Yes, that is absurd and even offensive, but since the NYT is going in for gross exaggeration to scare its readers about the budget, I thought I would play along. A NYT piece on the budget deficit told readers that:
“But even if Democrats and the financial markets go along with the delay [a decision to put off any longer term plans on taxes and spending if Romney wins the election], the months before Mr. Romney’s swearing-in could be as crucial to his presidency as the transition period was for Mr. Obama four years ago, when the economic crisis led him to draft a big stimulus package while President George W. Bush still occupied the White House.”
This is wrong. The economy was losing 700,000 jobs a month in the period between the election and when President Obama took office. His decision to push a stimulus, which in the context should not be called “big,” kept several million more people from losing their job. His decision shortly after the passage of the stimulus to “pivot to deficit reduction,” has likely ensured that millions of people will be needlessly unemployed for much of a decade.
It is difficult to imagine the set of events in a transition to a Romney administration that could have anywhere near the same consequence.
Yes, that is absurd and even offensive, but since the NYT is going in for gross exaggeration to scare its readers about the budget, I thought I would play along. A NYT piece on the budget deficit told readers that:
“But even if Democrats and the financial markets go along with the delay [a decision to put off any longer term plans on taxes and spending if Romney wins the election], the months before Mr. Romney’s swearing-in could be as crucial to his presidency as the transition period was for Mr. Obama four years ago, when the economic crisis led him to draft a big stimulus package while President George W. Bush still occupied the White House.”
This is wrong. The economy was losing 700,000 jobs a month in the period between the election and when President Obama took office. His decision to push a stimulus, which in the context should not be called “big,” kept several million more people from losing their job. His decision shortly after the passage of the stimulus to “pivot to deficit reduction,” has likely ensured that millions of people will be needlessly unemployed for much of a decade.
It is difficult to imagine the set of events in a transition to a Romney administration that could have anywhere near the same consequence.
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I wouldn’t try taking the deduction, but apparently banks and other corporate crooks are often able to deduct the settlements in civil actions from their taxes. Good piece in the Post calling attention to this issue.
I wouldn’t try taking the deduction, but apparently banks and other corporate crooks are often able to deduct the settlements in civil actions from their taxes. Good piece in the Post calling attention to this issue.
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Is everyone in the news business a frustrated mind reader? Given their often demonstrated tendency to tell us what politicians think, we might believe this to be the case.
The NYT was doing some mind reading in its coverage of the vice presidential debate when it told readers:
“Mr. Ryan believes competition will drive down the cost of health care, keeping the voucher’s value up to date.”
(“Up to date” in this context means large enough to cover the cost of a Medicare equivalent policy.) Of course the NYT gives no explanation of how it knows what Ryan “believes” about the effectiveness of competition in keeping costs down. The very next sentence in the article reports the assessment of the Congressional Budget Office:
“The Congressional Budget Office projected that over time, the value of the voucher would erode, shifting the extra costs to seniors.”
So does Ryan have access to information that the Congressional Budget Office does not have? Does he have a different way to interpret the data? After all, we have more than a half century of experience with the private insurance market, including experiments with including private insurers in Medicare. This experience has shown that private insurers raise, not lower, costs.
In the absence of any evidence otherwise, we might reasonably conclude that Representative Ryan wants to cut the cost of Medicare in order to maintain lower tax rates. We might also conclude that Ryan wants to give money to insurers who would profit enormously from the voucher system that he has proposed. The insurance industry is a major contributor to the Republican party.
It would of course be irresponsible for the NYT to report as a fact that Ryan is pushing his voucher plan as a way to redistribute tax dollars to the insurance industry. It is similarly irresponsible to report as a fact that he believes that his voucher plan will reduce costs.
Is everyone in the news business a frustrated mind reader? Given their often demonstrated tendency to tell us what politicians think, we might believe this to be the case.
The NYT was doing some mind reading in its coverage of the vice presidential debate when it told readers:
“Mr. Ryan believes competition will drive down the cost of health care, keeping the voucher’s value up to date.”
