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CRFB is Misleading on Retirement Age Print
Written by David Rosnick   
Friday, 17 September 2010 15:46

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.

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Core Prices Remain Largely Unchanged Print
Written by David Rosnick   
Friday, 17 September 2010 10:30
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.

For more information, read the full Prices Byte.
 
Census Bureau Report Shows Deterioration in Economic Security Print
Written by Shawn Fremstad   
Thursday, 16 September 2010 15:35
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.

For more information, read the full Poverty Byte.

 
A Tale of Two Graphs Print
Written by John Schmitt   
Wednesday, 15 September 2010 13:38
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

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.

But there are two problems here....

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Casey at the Blog: Joy in Recession Land Print
Written by Dean Baker   
Wednesday, 15 September 2010 07:20
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.

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Long Run Confusion, Take Two Print
Written by David Rosnick   
Friday, 10 September 2010 21:40
As Paul Krugman might say. the Committee for a Responsible Federal Budget (CRFB) is very, very confused.

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.
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The Heritage Foundation on What Women Want Print
Written by Shawn Fremstad   
Tuesday, 07 September 2010 13:05

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.

 
Does Heritage Miss Their Mommies? Print
Written by David Rosnick   
Friday, 03 September 2010 15:38
In a post today titled "Mothers' Intuition Trumps Feminist Ideology," Collette Capara at the Heritage Foundation blog concluded "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."

Interestingly, there used to be just such a program to help mothers stay at home and care for their children.  That program was Aid to Families with Dependent Children (AFDC).  The reason AFDC no longer exists is because organizations like the Heritage Foundation insisted that these mothers should work rather than raise their children.
 
The Cruelest Cut Print
Written by Shawn Fremstad   
Tuesday, 31 August 2010 09:45

The conservative "welfare reform" law enacted in 1996 is most commonly associated with the block granting of means-tested income support for extremely low-income parents and children (the program formerly known as AFDC and now as Temporary Assistance to Needy Families or TANF), a move that has rendered it largely ineffectual during the current recession. But the law also included some especially harsh restrictions on most means-tested social insurance benefits for immigrants, including basic disability benefits like Social Security Income (SSI) and basic health benefits like Medicaid. What's particularly notable about these restrictions is that they applied not only to undocumented immigrants (who were already ineligible for nearly all forms of public assistance) but also to many immigrants who were lawfully residing in the United States.

Perhaps the cruelest cut was a provision that rendered refugees and other humanitarian immigrants who have fled persecution, often including violence and torture, in their home countries ineligible for SSI after the had lived in the United States for seven years. Under the law, refugees can regain eligibility by obtaining U.S. citizenship, but as a story in yesterday's Miami Herald reports, some 4,000 refugees haven't been able to obtain citizenship within the timeframe, and are scheduled to lose SSI on October 1. Another 37,000 refugees could lose SSI over the next 10 years. 

One fix involves giving refugees more time to obtain citizenship, an approach first put forward by the last Bush Administration, and adopted temporarily in 2008, when Congress approved a two-year extension for most refugees facing the cutoff. However, as the Herald's story shows, this approach hasn't worked for many elderly or disabled immigrants. 

Instead, Congress and the Obama Administration should eliminate the SSI citizenship requirement altogether for elderly or disabled refugees.  Refugees, like other legal immigrants and all citizens, pay taxes, are subject to all state and federal laws, and can be required to serve in the U.S. military. Moreover, making subsistence benefits contingent on naturalization incentivizes (and effectively compels) naturalization for the wrong reason (a financial one) rather than the right ones (loyalty and the desire to participate politically in the United States by exercising the one other benefit that is contingent on citizenship, the right to vote in U.S. elections). 

 
APA Women and Unionization Print
Written by Hye Jin Rho   
Friday, 27 August 2010 13:16

Women have increasingly played a significant part in the unionized workforce in recent decades. In 2009, almost half (46%) of unionized workers were women, compared with 38% in 1989. John Schmitt makes a point that at this rate, women will exceed the share of men in the unionized workforce by 2020. Zeroing in on the matter, CEPR occasionally looks at a more specific group of workers represented by unions. For example, here, we seek to examine women in one of the fastest growing ethnic groups in the U.S. workforce, the Asian Pacific Americans.

