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November 28, 2012

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Latest Posts from Economist's View


Paul Krugman: Life, Death and Deficits

Posted: 16 Nov 2012 12:33 AM PST

 Raising the eligibility age for Social Security and Medicare is *not* the answer:

Life, Death and Deficits, by Paul Krugman, Commentary, NY Times: America's political landscape is infested with many zombie ideas... And right now the most dangerous zombie is probably the claim that rising life expectancy justifies a rise in both the Social Security retirement age and the age of eligibility for Medicare... — and we shouldn't let it eat our brains. ...
Now, life expectancy at age 65 has risen... But the rise has been very uneven..., any further rise in the retirement age would be a harsh blow to Americans in the bottom half of the income distribution, who aren't living much longer, and who, in many cases, have jobs requiring physical effort that's difficult even for healthy seniors. And these are precisely the people who depend most on Social Security. ...
While the United States does have a long-run budget problem, Social Security is not a major factor... Medicare, on the other hand, is a big budget problem. But raising the eligibility age, which means forcing seniors to seek private insurance, is no way to deal with that problem. ...
What would happen if we raised the Medicare eligibility age? The federal government would save only a small amount of money, because younger seniors are relatively healthy... Meanwhile, however, those seniors would face sharply higher out-of-pocket costs. How could this trade-off be considered good policy?
The bottom line is that raising the age of eligibility for either Social Security benefits or Medicare would be destructive, making Americans' lives worse without contributing in any significant way to deficit reduction. Democrats ... who even consider either alternative need to ask themselves what on earth they think they're doing.
But what, ask the deficit scolds, do people like me propose doing about rising spending? The answer is to do what every other advanced country does, and make a serious effort to rein in health care costs. Give Medicare the ability to bargain over drug prices. Let the Independent Payment Advisory Board, created as part of Obamacare to help Medicare control costs, do its job instead of crying "death panels." (And isn't it odd that the same people who demagogue attempts to help Medicare save money are eager to throw millions of people out of the program altogether?) ...
What we know for sure is that there is no good case for denying older Americans access to the programs they count on. This should be a red line in any budget negotiations, and we can only hope that Mr. Obama doesn't betray his supporters by crossing it.

Links for 11-16-2012

Posted: 16 Nov 2012 12:06 AM PST

Volcker: Our Biggest Problem is Effective Governance

Posted: 15 Nov 2012 11:45 AM PST

Busy day, so another quick one. This is Paul Volcker:

What the New President Should Consider, by Paul Volcker, NYRB: [The following is drawn from a lecture given at the Cooper Union for the Advancement of Science and Art in New York City earlier this year. Written before the current election, it addresses in part the winner, whoever he may be.]
... My point here is that we should look ahead. Where is the solid ground upon which to build, to restore some clear sense of national interest and national purpose, to restore confidence in the political process and in government itself?
We don't simply have a financial problem, a problem of economic balance and structure: we have a more fundamental problem of effective governance.
Virtually every day we read of polls about the president's popularity, or the ups and downs of the Republican contenders during the recent election. The poll that concerns me is different, and much more challenging.
"Do you trust your government to do the right thing most of the time?" That question has been asked regularly for decades by experienced pollsters. These days only 20 percent or even less say yes. In other words, four out of five Americans don't instinctively trust our own government to do the "right thing" even half of the time. That's not a platform upon which a great democracy can be sustained.
I know we have been witnessing a large ideological debate. Much of that is beyond the concerns of financial or economic policy. But I also know that the political divide is too often put as "big government" versus "small government." That particular argument may be—probably should be—endless. After all, it started back at the beginning of the republic, Jefferson against Hamilton, on and on. But can we not agree on some basic points of departure?
Government is, after all, necessary. What we want is effective government, worthy of instinctive trust. I have long been concerned that our particular governments—large or small, federal, state, and local—are not consistently administered and managed as well as they should be, and can be. ...

'Mitt Romney’s Ugly Vision of Politics'

Posted: 15 Nov 2012 11:09 AM PST

Ezra Klein, then Paul Krugman:

From the 47% to 'gifts': Mitt Romney's ugly vision of politics, by Ezra Klein: During the campaign, Mitt Romney repeatedly promised seniors that he'd restore President Obama's $716 billion in Medicare cuts. He promised them that, unlike Obama, he wouldn't permit a single change to Medicare or Social Security for 10 years. ... While the rest of the country was trying to pay down the deficit and prioritize spending, they'd be safe. He also promised the rich that they'd see a lower overall tax rate... Oh, and let's not forget his oft-stated intention to roll back the Dodd-Frank financial reforms and replace them with…something.
Keep all that in mind when you hear Romney blaming his loss on "the gifts" that Obama reportedly handed out to "the African-American community, the Hispanic community and young people." Romney was free with the gifts, too, and his promises to seniors and to the rich carried a far higher price tag than any policies Obama promised minorities or the young. But to Romney, and perhaps to the donors he was speaking to, those policies didn't count as "gifts."...

Romney really does appear to believe that there's a significant portion of the electorate that's basically comprised of moochers. That's Romney's political cosmology: The Democrats bribe the moochers with health care and green cards. ...
When Romney thinks he's behind closed doors and he's just telling other people like him how politics really works, the picture he paints is so ugly as to be bordering on dystopic. It's not just about class, but about worth, and legitimacy. His voters are worth something to the economy — they're producers — and they respond to legitimate appeals about how to best manage the country. The Democrats' voters are drags on the economy — moochers — and they respond to crass pay-offs. 
Romney doesn't voice these opinions in public. He knows better. But so did the voters. ...

Paul Krugman:

The Moocher Majority, by Paul Krugman: Lots of people having fun with Mitt Romney's post-election diagnosis, which is that President Obama played dirty: he won peoples' votes by — horrors — actually making their lives better...

Gosh. People who will have health insurance under Obama but would have lost it under Romney voted for Obama. What's wrong with those people?

But as many commentators have pointed out, Romney was just encapsulating the prevalent worldview on the right. Some of us see an increasingly, radically unequal America, with rising inequality actually reinforced by public policy, with tax rates on the rich lower than they have been in many decades and the overall redistributive effect of government down substantially since the 1970s. But the right sees an entitlement epidemic, in which the big problem is that too many people are getting free stuff.

It's important to understand the roots of this stuff. It began as a deliberate appeal to racism, with explicit condemnation of Those People as welfare moochers. Then it became more coded...

What Mitt Romney is now complaining about is the horrifying reality that ... anti-government rhetoric is turning into a way to lose elections rather than win them.

And I don't think the Republican party as currently constituted can change this: after 45 years of the Southern strategy, this stuff is what defines the party's soul.

How will the GOP respond to Romney's loss? With soul-searching or entrenchment? I think the Republican Party will change with time, it has to, and there are younger voices ready to lead the Party to new ground. But the old guard will argue it was the abandonment of traditional principles that caused the loss, and resist the suggestion that the maker-taker, welfare moochers type rhetoric was harmful. The old guard still holds most of the power, and it is not yet ready to step aside.

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