Sunday, November 16, 2014

Note on Charlie Baker

All this nattering about how the Democrats lost so big that even Massachusetts elected a Republican governor... it's coming from people who don't know anything about Massachusetts. First, before the current governor, a Democrat, the previous four governors were all Republicans. Very moderate Republicans. Second, Charlie Baker, the Republican, was endorsed by the liberal Boston Globe. In fact, the Globe endorsement could easily have swung the election, as a shift of 20,000 votes would have changed the outcome. Whatever the Democrats' problems are, Massachusetts does not exemplify them.

Tuesday, November 11, 2014

Comment on the Agreement with China About Climate Change

This seems huge to me, at least five minutes after reading about it. What strikes me about it is how it cuts the legs out from under Sen. Inhofe, Rush Limbaugh and all the other "hoax!"-criers. I mean, you could believe, maybe, that Obama and the Democrats were trying to fool the American people about climate change, for their own nefarious purposes, but is anyone going to believe that they fooled the Chinese? Even if you believe that Obama secretly wants to destroy America, do you believe that the Chinese want to destroy China? I just don't see what Republicans are going to say about this. But no doubt they'll come up with something.

Thursday, November 6, 2014

Obama and Ebola

God, that guy irritates me!

We were recently treated to Republicans around the country running scare ads about Ebola and how it's some sort of failure by Obama. There was a failure of leadership by Obama, but it wasn't a management failure. It was a political failure. Once again, he doesn't talk to people, doesn't explain, doesn't lead.

Obama should have given a brief prime-time speech on TV. (And for Pete's sake, what is so hard about sitting at a desk in the Oval Office? It's reassuring.) Something like this:

" [......] First of all, you are not going to get Ebola, nor is anyone in your family. So far in America, there has been one death from Ebola, and one person is currently infected. Both of  them were infected in West Africa. What the Centers for Disease Control said was true: it's only transmitted by bodily fluids, and people are not infectious until they're showing  symptoms. The people at risk are the people caring for Ebola victims in the later stages of the disease, when it gets pretty messy.

"Unfortunately, some politicians are irresponsibly stirring  up panic about this, coming up with all sorts of ridiculous theories about how Ebola might be transmitted. Well, if there's something wrong with your car, who are you going to take it to, a mechanic or a politician? Similarly, when it comes to dealing with infectious diseases, I'd rather talk to an expert.

"There is no outbreak of Ebola in America. There is one in West Africa, and that's a problem for us, for a couple of reasons.

"First, it's a humanitarian crisis, just like an earthquake in Haiti or a tsunami in Asia. But also, we need to get the disease under control, before it starts spreading to other countries.

The medical workers who have gone to West Africa, at some personal risk, to fight Ebola are heroes, and we all owe them a debt of gratitude.

"We need to fight Ebola with determination, not panic. [........]"

A speech like that might have made a difference in close races.

Wednesday, November 5, 2014

Ad for an Imaginary Democratic Candidate Who Wasn't Running From Obama

"By the numbers, the economy's doing really well.

"The unemployment rate is below 6% for the first time since before the crash. Even with the crash, the economy under Obama has created more jobs than in Bush's entire Presidency. In the last quarter, the economy grew at an annual rate of three and a half percent.

"So why doesn't it feel better?

"Because for the average family, it isn't  better. The income of the average family hasn't gone up at all. While the economy's been growing, 95% of the gains have gone to the top 1%. They've had a recovery, but the average family hasn't.

"Are Republican economic policies going to fix this? Don't hold your breath. To begin with, we need to increase the minimum wage. Then we need to get rid of some of the tax loopholes the favor the rich.

"The economy's growing. Now it's time for some of that growth to reach the rest of us."

Wednesday, October 29, 2014

Why Are the Democrats So Lame?

The newspapers are full of stories about how Democrats are struggling against Obama's low popularity, how they'll probably lose the Senate and lose ground in the House, and so on. "Oh, woe is me!" cry the Democrats. "Obama... the election... Obama...Oh, dear! Whatever shall we do?"

No doubt the pundits are right (or, if not the pundits, then at least the statisticians), and that's about how the elections will play out. But here's what puzzles me: the Democrats are way ahead on the issues.

The what?

Yes, you know. The issues. This election seems curiously devoid of discussion of actual policies. That's much more of a problem for Democrats, because the policies they favor are favored by large majorities of Americans. They need policy discussion to turn out their base, and to sway moderates. If there are no issues, then the topic becomes Obama, which doesn't seem to be working very well for them.

