Daily Digest - June 20: Doing the Dishes

Jun 20, 2013Rachel Goldfarb

Click here to receive the Daily Digest via email.

Why Forks in Your Office Kitchen Keep Disappearing (Marketplace)

Click here to receive the Daily Digest via email.

Why Forks in Your Office Kitchen Keep Disappearing (Marketplace)

Audrey Quinn speaks to Roosevelt Institute Fellow Mike Konczal about why office support positions are being cut in the recession. Mike says technology made some tasks, like booking travel, much simpler, but someone still needs to wash dirty coffee mugs.

Republican Staffer ‘Beats’ Food Stamp Challenge (MSNBC)

Ned Resnikoff reports that a Republican staffer claims to have "beaten" the challenge that 26 Democrats took on last week. Of course, he didn’t eat any fresh fruits or vegetables all week, which is probably not sustainable for people living this way.

GOPers Want to Keep Food Stamps From People Who Have a Cheap Car or $2,000 in Savings (MoJo)

Erika Eichelberger is angry at Republican congressmen who introduced assets tests as a federal requirement for SNAP. They are concerned that people become dependent on handouts, but it’s the inability to save for an emergency that keeps people in poverty.

RIP, American Dream? Why It's So Hard for the Poor to Get Ahead Today (The Atlantic)

Matthew O'Brien is concerned by data that shows that education cannot solve income inequality: a person born wealthy who does not go to college is 2.5 times as likely to end up wealthy as a person born poor with a degree.

U.S. Wages Fall Amid Overseas Pressure (Milwaukee Journal Sentinel)

John Schmid says that the Bureau of Labor and Statistics is reporting year-over-year declines in average weekly wages in the U.S. Some of his sources call this a "normal adjustment period," but that doesn't help people whose bills are rising.

The Capitalist’s Case for a $15 Minimum Wage (Bloomberg)

Nick Hanauer argues that entrepreneurs and businessmen like him should all support a higher minimum wage, because at the current minimum wage many people cannot buy their products. Accepting lower profits in the short-term would boost demand and sales over time.

This Graph Shows How Bad the Fed is at Predicting the Future (WaPo)

Dylan Matthews examines five years of June forecasts from the Fed and finds that they are quite inaccurate. Despite revising the predictions down from year to year, the final growth rates consistently fall behind the projections.

What You Need to Know About Immigration and the Deficit (Slate)

Matt Yglesias explains why we can trust the CBO scoring of the Gang of 8 immigration bill, which says that immigration reform will reduce the deficit by nearly $200 billion over the next ten years.

Share This

Daily Digest - June 19: No Grocery Money, No Problem?

Jun 19, 2013Rachel Goldfarb

Click here to receive the Daily Digest via email.

What Congress and the Media Are Missing in the Food Stamp Debate (The Nation)

Click here to receive the Daily Digest via email.

What Congress and the Media Are Missing in the Food Stamp Debate (The Nation)

Greg Kaufmann asks why we are talking about everything except the state of hunger in the U.S. when we talk about cutting SNAP benefits. There are people in this country who cannot afford enough food for themselves and their families: as he sees it, nothing else should be considered.

Kansas Bleeds the Middle Class (TAP)

Monica Potts visits Johnson County, Kansas, where she finds that suburban poverty is growing and there are no middle-class jobs available. This low-wage economy is a constant struggle, and there don't seem to be any escape routes in place.

Welfare reform took people off the rolls. It might have also shortened their lives. (WaPo)

Dylan Matthews reports on a new study on a Floridian precursor to federal welfare-to-work programs, which shows a troubling statistically significant difference in the mortality rate of the work program participants. More research is necessary, but it's possible welfare-to-work created new health problems.

Unelected Emergency Manager Preparing To Break Detroit’s Pension Promises (ThinkProgress)

Alan Pyke explains how bankruptcy proceedings would allow the emergency manager to put paying investors who gave the city loans before paying retirees. Investments are supposed to come with risks, but fixed-income seniors are apparently less important than debt.

The Chart That Eviscerates Five Terrible Talking Points About Taxes (Business Insider)

Josh Barros uses this chart on the progressivity of our tax system to remind us to think about how the whole system fits together, particularly when considering issues like the so-called "47% percent” or the progressivity of specific taxes.

We Need a New Deal For Millennials (HuffPo)

Richard Eskow argues that Millennials need to run far away from the politics-as-usual that is destroying their future. Instead, he would see a return to real values in politics, starting with the Millennials running for office themselves.

Guitar Center: Prices So Low, Employees Can't Survive on Wages (The Nation)

Allison Kilkenny reports that the 57 retail workers at Guitar Center's flagship in Manhattan have overwhelmingly voted to form a union. Their demands are pretty reasonable: a living wage, with a commission structure that makes sense in the Internet age.

Former intern sues Atlantic Records (Salon)

Christopher Zara explains this lawsuit, in which a former intern is suing to recover minimum wage and overtime with the help of the organization Intern Justice. This follows last week's ruling that some Fox Searchlight internships are illegal.

 

Share This

Governor Cuomo's "Tax-Free New York" Would Come at a High Cost

Jun 13, 2013Richard Kirsch

Eliminating taxes in college communities won't improve the economy, but it will undermine our public institutions.

Eliminating taxes in college communities won't improve the economy, but it will undermine our public institutions.

The decade-long conservative campaign for lower taxes and limited government has hit a wall of public outrage over the unfairness of the American tax system. But while lower taxes for the wealthy and corporations may not be popular, there is still huge public skepticism about how tax dollars can be put to work creating jobs or improving people’s daily lives. Fueling that skepticism are campaigns like that being run now by New York Governor Andrew Cuomo, who is aggressively promoting the idea that we can promote prosperity by lowering taxes.