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Reducing Unemployment with Work-Sharing Print
Written by Nicole Woo   
Friday, 20 August 2010 17:28

With today's news that jobless claims are up, Dean Baker points out that "employers are already hiring more than 4 million workers a month. The problem is that roughly 4 million workers a month are also leaving their jobs, half voluntarily and half involuntarily."

So while it's important to reduce jobless claims, the unemployment rate would also be lowered by working on the other side of the jobs equation -- by preventing some of the 2 million layoffs that happening every month.

This is where the idea of work-sharing comes in.  As the NY Times noted in a recent article on Germany's quick rebound from the recession,"A vast expansion of a program paying to keep workers employed, rather than dealing with them once they lost their jobs, was the most direct step taken in the heat of the crisis,"

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CEPR Comments about Federal Deficits to the Fiscal Commission Print
Written by Nicole Woo   
Wednesday, 11 August 2010 16:59

The following comments were submitted by CEPR to the National Commission of Fiscal Responsibility and Reform on August 11, 2010:

The Center for Economic and Policy Research (CEPR) is a non-partisan think tank in Washington, DC, that was established in 1999 to promote democratic debate on the most important economic and social issues that affect people's lives. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.

Since its founding, CEPR has conducted analyses of Social Security and the federal budget.  Here is a summary of our most recent work on federal deficits and Social Security, which we hope will be useful to the Commission as you continue your deliberations.

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Myths and Facts about Raising the Retirement Age for Social Security Print
Written by Nicole Woo   
Friday, 06 August 2010 16:34

Yesterday's release of the annual Social Security Trustees' Report caused a flurry of media coverage and commentary, including Dean Baker's observation that this year's report predicts much higher future wage growth than prior reports.  In fact, the new report forecasts that annual wages will be 47.8% higher in 2040 than in 2010 (adjusted for inflation).

In the month leading up to the report's release there's been, as CNN describes it, a "red-hot debate over raising the retirement age" for Social Security.  CEPR is helping inform the debate by busting certain myths.

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The Guardian’s Distorted Depiction of Venezuela Print
Written by Dan Beeton   
Thursday, 05 August 2010 15:07

The documentary film “South of the Border” examines how the governments of Venezuela, Bolivia, Ecuador, and other countries are depicted in the major U.S. media. Many major U.K. media outlets offer a similar treatment of Latin America. A recent analysis of BBC coverage of Venezuela in the Chávez years, for example, details numerous misleading statements and distortions. To take another case, The Guardian is currently prominently featuring a report from last year on “The rise and rule of” Hugo Chávez. The slideshow – almost a sort of mini-documentary – is done by South America correspondent Rory Carroll, and it provides a good example of the kinds of distortions and one-sided, de-contextualized information on South America that have appeared in many Guardian news reports over the past several years.

The slideshow begins violently, with the sound of gunshots and images of the failed 1992 coup d’etat launched by Chávez and other military officers. A barebones description of the coup quickly segues into an explanation that “Chávez … instead of shooting his way into power … seduced his way,” since “the poor were angry”, as Carroll puts it. There is no mention of the exponentially more bloody episode that would help explain how divided Venezuelan society had become prior to ‘92, and why the coup attempt was so popular: the 1989 caracazo, protests against IMF-mandated economic policies which were crushed by the Venezuelan military and police, resulting in hundreds and possibly thousands killed as troops fired on demonstrators.

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CEPR Gets Results: Part N of Wish There Were Fewer Results To Get Print
Written by David Rosnick   
Tuesday, 03 August 2010 17:11

In response to a find by Dean Baker and myself, the Congressional Budget Office (CBO) today issued a correction to their recent Long-Term Budget Outlook.  The issue at hand was the unusually large crowding-out of investment reported by CBO.  As deficits crowd out investment, this leads to slower economic growth as seen in the original CBO figure shown below:

 

 cbo_original

As Dean Baker pointed out last week, the deficits in the Alternate Fiscal Scenario had hardly changed since the previous long-term estimates last year.  Thus, the deficit costs to economic growth implied in this graph could not be consistent with the smaller costs reported last June.  The updated figure from CBO released today shows much smaller effects on GDP.

 cbo_revised2 copy

 CBO should be commended for its rapid response in addressing this error.