Instead of playing defense, they should be on the attack. For example:
  • Increase the minimum wage to $10.10 per hour. Some Democrats are using this, of course. According to the Pew Research Center, it polls at 73% support, with 50% saying it would make them more likely to vote for a candidate (versus 19% saying it would make them less likely). John Boehner has already declared his opposition, so Republican House candidates are pretty much stuck on this one. 
  • Break the power of big money in politics.  A Reuters/Ipsos poll found that 76% of Americans think that the amount of money in politics has given the rich more power than other Americans. And they're not wrong. This is the huge silent issue of American politics; politicians just do not want to talk about it. I'll bet you didn't know that the Democrats have a campaign-finance reform bill, the Government By the People Act. It's not the ideal bill, but it's pretty good and it's got a name. Candidates should be running on it--a generalized promise to do something is not going to impress anyone. 
  • Increase spending on infrastructure. A Gallup poll last year found more than 70 percent would vote for "a Federal government program that would spend government money to put people to work on urgent infrastructure repairs." A good place to turn on its head the Republican line about "intergenerational theft."
  • Keep guns out of the hands of criminals and unstable people. Expanded background checks continue to be overwhelmingly popular; a report on one recent poll announced: "In Georgia there's 71/22 support for them, in Tennessee it's 67/26, and in Arkansas it's 60/31." The Republicans blocked this in the Senate. I think the Demcrats' reflex is, if you can't say something libertarian about guns, don't say anything at all, but the polling suggests that's wrong.
    If I were an adviser to a Democratic candidate, I would be telling my candidate to run ads on those issues over and over. And to ask his opponent what his position is.

    A final issue I would throw in if I were running against a Republican House incumbent:
    • Congress should work at least as many days per year as an American kid in elementary school.  Doesn't sound too onerous, right? But it's around 180 days, while the House is scheduled to be in session this year for 113 days. I don't know of any polling on this, but I think the only reason there isn't an uproar is that no one knows about it.
    I'm not arguing that issues campaigns are better for democracy than mood campaigns, though that might be true. It's simply that at the moment, a mood campaign favors Republicans, and an issues campaign favors Democrats. The Democrats seem to be waiting for issues to fall from the skies. They should be looking at their feet.

    Sunday, June 22, 2014

    Every Economist in America Is Wrong: The Minimum Wage Is Better Than the EITC

    Maybe I'm missing something obvious, but...

    Let's say we want to help low-wage workers. Which of these plans sounds better to you?

    Plan A
    Tax:  Rich
    Benefit:  Poor and middle class

    Plan B
    Tax:  Rich and middle class
    Benefit:  Poor and rich

    It's a matter of taste, but I think most people would prefer Plan A. Plan A is the minimum wage. Plan B is the Earned Income Tax Credit.

    You may recall my discussion of this in a recent post. The basic economic analysis is that the minimum wage is equivalent to a tax on low-wage jobs and a transfer of the revenue from that tax to workers in those jobs. Economists, even liberal economists, see a few problems with that.
    • A lot of the transfer doesn't go to poor people. A good chunk of it goes to people from non-poor households. 
    • Putting a tax on low-wage jobs would be expected to reduce the number of low-wage jobs. This seems obvious, but is now hotly contested, with a substantial amount of empirical research finding zero effect; the consensus now is that the effect is zero or small.
    • Businesses will pass along some of their cost increases to customers, who may be poor themselves.
    Much better, economists say, to use the Earned Income Tax Credit. This is a wage subsidy which is targeted at the poor. It presumably is funded from general tax revenues, so it doesn't discourage low-wage jobs. And it doesn't get passed along, because it's not a cost to employers. In fact, a portion of it ends up benefiting employers, because the wage subsidy reduces the wage employers have to pay. (For example, if I'm paying my employees $7/hour, and employees get a $1/hour subsidy, I may find  that I can pay them only $6.50 per hour, so they end up with a wage of $7.50.) If that's true, I may actually increase my hiring. You can find a liberal economist's view of the minimum wage here and a conservative economist's here.

    What every economist thinks is what I thought, until, as I was writing that recent post, I read the Congressional Budget Office's report on the minimum wage. The media summarized the conclusions of the report as: raising the minimum wage will raise the incomes of the poor, but a small number will lose their jobs. But that summary, while true, misses the main point. Here, for example, is the Washington Post's Wonkblog:

    The CBO's report reminds us that the main effect of raising the minimum wage is to redistribute income from consumers and owners/higher-wage earners to lower-wage earners. As this chart shows, most people earning under six times the poverty line would benefit from the increase.

