Blog postings by CEPR staff and updates on the latest briefings and activities at the Center for Economic and Policy Research.

In a new report out yesterday, we examine the demographics — gender, race, and age — of long-term hardship in the labor market. The report follows up on a paper (pdf) we did in January that made the case for looking beyond the standard “long-term unemployment” measure, to include the “discouraged,” the “marginally attached,” and the involuntarily part-time.

The new paper describes the people who are currently experiencing long-term hardship. While the economic recovery is on track for some, others are being left further behind. This chart, for example, shows the race and gender breakdown of the short-term unemployed (STU), the long-term unemployed (LTU), the unemployed and underemployed using the Bureau of Labor Statistics “U-6″ measure, and those not in the labor force (NILF).


Our main conclusion, from the paper:

…by whichever measure  –the standard long-term unemployment rate or an expanded “long-term hardship” measure…– the data … show that the burden of long-term joblessness is borne unevenly. Blacks and Latinos, less-educated workers, and younger workers are all much more likely to be unemployed, long-term unemployed,  “discouraged,” “marginally attached,” or involuntarily part-time, with terrible consequences for these groups’ current and future economic, social, and health outcomes.
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In 2008, then Senator Obama famously ran as the candidate of hope and change. If former Massachusetts Governor Mitt Romney ends up getting the Republican nomination he may be the candidate of change in 2012, but with a somewhat different meaning.

Last month, Governor Romney told reporters that he favored indexing the minimum wage to the rate of inflation, which would mean that it would automatically rise to keep pace with the cost of living. (He took the same position in January when asked a question by a staffer from the National Employment Law Project Action Fund.) If the minimum wage had been indexed to the consumer price index since its last increase in July of 2009, it would be $7.60 an hour today instead of $7.25. Furthermore, with inflation projected at roughly 2.0 percent a year over the next decade, indexing would translate into an annual increase of 15-16 cents an hour going forward. 

But that was last month. This week Governor Romney came out against increasing the minimum wage when he was interviewed on Larry Kudlow's show on CNBC. Romney told Kudlow:

"So, certainly, the level of inflation is something you should look at and you should identify what’s the right way to keep America competitive. So that would tell you that right now, there’s probably not a need to raise the minimum wage.”

The minimum wage is not the only economic issue on which it seems that Romney has changed his position. At the start of the health care debate in 2009, he urged President Obama to look to the Massachusetts reform he implemented as a model, including the use of mandates. He is currently taking a somewhat different position toward the plan that President Obama pushed through Congress, which is based on the Massachusetts plan.

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This post originally appeared on the Council on Contemporary Families' website in response to the article "Is the Gender Revolution Over?"

As Cotter, Hermsen, and Vanneman argue, the extent of the gender revolution has been exaggerated. In the years between the passage of the Equal Pay Act in 1963 and 2010, the pay gap has closed at less than half-a-cent per year. Currently, women make about 75 percent as much as men.

Some racial groups, however, have experienced more closing of the gap. In 1980, black women earned 76 percent of what black men earned. By 1990, that had risen to 88 percent.  The rate of progress did slow in the 1990s, as Cotter et al found for women as a whole. Still, by 2010, black women made 92 percent as much as black men, which at first glance suggests more progress in gender equality among African-Americans.

Part of this greater convergence in wages is caused by a divergence in educational completion. In 1980, equal numbers (17 percent) of black men and women had a college degree or higher. Thirty years later, the percent of black women with a bachelor's or advanced degree had risen to 19 percent but dropped to 16 percent for men, which suggests that the progress of black men may have stalled more than the progress of black women.

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Brazil’s GDP growth slowed dramatically in 2011, falling from 7.5 percent growth in 2010 to 2.7 percent last year. In the fourth quarter, it grew by just 1.4 percent on an annualized basis. This is actually an improvement over the third quarter, when GDP fell at an annual rate of 0.3 percent.

GDP growth in the fourth quarter was divided fairly evenly among industries, with one exception: manufacturing, which shrank at a 9.5 percent annualized rate. Over all of 2011, it has remained flat, growing just 0.1 percent over its 2010 level. But since June it has seen two quarters of consecutive negative growth and fallen to 5.7 percent below its pre-recession peak of 2008.


