…because I’m an economist and a mom–that’s why!

“Preferring” Our Breast (Pumps)?

October 28th, 2010 . by economistmom

OK.  I feel that I’ve got to use my “comparative advantage” to say something “economic” about something most economists can’t speak from personal experience on:  breast pumps.

I read this story in yesterday’s New York Times (coincidentally on my train ride up to New York) and was amused.  The story explains that the cost of breast-feeding equipment is not considered a tax-deductible medical expense, even under the new health reform law, and complains this doesn’t seem right given that:

Denture wearers will get a tax break on the cost of adhesives to keep their false teeth in place. So will acne sufferers who buy pimple creams.

People whose children have severe allergies might even be allowed the break for replacing grass with artificial turf since it could be considered a medical expense.

But nursing mothers will not be allowed to use their tax-sheltered health care accounts to pay for breast pumps and other supplies.

I happen to agree with breast-feeding advocates that breast feeding is a good practice, with psychological and physical health benefits to both mom and baby that extend for years.  I happen to have breast fed all of my own (four) babies (not all at once of course), and I am one of those working moms who needed a good breast pump to use when I returned to work and decided it was worth paying a lot of money for this good “investment.”  (Here’s the equivalent newest version of the one I had, which I recall seemed a lot more expensive 15-20 years ago, but maybe that’s because my real and not just nominal income has increased.  I don’t think technology advances have had the same effect on breast pump prices as on flat-panel TVs…)

But a breast pump is not a health-related expense, as it’s not necessary in order to treat a medical condition or ailment.  It’s a work-related expense that happens to promote or be consistent with a healthy activity.  For the vast majority of women without severe obstacles to breast feeding the natural way (direct from the source!), breast pumps are not necessary in order to breast feed one’s baby unless and until mom goes back to the office and can’t have baby with her.

Given that this is mostly a work-related expense, it’s more consistent with expenses such as transportation and parking expenses, which employers often pay a portion of and which receive “preferences” under the federal income tax (nearly $500/month can be excluded from taxable income).  Or child care expenses which also receive generous tax treatment on the grounds that they are work-related expenses.  If breast-feeding, working-mom advocacy groups want to argue for a tax preference for breast-feeding equipment, I think they ought to argue it on gender-equity grounds as a cost of earning income that disproportionately burdens working women (moms with the breasts, duh!) more than working men.

If breast pumps were to be given tax-preferred treatment as a health-care expense just because it’s a piece of equipment that makes it easier to engage in a healthy activity, I’d say it would be hard to draw the line.  That would be equivalent to not just allowing the cost of (health-enhancing) yoga classes to be deductible as a health-related expense from taxable income, but allowing the cost of one’s yoga mat, props, and maybe even cute yoga clothes to receive tax exemption, too.

I Fear the Fear of the Fear Mongering More Than the Fear Mongering Itself

October 26th, 2010 . by economistmom

I’ve recently seen this commercial produced by Citizens Against Government Waste on prime-time TV.  I think it’s what those who oppose efforts to reduce the deficit refer to as “fear mongering.” I think it does qualify as “frightening” and if not a total exaggeration is at least overly dramatic in its depiction of the Chinese as an evil enemy.  What bothers me about the motives of CAGW in putting out this ad is that they’re trying to scare people into supporting… NOT less borrowing, but really lower spending and lower taxes.   As CAGW themselves explain (emphasis added):

The new ad is part of an ongoing communications program in CAGW’s decades-long fight against wasteful government spending, increased taxes, out-of-control deficit spending, and a crippling national debt that threatens the future and survival of our country.

In other words this is intended to scare people into supporting the false notion that we can reduce the debt by reducing spending–and only “wasteful” and the vaguely-defined “out-of-control deficit” spending at that–alone.  This is delusional.

