Media & Politics

September 13, 2011

Graph of the Day: Poverty on the Rise in America

Benjamin Landy

According to new data released today by the Census Bureau, the percentage of Americans living in poverty rose to 15.1 percent last year, the highest level of poverty since 1993. In 2010 A record 46.2 million people were below the poverty line, defined as income less than $22,314 a year for a family of four and $11,139 for individuals. It was the fourth consecutive year that the number of people in poverty has increased in America. Real median household income fell 2.3 percent to $49,445—lower than it was in 1997 and barely a 25 percent improvement since the 1960s.

Unsurprisingly, the Census data shows that the Great Recession only exacerbated longstanding economic disparities between geographic regions and racial categories. In 2010, the poverty rate varied significantly in the United States, with Blacks, Hispanics, and the southern states experiencing far greater economic hardship than Whites, Asians, and the northern states.

 

 

Percentage of americans poverty stateSource: US Census Bureau                    

The highest poverty rates in the nation belonged to Mississippi, Louisiana, and Washington, D.C.—each with approximately one out of every five people living in poverty—while New Hampshire enjoyed the lowest rate, with just 6.6 percent below the poverty line.        

Americans in poverty by raceSource: US Census Bureau                

The 2010 Census data also confirmed that economic inequality between racial groups in the United States remains a major obstacle to social justice, with the poverty rate for Blacks nearly three times that of Whites. While poverty rates increased across the board, the setback was particularly dramatic for Blacks and Hispanics, erasing several years of economic gains.

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September 06, 2011

Taking Note is Now: Blog of the Century

The Century Foundation

We've changed our name and address. However we are leaving our content accessable here at Taking Note.  As of Tuesday, September 6th, 2011 All new content is at our re-named, newly addressed:

Blog of the Century and can be found at  http://botc.tcf.org

September 01, 2011

Graph of the Day: Did Stimulus Money Hire the Unemployed?

Benjamin Landy

According to a new research paper by economists Garett Jones and Daniel Rothschild, “Did Stimulus Dollars Hire the Unemployed?” published by the conservative Mercatus Center, less than half of all employees hired with American Recovery and Reinvestment Act funds actually came from the ranks of the unemployed. “Hiring isn’t the same as net job creation,” the report argues. “In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations … were unemployed at the time they were hired. More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%) … This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed.”

Unsurprisingly, conservative economists like Tyler Cowen see Jones and Rothschild’s research as proof that the stimulus failed. “This paper goes a long way toward explaining why fiscal stimulus usually doesn’t have such a great ‘bang for the buck,’” writes Cowen on his blog Marginal Revolution. “It raises the question of whether as ‘twice as big’ [sic] stimulus really would have been enough.”

Sources of workers ARRA funded organizations

However, if you look more closely at the numbers, an alternative, more optimistic story about the ARRA emerges. First of all, for each of the 47.3 percent of workers who left their jobs for new, ARRA-subsidized positions, it is likely that another worker, potentially one who was previously unemployed, took their place. That means that job-shifters weren’t taking away opportunities from the unemployed; on the contrary, their stimulus-sponsored job mobility created a trickle-down effect, leading to new hiring at the businesses they left. Even if only half of these ‘second-order’ hires came from the ranks of the unemployed, that means that the true percentage of ARRA-subsidized jobs going to the unemployed is closer to 66 percent, not 42 percent.

Moreover, the report does not specifically detail how many people were able to keep their jobs thanks to ARRA funds. Even if no new jobs were created, a large amount of the stimulus money that went to the states enabled local governments to employ workers that would otherwise have been laid off. And in fact, Jones and Rothschild’s research indicates that the average organization receiving stimulus funds equal to 10 percent of its annual revenue reported retaining or hiring workers equal to 6 percent of its workforce. Which helps explain why, according to Recovery.gov, over 550,000 have been created or maintained by ARRA funds just between April and July of this year.

Of course, no one is claiming that the ARRA funds have been apportioned or managed perfectly —$787 billion is a lot of money. But considering the time constraints that the Obama administration was working under, it would be unreasonable to expect that such a massive economic stimulus could be implemented without some waste. That being said, the CBO estimates that, relative to what would have happened without the law, the ARRA raised real GDP by between 1.5 percent and 4.2 percent in 2010, and boosted employment by as much as 3.3 million. That may be the kind of recovery that Cowen dismisses as not much "bang for the buck," but I'd wager that the majority of the 14 million Americans who are currently unemployed would like to see more such stimulus, not less.

 

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August 25, 2011

Graph of the Day: Is the "Great Recession" Really a Household Debt Crisis?

Benjamin Landy

“Why is everyone still referring to the recent financial crisis as the ‘Great Recession’?” asks Harvard economist and former IMF chief Kenneth Rogoff, in a recent article for Project Syndicate. “The phrase 'Great Recession' creates the impression that the economy is following the contours of a typical recession, only more severe – something like a really bad cold,” he adds. “But the real problem is that the global economy is badly overleveraged.”

