Bloomberg View columnist Megan McArdle gives us yet another rendition of the story of young invincibles killing Obamacare, (literally, it is the headline of the piece). Remarkably, the column actually notes the Kaiser Family Foundation analysis showing that young invincibles really don’t matter much for the program. This analysis points out that because young people pay much less in premiums than older people, it really doesn’t matter much whether they don’t sign up in proportion to their population.
The column then cites a column by Seth Chandler, which argues that a skewing by subsidy size could indeed cause problems for the program. Chandler’s analysis is undoubtedly correct and acknowledged explicitly in the Kaiser analysis. If only people receiving large subsidies of all ages sign up for the program then it will face problems, just as would be the case if only people with bad health signed up for the program. However neither Chandler nor McArdle present any reason to believe that such skewing would be correlated with the sign-up patterns of the young invincibles.
The Chandler piece also takes issue with the conclusion of the Kaiser analysis that the 2.0 percent increase in insurer costs that would result from an extreme skewing by age would be unlikely to lead to a death spiral for the system, pointing out that any increase in costs makes a death spiral more likely. While this is true, it is worth noting for comparison purposes that per capita health care costs in 2014 are about 10 percent lower than was projected in 2008. In other words, this 2.0 percent increase is only a little bit larger than average error in annual health care cost projections.
Thanks to Aaron Beeman for calling my attention to this one.
Bloomberg View columnist Megan McArdle gives us yet another rendition of the story of young invincibles killing Obamacare, (literally, it is the headline of the piece). Remarkably, the column actually notes the Kaiser Family Foundation analysis showing that young invincibles really don’t matter much for the program. This analysis points out that because young people pay much less in premiums than older people, it really doesn’t matter much whether they don’t sign up in proportion to their population.
The column then cites a column by Seth Chandler, which argues that a skewing by subsidy size could indeed cause problems for the program. Chandler’s analysis is undoubtedly correct and acknowledged explicitly in the Kaiser analysis. If only people receiving large subsidies of all ages sign up for the program then it will face problems, just as would be the case if only people with bad health signed up for the program. However neither Chandler nor McArdle present any reason to believe that such skewing would be correlated with the sign-up patterns of the young invincibles.
The Chandler piece also takes issue with the conclusion of the Kaiser analysis that the 2.0 percent increase in insurer costs that would result from an extreme skewing by age would be unlikely to lead to a death spiral for the system, pointing out that any increase in costs makes a death spiral more likely. While this is true, it is worth noting for comparison purposes that per capita health care costs in 2014 are about 10 percent lower than was projected in 2008. In other words, this 2.0 percent increase is only a little bit larger than average error in annual health care cost projections.
Thanks to Aaron Beeman for calling my attention to this one.
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In his new and improved FiveThirtyEight Nate Silver examines the sources of increases in government spending over recent decades and identifies Social Security, Medicare, and Medicaid as the culprits. He then notes that these are effectively insurance programs. He then concludes that this explains the decline in trust for government:
“Nevertheless, the declining level of trust in government since the 1970s is a fairly close mirror for the growth in spending on social insurance as a share of the gross domestic product and of overall government expenditures. We may have gone from conceiving of government as an entity that builds roads, dams and airports, provides shared services like schooling, policing and national parks, and wages wars, into the world’s largest insurance broker.
“Most of us don’t much care for our insurance broker.”
There is a big problem with this story. Social Security, Medicare, and Medicaid are all hugely popular programs across the political spectrum. If the public thought this was all the government did with their money, the government would likely be very popular. In fact, many people often discount these programs from the government as in the famous line from older Tea Party supporters that the government should keep its hands off their Medicare.
In fact, the public hugely misperceives where government tax dollars are spent, as polls consistently show. For example a 2010 poll found, the public on average believes that 27 percent of the budget goes to foreign aid. The actual number is less than 1.0 percent. A CNN poll from the same year found that the median respondent thought that food stamps accounted for 10 percent of the budget, while subsidies to the Corporation for Public Broadcasting accounted for 5 percent of the budget. (The actual number is less than 0.01 percent.)
Since the public huge exaggerates the portion of the budget that goes to many non-insurance programs, it is likely that its view of the government is more a result of its attitude toward these programs. The latter is in turn probably more negative than would otherwise be the case because of the exaggerated view of the amount of money these programs receive.
Anyhow, the piece does a good job explaining what is and what is not growing in the budget, but since most people are clueless on these facts (largely to due to the pathetic quality of budget reporting), the piece strikes out badly in its explanation of public opinion.
