The rumored grand bargain would cost the economy about half a million jobs in 2013
Are you ready for a grand bargain? A deficit hawk party! Yes? No? Maybe? (Is this John Boehner?).
With the deadline for the fiscal cliff -- which is really more of a slope -- looming, President Obama and House Republicans have reportedly come close on an agreement that would kick most of the fiscal can. Well, they did for a few hours at least. It didn't take long for Boehner to walk back his support for the plan, but that hardly means it's dead. If there is a grand-ish bargain to be had, it will probably look something like this latest iteration of a deal.
As Ezra Klein reported, the deal comes in three parts: revenue, cuts, and stimulus. Let's break it down, and then break down what it means for jobs in the coming year.
REVENUE. Let the Bush tax cuts expire for households with adjusted gross incomes of $400,000 or more, and limit the value of itemized deductions to 28 percent. In other words, set tax rates for the top 1 percent back to where they were under President Clinton, and stop richer households from taking bigger deductions than middle-class households. All told, it raises a little more than $1 trillion in revenue over the next decade relative to a world where all of the Bush tax cuts continue. As Paul Krugman points out, it's unclear whether this includes the higher taxes on capital gains and dividends scheduled to kick in on January 1, 2013 -- on top of the 3.8 percent Obamacare surtax on capital gains.
Taxes would also go up from switching to chained CPI. As my colleague Derek Thompson explained, chained CPI is an alternative (and perhaps more accurate) measure of inflation that assumes consumers substitute to similar, lower-priced goods when other prices rise. In other words, it says inflation is lower. Tax brackets are indexed to inflation, so a lower measure of inflation means they will rise less -- and more people will creep into these higher brackets. It adds up to about $60-90 billion over ten years.
CUTS. Say hello to chained CPI again. It's not just a tax hike. It's a Social Security cut too. Remember, Social Security benefits are indexed to inflation as well, so the logic of a lower measure of inflation kicks in here too -- benefits will rise slower than they otherwise would have, with the compounded effect hitting older retirees the worst. It's about a $100-200 billion cut over a ten-year window. Congress is supposed to negotiate on another $1 trillion or so of cuts, and if they cannot agree on them there will be -- wait for it! -- a new sequester in the future. Because the last one worked so well.
STIMULUS. Extend unemployment insurance and the refundable tax credits from the stimulus, but not the payroll tax cut. There's also some new, albeit unspecified, infrastructure spending thrown in.
There are a lot of moving parts here, but only three of these moving parts will matter in 2013: the end of the Bush tax cuts for the rich, the end of the payroll tax cut, and new infrastructure spending. In other words, it's unlikely any of the cuts will hit the economy next year. The can known as the sequester would get kicked for another year or so -- unless, haha, Congress can agree to other, immediate cuts -- and chained CPI will be the same as CPI-W in 2013. That leaves the three aforementioned changes -- changes that add up to about a half million less jobs in 2013 than if there was no fiscal cliff at all, as you can see in the chart below. The payroll tax cut is a political orphan in need of a champion.
The Cliff Notes version of why this deal would cost us 500,000 jobs next year is it sucks more money out of the economy than it puts back in. Let's look at it piece-by-piece.
Bush tax cuts for the rich expire. Less money for the rich means less money for the rich to spend. But the rich are different from you and me -- they tend to have money left over after they buy the things they want. In other words, they spend less of their incomes, so a tax hike on them doesn't hurt demand as much as a tax hike on the middle-class would (as we shall see). The Congressional Budget Office (CBO) figures higher taxes on higher earners would subtract about 200,000 jobs next year.
Payroll tax cut ends. Less money for everybody means less money for everybody to spend. That's what the payroll tax, which, remember, hits the middle-class harder than it does the rich, does. But it gets worse. A higher payroll tax means a higher cost of hiring and that means less hiring. A lot less hiring. Working backwards from thesetwo CBO reports shows it means about half a million less jobs in 2013. As the left-leaning Center on Budget and Policy Priorities (CBPP) points out, it's almost twice as stimulative as the Bush tax cuts for the rich, at similar costs. Spending the $115 billion to extend it another year would be money well spent.
Infrastructure. This is where things get admittedly speculative. We don't even know how much infrastructure spending both sides have talked about, let alone what kind of projects, but we can make some informed guesses. President Obama has asked for $50 billion of new infrastructure spending before, which he probably wouldn't get, but we'll use here as a best-case. If we take former Vice Presidential economic adviser and current CBPP fellow Jared Bernstein's rule of thumb that every $1 billion of construction or repair spending adds roughly 9,000-10,000 jobs, and then assume that this new spending would come in over two years, that gives us about 250,000 new jobs in 2013. Again, this is a pretty generous estimate.
As far as can-kicking goes, this ain't too shabby. The CBO figures that the fiscal cliff will cost us 3.4 million jobs next year if Congress does nothing; suddenly, half a million less sounds okay. But Washington can do better. It just needs to go over the fiscal cliff first.
