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.
After more than a year of rumors and speculation, Bruce Jenner publicly came out as transgender with four simple words: “I am a woman.”
“My brain is much more female than male,” he explained to Diane Sawyer, who conducted a primetime interview with Jenner on ABC Friday night. (Jenner indicated he prefers to be addressed with male pronouns at this time.) During the two-hour program, Jenner discussed his personal struggle with gender dysphoria and personal identity, how it shaped his past and current relationships and marriages, and how he finally told his family about his true gender identity.
The show went to impressive lengths to explain unfamiliar concepts of gender and sexuality to its audience, although it didn't always go smoothly. Sawyer’s questions occasionally came off as awkward and tone-deaf, mirroring a broader lack of understanding by many Americans about the difficulties that trans people face. But Sawyer’s empathy also shone when explaining concepts like gender identity and transitioning to her audience—a rare experience on primetime American television. It was a powerful signal of how much progress the LGBT movement has made over the past twenty years, even though the T in that acronym still lags behind the other three letters in both social acceptance and legal protections, and in how much progress remains to be made.
In her new book No One Understands You and What To Do About It, Heidi Grant Halvorson tells readers a story about her friend, Tim. When Tim started a new job as a manager, one of his top priorities was communicating to his team that he valued each member’s input. So at team meetings, as each member spoke up about whatever project they were working on, Tim made sure he put on his “active-listening face” to signal that he cared about what each person was saying.
But after meeting with him a few times, Tim’s team got a very different message from the one he intended to send. “After a few weeks of meetings,” Halvorson explains, “one team member finally summoned up the courage to ask him the question that had been on everyone’s mind.” That question was: “Tim, are you angry with us right now?” When Tim explained that he wasn’t at all angry—that he was just putting on his “active-listening face”—his colleague gently explained that his active-listening face looked a lot like his angry face.
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.
Today was the latest installment of the never-ending Clinton scandal saga, but it won’t be the last. Yet in some ways, the specifics are a distraction. The sale of access was designed into the post-2001 Clinton family finances from the start. Probably nobody will ever prove that this quid led to that quo … but there’s about a quarter-billion-dollar of quid heaped in plain sight and an equally impressive pile of quo, and it’s all been visible for years to anyone who cared to notice. As Jonathan Chait, who is no right-wing noise-machine operator, complained: “The Clintons have been disorganized and greedy.”
“All of this amounts to diddly-squat,” pronounced long-time Clinton associate James Carville when news broke that Hillary Clinton had erased huge numbers of emails. That may not be true: If any of the conduct in question proves illegal, destroying relevant records may also have run afoul of the law.
The editors of Smithsonian magazine have announced the winners of their 12th annual photo contest, selected from more than 26,500 entries. The winning photographs from from the competition's six categories are published below: The Natural World, Travel, People, Americana, Altered Images and Mobile. Also, a few finalists have been included as well. Captions were written by the photographers. Be sure to visit the contest page at Smithsonian.com to see all the winners and finalists.
Mary Hamm was in pain, though it was hard to tell. She bustled around the Starbucks, pouring drinks, restocking pastries, and greeting customers with an unshakable gaze perfected during 25 years of working in hospitality. Her smile said, How can I help you? Her eyes said, I know you’re going to order a caramel Frappuccino, so let’s do this.
Occupying prime space in a Fredericksburg, Virginia, strip mall, beside a Dixie Bones BBQ Post, this Starbucks pulls in about $40,000 a week. Hamm, 49, had been managing Starbucks stores for 12 years. The problem was her feet. After two decades in the food-service business, they had started to wear out. She had two metal plates in the right one, installed over the course of five surgeries. Now her left foot needed surgery too. She doesn’t like to complain, but when I asked her how often she was in pain, she smiled and said quietly, “All the time.”
When healthcare is at its best, hospitals are four-star hotels, and nurses, personal butlers at the ready—at least, that’s how many hospitals seem to interpret a government mandate.
When Department of Health and Human Services administrators decided to base 30 percent of hospitals’ Medicare reimbursement on patient satisfaction survey scores, they likely figured that transparency and accountability would improve healthcare. The Centers for Medicare and Medicaid Services (CMS) officials wrote, rather reasonably, “Delivery of high-quality, patient-centered care requires us to carefully consider the patient’s experience in the hospital inpatient setting.” They probably had no idea that their methods could end up indirectly harming patients.
Leon Trotsky is not often invoked as a management guru, but a line frequently attributed to him would surely resonate with many business leaders today. “You may not be interested in war,” the Bolshevik revolutionary is said to have warned, “but war is interested in you.” War, or at least geopolitics, is figuring more and more prominently in the thinking and fortunes of large businesses.
Of course, multinational companies such as Shell and GE have long cultivated an expertise in geopolitics. But the intensity of concern over global instability is much higher now than in any recent period. In 2013, the private-equity colossus KKR named the retired general and CIA director David Petraeus as the chairman of its global institute, which informs the firm’s investment decisions. Earlier this year, Sir John Sawers, the former head of MI6, Britain’s CIA, became the chairman of Macro Advisory Partners, a firm that advises businesses and governments on geopolitics. Both appointments are high-profile examples of a much wider trend: an increasing number of corporations are hiring political scientists, starting their board meetings with geopolitical briefings, and seeking the advice of former diplomats, spymasters, and military leaders.“The last three years have definitely been a wake-up call for business on geopolitics,” Dominic Barton, the managing director of McKinsey, told me. “I’ve not seen anything like it. Since the Second World War, I don’t think you’ve seen such volatility.” Most businesses haven’t pulled back meaningfully from globalized operation, Barton said. “But they are thinking, Gosh, what’s next?”
This month, many of the nation's best and brightest high school seniors will receive thick envelopes in the mail announcing their admission to the college of their dreams. According to a 2011 survey, about 60 percent of them will go to their first-choice schools. For many of them, going away to college will be like crossing the Rubicon. They will leave their families -- their homes -- and probably not return for many years, if at all.
That was journalist Rod Dreher's path. Dreher grew up in the small southern community of Starhill, Louisiana, 35 miles northwest of Baton Rouge. His family goes back five generations there. His father was a part-time farmer and sanitarian; his mother drove a school bus. His younger sister Ruthie loved hunting and fishing, even as a little girl.
New Zealand's largest newspaper is deeply conflicted. With the World Cup underway in Brazil, should The New Zealand Herald refer to the "global round-ball game" as "soccer" or "football"? The question has been put to readers, and the readers have spoken. It's "football"—by a wide margin.
We in the U.S., of course, would disagree. And now we have a clearer understanding of why. In May, Stefan Szymanski, a sports economist at the University of Michigan, published a paper debunking the notion that "soccer" is a semantically bizarre American invention. In fact, it's a British import. And the Brits used it often—until, that is, it became too much of an Americanism for British English to bear.
The story begins, like many good stories do, in a pub. As early as the Middle Ages, Szymanski explains, the rough outlines of soccer—a game, a ball, feet—appear to have been present in England. But it wasn't until the sport became popular among aristocratic boys at schools like Eton and Rugby in the nineteenth century that these young men tried to standardize play. On a Monday evening in October 1863, the leaders of a dozen clubs met at the Freemasons' Tavern in London to establish "a definite code of rules for the regulation of the game.” They did just that, forming the Football Association. The most divisive issue was whether to permit "hacking," or kicking an opponent in the leg (the answer, ultimately, was 'no').