Fresh audio content
Just added to my radio archives (click on the date to get the audio links):
May 16, 2013 Barbara Garson, author of Down the Up Escalator, on how people are coping with the Great Recession, its aftermath, and 40 years of general decline (updates to the book here)
Deficit emergency over
The Congressional Budget Office’s latest debt and deficit projections for the next ten years are out and there’s no way any honest analyst could read them as anything but the official end to any rational concern about red ink.
Of course, given that the phantasmic plays such a large role in politics, it’s likely that important people will still worry about fiscal ruin. But to the degree that reality exerts even a weak gravitational pull on discourse, it should be harder to generate the sense of emergency that austerians thrive on.
From the CBO’s summary:
If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $642 billion, CBO estimates, the smallest shortfall since 2008. Relative to the size of the economy, the deficit this year—at 4.0 percent of gross domestic product (GDP)—will be less than half as large as the shortfall in 2009, which was 10.1 percent of GDP.
Because revenues, under current law, are projected to rise more rapidly than spending in the next two years, deficits in CBO’s baseline projections continue to shrink, falling to 2.1 percent of GDP by 2015.
And a featured graph:
The graph shows the sharp rise in the debt/GDP ratio that came with the Great Recession is nearly over, and the line is about to go flat—flat at a level well below the now-discredited 90% danger level that Carmen Reinhart and Kenneth Rogoff got people all worried about until their work was exposed as bogus. According to the spreadsheet that accompanies this release, the CBO projects the 2023 federal debt/GDP ratio to be 73.60%, down from 75.07% today. (You gotta love projections for ten years hence that are carried out to two decimal places.) Over the next 10 years, they project revenues to rise by 1.6 percentage points of GDP, and spending to rise by 1.0 points, for a (rounded) shrinkage in the deficit of 0.5 points. (Before rounding, the decline is 0.547774045234583 points, a hilarious level of precision.) The CBO projects this year’s deficit at 4.0% of GDP, which is very close to the 3.0% that many orthodox analysts regard as trivial.
The spending projections for the next decade are quite austere. Social Security’s share of GDP is slated to rise by 0.4 percentage points, and health spending (Medicare, Medicaid, etc.) by 1.0 point, but other major spending categories will decline. Mandatory spending other than Social Security and health will fall by 0.4 points; military spending, by 1.2 points; and civilian discretionary spending (which includes much of the civilizing stuff, like education and environment), by 0.9%. Whether that level of austerity is politically sustainable is an open question—people purport to hate government spending in the abstract, but when it gets down to specifics, the politics get a lot rougher. But these projections are basically what will happen if we continue on the path set by current law.
This being American politics, it’s time to bring the rational, evidence-based portion of this post to a close. Austerians are driven by a mix of irrational anxiety and a desire to take benefits away from all but the rich. Benefits create expectations, and dilute the power of labor market discipline, both of which are potentially explosive. People don’t like to have things taken away from them, so it helps to create a sense of emergency to lubricate the process.
So what will the fiscal sadists do? The CBO itself offers a hint of how to maintain deficit hysteria—the deficit will rise from 2020 to 2023, and could get really bad in the late 2020s (though they don’t provide any numbers). Egads! But the rise in the debt/GDP ratio from 2020 to 2023 is all of 2.2 percentage points, to a level still below today’s—and projections 15 or 20 years into the future are a thin support for drastic action today. (This is further proof of the rule that one should always read the numbers before the prose in official reports like these.) But that doesn’t mean fiscal hawks won’t piss and moan. They will. But their emoting will either have to get even more phantasmic—or more nakedly class war-ish.
If only we could get important people to show this level of long-term anxiety about atmospheric CO2.
Fresh audio product
Just posted to my radio archives:
May 9, 2013 Corey Robin, political scientist at Brooklyn College and author of The Reactionary Mind, on how the right thinks (with additional discussion of this essay on Nietzsche, Hayek, etc.)
May 2, 2013 Mark Blyth, author of Austerity: The History of a Dangerous Idea, on just that
April 25, 2013 Alex Vitale on the militarization of police forces • Josh Eidelson on spreading worker actions against Walmart and fast food
Fresh audio product
Just posted to my radio archives:
April 18, 2013 Minqi Li on the Chinese economy • George Ciccariello-Maher, author of We Created Chavez, on the social movements that allowed for Hugo Chavez’ emergence and he in turn stimulated
April 11, 2013 Tom Mills (author of this article) and Richard Seymour (author of this one) on the dreadful Margaret Thatcher
A reminder: sometimes I’m slower updating the web page than I am uploading the audio files. If you want quicker access, subscribe to the podcast. Details on the archive page.