(“Up to date” in this context means large enough to cover the cost of a Medicare equivalent policy.) Of course the NYT gives no explanation of how it knows what Ryan “believes” about the effectiveness of competition in keeping costs down. The very next sentence in the article reports the assessment of the Congressional Budget Office:
“The Congressional Budget Office projected that over time, the value of the voucher would erode, shifting the extra costs to seniors.”
So does Ryan have access to information that the Congressional Budget Office does not have? Does he have a different way to interpret the data? After all, we have more than a half century of experience with the private insurance market, including experiments with including private insurers in Medicare. This experience has shown that private insurers raise, not lower, costs.
In the absence of any evidence otherwise, we might reasonably conclude that Representative Ryan wants to cut the cost of Medicare in order to maintain lower tax rates. We might also conclude that Ryan wants to give money to insurers who would profit enormously from the voucher system that he has proposed. The insurance industry is a major contributor to the Republican party.
It would of course be irresponsible for the NYT to report as a fact that Ryan is pushing his voucher plan as a way to redistribute tax dollars to the insurance industry. It is similarly irresponsible to report as a fact that he believes that his voucher plan will reduce costs.
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During the vice-presidential debate Martha Raddatz used her position as debate moderator to ask the candidates about the impending bankruptcies of Social Security and Medicare. It was incredibly irresponsible to use such a loaded term to refer to the financial problems facing these programs.
Both Social Security and Medicare are projected to face shortfalls over their 75-year planning horizon, however these shortfalls are not accurately described as “bankruptcy.” This phrase undoubtedly leads many people to believe that there is a prospect that the programs would go out of business.
Polls consistently show that a majority of young people believe that they stand to get nothing back from Social Security when they retire. That is of course not true unless Congress were to vote to eliminate the program. Under the latest projections they would stand to get a larger benefit than current retirees even if nothing is ever done to change the program’s finances. It is unlikely that listeners would understand this to be the case based on Raddatz’s comment.
It is also unlikely that viewers would have realized that the changes put in place by the Affordable Care Act extended the date when Medicare is first projected to face a shortfall from 2016 to 2024 and reduced the projected shortfall over the program’s 75-year planning period by more than two thirds. The remaining gap could be filled by a tax increase that is less than 2 percent of projected wage growth over the next 30 years.
It is the job of the moderator to try to provide their audience with information and to draw out the candidates’ views. It is incredibly irresponsible to use this platform to push their personal agenda for the country’s two most important social programs.
During the vice-presidential debate Martha Raddatz used her position as debate moderator to ask the candidates about the impending bankruptcies of Social Security and Medicare. It was incredibly irresponsible to use such a loaded term to refer to the financial problems facing these programs.
Both Social Security and Medicare are projected to face shortfalls over their 75-year planning horizon, however these shortfalls are not accurately described as “bankruptcy.” This phrase undoubtedly leads many people to believe that there is a prospect that the programs would go out of business.
Polls consistently show that a majority of young people believe that they stand to get nothing back from Social Security when they retire. That is of course not true unless Congress were to vote to eliminate the program. Under the latest projections they would stand to get a larger benefit than current retirees even if nothing is ever done to change the program’s finances. It is unlikely that listeners would understand this to be the case based on Raddatz’s comment.
It is also unlikely that viewers would have realized that the changes put in place by the Affordable Care Act extended the date when Medicare is first projected to face a shortfall from 2016 to 2024 and reduced the projected shortfall over the program’s 75-year planning period by more than two thirds. The remaining gap could be filled by a tax increase that is less than 2 percent of projected wage growth over the next 30 years.
It is the job of the moderator to try to provide their audience with information and to draw out the candidates’ views. It is incredibly irresponsible to use this platform to push their personal agenda for the country’s two most important social programs.
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This is what readers of an article on the U.S. trade situation would conclude. The article notes the large U.S. trade deficit, but then focuses exclusively on the role of increased exports in reducing the deficit. In fact, in order to get the deficit down to a more sustainable level we will almost certainly need both higher exports and lower imports.
Incredibly, the article never once mentioned the value of the dollar. This is by far the most important determinant of both our exports and our trade deficit. If the dollar were to fall by 20 percent against other currencies, as a first approximation it will reduce the price of U.S. exports by 20 percent relative to the price of goods produced elsewhere. All economists agree that lower prices increase demand. It is bizarre that the piece never discusses the over-valuation of the dollar which is the cause of the trade deficit.