The sector with the best performance since the recession has been finance and insurance, which grew 3.9 percent in 2011 and is now 23.1 percent above its pre-recession peak.  This is a continuation of a long-term trend toward finance and away from manufacturing: over the last five years, overall GDP growth has averaged 4.2 percent per year, while the finance and insurance sector has averaged 9.8 percent and manufacturing has averaged just 1.8 percent growth annually.

For a more in-depth analysis, read our latest Latin America Data Byte.

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Yesterday’s New York Times has a high-production-values piece on differences in the recent labor-market performance of France and Germany. Reporter Steven Erlanger, whose foreign reporting I’ve admired in other contexts, builds the story around a comparison of two small towns –Sélestat and Emmendingen– located on either side of the French-German border. Unfortunately, the side-by-side comparison is not well-situated in the available national data, and the story falls quickly into a “lazy Latins” versus “industrious Prussians” frame that gives a misleading picture of the economic problems facing France today.

Let’s take a closer look at one particularly problematic sentence that captures the core themes of the piece:

But while the French may admire German rigor, they are reluctant to make some of the same sacrifices, including longer hours and less job security.

So, the Germans are rigorous, make sacrifices, work long hours, and accept less job security; the French are reluctant, work less, and cling to their job security.

This may be the way folks on the ground tell the story, but we actually have a lot of reliable internationally comparable data that suggest this view is almost entirely wrong.

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CEPR Co-Director Mark Weisbrot last week issued a statement supporting  Jeffrey Sachs’ reform candidacy for the World Bank. "Reform" is the operative word here. It is the nature of Sachs’ candidacy – the changes he proposes for what the World Bank does, coupled with his undeniable credentials – that makes his candidacy “unprecedented” and important.

Sachs' candidacy sets the stage for a public debate over the issues that World Bank reform advocates consider most important, from poverty to climate change to the rights of communities affected by World Bank-funded projects to have a say in what happens to them and their environment. This is debate that all World Bank reformers should welcome.

What seems most important at this juncture is to have a competitive process – an actual presidential race of sorts. The fact that a candidate with the experience and skills that Sachs has could "run," quite publicly, with his desire for the presidency well known to everyone, and still be passed up in the end in an arbitrary, secretive decision by the White House would only highlight the utterly undemocratic nature of World Bank governance. The U.S. has effective veto power, and one of its traditional privileges has been the power to choose the World Bank president. The European members get to choose the Managing Director of the equally undemocratic IMF.

Of course it is high time, after over 60 years of American World Bank presidents, for the world to take seriously the idea that the President of the World Bank could come from the developing world.  Such candidates should also put their candidacy forward. A "crowded field" is nothing to fear here – the more ideas for what could and should be done to reform the Bank, the better. The more candidates that show what qualifications could be possible in a World Bank president, the better. All of these will only demonstrate what has been lacking in World Bank chiefs so far – and what is likely to be lacking in them, if the White House and G20 governments opt for "business as usual."

But if the Obama Administration plans to keep with past precedent and again choose an American, then Sachs is one American well qualified for the job, and one who has a chance to bring "change we can believe in."

This post originally appeared on

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In two previous posts, John Schmitt and I discussed social science evidence supporting the argument, made most recently in the Economic Report of the President, that rising inequality in the United States is linked with reduced economic mobility.  One of the more, um, interesting arguments made by Scott Winship is that by making this connection the President will "talk down the economy." Winship, in recent Senate testimony, says he "worr[ies] that interest from one side in framing this year's presidential and senate campaigns around overdrawn themes of inequality and diminished opportunity for the middle class will affect perceptions of the economy's strength."

I'd argue that a bigger worry for presidential candidates is whether they are taking the public's very real and growing concern about inequality and mobility seriously. In a May 2011 Gallup poll, a majority of Americans (55 percent) said it was very/somewhat unlikely that "today's youth will have a better life than their parents." This is the highest percentage on record (and the first majority) answering this way since Gallup started asking the question in 1983.