Yet I think I fear the anti-fear-mongering ads put out by the “Our Fiscal Security” folks even more.  These ads poke fun of the fiscal hawks and essentially bully people into not believing the “scary” facts (yes, facts) that fiscal hawks emphasize, by exaggerating how the facts are presented.  Their bottom line:  “It’s only scary if you believe it.” This group wants to scare people into opposing any cuts to entitlement spending.  They want to reduce the deficit by tax increases alone.  But they are going about it by suggesting the whole claim that large deficits are a problem is a false one.  This “fearing of the fear mongering” troubles me a bit more.  The first type of “fear mongering” is delusional in perpetuating the notion that tax cuts can be consistent with deficit reduction.  But this second type of “fear-the-fear-mongering fear mongering” is more dangerous because it encourages people to ignore the facts and live in denial about not just how to solve the fiscal challenges facing our nation but there being any problem at all.

So you have one side trying to fear monger you into the contradictory positions of supporting deficit reduction but opposing any tax increases, and the other side trying to fear monger you into ignoring the facts about the deficit so that you’ll oppose any cuts to benefits.  This isn’t helpful.  I can’t wait until the election is over and the fear mongering on both sides dies down a bit.  For now, if you don’t already fear this fear mongering, then at least be very wary of it.

Now Isn’t the Time to Cut the Deficit–But It’s Still a Great Time to Commit to It

October 25th, 2010 . by economistmom


Here’s a very nice column in the New York Times by the only-very-recently-former Council of Economic Advisers Chair, Christina Romer.  The Times gave it the headline: “Now Isn’t the Time to Cut the Deficit”–emphasizing this part of Christina’s message:

Now is not the time. Unemployment is still near 10 percent in the United States and in Europe. Tax cuts and spending increases stimulate demand and raise output and employment; tax increases and spending cuts have the opposite effect. This is a basic message of macroeconomics and a central feature of public- and private-sector forecasting models. Immediate moves to lower the deficit substantially would likely result in a 1937-like “double dip” as we struggle to recover from the Great Recession.

Some advocates of austerity argue that, contrary to the conventional view, fiscal tightening now would lower long-term interest rates and improve confidence so much that the impact could be positive. But an ambitious new study in the World Economic Outlook of the International Monetary Fund confirms that fiscal consolidations — that is, deliberate deficit reductions — typically reduce growth substantially…

Taking budget actions now that would further increase unemployment would be not only cruel, but also short-sighted. The longer unemployment remains high, the more likely it is to become permanent as workers’ skills deteriorate and they gradually drop out of the labor force.

Such a situation would be terrible for both the affected workers and the long-run budget situation. Imagine a patient with a slow-growing tumor who is also recovering from pneumonia. The outcome is likely to be worse if the patient is not given time to recover before undergoing surgery.

But I add to the headline based on this part of Christina’s column (emphasis added):

WHILE immediate fiscal tightening isn’t wise for the United States, we do need to address the deficit. The best thing would be for Congress to pass a plan now that will reduce deficits when the economy is back to normal. France’s recent plan to gradually raise its retirement age to 62 from 60 is a classic example of such “backloaded” reduction. President Obama’s proposal to eliminate the Bush tax cuts on high incomes is another: it would raise revenue by only $30 billion in 2011, but by more than $600 billion over the next decade.

History shows that well-designed backloaded plans are credible. For example, changes to Social Security eligibility and taxes have been passed years, if not decades, before they took effect. And in an environment like today’s, when Congress has again agreed to pay-as-you-go rules, deviating from planned reforms forces countervailing actions.

Such backloaded deficit reduction would not hurt growth in the short run — and could raise it. If uncertainty about future budget policy is harming confidence, as some business leaders suggest, spelling out future spending and tax changes could be helpful. More important, showing that policy makers can come together and make essential decisions about our fiscal challenges would reassure all Americans that our economic future is better than the current grim reality.

That’s the key:  don’t reduce Social Security benefits or raise taxes today, but give Americans the courage, and the rest of the world’s investors the faith, that we can commit to a plan that is full of hard, not-so-pleasant policy changes, but gets us on a sustainable path no sooner than our economy can handle it–but not much later either.

At Least the British Are “Manning Up”–or Rather, Just “Manning”

October 21st, 2010 . by economistmom


From the front page of today’s Washington Post, this story by Anthony Faiola:

LONDON — Britain unveiled on Wednesday a campaign to dig itself out from under a mountain of public debt, setting up a global experiment: Can a major nation drastically slash government spending without derailing its economic recovery?