 
Will New Report Pave the Way for Honduras' Reincorporation Into the OAS? Print
Written by Alex Main   
Tuesday, 03 August 2010 11:54

Following several weeks of meetings and internal deliberations, a special “high-level commission” has presented the General Assembly of the Organization of American States (OAS) with a long-awaited report on Honduras.  Mandated by a June 8 resolution agreed to at the OAS ministerial meeting in Lima, Peru, the report presents an analysis of the current situation in Honduras and a series of recommendations on how to address the enduring political crisis and the attacks that target media and activists associated with the political opposition.

Honduras’ membership in the OAS was suspended following the military coup that illegally removed the government of President Manuel Zelaya from power on June 28th of last year.  A number of member countries – including most of South America’s governments – are still opposed to the lifting of the suspension and the implicit objective of this new report is to chart a course for Honduras’ full reincorporation into the hemispheric body.

More than an accurate description of the situation on the ground in Honduras, the report provides a fascinating snapshot of the political tug-of-war still taking place between key Honduran and regional actors.

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Rohter Strikes Out Yet Again on South of the Border Print
Written by Mark Weisbrot   
Monday, 02 August 2010 13:48

“Pajama people are boring me to pieces
They make me feel like I am wasting my time.”

-- Frank Zappa, “Po-jama People

Now comes Larry Rohter of the New York Times, with a 3,000-word, hyper-ventilating yet boring diatribe excoriating Oliver Stone and especially me, and defending his previous 1,658-word attempt in the Times to discredit our film, South of the Border. Rother writes with the old-fashioned arrogance of someone who has spend most of his journalistic career in the pre-Internet age, when it was not so easy to find out when someone is flat wrong, or blowing smoke, with just the click of a mouse on a hyperlink.

Today, you can click here and here. That takes care of at least 80 percent of Rohter’s “argument.”

As for the rest: if you scrape away the insults (there are quite a lot of them, Rohter is an angry man!) and the 1950s McCarthyite rhetoric (“loyal stenographers” of [insert official enemy here])—well, there isn’t a lot of substance there.

But wait: hold the Joomla!! I have discovered an “egregious error and specious claim;” in fact it makes Rohter’s latest response “so riddled with errors, misrepresentations, fabrications and fraudulent statistics as to be useless except as an example of over-the-top propaganda.”

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Debt and GDP Growth: Reinhart and Rogoff, One More Time Print
Written by Dean Baker   
Friday, 30 July 2010 16:44

Our friends at the Economic Policy Institute have already done a pretty good job burying the claim from Reinhart-Rogoff that high ratios of debt to GDP will lead to lower growth, but in DC, no bad theory stays dead for long. With that in mind, let's throw a little more dirt on the grave.

The Reinhart-Rogoff analysis is conducted entirely in terms of GDP growth. Back in the old days, economists used to focus on per capita GDP. The idea being that what mattered is output relative to the population. The people of Denmark are much richer on average than people in China even though China's GDP is more than 20 times higher. The reason is that China's population is more than 200 times as large as Denmark's. 

As many critics of R&R have noted, their sample of developed countries with high debt to GDP ratios is very small. Many of the obvious cases (e.g. Japan in the 90s and the 00s) can be readily explained as countries where slow growth led to high debt to GDP ratios. However, in many of the cases, such as Japan and Italy in recent years, the high debt countries are also countries with little or no population growth.

This means that we would expect a slower rate of GDP growth, other things equal. While there is undoubtedly some endogeneity to population growth (e.g. higher GDP growth leads to more immigration), we should still expect the benefits of growth to show up in higher per capita income.