It's notable this all-time high in pessimism about young people's economic future was recorded half a year before the President's moderately populist Osawatomie speech in which he raised the connection between inequality and declining mobility for the first time. So, the President was giving voice to a majority perception of diminished opportunity.  (Also worth noting, consumer confidence has trended steadily upward since the Osawatomie, which suggests that real day-to-day economic events affect perceptions of the economy's strength more than political campaigns.)

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This week, we post links to reports from CEPR and CBPP.

Center for Economic and Policy Research

It's So Hard to Get Good Help
Dean Baker

Center on Budget and Policy Priorities

Are The Size And Reach Of The Federal Government Exploding? Non-Interest Spending Outside Social Security and Medicare Will Fall Well Below Prior 50-Year Average as Economy Recovers
Richard Kogan and Robert Greenstein

Can Governor Romney’s Tax Plan Meet Its Stated Revenue, Deficit, And Distributional Goals at the Same Time?
Robert Greenstein, Chye-Ching Huang, and Chuck Marr

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In a post yesterday, we noted that the growing disparity in college completion provides support for the view that increasing inequality has reduced economic mobility. Bhashkar Mazumder, a senior economist at the Chicago Federal Reserve, makes a similar point in a new article, Is Intergenerational Economic Mobility Lower Now than in the Past?, published as a Chicago Fed Letter. Here’s Mazumder’s summary of the trend:

After staying relatively stable for several decades, intergenerational mobility appears to have declined sharply at some point between 1980 and 1990, a period in which both income inequality and the economic returns to education rose sharply. This finding is also consistent with theoretical models of intergenerational mobility that emphasize the role of human capital formation. There is fairly consistent evidence that intergenerational mobility has stayed roughly constant since 1990 but remains below the rates of mobility experienced from 1950 to 1980. 

And here’s his prediction for mobility going forward:

Although we cannot say with any certainty how much mobility today’s children will experience over the coming decades, recent research suggests cause for concern. The gap in children’s academic performance between high- and low-income families has widened significantly over the last few decades. If this trend persists, it would point to reduced intergenerational economic mobility going forward.

That said, reducing educational disparities is only part of the solution to increasing mobility, and it’s a long-term solution at that. Our biggest problem right now is that we’ve been producing too many poorly compensated jobs and too few good ones. Increasing compensation for workers in these jobs—through policy reforms like increasing the minimum wage, enforcing and strengthening labor laws, and making paid sick leave a basic right—would increase mobility. 

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The central issue in the furor that erupted a few weeks back over the "Gatsby Curve" was whether or not the sharp increase in inequality over the last three decades has depressed economic mobility. President Obama, the chair of his Council of Economic Advisers, and most of the leading experts in the field argue that today's extreme inequality is not only bad in itself, but it also lowers economic mobility. Brookings Institution fellow Scott Winship, however, says mobility is no worse today than it was earlier in recent economic history.

Winship's critique of the standard view on declining mobility centers on what he sees as limitations in the available data and problems with the statistical techniques used by economists analyzing the recent trends. At this point, quite a few people have offered responses to Winship's technical concerns (including one of us (pdf) at a recent event sponsored by the New America Foundation). But, most of this recent debate has been confined to a fairly narrow (and generally technical) discussion of Winship's criticisms of the way surveys capture, and the way economists model, income.

A recent paper (pdf) by Martha Bailey and Susan Dynarski, however, allows us to completely sidestep Winship's concerns about measuring income across generations. Bailey and Dynarski analyze college completion rates over time and find a disturbing pattern that provides strong support for the view that economic mobility has declined substantially over the last three decades.

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Those who like to argue that financial speculation taxes are not possible or won't raise any money always have a difficult time when the topic of the London stock exchange comes up. The problem is that the London stock exchange has imposed a tax on stock trades for centuries. For the last quarter century it has been set at 0.5 percent on a trade (0.25 percent on both the buyer and the seller), before 1986 it had been 1.0 percent of the value of the trade.

In spite of this tax the London stock exchange continues to be one of the largest in the world, thumbing its nose at those knowledgeable finance types who insist that all trading would just migrate elsewhere in response to much smaller taxes. The UK government also raises a considerable amount of money through this tax. Annual revenue runs between 0.2-0.3 percent of GDP, which would come to $30-$40 billion a year in the United States. This is real money even in Washington.