The piece was somewhat misleading when it told readers:
“Last year, U.S. exports totaled $2.1 trillion, a 14 percent rise from 2010. That activity accounted for many millions of jobs and about 14 percent of the nation’s economic output.”
Exports do not necessarily lead to jobs. For example, if GM moves a car assembly plant from Ohio to Mexico, we are not getting more jobs because part that used to go to Ohio are now exported to Mexico for assembly there. While exports do create jobs, many exports are intermediate goods like the car parts in this story and do not result in additional jobs in the United States.
This is what readers of an article on the U.S. trade situation would conclude. The article notes the large U.S. trade deficit, but then focuses exclusively on the role of increased exports in reducing the deficit. In fact, in order to get the deficit down to a more sustainable level we will almost certainly need both higher exports and lower imports.
Incredibly, the article never once mentioned the value of the dollar. This is by far the most important determinant of both our exports and our trade deficit. If the dollar were to fall by 20 percent against other currencies, as a first approximation it will reduce the price of U.S. exports by 20 percent relative to the price of goods produced elsewhere. All economists agree that lower prices increase demand. It is bizarre that the piece never discusses the over-valuation of the dollar which is the cause of the trade deficit.
The piece was somewhat misleading when it told readers:
“Last year, U.S. exports totaled $2.1 trillion, a 14 percent rise from 2010. That activity accounted for many millions of jobs and about 14 percent of the nation’s economic output.”
Exports do not necessarily lead to jobs. For example, if GM moves a car assembly plant from Ohio to Mexico, we are not getting more jobs because part that used to go to Ohio are now exported to Mexico for assembly there. While exports do create jobs, many exports are intermediate goods like the car parts in this story and do not result in additional jobs in the United States.
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I saw that Nick Rowe was unhappy that I was saying that the government debt is not a burden to future generations since they will also own the debt as an asset. I had planned to write a response, but I see that Brad DeLong got there first. I would agree with pretty much everything Brad said. The burden of the debt only exists if there is reason to believe that debt is somehow displacing investment in private capital, which is certainly not true at present.
I would probably argue the case even more strongly. In a depressed economy like we have today, there is reason to believe that the deficit, by boosting demand, is actually increasing investment, thereby making future generations wealthier. There is also the issue of human capital, that by keeping workers employed and keeping families intact, it is improving the productive capacities of the labor force in the future.
Perhaps most importantly, it is essential that people understand that the measure of the burden of the debt in future generations is not the size of the debt, but the extent to which we believe the debt has reduced output in the future compared to a counter-factual where we did not run the debt. If the debt did not reduce the economies’ future productive capabilities (or even raised them) then there is no burden of the debt. In any case, how well we are treating our children is measured first and foremost by the health and the economy and the society we pass on to them, not the amount of government debt.
It is also important to add that government borrowing (if it does divert capital from private investment) is just one way in which we can reduce the economy’s productive capacities in the future. Suppose we don’t borrow but instead sell off government assets like park land or highways which are then turned into toll roads. The sale of assets (including oil leases on government property) has roughly the same effect as government borrowing.
This also applies to other ways in which the government can raise money which may not be thought of as asset sales, but have a similar impact on future output. Foremost in this category is patent and copyright protection. In these cases the government is effectively paying people for innovations and creative work by promising to give patent and copyright holders a monopoly in certain markets in the future. This is using the government’s power to allow copyright and patent holders to collect a tax on specific products. In this sense, it has a similar impact on future generations’ well-being as if the government borrowed several trillion dollars to pay innovators and creative workers and then allowed their products to be sold in a free market.
Other factors not related to the debt also can make future generations poorer in important ways. If we get other countries or people angry at us so that we have to spend more on defense to keep the country safe, then we will have imposed a large burden on future generations. If we impose harsh penalties for minor offenses so that millions of people will be tied up in the penal system, then we are also imposing a large burden on future generations.