Governor Cuomo has been racing around New York, with six appearances around the state in less than two weeks, to promote a plan he calls “Tax-Free NY.” Just the name alone should be enough to alarm anyone who understands what society, citizenship. and civilization is all about or what is needed to create broadly shared prosperity. One of a governor’s fundamental jobs is to spend tax dollars wisely, to put the public’s resources to work educating our children, protecting the health of our air and water, building the roads and mass transit systems that allow us to get to work, enjoy community life. and get their goods to market. Taxes pay for public safety and courts that safeguard the rule of law. A “tax-free NY” would be a New York of anarchy, dire poverty, and hopelessness.

Of course, the governor is not really proposing to get rid of all taxes in New York. Instead he would eliminate all taxes – property, personal income, sales, and business – in new tax-free zones established in and around public and private colleges and universities in the state. Every one of these institutions of higher education are supported heavily by taxes in a host of ways: for their very existence and operations in the case of public colleges, and through research grants and government-provided or -guaranteed student grants and loans to private colleges. 

If there is an idea behind the governor’s program, it is that the researchers and thinkers who work in higher education have long made university communities incubators of new businesses. Creating tax-free zones around New York universities is somehow supposed to make them more attractive to business innovation. But Governor Cuomo has this totally backwards. Universities are business innovators because of the creative people who work there. Eliminating taxes around a community college or university does not make the people who teach and do research more creative or innovative. Businesses don’t start in university communities because of low taxes. Businesses are started in university communities because of the quality of the researchers and intellectual richness of the faculty. Attracting and supporting them takes money – from taxes!

As part of Governor Cuomo’s push, I have received two emails from his campaign touting “Tax-Free NY.” The emails are full of quotes from the super-rich promoting the governor’s proposal, including Goldman Sachs CEO Lloyd Blankfein and Jamie Dimon, CEO of JPMorgan Chase. My favorite is from Kenneth Langone, one of the billionaires who tried to defeat President Obama last year: “States need to begin helping businesses by lifting the tax burden and also creating an environment in which employees want to raise their families.” The Blankfeins and Dimons and Langones of this world may live in gated communities, use private education, pay for private health care (at the Langone NYU Medical Center), and enjoy lavish retirements without Social Security, but most other New Yorkers rely on taxes and public programs to help them raise their families.

Of course, Langone – who made his fortune from Home Depot – and the rest of Cuomo’s tycoons would never have become rich without all the public structures that support their businesses and employees. In his advocacy for “Tax-Free NY,” the Governor is encouraging people and businesses to shirk their responsibilities and deny their obligations. The businesses and employees who benefit from the richness of a university community, often marked by excellent schools and libraries and good public services, have a basic responsibility to help pay for the benefits that give them that opportunity.

Building an America that works for all us, with broadly based prosperity, will take leaders who can tell a different story about America – the true story about the great American middle class built by decisions the country made, through our government, to invest in public education, a legal system that protects private initiative, labor laws that protect workers from exploitation, and investment in public infrastructure. That, Governor Cuomo, is also what built New York as the Empire State. 

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

Share This

Daily Digest - June 13: Still Looking for the Jobs

Jun 13, 2013Rachel Goldfarb

Click here to receive the Daily Digest via email.

Fiscal Fixes for the Jobless Recovery (WSJ)

Click here to receive the Daily Digest via email.

Fiscal Fixes for the Jobless Recovery (WSJ)

Following his keynote address at A Bold Approach to the Jobs Emergency last week, Alan Blinder presents changes we could make to encourage more hiring. His solutions could appeal to Republican obstructionists: they may be government-based, but the jobs aren’t. Note: this article is behind a paywall.

What We Need Now: A National Economic Strategy For Better Jobs (Robert Reich)

Robert Reich disagrees with those who think technological advancements condemn part of our workforce to underemployment and low wages. Instead, they should push us to make many other changes that will get us to full employment and reduce income inequality.

Employers: Pay Your Interns. Labor Department: Bust Them if They Don’t! (EPI)

Ross Eisenbrey wants to see government enforcement of the six-part test of what constitutes an internship. When most internships fail the first requirement, that they be closely-supervised educational experiences, it's clear that we have a violation of labor laws.

Reminder: There Are Still 3 Times More Unemployed Workers Than Job Openings (The Atlantic)

Jordan Weissman doesn't want anyone to forget that the job crisis continues: there aren't enough jobs to go around in every major industry. This across-the-board problem continues to support the theory that the underlying issue is lack of consumer demand.

The Sword Drops on Food Stamps (The Nation)

George Zornick reports that Congress is officially going to cut SNAP funding, and the only debate left is how much to cut. Congress seems to be placing its priorities in all the wrong places: this will pass, but we can't get a jobs bill?

State Budgets are on the Mend (WaPo)

Michael Fletcher notes that state economies and budgets are on the mend, with 42 governors proposing increased spending next year. But he thinks this could be a momentary peak due to the spike in capital gains revenue at the end of 2012.

Boy, Is There Ever No Wage Inflation in This Economy (On The Economy)

Jared Bernstein explains how we're seeing decent consumer spending numbers despite the absolutely flat growth in wages. He's worried that the spending is tied to housing wealth and savings, a familiar approach from 2008.

Share This

Daily Digest - May 31: Everyone Hates ISPs

May 31, 2013Rachel Goldfarb

Click here to receive the Daily Digest via email.

Americans are not happy with their Internet service providers (Marketplace)

Click here to receive the Daily Digest via email.

Americans are not happy with their Internet service providers (Marketplace)

Ben Johnson talks to Roosevelt Institute Fellow Susan Crawford about the latest American Consumer Satisfaction Index, which shows ISPs are dead last in keeping customers happy. With little to no competition, they'd rather put profits into dividends for shareholders.

