The only way to close the budget deficit is to close the jobs deficit
It's State of the Union season, which means it's time for the usual suspects to tell President Obama to "go big" on the deficit. Never mind that jobs, not the deficit, top voters' list of priorities, or that austerity has failed everywhere it's been tried recently (includinghere). It's always a good time to lament the lack of bipartisan golf-playing and call for a grand bargain.
But what exactly makes a bargain grand in Washington? It's not just a matter of trading spending cuts for higher taxes. If it were, the combination of the sequester and the fiscal cliff tax deal would count. No, it has to be a specific kind of spending cut. It has to be a cut to social insurance. That's what Obama has offered with chained CPI, which cuts Social Security and raises taxes by using a lower measure of inflation to calculate benefits and brackets, but Republicans and centrist pundits don't think that's enough. They want Obama to increase the Medicare eligibility age from 65 to 67 too. Now, this sounds like the kind of "painful choice" that will put us on the path to fiscal sustainability, but it's not. The Congressional Budget Office figures it will only save about $150 billion over a decade, while, as Matthew Yglesias of Slate points out, costing patients twice that much. (If every state implements Obamacare's Medicaid expansion, it might not be regressive; just wasteful.).
In other words, it's inefficient savings that wouldn't even save all that much.
But wait. What are we even talking about? Are we worried about today's deficit or tomorrow's deficit? Today's deficit is about unemployment, full stop. Tomorrow's deficit is about rising healthcare costs amidst an aging society. These problems have nothing to do with each other. Which one are we trying to solve right now?
Okay, wait again. I can hear you saying But the deficit is about too much spending, not too much unemployment. And that brings us to the most important chart about the deficit you'll ever see. As Joe Weisenthal of Business Insider points out with the graph below of (inverted) surplus-or-deficit-as-a-share-of-GDP and unemployment, there's historically been a pretty correlation between them. Whether unemployment spikes or recedes, deficits follow.
(Note: The blue line shows the surplus-or-deficit-as-share-of-GDP inverted, and the red line shows the unemployment rate).
Unemployment isn't just a human disaster. It's a fiscal one too. Higher unemployment means lower tax revenue, and higher spending on safety net programs like food stamps -- that is, bigger deficits. And that means bringing down unemployment is the only way to bring down the deficit. Trying to slash the deficit during a depression -- in other words, a liquidity trap -- will only make unemployment worse, and hence leave the deficit little, if at all, better (and perhaps worse). This is hardly a novel insight. As Mike Konczal of the Roosevelt Institute discovered, John Maynard Keynes said as much all the way back in 1933, when he said policymakers just need to "look after unemployment, and the Budget will look after itself."
In other words, unemployment hawks are the real deficit hawks.
There's an irony here. The people who care about the deficit in the long run want to increase it in the short run. (As Brad DeLong asks, who said Keynes didn't care about the long run?). More infrastructure spending, more payroll tax cuts, and more debt writedowns and refinancings are the best ways to put people back to work now that the Fed is doing about as much as it's going to do (though it should do more). All of those things mean bigger deficits today, but bigger deficits today are worth a recovery tomorrow.
And no, austerity would not be some kind of magical elixir -- a stimulant, if you will -- for "confidence". With interest rates stuck at zero, austerity has only hurt growth wherever it's been tried the past few years. The evidence on this from Europe is quite clear, but here's some more, from our side of the pond: Atif Mian of Princeton and Amir Sufi of the University of Chicago recently looked at state-level data in the U.S., and found that too little aggregate demand, not too much uncertainty, is what's holding the economy back today. In other words, businesses are worried where their customers are going to come from, not where their taxes are going to go. Trying to cut our way to confidence won't help when that isn't the problem. It will only make our real problem -- too little demand -- worse.
That doesn't mean we shouldn't worry about long-term healthcare costs. It's just not clear how much we should worry about it. As former OMB director Peter Orszag points out, national healthcare inflation slowed to 3.8 percent in 2012 after annually increasing by more than 10 percent much of the preceding decade. Now, as Annie Lowrey of The New York Times explains, it's something of a mystery what is going on here-- is this slowdown just due to the Great Recession, or is it something else? -- but the takeaway is we have to bit more time than we thought to figure out how to keep bending the cost curve.