These and a long list of other policies (did I mention the environment and global warming?) all can impose substantial burdens on future generations in ways that are not at all captured by the debt. Therefore the debt does not in any way present a measure of the burden that we are imposing on future generations.
In fact, the debt we have today does not even give us a good measure of the debt. Suppose that we issue $4 trillion in 30-year bonds at 2.75 percent interest. If interest rates return to more normal level (say 6.0 percent on 30-year bonds) in 3 years we would be able to buy the bonds back for around $2.2 trillion, eliminating $1.8 trillion on debt. This would not change our interest burden one iota, but those who worship the debt as a measure of inter-generational equity would then be able to go to the alter in their basement and offer thanks for having reduced our debt to GDP ratio by more than 10 percentage points of GDP.
I saw that Nick Rowe was unhappy that I was saying that the government debt is not a burden to future generations since they will also own the debt as an asset. I had planned to write a response, but I see that Brad DeLong got there first. I would agree with pretty much everything Brad said. The burden of the debt only exists if there is reason to believe that debt is somehow displacing investment in private capital, which is certainly not true at present.
I would probably argue the case even more strongly. In a depressed economy like we have today, there is reason to believe that the deficit, by boosting demand, is actually increasing investment, thereby making future generations wealthier. There is also the issue of human capital, that by keeping workers employed and keeping families intact, it is improving the productive capacities of the labor force in the future.
Perhaps most importantly, it is essential that people understand that the measure of the burden of the debt in future generations is not the size of the debt, but the extent to which we believe the debt has reduced output in the future compared to a counter-factual where we did not run the debt. If the debt did not reduce the economies’ future productive capabilities (or even raised them) then there is no burden of the debt. In any case, how well we are treating our children is measured first and foremost by the health and the economy and the society we pass on to them, not the amount of government debt.
It is also important to add that government borrowing (if it does divert capital from private investment) is just one way in which we can reduce the economy’s productive capacities in the future. Suppose we don’t borrow but instead sell off government assets like park land or highways which are then turned into toll roads. The sale of assets (including oil leases on government property) has roughly the same effect as government borrowing.
This also applies to other ways in which the government can raise money which may not be thought of as asset sales, but have a similar impact on future output. Foremost in this category is patent and copyright protection. In these cases the government is effectively paying people for innovations and creative work by promising to give patent and copyright holders a monopoly in certain markets in the future. This is using the government’s power to allow copyright and patent holders to collect a tax on specific products. In this sense, it has a similar impact on future generations’ well-being as if the government borrowed several trillion dollars to pay innovators and creative workers and then allowed their products to be sold in a free market.
Other factors not related to the debt also can make future generations poorer in important ways. If we get other countries or people angry at us so that we have to spend more on defense to keep the country safe, then we will have imposed a large burden on future generations. If we impose harsh penalties for minor offenses so that millions of people will be tied up in the penal system, then we are also imposing a large burden on future generations.
These and a long list of other policies (did I mention the environment and global warming?) all can impose substantial burdens on future generations in ways that are not at all captured by the debt. Therefore the debt does not in any way present a measure of the burden that we are imposing on future generations.
In fact, the debt we have today does not even give us a good measure of the debt. Suppose that we issue $4 trillion in 30-year bonds at 2.75 percent interest. If interest rates return to more normal level (say 6.0 percent on 30-year bonds) in 3 years we would be able to buy the bonds back for around $2.2 trillion, eliminating $1.8 trillion on debt. This would not change our interest burden one iota, but those who worship the debt as a measure of inter-generational equity would then be able to go to the alter in their basement and offer thanks for having reduced our debt to GDP ratio by more than 10 percentage points of GDP.
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As part of the NYT’s affirmative action program for right-wingers, it ran an oped column by Gary E. MacDougal, a former business consultant and executive and advisor to former Illinois Governor Jim Edgar. The main point of the piece is that we spend almost $1 trillion a year on anti-poverty programs (combining spending at all levels of government), yet we still have 46 million people in poverty. MacDougal does the arithmetic and points out that this comes to over $23,000 a year for each person in poverty. He then concludes that we would be much better off blockgranting all this money to state governments, who we know to be wizards in dealing with poverty.
