February 2017, Dean Baker

Mark WeisbrotThe Huffington Post México, 28 de febrero, 2017

Apparently the paper is confused on this issue since it headlined a front page piece on the budget, "Trump budget sets up clash over ideology within G.O.P." The article lays out this case in the fourth paragraph:

"He [Trump] also set up a battle for control of Republican Party ideology with House Speaker Paul D. Ryan, who for years has staked his policy-making reputation on the argument that taming the budget deficit without tax increases would require that Congress change, and cut, the programs that swallow the bulk of the government’s spending — Social Security, Medicare and Medicaid."

Most of us recognize Donald Trump and Paul Ryan as politicians who hold their jobs as a result of being able to gain the support of important interest groups. It really doesn't make much difference what their political philosophy is. Contrary to what the NYT might lead us to believe, this is not a battle of political philosophy, it is a battle over money.

On this score, the NYT also gets matters seriously confused. First of all, it is wrong to describe Social Security, Medicare, and Medicaid as "the programs that swallow the bulk of government spending." Under the law, Social Security can only spend money raised through its designated taxes, either currently or in the past. For this reason, it is not a drain on the rest of the budget unless Congress changes the law.

Medicaid would also not rank among the three largest programs. The government is projected to spend $592 billion this year on the military compared to $401 billion on Medicaid.

The claim that Paul Ryan is concerned that these programs would "swallow the bulk of government spending" directly contradicts everything Paul Ryan has been explicitly advocating for years. Ryan has repeatedly put forward budgets that would reduce the size of the federal government to zero outside of the military, Social Security, Medicare, and Medicaid. (See Table 2 in the Congressional Budget Office's analysis.) It is difficult to understand how a major newspaper can so completely misrepresent a strongly and repeatedly stated view of one of the country's most important political figures.

In 2010 Wisconsin elected Scott Walker as governor, a conservative Republican. At this time, Republicans also controlled both houses of Wisconsin’s legislature. Neighboring state Minnesota elected Mark Dayton, a liberal Democrat. Democrats also controlled both houses of Minnesota’s legislature. Both governors were re-elected in 2014.

The two governors took their states on diametrically opposed courses. Walker cut taxes and paid for them with cuts to spending in education and a number of other areas. He also deliberately confronted the state’s public sector unions. He prohibited contracts requiring that all the workers who benefit from a union contract pay for their representation, along with several other measures designed to weaken unions. Later he signed legislation applying the same restriction to private sector contracts.

Dean Baker
Truthout, February 27, 2017

Neil Irwin has a good piece this morning discussing the evidence on the economy's growth potential. As he points out, the key question is how much slack remains in the economy. The key issue in this debate is the extent to which we can expect employment to rise.

Most of the debate deals with the extent to which we can expect more people to enter the labor market. The current 4.8 percent unemployment rate is reasonably low by any measure. While it can go somewhat lower, that will not allow for much further expansion of the economy. The bigger question is the extent to which we should expect people who are not in the labor force, meaning they are neither working nor actively looking for work, to come back into the labor force if the job market improved. On this point, there is considerable debate.

The basic story is straightforward, if we focus exclusively on prime-age workers (ages 25–54), the labor force participation rates are close to 2.0 percentage points below pre-recession levels and 4.0 percentage points below 2000 peaks. Those who insist that we are near full employment argue that this is pretty much the best we can do and that these drops are permanent. Those like myself, who think we can do much better, argue that we should be able to return to past rates of labor force participation rates (LFPR) among prime-age workers.

In this respect, I would like to enlist the help of the ghost of forecasters past. The figure below shows projections of prime-age LFPR for men from the Congressional Budget Office (CBO) and the Bureau of Labor Statistics (BLS).

Source: CBO and BLS.

The first bar is a projection CBO made in 2000 for 2008. It projected a LFPR for 2008 of 90.9 percent. The second projection is also from CBO. In 2007 it projected a LFPR for prime-age men in 2014 of 90.5 percent. The third bar is a 2007 projection from BLS for 2016. It projected a LFPR for prime-age men of 91.3 percent. This compares to an actual LFPR last year of 88.5 percent, almost three full percentage points lower.

February 23, 2017 (Latin America Data Byte)

Mark WeisbrotOutras Palavras, 20 de fevereiro, 2017

As everyone knows, the fundamental principle of the Republican party is to redistribute as much income as possible from the rest of us to the rich. In keeping with this principle, Paul Ryan and the Republicans in Congress are pushing through a proposal to make workers pay larger fees on their retirement accounts. Unlike conventional taxes, which could be wasted on things like education or child care, these fees go directly into the pockets of the financial industry. This way people will be able to see the benefits of their fees in the form of expensive houses and cars for the bankers, as well as the folks going to expensive restaurants and flying first class.

The story here is a simple one. Few workers have traditional defined benefit pensions any longer. For most workers, 401(k) plans have not been an adequate replacement. They are unable to put much money into these accounts and much of the money they do put in is eaten up by fees charged by the banks and insurance companies that administer them. Furthermore, many people end up cashing out these accounts when they change employers, leaving little for retirement.

To address these problems several states are considering measures to allow workers to contribute to plans managed by the state. Illinois has a plan that is going into operation this year while California's will be up and running in 2020. Several other states are considering similar measures.

The advantage of these plans is that workers could keep the same account as they changed jobs. Also, the fees would be much lower, with state managed plans likely averaging fees in the range of 0.2–0.3 percent annually. This compares to fees averaging close to 1.0 percent in privately run 401(K)s, with some charging over 1.5 percent.

Dean Baker
Proceso, 22 de febrero, 2017