Right now, Obama is offering lower revenues than he originally asked for and entitlement cuts for more stimulus -- and he's not even getting all of the stimulus! It's all because of the baseline illusion. As long as the Bush tax cuts are around, Boehner can claim he's the one offering concessions on revenues by saying he'll raise them at all. It's a silly argument, but it's a silly argument that goes away after January 1, when tax rates automatically go up. Then, Democrats can push a bill that cuts middle-class taxes and cuts deductions for the rich -- the $1.6 trillion from Obama's first offer -- and tell Republicans they have a choice. They can either get less revenue or less entitlement spending, but not both, and in return they have to sign off on all of the stimulus -- extended unemployment insurance, the payroll tax cut, and infrastructure spending. They could even set up a commission -- or a supercommittee, if they're feeling bold -- to cut spending in a year's time, with a new sequester to incentivize them to find cuts.
It's a deal that would bring our medium-term budget closer to balance, without costing the economy in the short-term. Now that would be grand.
Some businesspeople are working half of the week in far-off countries or catching 3 a.m. trains just so that they don’t have to uproot their lives at home.
A few years back, David Neeleman, the founder of JetBlue Airways, left his company and launched a new airline in Brazil. The airline, Azul, flies 22 million people a year, employs 12,000 people, and is the fastest-growing carrier in the region.
You’d think running such a large, complex operation would require a move to South America. But Neeleman commutes to Azul’s Sao Paulo headquarters every week from his home in Connecticut, taking the 10-hour redeye on Sunday nights and returning on Thursdays. This way, he says, he doesn’t have to uproot his family of 10 kids.
“My wife wasn’t so interested in moving,” said Neeleman, who recently bought TAP, Portugal’s national airline and is now commuting there as well. “We had all these kids playing [American] football and lacrosse. They don’t have those sports in Brazil.”
In the movie Up in the Air, George Clooney successfully captures the road-warrior ethos that has long been associated with, say, business consultants from firms like McKinsey & Company who work on projects outside their hometowns and spend most of their week in hotels. But now, more and more executives around the world are choosing to take on lengthy commutes on a permanent basis, even if their jobs don’t demand it. Increasing globalization and tech-enabled workplace flexibility are certainly part of the reason why. But a more child-centered approach to parenting also seems to be a factor, as these executives make other major sacrifices in order to balance their professional and home lives.
Even in big cities like Tokyo, small children take the subway and run errands by themselves. The reason has a lot to do with group dynamics.
It’s a common sight on Japanese mass transit: Children troop through train cars, singly or in small groups, looking for seats.
They wear knee socks, polished patent-leather shoes, and plaid jumpers, with wide-brimmed hats fastened under the chin and train passes pinned to their backpacks. The kids are as young as 6 or 7, on their way to and from school, and there is nary a guardian in sight.
A popular television show called Hajimete no Otsukai, or My First Errand, features children as young as two or three being sent out to do a task for their family. As they tentatively make their way to the greengrocer or bakery, their progress is secretly filmed by a camera crew. The show has been running for more than 25 years.
Forget the Common Core, Finland’s youngsters are in charge of determining what happens in the classroom.
“The changes to kindergarten make me sick,” a veteran teacher in Arkansas recently admitted to me. “Think about what you did in first grade—that’s what my 5-year-old babies are expected to do.”
The difference between first grade and kindergarten may not seem like much, but what I remember about my first-grade experience in the mid-90s doesn’t match the kindergarten she described in her email: three and a half hours of daily literacy instruction, an hour and a half of daily math instruction, 20 minutes of daily “physical activity time” (officially banned from being called “recess”) and two 56-question standardized tests in literacy and math—on the fourth week of school.
That American friend—who teaches 20 students without an aide—has fought to integrate 30 minutes of “station time” into the literacy block, which includes “blocks, science, magnetic letters, play dough with letter stamps to practice words, books, and storytelling.” But the most controversial area of her classroom isn’t the blocks nor the stamps: Rather, it’s the “house station with dolls and toy food”—items her district tried to remove last year. The implication was clear: There’s no time for play in kindergarten anymore.
A new study finds that people today who eat and exercise the same amount as people 20 years ago are still fatter.
There’s a meme aimed at Millennial catharsis called “Old Economy Steve.” It’s a series of pictures of a late-70s teenager, who presumably is now a middle-aged man, that mocks some of the messages Millennials say they hear from older generations—and shows why they’re deeply janky. Old Economy Steve graduates and gets a job right away. Old Economy Steve “worked his way through college” because tuition was $400. And so forth.
We can now add another one to that list: Old Economy Steve ate at McDonald’s almost every day, and he still somehow had a 32-inch waist.
A study published recently in the journal Obesity Research & Clinical Practice found that it’s harder for adults today to maintain the same weight as those 20 to 30 years ago did, even at the same levels of food intake and exercise.
Any attempt to address mass incarceration has to begin with an effort to tackle crime—and the social conditions linked to its rise.
