Derek Thompson

There are a million things to say about this graph, and I'm pretty sure that everybody who sees it will find some way to shoehorn it into their previously held opinions. So bear with me, please, as I do that very thing.

Here's what I consider the most amazing thing about this pretty amazing graph. It's not just that the U.S. had the shallowest recession, or the best recovery, among similar countries in Europe and Japan. It's this. We had the shallowest recession and the best recovery primarily because we (a) control our own currency and (b) used aggressive monetary policy to save the banks and lower interest rates while running high deficits.

And yet! Even as we smoked Europe and Japan in the race back to pre-recession GDP, we have actively debated undoing both of the things that clearly made our recovery superior. Weird conservatives have begged us to return to the gold standard at the very moment that an inflexible currency was dooming Europe. Normal conservatives have begged us to cut deficits even as austerity was dooming Europe.

Economics isn't like a science were you can run simultaneous experiments with control groups. But the last five years have been pretty darn close to a global stimulus experiment. Europe has been dabbling with its own 21st-century version of the gold standard while enforcing continent-wide austerity. Meanwhile, we've mostly done the opposite -- with high (if not high enough) deficits and aggressive (if not aggressive enough) monetary policy. The results speak for themselves.

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The Treasury Inspector General issued a report today finding the IRS used "inappropriate criteria" to target conservative groups. Long story very short: In response to a surge in 501(c)(4) applications, some IRS officials took short-cuts to determine if the organizations were acting in an overtly political manner, which would violate their tax-free status. The IRS told the group to use fairer and less politically charged criteria. And they didn't.

Here is the president's response to today's report (via Ryan Lizza)

Here is the summary of the Inspector General report:

Highlights of Inspector General report on IRS targeting of conservative groups

And here is the report in full:

Inspector General report on IRS targeting conservative groups

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Here's the story budget wonks will tell from today's Congressional Budget Office report: The deficit is poised to shrink to its lowest level since 2008. Good news? Yes, if you're a deficit hawk. Bad news? Yes, if you think (as I do) the deficit is falling too quickly, especially at a time of high unemployment and declining household debt.

Here's the story I wish more people would talk about: Our incredible shrinking Medicare projections. Since August, CBO has now revised down its projections of mandatory health care spending by nearly $500 billion, as Michael Linden pointed out. Since the 2010 CBO report, projected Medicare spending between 2013 and 2020 has fallen by just over $1 trillion ... or 16%.

Here's the graph comparing 2010's Medicare projection to 2013's ...

...  and here's the graph comparing cumulative Medicare spending over that time. In three years, we've taken projected Medicare spending in the twenty-teens down from about $6.5 trillion to about $5.5 trillion.

So many numbers. Why should you care?

Two reasons. First, the "runaway" growth of health care costs has been a motivating reason for responsible Washingtonians to ignore the unemployment crisis and focus on our deficit. But lo-and-behold, we've cut more than ONE TRILLION DOLLARS from projected Medicare spending -- and much more if you project out for the full decade. Many of the cuts have come from laws, like the Affordable Care act. Others came from lower growth in overall health care spending.

Second -- and this is the really important point I wish I could make more often -- this is an invaluable lesson in the folly of long-term budget projections (yeah, I appreciate the irony that I'm graphing budget projections to make this point). In a world where all predictions about the future of U.S. government spending turn out to be true, it makes a lot of sense to pay rapt attention to 10- and 20-year forecasts of spending and revenue. But in a world where the most exquisitely delicate change in hospital cost inflation suddenly saves hundreds of billions of dollars, it makes projections impressionistic, at best. In the future, there are budget crises that some people think might happen. In the present, there is a long-term unemployment crisis that we know is happening.

Why should impressionistic statistics about the future win that fight for Washington's attention?

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The lines at Disney World are awful, we can all agree, but the lengths to which some people will go to bypass them are worse. Wealthy Manhattan parents are reportedly using a service that typically assists disabled children around the theme park to drive their non-disabled families around in a "handicapped" scooter, allowing them to skip lines by up to two hours.

It sounds like something out of a "Modern Seinfeld" episode. But in this case, the horrible people are real. And they're spectacularly crass.

"You can't go to Disney without a tour concierge," one rich mom said, according to the New York Post. "This is how the 1 percent does Disney."

Well, gross. This is, above all, a problem of basic human decency. But it is also a problem of black markets -- or legal markets extended illegally (or extra-legally) to people who shouldn't qualify.

The official Disney VIP Tour includes guides and premium fast passes for between $300 and $400 per hour. That's much more expensive than a $130-per-hour disability service afforded by Dream Tours Florida. There's a very simple explanation for the price difference: The VIP tickets are priced to where the rich will pay (and also to weed out all but the richest families to keep the service exclusive); whereas, the disability tour company sees all families with a disabled person as consumers. So these rich families reportedly using Dream Tours Florida aren't benefiting from a peculiarly effective and peculiarly cheap service, precisely because neither the service nor the price is intended to serve wealthy families. They're benefiting from a service they don't deserve at a price far below where the real luxury market for fast passes has settled.