From the Mouths of Babes (NYT)

Paul Krugman feels that the Republican Party's war against SNAP is worth getting angry about, because SNAP encourages economic growth by giving families more to spend. And since the program feeds hungry people, more cuts mean more empty stomachs.

The Real Numbers: Half of America in Poverty -- and It's Creeping Upward (AlterNet)

Paul Buchheit argues that while the Census Bureau reports 15 percent of Americans are living in poverty, with alternate measures it's more like 50 percent -- a number that should raise some eyebrows, especially as Congress allows cuts to poverty programs.

Man of the (rich) people (Salon)

Joan Walsh agrees with rising Republican star Sen. Ted Cruz: Mitt Romney lost the presidency with the words "47 percent." But she sees a disconnect between Cruz's words and the pro-1 percent policies he and other Republican "reformers" are endorsing.

After Running The Numbers Carefully There's No Evidence That High Debt Levels Cause Slow Growth (Slate)

Matt Yglesias explains why it's problematic that Reinhart and Rogoff took their research straight to the op-ed pages: the data shows it’s likely they were aware that they were jumping from correlation to policy suggestions without the necessary stop at causation.

Washington 'Spends' More on Tax Breaks Than on Medicare, Defense, or Social Security (The Atlantic)

Derek Thompson shows that tax expenditures designed to promote mortgages, employer-sponsored health care, investment, and various other consumer behaviors cost American taxpayers more than many programs that are frequent targets for budget cuts.

Losing Hope in Detroit (Bill Moyers)

Greg Kaufmann examines the kinds of programs affected by sequestration, with Focus: HOPE in Detroit as his example. Their job-training program is going to lose between 250 and 350 spots this year, which will hurt 250 to 350 people still seeking good jobs.

Fast Food Workers Striking in Seattle (The Nation)

Josh Eidelson looks at the fast food strikes that shut down three fast food restaurants in Seattle yesterday. These one-day strikes are an organizing tactic for a world that is increasingly hostile to organized labor, and they're looking more and more effective.

Share This

Daily Digest - May 30: Your Cable Package is Free Speech

May 30, 2013Rachel Goldfarb

Click here to receive the Daily Digest via email.

Comcast and Verizon’s Phony Free-Speech Claim (Bloomberg)

Click here to receive the Daily Digest via email.

Comcast and Verizon’s Phony Free-Speech Claim (Bloomberg)

Roosevelt Institute Fellow Susan Crawford knows that it's the cable and internet providers who are trying to limit speech through their control of what's available over their wires. Business decisions aren't free speech- especially when they limit fair competition.

Why the Shareholder Rescue Never Comes (ProPublica)

Jesse Eisinger explains why shareholders aren't going to solve Too Big to Fail. Shareholders want to see big risks and big returns- and as long as they can count on federal bailouts, that means they don't mind seeing big banks, either.

People Over Politicians: Spending Less on Elections Could Strengthen Unions (The Century Foundation)

Douglas Williams argues that unions are wasting money when they donate to campaigns, because even politicians who claim to be pro-labor work against them. Instead, they could invest in local organizing and actually achieve some change.

No cause for relief—austerity will indeed drag hard on the economy in 2013 and 2014 (Working Economics)

Josh Bivens thinks that other writers are too quick to assume that rising stock and housing prices and falling gas prices mean that austerity hasn't slowed our economy. With the job market remaining "dismal," he thinks the recovery hasn't even arrived.

More and more Americans are feeling the effects of the sequester (WaPo)

Brad Plumer looks at the results of a May ABC News/Washington Post poll, which shows that 37 percent of Americans say they've been impacted negatively by the sequester. That number can only grow as spending on vital services continues to shrink.

Children of the Great Collapse (TAP)

Jared Bernstein lays out how the stimulus helped bring children out of poverty, and how the end of the Recovery Act along with sequestration will put them right back in it. Nothing helps the country's long-term economic growth quite like cutting 50,000 spots in Head Start.

Why Can’t America Be Sweden? (NYT)

Tom Edsall examines the claim that Sweden's "cuddly capitalism" would not work in the United States, where our role as supposed innovation entrepreneurs requires a more cutthroat system. This sounds like an awfully convenient excuse to abandon those in need.

The Very Low Threshold For What Conservatives Consider “Reform” (Washington Monthly)

Ed Kilgore doesn't think that policy priorities are enough to differentiate conservative reformers. When the plan for "reform" is to cut taxes and reduce the social safety net, it's hard to see how conservative reformers can claim to support the poor -- or new ideas.

Share This

Is There Really a "Conservative Reform" Movement in Policy?

May 23, 2013Mike Konczal

A few years ago, Freddie DeBoer argued that the terms “left” and “liberal” in the political blogosphere were really more descriptive of argument style and political strategy rather than any actual ideological differences. I think there’s a similar issue at play in the wave of articles about conservatives seeking to reform the movement.

As 2013 rolls on, we are seeing more and more articles about conservative reformers. Ryan Cooper had a list of “reformish conservatives” at the Washington Monthly, and now Jonathan Chait has a great profile of Josh Barro at The Atlantic. I understand why these articles are written - they profile interesting conservative writers that people should read more. But I don’t think they actually make their point.

Here’s how Chait sets it up: “conservative reformists... [argue] that the GOP’s product itself, not merely its marketing slogans, needs to change. Writers like David Brooks, Ross Douthat, Reihan Salam, and Ramesh Ponnuru have made versions of this case for several years.”

So there are two elements. First, reformers think that the GOP is currently on the wrong track with its policies, and second, they believe there need to be more “middle-class-friendly solutions” in new policy. This is different than saying that reformers don’t argue that the economy is a giant Randian morality play, or that President Obama is a left-wing radical; it’s about specific policies.

