That fact might have been worth mentioning in a NYT article that discussed a new program by U.K. Prime Minister David Cameron to offer government guarantees on mortgages where homeowners made down payments equal to just 5 percent of the price of the home. The article noted that the average house price in the U.K. is already $274,000.
While it pointed out that a recent rise in house prices brought them back to their pre-crash level it also might have been worth noting that the average price in the U.K. is almost 25 percent higher than the $220,000 average price in the United States. This might provide some cause for concern, since the per capita income in the U.K. is more than 25 percent lower than in the United States. (Until the bubble years, house prices had typically been somewhat lower in the U.K. than in the U.S.)
If house prices in the U.K. fell to the same level as in the United States, new homebuyers would find themselves 20 percent underwater and the government could find that it has added considerably to the national debt that it is trying so hard to reduce.
Note: Typo corrected.
That fact might have been worth mentioning in a NYT article that discussed a new program by U.K. Prime Minister David Cameron to offer government guarantees on mortgages where homeowners made down payments equal to just 5 percent of the price of the home. The article noted that the average house price in the U.K. is already $274,000.
While it pointed out that a recent rise in house prices brought them back to their pre-crash level it also might have been worth noting that the average price in the U.K. is almost 25 percent higher than the $220,000 average price in the United States. This might provide some cause for concern, since the per capita income in the U.K. is more than 25 percent lower than in the United States. (Until the bubble years, house prices had typically been somewhat lower in the U.K. than in the U.S.)
If house prices in the U.K. fell to the same level as in the United States, new homebuyers would find themselves 20 percent underwater and the government could find that it has added considerably to the national debt that it is trying so hard to reduce.
Note: Typo corrected.
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The New York Times told readers that Mayor Bloomberg is right, the data show that the poor have benefited by having more billionaires in the city. The basis for this assessment is that rich people pay a disproportionate share of the city’s tax revenues. Therefore by having more rich people, the city has more tax revenue to help out poor people.
The article even gives readers some basis for quantifying this gain. It tells readers that households with incomes of more than $10 million a year accounted for almost 20 percent of the city’s income tax revenue last year. Since the city raised just under $8 billion in income taxes, this means that the rich paid a bit less than $1.6 billion to the city in income taxes.
By comparison, the article tells us that 46 percent of the people in the city have an income of less than 1.5 times the poverty level. With a population of 8.25 million, this implies that roughly 3.8 million people live near or below the poverty line. This means that if all the tax revenue from the wealthy was used to benefit the poor, as opposed to benefiting the wealthy by providing them services or general support for the city infrastructure and services, it would come to $420 per poor person per year.
However tax payments are not the only way that the rich would affect the well-being of the poor. Their demand for housing and other resources (e.g. building space devoted to restaurants, gyms, art galleries, etc) drives up the cost of real estate in New York City. As a result, rent costs the poor more than it would if there were fewer rich people in the city.
It’s not easy to calculate what rents would be in the city if the number of rich people had not increased so much under Bloomberg, but they would almost certainly be considerably lower. According to the Bureau of Labor Statistics (BLS), since 2000 rents in the New York have risen by 40.7 percent in the New York metropolitan area compared to 36.2 percent in the country as a whole. The increase in rents in the city itself is almost certainly more than this number, since the BLS figure is for the whole metropolitan area.
The Census Bureau reports that the median rent for the city is $1,125 a month or $13,500 a year. If the presence of such a large number of rich people raised this figure by 10 percent, then rich people cost low and moderate income people $1,350 in higher rents. With an average of 2.7 people per housing unit, this is considerably more than the $1,130 they would get if all the income taxes raised from the rich were redistributed to the poor.
Of course the rich would impose costs on the poor in other ways as well. Because the price of real estate in general is higher due to their demand, all the stores in the city must pay higher rents because of the presence of so many rich people. These higher rents are passed on to low-income people in the price of their food and clothes and everything else they buy.
If the NYT wanted to do a serious analysis of whether the poor in New York City benefit from having so many rich people in the city, then it would have to examine all the ways in which their presence has an impact on the well-being of the poor. Just looking at tax revenue collected from the rich is an incomplete and obviously biased way to make this assessment.
