Aaron Carroll at The Incidental Economist has posted this very scary graph: Health care spending as a share of GDP in the OECD
Click for Larger Image, Source: The Incidental Economist analysis of OECD data.
Back in the late 1970s, US health-care costs as a share of GDP looked a lot like those of the rest of the world’s rich democracies. At about 8 percent of GDP, US health-care expenditures were at the high-end, but still very much in the pack. Since then, health-care costs have crept up everywhere, but the United States has broken away away from the rest. We now spend about 16 percent of (a much larger) GDP.
In and of itself, spending more on health care is not a bad thing. But, we spend a lot more money and still manage to leave about 15 percent of our population with no health insurance and another important chunk with inadequate insurance (annual limits, life-time limits, treatment exclusions, poor coverage for preventive care) or conditional coverage (lose your job –say, because you’re sick– and you lose your coverage). All of the other rich countries on the list (Chile, Mexico, and Turkey are the exceptions, but not so rich) provide universal coverage. And it isn’t like we have dramatically better health outcomes –either compared to 30 years ago or to the other rich countries in the graph.
Interestingly, we are the only rich country that finances a majority of health-care in the private sector. The rest finance health care expenditures through universal government programs. In some countries, such as the United Kingdom, the government also directly provides care; but, in most, the government finances the care, which is then delivered primarily by the private sector, much like the US Medicare system. (Interestingly, since 1970, Medicare costs have increased one-third less than those of private insurers.)
The unemployment rate held at 9.6 percent in September, despite a loss of 95,000 jobs — 77,000 of which were temporary Census positions. Including downward revisions in payroll employment for July and August, there are 110,000 fewer jobs than reported one month ago. While the overall unemployment rate did not change, the employment-to-population ratio (EPOP) of different populations were not similarly affected. White adults saw relatively little change in their EPOPs (-0.1 percentage points for men, 0.1 percentage points for women), but the EPOP for black men age 20 and older fell 0.5 percentage points and 2.6 percentage points for black teens.
The change in EPOP for black teens is particularly striking since only 16.2 percent were employed as recently as May. Ten years ago, 29.5 percent of black teens were employed compared with 11.7 percent in September. The overal EPOP in September was unchanged at 58.5 percent.
Neil Irwin posted a great set of graphs yesterday on the US “output gap” (the difference between the amount of goods and services the economy is actually producing and what the economy could be producing if it were operating at full capacity). He uses a nice interface to build a fairly complicated final image, starting from a simple line graph of the estimated “potential output” at full capacity:
Source: Neil Irwin. (click for larger image)
then adding the actual level of output:
Source: Neil Irwin. (click for larger image)
and, eventually, the actual and potential output through 2020, under different growth scenarios:
Source: Neil Irwin. (click for larger image)
One thing I like about the graphs is that they are high-tech, output-focused analogs of the series of employment-focused graphs that Tessa Conroy and I produced in the summer (earlier blog post here, full paper in pdf format here). Tessa and I also used a series of increasingly complicated graphs to build up to our punchline (which was, like Irwin, that anything short of very robust and sustained growth, starting soon, spells long-term trouble for the labor market). Irwin also makes excellent use of short text descriptions of key features in each graph, something that we didn’t do in our paper.
It was striking at the DC conference on America's Fiscal Choices that liberal economist Paul Krugman and conservative economist Martin Feldstein agreed the country urgently needs a really big stimulus – three times the size of the 2009 stimulus – to fill a $1 trillion dollar GDP gap.
Paul Krugman said he expects rising unemployment over the next few months, and not much improvement in 2011. Asked when the economy would return to full employment, he responded that – absent some very big event – the “maximum likelihood estimate” for a return to full employment was “never.” To improve the jobs situation, Krugman wants policy makers to “do everything you can,” including a big monetary and fiscal stimulus to get private investment going.
That is what the young George Washington would have told his father if he had been an economist. If anyone ever doubted that the economics profession is chock full of a bunch of shameless incompetents, the current situation proves them wrong.
We are sitting in the middle of the worst economic disaster in 70 years entirely because the economists in positions of responsibility (e.g. Alan Greenspan, Ben Bernanke, the Bush Administration economists, the Congressional Budget Office economists, and the vast majority of professional prognosticators cited in the media) could not see an $8 trillion housing bubble.
