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Article Artículo

Security Council Arrives in Haiti as New Electoral Commission is Announced

A United Nations Security Council delegation is set to arrive in Haiti beginning a three-day visit to discuss the ongoing political crisis in the country. Thousands of protesters, who have taken to the streets of the capital to call for the president’s resignation, planned to go to the airport to greet the visiting members.  On Monday, Haiti’s Foreign Minister, Duly Brutus addressed the Security Council in New York, asking for “the Security Council as well as all of our partners in the international community to continue to back the government” of President Martelly.

But the international community’s overt support for Martelly has already had a negative impact on the political crisis, as Jacqueline Charles of the Miami Herald reported earlier this week:  

The U.S. had hoped a last-minute deal brokered between Martelly and several opposition political parties would have allowed for lawmakers’ terms to be extended for up to four months, and an electoral law to be passed. But parliament dissolved before either measures could be voted after pro and anti-Martelly senators failed to show up to provide the necessary 16 member quorum.

Biden commended Martelly’s “efforts to reach a negotiated agreement,” while recognizing that he had “made several important concessions in order to reach consensus, and expressed disappointment that Haiti’s Parliament did not pass an electoral law before lapsing on January 12,” said the statement from the White House.

Hours before the signing of the deal, the U.S. Embassy issued a press release stating U.S. support for Martelly should he have to rule by decree. Many believed that statement, and later U.S. Ambassador Pamela White’s appearance in the parliament chambers on the night of the aborted vote, were deal changers that helped encourage senators not to show up. Both were widely condemned as un-welcomed interference in Haitian domestic politics.

Jake Johnston / January 23, 2015

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Workers

Ubernomics

In trying to push its case with the public, Uber decided to share its internal data with Alan Krueger, a prominent Princeton economist and former head of President Obama's Council of Economic Advisers. (Could this be part of Uber's dividend from hiring former Obama political adviser David Plouffe?) Anyhow, Kreuger finds that Uber drivers on average earn a gross premium of $6.00 an hour over the pay of drivers of traditional cabs. (He also had some rather unsurprising findings, for example that more people are now working for Uber after it expanded the number of cities in which it operates.)

The key issue here is the use of the gross premium rather than a direct earnings comparison. The difficulty, as the paper notes, is that we don't know the costs incurred by Uber drivers, who use their own car. (There is a good write-up of the study by Emily Badger in Wonkblog.) Depending on how much Uber drivers drive, they could still end up with less money than their counterparts in traditional cabs.

A useful piece of information is the cost of driving a car, which Badger's colleague, Andrea Peterson tells us is 57 cents per mile, according to the Internal Revenue Service. Well, this one seems pretty straightforward, if Uber drivers average more than 11 miles per hour, they are less well-paid than their counterparts working for traditional cab companies.

Krueger's study doesn't have data on miles traveled (this is strange, since Uber has this data, at least for the time that a paying passenger is in the car), but it does tell us that the median number of trips per hour is 1.3. We really would want the average here, since we are looking at an average wage pay difference. But if we take the 1.3 median number of trips per hour given in the study, then the average trip distance would have to be 8 miles or less for Uber drivers to come out ahead, assuming they did no unpaid miles.

This second assumption is of course obviously wrong. If an Uber driver take a rider 30 miles from downturn to a suburb, there is a good chance that they will be driving back with an empty car. Also, Uber drivers often cruise high density areas to try to be in line for a call. (This is my casual empiricism from asking the few Uber drivers I have been in contact with.) Anyhow, clearly total miles driven will exceed paid miles driven, which means that the average length of a ride would have to be considerably less than 8 miles for Uber drivers to come out ahead of drivers for traditional cabs.

There is one other item in this mix worth noting. The I.R.S figure of 57 cents a mile is a figure for a commercial driver. It assumes that this person has paid for the necessary licenses and insurance. Most Uber drivers have not paid for commercial licenses for themselves and their vehicles. Most probably also don't carry insurance that covers them for commercial driving.

Dean Baker / January 23, 2015

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George Will Thinks the Mortgage Interest Deduction Is Destroying the American Character

There may be some case here, but of course that is not what George Will is actually arguing. He is pulling numbers from outer space to tell a story of a run away welfare state. As he quotes that great welfare reformer of the past, Daniel Patrick Moynihan:

"the issue of welfare is not what it costs those who provide it but what it costs those who receive it."