Markets in everything, you might say. Sure. Regulation (and retribution) in everything would be good, too.

We've reached out to Dream Tours Florida and will report back when we hear.

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On April 24, Minnesota Sen. Amy Klobuchar scheduled a hearing. Fun story, right? A hearing in Washington is like a fern in the rainforest. But this hearing was notable for both its subject and its attendance. It was a meeting about the most important economic crisis facing America today: long-term unemployment.

At 10:30am, the hearing began. She was the only attendant.

***

I have two stories for you about Washington and the economy. Both true. But very different.

The first story is called: How Washington Saved the Economy. You might begin in 2008, when the Federal Reserve went on an unprecedented spree of asset-buying to un-gunk the banks, push down interest rates, and spur investing in mortally weakened economy. This was followed, in 2009, with an equally historic stimulus package aimed at filling holes in state budgets and sending cash back to families and businesses. The government ran steep $1+ trillion deficits to keep as much money in the weak private sector as possible.

There is little question that monetary and fiscal stimulus blunted the recession -- and saved the economy.

The second story is called: How Washington Permanently Scarred the Labor Market. You might begin this story in 2011, when Congress (led by Republican obstructionism) embarked on a historic quest to crush deficit spending by any means necessary. Hold the economy hostage over the debt ceiling? Check. Kill the American Jobs Act while scheduling a too-awful-to-be-a-real-law sequester? Check. Allow the too-awful-to-be-a-real-law sequester to become a real law? Checkmate.

The deficit fell fast. As unemployment ebbed, the ranks of long-term jobless calcified, creating two separate job markets. One broken market for people out of work for more than six months. And another slowly healing market for everybody else. But the combination of a thermostatic recovery and a deep aversion to stimulus crushed any hope that the long-term unemployed would get the help they needed. Long-term unemployment isn't special just because it's longer; it's special because it's self-perpetuating. Skills atrophy, networks dry up, and employers discriminate, creating a vicious cycle of joblessness that can't be cured by normal economic growth.

There is little question that, in the last two years, Washington has essentially left the long-term unemployed to fend for themselves -- and permanently scarred the labor market.

***

This isn't so much a tale of two cities, but a tale of one city that responded differently to two crises: (1) the collapse of the financial system and (2) the scarring of the labor market. These are both emergencies. So why did we respond to the first emergency like an ambulance siren and the second like a harmless murmur of white noise?

I can think of at least three explanations. The first two are the explanations I've heard, believed, and used. The third I hadn't fully considered until last week. But it might be the most compelling.

(1) It's the basic fact that, without a financial system, there is no economy.

This explanation blames pretty much nobody in Washington.

In 2007 and 2008, the entire economy stood on the brink of collapse, and the only way to save it was by a historic all-hands-on-deck response from the Federal Reserve and Congress. In retrospect, you could say that we went too far to protect the biggest banks (some of which are even bigger, today) without ensuring similar financial protection for homeowners. And yet, while millions of underwater homeowners are an acute tragedy, you might say, they won't guarantee a lasting national depression. Without enough gainfully employed homeowners, you won't have a strong housing market. Without a banking system, you won't have a housing market, period.

(2) It's all the Republicans' fault.

This explanation blames half of Washington.

Let's be crystal-clear about this: There is no doubt that Republican policies are disproportionately to blame for the shift away from stimulus. That's an easy story to tell, and I don't think Republicans would even dispute it. After all, they've argued that cutting spending would help the economy. The GOP has thoroughly convinced itself that spending-side efforts to fix unemployment are unworkable.

But there's something else, too.

In the last year, there has settled, even among the Democrats, a kind of reserved defeat that shows a stunning lack of urgency toward the crisis of long-term joblessness. From abandoning the payroll tax cut in late 2012, to quietly acceding to sequester, to going silent on unemployment, nearly all of Washington -- not just the right -- has essentially stopped talking about the most important economic issue of our time.

High-ranking Treasury officials officials I've spoken with on background couldn't name any specific proposals they have to help the long-term unemployed. Instead, they've argued that general economic growth stuff, such as infrastructure spending, should be enough to put these 4 million people back to work. But the economic literature objects: Fighting vast long-term unemployment with general economic growth policies is like fighting pneumonia with Vitamin C.

So, why aren't even Democrats scrambling to fight for the long-term unemployed?

(3) It's the mind-shifting power of money in politics.

This explanation blames everything about Washington. Money might not buy elections. But it does buy the attention of electeds. It subtly but substantially biases them toward the issues that most concern the rich.

Let's begin with a zoom-out: Winning elections is more expensive than ever. Ironically, that makes it harder to "buy" elections, in the conventional sense, because both sides in marquee elections raise so much cash that each marginal dollar becomes less consequential (principles of inflation apply). But it also means that candidates are required to spend an egregious and unprecedented share of their time getting rich people to donate. Having a Rolodex full of wealthy folks is a prerequisite for winning federal representation. It's also a recipe for having your priorities shaped, if not determined, by hours spent going over rich-guy problems.