Unfortunately, the American household is no exception. While political discourse has been dominated in recent months by arguments over our enormous national debt, climaxing with the tense mid-summer negotiations over the debt ceiling in Washington, the problem of household debt has gone largely unmentioned in the media. Now that is beginning to change, as a consensus develops among economists, pundits, and policymakers that Americans’ paralyzing mortgage and credit card debt is the main factor holding the economy back from recovery.

Household debt

The facts are these: although household debt peaked at $116,457 per household in 2008—nearly 100 percent of GDP at the time the financial markets collapsed—mortgage and credit debt has decreased merely seven percent as of 2010. The average American household would have to deleverage an additional 97 percent to return to 1976 levels. And while no one is arguing that household debt needs to be at those levels to restart the economy, it is generally understood that consumption will not increase adequately until Americans’ debts are significantly lower.

When we last experienced a deep recession in 1982, the household debt-to-GDP ratio was about 45 percent, or $17,286. So when the government adjusted its monetary policy, the economy was able to recover quickly. Today, with the average household still holding over $100,000 of debt, a more ambitious program will be required to return demand—and thus unemployment—to pre-recession levels.

Thankfully, a recent New York Times report indicates that the Obama administration may be planning just that. According to the article's sources, who would not be named, White House officials are currently weighing a variety of proposals to allow millions of homeowners to refinance their homes with government-backed mortgages at current low interest rates of about 4 percent, saving those homeowners $85 billion a year and creating a strong stimulus to the economy.

The Washington Post's Ezra Klein, for one, is not optimistic that this kind of government-backed refinancing program could work in the current political climate, but at least it proves that the administration is paying attention to the household debt problem and trying to come up with creative solutions to stimulate demand. Until we find a way to do that, millions of Americans will remain jobless, and the economic recovery will continue at its anemic pace. At the very least, the administration's recognition that the "Great Recession" is really a household-debt crisis sends the positive message that Obama's "pivot" to job creation is more than just hot air.

 

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August 22, 2011

Graph of the Day: In Defense of Warren Buffett

Benjamin Landy

Billionaire investor Warren Buffett became a controversial figure last week when his provocative op-ed, “Stop Coddling the Super-Rich,” landed prominently on the New York Times editorial page. “My friends and I have been coddled long enough by a billionaire-friendly Congress,” Buffett wrote. “It’s time for our government to get serious about shared sacrifice.” His suggestion, that the government immediately raise taxes on Americans making more than $1 million—and even more so on those making in excess of $10 million—set off a firestorm of criticism from conservatives.  

Among the more misguided attacks was a CNN.com opinion piece by Jeffrey Miron, a senior fellow at the Cato Institute and director of undergraduate studies at Harvard University, who outright dismissed the significance of increased government revenues. “The first problem with Buffett’s view,” Miron writes, “is that the number of super-rich is too small for higher rates to make much difference to our budget problems. . . . Imposing a 10% surcharge on this income would generate at most $73 billion in new revenue—only about 2% of federal spending.”

Miron is right that $73 billion won’t solve our “budget problems,” which I take to mean our $14.4 trillion national debt. Nobody is arguing that. But that hardly means $73 billion is inconsequential. In order to illustrate just how much money $73 billion is, I did some research to discover some of the things you could buy with that kind of money. The graphic below shows just a few examples.

73 billion final

If you were more militarily inclined, $73 billion could also buy you sixteen Nimitz-class nuclear-powered aircraft carriers—the largest and most powerful capital ship in the world—or 1,327 brand new F/A-18 Super Hornets from Boeing. And $73 billion could quintuple NASA’s operating budget, providing enough funds to develop and maintain an international lunar base for the next five years, according to CSIS cost analysis. Less than half that amount would provide safe drinking water for the entire planet, helping save the nearly 6,000 children who die every day from diseases associated with contaminated water supplies.

No matter how you choose to look at it, $73 billion is a lot of money. With all of the problems our country is facing today, can we afford to turn it down?

 

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August 19, 2011

A Speech for Our Hard Times

Harold Pollack

President Obama was giving a speech the other day. I heard something like the following:

Let me warn you and let me warn the Nation against the smooth evasion which says, “Of course we believe all these things; we believe in Social Security; we believe in work for the unemployed; we believe in saving homes. Cross our hearts and hope to die, we believe in all these things; but we do not like the way the present Administration is doing them. Just turn them over to us. We will do all of them- we will do more of them we will do them better; and, most important of all, the doing of them will not cost anybody anything.”

Continue reading "A Speech for Our Hard Times" »

August 16, 2011

Graph of the Day: For the Long-Term Unemployed, Finding a Job is Only Getting Harder

Benjamin Landy

For the long-term unemployed in America, life is only getting harder. While national unemployment remains high at 9.2 percent, near where the rate has been stuck for the last two years, the average number of weeks an unemployed worker has been jobless is still growing. According to the Bureau of Labor Statistics, if you are one of the 14 million unemployed today, you have been out of work, on average, for over nine months.

