A new survey from the Brazilian Igarape Institute, released today, indicates that official results from Haiti’s October 25 presidential election may not reflect the will of the voters. In the wake of the election, local observers and political leaders have denounced what they claim was massive fraud in favor of the governing party’s candidate, Jovenel Moïse, who came in first place with 32.8 percent of the vote according to the preliminary results. In second place was Jude Célestin with 25.3 percent and in third and fourth respectively were Moïse Jean Charles with 14.3 percent and Dr. Maryse Narcisse with 7 percent. Final results are expected this week.

But the survey, which is based on interviews with over 1,800 voters from 135 voting centers throughout all of Haiti’s ten departments, reveals a vastly different voting pattern than the official results. 37.5 percent of respondents indicated they had voted for Célestin while 30.6 percent voted for Jean Charles and 19.4 percent for Narcisse. The governing party’s Jovenel Moïse was the choice of just 6.3 percent of survey respondents. (See an AP story about the survey here.)

The official results have set up a potential runoff between Jovenel Moïse and Célestin on December 27, but Célestin has so far refused to recognize the results or accept his second-place position ahead of the second round of the elections. A coalition of eight candidates has labeled the results “unacceptable” and called on the Provisional Electoral Council (CEP) to form an independent commission to audit the results and investigate allegations of fraud. After a meeting on Monday between the CEP and the G8, as the opposition coalition is known, the CEP formally rejected the proposition, claiming that the electoral decree did not allow it. Opposition groups responded by pledging to continue a growing protest movement that has seen many thousands take the streets since results were announced, threatening to derail the costly and internationally backed electoral process.

A large protest was broken up by police on Wednesday near the CEP headquarters. Police used tear gas and rubber bullets and Steven Benoit, one of the opposition presidential candidates challenging the results, suffered injuries to his head. Moïse Jean Charles, who was riding on horseback, was also reportedly injured, and yet another presidential candidate, Jean Henry Céant, was reportedly detained and threatened with arrest.  

In recent weeks there has been significant discussion about the effects of raising taxes on the rich. Think tanks, government institutions, and media outlets such as the Brookings Institution, the U.S. Treasury Department, the New York Times, the Washington Post, and Vox have all devoted significant coverage to the prospect of raising taxes on wealthy Americans.

The coverage has focused for the most part on the federal income tax. The federal income tax is a progressive tax that requires rich Americans to pay higher rates than the poor.

But the federal income tax is just one part of the larger overall tax code. Other parts of the tax code which are regressive generate as much or even more revenue than the federal income tax.

I’ve been asked why I focus so much on restructuring the market as a way to address problems of inequality and poverty as opposed to tax and transfer programs. There are ideological, economic, and political reasons for this focus, which I will take in order.

On the ideological side, there is a commonly held view that the winners in the economy got there through a combination of luck, skill, and hard work. The losers scored less well in these categories. The central question from the standpoint of public policy then ends up being whether we should feel sorry for the losers, or at least sorry enough to take something away from the winners. Conservatives are mostly comfortable leaving distribution where it is, while liberals have guilty consciences so they feel we should help out the people at the bottom.

Rejecting loser liberalism means not accepting this framing. The winners did not win just by luck, skill, and hard work, but also by rigging the deck. For example, they construct trade deals to make U.S. manufacturing workers compete with low-paid workers in the developing world. The predicted and actual consequence is to reduce the employment and wages of U.S. manufacturing workers. Meanwhile, they maintain or increase the protections that make it difficult for people from developing (or developed) countries to train to U.S. standards and work as doctors, lawyers, and other highly paid professions in the United States.

The winners also made patent and copyright protection stronger and longer, with the predicted and actual effect of shifting more money to the small segment of the population that benefits from these forms of protection. And the winners have conducted a monetary policy, through their control of the Federal Reserve Board, which sustains higher than necessary rates of unemployment. The effect of excessive unemployment falls disproportionately on those at the middle and bottom of the wage distribution, not only increasing their risk of unemployment, but lowering the wages of those who do have jobs.

