Category Archives: Economics

Obamacare stubbornly not ruining country

Ezra Klein has an article up talking about Obamacare’s surprising success. Not just about the fact that it hasn’t been a disaster yet, but that it’s actually been more successful than even the more optimistic forecasts called for.

A new report from the Kaiser Family Foundation finds that in seven major cities that have released data on 2015 premiums, the price of the benchmark Obamacare plan — the second-cheapest silver plan, which the federal government uses to calculate subsidies —  is falling.

There are, of course, some caveats. This is just initial data, and the decrease is incredibly small. And the CBO warns that it doesn’t expect it to continue. None the less, it is part of a trend of data that is better than anticipated.

Krugman weighs in too, and I think he has a really good point. A year ago there was general pessimism about the ACA. The idea that it would be successful was not widely held, and most conservatives would have been incredulous at the mere suggestion. Krugman points to John Cochrane and The Hill, and they were hardly the worst. Yet here we are, with data on the ACA stubbornly refusing to look bad. I wish more conservatives were asking why.

Maybe more importantly, I wish this would be a hit to the credibility of the people who were so frantically warning of disaster. They weren’t just wrong, they were spectacularly wrong. It really should make people wonder what else they’re wrong about.

Because it’s not like this is an isolated issue. Many of the same people who were wrong about this have been wrong about a host of other economic and political issues lately. From the last presidential election when conservatives were surprised by the utterly predictable results, to inflation which has miraculously stayed low, to the ACA which hasn’t ruined healthcare or America yet. Any of these things in a vacuum would be reasonable enough to ignore. But I hope that at some point this pattern of making predictions that turn out to be completely untrue will shake their listeners faith in them. Because at this point it’s clearly not just an isolated mistake, it’s something more fundamental, something about their entire approach that makes them unable to see when they are wrong.

Ferguson, Racism, and Economics

I’ve been following circumstances in Ferguson with a lot of interest, but I’ve been reluctant to comment much on it. Admittedly, this is largely because I’m not comfortable talking about racism. But that discomfort is, in large part, what allows systemic racism to thrive. As Martin Luther King, Jr. said:

And it may well be that we will have to repent in this generation. Not merely for the vitriolic words and the violent actions of the bad people, but for the appalling silence and indifference of the good people who sit around and say, “Wait on time.”

I think it’s worth noting how strong that impulse to slow down is, even now. Maybe especially now. An example from the NYT:

Possibly the most widely held sentiment among whites is the hope that it all simply goes away. “I feel for everyone involved,” said Shannon Shaw, a jeweler in Mehlville. But, she added, “I think the protesters just need to go home.”

In America race and class issues are completely intertwined. Look closely enough and you can see one or the other, but it’s impossible to take a broader look at one without seeing the other. In a recent article in Time, Kareem Abdul-Jabbar wrote:

Of course, to many in America, being a person of color is synonymous with being poor, and being poor is synonymous with being a criminal. Ironically, this misperception is true even among the poor.

Why is that? As the civil rights movement progressed, overt racism became socially unacceptable. But people didn’t change as fast as society, so many people silently held on to racist beliefs, feelings, and attitudes. And of course that racism still came out in public, just more subtly. Racist statements would be vague enough that if challenged there was plausible deniability. Perhaps the least subtle example of this is economics, where the language of race was often simply replaced with class. Instead of talking about black people politicians would talk about the poor, or the inner city, or urban culture.

This had two effects. One is that it created a kind of code. People could once again express overtly racist ideas but still maintain plausible deniability. The other effect was both more subtle and more harmful. People who heard these statements but didn’t recognize their intent took them at face value, sometimes accepting the idea that the poor are, essentially, an inferior race. Even the people who were using class as code started to internalize the idea that race and class were interchangeable.

Lately, looking at the coverage of the events in Ferguson, I think the most striking difference between the protesters and their critics is the scope of the issue. The critics say that we can’t know what happened, that we must wait and find out if the shooting was justified. But this is to entirely misunderstand the protesters. Michael Brown’s death is a symbol to them, and regardless of what happened in the moments before his death they will still feel as powerless and abused as before. The problem isn’t any individual incident, it is the attitudes and the patterns.

If you are unconvinced, look at nearly any decision by the police and government since the shooting. More than a lack of respect, they have shown disdain for the community. From the repeated decision to use tear gas on peaceful protesters to the arrest of journalists to the imposition of curfew, at every turn the police have chosen to treat the community as an enemy.