Money porn
Institutional Investor’s alpha is out with its annual ranking (The Rich List) of top hedge fund earners, which always provokes meditation on our upper class. In 2012, the top 25 hedgies collectively earned $14.14 billion. That’s the lowest since 2008, but down only 2% from 2011. It is also equivalent to the collective income of 1.3 million of the poorer households in the U.S.
In the magazine’s telling, this year the markets rewarded “the fearless investor,” who ignored all those macro worries—a crappy U.S. recovery, implosions on the periphery of Europe, etc.—and stayed boldly long. At the top of the list was David Tepper, who made $2.2 billion last year. Tepper, you might be surprised to learn, said a couple of years ago that he was “tired of making money” and wanted to start giving it away. Less surprisingly, Tepper wants to put some of it to work kicking around teachers’ unions and promoting charter schools and vouchers (“Hedge fund manager readies for battle with NJEA to reform NJ schools”). In second place, Ray Dalio at $1.7 billion, less than half what he made as 2011’s #1. Dalio is best known for doing transcendental meditation, and also for cultivating a brutal, chilly, even cult-like atmosphere at his firm, Bridgewater Associates (The Billion-Dollar Aphorisms of Hedge Fund Cult Leader Ray Dalio). Together, Tepper and Dalio earned as much as almost 350,000 poorer households.
In standard theory, income is a reward commensurate with what one produces. What do guys like these produce? Profits for their investors.
technical notes
alpha, the name of II’s magazine, is investment jargon for returns in excess of what can be explained by market averages, adjusted for risk. It’s supposedly the measure of a money manager’s skill, which is not easy to tell statistically from luck.
The income calculation is this: the average income of the poorest 20% of U.S. households was $11,239 in 2011. Divide that into $14.14 billion and you get 1.3 million poorer households.
The economic consequences of student debt
The Federal Reserve Bank of New York is out with new research (“Young Student Loan Borrowers Retreat from Housing and Auto Markets”) showing that student debt is not merely painful to those owing it, but has also become economically damaging. The debt service burden is essentially neutralizing, or worse, the income advantage of having earned a bachelor’s degree or more, at least as measured by the ability to buy a house or a car.
Over the last decade, the share of 25-year-olds with student debt has risen from about 25% in 2003 to 43% in 2012, and their average debt burden has nearly doubled, from $10,649 in 2003 to $20,326 in 2012. At first this seemed to have few economic consequences; from 2003 to 2009, the homeownership rate of people with student debt was significantly higher than that of those without student debt—which isn’t surprising, given the income premium still enjoyed by those with education after high school. That changed during the Great Recession, as homeownership rates fell across the board. But those for student debtors fell harder than others, and as of 2012, the homeownership rate of those with student debt was lower than those without.
Something similar is true of car ownership: a higher proportion of those with student debt have historically borrowed to buy new or late-model used cars than those without student debt. That changed during the recession too. Now the rates are about the same.
It looks like student debt is replacing other kinds. Despite the rise in the student debt burden, the overall indebtedness of those still paying for their degrees has declined, meaning that they’ve pulled back markedly from more traditional forms of borrowing. This is, the New York Fed researchers conclude, probably the result of joint decisions by both borrowers and lenders. Student debtors have probably concluded that their future earning prospects are pretty crummy, and that paying down their loans will claim a painfully large chunk of their income. Why add to the problem by borrowing more to buy a house or a car? And lenders are no doubt spooked by all that lingering education debt (especially given high and rising delinquency rates). Credit scores of those with and without student debt were once pretty similar, but they diverged around 2008. As of last year, the average Equifax credit score for a 30-year-old with student debt was 24 points below the average for those without student debt; for 25-year-olds, the difference was 15 points. And that’s despite the theoretically greater earnings potential for the degreed.
Car sales have recovered since the recession lows, but they remain well below their long-term trend. And the recovery from the housing bust has been very weak. Weakness in both these markets, especially housing, has been a major drag since the economy officially bottomed out in 2009.
