J. Bradford DeLong's Blog, page 2086
February 22, 2011
Federal Spending in Two Graphs
Kash Mansouri writes:
The Street Light: Federal Spending Growth: David Wessel shows us the federal fiscal issue in one chart. The chart depicts an estimate of what the Obama administration's budget proposal would mean for spending in each major category over the next five years.
The bottom line: Spending on interest, Medicare and Medicaid and Social Security go up – a lot. Spending on nearly everything else goes down.
I prefer looking at it slightly differently. I think that when trying to understand the federal government's fiscal situation, at least on the spending side, it is more informative to see how we got to where we are. We now have an on-budget (i.e. excluding the Social Security program, which continued to run a surplus in 2010) deficit of about 9% of GDP. In the early 2000s, the budget deficit was about 4-5% of GDP. That's deterioration in the on-budget deficit of about 4-5% of GDP between 2003 and 2010.
Now take a look at the following chart, which shows federal spending on actual goods and services broken into two pieces: spending related to defense, and spending related to everything else. Then I've added federal spending on the two Meds: Medicare and Medicaid. (Note that this latter category is actually a transfer payment, not spending by the government on goods and services, since it takes the form of the government reimbursing individuals for medical spending that THEY have done.)
Defense spending has gone up about 2 percentage points since the early 2000s. Med+Med spending has gone up by about 2 percentage points since the early 2000s. All other federal spending has meandered feebly between 2% and 3% of GDP. That slight lift in the green line in the last two years is the "massive" stimulus, or put another way, what "out of control government spending" apparently looks like.
If it weren't for increased defense spending and the Meds over the past several years, the federal government's budget balance would have been pretty close to unchanged. Despite the most severe economic downturn in 70 years.
I say again: what stimulus?
February 21, 2011
Department of "Huh?!": Health Care Reform Edition
Outsourced to Jonathan Zasloff:
Health Care: The FT Gets Spun... ...so badly that it might not know east from west. Obviously someone from the right wing noise machine has gotten through to FT reporters Jeremy Lemer and Ed Crooks, and given them just the right talking points. For example, when discussing state insurance exchanges, they write:
Where they have been used at state level, their record has been mixed; they have failed in Texas, Florida, North Carolina and California.
I literally don’t know what they are talking about: Schwarzenegger signed California’s legislation to create its exchange just a few weeks before leaving office. Maybe it’s those high-risk pools that Harold has often criticized: but those are not the same as the insurance exchanges that the ACA will set up in 2014.
Then Lemer and Crooks say that the ACA’s promised cost savings might not materialize, which why “business opposition” has materialized. And what might that opposition be? Why, the US Chamber of Commerce, the National Association of Manufacturers, and the National Federation of Independent Business, essentially groups that are allied with the Republican Party. This, of course, is never mentioned by the FT — and neither is the fact that had it not been for such groups, ACA implementation would have occurred earlier, and states would not have to rely on the high-risk pools that they earlier criticize.
Meanwhile,
Pat Felder, who runs a car parts distributor in Baton Rouge, Louisiana, says her employee insurance premiums went up by 17 per cent last year, and she has been warned to expect a 20 per cent-plus rise this year. She says the insurance companies blame the rise on the new legislation.
Well, yes, they would, wouldn’t they? Earlier, Lemer and Crooks noted that for years, rates have been increasing at more than 20%. So why blame this latest one on the ACA?
And finally, we get the pure GOP talking points:
Critics are offering alternative proposals. Republicans in Congress want to curb medical litigation, which encourages unnecessary tests and procedures to avoid lawsuits. Many businesses favour abolishing regulations that prevent health insurance being sold across state lines, limiting choice.
Except that, you know, neither of these things will do anything significant to reduce costs, and just give more power to insurers. Lemer and Crooks never mention this.
Funny, I thought Rupert Murdoch had bought The Times, not the FT….
Abraham Lincoln
Second Inaugural Address:
Abraham Lincoln: Fellow-Countrymen:
AT this second appearing to take the oath of the Presidential office there is less occasion for an extended address than there was at the first. Then a statement somewhat in detail of a course to be pursued seemed fitting and proper. Now, at the expiration of four years, during which public declarations have been constantly called forth on every point and phase of the great contest which still absorbs the attention and engrosses the energies of the nation, little that is new could be presented. The progress of our arms, upon which all else chiefly depends, is as well known to the public as to myself, and it is, I trust, reasonably satisfactory and encouraging to all. With high hope for the future, no prediction in regard to it is ventured.