This is worth repeating a few hundred thousand times. Tens of millions of people are facing the loss of their jobs and/or their homes because bozos with Ph.Ds in economics could not do their job. And none of the bozos got fired for their incompetence. Most are still making 6 or 7 figure salaries.
CEPR senior economist John Schmitt testified on Thursday in front of the Congressional Out of Poverty Caucus on "An Emergency Response to the Crisis of Poverty in America: Understanding the Crisis and Refocusing the Fight." In his testimony, (see his full statement here) John pointed out that:
[E]ven before the Great Recession, the poverty rate was high by historical standards... at the peak of the last business cycle in 2007, one in eight people in this country had an income that we would have considered to be poor a half a century ago. Over the last thirty years, even as the economy grew by almost 70 percent per person, the share of the population that we judge to be poor has actually increased....
But even if we could restore – overnight – the economy to where it was in 2007, poverty would still be unacceptably high. Fortunately, we already know how to lower poverty dramatically. In the 1960s, in less than a decade, we cut poverty by almost half. The keys were economic institutions that linked workers wages and benefits to overall economic growth, and the expansion of the social safety net...
Economic analysts from the White House, to the non-partisan Congressional Budget Office, to former John McCain adviser Mark Zandi all tell us that the February 2009 stimulus package has created millions of jobs. Without those measures, poverty would have increased even more than it did in 2009. But, we now know that the stimulus program put forth in early 2009 was just not big enough. The single most important step we could take to combat poverty in 2011 is to implement a large -scale stimulus and jobs program today.
This is the question that millions are asking. And, we have the answer for you. The chart below projects out the payable real Social Security benefit for an average worker retiring at age 65. These numbers are derived from the intermediate projections in the 2010 Social Security Trustees report. Note that the benefit is in 2009 dollars, meaning that it is adjusted for inflation.
The numbers for the Washington Post show the actual decline in circulation from 2002 to 2010 taken from ABC Reader Profile Studies and ABC-Audience Fax E-Trends Tool. For later years it projects out the 3.7 percent average annual rate of decline over this period.
Note that, even if nothing is ever done, Social Security will always be able to pay out a higher real benefit than is received by retirees today. After 2037 it would no longer be able to pay full scheduled benefits, but the payable benefit in 2038 would still be 12.1 percent higher than what the average retiree gets this year. The payable benefit in 2085, the last year in the planning period, would be nearly twice the average benefit in 2010.
The prospects for the Washington Post don't looks quite so good. Its average daily circulation in 2010, at 580,000, is already 25.9 below its 2002 level. By 2038, when Social Security is first projected to face a shortfall, on its current path, the Post circulation would have dropped by 68.1 percent to 185,000. By the end of the Social Security's planning period in 2085, the current trend would put the Post's average daily circulation at 27,000.
Despite an uptick in the sales rate for August, home sales remain weak. The sales rate for existing homes bounced back slightly after taking a hit in July, but it remains well below the pace set by the homebuyers tax credit earlier this year. Existing homes sold at a 4,130,000 annual rate in August — 7.6 percent above the rate in July, but more than 20 percent below the average for the first half of the year. The purchase mortgage applications index remains depressed, running close to 30 months behind levels for the same months in 2009. This suggests sales in September and October are unlikely to pick up from their current rates.
All of this is consistent with the view that the main impact of the tax credits was to pull purchases forward. People who might have bought in the second half of 2010 or even 2011 instead bought their home before the tax credit expired. While the credits sustained an annual sales rate of well over 5 million for the period it was in effect, the sales pace is likely to remain close to 4 million for the rest of 2010 and 2011. The moving forward of purchases helped to support sales prices during this period, but did nothing to affect the underlying glut of housing.
Michael Norton (of Harvard Business School) and Dan Ariely (of Duke) have released results (pdf) from a series of experiments they did in 2005 on the subject of wealth inequality. They asked individuals in a nationally representative online panel to (1) estimate the current US distribution of wealth and (2) “build a better America” by describing what they thought would be the “ideal” wealth distribution.
