I would have you understand that I am all for recycling. Use it up, wear it out, make it do or do without--it was sound advice during World War II, and it still is today. Still, despite my committment to sustainable blogging, I was not pleased to see the Center on Budget and Policy Priorities reissue the graph I blogged about last year in virtually the same form.
I didn't think much of this graph at the time, and I still don't. The effect of the graph is to make it seem as if we could, by simply refusing to extend the Bush tax cuts on high earners, cover virtually all of the Social Security shortfall that is going to be putting immense pressure on the budget deficit over the next century. But this is not the case.
The CBPP gets its figure by taking present values of the Bush upper income tax cuts extended over 75 years, and comparing them to the present value of the Social Security shortfall. For those who haven't taken finance classes, present values are sort of like compound interest, in reverse. Instead of adding up the future gains from interest rates, you discount future cash flows by a discount rate. Why do this? Mostly because of a financial truism: a dollar today is worth more than a dollar tomorrow: it's certain, not risky, and while you can only use a dollar tomorrow, erm, tomorrow, you can use today's dollar either immediately, or at any time in the future.
Present value is a very useful tool for comparing different investment projects. Say you have one investment project that gives you an immediate return, and one that will give you a much higher return eventually, but takes ten years to pay off--a present value calculation lets you assess which project is actually going to be worth more.
But present value has some drawbacks, too. Our contractor was over last night trying to shore up some joists in our basement that were inappropriately cut to run electric wire, and I mentioned to him that I was working on this post. He thought for a minute, and then summed it up perfectly: "It seems to me that you've got two main problems here: liquidity constraint, and an inappropriate discount rate." Just so. Let me see if I can unpack that a little.
Because it discounts future dollars, often quite heavily, cash flows which happen beyond 10-20 years out virtually disappear. In this case, I assume that the CBPP used the same 5.25% discount rate that it used last year. Just to illustrate what the effect of that discount rate is, if you had a guaranteed $100 payment every year for the next 75 years, discounted at 5.25%, the present value of that cash flow would be $1864, versus the $7500 you get from just adding them all together. Over half of that present value comes from the first 14 years of the 75-year period. By twenty years out, that $100 is only worth $35 a year to you.
Now let's assume that someone comes along and offers me a deal: I can buy that guaranteed $100 cash flow, worth $1864, by taking out a loan. That loan has no interest payments for the first 30 years, and then I have to pay back $400 a year from year 30 to year 75. Should I do it?
Present value would say yes! The present value of those future $400 payments is only $1563, much less than the present value of my $100 annual payments that start now. But obviously, I am going to have trouble in year 30 covering my $400 payment with the $100 I am taking in every year.
The difference could be made up in savings; if I could save all my $100 payments at a guaranteed interest rate of 5.25%, then by year 30, the interest on my savings would be $382; using a combination of interest and slow withdrawals, I could pay off the loan and still have $4500 in the bank.
But the government does not borrow and save like normal people--its constraints are different. The closest it can come to saving is to pay off debt. And our debt is not yielding 5.25% right now; our highest-yielding debt is paying 4.375%, which the government is trying to sell more of, not pay off, in order to lengthen the average time-to-maturity of the debt held by the public, which lowers the risks to the Treasury of a sudden interest rate spike.
The average interest rate on debt held by the public is around 3% right now; it hasn't been as high as 3.75% since April 2009.
Now, you might say that this is not an ordinary time, and that when we pay off our debt in the future, we will get a better "return" on our savings. But remember that discount rate: it means that the immediate future is what gives you the most bang for your buck. And we've only got nine years of "savings" before the Social Security shortfall becomes larger than the cost of the Bush tax cuts, as this graph from the invaluable Committee for a Responsible Federal Budget points out:
We're not going to let the Bush tax cuts expire until 2012 at this point, which gives us 2013-9 to save by paying off debt. Let's say that you think that interest rates are going to bounce back to the 4.96 we paid in July of 2007, and we will use all of the money gained from repeal to pay down debt. By my extremely generous estimates (adding in my best estimate of other tax provisions that primarily benefit the rich, and which CBPP claims were not included in the Congressional Budget Office's $700 billion 10-year price tag for the repeal of the high-income tax cuts), by the end of the seven year period we might pay off as much as $600 billion dollars worth of debt. That's not nothing! Which is why we should never have extended the Bush tax cuts for anyone.
