Paragraph of the Day

August 31, 2014 1 comment

It comes from Nicholas Kristof in today’s New York Times on white Americans’ misconceptions about race:

One black friend tells me that he freaked out when his white fiancée purchased an item in a store and promptly threw the receipt away. “What are you doing?” he protested to her. He is a highly successful and well-educated professional but would never dream of tossing a receipt for fear of being accused of shoplifting.

I’ve never thought twice about throwing a receipt away (for something I wouldn’t consider returning at least). Before Kristof’s column, I thought that was common practice among all Americans—white, black, green, whatever. Now, I know otherwise. The fact that I don’t fear throwing receipts away—and the fact that I didn’t know that black people do fear that—is the definition of white privilege in America.

Categories: Race

On Means Testing

My piece on Marco Rubio’s plan to reform Social Security yesterday drew a reaction from some on the left, in particular with regards to means testing. Rubio proposes increasing the growth rate of benefits for poor seniors and decreasing it for rich ones. It isn’t a direct form of means testing, but it does change the program in a similar manner. In the article, I argued that it would strengthen Social Security and that means testing would do so as well. (When I use means test here, I’m referring to using different benefit levels, not a cutoff test as is often proposed.) There are two parts to this debate: policy and politics—and they impact each other.

Policy

The first question is whether you would means test Social Security benefits in a perfect world. In other words, if you could set up the federal government to your exact specifications, would it include means testing? I think it would. I believe the federal government should marshal its resources to help those at the bottom of the income distribution. It does not need to do anything for those at the top. There are certainly situations where government policies will benefit those at the top in order to correct market failures, but our tax and transfer system should focus on those at the bottom. If I’m given the option of giving the rich unnecessary retirement funds or not doing so (regardless of how those funds could be usedslightly lower taxes or increased spending on the poor), I would choose against it.

There are also some labor effects. If we began means testing Social Security, the rich will alter their work decisions. Some may choose to work more to make up for the lost benefits, others less since they will collect more in benefits as their income drops. It’s unclear which of those effects dominates, but I’m not particularly concerned that it will cause a sharp drop in labor force participation.

Politics

Of course, means testing wouldn’t happen in my theoretical policy world. It would happen in the real world where politics play a big role. Jesse Myerson put the liberal fear succinctly on Twitter: “Means-testing programs make them politically vulnerable, thereby *weakening* them.” I generally agree with that statement. Paul Ryan’s Hammock Theory of Poverty would have much less support if we had a universal basic income. But my inclination is that this political fear does not exist with Social Security for a couple of reasons.

First, I don’t really buy the Matt Yglesias theory that elites hate Social Security because they want everyone working. It’s impossible to prove this one way or anotherif elites do hold that belief, they aren’t going to come out and say it. But I believe the right to a comfortable, non-impoverished retirement is almost universally held in America. Even elites have grandparents and even they see that, at some point, their grandparents deserve to retire.

Secondly, seniors are a hugely important voting block for Republicans. The GOP won’t even propose using chained-CPI to change the inflation adjustment for Social Security benefits. Not that I support doing so, but the Republican refusal to do so shows their hesitance to support cuts to Social Security of any kind. Even Rubio doesn’t propose full means testing, just a change to the growth formula. In order for Republicans to apply the same “moochers vs. makers” framework to Social Security benefits, they would have to openly argue that they want seniors working more. It’s hard to imagine any situation where that’s a smart political position.

Thirdly, while Social Security’s funding problem is based an arbitrary accounting distinction, it’s a real political problem. Policymakers are going to try to find a way to close that funding gap and the larger that gap is, the more likely benefit cuts will be on the table (such as through chained-CPI). The longer that the Social Security trust fund stays solvent, the lower the chance that policymakers settle on some type of benefit cuts that also hurt low-income seniors. In that sense, means testing does strengthen the program by increasing the time until the trust fund runs out of money.

Finally, if we did means test Social Security, Republicans would have to give their assurances that they have no intent to cut the benefits for poor Americans. They will have to promise to continue treating Social Security as an entitlement program, and not as welfare. That may be a false promise, but that will also be a tough political position for Republicans to take.

For all those reasons, I have trouble seeing how means testing Social Security actually makes it politically vulnerable. Now, I wouldn’t just propose it either. It’s something Republicans want and can be used as a bargaining chip. But it’s also a smart policy idea. If Democrats could trade it for an increase in the EITC or using CPI-E to adjust Social Security benefits (once the BLS perfects it), that would be a win-win.

Categories: Domestic Policy

Update and Links

April 19, 2014 Leave a comment

It’s been far too long since I’ve updated this blog. It’s been a fast five months and I plan on keeping this site updated much better in the future with articles I’ve written and hopefully some original content here as well. If you follow me on Twitter, you know that I moved from Business Insider to The New Republic in mid-February after a few months at BI. At TNR, I’m working with Nora-Caplan Bricker on a soon-to-be-launched (and yet unnamed) policy vertical under Jon Cohn. I’m focusing on the economy and economic policy, but have also written pieces on a host of other issues.

If you want to check out some of my work from Business Insider, you can do so here. I’m going to consistently update this site with links to my writing at TNR. In addition, I’m debuting a weekly newsletter this week that will contain links to all of my work and any radio or TV appearances. (Those are infrequent at this point.)

Here’s a short list of what I wrote at TNR this past week:

Top 3

1. Renegade Rancher Cliven Bundy is Nothing Like Mahatma Gandhi. I rebut an article by National Review‘s Kevin Williamson in which he compared Bundy, the rancher in Nevada who refuses to recognize the federal government and took up arms against federal officials last week, to Gandhi. Williamson’s point, which he made better on Twitter, is well taken: At times, breaking the law is okay. But Bundy’s actions were not one of those times. He has broken the law for two decades by grazing his cattle for free on federal lands, the federal government finally cracked down on him, and he nearly attacked federal agents for doing so. That’s nowhere near the same realm as Gandhi.

2. The Real Reason Liberals Support Higher Taxes on the Rich. In a recent article for Slate, Zachary Karabell made the same mistake that most conservatives do when they argue against more redistribution. They believe liberals are looking to just tear down the rich, instead of to help everyone else. Instead, liberals want to use the revenue from higher taxes on the rich to fund expansions of the Earned Income Tax Credit and other programs targeted at low-income households. The higher taxes are a means to do so, not an end in and of themselves.

3. Janet Yellen is Looking Out for the Long-Term Unemployed. Here, I look at two recent speeches by Federal Reserve chair Janet Yellen. She has reiterated her belief that an improving economy will lead to greater employment opportunities for the long-term unemployed. In doing so, she has made clear that she intends to keep the Fed’s current policy path and not prematurely tighten policy as many inflation hawks wants the committee to do.

What Else?

  • There is no reason we need to simplify the number of tax brackets in the tax code. In the digital age, we can make an infinite number and it’s not an issue.
  • The tax code leaves childless workers behind.
  • An interview with Robert Shiller on his idea to insure against catastrophic income inequality in the future.
  • A Pew chart on the changing demographics in the U.S. and the political risk that poses to the Republican Party.
  • A chart of the counties that pay the most and least federal income taxes.
  • And a map of the current unemployment rate in all 50 states.

That’s it for this week. Thanks for reading and check back often!

Categories: My Life
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