    When I read the CBO report and saw Figure 3, my eyes almost popped out of my head. "Everyone needs to see this chart!" I thought. And yet the people at Wonkblog not only saw it but posted it, and missed the point completely. Try this instead:

    The CBO's report reminds us that the main effect of raising the minimum wage is to redistribute income from the top 10% to the bottom 90%. As this chart shows, the average family earning up to six times the poverty line (around $150,000 per year for a family of four) would benefit from the increase, even net of price increases and job losses.

    Perhaps they didn't realize that 90% of all American families earn less than $150,000 per year, or didn't make the connection.

    Apparently, in a lot of middle-class families there is someone earning the minimum wage. Some small fraction of those people will lose jobs if the minimum wage increases, and all will pay slightly higher prices. But the net effect is to make them, on average, better off.

    What if your family earns, say,  $200,000 per year? That's more  upper-middle class than rich. Are you a net loser? Actually, we don't know, because everybody in the top ten percent is lumped together in the chart. Many things we once thought were true about the top 10 percent, like their getting a much larger share of national income than they used to, turn out to be mostly attributable to the top 1% (see Figure 2 here).

    My guess is that people earning $200,000 per year end up being slight net losers. But clearly the big losers are people who earn a big chunk of their income from business profits, and (I can't find an estimate, but) those people are overwhelmingly the rich.

    So as a first approximation, I'm going with Plan A above as a description of the effect of an increase in the minimum wage: hurts the rich, helps the poor and middle class.

    In contrast, the EITC, being "better targeted," does not directly benefit the middle class. And because it presumably comes out of income-tax revenue, a good chunk of the middle class, as well as the rich, end up paying for it. Moreover, as I discussed above, some of the benefits end up being captured by owners of businesses, i.e., the rich. Some of the minimum wage "leaks" out to the middle class; some of the EITC leaks out to the rich. Yet somehow economists consider the former more of a problem than the latter.

    Finally, there's the employment effect. As noted above, there's a large body of empirical work finding, surprisingly, that modest increases in the minimum wage have no effect on employment. I looked at the CBO report to find the basis for their estimate that 500,000 jobs would be lost. That's not a huge number-- it's about 0.3% of the labor force-- and there's a lot of imprecision around it, but I still wondered how they had come up with it.

    When I got down into the weeds, I found that they had done careful work. They ended up making separate calculations  for teenagers and adults, then adding them together. I was curious how much of their final estimate of 500,000 jobs lost was made up of teenagers. But they never said.  So, using CBO's "conclusion" that adult employment is about one-third as sensitive to changes in the minimum wage as teen employment, and the fact that almost a quarter of jobs at or below the minimum wage are held by teenagers, I tried to calculate it.

    My result is that 48% of the job losses will be by teenagers. The adult job loss is not 500,000; it's about 260,000. An editorial comment: When people argue that increasing the minimum wage will be ineffective, they always talk about teenagers. When they say there will be job losses, those teenagers are never mentioned.

    Here, then, are the main takeaways from my reading of :the CBO report:
    • The minimum wage transfers income from the top 10% of the population to the bottom 90%. Quite likely a large part of that transfer is coming from the top 1%, but we don't know.
    • The number of people losing jobs is modest, and almost half of them are teenagers.
    I can't quite get over the feeling I'm missing something, so if you happen to know any economists, run this by them.

    Thursday, June 19, 2014

    Saturday, June 14, 2014

    Pakistan After the Karachi Airport Attack


    Do you make anything of the latest kerfuffle in Pakistan? Will the Army finally decide that India is not its biggest problem? Will Pakistanis finally decide the US is not their biggest problem?


    Alas, I am dubious on both counts. The military would have to work much harder to justify its completely voracious appetite if it lets go of India, which is so much bigger; everyone else would have to recognize--and take responsibility for--terrorism, corruption, the leadership's tepid commitment to democracy, and taking care of their own business if they let go of the view that the U.S. and its "aid" is the source of all their problems.

    What could well happen instead is that they continue to throw themselves into the dubious embrace of the Chinese and wake up a bit later to realize that it can get much worse than it is now.

    What happened in Karachi makes me despair. I despair in order not to feel fury. When you live as well as the ruling elites do in Pakistan (both military and civilian) a bit of noblesse oblige is in order, I think.


    I would especially extend my rant to say that perhaps the most insidious of the governmental bodies is the ISI (Inter-Services Intelligence), who put out contracts on human rights workers and journalists with almost complete impunity. They--and the rest of the military--seem to believe that they have the right to operate without the risk of being publicly criticized (or even identified). This, rather than electoral processes, is where democracy is perhaps the weakest in many countries, and I wish that political scientists and other scholars would pay more attention to it.