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BREAKING NEWS: LA Times Accurately Describes Globovision as “Obviously Slanted” With “No Pretense of Impartiality” Print
Written by Jake Johnston   
Friday, 30 July 2010 13:50
It has been generally standard fare in the media to refer to Venezuela’s Globovision as the “sole opposition-aligned television channel,” as the AP has put it.  Rarely, if ever, is the actual reporting of Globovision put into context, which makes yesterday’s Los Angeles Times article all the more amazing.  Chris Kraul and Mery Mogollon write:
The Caracas-based opposition news and opinion channel's newsreaders and reporters — who make no pretense of impartiality and remain undeterred by harassment and threats of a takeover — regularly blast the president with obviously slanted coverage while giving opposition politicians free and usually unchallenged rein to vent.
The article goes on to mention some of the regular fare that a viewer comes across while watching Globovision. An opposition leader calling for Chavez to be “investigated for treason”, or equating the exhumation of Simon Bolivar last week to witchcraft, and calling it a "pornographic spectacle." Even broadcasting calls to “rise up against the government.” 

While the article is impressive for its accurate description of the bias and slant in Globovision’s coverage, it could be strengthened by adding more historical context, and by pushing back on the myth that it is the “last independent,” or “only opposition” TV station in Venezuela.

During the coup in April 2002 almost all of Venezuela’s private media actively participated in overthrowing the democratically elected Chavez. This included manipulating footage to make it appear as though Chavez supporters were responsible for the killing of innocent civilians, and airing cartoons rather than covering the mass mobilization that brought Chavez back to power. In fact, the day after the coup on the opposition station Venevision, a number of coup supporters appeared, with one explicitly thanking the media, including Globovision and other private stations for their role in overthrowing Chavez.

Globovision is frequently referred to as the last independent television station that is critical of Chavez and, though the LA Times doesn’t state this explicitly, it does leave the reader with the sense that Globovision is the last remaining independent station.  However, there are a number of other independent stations both local and national and these account for a much larger share of the overall market than the country’s state owned television and radio. Nationally there is Venevision and Televen, for example.

Although the Los Angeles Times article is a real breakthrough in the coverage of Venezuelan media, it only scratches the surface of some of the broader issues around the behavior of the private, opposition media in Venezuela

 
CEPR News July 2010 Print
Written by Dawn Lobell   
Friday, 30 July 2010 13:21
CEPR Fights Deficit Hysteria, Both Here and Abroad

CEPR’s latest paper, “Alternatives to Fiscal Austerity in Spain” by CEPR Co-Director Mark Weisbrot and Research Assistant Juan Montecino shows that Spain, under pressure to cut spending and raise taxes while its economy is barely recovering, might be better off with a continued stimulus. "The planned budget cuts and tax increases in Spain are not only unnecessary, but socially and economically destructive," said Weisbrot. "They also could easily leave Spain with a worse debt problem than they would have with a continued fiscal stimulus." Mark points out that there are no convincing economic arguments against further global stimulus in his recent Guardian column.

CEPR Co-Director Dean Baker has also been busy countering the deficit hawks and fighting the anti-stimulus talking points. This recently released issue brief notes how the Congressional Budget Office has changed its modeling to worsen the potential impact of deficits and debt on private investment.  Dean also uses his Guardian column to point out the absurdity of addressing the deficit when so many are unemployed.  On Amy Goodman's Democracy Now, he talks about the deficit hawks and their desire to cut Social Security. In this video, he debated Douglas Holtz-Eakin on the expiration of the Bush tax cuts (he also discussed US tax policy on NPR’s On Point.). And on CNBC, he explains what the July jobs report means for economic recovery.

CEPR Responds to Critics as South of the Border Opens Across the US

Oliver Stone’s latest documentary, "South of the Border", co-written by Mark Weisbrot, is showing to large audiences in various US cities and recently opened in Dallas, Houston, Phoenix, and New Orleans. This coming weekend, the film opens in Seattle, Minneapolis, Santa Barbara and Portland, OR. Mark traveled to Chicago and the San Francisco bay area earlier this month to talk about the film. You can hear him talk about the film here, here, here and here.

Read more...

 

 
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