Obama

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Crying Wolf

I must admit that I find it difficult to take the current stand off between the White House and Congress over immigration too seriously. Unfortunately we are all too accustomed to the lunacy of watching as the far right dictates to its erstwhile more centrist brethren, and then has to capitulate at the last moment when the enormity of the imminent calamity they tried to provoke scares the living daylights out of everyone.

It’s a childish and stupid game. But they keep on repeating it. Aren’t we all taught that the repeated crying of wolf ends up badly?

It is one thing to object to Obama’s use of an executive order to start fixing our immigration system, it is another entirely to threaten to shut down swathes of government unless he relents. The two are not related.

It is an especially unique aspect of the American legislative process that any bill passing through the halls of Congress can be laden with amendments that have absolutely nothing at all to do with the original bill’s objective. A transport bill can, for example, be used to defund a social program.

Thus a bill to fund to the Department of Homeland Security’s budget, a perfect try routine activity, and one that seems quite important given the DHS’s mandate, can have an amendment attached to it undoing Obama’s executive order on immigration.

What is extra galling about the problem is that legislation to fix the immigration system has been pending in the House for months. It has already passed the Senate. Further: by all accounts it would pass in the House with some ease. Why? Because the Democrats would support it along with enough Republicans. It would, in other words, be a genuine piece of that very rare artifact: bipartisan legislation.

Which is what offends the Republican leadership and thus they refuse to bring the legislation to the floor for a vote. They want to focus only on bills that garner votes from their entire caucus. They don’t want to appear to have to rely on the Democrats to fend off the objections of far right.

So the country is plunged every so often into these absurd and childish last minute panics.

This time we have the prospect of one of our primary government departments grinding to a halt because the Republicans cannot persuade their own far right to debate immigration on its merits rather than through this backdoor blackmail process.

We have been here so many times in the last few years that I have stopped paying attention. Every repetition of the circus undermines the standing of Congress with the public. It accelerates our loss of confidence in our government. It underlines just how deep the divisions in Congress go, and how dysfunctional the entire system of government has become.

Anyway, I read today that Mitch McConnell is trying to call time on his own party’s blackmail efforts. Don’t forget he boldly stipulated, in the afterglow of the Republican’s big win in the last elections, that the days of blackmail were now over. The Republicans, he said, would now govern.

Alas, nothing has changed. The Republicans have launched no new major legislation, and don’t seem to be in a hurry to get going on any either. And now they have reverted to their silly games.

I suppose we ought to give them time to grow up.

Meanwhile we just have to hope that these days of crying wolf don’t end with a real wolf rampaging through our economy. Because, frankly, we probably wouldn’t notice.

After all, when was the last time Congress paid attention to anyone but the big donors who pay for the elections, and the lobbyists who control the writing of the legislation they all vote on down there?

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Infrastructure [Non]Spending

Apparently one of the very few areas of likely cooperation between the White House and our newly energized all-Republican Congress is spending on our lamentable infrastructure.

I am sufficiently cynical that I doubt we will see much more than a great deal of handwringing and posturing before the two sides retreat back into their well prepared and long occupied trenches. The White House will want a major federal initiative, whilst the Republicans will want a series of smaller and state run initiatives.

There is a very small glimmer of hope: Paul Ryan who now heads the appropriate committee in the House has suggested a rise in the gasoline tax which is still a primary source of funding for road maintenance. The federal gas tax has not been raised since 1993 and so still stands at a paltry 18.4 cents per gallon (4.86 cents per liter). It produces an equally paltry $25 billion a year, of which about 60% goes towards highway and bridge construction. The revenue from the gas tax, and the associated tax on diesel, flows into something called the Highway Trust Fund which was set up in 1956 to carve out funds specific to road and bridge construction. Prior to that all the necessary funding came from the general fund.

Given the American predilection for driving and the consequent political sensitivity to gasoline prices, it has been practically impossible to raise the needed funds from taxes to keep our roads in good order. Indeed by late summer 2014 the Highway Trust Fund had run out of cash and was having to be propped up out of general revenues.