For the most part, movements in the London stock exchange index have tracked reasonably well movements in the S&P 500, but for the last four years, it looks at the main London index was considerably less volatile. There are many factors that might explain the greater volatility of S&P 500 in this period, other than the financial transactions tax, but it is still striking to note the difference.

Click to Enlarge


Source: Yahoo! Finance.

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The following highlights CEPR's latest research, publications, events and much more.

CEPR on Greece

Two days after the Greek government and European authorities announced a new €130 billion bail-out agreement, CEPR released a paper that looks at Greece's experience with “internal devaluation” and finds there's a high risk of continued prolonged recession. The paper, “More Pain, No Gain for Greece: Is the Euro Worth the Costs of Pro-Cyclical Fiscal Policy and Internal Devaluation?” by Co-Director Mark Weisbrot and Research Assistant Juan Antonio Montecino, argues that Greece should consider default and an exit from the euro.  “The IMF has consistently underestimated the depth of the Greek recession,” said Mark. Referring to the program of ongoing austerity being pushed on the Greek people by the “troika” (the European Central Bank, the European Commission, and the IMF), Mark said, “At some point, it becomes rational for Greeks to ask, is the euro worth this kind of punishment?”

The paper was cited at length by the London Telegraph (UK) which stated, “Unlike the troika’s messy efforts, the CEPR’s arguments are clear and compelling.” Mark was quoted in stories on ABC and and this report by the Associated Press, which appeared in dozens of U.S. newspapers. Mark was also interviewed about the Greek crisis by the BBC News and the radio show “This is Hell” out of WNUR (Chicago).

The paper also received a great deal of attention in Greece, where it was the focus of a much reprinted article in leading business daily IMERISIA as well as in other European countries.

CEPR has been writing on the eurozone crisis for two years, as CEPR Co-director Dean Baker mentions in this article for Al Jazeera English. In the article, Dean notes that people in Greece and other peripheral European countries must “wake up to the fact that they are not dealing with reasonable people on the other side of the negotiating table.” Mark noted that the ongoing eurozone crisis is affecting the U.S. as well as the European economy, and could present a significant challenge to President Obama’s reelection hopes if it continues to worsen, in a column for U.S. News and World Report. Mark was also interviewed at length about the eurozone crisis by the New Left Project.

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The pending home sales index for January had the highest reading since April of 2010, when the first-time homebuyers tax credit expired. Sales in the South were especially strong, up by more than 10 percent from year-ago levels. New and existing home sales also have shown a similar upward trend, and inventories of both have fallen to a more normal range of close to six months of sales. At the trough of the downturn, the range was near 10 months of sales.

But these positive signs must be viewed with some caution. Monthly data are always erratic, especially in the winter months when weather can be a very important factor. In the case of this winter, an unusually mild January likely boosted sales in the Midwest and Northeast. More importantly, though, the sources of long-term drag on the housing market remain. Despite some improvement in the job market and an increasing willingness by lenders to allow modifications and/or refinancing, we are still likely to see more than 900,000 foreclosures in both 2012 and 2013.

For a more in-depth analysis, see the latest Housing Market Monitor.

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Since there were many thoughtful comments on my earlier post, it seemed worth saying a bit more by way of response. As I noted at the onset, I did not see a difference between MMT and the Keynes that I first studied more than 30 years ago. I guess I still don’t see the difference.

In my prior post I noted that there were three channels to raise the economy back towards its potential:

  1. Government spending and tax cuts;
  2. Expansionary monetary policy; and
  3. Devaluing the dollar to increase net exports.

I should also add a fourth channel that can move the economy to full employment by reducing the average workweek or work year: work sharing.

As best I can tell, the MMT folks would have us only use the first channel and seem to disparage the other three routes to raising employment levels. I will briefly argue the merits of the other three channels and explain why I do not think reliance exclusively on the first channel is the best policy.

The Monetary Policy Channel

Several comments on my earlier post argued that monetary policy alone could not be counted on to get the economy back to full employment. This is true, but of course not what I was arguing.