Are either of these things true? I don’t see it. Or, I see it more on the marketing end than on the policy end. I’m going to keep specific individuals vague here and generalize, because the arguments are predicated on a general move rather than any idiosyncratic argument. Here’s what I take to be the current conservative policy consensus:

1. Social Security and Medicare should be privatized. The word privatization is a complicated one with a lot of meanings, but generally competition should come to Medicare and private accounts to Social Security. This is for budgeting reasons, but also ideological ones. As Yuval Levin wrote, “the vision that has dominated our political imagination for a century — the vision of the social-democratic welfare state — is drained and growing bankrupt.”

2. Everything that isn’t nailed to the floor should be block-granted to the states. From there, funding should be slowed, and private agents should be emphasized at all points. Welfare reform, but for everything (especially Medicaid).

3. The tax code is too progressive, and that was true even before the changes in the fiscal cliff. The number of brackets should be reduced, perhaps even to two. Taxes in general should be lower, with some base-broadening to balance it.

4. The way to deal with health care is to allow insurance purchases across state lines while supporting state-level pre-existing condition pools. Ending Obamacare by itself is smart policy, even if something doesn’t “replace” it. And if push comes to shove, universal coverage is not a necessary goal.

5. Inequality is largely a non-issue, manipulated by liberals to justify their programs. The rich work harder in a global market that rewards skills and superstars. The middle class is only stagnating if you ignore health care costs and the fact that you can consume better technology cheaper. The economy works far better for average people than liberals understand.

6. Global warming, to whatever extent it is happening, should not have a government response to try and reduce carbon. Market signals, technology, migration, and adapting are better and cheaper options for even the gloomiest predictions. Or, looking at it in a different way, growth will ultimately solve the problem of global warming, and so any government policy that hurts growth (which they all do) is the wrong option.

I don’t think I’m making a strawman here. (1-3 is directly from Paul Ryan.) So the question is: how many of the reformers disagree with any of those? This is the core of current policy, and I don’t know if any of the reformish crew even disagree with these statements, much less want to spend the energy challenging them.

Now what about disagreements? What are they adding to the table? As far as I read what reformers bring to the table, it consists of:

a. Monetary policy shouldn’t adopt a price stability mandate (or a gold standard, for that matter), and in fact Ben Bernanke could and should be doing more to help the recovery with the powers he has available. (Fiscal policy like the stimulus, however, is a bad idea that largely fails.)

b. Tax credits, particularly the earned income tax credit and the child tax credit, are successful programs which might even be expanded. They’re good even though they mean 47 percent of Americans pay no federal income tax, which conservatives hate. ("Predistribution" means of boosting low-end wages, like a higher minimum wage, should be avoided though.)

c. Financial institutions should hold more capital, and perhaps we should apply a “structural” reform to the sector like a size cap or siloing of functions.

d. The government protects incumbent interests in industry, both with obvious subsidies but also with certain property rights, like copyright.

Am I missing more? These are important things, but it’s really tough to think of this as a general new direction in policy. Much of it is actually a defense and potential extension of already-existing policies against people further to the right. And even here you’ll have major disagreements. (It is amusing to think of Timothy P. Carney writing a column about how Ben Bernanke needs to “commit to being irresponsible.”)

A lot of the reformer articles posit more aggressive conservative reformers like David Frum, Bruce Bartlett, and now Josh Barro. What stands out to me is that these three write as if the Obama administration happened. The rest of the reformers write as if his first term never happened as a baseline, and crucially that they can’t write stuff seen as getting in the way of repeal.

They also understand that the Great Recession destroyed the previous consensus that we had solved the question of the business cycle. It’s tougher to argue that we should have a radically smaller federal government when it looks like the size of the government and automatic stabilizers helped keep the Great Recession from becoming a Great Depression-like collapse. The reformers have bounced around on this topic, but aside from the three mentioned, they haven’t had conversions. Mostly they believe the Great Moderation should have just tried harder.

I’d emphasize one last thing about the policy of conservative reformers: in practice it will likely be more gestural than substantive. I don’t know enough to mediate the health care battles, but I do know financial reform pretty well. And as financial reform is often brought out as an example of new reformers at work, it’s interesting to watch the lack of attention reformers pay to the actual nuts and bolts of the process.

I don’t see reformers call for getting the head of the CFPB appointed. I don’t see them arguing that repealing FDIC’s new resolution authority powers should be taken out of the Ryan Budget. I don’t see them arguing that efforts to repeal derivatives regulations already are premature or bad policy. I don’t see them angry about the mess of the securitization servicing system, which is creating a nightmare of law-breaking in the housing market. I also don’t seem them arguing the opposite either.

It’s focused on “break up the banks!” Crucially, this gets its energy from the idea that We Should Do Something Big about financial reform, rather than how it plays into a larger set of regulations, laws, and markets. It’s to position the Republicans as Doing Something where the Democrats haven’t. It’s sadly less policy and more political strategizing.

Follow or contact the Rortybomb blog:

  

 

A few years ago, Freddie DeBoer argued that the terms “left” and “liberal” in the political blogosphere were really more descriptive of argument style and political strategy rather than any actual ideological differences. I think there’s a similar issue at play in the wave of articles about conservatives seeking to reform the movement.

As 2013 rolls on, we are seeing more and more articles about conservative reformers. Ryan Cooper had a list of “reformish conservatives” at the Washington Monthly, and now Jonathan Chait has a great profile of Josh Barro at The Atlantic. I understand why these articles are written - they profile interesting conservative writers that people should read more. But I don’t think they actually make their point.

Here’s how Chait sets it up: “conservative reformists... [argue] that the GOP’s product itself, not merely its marketing slogans, needs to change. Writers like David Brooks, Ross Douthat, Reihan Salam, and Ramesh Ponnuru have made versions of this case for several years.”