Thus Ryan’s sudden conversion to the need for a tax increase.

The problem is that our infrastructure issues run deep and wide. In effect the US has not invested sufficiently in its basic infrastructure for over seventy years. The last true burst of construction was during the Great Depression, the legacy of which we still see around us in the form of old, but still functioning, bridges, roads, dams, and tunnels.

The Eisenhower initiative to build highways was a temporary break within this seventy year period of chronic underinvestment, but it merely added to the infrastructure that now needs upkeep.

Every four years the American Society of Civil Engineers publishes a national report card summarizing the dilapidated state of the nation’s infrastructure. The latest report dates from 2013. It makes grim reading. Here are the grades the ASCE issued:

  • Ports: C
  • Energy: D+
  • Aviation: D
  • Dams: D
  • Drinking Water: D
  • Hazardous Waste: D
  • Roads: D
  • Public Transit: D
  • Wastewater: D
  • Inland Waterways: D-
  • Levees: D-
  • Railways: C+
  • Bridges: C+
  • Solid Waste: B-
  • Overall: D+

It’s very hard not to get depressed when you read the ASCE report. Private commerce depends on public spending to provide it with the roads, ports and so on through which that commerce flows. Yet America has deliberately allowed its infrastructure to deteriorate. It has lived off the investment of past generations and has deprived future generations of the kind of world class infrastructure they will need in order to compete properly.

It is an astonishing breakdown of civic responsibility. All the more so now that we could raise the funding to repair and replace where needed at historically low interest rates. Far from ‘burdening’ the future with more debt – a highly dubious concept to begin with – we could be empowering them with the basic structure they need to support healthy economic growth.

Instead we have decided to hobble them with rottenness. Presumably this is because we are radically tax averse and have allowed the link between taxes and government investment to break down in our political discourse. The ‘starve the beast’ mantra of the extreme right, whilst it was intended as an attack on entitlement spending has morphed into a general attack on all government spending, even the kind of spending that undergirds the economy. The result being decades of neglect of the very basis of commerce.

But here we are: a small, but possibly significant, step in the right direction. Will Ryan come through? We will have to wait to see.

In the mean time we ought to reflect on some of the ASCE’s statistics. The average age of our 84,000 dams is 52 years. One in nine of our bridges is structurally deficient. The average age of our 607,380 bridges is 42 years. And fully 45% of all American households have zero access to any form of public transportation – so much for our chances of reducing our dependency on oil!

One more thing: that $25 or so billion a year the gas tax brings in pales into irrelevance beside the $3.6 trillion the ASCE estimates we need to spend by 2020 to correct all the deficiencies it has identified.

And that’s the source of my cynicism. Do we really expect a Republican run Congress to undertake or fund programs of that magnitude? Of course not. All we can expect is a public relations campaign and a small amount of funding in order that they can claim to have done something

We can guarantee that the ‘something’ will be nowhere near enough.

Addendum:

On a personal note: the railway that links New York City with Albany is a prime example of neglect and deficiency. The approximately 140 mile distance takes about three and a half hours to cover. Amtrak, the service provider, doesn’t even own all the right of way so its ‘high speed’ service periodically has to give way to slow moving and very long cargo carrying trains. As an inter-city transport link it is an embarrassment. Just for reference we should recall that top speeds of around 60+ miles per hour were frequently achieved in the mid 1800’s. America’s railways have regressed rather than progressed since then.

 

 

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Health Care Reform Costs – Fact or Fiction?

Oh dear. I think I’ve just wasted a morning. Here’s the story: a friend of mine points me to an article in the New York Post by someone called Paul Sperry. I don’t read the Post, so I have no idea who that is. The article turns out to be the usual far right series of complaints about Obamacare. This one is almost a perfect  summary of all them. So I thought I would get into the details and try to understand the epic grumpiness of it all. Anyway, one full morning later all I have learned is that highly selective statistics, cheeky calculations, and some outright fibbing are all it takes to get published in the NY Post.

But I knew that anyway. Hence the waste of time.

Since I’ve done the work here’s the result.