The new Conservative-led coalition headed by Prime Minister David Cameron announced cuts deeper than the ones made by Margaret Thatcher in the 1980s, outlining a plan to eliminate half a million government jobs, slash welfare benefits and reduce $131 billion worth of other public spending on everything from fighter jets to social security to the arts by 2015…

In the aftermath of the financial crisis — with collapsing tax revenue and soaring stimulus spending — the budget deficit here is one of the highest in the industrialized world, standing at 11.5 percent of economic output, or slightly higher than in the United States.

In the same way this issue is an extremely difficult one here in the U.S.–how to get back to longer-term fiscal sustainability without causing the still-fragile near-term economy to collapse–the policy choices confronting the British have been tough.

But apparently they, unlike Americans and our policymakers, have decided to do something (tough) anyway.  Again from the Post story (emphasis added):

“Today is the day when Britain steps back from the brink, when we confront the bills of a decade of debt,” George Osborne, the chancellor of the exchequer, or Britain’s treasury secretary, declared before Parliament on Wednesday.

The effort here is set to transform the British welfare state, setting new limits on benefits for the poor and raising the retirement age for millions of Britons. Fewer police officers will soon be on the streets, and train fares and college tuitions will rise. One in 12 government employees is set to lose their job.

Yet the British, unlike their peers in continental Europe, appear culturally more willing to cope with what Cameron has dubbed a new “age of austerity,” with polls showing almost twice as many Britons supporting deep debt reduction as opposing it.

In announcing the long-anticipated cuts Wednesday, the government portrayed its campaign as fair to the poor, arguing that the wealthy, through new taxes and benefit cuts, will proportionally shoulder more of the burden. But critics and leading think tanks have accused the government of being duplicitous, saying that women and the poor, who depend more on public services, are set to bear the brunt of the pain.

Note that the tough choices involve both higher taxes and spending cuts.  From a New York Times story (by Sarah Lyall and Alan Cowell), some of the specifics on the tax side are described (emphasis added):

“We have had to make choices, choices in the things we support,” Mr. Osborne said. “We have taken our country back from the brink of bankruptcy.”

The average cut in the budgets of government departments, he said, will be 19 percent, not the 25 percent he had initially threatened.

He said a temporary tax on bank balance sheets would be made permanent. Many Britons, like Americans, are angry with big banks for their role in the world financial crisis. Mr. Osborne said the government would seek to extract “the maximum sustainable taxes” from financial institutions.

In June, Mr. Osborne also said that the value-added tax — a tax paid on most consumer goods in Britain — would increase in January, to 20 percent from 17.5 percent.

With all the “man up” talk flying around lately, when I first saw these stories I thought to myself “well, at least the British are manning up.”  You know, they’re “being a man” about actually leveling with their people that taxes will have to come up and benefits will have to come down, and even for some people that might even be “you.”

But then I read this recent explanation of the term “man up” (also from the New York Times), noting the British take on the term:

The Oxford English Dictionary cites a 1947 letter to the editor of The Times of London from Henry Strauss, a Conservative member of Parliament, complaining about man up as an insidious Americanism. “Must industries be fully ‘manned up’ rather than ‘manned’?” Strauss asked. “Must the strong, simple transitive verb, which is one of the main glories of our tongue, become as obsolete in England as it appears to be in America?”

So let me rephrase.  The British are not “manning up.”  That term is full of counterproductive, American machoism–all sound and no fury.  Blame the other for your own problems, take no personal responsibility, and get nowhere except maybe deeper into your holes. What the British policymakers are actually doing is simply “manning”–meaning they’re just doing their jobs.

Why This Ain’t Gonna Be Easy

October 20th, 2010 . by economistmom


A new Gallup poll tells us that:

More than three in four Americans believe the cost of the government’s major entitlement programs, including Social Security and Medicare, will create major economic problems for the U.S. in the next 25 years if no changes are made to them. At the same time, Americans do not provide a mandate for raising taxes or cutting benefits to address the situation.

