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.
Orr: “It’s a pleasure to meet you, Your Grace. My name is Tyrion Lannister.”
At last! I know I speak for quite a few book readers when I say that pretty much the only thing that kept me going through the eleventy thousand discursive, digressive pages of George R. R. Martin’s fifth tome, A Dance With Dragons, was the promise of Tyrion finally meeting up with Daenerys Targaryen. And, of course, after eleventy thousand pages, it never happened. So on behalf of myself and everyone else who sacrificed sleep, work, family, and friends waiting for this moment, let me say thank you, David Benioff and D. B. Weiss. Bonus points for what seemed to be a cameo by Strong Belwas (a book character who was written out of the show) as the nameless fighter who freed Tyrion from his chains.
New research confirms what they say about nice guys.
Smile at the customer. Bake cookies for your colleagues. Sing your subordinates’ praises. Share credit. Listen. Empathize. Don’t drive the last dollar out of a deal. Leave the last doughnut for someone else.
Sneer at the customer. Keep your colleagues on edge. Claim credit. Speak first. Put your feet on the table. Withhold approval. Instill fear. Interrupt. Ask for more. And by all means, take that last doughnut. You deserve it.
Follow one of those paths, the success literature tells us, and you’ll go far. Follow the other, and you’ll die powerless and broke. The only question is, which is which?
Of all the issues that preoccupy the modern mind—Nature or nurture? Is there life in outer space? Why can’t America field a decent soccer team?—it’s hard to think of one that has attracted so much water-cooler philosophizing yet so little scientific inquiry. Does it pay to be nice? Or is there an advantage to being a jerk?
The country’s political dysfunction has undermined all efforts to build an effective fighting force.
The Obama Administration has run out of patience with Iraq’s Army. On Sunday, Secretary of Defense Ashton Carter appeared on CNN’s “State of the Union” to discuss the recent fall of Ramadi, one of Iraq’s major cities, to ISIS. Despite possessing substantial advantages in both numbers and equipment, he said, the Iraqi military were unable to prevent ISIS forces from capturing the city.
“That says to me and, I think, to most of us, that we have an issue with the will of the Iraqis to fight ISIL and defend themselves.”
Carter’s frustrations are shared by his boss. When asked about the war against ISIS in a recent interview with the Atlantic’s Jeffrey Goldberg, President Obama said that “if the Iraqis are not willing to fight for the security of their country, then we cannot do it for them.”
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.
Some fans are complaining that Zack Snyder’s envisioning of the Man of Steel is too grim—but it’s less a departure than a return to the superhero’s roots.
Since the official teaser trailer for Batman v Superman: Dawn of Justice debuted online in April, fans and critics alike have been discussing the kind of Superman Zack Snyder is going to depict in his Man of Steel sequel. The controversy stems from Snyder’s decision to cast Superman as a brooding, Dark Knight-like character, who cares more about beating up bad guys than saving people. The casting split has proved divisive among Superman fans: Some love the new incarnation, citing him as an edgier, more realistic version of the character.
But Snyder’s is a different Superman than the one fans grew up with, and many have no problem expressing their outrage over it. Even Mark Waid, the author of Superman: Birthright (one of the comics the original film is based on), voiced his concern about Man of Steel’s turn toward bleakness when it came out in 2013:
Rebel groups that employ terror in civil wars seldom win or gain concessions—but they tend to prolong conflicts, a new paper finds.
Nearly 14 years into the war on terror, there are signs of terrorism all around us, from Memorial Day tributes to the victims of the wars in Iraq and Afghanistan to the raging congressional debate over reauthorizing the Patriot Act.
Yet some of the most basic information about terrorism remains surprisingly elusive. For example: Does it work?
There have been some attempts at answering the question, but many of them are either largely anecdotal or geographically constrained. Other studies have focused on international terror. But as political scientist Page Fortna of Columbia University notes, the vast majority of terrorism isn’t transnational—it’s localized, utilized in the context of civil wars and fights for territorial control. Many of the intractable conflicts the U.S. is involved in today fit this definition: the fighting between ISIS, Jabhat al-Nusra, and other groups in Iraq and Syria; the Boko Haram insurgency in Nigeria; al-Shabab’s terrorism in Somalia and Kenya; Yemen’s civil war; the Israel-Palestinian conflict. Is terrorism an effective tool when used in those conflicts?
Changing neighborhoods may be a class issue, but in America, that means it's also a racial one.
Ask city-dwellers to describe what, precisely, gentrification is you’ll get an array of answers. The term is a murky one, used to describe the many different ways through which money and development enter poorer or less developed neighborhoods, changing them both economically and demographically.
For some, gentrification and gentrifiers are inherently bad—pushing out residents who are often older, poorer, and darker than the neighborhood’s new occupants. For others, a new group of inhabitants brings the possibility of things residents have long hoped for, better grocery stores, new retail, renovations, and an overall revitalization that often eludes low-income neighborhoods.
In an interview, the U.S. president ties his legacy to a pact with Tehran, argues ISIS is not winning, warns Saudi Arabia not to pursue a nuclear-weapons program, and anguishes about Israel.
On Tuesday afternoon, as President Obama was bringing an occasionally contentious but often illuminating hour-long conversation about the Middle East to an end, I brought up a persistent worry. “A majority of American Jews want to support the Iran deal,” I said, “but a lot of people are anxiety-ridden about this, as am I.” Like many Jews—and also, by the way, many non-Jews—I believe that it is prudent to keep nuclear weapons out of the hands of anti-Semitic regimes. Obama, who earlier in the discussion had explicitly labeled the supreme leader of Iran, Ayatollah Ali Khamenei, an anti-Semite, responded with an argument I had not heard him make before.
“Look, 20 years from now, I’m still going to be around, God willing. If Iran has a nuclear weapon, it’s my name on this,” he said, referring to the apparently almost-finished nuclear agreement between Iran and a group of world powers led by the United States. “I think it’s fair to say that in addition to our profound national-security interests, I have a personal interest in locking this down.”
Hundreds of years ago, ignorance about decomposition and disease sparked fears that the dead returned to drink the blood of the living.
In 1846, a man named Horace Ray died of tuberculosis in Griswold, Connecticut. Within the next six years, two of his grown sons died of the same disease. When yet another son fell ill two years later, Ray’s family and friends could think of only one explanation: The dead sons were somehow feeding on and sickening the living one—from the afterlife. In an effort to keep the remaining son from getting even worse, they exhumed the dead sons’ bodies and burned them.
This wasn’t an isolated incident. In 1874, a Rhode Island man named William Rose dug up his own daughter’s body and burned her heart, and in 1875 a victim of “consumption,” as TB was called then, had her lungs burned posthumously for good measure.
Advocates say that a guaranteed basic income can lead to more creative, fulfilling work. The question is how to fund it.
Scott Santens has been thinking a lot about fish lately. Specifically, he’s been reflecting on the aphorism, “If you give a man a fish, he eats for a day. If you teach a man to fish, he eats for life.” What Santens wants to know is this: “If you build a robot to fish, do all men starve, or do all men eat?”
Santens is 37 years old, and he’s a leader in the basic income movement—a worldwide network of thousands of advocates (26,000 on Reddit alone) who believe that governments should provide every citizen with a monthly stipend big enough to cover life’s basic necessities. The idea of a basic income has been around for decades, and it once drew support from leaders as different as Martin Luther King Jr. and Richard Nixon. But rather than waiting for governments to act, Santens has started crowdfunding his own basic income of $1,000 per month. He’s nearly halfway to his his goal.