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Article Artículo

It's Monday and Robert Samuelson Wants to Cut Social Security and Medicare

Yes, once again Robert Samuelson stresses the urgency of cutting Social Security and Medicare. It's the usual pox on both your houses story, but as usual he leaves his thumb on the scale. In discussing the Republicans' proposals to save money by cutting spending, he says that their budget saves $2 trillion over the next decade (@ 0.9 percent of GDP) by repealing Obamacare. This is not quite right. The Republican proposal repeals the spending in the program, but leaves most of the revenue that paid for the spending in place. 

In making the case for cutting Social Security and Medicare he suggests raising the retirement age to 69 or 70 over 15 years. By comparison, in 1983 the normal retirement age was raised from 65 to 67 over a 40 year period, so Samuelson is proposing a very abrupt increase in the retirement age. (The increase from age 66 to 67 is being phased in over the years 2016-2022, so Samuelson's rise would overlap with this rise.) More accurately, this should be thought of as a cut in benefits of almost 20 percent over a 15 year period. In addition, Samuelson also wants to raise the age of Medicare eligibility to 69 or 70, implying large increases in health care costs for people between age 65 and 70.

The median retiree will have virtually no income other than Social Security in retirement. The average Social Security benefit is a bit less than $1,300 a month, yet somehow Samuelson views these cuts as being progressive. He does also want to cut benefits for "wealthier" retirees. In order to get any notable savings it would be necessary to have a cutoff for benefit cuts at around $40,000 of non-Social Security income. This gives a whole new definition to the term "wealthier."

Dean Baker / March 30, 2015

Article Artículo

Deflation Due to Lower Commodity Prices Is Not a Problem (Except to Commodity Producers)

For some reason economics reporters and economists seem to have a really hard time understanding deflation. There are two lessons for today. First, we get the standard lesson: crossing zero means nothing, the problem is too low a rate of inflation.

As I've written a few thousand times, inflation is an aggregate measure that combines price changes of hundreds of thousands of goods and services. When the inflation rate gets near zero it means that than many of the price changes are already negative. Going from a near zero positive to a near zero negative just means a higher ratio of negative price changes to positive price changes (or the negative ones are larger). How can going from 45 percent negative price changes to 55 percent negative price changes be a disaster? That makes zero sense.

Furthermore, since these are all quality adjusted price changes it may not even be the case that prices are actually falling for the goods themselves. The price index for new cars in the United States is less than 3 percent above its 1998 level, yet the average new car costs considerably more in 2015 than it did in 1998. The difference is that the Bureau of Labor Statistics (BLS) attributes most of the price rise to quality improvements. The story would be even more dramatic with computers where BLS reports that prices have fallen by more than 95 percent since 1997. Does anyone believe that an economy faces disaster just because its cars and computers are getting better?

Dean Baker / March 29, 2015

Article Artículo

Colombia

Latin America and the Caribbean

World

Child Rapes and “Sex Parties” by US Forces are Latest to Tarnish Plan Colombia’s Image

Plan Colombia has been on the lips of many U.S. officials lately, who tout the 15-year-old plan as a model to stabilize the country and promote human rights and transparency. This week, two new reports alleged sexual exploitation by U.S. security forces in Colombia, underscoring the detrimental (and hypocritical) role of Plan Colombia and U.S. military and police presence in the region.  

A report [PDF]released Thursday by the U.S. Inspector General (IG) investigating the DEA found that DEA agents stationed in Colombia allegedly had “sex parties” with prostitutes bankrolled by drug cartels. This follows last month’s even more alarming report, commissioned to inform peace talk negotiations, that revealed sexual abuse of more than 54 young Colombian children at the hands of U.S. security forces between 2003 and 2007.

According to the IG report, Colombian police officers reportedly provided “protection for the DEA agents’ weapons and property during the parties.” It also states that “the DEA, ATF, and Marshals Service repeatedly failed to report all risky or improper sexual behavior to security personnel at those agencies” and expressed concern at the DEA’s general delay and unwillingness to comply with the investigation.

While the sex party report has garnered a fair amount of media attention, the Colombian report of sexual abuse has gone largely unmentioned. (Fairness and Accuracy in Reporting points out that, although the claims in have received some international attention, there has been almost no coverage of the claims in the U.S. media.) That report was commissioned by the Colombian government and the FARC in an attempt to determine responsibility for the more than 7 million victims of Colombia’s armed conflict. It reported that U.S. military personnel sexually abused 53 young girls, filmed the assaults, and sold the footage as pornographic material. In another instance, a U.S. sergeant and a security contractor reportedly drugged and raped a 12-year-old girl inside a military base. The alleged rapists, U.S. sergeant Michael J. Coen and defense contractor Cesar Ruiz, were later flown safely out of the country, while the girl and her family were forced from their home after receiving threats from “forces loyal to the suspects,” as Colombia Reports described them.

CEPR and Eileen O'Grady / March 27, 2015

Article Artículo

The Real Rate of Recovery, Part 5: Long-Term Unemployment
Many media outlets cite the official unemployment rate—the Bureau of Labor Statistics’ U-3 unemployment rate—when reporting on the recovery in the jobs market. This rate stood at 5.0 percent in December 2007 (the first month of the recession) and rose to

Kevin Cashman and Nicolas Buffie / March 26, 2015

Article Artículo

The Rise of Discouraged Workers

My colleague Kevin Cashman and I recently released a new measure of unemployment called the "Jobless Rate". The "Jobless Rate" takes account of all Americans who say they want a job but are unable to find one. While the official unemployment rate for February was just 5.5 percent, the jobless rate stood at 9.3 percent.

CEPR and Nicolas Buffie / March 25, 2015

Article Artículo

The Economy, Like Arithmetic, Is Not Complicated; Even If Robert Samuelson Does Not Understand It

Robert Samuelson (sorry, he's not going to take advantage of my vacation) gets it badly wrong about the economy again. He began his Monday column by telling readers:

"The Federal Reserve is at a crossroads, and it doesn’t know where it’s going."

Really? The Fed doesn't know where it's going? How about Robert Samuelson doesn't know where it's going? 

It gets worse:

"There was a time when we were more confident. We didn’t pay attention to details, because the experts had matters in hand. During the Alan Greenspan era (1987-2006), the Fed was routinely seen as an economic superman. Its surgical shifts in the federal funds rate seemed to stabilize the economy: Expansions were long, recessions rare and mild."

Umm, no. "We" did pay attention to details. We yelled as loudly as we possibly could that there was a huge housing bubble that would sink the economy when it burst. Of course papers like the Washington Post did not pay attention to us because it did not fit their story that the Fed was an economic superman. Such nonsense was the conventional wisdom at the time and the paper did not want to give those who challenged the claim a voice. Now, it wants to pretend that people who understood the basic economics of the housing bubble, and the stock bubble before it, did not exist. 

And Samuelson gives us more error:

Dean Baker / March 25, 2015