The key findings:
First, respondents dramatically underestimated the current level of wealth inequality. Second, respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution. Most important from a policy perspective, we observed a surprising level of consensus: All demographic groups – even those not usually associated with wealth redistribution such as Republicans and the wealthy – desired a more equal distribution of wealth than the status quo.
This figure from the paper shows the actual distribution of wealth, respondents’ average estimate of the actual distribution, and their “ideal” distribution:
Source: Norton and Ariely.
Even those respondents who voted for George W. Bush look like they’re far to the left of “actually existing capitalism.” In the actual distribution, the top fifth holds over 80 percent of all wealth in the United States. On average, Bush voters estimated that the true share was close to, but not quite 60 percent. Ideally, however, Bush voters believed the top 20 percent should have about 35 percent of all wealth (for Kerry voters, it was about 30 percent).
Imagine you’re one of the 6.8 million Americans who have been unemployed for more than six months. (Imagine, that is, if you don’t already have the misfortune of being one of them). You receive a job offer that you quickly accept. But it comes with an increasingly common catch: your potential employer wants to check your credit first.
This catch, which they had assured you was only a formality, turns out to be a catch-22. When the HR person doesn’t like what they see, they take back the offer. It turns out you can only get the job you need to pay your bills and repair your credit history if you don’t have a credit history in need of repair.
If you haven’t applied for a job recently, or read press accounts of the increasing use of credit checks by employers, you might be astonished to know that employers can decide to hire or fire you because you were late paying a bill. But the use of credit reports by employers is now widespread. A recent survey by the Society of Human Resources Management found that 60 percent of employers conduct credit background checks for some or all job candidates.
According to the Committee for a Responsible Federal Budget, “life expectancy at age 20 has increased by 9 years for men and 10 for women.” By comparing this change to the increase in retirement age, the CRFB is implying that people who reached age 20 in 2006 can expect retirements 7-8 years longer than people who reached age 20 in 1940. This is a gross exaggeration.
There are two reasons why this is dangerously wrong. First, there is a technical point. There are two main measures of life expectancy, and the CRFB chooses unwisely for their comparison. Second, life expectancy only measures the length of retirement for those who are of retirement age. By choosing both to use life expectancy and then choosing the less relevant measure, the CRFB grossly exaggerates the actual and projected experiences of workers.
The Consumer Price Index rose 0.3 percent in August, making it the second consecutive month the measurement has seen an increase. The rise is almost entirely attributable to energy prices, which rose another 2.3 percent, as the core price index of consumer goods remains largely unchanged. Core prices over the last 12 months have risen only 0.9 percent.
Transportation contributed greatly to measured inflation with a 1.2 percent increase, but most if not all of the increase is attributable to fuel prices. In August, the price of gasoline rose 3.9 percent. Even though gasoline prices experienced a 4.1 drop in June, prices have risen at a 16.2 percent annualized rate since May.
All major categories of imports and non-agricultural export prices showed accelerating inflation, which is consistent with a falling dollar. Imports become more expensive as the real price of dollars declines relative to other currencies, leading to a decline in purchasing power. On the flip side, exporters may demand additional dollars for their goods even as the prices of exported goods fall in other countries. These seemingly contradictory effects have progressed since the real dollar began declining in early 2002—following a large run-up which began in the mid-1990s.
The Census Bureau on Thursday released a report on trends in income and health insurance coverage between 2008 and 2009. As expected, the numbers show a substantial deterioration in Americans' economic security. According to the report, in 2009 one in three Americans had incomes that fall below the amount most Americans and various budget estimates show is necessary to “make ends meet” -- $45,000 to $50,000 for a family of four. The report also shows substantial increases in the poverty rate and rate of people without health insurance, as well as declines in median income for various demographic groups such as young adults, Blacks and non-citizens (although, not overall).
The numbers, however, do not reflect legislation enacted in 2009 and 2010 to boost job growth and increase economic security. Financial assistance provided by the American Recovery and Reinvestment Act of 2009 to low- and moderate-income households comes in forms not factored into the official poverty and median income numbers. In addition, many of the investments in the Recovery Act were not made until the latter half of 2009 and this year. Also, health care reform has only begun to be implemented. Most of the expansions in coverage will not occur until 2014.