    Wednesday, June 11, 2014

    In Love With the Earned Income Tax Credit...But Not Enough to Tie the Knot

    It's spring, and love, love, love is in the air! Yes, conservative intellectuals have fallen in love with the Earned Income Tax Credit, the federal program that subsidizes workers in low-wage jobs.

    The source of this strange passion is, of course, recent Democratic proposals to increase the minimum wage, proposals with overwhelming popular support. Greg Mankiw, head of the Council of Economic Advisers under George W. Bush, makes the argument for the EITC over the minimum wage. It goes  like this:

    Analytically, an increase in the minimum wage is identical to putting a tax on low-wage jobs, and then giving the revenue from the tax to low-wage workers. The good part is that we're raising the incomes of low-wage workers, who in many cases are below the poverty line. The bad part is that we're paying for it by taxing low-wage jobs.

    Taxing low-wage jobs has a couple of problems. First, you would expect that taxing anything would reduce the amount of it. So there were would be fewer jobs available. Second, the net cost of the tax ends up being paid by employers. Why, says Mankiw, should they bear all the burden for a broader societal decision? The money should be paid by the government so that the cost is shared more broadly. (Actually, some of the cost to employers gets passed along to consumers as higher prices.  But again, why should consumers of those specific products pay all the cost?)

    Then we should increase the EITC instead, right? So where should the money come from, and how much? What's Mankiw proposing?

    As it turns out, Mankiw is a bit of a cad; rather than propose, he prefers to love the EITC and leave it. He concludes: "If, as a nation, we decide we want to do more to supplement the incomes of low-wage workers, that’s fine. But let’s do it openly, without artifice, and with broad participation." I never said I was in love with you...I just said that if I were in love, it would be with you and not your sister.

    Then what are the possibilities? We could raise taxes. Or we could add it to the deficit, thus deferring to the future a decision about how to pay for it. Or we could cut military spending. Or we could cut domestic spending. Which of those options do you think Republicans would accept? In practice, Mankiw's idea comes down to this: let's supplement the income of low-wage workers, and let's pay for it by cutting food stamps. I wouldn't expect much impact on the poverty rate, would you?

    If anyone tells you we should increase the EITC instead of raising the minimum wage, just ask how they suggest we pay for it.

    Tuesday, May 27, 2014

    Assad's Doing It Again

    Many people breathed a sigh of relief when the US worked out a deal with Russia and Syria over Assad's use of poison gas in the Syrian civil war. Instead of launching an airstrike against Syria in retaliation, we would simply remove the remaining chemical weapons.

    I did not breathe a sigh of relief; I though it was a bad deal. Given the lack of enthusiasm for an airstrike in Congress and in public opinion, this may have been the best the Obama administration could get. But I think that's because the issue got framed wrong in the public debate.

    Here, for example, are some things the airstrike was not supposed to achieve:

    • Destroying Assad's remaining chemical weapons;
    • Involving the US in the war on the side of the rebels.

    Here are some things the airstrike was supposed to achieve:

    • Deterring Assad, and every leader of any army anywhere, from using chemical weapons in the future;
    • Reducing the killing of civilians in Syria.
    Clearly, removing Assad's chemical weapons does not accomplish those goals. It's not a deterrent to tell someone, "If you ever write another check, I'll take away the checkbook." There's nothing to lose by writing a check, and you might get away with it. And there's nothing for any future leader to lose by using poison gas. But the threat of an airstrike against Assad's air force is a deterrent; if carried out, it would significantly weaken him in his war. Quite likely, that would make the price of using chemical weapons too high in the future, for Assad or anyone in a similar situation.

    As for protecting civilians, removing Assad's chemical weapons has not discouraged him in the least from using his air force against civilians. Whether through depraved indifference or conscious policy, thousands of civilians have died in air attacks. Many of those people might have been saved by anything that weakened his air force.

    Now come credible reports that Assad's air force has dropped bombs containing chlorine gas. Chlorine was the first lethal gas used in warfare. It has common industrial uses (municipal water treatment, for example), so it was not among the banned chemicals now being removed from Syria. But its use in warfare is clearly illegal and a war crime.

    Assad obviously has not been deterred. In fact, not to take it too personally, he is thumbing his nose at us. This is not good for world stability and maintenance of civilized norms.

    We need to respond with an air strike against Assad. Obama must do what for some reason he hates to do, which is go on TV and explain to people why we should do this.