Perry starts early with the notion that 20% of fourth quarter GDP growth came from health care, and that the majority of that was Obamacare subsidies.

Well, he’s kind of right. He obviously read the Bureau of Economic Analysis news release from last week. On page 7 it breaks the economy down and gives the contribution that each category made to the headline 2.6% growth. Down there on line 17 we find that health care spending contributed 0.51% of that 2.6%. Some simple arithmetic tells us that .51 out of 2.6 is around 20%.

Thus Perry is correct for total health care. Just for reference, the health care contribution in the first quarter of 2014 was -0.16. Those quarterly numbers tend to jump about a bit. The BEA report doesn’t break out the Obamacare subsidy effect though, so we have no way of telling what share it contributed. So Sperry’s throw away comment that ‘the majority of that spending was taxpayer-funded subsidies from Obamacare’ is entirely unsubstantiated in the report. For all we know Sperry just made that up

He probably did. He needed to. Because his next sentence is one he wants to emphasize:

“In other words, the stimulus never ended”

Really?

I assume he is referring to the stimulus of the early crisis years. The one that has completely ended.

We can check that by using the same table on page 7 of the same report. On line 53 it helpfully tells us the contribution of Federal budget spending on the same headline growth figure of 2.6%. It turns out to be -0.54%. In other words, not only did the stimulus vanish, but the Federal budget is now acting as the complete opposite. It is a drag in GDP, it isn’t a stimulus at all.

But let’s not allow facts to ruin the story.

So we move on.

Next Sperry alerts us to the fact that:

“Health care is what Americans are spending most of their money on today – far more than they spend on housing and utilities combined ..”

OK. Let’s take a look.

The very next page of our BEA report gives us the details. Line 2 tells us that personal consumption expenditures in the fourth quarter were $12,112.3 billions. And on line 17 it tells us that health care spending was $2,034.3 billions. Now, I agree that’s a lot of health care spending, but it isn’t ‘most’ of total spending – it’s only 17%.

Handily on the line above health care spending we find the details for housing and utilities. It happens to have been $2,188.6 billions. So how can Sperry say that health care spending was ‘far more’ than housing and utilities, when it was actually less? Beats me.

But let’s not forget: he’s trying to tell us a story.

Next he’s on to arguing Obama misled us all in his State of the Union speech by ignoring that:

“… health care accounted for a whopping two-thirds of the uptick in consumer spending and much of the overall economic improvement.”

That’s terrible. If it’s true. Is it?

Well. No.

Here are the facts: personal spending grew $110 billions in the fourth quarter. Health care spending grew $26 billions. So health care accounted for 24% of the growth, not ‘a whopping two-thirds’. Where he came up with that whopper, I have no idea.

He doesn’t stop. He sweeps on by the Congressional Budget Office estimate that Obamacare enrollment will rise to 34 million people by 2016, and launches his next missile: health care spending will continue to outpace GDP growth over the next few years.

Yes it will. At least according to the Government actuaries projecting Medicaid and Medicare costs, which is where, I think, he gets his numbers. he uses a forecast of 6.1% annual growth in health care spending between 2016 and 2023 – he calls that ‘whopping’ too. According to the CBO the economy will grow about 4.2% a year over that same period [not adjusted for inflation].  Sperry wants us all to believe this faster rate in health care spending is due to the evils of Obamacare, so he neglects to tell us that the more important factor is the upcoming bulge in the number of retirees qualifying for Medicare. That plus the expected rising cost of medical services are the greater source of growth than Obamacare. At least to the same ‘government actuaries’ that Sperry appears to be quoting.

Let’s not worry about this though. Sperry’s story beckons.

And here we are getting to the nub of his article:

“Over time, higher taxes and spending act as a drag on the economy, crowding out private investment. Almost 90% of Obamacare users get federal aid. As a result, a new CBO report projects Obamacare subsidies will balloon to nearly $2 trillion over the next decade, only partially paid for by the more than $640 billion in taxes and fines, which means more government spending and more upward pressure on interest rates.”

That’s quite a mouthful. Let’s unpack it slowly.

