“The Punishment Cure”: The GOP Pattern Of Afflicting The Afflicted While Comforting The Comfortable
Six years have passed since the United States economy entered the Great Recession, four and a half since it officially began to recover, but long-term unemployment remains disastrously high. And Republicans have a theory about why this is happening. Their theory is, as it happens, completely wrong. But they’re sticking to it — and as a result, 1.3 million American workers, many of them in desperate financial straits, are set to lose unemployment benefits at the end of December.
Merry Christmas.
Now, the G.O.P.’s desire to punish the unemployed doesn’t arise solely from bad economics; it’s part of a general pattern of afflicting the afflicted while comforting the comfortable (no to food stamps, yes to farm subsidies). But ideas do matter — as John Maynard Keynes famously wrote, they are “dangerous for good or evil.” And the case of unemployment benefits is an especially clear example of superficially plausible but wrong economic ideas being dangerous for evil.
Here’s the world as many Republicans see it: Unemployment insurance, which generally pays eligible workers between 40 and 50 percent of their previous pay, reduces the incentive to search for a new job. As a result, the story goes, workers stay unemployed longer. In particular, it’s claimed that the Emergency Unemployment Compensation program, which lets workers collect benefits beyond the usual limit of 26 weeks, explains why there are four million long-term unemployed workers in America today, up from just one million in 2007.
Correspondingly, the G.O.P. answer to the problem of long-term unemployment is to increase the pain of the long-term unemployed: Cut off their benefits, and they’ll go out and find jobs. How, exactly, will they find jobs when there are three times as many job-seekers as job vacancies? Details, details.
Proponents of this story like to cite academic research — some of it from Democratic-leaning economists — that seemingly confirms the idea that unemployment insurance causes unemployment. They’re not equally fond of pointing out that this research is two or more decades old, has not stood the test of time, and is irrelevant in any case given our current economic situation.
The view of most labor economists now is that unemployment benefits have only a modest negative effect on job search — and in today’s economy have no negative effect at all on overall employment. On the contrary, unemployment benefits help create jobs, and cutting those benefits would depress the economy as a whole.
Ask yourself how, exactly, ending unemployment benefits would create more jobs. It’s true that some of the currently unemployed, finding themselves even more desperate than before, might manage to snatch jobs away from those who currently have them. But what would give businesses a reason to employ more workers as opposed to replacing existing workers?
You might be tempted to argue that more intense competition among workers would lead to lower wages, and that cheap labor would encourage hiring. But that argument involves a fallacy of composition. Cut the wages of some workers relative to those of other workers, and those accepting the wage cuts may gain a competitive edge. Cut everyone’s wages, however, and nobody gains an edge. All that happens is a general fall in income — which, among other things, increases the burden of household debt, and is therefore a net negative for overall employment.
The point is that employment in today’s American economy is limited by demand, not supply. Businesses aren’t failing to hire because they can’t find willing workers; they’re failing to hire because they can’t find enough customers. And slashing unemployment benefits — which would have the side effect of reducing incomes and hence consumer spending — would just make the situation worse.
Still, don’t expect prominent Republicans to change their views, except maybe to come up with additional reasons to punish the unemployed. For example, Senator Rand Paul recently cited research suggesting that the long-term unemployed have a hard time re-entering the work force as a reason to, you guessed it, cut off long-term unemployment benefits. You see, those benefits are actually a “disservice” to the unemployed.
The good news, such as it is, is that the White House and Senate Democrats are trying to make an issue of expiring unemployment benefits. The bad news is that they don’t sound willing to make extending benefits a precondition for a budget deal, which means that they aren’t really willing to make a stand.
So the odds, I’m sorry to say, are that the long-term unemployed will be cut off, thanks to a perfect marriage of callousness — a complete lack of empathy for the unfortunate — with bad economics. But then, hasn’t that been the story of just about everything lately?
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 8, 2013
“Billionaires’ Row And Welfare Lines”: It’s A Great Time To Be Rich In America
The stock market is hitting record highs.
Bank profits have reached their highest levels in years.
The market for luxury goods is rebounding.
Bloomberg News reported in August, “Sales of homes priced at more than $1 million jumped an average 37 percent in 2013’s first half from a year earlier to the highest level since 2007, according to DataQuick.”
A report last week in The New York Times says that developers are turning 57th Street in Manhattan into “Billionaires’ Row,” with apartments selling for north of $90 million each.
And there’s no shortage of billionaires. Forbes’s list of the world’s billionaires has added more than 200 names since 2012 and is now at 1,426. The United States once again leads the list, with 442 billionaires.