On the occasion corresponding to this four years ago all thoughts were anxiously directed to an impending civil war. All dreaded it, all sought to avert it. While the inaugural address was being delivered from this place, devoted altogether to saving the Union without war, insurgent agents were in the city seeking to destroy it without war—seeking to dissolve the Union and divide effects by negotiation. Both parties deprecated war, but one of them would make war rather than let the nation survive, and the other would accept war rather than let it perish, and the war came.
One-eighth of the whole population were colored slaves, not distributed generally over the Union, but localized in the southern part of it. These slaves constituted a peculiar and powerful interest. All knew that this interest was somehow the cause of the war. To strengthen, perpetuate, and extend this interest was the object for which the insurgents would rend the Union even by war, while the Government claimed no right to do more than to restrict the territorial enlargement of it. Neither party expected for the war the magnitude or the duration which it has already attained. Neither anticipated that the cause of the conflict might cease with or even before the conflict itself should cease. Each looked for an easier triumph, and a result less fundamental and astounding. Both read the same Bible and pray to the same God, and each invokes His aid against the other. It may seem strange that any men should dare to ask a just God's assistance in wringing their bread from the sweat of other men's faces, but let us judge not, that we be not judged. The prayers of both could not be answered. That of neither has been answered fully. The Almighty has His own purposes. "Woe unto the world because of offenses; for it must needs be that offenses come, but woe to that man by whom the offense cometh." If we shall suppose that American slavery is one of those offenses which, in the providence of God, must needs come, but which, having continued through His appointed time, He now wills to remove, and that He gives to both North and South this terrible war as the woe due to those by whom the offense came, shall we discern therein any departure from those divine attributes which the believers in a living God always ascribe to Him? Fondly do we hope, fervently do we pray, that this mighty scourge of war may speedily pass away. Yet, if God wills that it continue until all the wealth piled by the bondsman's two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn with the lash shall be paid by another drawn with the sword, as was said three thousand years ago, so still it must be said "the judgments of the Lord are true and righteous altogether."
With malice toward none, with charity for all, with firmness in the right as God gives us to see the right, let us strive on to finish the work we are in, to bind up the nation's wounds, to care for him who shall have borne the battle and for his widow and his orphan, to do all which may achieve and cherish a just and lasting peace among ourselves and with all nations.
Liveblogging World War II: February 21, 1941
Britannica Online:
February 21, 1941: The government in Rome slashes rations of fats, olive oil, and butter by 50%.
Hoisted from the Archives with Additions: The Long-Term Budget Outlook: Obama as Deficit Hawk
When I read things like this from Clive Crook:
FT.com / Comment / Opinion - All in a flap about America’s deficit: Washington is quarrelling its way to a government shutdown, but not to a remedy for its fiscal problems. The reason is simple. Despite the noise and fuss, few politicians in Washington care that much about cutting public borrowing. They care about other things far more, and it might take another financial calamity to change their minds.
Barack Obama has explicitly said that he does not care about long-term public borrowing. Having no proposals to deal with the problem is now official White House policy. There is no other way to interpret the budget the president sent to Congress last week. Under this plan, the full-employment fiscal deficit hovers for a while at about 3 per cent of gross domestic product later this decade, then explodes under pressure of rising spending on Medicare and other entitlements...
I really don't know what to think. The Affordable Care Act of 2010 was the biggest change in course in federal government borrowing ever--if its cap on high-cost health plans remains (which Obama very much wants it to), if its grants of authority to the Payment Authorization Board to reform Medicare stick (which Obama very much wants them to). You can argue that some future congress could overturn them--but by that logic no president and no congress today can ever do anything to reduce federal government borrowing.
Does Clive Crook simply not know what was in the Affordable Care Act? Does he simply not read things like the Congressional Budget Office Long-Term Budget Outlook? Does he simply not care about informing his readers but would rather misinform them?
To write that "Barack Obama has explicitly said that he does not care about long-term public borrowing" is a flat-out lie. And I have a very hard time figuring out why people would say something that is a flat-out lie...