I was making the case that the Fed can do more to boost the economy, even with short-term rates near zero. It could target a longer term rate, for example committing itself to push the 5-year Treasury rate to 1.0 percent or the 10-year Treasury rate to 1.5 percent.

This would boost the economy in several ways. First, investment is relatively unresponsive to interest rates, but it is not altogether unresponsive. In other words, with sharply lower interest rates, we should expect to see some additional private sector investment.

We should also see money freed up from mortgage refinancing. This amounts to a shift of income flows from creditors to debtors. That should lead to some additional consumption under the assumption that the propensity to consume for people with mortgages is somewhat greater than the propensity to consume among people who own mortgages or mortgage backed securities.  (Many people have over-estimated this effect, but it certainly is not zero. If we can get $4 trillion in mortgages refinanced at interest rates that average 1.5 percentage points less than their prior mortgage, it would reduce annual payments by $60 billion. If we assume that one third of this translates into additional consumption, it amounts to $20 billion a year in added demand. )

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New reports were released this week by the Center for Economic and Policy Research, Demos and the Economic Policy Institute.

Center for Economic and Policy Research

Health-Insurance Coverage for Low-Wage Workers, 1979-2010 and Beyond
John Schmitt


Putting Vermont Money Back to Work for Vermont: Introducing the Vermont Partnership Bank

Economic Policy Institute

A Decade of Declines in Employer-Sponsored Health Insurance Coverage
Elise Gould

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There is a growing chorus of sophisticated types telling the country that we could have millions more jobs in manufacturing, if only we had qualified workers. This claim has the interesting feature that it places responsibility for the lack of jobs on workers, not on the people who get paid to manage the economy (e.g. the Fed, Congress, the White House).

As they say on Wall Street, talk is cheap. It is easy for an employer to claim that he/she would hire lots of people if only he could find workers with the right skills. However economists claim that we look at what people do, not what they say.

If it really is the case that employers have job openings, but can't find workers with the necessary skills, then we should be able to find evidence for this fact. The first piece of evidence that we might expect to find is a surge in job openings. In other words, if manufacturers are unable to find workers with the necessary skills, then there should be a lot of vacant positions.

Well, the good people at the Bureau of Labor Statistics (BLS) keep data on job openings in manufacturing.

Job Openings in Manufacturing
(click for larger version)

Manu-jobs Source: BLS.

The chart does show a recovery in the number of job openings, but we are still just getting back to the level of the middle of 2007. We are still far below the peak of the last business cycle and down by close to 40 percent from the January 2000 level, the first month in which the survey was used.

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I've only read the prologue and first chapter of Charles Murray's new book on growing class inequality. (That's all that I can download for free on my e-reader—I'm looking forward to reading the rest when I can borrow it from my local socialist bibliothèque, err, I mean, the D.C. public library.) So far, I've found two statements in Murray's prologue particularly interesting.

First, Murray correctly notes that income poverty was roughly cut in half between 1949 and 1963, going from 41 percent to just under 20 percent, and that this was a phenomenal achievement. Because the official poverty series published by the federal government starts in 1959, the decline in poverty in the 1950s doesn't get as much attention as it should, including from anti-poverty researchers and advocates. (Income poverty, of course, continued to decline for 10 years after 1963. The overall decline between 1949 and 1973 was about 73 percent. As I've discussed in a chapter in Half in Ten's recent report on poverty, over this entire period, income poverty trends basically tracked rising real median incomes and sustained rates of low unemployment. As the political center of gravity shifted to the right in the Carter-Reagan years, positive trends in both income poverty and real median incomes slowed and stalled out.)

Second, Murray argues that what he calls the founding "American project" was about "demonstrating that human beings can be left free as individuals and families to live their lives as they see fit, coming together voluntarily to solve their joint problems."

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In an otherwise very good New York Times Sunday Review piece, Sandra Aamodt and Sam Wang argue that: "French children also are tracked into different academic paths by age 12, a practice that reinforces the influence of parental socioeconomic status on educational and career outcomes, reducing social mobility." Whether or not their point about tracking is correct, the implication here that children in France have less social mobility than those in the United States is not.