It’s nice to imagine an economy where the purchase of cars and houses using gobs of borrowed money would be less central to material well-being, but we’re a long way from that. It looks like student debt, aside from being a miserable burden on those paying it, is harming the broad economy, and will continue to for years to come.
Fresh audio product
Just uploaded to my radio archives:
April 4, 2013 Kate Losse, who spent five years at Facebook and wrote about it in The Boy Kings, on Sheryl Sandberg’s “lean-in”corporate feminism (which she reviewed here) • Ahmad Shokr, historian and journalist, on Egypt’s economic troubles
Fresh audio product
Just uploaded to my radio archives:
March 28, 2013 Terry Kupers on the psychological effects of prison • Haley Sweetland Edwards, author of this article, how Wall Street took over Dodd-Frank
March 21, 2013 Yanis Varoufakis on the economies of Australia, Cyprus, and Greece • Jonathan Westin of Fast Food Forward on organizing fast food workers in NYC
Fresh audio product
Just uploaded to my radio archives:
March 14, 2013 Özgür Orhangazi, author of this paper, on the economics of Venezuela under Hugo Chávez • George Ciccariello-Maher, author of the imminently forthcoming We Created Chavez, on the politics of Venezuela under Hugo Chávez
Fresh audio product
Just uploaded to my radio archives:
March 7, 2013 Robert Gordon on the end of growth (paper here) • Adolph Reed, author this review essay, on some recent “race” movies (Django Unchained, etc.)
Clarification on crappiness
I want to make it clear that my characterization of the health insurance that Stop & Shop has been providing some of its workers, which Obamacare is causing the company to want to drop, as “crappy” was entirely mine, and not Lara Shepard-Blue’s. She’s a much more responsible and measured person than I, and sorry if it looked like I was putting words in her mouth.
Give to KPFA, get this premium
If you like my radio show, Behind the News, then please give some money to KPFA, which in the closing days of a fund drive. I wouldn’t do the show if it weren’t for KPFA, and they’ve been very generous in giving me not only a show but one in a nice timeslot. For a pledge of $75, you can get a CD containing 37 interviews I’ve done since 2002. The CD is a collection of MP3 files, not an audio CD, to you can’t pop it into every CD player. But it’s a lot of stuff, and it makes me feel good to look over the list.
Pledge to KPFA here:
And here are the interviews on the CD (dates in parentheses are dates of first broadcast):
Amiri Baraka (1/11/07) poetry in New Jersey, politics in Newark Frank Bardacke (11/29/12) Cesar Chavez and the United Farm Workers Moustafa Bayoumi (8/14/08) being Arab in the US Ian Bone (3/15/07) anarchist organizing and the hideousness of the rich Dennis Brutus (12/31/09) poet and activist on South Africa (includes some poems) Alexander Cockburn (8/27/11) on the media, the media criticism racket, and the devolution of politics Hamid Dabashi (4/12/07) history and culture of Iran Jodi Dean (12/18/10) the political psychology of blogging Mark Dery (5/26/12) pop culture, beheading, David Bowie Robert Fatton (1/21/10) on the history and politics of Haiti (includes excerpts from two 2004 interviews) Barbara J. Fields (2/14/13) "racecraft": the ideology and practice of race and racism in the the U.S. Cordelia Fine (11/27/10) the questionable science of gender Robert Fitch (2/9/06) corruption and ossification in American unions David Frum (8/9/12) partial conservative renegade on the right and his roman a clef about life in DC Adolfo Gilly (3/13/08) Mexican history, on Latin America and his revolutionary pessimism Melissa Gira Grant (9/13/12) sex workers and their self-appointed rescuers David Graeber (8/13/11) money and debt Ursula Huws (10/2/03) work today David Cay Johnston (9/3/11) how the rich don't pay taxes Carrie Lane (4/9/11) how unemployed tech workers see themselves Catherine Liu (1/28/12) education, testing, anti-intellectualism, and the bogus politics of “anti-elitism” James Livingston (4/28/12) speaks up in favor of the consumer culture as a liberatory thing Jane McAlevey (12/6/12) how to revive organized labor Terry Moe (5/28/11) right-wing school “reformer” Bethany Moreton (6/6/09) religion and Walmart Leo Panitch and Sam Gindin (9/27/12) the emergence and structure of the U.S. empire Christian Parenti (7/2/11) climate change, state collapse, war William Pepper (1/23/03) MLK assassination Frances Fox Piven (11/19/11) OWS in the context of social movements Diane Ravitch (4/8/10) the monstrosities of education reform Adolph Reed (4/9/11) politics and race Corey Robin (10/1/11) the conservative mind Gary Shteyngart (9/23/10) on his novel Super Sad True Love Story, and American decline Joseph Stiglitz (8/15/02) U.S. economy, IMF Matt Taibbi (4/23/11) where all that Fed bailout moey went Gore Vidal (5/16/02) war on terror Richard Walker (11/13/10) the wreckage of California
Workers with crappy health coverage now facing none at all
My Facebook friend Lara Shepard-Blue, a union organizer in Western Massachusetts, just posted this grim bit of news:
The contract covering 42,000 Stop & Shop workers in MA, CT and RI expired last night with no agreement. The problem is the company’s Obamacare-prompted proposal to eliminate medical insurance and prescription coverage for part-timers. Because caps on coverage aren’t allowed under Obamacare and the current plan for PTers has a $20K cap, they say the cost of coverage for part-timers will increase to the same cost as for full-timers when this part of the law goes into effect.