But at 5% average interest rates, we'd be saving less than $30 billion a year in interest. Add that to the $80 billion or so the high-income tax cuts will cost us in 2020 and you get $110 billion a year, or about 0.48% of GDP by my calculations. But in 2020, as you can see from the graph, the Social Security shortfall is 0.51% of GDP. By 2025 it hits around 1% of GDP.
Maybe you think interest rates will jump even further? It's certainly possible. But if you think this, then I assume you aren't among the people making fun of the invisible bond vigilantes, or demanding that we borrow more money for stimulus. Assuming that inflation is not going to suddenly zoom to 5% without Ben Bernanke noticing (or reacting), if you think that interest rates are going to hit 7% in 2013, that means you think that the bond market is going to freak out and raise our real interest rates by hundreds of basis points. Given that the average maturity of our debt is currently less than five years, that means we're going to have to roll over a bunch of debt paying less than 3% for a bunch of debt paying more than 7% . . . which to my ears is the same as shrieking "We're screwed!"
Last year I caught a lot of flak for pointing out that most of the heavy lifting was being done by the discounting, and that if you just looked at the cash flows, there wasn't any good way to pay for Social Security over the next 75 years just by repealing the Bush tax cuts for the rich. But you can see this point illustrated in the CBPP's own graph. At right, you'll see their graph from last year. Notice anything different about it from the one above? I mean, other than the fact that they included the cost of all the Bush tax cuts, not just the ones for high earners?
That's right, last year the costs were equal. This year, the Social Security shortfall is almost 15% larger--0.8% of GDP rather than 0.7%. That's the effect of just one year of poor economic growth, and one year closer to the point where the lines cross on that CFRB graph. That alone tells you how much the timing differences in the cash flows are affecting their results, and why this is not a very useful chart.
There's another problem, one which the CFRB points out in its excellent post on the dangers of this comparison. Actually, they too have recycled--they pointed out exactly the same thing last year when the CBPP debuted the graph. Which is that the CBPP's numbers are incredibly sensitive to initial assumptions about the growth rates in these two budget items.
That's not such a problem with Social Security, where the projections are among the most stable we can make. Demographic change is a slow moving disaster. To a first approximation, every single person who will be collecting benefits in 2030 is now living and working in the United States. And the benefits are tied to the taxes that are paid, which means that unless you think we're going to get a giant burst of immigration, the deficit isn't going to widen or narrow overmuch. Furthermore, the benefits are indexed to wages, which means, broadly, to productivity and GDP growth, so there aren't going to be huge upside or downside surprises.
The estimates of the cost of the Bush tax cuts, however, are extraordinarily sensitive to initial assumptions:, as they pointed out last year:
Essentially, CBPP assumes that the growth rates in revenue loss from 2017 through 2020 will continue forever. Over time, the compounding effects of these growth rates are significant -- increasing the value of the cuts to about 1.1 percent of GDP by 2080. Yet tiny changes in some of the numbers they use can drastically alter this number.
For example, they estimate that the tax cuts will cost $99 billion in 2017 and $120 billion in 2020 based off of a combination of Treasury and TPC estimates. We used some TPC tables to estimates these numbers at $102 billion in 2017 and the same $120 billion in 2020. When we tried to roughly apply their methodology using our $102 billion instead of their $99 billion (in other words, a nominal growth rate of about 5.6% instead of 6%) we found that the shortfall only reaches about 0.65 percent of GDP rather than 1.1 percent.
This is not to say that our $102 billion is right and their $99 billion is wrong - both are plausible and surely both will be wrong. The point is that tiny changes in these numbers cause wild swings in the ultimate cash flow results. (Though the magnitude of the present value cost wouldn't swing nearly as much - under the scenario we presented, the present value of the upper-income cuts would be between 0.5 and 0.6 percent of GDP rather than 0.7 percent).
We also tried projecting forward two other ways: assuming that the upper income tax cuts remained a fixed proportion of total revenue under CBO's extended baseline scenario and assuming bracket creep for the upper-income cuts in line with the total bracket creep we estimate in our CRFB baseline.
Here are the results:
The CBPP is entirely right to point out that the Bush tax cuts were extremely costly. Given our parlous fiscal condition, we cannot afford to extend them--we couldn't in 2010, either, but we did it anyway, and that's water under the bridge. Come 2012, they need to expire. But this is what the CBO says our budget looks like if the Bush tax cuts for high earners expire, but the rest of the budget is business-as-usual: "fixing" the AMT and Medicare doctor reimbursement rates, easing the cutbacks made by ObamaCare, and otherwise acting the way we've acted for the last decade:
This is obviously not sustainable. And much of it is simply driven by the growing ratio of retirees to workers, requiring ever-more Social Security and Medicare dollars to sustain them.
