September 24, 2013

September 24, 2013

Dean Baker
Truthout, September 23, 2013
The Huffington Post, September 23, 2013

The NYT's responsibility for Republican efforts to cut food stamps may not be immediately obvious, but on closer examination the truth comes out. Look at the basic story: the Republicans want to cut the budget for food stamps. Their proposed cuts don't amount to much in terms of the entire federal budget but they are likely impose considerable hardship to the people affected. If the Republican cuts go through, between 2-4 million very low income people would lose benefits that average $160 a month.

These cuts are likely to be a serious hardship to the people affected. But what do they mean to the rest of us? The answer is not much. No doubt you heard the New York Times and other media outlets reporting that the Republican cuts would reduce projected federal spending by 0.086 percent over the next decade.

If you don't recall hearing that one you probably are not alone. This number has not been featured very prominently in the news reporting on the proposed cuts. Instead, the New York Times and other news outlets routinely refer to the proposed $40 billion in cuts.

This matters a lot. The reality is no one has a clue what $40 billion in spending means over the next decade. There are probably 5-10 thousand budget wonks with their nose in these numbers who can make sense out of hearing that the Republicans want to cut $40 billion in spending over ten years. For just about everyone else, the NYT and other news outlets are just saying that the Republicans want to cut a REALLY BIG NUMBER from food stamps over the next decade.

This is not a debatable point. Polls consistently show that people have no clue as to the total size of the budget. And they have little idea what are the major spending categories that absorb most of their tax dollars. I have raised this issue with many budget reporters and not one has ever tried to claim that any substantial portion of their readers had a clear idea of what budget numbers meant, especially when expressed over 5-10 year periods.

We even got a wonderful demonstration of this problem when Paul Krugman mistakenly took a 10-year proposed cut in food stamps as being a 1-year proposed cut and made it the basis for a NYT column. How many NYT readers are more knowledgeable about the budget and used to dealing with large numbers than Paul Krugman? If the NYT's reporting on the budget can mislead Paul Krugman what does it do for the more typical reader?

The Washington Post might not be very aggressive when it comes to billionaire too big to fail bankers, hedge and private equity fund swindlers, or pharmaceutical companies exploiting patent monopolies by pushing bad drugs, but when it comes to beating up on people getting $1,150 a month for disability, there is no one tougher. The Post is on the job again today with an editorial warning about the "explosive recent growth" in disability roles. 

The Post conveniently ignores facts and reality in pushing its case. For example, it counters the views of "defenders of the program" with the views of "critics, including a significant number of academic economists." Of course there are a large number of academic economists who are among the defenders of the program, but the Post did not think this point was worth mentioning; it could distract readers.

This sentence continues:

"suggest that the program’s manipulable and inconsistently applied eligibility criteria have enabled millions of people who could work to sign up for benefits instead."

"Millions of people," really? The work linked to in the paper won't give you this number. One careful study that was produced by the University of Michigan a few years ago, identified categories of applicants that it deemed marginally eligible. It found that if this group was denied disability, 28 percent would be working two years later. Since this group accounted for 23 percent of applicants, that would mean 6.4 percent of applicants (28 percent of 23 percent) would be working in two years, if they were denied benefits.

There are currently just under 10 million disability beneficiaries. If we assume that 6.4 percent of these people would be working if they had been denied benefits that comes to 640,000 people. That is considerably short of "millions of people" in places other than the Washington Post opinion pages. Furthermore, the Michigan study found that the share of these marginal refusals who were working four years later fell to 16 percent, so the 640,000 figure is undoubtedly too high based on this analysis.

Of course the other point to keep in mind for those looking to crack down on these freeloaders is that our system will never be perfect. The inappropriate beneficiaries will not identify themselves. Any effort to tighten criteria to ensure that ineligible people don't qualify will inevitably lead to more eligible people wrongly being denied benefits. In other words, the Post's policy could mean that some people with terminal cancer don't get benefits. 

September 20, 2013

Mark WeisbrotNewsday, September 19, 2013

A new CEPR paper by economist David Rosnick examines the impact that the Trans-Pacific Partnership (TPP) – a trade and investment agreement, modeled on NAFTA – could be expected to have on U.S. wages.  The TPP, which is currently being negotiated by 12 countries in Latin America, Asia, North America – as well as by Australia and New Zealand – would result in a net lowering of wages for most U.S. workers, as the inequality effect of the increased trade would outsize the miniscule economic growth projections associated with it. Latin American governments involved in TPP negotiations include Chile, Mexico and Peru, all of which already have NAFTA-style trade and investment arrangements with the U.S.

Economic growth and job creation have historically been promoted as key incentives for why countries should rush to enact such so-called “free trade” agreements. NAFTA, for example, was touted as offering tremendous economic potential to Mexico, with predictions that the country would become a “First World” nation. But Mexico’s growth – stagnant since the neoliberal era that began in the 1980’s – did not pick up following NAFTA’s implementation in 1994. As CEPR Co-Director Mark Weisbrot and then-Research Associate Rebecca Ray noted in a paper last year:

Mexico’s economic growth since 2000 has not improved over that of the long-term failure of the previous two decades.  Its average annual per capita growth of 0.9 percent for 2000-2011 is about the same as the 0.8 percent annual rate from 1980 to 2000, and a small fraction of the 3.7 percent rate of the pre-2000 era.  

Mexico’s economy since 2000 has also performed very badly as compared with the rest of Latin America.  Its annual growth of GDP per person is less than half of the growth experienced by the rest of the region.

The impact on Mexico from the global recession – caused by the collapse of the U.S. housing bubble and bubbles in European countries – has been significant, and negative. Mexico, whose exports to the U.S. accounted for 21 percent of its GDP in 2007, suffered the worst output loss -- 9.4 percent of GDP -- in Latin America during the 2008-2009 recession. Although Mexico's growth was good in the three years of recovery since its recession, inspiring a spate of articles in the business press with high praise and hopes that 30 years of economic sacrifice had finally paid off, the economy shrank in the second quarter of this year and projections for 2013 have now been halved to a meager 1.8 percent growth.

Mark WeisbrotThe Guardian Unlimited, 18 de setembro de 2013Em inglês | Em espanhol

Mark WeisbrotThe Guardian Unlimited, 18 de septiembre, 2013En Inglés | En Portugués

A popular line of argument in Washington policy circles is that spending on seniors is crowding out spending on our kids. In this story we would be able to pay for good schools, early childhood education and daycare, and health care and child nutrition if only grandma and grandpa weren't sucking away all the money for their Social Security and Medicare. The remedy for these folks is to cut Social Security and Medicare and tell our seniors that they will have to get by on less.

While there is tons of money behind this argument (e.g. the myriad of Peter Peterson funded groups, the Washington Post news and editorial sections, and most of the rest of the elite punditry), it doesn't fit the data. The idea that there is some fixed sum available to support social welfareprograms, and it will either go to kids or to seniors, has no basis in reality. The share of GDP going to support social spending of various types has increased substantially over the post-World War II era. So this sum clearly has not been fixed in the United States.

At the federal level, Social Security and other forms of social spending accounted for less than 5 percent of GDP in 1950. Today they account for more than 12 percent. It's not clear why anyone would think that this sum is fixed for all eternity. (It's also worth noting that much of our spending on health care is wasted on excessive payments to doctors, drug companies, insurers, and other health care providers. It is seriously misleading to treat this waste as spending on the elderly.)

We get an even stronger story if we look at the situation across countries. It turns out that countries that spend a larger share of their GDP supporting their seniors also spend a larger share of their income supporting the young. The chart below shows spending per kid and spending per senior for the OECD countries, both divided by per capita income.