Note: typos corrected.
The New York Times told readers that Mayor Bloomberg is right, the data show that the poor have benefited by having more billionaires in the city. The basis for this assessment is that rich people pay a disproportionate share of the city’s tax revenues. Therefore by having more rich people, the city has more tax revenue to help out poor people.
The article even gives readers some basis for quantifying this gain. It tells readers that households with incomes of more than $10 million a year accounted for almost 20 percent of the city’s income tax revenue last year. Since the city raised just under $8 billion in income taxes, this means that the rich paid a bit less than $1.6 billion to the city in income taxes.
By comparison, the article tells us that 46 percent of the people in the city have an income of less than 1.5 times the poverty level. With a population of 8.25 million, this implies that roughly 3.8 million people live near or below the poverty line. This means that if all the tax revenue from the wealthy was used to benefit the poor, as opposed to benefiting the wealthy by providing them services or general support for the city infrastructure and services, it would come to $420 per poor person per year.
However tax payments are not the only way that the rich would affect the well-being of the poor. Their demand for housing and other resources (e.g. building space devoted to restaurants, gyms, art galleries, etc) drives up the cost of real estate in New York City. As a result, rent costs the poor more than it would if there were fewer rich people in the city.
It’s not easy to calculate what rents would be in the city if the number of rich people had not increased so much under Bloomberg, but they would almost certainly be considerably lower. According to the Bureau of Labor Statistics (BLS), since 2000 rents in the New York have risen by 40.7 percent in the New York metropolitan area compared to 36.2 percent in the country as a whole. The increase in rents in the city itself is almost certainly more than this number, since the BLS figure is for the whole metropolitan area.
The Census Bureau reports that the median rent for the city is $1,125 a month or $13,500 a year. If the presence of such a large number of rich people raised this figure by 10 percent, then rich people cost low and moderate income people $1,350 in higher rents. With an average of 2.7 people per housing unit, this is considerably more than the $1,130 they would get if all the income taxes raised from the rich were redistributed to the poor.
Of course the rich would impose costs on the poor in other ways as well. Because the price of real estate in general is higher due to their demand, all the stores in the city must pay higher rents because of the presence of so many rich people. These higher rents are passed on to low-income people in the price of their food and clothes and everything else they buy.
If the NYT wanted to do a serious analysis of whether the poor in New York City benefit from having so many rich people in the city, then it would have to examine all the ways in which their presence has an impact on the well-being of the poor. Just looking at tax revenue collected from the rich is an incomplete and obviously biased way to make this assessment.
Note: typos corrected.
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See, nothing gets by those vigilant super-sleuths at the Washington Post. In yet another front page story highlighting government waste the paper told readers that the Agriculture Department spent almost 0.000004 percent of the budget on toner cartridges, the Department of Veterans Affairs spent 0.000014 percent of the budget on artwork, and the Coast Guard spent 0.000004 percent of the budget on cubicle furniture. Of course the Post didn’t tell people how large these items were as a share of the federal budget, instead it told readers that the Agriculture Department spent $144,000 on toner cartridges, the Department of Veterans Affairs spent $562,000 on artwork, and the Coast Guard spent $178,000 on cubicle furniture.
These were all end of the fiscal year expenditures. The intention of the paper is clearly to imply that these are examples of wasteful spending but none of the information in the article provides a basis for this assessment. Government office buildings need office furniture, they use printing cartridges, and they also typically have some amount of artwork. This piece provides no evidence whatsoever that these particular expenditures were wasteful, they simply were spending that agencies decided to put through at the end of their fiscal year when they knew they had the money for them.
This may actually have been very prudent spending on the part of the agencies. For example, the Coast Guard may have badly needed new furniture for its cubicles. (Furniture does wear out — I have been to the WaPo’s office, they replace their furniture on occasion.) It may have put off the purchase until it was certain that it could meet its other expenses for the year. Once it was apparent that it had met all essential expenses, the Coast Guard may have then decided to use its remaining funds to buy the needed furniture. This would be very rational budgeting, not evidence of waste.