Which brings me to my final point: escalation. I feel like that is the key theme that runs through all of the problems that have hit the news in Ferguson. Not just since the death of Michael Brown, but before it too. The authorities seem to welcome the chance to escalate situations, to the point that very few of the people in power seem to even see any other options. It creates a cycle of escalation.

tldr: The Pitchforks Are Coming…

This article by Nick Hanauer is pretty cool. Presented as a letter to fellow zillionaires, he talks about wealth and politics and inequality, and he warns that the current situation is unsustainable. He expects that if current trends continue we’re heading for a French style revolution. And he suggests that using the minimum wage as Seattle has, to empower workers and consumers, is the best way to fix the problem. It’s a good read.

It’s also pretty long, so I wanted to highlight a few pieces that caught my eye:

We’ve had 75 years of complaints from big business—when the minimum wage was instituted, when women had to be paid equitable amounts, when child labor laws were created. Every time the capitalists said exactly the same thing in the same way: We’re all going to go bankrupt. I’ll have to close. I’ll have to lay everyone off. It hasn’t happened.

This one struck me for it’s clear (intentional?) similarity to Atlas Shrugged. There are countless examples of the wealthy threatening to “go Galt.” There are few, if any, examples of it actually happening. It’s a fantasy.

The most insidious thing about trickle-down economics isn’t believing that if the rich get richer, it’s good for the economy. It’s believing that if the poor get richer, it’s bad for the economy.

I don’t think I’d ever noticed before that this was an implication of trickle down economics. There’s an implicit claim that when the non-rich succeed (as a class, not as individuals) it is harmful to the economy. Likely most proponents of trickle down economics would object, would say that they don’t mean that. They’re right that they’d never say they want a large class of working poor, but it is an expected, maybe even necessary, element of the economic system they champion.

In order for us to have an economy that works for everyone, we should compel all retailers to pay living wages—not just ask politely.

That the minimum wage exists at all is testament to it’s necessity. Asking isn’t enough, if it were we wouldn’t need a law in the first place. We should spend a lot more time and effort figuring out what the optimal level for it is, and we should be careful not to listen to those who don’t think it should exist in the first place.

The only way to slash government for real is to go back to basic economic principles: You have to reduce the demand for government. If people are getting $15 an hour or more, they don’t need food stamps. They don’t need rent assistance. They don’t need you and me to pay for their medical care.

This is a fantastic way to present this idea. I’m not sure it’s completely new, but I’ve never seen it presented quite this way, and it’s very insightful. And hopefully putting it in those terms will help conservatives to better understand it. Welfare exists, and will exist, as long as there are no alternatives. People will be much less defensive of welfare programs if they actually can get a job that supports their family.

I look at the average Joe on the street, and I say, “There but for the grace of Jeff go I.”

(Jeff, as in Bezos, founder of Amazon) This is one of the big tipping points for me, about capitalism and fairness and taxes and the entire idea of laissez-faire economics. Nick isn’t a billionaire because he worked hard. He did work hard. But he also worked less hard than a lot of people who aren’t rich. And he isn’t a billionaire because of his hard work: he’s a billionaire because of Jeff Bezos.

Another tax day

If you’re upset about how difficult taxes are (and I think you should be) don’t blame the IRS.

Blame business lobbies, like Intuit. NPR:

Intuit has spent about $11.5 million on federal lobbying in the past five years — more than Apple or Amazon. Although the lobbying spans a range of issues, Intuit’s disclosurespointedly note that the company “opposes IRS government tax preparation.”

Blame anti-government activists like Grover Norquist. Forbes:

A simpler, less onerous tax system would presumably make people feel better about the government, and that is the last thing Grover and his fellow travelers want.

Blame Congress. After all, tax reform is their job, and they’re the only ones who can do it. Our difficult, complex tax system isn’t the inevitable effect of government or bureaucracy. Tax reform has happened before, and it could happen again.

The primary difficulty isn’t anything inherent in taxes, it’s the combination of powerful lobbies with a vested interest in a difficult tax system and partisan divides in Congress preventing a real effort to achieve reform. And, in no small part, it’s also the fault of cynicism on the part of voters, who don’t demand effective reform because they don’t think it’s realistic.

Losing or leaving a job?

While they may sound the same, there is a substantial difference between “reduction in the supply of labor” and “Americans losing their jobs.” The first statement is something brought up in the latest CBO report. But many Republicans are using the second phrase to describe it.