It’s a great time to be a rich person in America. The rich are raking it in during this recovery.
But in the shadow of their towering wealth exists a much less rosy recovery, where people are hurting and the pain grows.
This is the slowest post-recession jobs recovery since World War II. The unemployment rate is falling, but for the wrong reason: an increasing number of people may simply be giving up on finding a job. The labor force participation rate — the percentage of people over 16 who either have a job or are actively searching for one — fell in August to its lowest rate in 35 years.
This disconnecting is particularly acute among young people. Measure of America, a project of the Social Science Research Council, recently released a study finding that a staggering 5.8 million young people nationwide — one in seven of those ages 16 to 24 — are disconnected, meaning not employed or in school, “adrift at society’s margins,” as the group put it.
Median household income continues to fall, according to recent data from the Census Bureau. The data showed, “In 2012, real median household income was 8.3 percent lower than in 2007, the year before the most recent recession.”
And according to an April Pew Research Center report, “During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7 percent of the wealth distribution rose by an estimated 28 percent, while the mean net worth of households in the lower 93 percent dropped by 4 percent.”
The dire statistics take on even more urgency when we consider what they mean for America’s most vulnerable: our children.
According to First Focus, a bipartisan advocacy organization focusing on child and family issues: “The 1,168,354 homeless students enrolled by U.S. preschools and K-12 schools in the 2011-2012 school year is the highest number on record, and a 10 percent increase over the previous school year. The number of homeless children in public schools has increased 72 percent since the beginning of the recession.”
A report last month by the Carsey Institute at the University of New Hampshire bemoaned the stagnation of the child poverty rate in this country, saying, “These new poverty estimates released on Sept. 19, 2013, suggest that child poverty plateaued in the aftermath of the Great Recession, but there is no evidence of any reduction in child poverty even as we enter the fourth year of ‘recovery.’ ”
Nearly one in four American children live in poverty.
A report last year from the National Poverty Center estimated “that the number of households living on $2 or less in income per person per day in a given month increased from about 636,000 in 1996 to about 1.46 million households in early 2011, a percentage growth of 130 percent.”
And yet, the value of aid for those families is shrinking and under threat.
A report this week by the Center on Budget and Policy Priorities found, “Cash assistance benefits for the nation’s poorest families with children fell again in purchasing power in 2013 and are now at least 20 percent below their 1996 levels in 37 states, after adjusting for inflation.”
The number of Americans now enrolled in the Supplemental Nutrition Assistance Program (SNAP) is near record highs, and yet both houses of Congress have passed bills to cut funding to the program. The Senate measure would cut about $4 billion, while the House measure would cut roughly ten times as much, dropping millions of Americans from the program.
Next week, lawmakers will start trying to find a middle ground between the two versions of the farm bills that include these cuts.
There is an inherent tension — and obscenity — in the wildly divergent fortunes of the rich and the poor in this country, especially among our children. The growing imbalance of both wealth and opportunity cannot be sustained. Something has to give.
By: Charles M. Blow, Op-Ed Contributor, The New York Times, October 25, 2013
“Free To Be Hungry”: Conservatives Believe That Freedom Is Just Another Word For “Not Enough To Eat”
The word “freedom” looms large in modern conservative rhetoric. Lobbying groups are given names like FreedomWorks; health reform is denounced not just for its cost but as an assault on, yes, freedom. Oh, and remember when we were supposed to refer to pommes frites as “freedom fries”?
The right’s definition of freedom, however, isn’t one that, say, F.D.R. would recognize. In particular, the third of his famous Four Freedoms — freedom from want — seems to have been turned on its head. Conservatives seem, in particular, to believe that freedom’s just another word for not enough to eat.
Hence the war on food stamps, which House Republicans have just voted to cut sharply even while voting to increase farm subsidies.
In a way, you can see why the food stamp program — or, to use its proper name, the Supplemental Nutritional Assistance Program (SNAP) — has become a target. Conservatives are deeply committed to the view that the size of government has exploded under President Obama but face the awkward fact that public employment is down sharply, while overall spending has been falling fast as a share of G.D.P. SNAP, however, really has grown a lot, with enrollment rising from 26 million Americans in 2007 to almost 48 million now.
Conservatives look at this and see what, to their great disappointment, they can’t find elsewhere in the data: runaway, explosive growth in a government program. The rest of us, however, see a safety-net program doing exactly what it’s supposed to do: help more people in a time of widespread economic distress.