In his new and improved FiveThirtyEight Nate Silver examines the sources of increases in government spending over recent decades and identifies Social Security, Medicare, and Medicaid as the culprits. He then notes that these are effectively insurance programs. He then concludes that this explains the decline in trust for government:
“Nevertheless, the declining level of trust in government since the 1970s is a fairly close mirror for the growth in spending on social insurance as a share of the gross domestic product and of overall government expenditures. We may have gone from conceiving of government as an entity that builds roads, dams and airports, provides shared services like schooling, policing and national parks, and wages wars, into the world’s largest insurance broker.
“Most of us don’t much care for our insurance broker.”
There is a big problem with this story. Social Security, Medicare, and Medicaid are all hugely popular programs across the political spectrum. If the public thought this was all the government did with their money, the government would likely be very popular. In fact, many people often discount these programs from the government as in the famous line from older Tea Party supporters that the government should keep its hands off their Medicare.
In fact, the public hugely misperceives where government tax dollars are spent, as polls consistently show. For example a 2010 poll found, the public on average believes that 27 percent of the budget goes to foreign aid. The actual number is less than 1.0 percent. A CNN poll from the same year found that the median respondent thought that food stamps accounted for 10 percent of the budget, while subsidies to the Corporation for Public Broadcasting accounted for 5 percent of the budget. (The actual number is less than 0.01 percent.)
Since the public huge exaggerates the portion of the budget that goes to many non-insurance programs, it is likely that its view of the government is more a result of its attitude toward these programs. The latter is in turn probably more negative than would otherwise be the case because of the exaggerated view of the amount of money these programs receive.
Anyhow, the piece does a good job explaining what is and what is not growing in the budget, but since most people are clueless on these facts (largely to due to the pathetic quality of budget reporting), the piece strikes out badly in its explanation of public opinion.
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Last week we were being warned that the labor market was too tight and an outbreak of inflation was imminent. Today, Edward Lazear, formerly chief economist in the Bush administration, is telling us that labor demand is plummeting as shown by a reduction in the length of the average workweek. Okay so the labor market is too tight and too weak, that looks really bad. Given that economists also tell us that robots will take all our jobs and that a growing population of retirees will leave us with a shortage of workers it is remarkable that the public doesn’t insist on hanging us all.
But Lazear does raise an interesting point that deserves to be considered. The Labor Department’s establishment survey shows a notable decline in the length of the average workweek from 34.5 hours in November (he picks September as his starting point) to 34.2 hours in February. In work time, this is equivalent to a loss of more than 1 million jobs. As a result of this drop in hours, the index of total hours worked actually shows a decline of 0.1 percent since September and 0.6 percent since November. What do we make of this?
There are two questions that come up. First how reliable are these data and second, are they consistent with other data?
On the first point, there are grounds for skepticism. As Lazear notes in the piece, weather could have been a factor in shortening workweeks in February. Much of the Northeast-Midwest was hit by unusually bad weather that may have led people to miss a day or two of work. If we look back over the last three decades, there are other instances of comparable declines in the length of the average workweek that don’t seem to correspond to downturns in the economy.
For example, we saw the same drop from 34.5 hours in December of 1994 to 34.2 hours in May of 1995, a period when the recovery was moving along at a healthy pace. (These data refer to the hours of production and non-supervisory workers, since the all workers index does not go back before 2006.) The average workweek declined from 34.7 hours to 34.4 hours between January of 1989 and May of 1989, again a period where the economy was still growing at a healthy rate. And it fell from 34.8 hours in November of 1987 to 34.5 hours in March of 1988. There was an even sharper drop from 35.0 hours in January of 1986 to 34.6 hours in July of 1986. In short, we have seen these sorts of drops before even as the economy was growing and adding jobs at a healthy pace.
The other question is whether the data are consistent with what we see in other series. Here the answer is clearly no. The separate survey of households shows that the number of people employed part-time (defined as less than 35 hours a week) has actually fallen by more than 0.3 percent since September. This survey is much less reliable than the establishment data. Also, it is possible that workers may working fewer hours but not crossing the 35 hour threshold to be classified as part-time. (We could also directly analyze the micro data, but that’s more effort than I am prepared to put into this question just now.) Anyhow, the published data from the household survey clearly gives no support to the declining hours story.
So, what should we make of this drop in hours? For the moment, the answer should be not much. Let’s see what happens in the next two months. There is a story that Obamacare will lead to a reduction in the length of the average workweek, as many people will no longer need to work a full-time job to get health care insurance. That is one of the good things about the Affordable Care Act in my book. However, a reduction in hours for this reason should be largely offset by an increase in the number of jobs. If that proves to be the case, that will be good news.