Apart from the questionable assessment of the effectiveness of state governments, the main problem with MacDougal’s argument is the arithmetic. A large portion of his $1 trillion goes to people who are above the poverty line. For example, more than a quarter of the money is the $250 billion spent each year on Medicaid and other health care programs. Eligibility for Medicaid varies by state but in all cases has cutoffs well above the poverty line. The same is true of the Earned Income Tax Credit (EITC), which has a cutoff for a family of four of more than $40,000, nearly twice the official poverty line. This means that MacDougal’s $1 trillion is going to a population that is more than twice the size of the poverty population, so his arithmetic is wrong by a very large factor.
It’s also worth noting that much of this money is dedicated to educational programs of different sorts where payments are made to school districts and educational institutions, it is never seen by the families themselves. The money that the government spends on public education for poor children is not included in the calculation of the poverty line.
The urge to just hand money to the states may seem less compelling when we consider that more than half of the $668 billion in federal spending (18 percent of total spending) targeted by MacDougal consists of health care programs that are already administered by the states, the EITC which is paid directly to working families through the tax code and Pell grants. (Food stamps account for roughly a quarter of the rest of the money.)
While many anti-poverty programs are undoubtedly wasteful and should be reformed or eliminated, the notion that the government spends a massive amount on poverty programs is an invention of the right-wing that has no basis in reality.
As part of the NYT’s affirmative action program for right-wingers, it ran an oped column by Gary E. MacDougal, a former business consultant and executive and advisor to former Illinois Governor Jim Edgar. The main point of the piece is that we spend almost $1 trillion a year on anti-poverty programs (combining spending at all levels of government), yet we still have 46 million people in poverty. MacDougal does the arithmetic and points out that this comes to over $23,000 a year for each person in poverty. He then concludes that we would be much better off blockgranting all this money to state governments, who we know to be wizards in dealing with poverty.
Apart from the questionable assessment of the effectiveness of state governments, the main problem with MacDougal’s argument is the arithmetic. A large portion of his $1 trillion goes to people who are above the poverty line. For example, more than a quarter of the money is the $250 billion spent each year on Medicaid and other health care programs. Eligibility for Medicaid varies by state but in all cases has cutoffs well above the poverty line. The same is true of the Earned Income Tax Credit (EITC), which has a cutoff for a family of four of more than $40,000, nearly twice the official poverty line. This means that MacDougal’s $1 trillion is going to a population that is more than twice the size of the poverty population, so his arithmetic is wrong by a very large factor.
It’s also worth noting that much of this money is dedicated to educational programs of different sorts where payments are made to school districts and educational institutions, it is never seen by the families themselves. The money that the government spends on public education for poor children is not included in the calculation of the poverty line.
The urge to just hand money to the states may seem less compelling when we consider that more than half of the $668 billion in federal spending (18 percent of total spending) targeted by MacDougal consists of health care programs that are already administered by the states, the EITC which is paid directly to working families through the tax code and Pell grants. (Food stamps account for roughly a quarter of the rest of the money.)
While many anti-poverty programs are undoubtedly wasteful and should be reformed or eliminated, the notion that the government spends a massive amount on poverty programs is an invention of the right-wing that has no basis in reality.
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The NYT has a nice piece pointing out that the notion of a “fiscal cliff” hitting the country at the end of the year is fundamentally wrong. The immediate impact of leaving the scheduled tax increases and spending cuts in place through the end of the year will be almost zero. As the piece points out, the dire projections of sharply slower growth or even a recession are not based on letting the December 31 deadline pass, but rather leaving the higher taxes and lower spending in place for the whole year. If Congress and the president were to reach an agreement in January or even February, the impact on the economy would be limited.
The NYT has a nice piece pointing out that the notion of a “fiscal cliff” hitting the country at the end of the year is fundamentally wrong. The immediate impact of leaving the scheduled tax increases and spending cuts in place through the end of the year will be almost zero. As the piece points out, the dire projections of sharply slower growth or even a recession are not based on letting the December 31 deadline pass, but rather leaving the higher taxes and lower spending in place for the whole year. If Congress and the president were to reach an agreement in January or even February, the impact on the economy would be limited.
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