The recent growth of SNAP has indeed been unusual, but then so have the times, in the worst possible way. The Great Recession of 2007-9 was the worst slump since the Great Depression, and the recovery that followed has been very weak. Multiple careful economic studies have shown that the economic downturn explains the great bulk of the increase in food stamp use. And while the economic news has been generally bad, one piece of good news is that food stamps have at least mitigated the hardship, keeping millions of Americans out of poverty.
Nor is that the program’s only benefit. The evidence is now overwhelming that spending cuts in a depressed economy deepen the slump, yet government spending has been falling anyway. SNAP, however, is one program that has been expanding, and as such it has indirectly helped save hundreds of thousands of jobs.
But, say the usual suspects, the recession ended in 2009. Why hasn’t recovery brought the SNAP rolls down? The answer is, while the recession did indeed officially end in 2009, what we’ve had since then is a recovery of, by and for a small number of people at the top of the income distribution, with none of the gains trickling down to the less fortunate. Adjusted for inflation, the income of the top 1 percent rose 31 percent from 2009 to 2012, but the real income of the bottom 40 percent actually fell 6 percent. Why should food stamp usage have gone down?
Still, is SNAP in general a good idea? Or is it, as Paul Ryan, the chairman of the House Budget Committee, puts it, an example of turning the safety net into “a hammock that lulls able-bodied people to lives of dependency and complacency.”
One answer is, some hammock: last year, average food stamp benefits were $4.45 a day. Also, about those “able-bodied people”: almost two-thirds of SNAP beneficiaries are children, the elderly or the disabled, and most of the rest are adults with children.
Beyond that, however, you might think that ensuring adequate nutrition for children, which is a large part of what SNAP does, actually makes it less, not more likely that those children will be poor and need public assistance when they grow up. And that’s what the evidence shows. The economists Hilary Hoynes and Diane Whitmore Schanzenbach have studied the impact of the food stamp program in the 1960s and 1970s, when it was gradually rolled out across the country. They found that children who received early assistance grew up, on average, to be healthier and more productive adults than those who didn’t — and they were also, it turns out, less likely to turn to the safety net for help.
SNAP, in short, is public policy at its best. It not only helps those in need; it helps them help themselves. And it has done yeoman work in the economic crisis, mitigating suffering and protecting jobs at a time when all too many policy makers seem determined to do the opposite. So it tells you something that conservatives have singled out this of all programs for special ire.
Even some conservative pundits worry that the war on food stamps, especially combined with the vote to increase farm subsidies, is bad for the G.O.P., because it makes Republicans look like meanspirited class warriors. Indeed it does. And that’s because they are.
By: Paul Krugman, Op-Ed Columnist, The New York Times, September 22, 2013
“Big ‘Perilous’ Change”: Now More Than Ever, George W. Bush Is On The Ballot
It’s probably safe to say no publication has more consistently promoted the idea that “George W. Bush is on the ballot” in 2012 than the Washington Monthly. And that goes beyond the usual issue of the Bush administration’s responsibility for the Great Recession. We’ve argued that the 2012 campaign closely resembles the 2000 precedent in the specific policies and agendas of the GOP nominees, and the likely trajectory of the country if Romney wins. That’s why we’ve published and promoted the e-book, Elephant in the Room: Washington in the Bush Years. We’ve been here before.
But as election day approaches, there’s a final parallel that’s worth underlining: Romney is emulating Bush’s mendacious claim to be a “uniter not a divider,” and far more moderate than his party. As Paul Glastris reminds readers in the Editor’s Note in the upcoming November/December issue of the magazine (a sneak preview is available here), W. relied a lot on misleading voters about his relationship with his party:
One early summer day in 2000 I was summoned to the Oval Office along with several other White House staffers to get instructions from President Bill Clinton on what he wanted to say in his upcoming speech at the Democratic National Convention in Los Angeles, a speech I was assigned to cowrite. But the president was in political strategist mode that day, and in the midst of downloading his thoughts on the speech he launched into a long soliloquy about the dynamics of the presidential contest and the nature of the man Al Gore was up against, Texas Governor George W. Bush. “Let me tell you something,” he said at one point. “Bush is a lot more conservative than people realize.”