Note: Typos fixed, thanks Robert Salzberg.
Last week we were being warned that the labor market was too tight and an outbreak of inflation was imminent. Today, Edward Lazear, formerly chief economist in the Bush administration, is telling us that labor demand is plummeting as shown by a reduction in the length of the average workweek. Okay so the labor market is too tight and too weak, that looks really bad. Given that economists also tell us that robots will take all our jobs and that a growing population of retirees will leave us with a shortage of workers it is remarkable that the public doesn’t insist on hanging us all.
But Lazear does raise an interesting point that deserves to be considered. The Labor Department’s establishment survey shows a notable decline in the length of the average workweek from 34.5 hours in November (he picks September as his starting point) to 34.2 hours in February. In work time, this is equivalent to a loss of more than 1 million jobs. As a result of this drop in hours, the index of total hours worked actually shows a decline of 0.1 percent since September and 0.6 percent since November. What do we make of this?
There are two questions that come up. First how reliable are these data and second, are they consistent with other data?
On the first point, there are grounds for skepticism. As Lazear notes in the piece, weather could have been a factor in shortening workweeks in February. Much of the Northeast-Midwest was hit by unusually bad weather that may have led people to miss a day or two of work. If we look back over the last three decades, there are other instances of comparable declines in the length of the average workweek that don’t seem to correspond to downturns in the economy.
For example, we saw the same drop from 34.5 hours in December of 1994 to 34.2 hours in May of 1995, a period when the recovery was moving along at a healthy pace. (These data refer to the hours of production and non-supervisory workers, since the all workers index does not go back before 2006.) The average workweek declined from 34.7 hours to 34.4 hours between January of 1989 and May of 1989, again a period where the economy was still growing at a healthy rate. And it fell from 34.8 hours in November of 1987 to 34.5 hours in March of 1988. There was an even sharper drop from 35.0 hours in January of 1986 to 34.6 hours in July of 1986. In short, we have seen these sorts of drops before even as the economy was growing and adding jobs at a healthy pace.
The other question is whether the data are consistent with what we see in other series. Here the answer is clearly no. The separate survey of households shows that the number of people employed part-time (defined as less than 35 hours a week) has actually fallen by more than 0.3 percent since September. This survey is much less reliable than the establishment data. Also, it is possible that workers may working fewer hours but not crossing the 35 hour threshold to be classified as part-time. (We could also directly analyze the micro data, but that’s more effort than I am prepared to put into this question just now.) Anyhow, the published data from the household survey clearly gives no support to the declining hours story.
So, what should we make of this drop in hours? For the moment, the answer should be not much. Let’s see what happens in the next two months. There is a story that Obamacare will lead to a reduction in the length of the average workweek, as many people will no longer need to work a full-time job to get health care insurance. That is one of the good things about the Affordable Care Act in my book. However, a reduction in hours for this reason should be largely offset by an increase in the number of jobs. If that proves to be the case, that will be good news.
Note: Typos fixed, thanks Robert Salzberg.
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That wouldn’t be such a big problem if he didn’t write on economic issues. This time the problem affects his discussion of past and future efforts at boosting the economy.
Samuelson seems to think that investment and consumption are depressed because of businesses and consumers fears about the economy. If he had access to the economic data, he would know that non-residential investment is almost back to its pre-recession share of GDP (12.3 percent in the most recent quarter compared to an average of 12.8 percent in the years 2005-2007). Given the large amount of excess capacity in most manufacturing sectors, this doesn’t suggest much business pessimism. The consumption share of GDP is at near record highs, exceeded only by the 2011 and 2012 shares, which were boosted by the payroll tax cut.
So neither business investment nor consumption show any evidence of weakness due to pessimism. The obvious basis for continuing weakness is that housing construction is still depressed due to the overbuilding of the bubble years and continued high vacancy rates. Also consumption is lower relative to disposable income than it was during the bubble years because households have lost close to $8 trillion in bubble generated housing equity. Ultimately the problem is that the economy needs some extraordinary source of demand (e.g. large budget deficits or asset bubbles) to replace the $500 billion in annual demand lost to the trade deficit.
The piece also cites John Taylor’s work to claim that the tax cuts that were part of the stimulus had no effect on consumption. Research by David Rosnick and me shows that Taylor’s results on this issue are not robust. Minor changes in specification lead to the conclusion that the tax cuts had a substantial impact on consumption and growth.
That wouldn’t be such a big problem if he didn’t write on economic issues. This time the problem affects his discussion of past and future efforts at boosting the economy.