If you want to take a “glass half full” view, however, the poll also shows (emphasis added):

62% do support one approach or the other. Specifically, 12% favor both options, 30% favor a tax increase but not benefit cuts, and 20% favor benefit cuts but not a tax increase. Still, the data show that there is little consensus on how to address a problem most Americans see looming, and more than one-third of Americans (35%) oppose both options.

In other words, if we’re to come to any agreement on how to improve the federal budget outlook (not just agreement that there’s a problem with it), we’re going to have to do the “mutual sacrifice” kind of compromising, not the “rewards all around” kind we’ve been practicing over the past decade.

Obviously that’s a hard sell any time, but it is pretty much impossible in an election year.

Update on a Couple Major Infrastructure Projects

October 19th, 2010 . by economistmom


More than two years ago I blogged about a major infrastructure project I witnessed in its early stages while I was vacationing–the Hoover Dam bypass project.  Well, the project has just been completed, as I learned this weekend from the cover story in Parade Magazine.  Impressive story about its design and construction, and great photos–so check it out.

At the same time more than two years ago I likened my family to a major infrastructure project, as my husband and I were celebrating our 20th wedding anniversary during that family vacation.  Well, just as one of these “major infrastructure projects” has been completed, the other is nearly finally dismantled.  I guess this is sort of my “coming out” as “Divorced Economist Mom.”  (At least a little more to come in the coming weeks and months, but that’s enough said for now.)

It’s Back: Goodies for Granny In Lieu of the COLA

October 15th, 2010 . by economistmom


The Social Security Administration announced today that for the second year in a row there would be no cost-of-living increase in Social Security benefits for 2011.  Why not?  As the SSA explains, this is a straightforward, non-political determination based on historical economic data:

The Social Security Act provides for an automatic increase in Social Security and SSI benefits if there is an increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a cost-of-living adjustment (COLA) was determined to the third quarter of the current year.

So very objectively, there will be no cost-of-living increase in Social Security benefits in 2011 because there was no increase in the cost of living, as measured by the CPI-W, from the 3rd quarter of 2008 (the last time a COLA was triggered, for 2009 benefits) to the 3rd quarter of 2010 (which determines the COLA for 2011 benefits).  The chart above comes from the Bureau of Labor Statistics and shows the CPI-W, by level (seasonally adjusted), from January 2008 to September 2010.  Note that in September 2008, the CPI-W was 215.111; in September 2010, it was 214.345 (lower).

Well, no matter.  Last year at this time, when the CPI in September 2009 came in even lower (note the data point in the chart), the President and members of Congress called for $250 checks for seniors to make up for the lack of a COLA.  Policymakers downplayed the fact that there was no need to compensate seniors for (the lack of) inflation, and played up the fact that there was still very apparent need for continued economic stimulus.  Most policy observers like me who are not politicians commented at the time that the biggest reason for the $250-check-for-lack-of-COLA proposal was that it was good pandering to seniors.  I also remarked that maybe it wasn’t such bad stimulus, but I could think of better, and anyway, it had nothing to do with the non-COLA other than the non-COLA being a convenient way to get seniors riled up and especially receptive to the politicians’ pandering.

Well, the $250 non-COLA bonus never passed last year, but good-for-politics ideas like that tend to resurface regularly. And this year is even a better year for it.  Prices are still low but have come up since last year (but are still lower than two years ago which the current levels of Social Security benefits are based on), and to top it all off, this year is an election year!  The Ways and Means Committee’s Social Security chairman, Earl Pomeroy, has announced the House will take up the $250 bonus proposal in November.  The President has announced his support for the same.  House Speaker Pelosi calls this a “fiscally responsible” proposal, and maybe she’d even consider proposals for double the cost to be so.  (A bidding war may be coming in the final days leading up to the election.)