The point is that we did not just end up with a situation where some people are extremely wealthy and many people have little or nothing, we have policies that were designed to bring about this result. We don’t have to ask the wealthy to feel compassion for the poor or have guilty consciences over their good fortune. We need to stop the wealthy from rigging the game so they continue to end up with all the money.

In policy circles, "free trade' is always supposed to be good. Only ignorant Neanderthal types like protectionism. Therefore the NYT was talking up the Trans-Pacific Partnership (TPP) when it presented the pact as being part of a "free trade" tradition:

"Surrounding himself with cabinet secretaries and generals who had served presidents of both parties, Mr. Obama presented what has long been the establishment Washington consensus in favor of free trade against the surging tide of populist outrage from the political left and right against an agreement that critics call a bad deal for American workers."

Since the United States already has trade deals with most of the countries in the TPP, and these countries account for the vast majority of U.S. trade with TPP countries, it does relatively little to reduce trade barriers. On the other hand, it makes patent and copyright and related protections stronger and longer. It is entirely possible that the impact of these protections in raising barriers will be larger than the reductions in tariffs and other barriers.

It is also worth noting that the more money that foreigners have to pay for drugs and other protected products, the less money they will have to buy U.S. manufactured goods. For this reason, higher drug prices might be good news for people who own lots of Pfizer stock, but they are bad news for just about everyone else.

Dean Baker
Truthout, November 16, 2015

Josh Barro had a good discussion of the impact of longer life expectancy on the finances of Social Security. The basic point is the program will cost more money. There are a couple of points that are worth a bit more discussion and one mistake that should be corrected.

Starting with the mistake, Barro ends his piece by saying that the last major overhaul to Social Security was carried through by a bipartisan commission in 1985. Actually, the recommendations of the Greenspan commission were approved by Congress in 1983.

The first point worth some additional comment is Barro's reference to the chained Consumer Price Index (CCPI), which he says most economists view as a more accurate measure of the rate of inflation. President Obama and others have proposed using the CCPI to index post-retirement benefits. This would reduce average benefits by around 3 percent, since the CCPI shows a rate of inflation that is 0.2–0.3 percentage points lower than the CPI currently being used. This reduction would be cumulative, so that after ten years a retiree would receive a benefit that is between 2–3 percentage points lower than under the current system. After 20 years the benefit reduction would be between 4-6 percent.

While the CCPI is arguably more accurate as a measure of the rate of inflation seen by the population as a whole, economists do not have evidence of whether this is true for retirees. Older people have different consumption patterns than the rest of the population. They may also change their consumption less in response to changes in price than the rest of the population. (The difference between the CCPI and the currently used CPI is that the CCPI picks up the effect of changes in consumption patterns due to price changes.)

During the 2007–2009 recession, inflation fell significantly. After a brief uptick in prices in late 2011 and early 2012, inflation again subsided. According to all three of the major price indices, inflation remains below the Federal Reserve’s target inflation rate of 2.0 percent, as shown in the figure below[i]:

The following is cross-posted from the Haiti Elections Blog, which was created to help promote the free access to information and accountability within the electoral process. The blog is co-managed by several non-governmental organizations who work with and within Haiti.

On November 5, the CEP released preliminary results for the first-round presidential election held on October 25, which prescribed a presidential run-off between PHTK's Jovenel Moïse and LAPEH's Jude Celestin on December 27. The November 8 release of results for the second-round legislative elections, also held on October 25, occurred with much less fanfare. While most attention has been fixed on the contested presidential results, the legislative results may be even more significant for the political future of Haiti.

Presidential Race

According to the CEP's results, PHTK's Jovenel Moise (32.81%) and LAPEH's Jude Celestin (25.27%) were the top two finishers, while Moise Jean-Charles of Pitit Dessalines finished third (14.27%) and Fanmi Lavalas' Maryse Narcisse came in fourth (7.05%). 