Samuelson seems to think that investment and consumption are depressed because of businesses and consumers fears about the economy. If he had access to the economic data, he would know that non-residential investment is almost back to its pre-recession share of GDP (12.3 percent in the most recent quarter compared to an average of 12.8 percent in the years 2005-2007). Given the large amount of excess capacity in most manufacturing sectors, this doesn’t suggest much business pessimism. The consumption share of GDP is at near record highs, exceeded only by the 2011 and 2012 shares, which were boosted by the payroll tax cut.
So neither business investment nor consumption show any evidence of weakness due to pessimism. The obvious basis for continuing weakness is that housing construction is still depressed due to the overbuilding of the bubble years and continued high vacancy rates. Also consumption is lower relative to disposable income than it was during the bubble years because households have lost close to $8 trillion in bubble generated housing equity. Ultimately the problem is that the economy needs some extraordinary source of demand (e.g. large budget deficits or asset bubbles) to replace the $500 billion in annual demand lost to the trade deficit.
The piece also cites John Taylor’s work to claim that the tax cuts that were part of the stimulus had no effect on consumption. Research by David Rosnick and me shows that Taylor’s results on this issue are not robust. Minor changes in specification lead to the conclusion that the tax cuts had a substantial impact on consumption and growth.
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The Washington Post told readers that the Republicans are putting together an alternative to the Affordable Care Act (ACA). Unfortunately it substituted Republican talking points for an actual description of the plan.
At one point the article told readers:
“They would prefer to see a shift away from the federal government and to the states, with an emphasis on getting more consumers on private plans.”
In fact the Republican plan explicitly takes away authority from the states. It would have the federal government require states to accept insurance plans offered by other states. This is 180 degrees at odds with what the Post told readers.
This would be comparable to requiring the United States to allow insurance plans from insurers regulated in the Cayman Islands, Panama, or some other tax/regulatory havens. That would take away control from the United States government. This should have been pretty obvious to the Post reporters.
The other part of this claim is also bizarre. The ACA requires that people buy health care insurance from private insurers. What could it possibly mean to say that the Republicans have:
“an emphasis on getting more consumers on private plans.”
This is presumably a line that was focus group tested for appeal, since the Republicans have routinely referred to the ACA as a government takeover of the health care system. However it has no basis in reality and no place in a news article, except as a quote. Even in that case a responsible newspaper would point out to readers that the assertion is not true.
The Washington Post told readers that the Republicans are putting together an alternative to the Affordable Care Act (ACA). Unfortunately it substituted Republican talking points for an actual description of the plan.
At one point the article told readers:
“They would prefer to see a shift away from the federal government and to the states, with an emphasis on getting more consumers on private plans.”
In fact the Republican plan explicitly takes away authority from the states. It would have the federal government require states to accept insurance plans offered by other states. This is 180 degrees at odds with what the Post told readers.
This would be comparable to requiring the United States to allow insurance plans from insurers regulated in the Cayman Islands, Panama, or some other tax/regulatory havens. That would take away control from the United States government. This should have been pretty obvious to the Post reporters.
The other part of this claim is also bizarre. The ACA requires that people buy health care insurance from private insurers. What could it possibly mean to say that the Republicans have:
“an emphasis on getting more consumers on private plans.”
This is presumably a line that was focus group tested for appeal, since the Republicans have routinely referred to the ACA as a government takeover of the health care system. However it has no basis in reality and no place in a news article, except as a quote. Even in that case a responsible newspaper would point out to readers that the assertion is not true.
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The headline of the piece was “manufacturing gains likely to spur Fed’s stimulus cuts.” The actual news was that manufacturing output was reported as rising 0.8 percent in February, reversing most of a 0.9 percent decline in January. It’s a bit hard to see this as solid growth. If we add in December, manufacturing has grown at a 0.4 percent annual rate over the last three months.
Manufacturing output is just 1.5 percent above its year ago level. This has led to a drop in the capacity utilization rate of 0.1 percentage point to 76.4 percent. It is pretty hard to see this as an argument for cutting back stimulus.
The headline of the piece was “manufacturing gains likely to spur Fed’s stimulus cuts.” The actual news was that manufacturing output was reported as rising 0.8 percent in February, reversing most of a 0.9 percent decline in January. It’s a bit hard to see this as solid growth. If we add in December, manufacturing has grown at a 0.4 percent annual rate over the last three months.
Manufacturing output is just 1.5 percent above its year ago level. This has led to a drop in the capacity utilization rate of 0.1 percentage point to 76.4 percent. It is pretty hard to see this as an argument for cutting back stimulus.
