Wednesday, August 14, 2013

Paul Ryan's War on Old and Disabled Americans

From the Economic Policy Institute: Social Security is the Most Effective Anti-Poverty Program in the U.S., In One Chart

Last month the U.S. House Committee on the Budget is held a hearing on the progress of the War on Poverty. While the United States is still slowly recovering from the worst recession since the Great Depression, fortunately this time around government safety net programs have been in place to keep more people from falling into poverty. The Supplemental Poverty Measure (SPM) shows the strength of the government to mitigate the incidence of poverty.

As the figure below shows, Social Security is, by far, the most effective anti-poverty program in the United States. Without Social Security, an additional 8.3 percent of Americans, or over 25 million more people, would fall below the SPM poverty threshold. Refundable tax credits, such as the Earned Income Tax Credit, kept 2.5 percent, or nearly 8 million Americans above the SPM poverty threshold. Other programs such as SNAP (food stamps), unemployment insurance, Supplemental Security Income, and housing subsidies also have a significant impact on the ability of families to stay afloat.

Click chart to enlarge

Social Security curbs poverty

From Brad DeLong: Why We Need a Bigger Social Security System with Higher, Not Lower Benefits

Edward Filene's idea from the 1920s of having companies run employer-sponsored defined-benefit plans has, by and large, come a-crashing down. Companies turn out not to be long-lived enough to run pensions with a high enough probability. And when they are there is always the possibility of a Mitt Romney coming in and making his fortune by figuring out how to expropriate the pension via legal and financial process. Since pension recipients are stakeholders without either legal control rights or economic holdup powers, their stake will always be prey to the princes of Wall Street.

That suggests that what we really need is a bigger Social Security system--unless, of course, we can provide incentives and vehicles for people to do their retirement saving on their own. But 401(k)s have turned out to be as big a long-run disaster as employer-sponsored defined-benefit pensions when one assesses their efficiency as pension vehicles.

And so let me turn the mike over to James Kwak:

The Problem with 401(k) Plans: Ian Ayres has made a lot of people upset, at least judging by the Wall Street Journal article about him (and co-author Quinn Curtis) and indignant responses like this one from various interested parties. What Ayres and Curtis did was point out the losses that investors in 401(k) plans incur because of high fees charged at the plan level and high fees charged by individual mutual funds in those plans. The people who should be upset are the employees who are forced to invest…. Ayres and Curtis estimate the total losses caused by limited investment menus (small), fees (large), and poor investment choices (large)…. What really annoyed people in the 401(k)) industry (that is, the mutual fund companies that administer the plans and the consultants who advise companies on plans) was Ayres and Curtis’s charge that many plans are violating their fiduciary duties to plan participants by forcing them to pay these fees….

The response of the industry has been one of righteous indignation and blanket assertion. For example, Drinker Biddle huffs, “In our experience, most plans are well-managed.” 401(k) plans provide different “services,” so different plan-level fees are appropriate; and high fund fees are OK because “it is commonly accepted that the use of actively managed funds is prudent.” Just because lots of rent-seekers say so doesn’t make it so…. There’s no good reason not to just provide a lineup of cheap, big index funds with low costs and low tracking error….

So yes, most plan sponsors and administrators are violating their fiduciary duties…. Not that they should stay up nights…. The courts have for the most part endorsed current behavior, probably “reasoning” that if everyone’s doing it, it must be OK. But anything Ayres and Curtis can do to draw attention to the problem of high fund fees and plan fees will help move us closer to the day when workers don’t have to pay for their companies’ poor choices.

I disagree: they should stay up nights. Chances that they will be hauled into a this-world court are low, it is true. But they do have to worry about how they are going to bear looking into the mirror in the bathroom when the sun rises.

Paul Ryan war on the poor

Paul Ryan's Opening Statement: The War on Poverty: A Progress Report

Forty-nine years ago, Lyndon Johnson declared war on poverty. In 1964, he said, “We have declared unconditional war on poverty. Our objective is total victory.” Later that year, he added, “I believe that thirty years from now Americans will look back upon these 1960s as the time of the great American Breakthrough . . . the victory of prosperity over poverty.”

Since then, we’ve spent over $15 trillion in that war. So what do we have to show for it? Well, today 46 million people live in poverty. And 20 million Americans live on less than half of the poverty level. For too many families, the American Dream is out of reach.

Now that’s partly because of the recession. But even as the economy picks up steam, millions of families are falling behind. And many communities have been hurting for years—well before the recession hit. The fact is, we’re losing the War on Poverty. And we need to know why.

This isn’t about cutting spending. This is about improving people’s lives. In this country, the condition of your birth shouldn’t determine the outcome of your life. If you work hard and play by the rules, you can get ahead. That’s something we all believe in. That’s something we all care about.

This is the central promise of America. We want to protect that idea—and preserve it for the next generation. And government has a role to play. But we’ve been doing a lousy job. The reason is, government focuses too much on inputs. We focus on how much money we spend. Instead, we should focus on results. We should focus on how many people get off public assistance—because they have a good job.

The federal government is like a giant sedimentary rock. There are layers upon of layers of programs that have built up over time. In fact, there are so many of them—and there is so little coordination between them—that they work against each other. In effect, we penalize people for finding a job or getting a raise.

And even worse, some programs displace the efforts of local communities to help families in need. Government shouldn’t displace these efforts. It should support them.

So I hope today’s hearing will start a conversation. Both sides need to rethink government’s approach to poverty. How can we support our local communities? How can we renew the American Idea?

From Kathleen Geier: 'No, Walmart Doesn’t Create Jobs'

Because it’s a such a slow news day, and because the DC big box living wage bill is still in the news, I thought I’d write about the Walmart piece I published in earlier this week.

One of the most compelling-seeming arguments that the pro-Walmart forces have been making is that DC should reject the bill and welcome Walmart into the community, because Walmart would create many much-needed jobs. So I decided to look at what the research says about Walmart’s impact on employment. Guess what? Contrary to the happy talk, Walmart does not create jobs. Actually, it kills them.

Here’s why: first, at the local level, all Walmart does is put mom-and-pop stores out of business. The overwhelming body of evidence, including the most rigorous peer-reviewed studies, suggest that when Walmart enters a community, the result is a net loss of jobs, or at best, that it’s a wash. In fact, the biggest, best scholarly study about the impact of Walmart on local employment was done by an economist at University of California at Irvine named David Neumark, who is not exactly a wild-eyed liberal. He’s the kind of economist, actually, who writes anti-minimum wage op-eds for the Wall Street Journal.


  1. When Paul Ryan says, "Some programs displace the efforts of local communities to help families in need." --- he's referring to programs like food stamps and local churches and charities.

    A couple of weeks ago Al Sharpton and his guests were on MSNBC discussing the GOP's NEW plan to cut food stamps by $40 billion. They said that one Republican congressman, at a hearing on the poor this week, asked why the churches weren't doing more.

    Al Sharpton said, "So the next time we should just ask the churches to bail out the banks?"

    The next time Wisconsin is hit with a blizzard we should call the local charity to plow the streets?

    Paul Ryan hates ALL government. The churches and charities have already been overwhelmed since the Great Recession. Paul Ryan is a putz.

  2. Rep. Markwayne Mullin (R-Okla.) thinks people who are physically fit and using food stamps must be committing "fraud," he said. "Absolute 100 percent, all of it is fraud. There's fraud all through that."