That's why I think it's a terrible idea to juxtapose the Bush tax cuts for the wealthy and Social Security in a graph that implies that the costs are roughly the same size. Not just because they're not really equivalent--but because we don't have that money to spend. We're already assuming that we let those tax cuts go in 2012, and the budget picture is still a disaster.
Easing the budget pressure from Social Security is going to require finding new revenue, or new cuts to existing programs--we can't solve the shortfall with revenues we've already spent, any more than you can pay the mortgage with the check you sent to the electric company last week. And those revenues and cuts will have to be large. It is not helpful to imply otherwise. The American public is already unwilling to confront the actual costs of the programs it has. They don't need any more encouragement to push their heads ever deeper into the sand.
The revolutionary ideals of Black Panther’s profound and complex villain have been twisted into a desire for hegemony.
The following article contains major spoilers.
Black Panther is a love letter to people of African descent all over the world. Its actors, its costume design, its music, and countless other facets of the film are drawn from all over the continent and its diaspora, in a science-fiction celebration of the imaginary country of Wakanda, a high-tech utopia that is a fictive manifestation of African potential unfettered by slavery and colonialism.
But it is first and foremost an African American love letter, and as such it is consumed with The Void, the psychic and cultural wound caused by the Trans-Atlantic slave trade, the loss of life, culture, language, and history that could never be restored. It is the attempt to penetrate The Void that brought us Alex Haley’s Roots, that draws thousands of African Americans across the ocean to visit West Africa every year, that left me crumpled on the rocks outside the Door of No Return at Gorée Island’s slave house as I stared out over a horizon that my ancestors might have traversed once and forever. Because all they have was lost to The Void, I can never know who they were, and neither can anyone else.
In Cyprus, Estonia, the United Arab Emirates, and elsewhere, passports can now be bought and sold.
“If you believe you are a citizen of the world, you are a citizen of nowhere. You don’t understand what citizenship means,” the British prime minister, Theresa May, declared in October 2016. Not long after, at his first postelection rally, Donald Trump asserted, “There is no global anthem. No global currency. No certificate of global citizenship. We pledge allegiance to one flag and that flag is the American flag.” And in Hungary, Prime Minister Viktor Orbán has increased his national-conservative party’s popularity with statements like “all the terrorists are basically migrants” and “the best migrant is the migrant who does not come.”
Citizenship and its varying legal definition has become one of the key battlegrounds of the 21st century, as nations attempt to stake out their power in a G-Zero, globalized world, one increasingly defined by transnational, borderless trade and liquid, virtual finance. In a climate of pervasive nationalism, jingoism, xenophobia, and ever-building resentment toward those who move, it’s tempting to think that doing so would become more difficult. But alongside the rise of populist, identitarian movements across the globe, identity itself is being virtualized, too. It no longer needs to be tied to place or nation to function in the global marketplace.
Deputy Attorney General Ron Rosenstein flew to Seattle for a press conference at which he announced little, but may have said a great deal.
Back in the fall of 2001, exactly one month after the 9/11 attacks, a lawyer in Seattle named Tom Wales was murdered as he worked alone at his home computer at night. Someone walked into the yard of Wales’s house in the Queen Anne Hill neighborhood of Seattle, careful to avoid sensors that would have set off flood lights in the yard, and fired several times through a basement window, hitting Wales as he sat at his desk. Wales survived long enough to make a call to 911 and died soon afterwards. He was 49, divorced, with two children in their 20s.
The crime was huge and dismaying news in Seattle, where Wales was a prominent, respected, and widely liked figure. As a young lawyer in the early 1980s he had left a potentially lucrative path with a New York law firm to come to Seattle and work as an assistant U.S. attorney, or federal prosecutor. That role, which he was still performing at the time of his death, mainly involved prosecuting fraud cases. In his off-duty hours, Wales had become a prominent gun-control advocate. From the time of his death onward, the circumstances of the killing—deliberate, planned, nothing like a robbery or a random tragedy—and the prominence of his official crime-fighting record and unofficial advocacy role led to widespread assumption that his death was a retaliatory “hit.” The Justice Department considers him the first and only U.S. prosecutor to have been killed in the line of duty.