Broken down by region, Jovenel Moise's strongest showing was in the north of the country; his share of the vote in the Nord Est, Nord Ouest and Nord departments was 62.6%, 54.6% and 48.6%, respectively. His worst results came from the Sud Est, where he received only 14.9% of the vote. For runner-up Jude Celestin, his popularity was highest in the Sud Est, where he won 46.7% of the vote while in the Nord it was lowest at 9.9%. Celestin's share of the vote in this department was likely squeezed by the strong appeal of Jovenel Moïse and Moïse Jean-Charles. Pitit Dessalines' Jean-Charles finished third and scored highest in the Artibonite (17.1%) and the Nord (29.1%), which Jean-Charles represented as a Senator for many years. Prior to that, under the Aristide government, Jean-Charles was the mayor of Milot, just outside the capital of the Nord, Cap-Haïtien. Fourth-place finisher Maryse Narcisse did the best in the Ouest (14.7%) and the Sud (11.8%).

The presidential tallies released by the CEP cannot necessarily be taken at face value. While OAS, EU observers and the Core Group have endorsed the results, Haitian civil society groups have denounced the massive fraud they claim occurred on October 25 and called for an independent investigation. Seven presidential candidates have added their voice to this call, including Celestin and third- and fourth-place finishers Moïse Jean-Charles and Maryse Narcisse. Accusations that political party mandataires were able to vote multiple times, ballot-box stuffing, and manipulation of results at the Tabulation Center have undermined many Haitians' confidence in the announced results. Haiti appears to be on the cusp of a post-electoral crisis, whose outcome is far from determined.

If the preliminary results are allowed to stand, Haiti's next president will possess an extremely weak mandate to govern. According to the CEP's figures, over 73% of registered Haitian voters deciding to stay home on October 25, a percentage which may in reality be higher if multiple voting by mandataires was as widespread as many suspect. Repeating the pattern of the August 9 vote, the turnout for October 25's presidential race was again lowest in the Ouest department at 20.3%. Turnout was highest in the Nord Est (38.8%) and Nippes (37.2%) departments. Jovenel Moise was thus able to finish first with the support of only 8.7% of registered voters, while Jude Celestin came in second with only 6.7% of registered voters backing him. In the second round scheduled for December 27, Haitians could be asked to choose between two candidates who were the first choice of less than 16% of registered voters.

The proportion of tally sheets (procès verbaux) not recuperated by the CEP after October 25 was 2.2%. Overall, tally sheets from 296 polling stations were not received by the CEP. This is much lower than after the first round vote in August, when nearly 18% of tally sheets never arrived at the Tabulation Center. Undoubtedly, this was due in large part to violence and disorder occurring on a much smaller scale during the presidential balloting. In only two places - Borgne (Nord) and Cotes-des-Fer (Sud Est)- was voting severely disrupted. Limonade was another constituency where a high proportion of tally sheets (38%) were not counted.At the regional level, most departments had only 1-2% of presidential tally sheets go missing. However, one region - the Sud Est - stands out, with 9.4% of tally sheets not received. This is also the department where Jude Celestin got the highest proportion of the vote. 

The higher proportion of recuperated tally sheets may also be due to improvements in election day logistics. On both August 9 and October 25, UNOPS was responsible for picking up tally sheets and others sensitive electoral materials collected at the Bureau Electoral Departementaux (BEDs) and transporting it to the Tabulation Center. Members of the CEP, however, have accused UNOPS of poor disorganization and a lack of planning on August 9, resulting in numerous tally sheets being lost. UNOPS reportedly received increased funding from international donors and made several improvements prior to the October 25 vote. On the other hand, PHTK candidate Antoine Rodon Bien Aimé recently accused UNOPS of orchestrating a massive fraud on October 25, involving real tally sheets being switched for counterfeit ones during transportation.

The CEP also excluded from the presidential vote totals 490 tally sheets, amounting to 3.6% of the total, either due to fraud, tampering or clerical errors. Intriguingly, the two regions where PHTK's Moïse received the most support are also those that recorded the highest number of quarantined tally sheets: the Nord Est (9.8%) and the Nord Ouest (6.4%). It is difficult to know, however, where the biggest problems were on October 25 since the CEP has not provided any breakdown of reasons why the tally sheets were quarantined.