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This NYT piece compares life expectancy and health outcomes in Fairfax, Virginia, a wealthy county of Washington suburbs, with McDowell County, West Virginia, a poor coal-mining county in Appalachia. It describes some of the differences in living conditions that have led to a 15-year gap in life expectancies between the two counties. The differences in health outcomes in these counties are attributable to factors that have led to sharp increase in gaps in life expectancy by income across the country.
This NYT piece compares life expectancy and health outcomes in Fairfax, Virginia, a wealthy county of Washington suburbs, with McDowell County, West Virginia, a poor coal-mining county in Appalachia. It describes some of the differences in living conditions that have led to a 15-year gap in life expectancies between the two counties. The differences in health outcomes in these counties are attributable to factors that have led to sharp increase in gaps in life expectancy by income across the country.
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Joe Stiglitz had a nice piece on globalization pointing out that recent “trade” agreements have been largely about shaping rules and regulations to benefit the one percent rather than reducing trade barriers. The strategy of the Obama administration and other proponents of deals like the Trans-Pacific Partnership is to make nonsense claims about the economic benefits of these deals and use ad hominem arguments against the opponents (i.e. call them Neanderthal “protectionists”).
In reality, it is the proponents of these deals who are the protectionists, supporting the barriers that limit competition from foreign doctors and others in highly paid professions. And, one of the main goals of these deals is to increase the strength of patent and copyright protection, often raising the price of the affected items by several thousand percent about the free market price.
Joe Stiglitz had a nice piece on globalization pointing out that recent “trade” agreements have been largely about shaping rules and regulations to benefit the one percent rather than reducing trade barriers. The strategy of the Obama administration and other proponents of deals like the Trans-Pacific Partnership is to make nonsense claims about the economic benefits of these deals and use ad hominem arguments against the opponents (i.e. call them Neanderthal “protectionists”).
In reality, it is the proponents of these deals who are the protectionists, supporting the barriers that limit competition from foreign doctors and others in highly paid professions. And, one of the main goals of these deals is to increase the strength of patent and copyright protection, often raising the price of the affected items by several thousand percent about the free market price.
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Some folks might think that the point of a newspaper is to provide information to readers. Those people have nothing to do with reporting at the Washington Post. That is why, in an article on unexpected state budget surpluses, the paper told readers that capital gains taxes from the initial public offerings of Facebook and Twitter generated $3 billion in unexpected revenue for California, that Florida’s legislature is voting on a $400 million tax cut, and Idaho is projecting an $80 million surplus.
These are all very cute numbers which probably mean almost nothing to 99 percent of Washington Post readers. If the paper was actually trying to inform readers it might have told them that the money from Facebook and Twitter amounts to approximately 3 percent of the state’s revenue for a year. It could have told readers that Florida’s proposed tax cut comes to a bit more than $20 per person and that Idaho’s projected surplus is equal to just under 3.0 percent of its budget.
While most Post readers understand percentages and can relate to to a per person dollar amount, it is unlikely that many are familiar with the size of these states budgets or economies offhand. They could take two minutes to look this information up on the web, but most readers will have less time for this task than the Washington Post’s reporter. In fairness, the piece did point out that a proposal to use $4.6 billion to fund pre-kindergarten programs would take up about 3 percent of the state’s overall budget. (The higher level of implied spending presumably includes money other than what appears in the general budget.)
Some folks might think that the point of a newspaper is to provide information to readers. Those people have nothing to do with reporting at the Washington Post. That is why, in an article on unexpected state budget surpluses, the paper told readers that capital gains taxes from the initial public offerings of Facebook and Twitter generated $3 billion in unexpected revenue for California, that Florida’s legislature is voting on a $400 million tax cut, and Idaho is projecting an $80 million surplus.
These are all very cute numbers which probably mean almost nothing to 99 percent of Washington Post readers. If the paper was actually trying to inform readers it might have told them that the money from Facebook and Twitter amounts to approximately 3 percent of the state’s revenue for a year. It could have told readers that Florida’s proposed tax cut comes to a bit more than $20 per person and that Idaho’s projected surplus is equal to just under 3.0 percent of its budget.
While most Post readers understand percentages and can relate to to a per person dollar amount, it is unlikely that many are familiar with the size of these states budgets or economies offhand. They could take two minutes to look this information up on the web, but most readers will have less time for this task than the Washington Post’s reporter. In fairness, the piece did point out that a proposal to use $4.6 billion to fund pre-kindergarten programs would take up about 3 percent of the state’s overall budget. (The higher level of implied spending presumably includes money other than what appears in the general budget.)
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