First we get the usual criticism of deficit spending: it will ‘crowd out’ private investment. Maybe if the economy was running at full tilt, and its arguable even then. But whilst we are still in crawl-out-of-the-hole mode it is very much not true. The government can’t crowd out something that doesn’t want to exist.

Second, we hear that 90% of all Obamacare ‘users’ get federal aid. Well, duh! The entire operation is targeted at people who are poor and who cannot afford health care without some ‘aid’. There’s no news in this.

Third we see the CBO estimates for subsidies and taxes. The numbers Sperry gives us come straight from the CBO report on page 117. They are for the entire period 2016 – 2025. They are: costs of $1,993 billions, offset by $644 billions of revenues, producing an apparent budget loss of $1,349 billions. Never mind that the CBO warns us that these estimates are in the process of being revised, and that they don’t take into account the CBO’s more recent estimates of the economy in general. So Sperry is being correct, but the CBO wants us to put an asterisk against the numbers.

Lastly comes the consequence: this extra spending will put upward pressure on interest rates. Possibly. Possibly not. That rather depends on a host of other factors. And need I remind you that we have just navigated five years or so of vastly expanded deficit whilst interest rates have been near zero. The connection between government spending and interest rates, if it ever existed, has been non-existent during the crisis.

Wait, there’s more: we next are pointed towards a University of Chicago professor – Casey Mulligan – who has calculated that Obamacare will damage growth because it costs jobs and slows productivity growth.

Let me ignore my normal aversion to anything produced by the University of Chicago and pretend that Mulligan has done serious research. Sorry, that doesn’t work. He hasn’t. He has cherry-picked the data in order to ‘prove’ the usual Chicago point that government is a very bad thing. I don’t think I ought to spend much time on Mulligan. He has been a star for the far right since he started to publish analyses building off of the CBO report of last February. In that report the CBO highlighted the effects that Obamacare would have on the supply of labor. Specifically the CBO pointed out that many low wage workers keep a job not because they want to work, but because they need health insurance. To the extent that health care reform such workers now have the choice of opting out of work. Additionally, some full time workers might now choose to drop down to part-time employment for the same reason.

The upshot of this supply impact is that there will be a slight drop in the employment to population ratio, and slight drop in the hours worked. Both these would normally have the effect of slowing GDP growth.

The question that Mulligan sweeps imperiously past, is exactly how do we estimate this impact given that we have no reliable history?

Let me not dwell on it. Both Paul Krugman and Paul Gruber have demolished Mulligan. I see no need to pile on.

Besides, my target is Sperry.

So, back to his article.

After our detour through the Mulligan maze, we are told that there has been a large decline in adult employment measured as a ratio as the adult population. Apparently:

“[it] is at an alarmingly low 44%. In fact, ‘The number of full-time jobs as a percentage of the total population is the lowest it’s ever been,’ Gallup CEO Jim Clifton warns.”

That 44% number is sourced from the Gallup polling organization. It measures the number of people who say they are employed at least 30 hours as a percent of the total population over 18 years old.

The problem is that the total population figure includes retirees – people who don’t want work anymore. This renders it rather meaningless. As the population ages we ought to expect that the Gallup metric would produce ever smaller percentages. This is a familiar issue and has nothing to do with health care reform. Then there’s the issue I have with Clifton’s statement [as quoted by Sperry] that the Gallup metric is now at its lowest in history. It isn’t. The equivalent figure for January 2014 was 42%, and it was 41.7% in January 2011. Oh, and the ‘history’ for this particular measure is since 2010, when Gallup decided it could make a buck by producing an alternative to the official numbers for its right wing clientele.

By the way: Clifton has withdrawn his more aggressive statements. Apparently Sperry sees no need to update us on that.

Phew. We are nearly there.

Let’s leave aside the comments about part time work. It’s clear that health care reform is having an effect: many employers are cutting hours per employee to below 30 per week because that allows them to avoid paying for insurance. This is the infamous ’29-er’ problem the right wingers keep on about. They never seemed to care about the long term trend towards reduced hours before, but now it is a national disgrace. I agree. Employers ought to be taken to task for such a transparent effort to avoid providing their employees with basic health care coverage.