From last July:
Fiscal Policy: The Long-Term Budget Outlook - Grasping Reality with a Sharp Beak: Fiscal Policy: The Long-Term Budget Outlook
Let us look at some numbers from the 2009 and 2010 versions of the Congressional Budget Office publication Long-Term Budget Outlook http://tinyurl.com/dl20100711b. The first column shows (i) the date at which the outlook was taken--summer 2009 or summer 2010--and (ii) the period of the forecast--50 years (they also do 25- and 75-year forecasts). The "revenues" column shows what--if the economy performs as forecasted--average federal revenues will be over that period in that scenario. The "expenditures" column shows what average federal expenditures will be. the final column, "fiscal gap" shows the difference: what CBO currently forecasts America's long-term budget problem to be.
The "extended baseline scenario" numbers. These are the numbers if from now forward the U.S. Congress sticks to PAYGO: if everything that increases the deficit, either by boosting spending or cutting taxes, is paid-for by savings elsewhere in the budget. The estimated extended-baseline 50-year fiscal gap last summer was 2.6% of GDP. Today it is 0.8% of GDP. That is a big swing to see in a year. Where does this swing come from? It certainly does not come from any more optimistic long-run economic growth forecast by CBO this year than last year. As best as I can figure out, the big moving parts that have produced this 1.8% of GDP improvement in the long-term 50-year fiscal gap are three:
CBO's belief that the Obama health care reform bill--the PPACA--will produce a health-care system that (a) is probably more efficient and (b) certainly spends less on Medicare than would have been the case otherwise. It's up to us to see whether the slower rate of growth of Medicare and Medicaid spending now written into the law will be the result of a more efficient system that gets us more health care treatment for the same money or of a system that shuts its wallet on the sick more quickly, but we do now have a slower rate of growth of federal Medicare and Medicaid spending written into law.
Offsetting these savings achieved by passing the PPACA, the large pool of subsidy money to make it feasible for America's working poor and lower-middle class to purchase health insurance. These two pretty much offset each other--so expenditures as a share of GDP projected over the next fifty years are much the same now as they were last year.
Last, another piece of the PPACA: the excise tax on high-cost health plans to make it painful and costly for insurance companies not to worry about containing costs. This raises a lot of money by 2050 in CBOs projection.
The net effect of all of these? Two-thirds of the long-term fifty-year deficit and debt problem that the Congressional Budget Office saw a year ago has been eliminated *if the U.S. Congress now sticks to PAYGO--as it did during the Clinton years--and doesn't pass new programs and amendments to old programs that add to the deficit.
You would think that enormous action to bend the curve over the long run in the U.S. government's tax and spending plans--the greatest single act of fiscal conservatism in American history--would have deficit hawks partying in the streets, reeling drunkenly past the Capitol after midnight in conga lines blowing horns, wouldn't you?
Hoisted from the Archives: The Long-Term Budget Outlook: Obama as Deficit Hawk
Fiscal Policy: The Long-Term Budget Outlook - Grasping Reality with a Sharp Beak: Fiscal Policy: The Long-Term Budget Outlook
Let us look at some numbers from the 2009 and 2010 versions of the Congressional Budget Office publication Long-Term Budget Outlook http://tinyurl.com/dl20100711b. The first column shows (i) the date at which the outlook was taken--summer 2009 or summer 2010--and (ii) the period of the forecast--50 years (they also do 25- and 75-year forecasts). The "revenues" column shows what--if the economy performs as forecasted--average federal revenues will be over that period in that scenario. The "expenditures" column shows what average federal expenditures will be. the final column, "fiscal gap" shows the difference: what CBO currently forecasts America's long-term budget problem to be.
The "extended baseline scenario" numbers. These are the numbers if from now forward the U.S. Congress sticks to PAYGO: if everything that increases the deficit, either by boosting spending or cutting taxes, is paid-for by savings elsewhere in the budget. The estimated extended-baseline 50-year fiscal gap last summer was 2.6% of GDP. Today it is 0.8% of GDP. That is a big swing to see in a year. Where does this swing come from? It certainly does not come from any more optimistic long-run economic growth forecast by CBO this year than last year. As best as I can figure out, the big moving parts that have produced this 1.8% of GDP improvement in the long-term 50-year fiscal gap are three:
CBO's belief that the Obama health care reform bill--the PPACA--will produce a health-care system that (a) is probably more efficient and (b) certainly spends less on Medicare than would have been the case otherwise. It's up to us to see whether the slower rate of growth of Medicare and Medicaid spending now written into the law will be the result of a more efficient system that gets us more health care treatment for the same money or of a system that shuts its wallet on the sick more quickly, but we do now have a slower rate of growth of federal Medicare and Medicaid spending written into law.