The whole piece is trying to make a scandal when it really has no evidence to show anything of the sort. That might have been more apparent to readers if it had written the alleged boondoggle spending as a share of the budget rather than trying to impress people with the size of the expenditures.
See, nothing gets by those vigilant super-sleuths at the Washington Post. In yet another front page story highlighting government waste the paper told readers that the Agriculture Department spent almost 0.000004 percent of the budget on toner cartridges, the Department of Veterans Affairs spent 0.000014 percent of the budget on artwork, and the Coast Guard spent 0.000004 percent of the budget on cubicle furniture. Of course the Post didn’t tell people how large these items were as a share of the federal budget, instead it told readers that the Agriculture Department spent $144,000 on toner cartridges, the Department of Veterans Affairs spent $562,000 on artwork, and the Coast Guard spent $178,000 on cubicle furniture.
These were all end of the fiscal year expenditures. The intention of the paper is clearly to imply that these are examples of wasteful spending but none of the information in the article provides a basis for this assessment. Government office buildings need office furniture, they use printing cartridges, and they also typically have some amount of artwork. This piece provides no evidence whatsoever that these particular expenditures were wasteful, they simply were spending that agencies decided to put through at the end of their fiscal year when they knew they had the money for them.
This may actually have been very prudent spending on the part of the agencies. For example, the Coast Guard may have badly needed new furniture for its cubicles. (Furniture does wear out — I have been to the WaPo’s office, they replace their furniture on occasion.) It may have put off the purchase until it was certain that it could meet its other expenses for the year. Once it was apparent that it had met all essential expenses, the Coast Guard may have then decided to use its remaining funds to buy the needed furniture. This would be very rational budgeting, not evidence of waste.
The whole piece is trying to make a scandal when it really has no evidence to show anything of the sort. That might have been more apparent to readers if it had written the alleged boondoggle spending as a share of the budget rather than trying to impress people with the size of the expenditures.
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George Will is apparently still obsessed with inflation and very disappointed that the Fed’s policy of quantitative easing has not led to hyperinflation thus far. This led him to write a seriously confused column condemning the Fed and its Chairman Ben Bernanke.
Will complains:
“A touch on the tiller here, a nimble reversal there — these express the fatal conceit of an institution that considers itself capable of, and responsible for, fine-tuning the nation’s $15.7 trillion economy.”
This assertion is incredibly wide of the mark, even getting the size of the economy wrong by $1 trillion. Certainly Bernanke and the Fed are not claiming the ability to fine-tune the economy. If they had this ability then the economy would not currently be operating at a level of output that is $1 trillion below its potential. That is not anywhere in the ballpark of fine-tuning.
The comment that apparently upset Will is Bernanke’s claim that the Fed would have no problem raising interest rates and slowing the economy if there was an outbreak of inflation on the horizon. It’s not clear why this comment would seem so strange. Inflation only rises very gradually and there has been no problem of inflation growing out of control for more than three decades in the United States or any other wealthy country. This would suggest that Bernanke has some reason for believing that he or his successor will continue to be able to prevent an outbreak of accelerating inflation.
Will is also convinced that the stock market has been artificially inflated by the Fed’s quantitative easing and zero interest rate policy. The S&P 500 peaked at over 1550 in the fall of 2007. If it had risen in step with the trend growth rate of GDP it would be over 1950 today, almost 20 percent higher than its current level. For some reason Will never complained about the 2007 stock market level in spite of the fact that it was markedly higher relative to the value of GDP at the time.
Note — typo corrected in first sentence.
George Will is apparently still obsessed with inflation and very disappointed that the Fed’s policy of quantitative easing has not led to hyperinflation thus far. This led him to write a seriously confused column condemning the Fed and its Chairman Ben Bernanke.
Will complains:
“A touch on the tiller here, a nimble reversal there — these express the fatal conceit of an institution that considers itself capable of, and responsible for, fine-tuning the nation’s $15.7 trillion economy.”
This assertion is incredibly wide of the mark, even getting the size of the economy wrong by $1 trillion. Certainly Bernanke and the Fed are not claiming the ability to fine-tune the economy. If they had this ability then the economy would not currently be operating at a level of output that is $1 trillion below its potential. That is not anywhere in the ballpark of fine-tuning.