Sperry, however moves on quickly to one last zinger: Obamacare also depresses wages. The source? A recent poll conducted by the national Federation of Independent Businesses. That poll tells us that, of 900 firms polled, 26% have held wages flat because of the added costs of Obamacare.

Umm. That means 74% didn’t. So the vast majority of businesses have not adjusted wages despite having a higher cost. I would have thought that would be the real news.

Further, the long term and very large run-ip in health care costs, especially private insurance costs, are a major reason why wages have been flat for years. This issue existed long before Obamacare. As long as health care is viewed as some sort of optional ‘benefit’ to workers its cost will always enter into the total compensation calculations run by business. If that cost is rising rapidly, as it has for a decade or more, there will be less left to pay workers a wage increase. And since private health care insurance costs are expected to rise more quickly than public costs are, the wage/benefit trade-off is more pressing outside of Obamacare than it is within.

OK. That’s it. As I said I wasted a goodly amount of time on this.

In sum: people like Sperry, and Mulligan for that matter, make no attempt to inform the public or to undertake balanced research. They are single minded in their efforts to create a false aura around Obamacare in order to undermine the public’s support for it.

That’s a shame because we need to improve the reform and learn from its weaknesses. To do that the public needs good, not distorted, information. Clearly the New York Post sees no need to provide such information. It prefers to bend the truth as far as it can. And, periodically, fib.

One last thing: lost in all this is any reference to that fact that our society now has far fewer uninsured people that it ever did. That was the reform’s big objective. It has succeeded.

So, to that extent, reform’s opponents have lost the battle.

Good.

 

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Obama-itis

I have a friend who is incapable of saying anything against Obama. It is truly astonishing. He loves Obama’s budget proposals. I hate them.

Right now the media is awash with breathless articles arguing that Obama has a great opportunity to ‘do a deal’ with the Republicans. After all he is now ‘concerned with his legacy’, and the GOP is, apparently, suddenly concerned that it has to do something vaguely constructive in order to look responsible in 2016. It’s their only hope of winning – to look like a responsible party! Who knew?

This marvelous confluence of short term desires is a perfect storm for those professional Kremlin watchers who misinterpret the minute details of Washingtonian infighting as some sort of geopolitical grand strategy.

Surely, they say, we can all break the dreaded Washington deadlock now. The time for progress has arrived!

Really?

Let’s keep this short.

A major plank in Obama’s budget proposal is that he is willing to trade a major tax break for big business in return for a one time windfall tax on foreign earnings they repatriate. The tax break being a heavy cut in the tax rate they incur going forward. For ever.

Where in here is a compromise?

It looks, to me, like a sell out. That foreign income ought to have been taxed anyway. And even though our corporate tax rate is very high by international standards, so are the tax wheezes and dodges that diminish that rate to next to zero when it comes to writing actual tax payment checks. Our biggest businesses pay hardly any tax. Why cut their tax rate? And why is it a ‘victory’ to get them to pay a tax they already owe?

I think that the allure of the faintest glimmer that we might invest something in our rotten infrastructure – which is what Obama is proposing that windfall corporate tax is used for – has confused my friend and his media buddies.

Think about it: we are so incapable of investing in essential infrastructure because of the pressure of right wing extremist opposition to all things governmental, that we have to lower – permanently – our revenue from taxes, in order to induce a modicum of sanity.

That is not compromise. It is capitulation.

As a nation these United States have become so dysfunctional and so beholden to right wing economic ideas that we radically underinvest in infrastructure. Our roads, ports, airports, railways, bridges, schools, and so on are decaying rapidly. Our internet services are deplorable and high cost. Our health care system sucks. We have spent the past three decades avoiding investment in order to give ourselves unsustainable tax cuts. We have gutted the future. We have deprived future generations of a world class base from which to compete.