As the figure below—from researcher Miles Corak—shows, France actually has more intergenerational mobility than the United States. 


“Intergenerational elasticity in earnings”—the y axis on the chart—is the mobility statistic. It shows the percentage difference in earnings in the child’s generation associated with the percentage difference in the parental generation. So, in the United States, an intergenerational elasticity in earnings of roughly .5 tells us that if one father makes 100% more than another then the son of the high-income father will, as an adult, earn 50% more than the son of the relatively lower-income father. France's elasticity of roughly .4 shows that a 100% difference between the fathers would only lead to a 40% difference between the sons.

In short, France has more mobility. While it still may be the case that there would be even more mobility in France if it weren't for the presence of distinct vocational and academic tracks at the secondary level (and less mobilty in the United States if we adopted this approach), I don't know that the evidence is clear on this front. Some research suggests, for example, that vocational tracks may increase mobility by "reducing the likelihood of unemployment and of employment in the least desirable of jobs." 

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New reports were released this week by Center for American Progress, Center on Budget and Policy Priorities, Economic Policy Institute and Institute for Women's Policy Research

Center for American Progress

Meeting the Infrastructure Imperative
Donna Cooper

Center on Budget and Policy Priorities

Romney Budget Proposals Would Require Massive Cuts in Medicare, Medicaid, and Other Nondefense Spending
Richard Kogan and Paul N. Van de Water

Economic Policy Institute

No Relief in 2012 from High Unemployment for African Americans and Latinos
Algernon Austin

Institute for Women's Policy Research

Tipped Over the Edge: Gender Inequity in the Restaurant Industry

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Okay, they didn't do it in exactly those words, but that is the implication of a blog post by J.D. Keinke at the American Enterprise Institute. Keinke notes the sharp reduction in the growth rate of annual health care expenditures, with spending growth the last two years coming in at under 4.0 percent.

Keinke takes this as evidence that the health care system has fixed itself and that the country no longer suffers from out-of-control health care costs. We may want to hold off a bit longer and see a few more years of data before we break out the champagne. We may also question the story that this slowdown was due to the market working its magic in the health care sector.

There are a lot of efforts at cost control being tried at all levels of government. Perhaps these cost-control efforts really have nothing to do with the slowing of spending, but it would be good to see some evidence here rather than just an assertion.

It is also worth noting that this is a simple explanation for slower cost growth in at least one area: prescription drugs. According to the Food and Drug Administration's ratings, in the last decade, the industry has developed very few new "priority" drugs that involve qualitative improvements over existing drugs. New drugs have historically been the main cause of higher drug prices. In this case, the slower rate of growth in spending is a mixed blessing.

However, there is one thing we can say with certainty if Keinke is right about the future path of spending growth. If the rate of growth of health care spending remains at the pace of the last two years, then we can throw all those projections of exploding long-term budget deficits in the trash.

It was always health care costs that drove the scary budget scenarios that Peter Peterson and the deficit hawk gang loved to tout. If we are now living in a world where health care spending grows at pretty much the same rate as the overall economy, there will no longer be a deficit tsunami in the long-term budget projections that can be used to justify cuts in Social Security, Medicare and other important programs. If Keinke is right we can look forward to lots of unemployed deficit hawks in the near future.

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Promoting fears about the budget deficit is a major industry in Washington. The central theme is usually that we have out of control spending which will make us just like Greece in only a few short years. The policy take away from this story is that we have to cut Social Security and Medicare, and the sooner the better. This is just the idea put forth by Rep. Tom Cole (R-Okla.) in a recent piece that appeared on The Hill's Congress Blog.

Everything in this picture is wrong. The basic story of out-of-control deficits as an ongoing problem is nonsense. While people may have complained about the deficits in the Bush presidency, the debt-to-GDP ratio was actually falling by the end of his administration and was projected to continue to fall for the foreseeable future, even without the ending of the Bush tax cuts.

The factor that changed this picture was the economic downturn that followed the collapse of the housing bubble. The projections for deficits soared before President Obama even took office; the people who want to blame an Obama Administration spending spree for the deficit are missing the mark.

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