The most basic difference between the two is that a person cutting back from full-time to part-time will create a “reduction in the supply of labor,” but obviously is not losing their job. More importantly, though, the report is referring to people who choose to work less, not those who are offered less work by their employer. Obviously, this is important. Rather than evidence that healthcare reform is the disaster Republicans have been hoping for, it’s evidence that healthcare is doing what it was intended to.

Let me explain. We had a system where health insurance is connected to full-time work by both group bargaining and tax incentives. So people with healthcare needs didn’t just need money to buy health insurance, they needed a job that provided health benefits. For example, a young couple has two full-time jobs. One wants to reduce their hours to take care of kids, but their spouse’s job does not offer health benefits. Or consider a person near retirement who keeps working because they wouldn’t be able to get health insurance if it wasn’t provided by their job.

The ACA (Obamacare) allows people buying insurance for themselves benefits similar to those provided by a job. The result is people who were working full-time only for health insurance are now free to reduce their hours or retire. Those are the people the CBO report is talking about when it talks about reduction in the supply of labor. And that’s why it’s a good thing. People being trapped in full-time jobs only because there was no other way for them to receive healthcare was a problem. It’s a good thing that it is being fixed, and the huge number of people changing their work status is evidence not that Obamacare is hurting people, but that this problem was larger than we realized, and fixing it is helping more people than expected.

Also, as noted here by Politifact, this effect of allowing people to retire or reduce hours will create room for the long term unemployed and those who have given up on working to get jobs. Which makes sense. We are still in an economy with more job seekers than jobs, so allowing people to work less if they want to will mean more available work for those who are looking for it. That means that in the next few years this effect will likely aid recovery; it will only start to reduce GDP after unemployment has improved.

Or, to put it in economic terms, this is a reduction in the excess labor supply. It may even help counterbalance the insufficient demand for labor.

Why the apathy about unemployment benefits?

Just a few weeks ago Congress let long term unemployment benefits lapse. Now, the Senate is attempting to restore them. The Republicans in the House look likely to try to prevent that. On the legislative side, it seems the most common objection is a lack of funding. I’m sympathetic; given how long the program has persisted it’s not unreasonable to want to provide funding for it. But unless Republicans actually propose a funding method that objection just functions as an excuse. It’s a way to end unemployment benefits without admitting that they wanted to.

Meanwhile, the Obama administration is pushing to make this a major issue as part of their effort to focus on inequality. As far as I can tell, it doesn’t seem to be getting much traction with average people. I think it should. Let’s remember the context we’re in.

About six years ago now there was a massive financial catastrophe, and many people lost their jobs through no fault of their own. Ever since then jobs have been scarce, and people have been forced to take jobs outside of their field, work part time instead of full time, retire, or perpetually look for work. There is systemic bias against the unemployed, making it much harder for those who didn’t immediately find work to get a job.

Unemployment is still elevated. That is to say, since the crash we have not created enough jobs to employ all the people who lost them. So if long term unemployment insurance is lifted, what do we expect the people still on it to do? Remember, as long as there are more people looking for work than there are new jobs unemployment will remain a zero sum game. Trying harder might get one person a job, but it will come at the expense of someone else’s job. There is literally nothing the unemployed can do to reduce unemployment.

So there will be people who are unemployed and looking for work but will not be able to get it. What do we expect them to do? I see no reasonable answer to this question, which is why I’m so confounded by the apathy on this issue.

Why are taxes so important?

Ezra Klein recently made a really good post offering a different approach to the grand bargain Obama has been chasing his entire presidency. It’s a great idea, but one section in particular stuck out to me.

To put it plainly, Democrats aren’t going to persuade Republicans to lift sequestration in return for a mix of entitlement cuts and tax increases. It doesn’t matter that those tax increases will come in the form of ending certain tax breaks. It doesn’t matter that Paul Ryan’s budget said these tax expenditures are “similar to government spending.” It doesn’t matter that raising taxes on the rich is popular.

At this point, the Republican opposition to taxes has nothing to do with policy. It has nothing to do with the economy. It’s religion. It’s dogma. It’s identity. Refusing to raise taxes is what it means to be a Republican in this day and age.

That’s certainly consistent with what I see, and I don’t understand it. That bothers me. I was a party line conservative until about 2006. Even where I disagree with them, I’m used to understanding the conservative perspective. But on this point that’s long gone. Keeping the government’s income from going up seems to be the line in the sand, the one issue that all Republicans agree is top priority. From a technical standpoint this makes no sense, and from a political standpoint I don’t understand why low taxes seems to have overshadowed everything else.

I don’t have a point to make here, I’m just lost on this one. Can anyone help me out?