This lack of transparency concerning decisions made at the Tabulation Center has been a major criticism of Haitian observer groups, who have demanded more information about the decision-making procedures used to quarantine tally sheets. Given that far fewer tally sheets were quarantined during the 2010 elections (312), which the U.S. alleged were plagued by fraud, greater clarity on this issue seems like an eminently reasonable demand.

Legislative Races

With all eyes fixed on the outcome of the presidential races, far less attention has been given to what is perhaps the most significant story told by the preliminary results: Haiti's next legislature will feature a formidable pro-Martelly bloc, regardless of who becomes president.

Robert Samuelson devoted his column this morning to discussing the fate of Fannie Mae and Freddie Mac (F&F). He notes that both are still effectively owned by the government even though almost everyone agreed years ago that they should be wound down and eliminated.

The complaint against leaving F&F public is that it leaves the government exposed to the sort of liabilities that led us to spend more than $180 billion bailing out F&F in 2008–2009. This badly misunderstands the dynamics of housing finance.

First, on the money used to bail out F&F, we ended up making a profit using the standard accounting that the media employs for bank bailouts. The government collected more money from F&F than it loaned it. This is of course a silly criterion, since the government is among the world's lowest cost borrowers, so it can generally make money by lending at interest rates between its cost of borrowing and the cost of borrowing for the businesses to which it is lending money. (This is the story of how the Export-Import Bank is profitable.)

The issue here is that the government is allocating capital by making subsidized loans available to favored companies in the case of the Export-Import Bank or the housing sector in the case of F&F. This has a cost in the form of higher priced capital to other borrowers, even if this does not appear as a budget item. Anyhow, the issue should be less the bailout money than whether F&F helped fuel the housing bubble, and if there is an alternative structure that would make such irrational exuberance less likely.

On the first question, there can be no doubt that F&F contributed to the bubble (they did finance 40 percent of new loans), but they were followers rather than leaders. The worst loans were financed by the investment banks that bundled them into their own mortgage backed securities. The business press derided F&F at the time for losing market share to more nimble private sector competitors. When F&F did start to move more aggressively into the subprime market it was for pursuit of profit (they were privately-held profit-making companies at the time), not because they were trying to serve the public good.

When a columnist uses your blog name in his title, he has to expect a response, right? Egan is unhappy about attacks on reporters and reporting from both the left and right. I am not going to particularly defend the targets of Egan’s criticism, but I will say that people have very good reason to be angry at the media. And here I am referring to elite outlets like the NYT, Washington Post, National Public Radio, not the small town journalists working at “poverty-level wages” who Egan grabs as a cover. (This reminds me of Walmart and McDonald’s touting the small businesses that will be hurt by a higher minimum wage. It’s not the story and everyone knows it.) I will stick to economic reporting, since that is my turf.

First, these news outlets cover economic issues almost entirely from an insider perspective. This means that the news is what people at the White House, the Fed, or the leadership in Congress want to be the news. And, it is overwhelmingly told from their perspective.

This means, for example, that trade deals like the Trans-Pacific Partnership (TPP) are often wrongly described as “free trade” deals. And it is often assumed, sometimes explicitly, that the point of these deals is to increase growth. Of course the deals are not at all “free trade,” since a main purpose of all recent U.S. trade agreements has been to increase patent and copyright protection. These are forms of protectionism. They serve a purpose in providing incentives for innovation and creative work, but they are nonetheless forms of protectionism.

It is simply wrong to describe patents and copyrights as “free trade.” Calling them free trade distracts from a serious discussion of their impact on the economy, inequality, and public health, after all, we are all supposed to support free trade.

Interestingly, the costs of these forms of protectionism are left out of almost every economic model that attempts to estimate the TPP’s impact on economic growth? This cost would almost certainly be a large negative. If patent protection raises the price of a drug fifty-fold (not uncommon) it has the same impact on the market as a 5000 percent tariff. Why do reporters never point this out?

The assumption that these deals are about increasing growth is also unwarranted. The negotiating parties are industry groups like the pharmaceutical industry, the financial industry, and the entertainment industry. These groups are interested in promoting profits for their industries not economic growth. Why is this so hard for reporters to acknowledge?