So there are two elements. First, reformers think that the GOP is currently on the wrong track with its policies, and second, they believe there need to be more “middle-class-friendly solutions” in new policy. This is different than saying that reformers don’t argue that the economy is a giant Randian morality play, or that President Obama is a left-wing radical; it’s about specific policies.

Are either of these things true? I don’t see it. Or, I see it more on the marketing end than on the policy end. I’m going to keep specific individuals vague here and generalize, because the arguments are predicated on a general move rather than any idiosyncratic argument. Here’s what I take to be the current conservative policy consensus:

1. Social Security and Medicare should be privatized. The word privatization is a complicated one with a lot of meanings, but generally competition should come to Medicare and private accounts to Social Security. This is for budgeting reasons, but also ideological ones. As Yuval Levin wrote, “the vision that has dominated our political imagination for a century — the vision of the social-democratic welfare state — is drained and growing bankrupt.”

2. Everything that isn’t nailed to the floor should be block-granted to the states. From there, funding should be slowed, and private agents should be emphasized at all points. Welfare reform, but for everything (especially Medicaid).

3. The tax code is too progressive, and that was true even before the changes in the fiscal cliff. The number of brackets should be reduced, perhaps even to two. Taxes in general should be lower, with some base-broadening to balance it.

4. The way to deal with health care is to allow insurance purchases across state lines while supporting state-level pre-existing condition pools. Ending Obamacare by itself is smart policy, even if something doesn’t “replace” it. And if push comes to shove, universal coverage is not a necessary goal.

5. Inequality is largely a non-issue, manipulated by liberals to justify their programs. The rich work harder in a global market that rewards skills and superstars. The middle class is only stagnating if you ignore health care costs and the fact that you can consume better technology cheaper. The economy works far better for average people than liberals understand.

6. Global warming, to whatever extent it is happening, should not have a government response to try and reduce carbon. Market signals, technology, migration, and adapting are better and cheaper options for even the gloomiest predictions. Or, looking at it in a different way, growth will ultimately solve the problem of global warming, and so any government policy that hurts growth (which they all do) is the wrong option.

I don’t think I’m making a strawman here. (1-3 is directly from Paul Ryan.) So the question is: how many of the reformers disagree with any of those? This is the core of current policy, and I don’t know if any of the reformish crew even disagree with these statements, much less want to spend the energy challenging them.

Now what about disagreements? What are they adding to the table? As far as I read what reformers bring to the table, it consists of:

a. Monetary policy shouldn’t adopt a price stability mandate (or a gold standard, for that matter), and in fact Ben Bernanke could and should be doing more to help the recovery with the powers he has available. (Fiscal policy like the stimulus, however, is a bad idea that largely fails.)

b. Tax credits, particularly the earned income tax credit and the child tax credit, are successful programs which might even be expanded. They’re good even though they mean 47 percent of Americans pay no federal income tax, which conservatives hate. ("Predistribution" means of boosting low-end wages, like a higher minimum wage, should be avoided though.)

c. Financial institutions should hold more capital, and perhaps we should apply a “structural” reform to the sector like a size cap or siloing of functions.

d. The government protects incumbent interests in industry, both with obvious subsidies but also with certain property rights, like copyright.

Am I missing more? These are important things, but it’s really tough to think of this as a general new direction in policy. Much of it is actually a defense and potential extension of already-existing policies against people further to the right. And even here you’ll have major disagreements. (It is amusing to think of Timothy P. Carney writing a column about how Ben Bernanke needs to “commit to being irresponsible.”)

A lot of the reformer articles posit more aggressive conservative reformers like David Frum, Bruce Bartlett, and now Josh Barro. What stands out to me is that these three write as if the Obama administration happened. The rest of the reformers write as if his first term never happened as a baseline, and crucially that they can’t write stuff seen as getting in the way of repeal.

They also understand that the Great Recession destroyed the previous consensus that we had solved the question of the business cycle. It’s tougher to argue that we should have a radically smaller federal government when it looks like the size of the government and automatic stabilizers helped keep the Great Recession from becoming a Great Depression-like collapse. The reformers have bounced around on this topic, but aside from the three mentioned, they haven’t had conversions. Mostly they believe the Great Moderation should have just tried harder.

I’d emphasize one last thing about the policy of conservative reformers: in practice it will likely be more gestural than substantive. I don’t know enough to mediate the health care battles, but I do know financial reform pretty well. And as financial reform is often brought out as an example of new reformers at work, it’s interesting to watch the lack of attention reformers pay to the actual nuts and bolts of the process.

I don’t see reformers call for getting the head of the CFPB appointed. I don’t see them arguing that repealing FDIC’s new resolution authority powers should be taken out of the Ryan Budget. I don’t see them arguing that efforts to repeal derivatives regulations already are premature or bad policy. I don’t see them angry about the mess of the securitization servicing system, which is creating a nightmare of law-breaking in the housing market. I also don’t seem them arguing the opposite either.

It’s focused on “break up the banks!” Crucially, this gets its energy from the idea that We Should Do Something Big about financial reform, rather than how it plays into a larger set of regulations, laws, and markets. It’s to position the Republicans as Doing Something where the Democrats haven’t. It’s sadly less policy and more political strategizing.

Follow or contact the Rortybomb blog:

  

 

Share This

If More Efficient Government is the Goal, Capping Revenues Isn't the Answer

Apr 18, 2013Joelle Gamble

Arbitrarily limiting revenues and cutting critical services doesn't boost efficiency; it just shifts the burden onto citizens.

Arbitrarily limiting revenues and cutting critical services doesn't boost efficiency; it just shifts the burden onto citizens.