There are three, hardly mutually exclusive, endgames when it comes to containing healthcare costs: (1) the cost-controls in Obamacare, like IPAB, work; (2) the government uses Medicare's bargaining power to negotiate better prices from doctors and drug-makers; or (3) the government voucherizes Medicare, and hopes competition keeps prices down. This last option sounds great -- who doesn't like competition? -- but, as economist Kenneth Arrow famously argued, the healthcare market doesn't work like other markets. "Consumers" -- that is, patients -- don't exactly have the expertise to shop around for the best deal on, say, heart surgery. Nor do they decide what to pay for. Insurers do that. There's little empirical reason to expect big savings out of increased competition -- with plenty of potential downside if the vouchers don't turn out to be generous enough.
This is the debate over Medicare's future, not whether to increase the eligibility or not. But it's tomorrow's debate. Today's debate is what we can do to put people back to work. The former is hard enough, without making it a pre-condition for solving the latter.
Jobs are the only thing that will make the state of our deficit better.
The social network learns more about its users than they might realize.
Facebook, you may have noticed, turned into a rainbow-drenched spectacle following the Supreme Court’s decision Friday that same-sex marriage is a Constitutional right.
By overlaying their profile photos with a rainbow filter, Facebook users began celebrating in a way we haven't seen since March 2013, when 3 million peoplechanged their profile images to a red equals sign—the logo of the Human Rights Campaign—as a way to support marriage equality. This time, Facebook provided a simple way to turn profile photos rainbow-colored. More than 1 million people changed their profile in the first few hours, according to the Facebook spokesperson William Nevius, and the number continues to grow.
“This is probably a Facebook experiment!” joked the MIT network scientist Cesar Hidalgo on Facebook yesterday. “This is one Facebook study I want to be included in!” wrote Stacy Blasiola, a communications Ph.D. candidate at the University of Illinois, when she changed her profile.
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.
For centuries, experts have predicted that machines would make workers obsolete. That moment may finally be arriving. Could that be a good thing?
1. Youngstown, U.S.A.
The end of work is still just a futuristic concept for most of the United States, but it is something like a moment in history for Youngstown, Ohio, one its residents can cite with precision: September 19, 1977.
For much of the 20th century, Youngstown’s steel mills delivered such great prosperity that the city was a model of the American dream, boasting a median income and a homeownership rate that were among the nation’s highest. But as manufacturing shifted abroad after World War II, Youngstown steel suffered, and on that gray September afternoon in 1977, Youngstown Sheet and Tube announced the shuttering of its Campbell Works mill. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. The effect was so severe that a term was coined to describe the fallout: regional depression.
The second episode of the new season was a slow burner with a dramatic twist.
Let’s start at the beginning, with Frank in bed with his wife, Jordan, discussing water stains on the ceiling and childhood entombments. I don’t know about you guys, but I found this whole bit slack and familiar. Maybe there was a two-minute scene in there, but five? Maybe a more charismatic actor could have pulled off that lengthy monologue. But Vince Vaughn is no Robert Shaw, and his childhood basement is no U.S.S. Indianapolis.
The historian and Knesset member Michael Oren accuses the president of distancing the U.S. from Israel, and calls out left-wing Jews and Israel’s Jewish critics in the American press.
In a recent post, I suggested that the intervention of two men, the former U.S. national security advisor Tom Donilon and the former Israeli ambassador to the United States, Michael Oren, might help improve the dysfunctional relationship between the Obama administration and the government of Israeli Prime Minister Benjamin Netanyahu.
At the time I wrote this, both men had reputations as people who were concerned about preserving the extraordinarily complicated, and extraordinarily close, U.S.-Israel relationship, and both had spent a good deal of time calming the waters between Obama and Netanyahu. Today, Donilon maintains that reputation. As for Oren …
Put it this way: If Goldblog readers would allow me to withdraw the suggestion, I’d be much obliged. Oren has created a new role for himself: acid critic of the Obama administration and of left-leaning American Jews (especially in the press and in the White House) who, he believes, are trading on their Jewishness when they criticize Israel. Oren’s critique, at its heart, is simple: Obama, in part because he wanted to reconcile the U.S. with the “Muslim world” (a very large, ill-defined, and politically complicated concept, in Oren’s mind), decided to distance the United States from Israel; to surprise Israel by altering U.S. Middle East policy without prior notice; and to negotiate with Israel’s most potent enemy without alerting Israeli leaders.