The Big Dog certainly got that right, and the scary but unmistakable thing is that the Republican Party which Mitt Romney is trying to distance himself from at the last minute (rhetorically, though not substantively in any major way) is if anything considerably more conservative than it was in 2000. And if there’s any actual split between Romney and his party, it will only produce incompetent and dystfunctional government, as it often did when W. tried to exhibit “compassion” in order to appeal to swing constituencies:
The ideological contradictions unleashed within the GOP during those years have only grown. We see it in the increasingly stormy and dysfunctional relationship between the corporate and Tea Party wings of the party, in the freak show that was the 2012 GOP primary, and in the bottomless, robotic mendacity of the Mitt Romney campaign.
Yep, we’ve heard it all before. And as someone who was on to Bush’s game in 2000, and thinks he won (or to put it more accurately, succeeded in being inaugurated) because Democrats let him become the candidate of “safe change,” the possibility that Romney will succeed in the exact same scam is maddening.
Every voter should think about ol’ W. when they go to vote this year, and ask themselves: “Do we want to go back down that road again?”
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, November 2, 2012
“Growing Inequality”: A Rich Man, Poor Man Election
Three new reports on taxes, inequality and economic mobility add up to one conclusion: The 2012 presidential election should be about one thing, and one thing only: class warfare.
Let’s start with a report from the Pew Charitable Trusts, “Pursuing the American Dream: Economic Mobility Across Generations.”
The Pew Economic Mobility Project has been tracking the economic status of thousands of families since 1968 — the data covered in the current report is through 2009. And there is some good news: Absolute income has increased for Americans of all economic classes, from the poorest to the richest. The richest Americans have seen much larger relative gains, and, naturally, are far more immune to skyrocketing healthcare and education costs than are the poor, but at least part of the American dream is still intact: Children are still earning higher incomes than their parents.
But then comes the bad news: When one measures wealth — the total assets held by families — instead of income, the picture is substantially different. As Catherine Rampell summarized in the New York Times:
The median person in the poorest quintile has a family net worth that is 63 percent less than that of his counterpart a generation ago: $2,748, versus $7,439 …
The median family in the top socioeconomic class today (i.e., the family at the 90th percentile) is worth $629,853, compared to $495,510 in the last generation. That’s a 27 percent increase in the size of the median fortune in the top income stratum.
If you’re scoring at home: Rich: richer; Poor: poorer.
Now let’s move to “Inequality and Redistribution During the Great Recession,” a research paper produced by the Minneapolis Fed.
In 2010, the bottom 20 percent of the U.S. earnings distribution was doing much worse, relative to the median, than in the entire postwar period. This is because their earnings (including wages, salaries, and business and farm income) fell by about 30 percent relative to the median over the course of the recession. This lowest quintile also did poorly in terms of wealth, which declined about 40 percent …
However, even as earnings plunged, disposable income and consumption managed to hold even, relatively speaking, for the poorest Americans as compared to other classes. This is a bit of a mystery, noted the authors, who believe it can be explained by aggressive government redistribution and tax cuts.
Our main substantive conclusion is that government redistribution in the Great Recession was at historical highs and partially shielded households from experiencing large declines in disposable income and consumption expenditures. The same households, though, have experienced losses in net wealth, and this might make them more vulnerable to further or more persistent earnings declines in the future.
If you’re still keeping score: While the rich were getting richer and the poor poorer, the Great Recession absolutely hammered the worst-off Americans, but substantial government support — unemployment benefits, food stamps, Medicaid, tax cuts — saved the most vulnerable Americans from utter disaster.
And that brings us to our third report, the Congressional Budget Office’s latest numbers on federal taxes: “The Distribution of Household Income and Federal Taxes: 2008-2009.”
The bottom line: In 2009, as a result of tax cuts included in the stimulus, Americans ended up paying the lowest percentage of their income in federal taxes since 1979.
The observations included in these reports mutually reinforce each other. For example, one reason why the wealthiest Americans have done so much better than everyone else is directly related to substantial cuts in the capital gains tax rate over the past several decades. High unemployment and the collapse in home prices as a result of the Great Recession, on the other hand, have a disproportionately greater effect on poorer Americans, whose net wealth has been declining over past decades.
The numbers also beg to be put in political context. Over the long term, the rich have been getting richer and the poor poorer. In the short term, the poor took the brunt of the impact of the Great Recession, and were only kept afloat through government assistance. However, as tax rates have fallen to historic lows, it has become more and more difficult for the federal government to find the resources necessary to ameliorate widening inequality.
Now consider the fact that the Republican candidate for president wants to cut taxes even further, while eviscerating the social welfare safety net that is the only thing staving off complete economic disaster for poorer Americans. It’s class warfare all right, but one side seems to have already won.
By: Andrew Leonard, Salon, July 11, 2012
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