The 2013 tax-filing deadline is just a few days behind us, but many Republican members of Congress have already started talking about this year’s revenue intake. Due to CBO projections that federal revenues in 2013 will be the highest in history, Republicans are arguing that the real issue with government is that it has a serious spending problem, and that it is too big and too inefficient to allow for domestic economic prosperity. Predictably, their solution to this problem is to cut taxes and spending. But this approach could actually create more of the inefficiency they claim to oppose.

If we want to build a more efficient government and increase economic prosperity, we should not slash critical government services or restrict revenues across the board. In fact, in a still weak and recovering economy, limiting revenues can heighten inefficiencies in government in a way that exacerbates resource inequalities. We can look to the effects of state property tax caps in Massachusetts and California as local-scale examples of what happens when we try to shrink government just for the sake of shrinking it.

In 1978, at the height of an anti-tax wave, California voters passed proposition 13, a cap on residential and commercial property taxes. Under the new law, increases in tax rates on assessed real property values essentially cannot exceed 2 percent per year. In addition, the law imposed two strict requirements for how new state and local revenues can be raised: State taxes can only be increased either by ballot or with a supermajority vote in both houses of the state legislature, and special-purpose taxes by local governments can only be increased by a supermajority of votes in a local election.

Similarly, Massachusetts’ proposition 2 ½, passed in 1980, limited property tax revenues to 2.5 percent of an area’s assessed property value while also capping growth in revenue from those assessments to 2.5 percent per annum.

Arguments in favor of these initiatives assert that caps on taxes are a needed move to increase government efficiency and to relieve strained families from the economic burden of higher taxes. Essentially the same ideas are permeating the national debate around the federal budget and deficit reduction as deficit hawks claim that government is too big and its spending is too much of a burden on the economy. Recently, as Roosevelt Institute Fellow Mike Konzcal notes, evidence has been growing that this argument is built on shaky ground.

Caps on annual property assessments, which had been a statistically stable source of revenue, forced municipalities to scramble to adjust to the permanent loss of resources, resulting in haphazard cuts and unreliable financial decision-making. Coupled with the movement to give more direct power over taxation to the voters (see CA proposition 218, the Right to Vote on Taxes Act), this state of uncertainty has only calcified – and uncertainty does not breed the efficient government systems that anti-tax advocates have promised.

Furthermore, instead of providing “efficiency savings” to state and local government, reduced revenues have simply shifted the burden of providing services from a stable entity onto the backs of the affected communities. The price of basic government operations doesn’t suddenly get cheaper because there is less revenue. It forces officials to sacrifice important programs to cover basic operational costs, and often the people who relied on those programs are those who can least afford to take the sudden hit. For local low- and middle-income communities in California and Massachusetts, this meant school funding shortages that exist to this day. At the federal level, the mounting effects of sequestration on various services and workers are setting up similar long-term problems.

Everything is amplified in a weak or recovering economy. Direct cuts to services that low- and middle-income communities rely on only exacerbate economic inequality and further hamper future prosperity. Families who already are having difficulty paying bills will be forced to deal with new challenges, from cuts to student aid and Medicaid to being laid off or furloughed.

In setting our fiscal course for the next several years, Congress should take a hard look at the risks taken by the states and avoid caving into the idea that revenue is a necessary evil to be restricted as much as possible. We can agree that our common goal is a smarter, more efficient government; however, cutting revenue streams to force reform is not the smartest, most efficient policy to achieve that goal.

Joelle Gamble is Deputy Field Director of the Roosevelt Institute | Campus Network.

Share This

Good News on the Deficit Makes Social Security Cuts Even Worse

Apr 12, 2013Jeff Madrick

The deficit is already shrinking rapidly, and Social Security won't add much to it anyway.

The deficit is already shrinking rapidly, and Social Security won't add much to it anyway.

The reason President Obama's proposal to cut Social Security benefits is tragic is that it is simply not necessary. His plan is to use a different method to compute how much benefits are raised to offset inflation. But Social Security will add very little to federal spending over the next 30 to 40 years. As a proportion of national income (GDP), It will rise from 5 percent to 6 percent. At the same time, retirees are set to get much less money from their pensions because so many were forced to depend on 401(k)s and defined contribution plans rather than traditional pensions with defined benefits.

But a new report from Goldman Sachs economists puts the Obama decision in an even harsher light. The federal deficit is coming down rapidly on its own. In a piece entitled, “The Rapidly Shrinking Federal Deficit,” Goldman notes that the deficit averaged 4.5 percent of GDP in the first calendar quarter, compared to 10.1 percent in fiscal year 2009. The reasons are faster economic growth, higher taxes, and reduced government spending. 

More importantly, Goldman thinks the deficit will fall to 3 percent or so over the next two years, mostly because business and households will begin spending again. They think so-called deleveraging—that is, paying back debt—is coming to an end.

And here’s some additional good news: deglobalization! McKinsey reports that deglobalization has plagued the world since the financial crisis. The cross-border flows of capital are down sharply. The good news, McKinsey admits, is that they probably should be. Such border flows were often hot capital, financing speculation more than long-term investment. Now foreign direct investment, usually stable investment in business, is a much higher proportion of capital flows.  

And financial deepening—the proportion of GDP that is in debt and stocks--is also down. What sticks out like a  sore thumb is that the financial deepening of the preceding two and a half decades—which was huge--went far less to households and business than is to be expected. Even McKinsey says this is astonishing, because what else is finance supposed to do but supply funds to individuals and businesses? Instead, an enormous proportion went to finance itself—that is, financial firms borrowed at dramatically higher rates. And an awful lot of that must have gone into speculative activities, especially highly risky mortgage securities. From my point of view, this financialization was the disease created by the triumphalism of globalization. Globalization, to be sure, had benefits, but they were overshadowed by the financial instability of capital flows, which grew enormously since Ronald Reagan was president.