"Being a candidate means being a telemarketer for 24 months before an election," Connecticut Sen. Chris Murphy said last week at a conference by the Yale Institution for Social and Policy Studies. But not just any telemarketer. A telemarketer for people with lots of money. After all, it doesn't make much sense to spend your limited time asking jobless families to send you their unemployment insurance.

Murphy's remarks were as critical of the corrosive power of money as they were revealing: Even if money doesn't buy legislators outright, it does buy their legislative focus. Political science backs the claim: As Larry Bartels' 2005 paper on "Economic Inequality and Political Representation" found, Democrats and Republicans are responsive to middle-class and high-income constituents much more precisely than the low-income ...

Even if money doesn't always change the outcome of political debates, it shapes what debates we have. We didn't have a debate about whether we should extend the payroll tax in December 2012. But we did have a debate about whether we should raise taxes on families making more than $250,000. Congress didn't vote to cancel the sequester when it learned it would cut unemployment benefits and assistance to low-income households. But it did cancel the FAA cuts when frequent flyers complained about security lines and departure times. Nobody on Capitol Hill is talking about long-term joblessness. We're still debating carried interest and the Volcker Rule.

I'm paid to spend my day reading economic papers and asking people to explain their conclusions. Spending my time this way has persuaded me that long-term unemployment is a national emergency that is both devastating millions of families and making the country permanently poorer.

Politicians have a slightly different information diet. They spend more time gleaning information from lobbyists and rich donors whose concerns and opinions graft themselves onto representatives as easily as the pithiest economists' opinions attach themselves to me. If politicians naturally gravitate to the issues rich folks want to talk about, it doesn't make them bad people. It makes them normal people in a broken system that elevates polarization -- both between parties and between the priorities of high-income and low-income families -- while subtly concealing the issues that most affect Americans who cannot afford a lobbyists' luncheon or a number on a congresswoman's speed-dial. 

The centrality of big money in politics makes it nearly impossible for an issue like long-term unemployment to buy a sliver of mindshare. Our priorities are shaped not only by the stories we choose to believe, but also the stories we happen to hear, from the ideas we give a hearing ...

***

... Sen. Chris Murphy eventually joined the April 24 meeting on long-term unemployment. He was joined by two more Democrats. Sixteen of the 20 members of the Joint Economic Committee never bothered to show up. National Journal wrote a report. Liberals blogs expressed outrage. But the story quickly died, carried out by the effluence of the media cycle and the frenzied schedule of Washington, its writers, and its representatives. There were so many hearings to attend. There were so many calls to make.

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Moms are different, these days. They're more likely to have gone to college, more likely to work full-time, less likely to have more than two children, and less likely to be married than previous generation. To the data ...

Mothers with infant children in the U.S. today are more educated than they have ever been... [Pew Social Trends]

... because women, in general, are much more likely to have gone to college. [Pew Social Trends]

Moms are working as hard as ever -- but they're spending more time in offices than at home ... [Pew]

... as a result, moms and dads are more similar now than ever. For most of the 20th century (and before), parents specialized. Dad worked for money. Mom worked at home. But as female education increased -- and mid-century technology made housework less time-intensive -- moms and dads became less specialized. More moms worked more for money. More dads worked more at home.

There is still a gap: 43 percent of married mothers are employed full-time, compared with 88 percent of married fathers. Full-time workers are those who usually work 35 hours or more per week. Moms, for example, are much more likely to do the "dirty work" of child care while fathers are more likely to spend a greater share of their time playing with kids or doing home maintenance, like mowing the lawn. But as you can see, it's a closing gap. [Pew]

The more kids you have, the less likely you are to work. Think of it this way. Each additional child reduces a typical mom's likelihood to be in the workforce by about 5 percentage points, according to 2005 data from the Bureau of Labor Statistics. It is also the case that mothers with infant children are the least likely to work, and participation rates rise as children enter their early teen years. So what we're also seeing in this graph is that the more children you have, the more likely you are to have a very young child whose care is more time-intensive. [BLS]

Middle-class moms are the most likely to be in the labor force. This graph, also from 2005 BLS data, shows that women are most likely to work when their husband's wage puts them in the middle quintile of earners. This speaks to the rise of dual earner households, which has helped middle-income families keep up with inflation as mid-skill work for men has suffered with the decline of manufacturing. [BLS]

Birth rates have fallen tremendously for all education levels ... but, somewhat surprisingly, the drop has been steepest among mothers with less education. [Pew Social Trends]

Childless fortysomethings are a growing reality. Not having kids by your 40s is nearly twice as likely as it was 40 years ago. [Pew]

Single moms are a growing reality, too -- at every income level, every education level, among whites, blacks, and Hispanics. As the New York Times showed, the share of households with married parents has declined for each third of earners. The decline has been especially steep among the poorest third. [NYT]

More births are happening outside of marriage at practically every level. The rise of unwed moms is a cultural and economic mystery that we unpacked here and here, but the big story is that the share of births occurring outside of marriage is increasing across demographic groups ... [NYT]

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