Tuesday, September 18, 2012

The Romney Video

Stuck in the rain and can't go play so I have been reading more stuff about  the Romney kerfuffle than any decent person ought to.  For those who have lives, I recommend David Shaviro on the incoherence of the tax analysis; Kevin Drum on what it says about Romney's people skills; Brad Plumer with tax chart porn.

But let me throw in one more issue.  Start by stipulating that the video convicts Romney of being far more stupid and evil than many thought him to be.  Grant that a serious society helps those who need help and grant also that the Friedman/Reagan earned income tax credit is a legitimate piece of public policy.  Still, go back to the David Brooks datum (lifted from AEI) that in 1960, 30 percent of Americans got some sort of government support; now we are up to 49 percent.

I'm sure one could quarrel with the content of this number.  And I'd concede that one reason for the increase very likely is the fact that we've expanded our definition of what matters should concern us.  Still it must be that one reason for the increase is that we simply have far greater needs today than we did so often in the past, even as measured by narrow and conventional definitions.  

Or perhaps restate it this way: we have simply lost the knack for providing decently-paying employment at a level that we took for granted back before the first Arab oil shock in the 1970s.  And a society that cannot find decent work for the multitude is a society in trouble.  Setting aside the aged and the genuinely infirm (and perhaps a few moochers like Mitt Romney), I suspect that when push comes to shove, most people want the chance to make a life for themselves.  A society that cannot formulate that framework is a society in trouble.  Forget about whether we can provide present levels of support--we can--the question remains whether we are happy with a society that impels us to do so.  


marcel said...

One major part of the increase is purely demographic - seniors on SS are a much larger fraction of the population than 50 odd years ago.

Anonymous said...

I looked into this for you and found that the 49% number is utterly bogus. First, the previous comment is absolutely correct. The proportion of seniors (people over 65) has risen from 9% to 13% since 1960. This means that the number of households with a social security has risen as well.

But this is just boring demographic change. So lets look deeper into the original article: http://www.templetonpress.org/nation-takers

Lower down he breaks things down more so we have the slightly less bogus number of "over 30%" of households which receive "means-tested benefits" compared with 17% in 1980. Luckily for us, he provides us with a reference:

There are two things of note here. First, this is the estimate for 2009 which is the bottom of the deepest recession since the WW2.
Second, this is the proportion of population living in households where at least one person receives benefits, not proportion of households receiving benefits.

Lets unravel the first item by looking at the equivalent report for 2007, just before the recession:

If you scroll down to table 531, you'll see that the rate there was 26.3%, so 4 points of the difference is about people being thrown onto public assistance because they were laid off during the recession.

Now lets look at the second point above. I wanted to check his numbers for the beginning of his range (17% in 1980), but there was no equivalent chart going that far back. Instead there was a different table, one actually showing the percentage of households that received support. It is not possible to compare directly between "Persons Living in Households Receiving Selected Noncash Benefits" and "Households Receiving Means-Tested Noncash Benefits", because we can't be sure that household size is uniform between those receiving benefits and others.

Finally, I found the missing key. The report from 2007 marks the transition: http://www.census.gov/prod/2006pubs/07statab/socinsur.pdf

Before 2007, they only show percentage of households. Afterwards they only show percentage of persons *living in* households. But in that report, they show both an estimate of the former in 2002 and the latter in 2004. See tables 529 and 530.

We can see, looking at chart 529 that he gets his 17% number from this chart (or an equivalent one). Which he then directly compares with the 30% number. This is comparing two very different numbers and we can see how different by looking here.

The estimate from chart 529 is 20.2% and the estimate from chart 530 is 26.4%. This gives us an idea that households with benefits are larger than those without. And it also shows us that the rate was flat between 1995 and 2002 and also between 2004 and 2007. So we have accounted for 10 points of the difference by looking for the effects of the great recession and his methodological errors.

Overall, there was an increase from about 17% to 20% in the early 90s of households with benefits. And there was an increase of about 26% to 30% of people *living* in households where at least one person received benefits between 2007 and 2009, probably caused by the great recession.

These are important changes but not a 'restructuring of society' or 'half the population can't find good work' kinds of changes. The 49% number includes major demographic changes unrelated to poverty or work. The 30% number is mostly a methodological error and the effects of the great recession.

Ken Houghton said...

I was going to point out that the EITC--a program that any good economist will tell you produces 70% of its benefit to employers (in the former of lower wages) not the recipients--accounts for a decent chunk of the change (though not so much as Medicare/Medicaid, which is the reason AEI had to cherry-pick then instead of, say, 1970 or 1973 or any of the other Usual Suspects).

But Anonymous did such a good job of destroying the mantra in the first place that it seems unnecessary.

bjdubbs said...

I look around and see plenty of work. There's never a shortage of work. I also look around and see a ton of televisions on the curb, thrown away and not being picked up. And if we can afford to pay "present levels of support," then we can pay for work. So no shortage of work and no shortage of wealth. Yeah, nothing's changed. Same as it ever was.

Ebenezer Scrooge said...

Our host describes the traditional Japanese welfare system: little direct redistribution to individuals, but plenty of opportunities to hold decent-paying jobs, whether they were economically needed or not.

That was also a basic divide between US Progressives and New Dealers in the 1930's. (Many Progressives hated they New Deal. They were strongly opposed to the New Deal's direct income transfers, but didn't mind a regulatory system that encouraged indirect income transfers.

Dan Mulligan said...

Please do not quote David Brooks or the American Enterprise Institute for any FACT ever again.

Thank you.