In an interview published Sunday, the US Treasury’s Chief Economist Alan Krueger told the Financial Times that: “The jobs situation – as difficult as it is – has actually started to improve earlier than in the last two recoveries.”
Today, Ezra Klein picked up on this same point, running with this graph from a post by Invictus at Ritholtz.com:
Source: Invictus, Ritholtz.com
This first graph shows the change in total private-sector employment from the trough of the last three recessions (assuming that the Great Recession ended in the summer of 2009). By this measure, the last year or so doesn’t look so bad. Private employment turned around sharply about the beginning of this year, well ahead of the schedule for the previous two recessions.
Maybe the boys and girls in Congress will never muster the will to provide the stimulus to get the economy moving. Perhaps Bernanke and the Fed crew will never get over their fear of inflation even as it turns to deflation. And, Washington politicians are too macho to say that we actually need the dollar to fall (i.e. a weak dollar) to get our trade deficit in line.
But, at least we have the pleasure of watching the leading lights of the anti-stimulus crew flailing in the cyberspace of the NYT, trying to pretend that their case makes sense. And no one does this better than University of Chicago economist Casey Mulligan.
Professor Mulligan thinks that he can show that stimulus does not work by examining the job impact of the workers temporarily employed to carry through the 2010 Census. Mulligan notes the assumption of stimulus proponents that the there would be a multiplier effect of 1.6 for each job directly created by the stimulus. This means that for every person directly employed as a result of stimulus spending there would be 0.6 jobs created as a result of the spending out of this worker’s wages.
Mulligan applies this arithmetic to the hiring of temporary Census employees earlier this year. Census employment peaked at just under this 600,000. The 0.6 multiplier would imply a jump in 360,000 non-Census related jobs. Mulligan looks at the data and cannot find any evidence of this sort of jump and believes that he has an important piece of evidence against the stimulus.
At issue is this chart. What this figure presents are two policy choices (among many). One choice is to extend the tax cuts for upper-income taxpayers and cut Social Security benefits. Another possibility is to let those upper-income tax cuts expire as specified under current law, and fully fund Social Security. What we find is that with either option, the national debt in 2085 is the same.
The CRFB argues that although present-value calculations "are an important way to measure out fiscal obligations" it must be that "cash flow matters too." In other words, even if we do get to exactly the same level of debt in 2085, it matters how we get there. If we choose to extend the tax cuts and cut Social Security, for example, we will have higher levels of debt every year for the next 75 years, but the difference will slowly shrink back to zero.
It may certainly be preferable to have higher debt today and pay later when the economy is much more productive and workers have much higher incomes than they do currently. But even 75 years down the road, few workers will make the equivalent of $200,000 this year. According to the projections of the Social Security Trustees, the average worker will earn a little more than $105,000 per year in 2085 compared to $43,000 today. This means someone earning almost twice the average in 75 years (and getting a cut in benefits) will have income less than those who would get tax cuts next year.
Expanding on David's last post about the Heritage Foundation's newfound interest in family leave, it's also worth noting that Heritage's claim that "for the vast majority [sic] married moms, the workplace is not the top choice of where they want to spend their days" is a somewhat imprecise summation of the survey data they cite. What the survey data cited by Heritage really show is a plurality of married women with children (46 percent) would prefer to combine less-than-full-time employment in the paid labor force with less-than-full-time care work in the household. When combined with the 18 percent who prefer full-time paid work, this means that the "vast majority" (about 64 percent) actually prefer either full-time or part-time paid work to full-time unpaid care work. This isn't particularly surprising given that the employment rate for married women with children was 67.8 percent in 2009.
Given, as David noted, Heritage's opposition to narrowly targeted, means-tested income supplements for at-home child care (at least for single parents), it does leave one wondering what policies they have in mind when they say that "taxpayers and policymakers should work to promote policies that would enable moms to make the choice to stay at home and care for their children." Of course, there's always the all-purpose conservative policy fix of tax cuts for the well-off, but there's no evidence that tax cuts increase at-home care. In fact, the last several decades of increasing female labor force participation have been accompanied by cuts in marginal tax rates. A solution that would actually work (i.e., have the intended effect of increasing the time parents spend with children) would be to provide moms and dads with paid family leave and increased workplace flexibility so that they can combine work and family duties.