With the publication of “The Black Family in the Age of Mass Incarceration” Ta-Nehisi Coates has added an elegant and forceful voice to the growing frustration with the inefficacy and injustice of America’s criminal-justice system. Mandatory-sentencing laws, the War on Drugs, juvenile-justice sentences that seem to do more to create than deter criminals, racial arrest and sentencing disparities: All are ready for a tough national cross-examination.
But even in the unlikely event that Washington and state legislatures successfully adapt the nation’s crime policies to a safer, more racially sensitive era, the nation will still look around to find more black men in prison than it might expect or want. There’s a simple reason for that, one that Coates himself notes: Relative to other groups, blacks commit more crimes. To understand why is to tackle some very hard-to-talk-about realities of black family life. And on that issue—and despite his announced interest in the topic—Coates has been the opposite of lucid.
Alexie never thought he could leave his reservation to pursue a writing career—but a line written by Adrian C. Louis taught him to venture outside the "reservation of his mind."
By Heart is a series in which authors share and discuss their all-time favorite passages in literature.
In 1993, when Publishers Weeklypreviewed Sherman Alexie’s short story collection The Lone Ranger and Tonto Fistfight in Heaven, the author was “primarily known as a poet.” Things change in 20 years. Today, Alexie is celebrated for his acclaimed novels, stories, and collections of both poetry and fiction, screenplays and film work, and a National Book Award-winning young-adult novel. He helms a killer Twitter feed. He’s an indispensable and versatile American voice.
But in an interview for this series, Alexie confessed that his writing career very nearly never happened. For Alexie, a Spokane/Coeur d'Alene Indian who grew up destitute, literary dreams were more than beyond reach—it never occurred to him that a reservation Indian could speak out and be heard. A chance encounter with a poem by Adrian C. Louis gave Alexie the life-altering license to sit down, put pen to paper, and write out all he knew.
In the name of emotional well-being, college students are increasingly demanding protection from words and ideas they don’t like. Here’s why that’s disastrous for education—and mental health.
Something strange is happening at America’s colleges and universities. A movement is arising, undirected and driven largely by students, to scrub campuses clean of words, ideas, and subjects that might cause discomfort or give offense. Last December, Jeannie Suk wrote in an online article for The New Yorker about law students asking her fellow professors at Harvard not to teach rape law—or, in one case, even use the word violate (as in “that violates the law”) lest it cause students distress. In February, Laura Kipnis, a professor at Northwestern University, wrote an essay in The Chronicle of Higher Education describing a new campus politics of sexual paranoia—and was then subjected to a long investigation after students who were offended by the article and by a tweet she’d sent filed Title IX complaints against her. In June, a professor protecting himself with a pseudonym wrote an essay for Vox describing how gingerly he now has to teach. “I’m a Liberal Professor, and My Liberal Students Terrify Me,” the headline said. A number of popular comedians, including Chris Rock, have stopped performing on college campuses (see Caitlin Flanagan’s article in this month’s issue). Jerry Seinfeld and Bill Maher have publicly condemned the oversensitivity of college students, saying too many of them can’t take a joke.
The Islamic State is no mere collection of psychopaths. It is a religious group with carefully considered beliefs, among them that it is a key agent of the coming apocalypse. Here’s what that means for its strategy—and for how to stop it.
What is the Islamic State?
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
David Hume, the Buddha, and a search for the Eastern roots of the Western Enlightenment
In2006, i was 50—and I was falling apart.
Until then, I had always known exactly who I was: an exceptionally fortunate and happy woman, full of irrational exuberance and everyday joy.
I knew who I was professionally. When I was 16, I’d discovered cognitive science and analytic philosophy, and knew at once that I wanted the tough-minded, rigorous, intellectual life they could offer me. I’d gotten my doctorate at 25 and had gone on to become a professor of psychology and philosophy at UC Berkeley.
I knew who I was personally, too. For one thing, I liked men. I was never pretty, but the heterosexual dance of attraction and flirtation had always been an important part of my life, a background thrum that brightened and sharpened all the rest. My closest friends and colleagues had all been men.
American politicians are now eager to disown a failed criminal-justice system that’s left the U.S. with the largest incarcerated population in the world. But they've failed to reckon with history. Fifty years after Daniel Patrick Moynihan’s report “The Negro Family” tragically helped create this system, it's time to reclaim his original intent.
By his own lights, Daniel Patrick Moynihan, ambassador, senator, sociologist, and itinerant American intellectual, was the product of a broken home and a pathological family. He was born in 1927 in Tulsa, Oklahoma, but raised mostly in New York City. When Moynihan was 10 years old, his father, John, left the family, plunging it into poverty. Moynihan’s mother, Margaret, remarried, had another child, divorced, moved to Indiana to stay with relatives, then returned to New York, where she worked as a nurse. Moynihan’s childhood—a tangle of poverty, remarriage, relocation, and single motherhood—contrasted starkly with the idyllic American family life he would later extol.