure that government by, of, and for the people would continue to flourish. For, as he often noted, what was really at stake in this struggle between the average citizen and the interests of the wealthy was the state of democracy itself. In the same election speech, for example, he also observed:

Unhappy events abroad have re-taught us two simple truths about the liberty of a democratic people. The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic State itself.

The second truth is that the liberty of a democracy is not safe if its business system does not provide employment and produce and distribute goods in such a way as to sustain an acceptable standard of living.

FDR’s belief in the need for government to serve as an active instrument of social and economic justice won him the greatest electoral landslide in American history. It also helped preserve American democracy in an age when democratic government was under siege worldwide. Surely these are two lessons the Obama administration might turn to as it struggles to win the hearts and minds of the American people at this critical moment in our history.

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. He is currently writing a book entitled Cordell Hull, Anthony Eden and the Search for Anglo-American Cooperation, 1933-1938.

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