Okay, none of us like to see healthy people in their prime working years scamming the rest of us rather than working. But in spite of Will's best efforts at playing with numbers, he does not have much of a story. He tells readers:

"Transfers of benefits to individuals through social welfare programs have increased from less than 1 federal dollar in 4 (24 percent) in 1963 to almost 3 out of 5 (59 percent) in 2013. In that half-century, entitlement payments were, Eberstadt says, America’s “fastest growing source of personal income,” growing twice as fast as all other real per capita personal income. It is probable that this year a majority of Americans will seek and receive payments.

This is not primarily because of Social Security and Medicare transfers to an aging population. Rather, the growth is overwhelmingly in means-tested entitlements."

If we go to the Congressional Budget Office, we can quickly find data going back to 1973. This shows entitlement spending, which accounts for the vast majority of federal government transfers, went from 7.5 percent of GDP in 1973 to 12.3 percent in 2014. I'm not sure that this sort of growth will destroy the nation's fiber. (I realize that this excludes the 1963-73 period, but if that is the story, then the nation's fiber was destroyed more than 40 years ago.)

Furthermore, contrary to what Will tells us, most of the growth was in Social Security and Medicare payments to an aging population, which went from 4.2 percent of GDP in 1973 to 7.8 percent in 2014. This increase accounts for 3.6 percentage points of the 4.8 percentage points of growth in entitlement payments over this period. (Most of the rest can be accounted for by Medicaid, which increased by 1.2 percentage points as a share of GDP. This is a means-tested program, but more than half of expenditures go to low-income seniors.)

Dean Baker / January 22, 2015

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Local Taxes Are Naturally Regressive

E.J. Dionne had a very nice piece in the Washington Post last Thursday on how the U.S. tax code is less progressive than most reporting indicates. Dionne’s main point is that by focusing on federal taxes, many journalists miss out on state and local taxes, which tend to tax the poor at higher rates than the rich:

“It is thus a public service that the Institute on Taxation and Economic Policy (ITEP) has issued a report showing that, at the state and local level, government is indeed engaged in redistribution — but it’s redistribution from the poor and the middle class to the wealthy.

“The institute found that in 2015 the poorest fifth of Americans will pay, on average, 10.9 percent of their incomes in state and local taxes and the middle fifth will pay 9.4 percent. But the top 1 percent will pay states and localities only 5.4 percent of their incomes in taxes.”

Dionne attributes the regressive nature of state and local taxes to the types of taxes that these areas tend to impose. As he notes, states and localities often rely heavily on sales and excise taxes; according to the ITEP report, both taxes are quite regressive. Property taxes are also regressive, though state-level income taxes tend to be progressive.

But there’s another way in which state and local taxes tend to be regressive: they contribute to inequality between states.

CEPR and Nicolas Buffie / January 20, 2015

Article Artículo

The Doom and Gloom in Denmark and the Washington Post

Denmark has long cold rainy winters where the sun only shows up briefly. It is understandable that someone can get pretty sour living in these conditions. But that is no reason for the Washington Post to run scurrilous screeds from Scandinavia that inaccurately impugn the region.

That is a reasonable description of Michael Booth's Sunday Outlook piece, which managed to get most of the important points wrong in a piece titled, "Stop the Scandimania: Nordic nations are not the utopia they are made out to be."

Going in order of importance, Booth somehow thinks that the McDonald's workers in Denmark getting paid $20 an hour pay 75 percent of their income in taxes. He better try to explain that one to the OECD. It puts the tax rate for the average worker at 26.7 percent. Booth is apparently adding in the 25 percent valued added tax, which would still leave us just over 45 percent (the 25 percent tax is applied on 73.3 percent of income left over after-tax). That's pretty far from 75 percent.

Booth then turns to mocking the employment record of the Scandinavian countries:

"last month the Times assured us that 'A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia.' (*Cough* unemployment is 5.6 percent in the United States, vs. 8.1 percent in Sweden, 8.9 percent in Finland and 6.4 percent in Denmark.)"

According to the European Commission, the employment rate for people between the ages 20 and 64 is 73.3 percent in Finland, 79.8 percent in Sweden, and 75.6 percent in Denmark. All of which are above the 71.1 percent rate in the United States.

He then goes to Sweden, which he rightly attacks for its strong anti-immigrant movement, but then adds:

"This has distracted from the slowing economy, increasing state and household debt levels, and one of the highest youth unemployment rates in Europe."

Again, he'll have to explain his calculations to the folks who do this stuff for a living. The European Commission has a category for young people who are not working or in school or a training program. The share of young people in Sweden in this category about 7.5 percent, near the bottom of the European Union. As far as state indebtedness, the I.M.F. tells us the government has a deficit of about 2.0 of GDP and total debt equal to 42 percent of GDP, that less than 70 percent of the level in the United States.

Dean Baker / January 20, 2015