That’s evade, not drop, though they’ll probably drop too
I wrote that last post when I was in a hurry to get out the door and pick up my kid. I said employers will “drop” coverage when Obamacare takes effect. I should have said they’ll evade the mandate by paying the penalty rather than the insurance premium. Most victims of this evasion don’t have health insurance now, so “drop” is clearly the wrong word for the set of workers that the FT article reported on.
But the original McKinsey survey was about employers who now offer health insurance who are likely to drop coverage when the scheme takes full effect next year. Quoting from my first post on the topic (Bye-bye employer health insurance): “30% of respondents to McKinsey’s survey ‘will definitely or probably stop offering ESI in the years after 2014’—but 50% of those with ‘high awareness of reform’ will do so.” Why? Because when employers without high awareness were informed of the government subsidies available for uncovered workers to buy insurance on the exchanges, they felt a lot better about dropping coverage and paying the penalty instead.
Clearly, if the mandate were to mean anything, the penalty would have to be a lot higher than $2,000. And equally clearly, a lot of costs are going to be shifted onto the government—more, it seems, than the architects of this crazy plan assumed.
Yeah, lots of employers are going to evade health coverage
Back in the summer of 2011, McKinsey released results of a survey they’d done of employers showing that many would not offer health insurance coverage when Obamacare* takes full effect. The liberal establishment united in loud criticism of the consulting firm’s report—but it’s looking like they were right. I wrote up the original report (“Bye-bye employer health insurance”) and experienced some of the loud criticisms, prompting a follow-up (“McKinsey: more right than wrong”) based on reading the full survey, something that some of the critics, including apparently Paul Krugman, hadn’t done.
Ah, vindication. Today’s Financial Times has has a front-page piece (“US business hits out at ‘Obamacare’ costs”) confirming the central point of the McKinsey survey: for many employers, it will be much cheaper to pay the penalties than cover full-time workers, and cut the hours for others so they fall under the definition of full-time and then don’t have to be covered. Retailers and fast-food chains are the most likely to do that, but there’s no reason that many other employers wouldn’t join in.
David Dillon, CEO of Kroger, put it succinctly: “If you look through the economics of the penalty the companies pay versus the cost to provide coverage, the penalty’s too low, or the cost of coverage is too high.” The penalty for not covering a worker is $2,000 a year—less than half the cost of covering a single worker ($4,664, according to the Kaiser Family Foundation), and less than a fifth the cost of covering a family ($11,429). Uncovered employees will be forced to buy coverage on the new insurance exchanges—with a government subsidy if their income is low enough—or pay the penalty themselves. You don’t need an MBA to figure out the math on that one.
As I said in my first post on the McKinsey survey: “In the short term, this could provoke a real social emergency, as scores of millions are thrown onto the private individual insurance market and forced to pay $1,000 a month for crappy coverage. But this could vastly increase the constituency for a single-payer scheme, such as Medicare for All—assuming our rulers don’t destroy Medicare first.” Still true.
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*Usage note: Liberals hate the term “Obamacare,” given its prominence in the right-wing playbook. But he’s the one responsible for this monstrosity. Obamacare. Obamacare. Obamacare.
LBO News from Doug Henwood 