McKinsey warns that this deglobalization of finance could go too far. As noted, cross-border flows, especially long-term investments, can be highly benefical for world growth. But for me, it is now welcome. 

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed

Share This

Mapping Out the Arguments Against Chained CPI

Apr 9, 2013Mike Konczal

Reports started coming in late last week that President Obama’s budget, to be released early tomorrow, will include a change to the cost-of-living adjustment (COLA) for Social Security. Specifically, it will adopt a “chained CPI” (consumer price index) measure.

Many people have been writing stories about why this is a bad idea. I want to generalize them into four major categories of critique of moving to a chained CPI (with one aside). As you read stories about the pros and cons of this change in the weeks ahead, hopefully this guide can provide some background.

Accuracy, or Lack Thereof

Economists like the idea of chained CPI because they think it’s more representative of how people behave when they substitute among goods. In this story, we have been over-correcting for inflation in the past decades.

However, as a letter from EPI, signed by 300 economists and social insurance experts, explains, it is just as likely as we are under-correcting. EPI notes "it is just as likely that the current COLA fails to keep up with rising costs confronting elderly and disabled beneficiaries." The current adjustment is based on an index of workers excluding retirees.

If you look into the data, the elderly spend a lot more of their limited money on housing, utilities, and medical care. Health care costs have been rising rapidly over the past several decades, and it is difficult to substitute on other necessary, fixed-price goods like utilities. With the notable exception of college costs, the things urban wage earners spend money on haven't increased in price as quickly as what the elderly purchase. As a result, the CPI-E (the index tailored to the elderly) has increased 3.3 percent a year from 1982 to 2007, while the CPI-W (tailored to wage earners) has only increased 3 percent a year. Definitionally, through the way it is calculated, chained CPI-W will always be lower than CPI-W. [Edit: This will almost certainly be lower, but it isn't definitionally true.]

As Dean Baker has noted, if accuracy were the only motive for changing COLA, it would be relatively easy to get a full, chained version of the index of prices faced by the elderly and use that. That has not been proposed.

Hedging Unexpected Longevity

Another argument is that this is a relatively small cut, or that a slower rate of growth shouldn’t really be thought of as a cut. But there’s a big problem with this.

There are many nice things about the design of Social Security, but one of them is that it is a form of insurance against the downsides of living longer than expected. Let’s say you retire at 65, believe you’ll live to 85, and save enough to make it to 88 just in case. And then you live to 92. Are those last five years absolutely miserable, with your savings completely depleted and an inability to earn market wages except through begging and charity? No, because my man Franklin Delano Roosevelt and Social Security got your back. Social Security helps hedge against two risks that are very difficult to manage: when you were born (and thus the years into which you’ll retire) and how long you’ll live.

Notice how chained CPI cuts, though. In the same way that compounding interest grows quickly over time because you get interest on what you’ve saved, a lower cost-of-living adjustment creates a lower baseline for future adjustments, so the cuts grow over time.

This means that the real cuts come from people who happen to live the longest. Which is precisely one of the risks Social Security is meant to combat. This is one reason why women, who live longer than men, are much more at risk from these chained CPI cuts.

Aside: Can’t We Balance the Downside?

You’ll notice liberals who support moving to chained CPI have complicated “swallow a bird to catch the spider who’s catching the fly” policy proposals to go along with it. If we swallow Obama’s chained CPI proposal, we’ll need to swallow an age “bump” to catch chained CPI from falling heavily on the very old. But after we swallow the age bump, we’ll need to swallow some sort of exemption for Supplemental Security Income to catch the fact that the change would still fall heavily on the initial benefit level for the poorest elderly and disabled people. And so on.

Doing all these fixes, of course, eliminates much of the savings that people are hoping to get. And it is unlikely that these clever ways of balancing the worst effects of the change will get even a single Republican vote. And of course, in spite of all this effort, Republicans could still call out the president for proposing to cut Social Security.

Neither Grand nor a Bargain

You’ll hear arguments that a Grand Bargain is necessary, so it’s better to bring Social Security into long-term balance now, with Democrats at the helm, than in the future, when there will be less time and an uncertain governance coalition. You can get fewer cuts and more revenue than you would otherwise and take the issue off the table for the foreseeable future to concentrate on other priorities.

But if that’s your idea, then this is a terrible deal and sets a terrible precedent, because this deal would accomplish none of your goals. You'd cut Social Security without putting in any new revenue. And it wouldn't be sufficient to close the long-term gap, so the issue would stay on the table. Indeed, the deficit hawks would probably be emboldened, viewing this as a "downpayment" on future cuts, and require any future attempts to get more revenue for Social Security, say by raising the payroll tax cap, to involve significant additional cuts.

We Need to Expand Social Security

As Michael Lind, Joshua Freedman, and Steven Hill of the New America Foundation, along with Robert Hiltonsmith of Demos, expertly document, Social Security should be expanded in the years ahead, not cut.

Retirement security is meant to be a three-legged stool of Social Security, private savings, and employer pensions. The last two legs of that stool have been collapsing in the past few decades, and there is no reason to believe that this will change in the near future. 401(k)s have been a boon for the rich to avoid taxes and save money that they’d be saving anyway, while it isn’t clear that average Americans have saved enough to offset declining pensions. Median wages have dropped in the recession and are likely to show little growth in the years ahead, which makes building private savings harder. There isn't a ton to cut - even the middle income quintile of retirees, making only around $20,000 a year, get 62 percent of their income from Social Security.

There are many ways to boost Social Security, and the New America paper introduces one. But as the authors note, “[a]ny strategy that expands the reliable and efficient public share of retirement security in America would be an improvement over today’s system, which is biased toward the affluent and skewed toward private savings.” And the best way to do programs is to build out programs that already work well.