The comment that apparently upset Will is Bernanke’s claim that the Fed would have no problem raising interest rates and slowing the economy if there was an outbreak of inflation on the horizon. It’s not clear why this comment would seem so strange. Inflation only rises very gradually and there has been no problem of inflation growing out of control for more than three decades in the United States or any other wealthy country. This would suggest that Bernanke has some reason for believing that he or his successor will continue to be able to prevent an outbreak of accelerating inflation.
Will is also convinced that the stock market has been artificially inflated by the Fed’s quantitative easing and zero interest rate policy. The S&P 500 peaked at over 1550 in the fall of 2007. If it had risen in step with the trend growth rate of GDP it would be over 1950 today, almost 20 percent higher than its current level. For some reason Will never complained about the 2007 stock market level in spite of the fact that it was markedly higher relative to the value of GDP at the time.
Note — typo corrected in first sentence.
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No one expects serious budget or economic analysis on the Washington Post’s editorial page, but endorsing a tax and spending freeze until the unemployment rate falls below 6.5 percent (bizarrely called “Jobs First”) is an embarrassment even for the Post. Incredibly, neither the Post nor their “No Labels” leaders explain what a freeze even means. Is spending frozen in nominal terms, in real terms? Does it allow for increases in spending in mandatory programs like Social Security and Medicare?
You won’t find answers to these basic questions in either the Post’s editorial or on the No Labels website. (For those folks who aren’t familiar with them, No Labels was started by a bunch of Wall Street types who think that everyone should just stop fighting and agree with them.)
Anyhow, it is hard to comment much on something that is so vague, but the irony of the “Jobs First” label should be apparent to everyone. In order to get down to 6.5 percent unemployment in a reasonable period of time we are likely to need more government spending. By freezing government spending, the No Labels crew are effectively putting jobs last. But hey, this is the Washington Post editorial page, who cares about economics, logic, or jobs?
No one expects serious budget or economic analysis on the Washington Post’s editorial page, but endorsing a tax and spending freeze until the unemployment rate falls below 6.5 percent (bizarrely called “Jobs First”) is an embarrassment even for the Post. Incredibly, neither the Post nor their “No Labels” leaders explain what a freeze even means. Is spending frozen in nominal terms, in real terms? Does it allow for increases in spending in mandatory programs like Social Security and Medicare?
You won’t find answers to these basic questions in either the Post’s editorial or on the No Labels website. (For those folks who aren’t familiar with them, No Labels was started by a bunch of Wall Street types who think that everyone should just stop fighting and agree with them.)
Anyhow, it is hard to comment much on something that is so vague, but the irony of the “Jobs First” label should be apparent to everyone. In order to get down to 6.5 percent unemployment in a reasonable period of time we are likely to need more government spending. By freezing government spending, the No Labels crew are effectively putting jobs last. But hey, this is the Washington Post editorial page, who cares about economics, logic, or jobs?
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It’s always good to see CEPR’s research findings picked up in the NYT even if someone else had to do them. In this case, the NYT reports that the Affordable Care Act is not leading to more part-time work. Yes, we showed that two months ago. But hey, the lag is getting much shorter. After all, we warned that the collapse of the housing bubble could lead to a severe recession and serious financial consequences back in 2002. They didn’t begin to take that one seriously until the collapse was already in progress.
It’s always good to see CEPR’s research findings picked up in the NYT even if someone else had to do them. In this case, the NYT reports that the Affordable Care Act is not leading to more part-time work. Yes, we showed that two months ago. But hey, the lag is getting much shorter. After all, we warned that the collapse of the housing bubble could lead to a severe recession and serious financial consequences back in 2002. They didn’t begin to take that one seriously until the collapse was already in progress.
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If you ever wondered where all the psychics came from who hang their shingles around DC, the answer is that they are probably former Washington Post reporters. The paper again told readers what people think. In an article on how the latest battle over Obamacare has re-energized the Tea Party, the Post told readers:
“Obamacare, which seeks to extend health coverage to millions of uninsured Americans, is viewed by tea party activists as a dangerous new government intrusion. They fear it will reduce their choices of medical providers and burden the weak economy.”