So my opinion about this proposal hasn’t really changed qualitatively since last year, when I said (in the Washington Post “Topic A” feature) that:

This is not about making seniors “whole.” Because seniors are guaranteed to receive Social Security benefits regardless of the strength or weakness of the economy, they more than others have had a significant part of their income protected in this recession, and they received special aid in the last stimulus package, too. This is about taking from one generation and giving to another. By choosing to finance the provision by borrowing, our politicians hope the beneficiaries (seniors) will notice — while those most heavily penalized (our kids and grandkids) are thankfully not old enough to vote. This seems to be a purely political strategy to pander to seniors (once again) over other groups.

…but maybe quantitatively, I’m a little sicker of hearing it this second time around.

Stephen Colbert: Letting Bush Tax Cuts Expire Would Deplete “Supply of Mankiw”

October 14th, 2010 . by economistmom
The Colbert Report Mon - Thurs 11:30pm / 10:30c
Tax Shelter Skelter
Colbert Report Full Episodes 2010 Election March to Keep Fear Alive

Hard to add to Stephen’s presentation of the issue of the Bush tax cuts. He describes the class warfare and supply-side arguments, even bringing in Greg Mankiw’s explanation of how higher tax rates on the rich decrease those rich people’s (including Greg’s own) incentives to work.

And here’s a link to the segment (immediately following the one above) where Austan Goolsbee sits down with Stephen.

Putting Labels Aside

October 13th, 2010 . by economistmom


I’ve got a guest appearance on the No Labels blog today.  Check out the organization and their “statement of purpose.”

I like their banner statement–which is sort of a condensed version of their statement of purpose:

Put the Labels Aside. Do What’s Best for America.
We are Democrats, Republicans, and Independents who are united in the belief that we do not have to give up our labels, merely put them aside to do what’s best for America.

And here’s how I related my “Economist Mom” perspective on the federal budget deficit to the No Labels movement:

If we citizens could look beyond the partisan bickering and the clutching to the ideological but illogical positions typically exhibited by our “leaders,” then we might actually find that there is common ground in the common sense solutions that are no doubt “tough choices”—but are choices we must make as better parents who care about seeing that our kids get to the better place they deserve.

Good Enough for a Nobel Prize But Not Good Enough for Senate Approval

October 11th, 2010 . by economistmom


NEW, Feb. 2012:  Here’s a translation of this blog post in Romanian, by Alexander Ovsov!

MIT economics professor Peter Diamond is one of three economists who have just won the Nobel Prize in Economics. The AP’s Louise Nordstrom and Karl Ritter note how it was easier for Diamond to get the Nobel than to get confirmed for the Federal Reserve Board (emphasis added):

President Barack Obama has nominated Diamond to become a member of the Federal Reserve. However, the Senate failed to approve his nomination before lawmakers left to campaign for the midterm congressional elections.

Senate Republicans have objected to what they see as Diamond’s limited experience in dissecting the inner workings of the national economy.

[Federal Reserve Chairman Ben] Bernanke was one of Diamond’s students at MIT. When Bernanke turned in his doctoral dissertation in 1979, one of the people he thanked was Diamond for being generous with his time and reading and discussing Bernanke’s work.

And what was the work that earned Diamond his Nobel?  As the same AP story explains:

Two Americans and a British-Cypriot economist won the 2010 Nobel economics prize Monday for developing a theory that helps explain why many people can remain unemployed despite a large number of job vacancies…for their analysis of the obstacles that prevent buyers and sellers from efficiently pairing up in markets.

Diamond…analyzed the foundations of so-called search markets…

Diamond wrote a paper in the early 1980s that found that unemployment compensation can lead to better job matches. Workers “become more selective in the jobs they accept” because of the employment aid. And, that makes for better matches and increases efficiency, he found.

He told a Senate committee during his nomination hearing in July that a central theme of his research has been how the economy deals with risks that affect both individuals, and the entire economy.

“In all my central research areas, I have thought about and written about the risks in the economy and how markets and government can combine to make the economy function better for individuals,” he said in that hearing.

Hmmm…. perhaps what Senate Republicans really object to in Diamond’s nomination is that he doesn’t ascribe to the notion that unemployment compensation makes people lazy.  As Ezra Klein points out, the “lack of experience” argument is a bit hard to swallow given others who serve and have served on the Board.

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