Any other stories out there that require a new category?

Follow or contact the Rortybomb blog:

  

 

Reports started coming in late last week that President Obama’s budget, to be released early tomorrow, will include a change to the cost-of-living adjustment (COLA) for Social Security. Specifically, it will adopt a “chained CPI” (consumer price index) measure.

Many people have been writing stories about why this is a bad idea. I want to generalize them into four major categories of critique of moving to a chained CPI (with one aside). As you read stories about the pros and cons of this change in the weeks ahead, hopefully this guide can provide some background.

Accuracy, or Lack Thereof

Economists like the idea of chained CPI because they think it’s more representative of how people behave when they substitute among goods. In this story, we have been over-correcting for inflation in the past decades.

However, as a letter from EPI, signed by 300 economists and social insurance experts, explains, it is just as likely as we are under-correcting. EPI notes "it is just as likely that the current COLA fails to keep up with rising costs confronting elderly and disabled beneficiaries." The current adjustment is based on an index of workers excluding retirees.

If you look into the data, the elderly spend a lot more of their limited money on housing, utilities, and medical care. Health care costs have been rising rapidly over the past several decades, and it is difficult to substitute on other necessary, fixed-price goods like utilities. With the notable exception of college costs, the things urban wage earners spend money on haven't increased in price as quickly as what the elderly purchase. As a result, the CPI-E (the index tailored to the elderly) has increased 3.3 percent a year from 1982 to 2007, while the CPI-W (tailored to wage earners) has only increased 3 percent a year. Definitionally, through the way it is calculated, chained CPI-W will always be lower than CPI-W. [Edit: This will almost certainly be lower, but it isn't definitionally true.]

As Dean Baker has noted, if accuracy were the only motive for changing COLA, it would be relatively easy to get a full, chained version of the index of prices faced by the elderly and use that. That has not been proposed.

Hedging Unexpected Longevity

Another argument is that this is a relatively small cut, or that a slower rate of growth shouldn’t really be thought of as a cut. But there’s a big problem with this.

There are many nice things about the design of Social Security, but one of them is that it is a form of insurance against the downsides of living longer than expected. Let’s say you retire at 65, believe you’ll live to 85, and save enough to make it to 88 just in case. And then you live to 92. Are those last five years absolutely miserable, with your savings completely depleted and an inability to earn market wages except through begging and charity? No, because my man Franklin Delano Roosevelt and Social Security got your back. Social Security helps hedge against two risks that are very difficult to manage: when you were born (and thus the years into which you’ll retire) and how long you’ll live.

Notice how chained CPI cuts, though. In the same way that compounding interest grows quickly over time because you get interest on what you’ve saved, a lower cost-of-living adjustment creates a lower baseline for future adjustments, so the cuts grow over time.

This means that the real cuts come from people who happen to live the longest. Which is precisely one of the risks Social Security is meant to combat. This is one reason why women, who live longer than men, are much more at risk from these chained CPI cuts.

Aside: Can’t We Balance the Downside?

You’ll notice liberals who support moving to chained CPI have complicated “swallow a bird to catch the spider who’s catching the fly” policy proposals to go along with it. If we swallow Obama’s chained CPI proposal, we’ll need to swallow an age “bump” to catch chained CPI from falling heavily on the very old. But after we swallow the age bump, we’ll need to swallow some sort of exemption for Supplemental Security Income to catch the fact that the change would still fall heavily on the initial benefit level for the poorest elderly and disabled people. And so on.

Doing all these fixes, of course, eliminates much of the savings that people are hoping to get. And it is unlikely that these clever ways of balancing the worst effects of the change will get even a single Republican vote. And of course, in spite of all this effort, Republicans could still call out the president for proposing to cut Social Security.

Neither Grand nor a Bargain

You’ll hear arguments that a Grand Bargain is necessary, so it’s better to bring Social Security into long-term balance now, with Democrats at the helm, than in the future, when there will be less time and an uncertain governance coalition. You can get fewer cuts and more revenue than you would otherwise and take the issue off the table for the foreseeable future to concentrate on other priorities.

But if that’s your idea, then this is a terrible deal and sets a terrible precedent, because this deal would accomplish none of your goals. You'd cut Social Security without putting in any new revenue. And it wouldn't be sufficient to close the long-term gap, so the issue would stay on the table. Indeed, the deficit hawks would probably be emboldened, viewing this as a "downpayment" on future cuts, and require any future attempts to get more revenue for Social Security, say by raising the payroll tax cap, to involve significant additional cuts.

We Need to Expand Social Security

As Michael Lind, Joshua Freedman, and Steven Hill of the New America Foundation, along with Robert Hiltonsmith of Demos, expertly document, Social Security should be expanded in the years ahead, not cut.

Retirement security is meant to be a three-legged stool of Social Security, private savings, and employer pensions. The last two legs of that stool have been collapsing in the past few decades, and there is no reason to believe that this will change in the near future. 401(k)s have been a boon for the rich to avoid taxes and save money that they’d be saving anyway, while it isn’t clear that average Americans have saved enough to offset declining pensions. Median wages have dropped in the recession and are likely to show little growth in the years ahead, which makes building private savings harder. There isn't a ton to cut - even the middle income quintile of retirees, making only around $20,000 a year, get 62 percent of their income from Social Security.

There are many ways to boost Social Security, and the New America paper introduces one. But as the authors note, “[a]ny strategy that expands the reliable and efficient public share of retirement security in America would be an improvement over today’s system, which is biased toward the affluent and skewed toward private savings.” And the best way to do programs is to build out programs that already work well.

Any other stories out there that require a new category?

Follow or contact the Rortybomb blog:

  

 

Share This

Pages