Avg weeks unemployedSource: Bureau of Labor Statistics                   

Unfortunately, more and more businesses are using current employment as a proxy for employability, meaning the long-term unemployed face mounting discrimination and ever diminishing prospects compared to their recently laid-off peers. And, unlike discrimination based on race, ethnicity, disability, religion, sex and age, employers are entirely within their legal rights to use unemployment –especially long-term unemployment – as grounds for rejection. So while the number of people unemployed for less than 5 weeks declined by 387,000 in July, the number of people unemployed for over 27 weeks barely changed, holding steady at 6.2 million.

Only New Jersey has outlawed this kind of discrimination, and although several other states are considering similar legislation, the 6 million Americans who have been without work for over six months are still in serious trouble. According to a new report by the National Employment Law Project - an advocacy group for the employment rights of low wage workers - the half-year mark is a watershed moment in the eyes of many employers. Many companies are far less likely, even unwilling, to hire people who have been unemployed for over six months.

Until the unemployed are able to find work, we should extend their jobless benefits for another six months, which studies show generates two dollars of economic growth for every one dollar the federal government spends. Without bipartisan support to extend these expiring benefits, many millions of Americans may find themselves in poverty when their unemployment insurance checks stop coming at the end of this year.

 

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August 15, 2011

Rick Perry’s Book is Really Bad

Harold Pollack

(Cross-posted at the Reality Based Community)

Matt Yglesias and Ezra Klein both review Texas Governor Rick Perry’s book, Fed Up! Our fight to save America from Washington.

Matt notes what he calls “The ten weirdest ideas” in that book. Many of Perry’s ideas are, indeed, weird, such as the claim that Al Gore is part of a conspiracy to deny global cooling. Yet if I were grading Matt’s review, I would be forced to deduct points for redundancy. I’m just not convinced that Matt digested this complex work with the kind of detailed textual analysis that (say) Rabbi Adin Steinsaltz applied in several ancient and modern languages to the Talmud….

Continue reading "Rick Perry’s Book is Really Bad" »

August 12, 2011

Graph of the Day: Consumer Confidence Plummets

Benjamin Landy

With millions of Americans out of work, slow economic growth, and now Standard and Poor’s downgrade of U.S. debt, consumer confidence is plummeting to new lows. According to the latest Gallup poll, Americans’ economic confidence has fallen to a level last reached in the depths of the great recession in 2009.

 

Consumer confidence 1Source: Gallup                    
Consumer confidence 2Source: Gallup               

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August 04, 2011

Graph of the Day: Can Higher Education Solve the Jobs Crisis?

Benjamin Landy

With the fragile U.S. economy struggling to recover and millions of Americans still out of work, many pundits and policy makers have taken to claiming that high unemployment is a structural, not cyclical problem. In other words, the issue is not that there is low consumer demand -- and therefore low demand for workers -- but rather that unemployed workers do not have the skills or education that employers require. Further, it is claimed that as the economy returns to full employment, businesses will be stymied by a significant lack of qualified college graduates.

However, a recent report (PDF) by the Economic Policy Institute shows that there is little evidence to support the claim that higher education is the solution to the current jobs crisis, including rising wage and income inequality.

Job seekers ratio

According to Lawrence Mishel, the author of the report, there have been far too few job openings for all of the unemployed looking for work, suggesting the underlyling economic problem remains cyclical low demand. As the above graph from the report shows, the ratio of unemployed workers per job opening remains nearly twice as high as at the peak of the 2001 recession. And the current jobs shortfall is not just in one or two affected industries, like construction, but across all sectors. Neither does one education group account for the increase in long term unemployment, as the structural argument would suggest.

If high unemployment was truly a result of a wider skill-biased technological shift, then we should expect that the median wage of workers with a bachelors degree be improving relative to workers without any college experience, following the law of supply and demand. However, as the following graph from the EPI report illustrates, neither college graduates nor high school graduates saw increased median weekly wages during the last decade; in fact, wages actually declined slightly from 2000 to 2009.

Median weekly wages

The immediate problem, Mishel concludes, is that workers face "a wage deficit, not a skills deficit," as a result of the slow economy, which could be temporarily helped by further stimulus through government spending. However, he warns that the larger problem of stagnant wages may be explained by the immense widening of the income gap since the late 1970s. While the wages of the bottom 90 percent have grown only 16 percent in the last three decades, wages grew twenty times faster for the top 0.1 percent -- up 324 percent since 1979.  

Growth in annual earnings by wage group

As I explained in a previous post, wages stopped tracking productivity in the mid 1970s. Around 1973, wages for the bottom 90 percent began to stagnate, while wages for the top 10 percent and productivity nearly doubled. Clearly, expanding higher education alone will not solve the current unemployment crisis, nor the more fundamental disparity between income levels and productivity in this country.  To address those underlying issues will require progressive policies, political courage, and the grass-roots renewal of those American values that we seem, in recent years, to have forgotten: collective responsibility and civic duty.

 

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