A week after 17 people were murdered in a mass shooting at Marjory Stoneman Douglas High School in Parkland, Florida, teenagers across South Florida, in areas near Washington, D.C., and in other parts of the United States walked out of their classrooms to stage protests against the horror of school shootings and to advocate for gun law reforms.
A week after 17 people were murdered in a mass shooting at Marjory Stoneman Douglas High School in Parkland, Florida, teenagers across South Florida, in areas near Washington, D.C., and in other parts of the United States walked out of their classrooms to stage protests against the horror of school shootings and to advocate for gun law reforms. Student survivors of the attack at Marjory Stoneman Douglas High School traveled to their state Capitol to attend a rally, meet with legislators, and urge them to do anything they can to make their lives safer. These teenagers are speaking clearly for themselves on social media, speaking loudly to the media, and they are speaking straight to those in power—challenging lawmakers to end the bloodshed with their “#NeverAgain” movement.
Why the ingrained expectation that women should desire to become parents is unhealthy
In 2008, Nebraska decriminalized child abandonment. The move was part of a “safe haven” law designed to address increased rates of infanticide in the state. Like other safe-haven laws, parents in Nebraska who felt unprepared to care for their babies could drop them off in a designated location without fear of arrest and prosecution. But legislators made a major logistical error: They failed to implement an age limitation for dropped-off children.
Within just weeks of the law passing, parents started dropping off their kids. But here's the rub: None of them were infants. A couple of months in, 36 children had been left in state hospitals and police stations. Twenty-two of the children were over 13 years old. A 51-year-old grandmother dropped off a 12-year-old boy. One father dropped off his entire family—nine children from ages one to 17. Others drove from neighboring states to drop off their children once they heard that they could abandon them without repercussion.
Here are some readers with extra elements on this discussion—political, cultural, international. First, an American reader on the interaction of current concepts of masculinity and the nearly all-male population of mass gun murderers:
The path to its revival lies in self-sacrifice, and in placing collective interests ahead of the narrowly personal.
The death of liberalism constitutes the publishing world’s biggest mass funeral since the death of God half a century ago. Some authors, like conservative philosopher Patrick Deneen, of Why Liberalism Failed, have come to bury yesterday’s dogma. Others, like Edward Luce (The Retreat of Western Liberalism), Mark Lilla (The Once and Future Liberal), and Steven Levitsky and Daniel Ziblatt (How Democracies Die) come rather to praise. I’m in the latter group; the title-in-my-head of the book I’m now writing is What Was Liberalism.
But perhaps, like God, liberalism has been buried prematurely. Maybe the question that we should be asking is not what killed liberalism, but rather, what can we learn from liberalism’s long story of persistence—and how can we apply those insights in order to help liberalism write a new story for our own time.
A new study explores a strange paradox: In countries that empower women, they are less likely to choose math and science professions.
Though their numbers are growing, only 27 percent of all students taking the AP Computer Science exam in the United States are female. The gender gap only grows worse from there: Just 18 percent of American computer-science college degrees go to women. This is in the United States, where many college men proudly describe themselves as “male feminists” and girls are taught they can be anything they want to be.
Meanwhile, in Algeria, 41 percent of college graduates in the fields of science, technology, engineering, and math—or “STEM,” as it’s known—are female. There, employment discrimination against women is rife and women are often pressured to make amends with their abusive husbands.
According to a report I covered a few years ago, Jordan, Qatar, and the United Arab Emirates were the only three countries in which boys are significantly less likely to feel comfortable working on math problems than girls are. In all of the other nations surveyed, girls were more likely to say they feel “helpless while performing a math problem.”
The president’s son is selling luxury condos and making a foreign-policy speech.
Who does Donald Trump Jr. speak for?
Does the president’s son speak for the Trump Organization as he promotes luxury apartments in India? Does he speak for himself when he dines with investors in the projects? Does he speak for the Trump administration as he makes a foreign-policy speech in Mumbai on Friday?
“When these sons go around all over the world talking about, one, Trump business deals and, two, … apparently giving speeches on some United States government foreign policy, they are strongly suggesting a linkage between the two,” Richard Painter, President George W. Bush’s chief ethics lawyer who is a professor of law at the University of Minnesota, told me. “Somebody, somewhere is going to cross the line into suggesting a quid pro quo.”