Of course the Post has no clue as to how tea party activists actually view Obamacare or what they fear. Many may fear that the government will send death panels into their homes to deny them or their loved ones care since this is what many of their leaders have asserted. A real newspaper would report on what people say and leave speculation about their fears and beliefs to others.
If you ever wondered where all the psychics came from who hang their shingles around DC, the answer is that they are probably former Washington Post reporters. The paper again told readers what people think. In an article on how the latest battle over Obamacare has re-energized the Tea Party, the Post told readers:
“Obamacare, which seeks to extend health coverage to millions of uninsured Americans, is viewed by tea party activists as a dangerous new government intrusion. They fear it will reduce their choices of medical providers and burden the weak economy.”
Of course the Post has no clue as to how tea party activists actually view Obamacare or what they fear. Many may fear that the government will send death panels into their homes to deny them or their loved ones care since this is what many of their leaders have asserted. A real newspaper would report on what people say and leave speculation about their fears and beliefs to others.
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Last week I blamed the media in general and the New York Times in particular for the battle over the Republican proposal to cut food stamps. The logic is that the media routinely report that the Republicans want to cut $4 billion from the program. Undoubtedly many people hearing this number believe that it constitutes a major expense for the federal government.
The proposed cut to the program is actually equal to just 0.086 percent of federal spending. In other words, it could make a big difference to the people directly affected, but it makes almost no difference in terms of the overall budget. Very few people understand this fact because $4 billion sounds like a lot of money. The media could help to clear up this confusion by reporting the number as a share of the budget, but they don’t do that because — I don’t know.
Anyhow, for those who would like some further context for this proposed cut to the food stamp program we can consider the impact of raising wages on food stamp spending, specifically the wages of Walmart workers. The pay of many Walmart workers is not much above the minimum wage. As a result, a large percentage of Walmart workers qualify for government benefits like food stamps.
By contrast, if the wages of workers at the bottom end of the labor market had kept pace with productivity growth over the last 45 years it would be almost $17.00 an hour today. In that situation, very few Walmart workers would qualify for government benefits.
Earlier this year, the Democratic staff of the House Committee on Education and the Workforce put together calculations for the range of costs to the government through various programs of a Walmart superstore in Wisconsin that employs 300 workers. They put a range for the cost of food stamp benefits for a single store at between $96,000 and $219,500.
According to Fortune Magazine, Walmart has 2.1 million employees nationwide, which means that we should multiply these numbers by 7,000 to get a national total. That puts the annual cost of food stamps for the families of Walmart workers at between $670 million and $1.54 billion. The figure below shows the potential savings to taxpayers from raising the wages of Walmart workers to a level where they don’t qualify for food stamps with the savings from the Republicans’ proposed cuts to the program.
In short, if the goal is to save taxpayers money on food stamps there are different ways of achieving it. One is to cut benefits, as the Republicans have proposed. The other is to increase wages for low-paid workers so that they no longer qualify for benefits like food stamps.
Last week I blamed the media in general and the New York Times in particular for the battle over the Republican proposal to cut food stamps. The logic is that the media routinely report that the Republicans want to cut $4 billion from the program. Undoubtedly many people hearing this number believe that it constitutes a major expense for the federal government.
The proposed cut to the program is actually equal to just 0.086 percent of federal spending. In other words, it could make a big difference to the people directly affected, but it makes almost no difference in terms of the overall budget. Very few people understand this fact because $4 billion sounds like a lot of money. The media could help to clear up this confusion by reporting the number as a share of the budget, but they don’t do that because — I don’t know.
Anyhow, for those who would like some further context for this proposed cut to the food stamp program we can consider the impact of raising wages on food stamp spending, specifically the wages of Walmart workers. The pay of many Walmart workers is not much above the minimum wage. As a result, a large percentage of Walmart workers qualify for government benefits like food stamps.
By contrast, if the wages of workers at the bottom end of the labor market had kept pace with productivity growth over the last 45 years it would be almost $17.00 an hour today. In that situation, very few Walmart workers would qualify for government benefits.