We cannot fix it because infrastructure spending is an inherently governmental task, and ever since Reagan we have been led to believe that the government ought to be bled dry of cash. ‘Starving the beast’ has been the dominant right wing strategy since the old actor lied to us, and to this day the notion of raising taxes to pay for some of these services is an anathema to most voters.

So, in sallies Obama proposing to cave in on another battle front in order to appear above the petty fray.

With Democrats like him we don’t need Republicans.

But my friend persists in the adulation.

I have no idea why.

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2016 Here We Come – Or Is It 1980?

Here we go. The early speeches are being made. The media is getting breathless. Serious people everywhere are practicing their serious positions. The next presidential race is underway.

How many times will we be told that America has to face its ‘fiscal challenge’? By which, naturally, serious people always mean that we have to cut social spending because, obviously, we just can’t afford it.

Well it’s obvious to them.

It’s way too early to tell what issues will dominate the race – lots of war talk, and middle east confusion notwithstanding – but we are already getting a few hints.

Apparently the Republicans are terribly concerned over inequality, the decline in median incomes, and the generally dilapidate state of our middle class. Who knew they were so worried?

No one who has paid attention for the past three decades, that’s who.

Here’s a quote from a recent Jeb Bush speech:

“Six years after the recession ended, median incomes are down, households are, on average, poorer … and millions of people have given up looking for a job altogether … Roughly two out of three American households live paycheck to paycheck. Any unexpected expense can push them into financial ruin. We have a record number of Americans on food stamps and living in poverty. The recovery has been everywhere but in the family paychecks. The American Dream has become a mirage for far too many.”

This litany of disaster is, according to the Republicans, firmly and unequivocally Obama’s doing. It was him, they say, and his awful inattention to the middle class.

This sudden outburst of empathy for the 99% of Americans is, I imagine, a proactive effort to distract our febrile media and make sure that the Democrats cannot use inequality as a major electoral weapon. Not that the Democrats seem to have much of a position on anything. Yet anyway.

Anyone who has followed economic policy since Reagan launched his attack on the middle class will notice just how amazing this switch is. For thirty five straight years the Republicans have advocated policies based on the basis of orthodox economics – it’s a toxic mix of deregulation, neutering government, and steady diminution of social spending. The idea being that market magic will create enormous growth and that, equally magically, those self same markets will ensure wealth flows to those who ‘deserve’ it. It’s a great story. It has such a morally superior sound to it. Why on earth would we not go all in?

We did.

And it was shown to be the fallacious nonsense it always was.

Markets are unreliable to begin with. They are especially unreliable when they are twisted to favor a lucky and greedy few. Which is what deregulation fostered. In our case the lucky and greedy few being the 1% and the big corporations. They have certainly boomed under the rules set out by orthodox economics and the Republicans.

The middle class? Not so much.

In fact, I think it’s now pretty clear that those policies are the root cause of the middle class decline and the rise of inequality that the Republicans are now suddenly so worried about.

Hence the urgency of the need to divert attention away from the cause of the problem.

But, at least in the case of Jeb Bush, the Republicans can’t escape the pull of the allure of market magic, and, more precisely, the allure of protecting the 1%. Here’s what Bush said about Obama’s recent tentative attempt to change the tax rules on what are known as ‘529’ savings plans – the ones that allow tax advantages savings for college tuition:

“Just last month, he [Obama] thought it was a good idea to tax 529 college savings plans. Remember: 529s were created to be tax-free ways to save for college. Millions of people started them for their kids and grandkids … So it’s no surprise people hated the president’s idea. And he dropped it. But it was an instructive lesson in the liberal and progressive mindset.”

Well, well.

Whilst millions of people may have started such accounts, it is no secret that the people who benefit the most, as it is with all tax dodges, are the 1%. It is our already well off. Our well off and their kids raised such a stink when Obama proposed the tax change that he backed down quickly.

And, yes, it is an insight into our contemporary progressive mindset: there was not enough courage to cut an obvious giveaway to the rich.

Which means that as we enter the 2016 electoral cycle we have no one – as yet – who is truthfully committed to protecting the middle class.

In other words: expect lost of blather, misdirection, and nonsense, with very little actual action.

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