Offsetting these savings achieved by passing the PPACA, the large pool of subsidy money to make it feasible for America's working poor and lower-middle class to purchase health insurance. These two pretty much offset each other--so expenditures as a share of GDP projected over the next fifty years are much the same now as they were last year.
Last, another piece of the PPACA: the excise tax on high-cost health plans to make it painful and costly for insurance companies not to worry about containing costs. This raises a lot of money by 2050 in CBOs projection.
The net effect of all of these? Two-thirds of the long-term fifty-year deficit and debt problem that the Congressional Budget Office saw a year ago has been eliminated *if the U.S. Congress now sticks to PAYGO--as it did during the Clinton years--and doesn't pass new programs and amendments to old programs that add to the deficit.
You would think that enormous action to bend the curve over the long run in the U.S. government's tax and spending plans--the greatest single act of fiscal conservatism in American history--would have deficit hawks partying in the streets, reeling drunkenly past the Capitol after midnight in conga lines blowing horns, wouldn't you?
Why Oh Why Can't We Have a Better Press Corps? Chuck Lane Edition
Outsourced to DougJ:
Balloon Juice » This is repulsive: Charles Lane has written one of the most deeply repulsive things I have ever seen in a major newspaper:
Perhaps most disappointing of all is that the president himself, rather than living up to the words he spoke so eloquently in Tuscon, has chosen to fuel the fury on the Great Lakes. He labeled Walker’s legislation “an assault on unions,” while the White House political operation bused in more demonstrators to join those waving Walker = Hitler placards. These are the words and deeds of a partisan politician, not a national leader.
If the brave Gabrielle Giffords could speak normally, what would she say about these events? I hope she would agree with me: This is a sad moment for liberalism, for the Democratic Party, and, really, for the whole country.
That’s right, Gabrielle Giffords was shot in the head and almost killed, for reasons that may have been related to a right-wing movement that Lane often celebrates. And now he seeks to put words in her mouth; he seeks to make a speechless victim of political violence a spokesperson for his own political philosophy.
This is disgusting and demands an apology.
Miracle Max's Underrated Weblogs
Epicurean DealMaker (Wall Street finance lawyer) http://mungowitzend.blogspot.com/
The Economics of Contempt (ditto) http://economicsofcontempt.blogspot.com/
Underbelly (law professor) http://underbelly-buce.blogspot.com/
Frans de Waals: The Moral Animal
Interview:
THE MDM WONDERLANCE * SCIENTECH * PROF. FRANS DE WAAL: PROF. FRANS DE WAAL: For the past three decades, scientists and popularizers have tried to tell us that we and all other animals are inherently selfish, and that the evolution of morality is an almost impossible affair, since nature cannot provide the caring for others needed for morality. I call this "Veneer Theory," since it assumes that human morality and kindness is just a thin veneer over an otherwise nasty human nature. This is a position that goes back to Thomas Henry Huxley, a contemporary of Darwin, and has been repeated over and over even though Darwin himself disagreed. Darwin saw human morality as continuous with animal social instincts, and my own work is a return to Darwinian thinking. I am supported in this now by many recent studies that indicate that humans (and other animals) are far more altruistic and cooperative than was assumed. The field has radically changed in recent years. Psychologists stress the intuitive way we arrive at moral judgments while activating emotional brain areas, and economists and anthropologists have shown humanity to be far more cooperative, altruistic, and fair than predicted by self-interest models. Similarly, the latest experiments in primatology reveal that our close relatives will do each other favors even if there's nothing in it for themselves.
Chimpanzees and bonobos will voluntarily open a door to offer a companion access to food, even if they lose part of it in the process. And capuchin monkeys are prepared to seek rewards for others, such as when we place two of them side by side, while one of them barters with us with differently colored tokens. One token is ‘selfish,’ and the other ‘prosocial.’ If the bartering monkey selects the selfish token, it receives a small piece of apple for returning it, but its partner gets nothing. The prosocial token, on the other hand, rewards both monkeys. Most monkeys develop an overwhelming preference for the prosocial token, which preference is not due to fear of repercussions, because dominant monkeys (who have least to fear) are the most generous.
We can learn about the origins of our sociality, both in terms of hierarchies, competition and power games and in terms of empathy and morality. We share both with our animal relatives, both the good and the bad, and should stop blaming everything we don't like about ourselves on our biology ("we're acting like animals!") while claiming all good we do for our noble human nature. All of our tendencies evolved for a reason among the social primates, and once we understand this, we will better understand the dynamics of our own societies.
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