Over the last two weeks, Republican presidential candidates have repeatedly missed opportunities to demonstrate that they care about communities outside of their traditional base.
After Mitt Romney’s defeat in 2012, the Republican National Committee published an “autopsy.” “When it comes to social issues,” the autopsy declared, “the Party must in fact and deed be inclusive and welcoming. If we are not, we will limit our ability to attract young people.” The autopsy also added that, “we need to go to communities where Republicans do not normally go to listen and make our case. We need to campaign among Hispanic, black, Asian, and gay Americans and demonstrate we care about them, too.”
The last two weeks, more than any since Romney’s defeat, illustrate how miserably the GOP has failed.
Start with June 17, when Dylann Roof, a young white man enamored of the Confederate flag, murdered nine African Americans in church. Within three days, Romney had called for the Confederate flag’s removal from South Carolina’s capitol. Four days later, the state’s Republican governor and senators called for its removal too. But during that entire week—even as it became obvious that the politics of the flag were shifting—not a single GOP presidential candidate forthrightly called for it to be taken down. Instead, they mostly called it a state decision, a transparent dodge politicians deploy when they don’t want to make a difficult call.
The president delivers his single most accomplished rhetorical performance, and it’s one you should watch rather than read.
I think Barack Obama’s eulogy yesterday for parishioners of the Emanuel African Methodist Episcopal Church in Charleston was his most fully successful performance as an orator. It was also one that could have come only at this point in his public career—and not, for instance, when he was an intriguing figure first coming to national notice, as he was during his celebrated debut speech at the Democratic National Convention in Boston 11 years ago; or when he was a candidate fighting for political survival, as he was when he gave his “Race in America” speech in Philadelphia early in 2008.
I’ll explain why I say so, but first a word about the odd circumstances in which I’ve heard and learned about the speech.
The meaning of the Confederate flag is best discerned in the words of those who bore it.
This afternoon, in announcing her support for removing the Confederate flag from the capitol grounds, South Carolina Governor Nikki Haley asserted that killer Dylann Roof had “a sick and twisted view of the flag” which did not reflect “the people in our state who respect and in many ways revere it.” If the governor meant that very few of the flag’s supporters believe in mass murder, she is surely right. But on the question of whose view of the Confederate Flag is more twisted, she is almost certainly wrong.
Roof’s belief that black life had no purpose beyond subjugation is “sick and twisted” in the exact same manner as the beliefs of those who created the Confederate flag were “sick and twisted.” The Confederate flag is directly tied to the Confederate cause, and the Confederate cause was white supremacy. This claim is not the result of revisionism. It does not require reading between the lines. It is the plain meaning of the words of those who bore the Confederate flag across history. These words must never be forgotten. Over the next few months the word “heritage” will be repeatedly invoked. It would be derelict to not examine the exact contents of that heritage.
In 1784, the doctor Benjamin Rush described alcohol as a threat to morality—and a danger to the nascent republic.
Go ahead, have a small beer; it will bring “Serenity of Mind, Reputation, Long Life, & Happiness.” Even a strong beer would be fine, for that brings “Cheerfulness, Strength, and Nourishment,” as long as it’s only sipped at meals. So declared Benjamin Rush, one of the signers of the Declaration of Independence and the early republic’s most prominent physician. In his loquaciously named pamphlet, An Inquiry Into the Effects of Ardent Spirits on the Human Mind and Body, first published in 1784, Rush describes the “usual” downward spiral of drink. What starts as water and wine quickly turns into punches and toddies and cordials, ending with a hopeless vortex of gin, brandy, and rum, “day and night.”* In the pits of intemperance, one can expect such vices as “Idleness, Gaming, peevishness, quarrelling, Fighting, Horse-Racing, Lying and Swearing, Stealing and Swindling, Perjury, Burglary, [and] Murder,” with punishments including “Black eyes and Bags,” “State prison for Life,” or, worst of all, “Gallows.”**
In any case, people have probably heard the phrase in reference to something gone awry at work or in life. In either setting, when the shit does hit the fan, people will tend to look to the most competent person in the room to take over.
And too bad for that person. A new paper by a team of researchers from Duke University, University of Georgia, and University of Colorado looks at not only how extremely competent people are treated by their co-workers and peers, but how those people feel when, at crucial moments, everyone turns to them. They find that responsible employees are not terribly pleased about this dynamic either.