Earlier this year, the Democratic staff of the House Committee on Education and the Workforce put together calculations for the range of costs to the government through various programs of a Walmart superstore in Wisconsin that employs 300 workers. They put a range for the cost of food stamp benefits for a single store at between $96,000 and $219,500.
According to Fortune Magazine, Walmart has 2.1 million employees nationwide, which means that we should multiply these numbers by 7,000 to get a national total. That puts the annual cost of food stamps for the families of Walmart workers at between $670 million and $1.54 billion. The figure below shows the potential savings to taxpayers from raising the wages of Walmart workers to a level where they don’t qualify for food stamps with the savings from the Republicans’ proposed cuts to the program.
In short, if the goal is to save taxpayers money on food stamps there are different ways of achieving it. One is to cut benefits, as the Republicans have proposed. The other is to increase wages for low-paid workers so that they no longer qualify for benefits like food stamps.
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We all should be thankful for the vigilance of the Washington Post, otherwise we might not know about an agency in Alaska that could be wasting around $1.8 million a year in federal spending. The Post decided to do a major story on the inspector general of a small development agency in Alaska who wrote a letter to Congress saying that the agency was a waste of money and should be closed.
According to the piece, the agency, the Denali Commission, was the creation of former Alaska Senator Ted Stevens. At one time more than $150 million was flowing through it to finance various projects in Alaska. This flow has been reduced to $10.6 million following Senator Steven’s defeat and subsequent death.
The immediate issue according to the inspector general is not the $10.6 million in projects, many or all of which may be worthwhile, but rather the agency itself. The inspector general complained that it was an unnecessary intermediary for these funds and therefore a waste of taxpayer dollars.
The article indicates that the agency has 12 employees. If we assume that total compensation for each, plus the indirect costs associated with running the office, come to $150,000 a year, then the implied waste would be $1.8 million a year, assuming that no equivalent supervisory structure would need to be established elsewhere in Alaska’s government.
If we go to CEPR’s incredibly spiffy budget calculator, we see that this spending qualifies as less than 0.0001 percent of the budget. Clearly this article was a good use of a Post’s reporter’s time and way to consume a large chunk of space in the newspaper.
We all should be thankful for the vigilance of the Washington Post, otherwise we might not know about an agency in Alaska that could be wasting around $1.8 million a year in federal spending. The Post decided to do a major story on the inspector general of a small development agency in Alaska who wrote a letter to Congress saying that the agency was a waste of money and should be closed.
According to the piece, the agency, the Denali Commission, was the creation of former Alaska Senator Ted Stevens. At one time more than $150 million was flowing through it to finance various projects in Alaska. This flow has been reduced to $10.6 million following Senator Steven’s defeat and subsequent death.
The immediate issue according to the inspector general is not the $10.6 million in projects, many or all of which may be worthwhile, but rather the agency itself. The inspector general complained that it was an unnecessary intermediary for these funds and therefore a waste of taxpayer dollars.
The article indicates that the agency has 12 employees. If we assume that total compensation for each, plus the indirect costs associated with running the office, come to $150,000 a year, then the implied waste would be $1.8 million a year, assuming that no equivalent supervisory structure would need to be established elsewhere in Alaska’s government.
If we go to CEPR’s incredibly spiffy budget calculator, we see that this spending qualifies as less than 0.0001 percent of the budget. Clearly this article was a good use of a Post’s reporter’s time and way to consume a large chunk of space in the newspaper.
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The NYT Room for Debate section must have caught many readers by surprise on Thursday when it posed the question of whether economic growth was essential for mobility and it held Mexico up as an example of a dynamic economy. The reason this might have been a surprise is that Mexico has mostly been a growth laggard. It’s growth rate has generally been considerably slower than the growth rate of other Latin American countries and is projected to remain slower in the foreseeable future.
The NYT Room for Debate section must have caught many readers by surprise on Thursday when it posed the question of whether economic growth was essential for mobility and it held Mexico up as an example of a dynamic economy. The reason this might have been a surprise is that Mexico has mostly been a growth laggard. It’s growth rate has generally been considerably slower than the growth rate of other Latin American countries and is projected to remain slower in the foreseeable future.
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