CafePress will make anything in virtually any theme imaginable. So when I did a quick google search on “EconomistMom” to check for articles linking to my blog, the link to the CafePress “Economist Mom” merchandise came up at the top of page 2! Pretty cool. I guess I should at least get a bumper sticker for my car. And note the 30% off sale until this Friday! 
…I’ve been inundated with spam comments! Most have been captured by my spam blocker, but some have not. Just wanted to warn readers that if the normal defensive mechanisms break down (and they have big time a couple times in the past two years), I’ll have to put up thicker “screens.”
I guess with the good publicity (and THANKS very much, Ezra!) comes some undesirable (if only “automated”) attention! Not that I’m complaining. I’m just sayin’…
Over the past week I’ve been home full time with my kids, which is why I haven’t been posting much. I have an overdue list of matters of fiscal-policy substance I’ve been wanting to write about, which I hope to get to next week when things are quiet for me on the home front.
I’ve also got a couple things coming up next week that some of you might be able to follow/listen to/attend:
Hope you all have a good weekend in the meantime! And thanks for sticking with me even when I occasionally go quiet, busy with the other things in my life.
The Tax Policy Center’s Howard Gleckman astutely observes that the “jobs-creating, loophole-closing tax [extenders] bill does little of either.” He notes the irony in claims that these temporary-but-perennial tax cuts (more formally referred to as the extension of “expiring tax provisions”) are fiscally responsible and good (even “essential”) for the economy:
The Joint Committee on Taxation estimates that extending the expiring provisions would reduce federal revenues by $32.5 billion over 10 years. But keep in mind these tax subsidies would all expire—on paper at least—over just a year or two. A more accurate 10-year estimate of the revenue loss (assuming the tax breaks eventually are continued throughout the decade) would likely approach $200 billion…
[W]hile nearly all of the cost of extending the 70 expiring provisions occurs in 2010 and 2011, 90 percent of the revenue to pay for these goodies would not be collected until 2012 and beyond. It isn’t hard to imagine that much of this money will never materialize, either because the law will be changed or because very smart lawyers will figure ways around it. The overall bill, including the new spending, would add about $140 billion to the deficit. It is hard to be too cynical about tax extenders that have reached a state of near-immortality. But the least Congress could do is to call this annual rite what it is: Continuing tax loopholes, not closing them.
And speaking of the deficit-financed extension of expiring tax cuts being twisted around and artistically re-characterized as “fiscally responsible,” let’s bring up my favorite issue–or more accurately, “peeve.” I consider the “mother of all tax extenders” the proposed extension of most of the Bush (2001 and 2003) tax cuts, which is the single most costly deficit-financed policy proposed in President Obama’s budget. This week the Pew Charitable Trusts issued a report (”Decision Time: The Fiscal Effects of Extending the 2001 and 2003 Tax Cuts”) that puts the cost of extending the Bush tax cuts in better perspective. The report notes how the deficit-financed permanent extension of these tax cuts (even “just” most of them as proposed by President Obama) would add significantly to the federal debt, bringing it to more clearly “unsustainable” levels of around 80 percent of GDP in just ten years–and highlights the fact that allowing (just) the top-end rate brackets to expire (continuing tax cuts in full for those with incomes under $250,000) barely saves money relative to the cost of extending the entirety of the Bush tax cuts. Another way the Pew report highlights how costly the Bush tax cuts are is to point out how hard it would be to pay for the extension of the tax cuts by reducing government spending; for example, one way to pay for extending “only” the Bush tax cuts that President Obama proposes to extend would be to cut all mandatory and discretionary federal spending by 5 percent. (If you want to extend all the Bush tax cuts, you’d have to cut all federal spending by 7 percent.)
The Pew report also suggests that you could make the extension of the Bush tax cuts not so much a “mother of a” tax extender by extending them for only two years, rather than permanently. But then of course you get back to Howard’s fundamental question: is there really such a thing as a fiscally-responsible (inexpensive and truly “expiring”) tax extender?
The Pew report doesn’t really provide any estimates that the CBO budget outlook hadn’t already provided; it just more clearly highlights the significance of the policy choice the Obama Administration will make about the Bush tax cuts. Concord’s “plausible baseline” uses the CBO numbers on expiring tax provisions another way, to show that under a fiscally “worst-case” scenario where all expiring tax provisions currently on the books (including stimulus tax cuts) are permanently extended and entirely deficit financed, these tax cuts would add $6.3 trillion to the ten-year (2010-20) budget deficit, which under current law (assuming all expiring tax provisions actually expire as scheduled) is “just” $6.0 trillion.
So this is a huge deal–this proposed permanent extension of most of the Bush tax cuts. As this hilarious Onion story suggests, it is like a “sprouting leaf of spinach.” How so?
After nervously clearing his throat, Motley was heard to ask, “Wherefore is the National Debt like a sprouting leaf of spinach?” When a glowering Obama demanded the answer, Motley stated, “For it shall rapidly grow into something our children cannot bear.”
I have complained before of the Obama Administration’s use of a “policy extended” rather than current-law budget baseline against which to evaluate the costs of their budgetary proposals. Measured against the CBO-official, current-law baseline, the President’s proposals add nearly $4 trillion to the ten-year deficit–increasing the deficit from $6.0 trillion to $9.8 trillion, or more than 60 percent. Measured against the Obama Administration’s “policy extended” baseline where all the Bush tax cuts are extended permanently (and entirely deficit financed, of course), the Administration shows they reduce the ten-year deficit by over $2 trillion–decreasing the deficit from $10.6 trillion to $8.5 trillion, or nearly 20 percent.
Baselines matter. And not just to budget geeks or other people who care about budget rules and the pay-as-you-go (PAYGO) standard (with many exemptions, of course). But they matter to ordinary people, too, to provide perspective on what exactly is being changed and how large or small the change is (and how good or bad).
That’s why when I read this story in the Washington Post on Tuesday about the First Lady’s fight against childhood obesity and getting food manufacturers to commit to reducing the calorie content of their foods, I heard myself screaming: “but what is the baseline?!… and is this big or small, and good or bad?!” I mean, what the heck does a trillion or a trillion and a half calories mean?… Key points from the article, that yet do not help me understand how significant this is (emphasis added):
In a direct response to Michelle Obama’s declared war on childhood obesity, an alliance of major food manufacturers on Monday pledged to introduce new, more healthful options, cut portion sizes and trim calories in existing products.
The Healthy Weight Commitment Foundation, a coalition including Campbell Soup, Coca-Cola, General Mills, Kellogg, Kraft Foods and PepsiCo, will slash 1 trillion calories by the end of 2012 and 1.5 trillion calories by the end of 2015. The 16 members make 20-25 percent of food consumed in the United States…
Missing from the announcement were any specifics on the new products or cuts that will be made to existing items. But White House officials stressed that the companies will be held accountable. Each year, their progress will be assessed by the Partnership for a Healthier America, a nonpartisan organization for which the first lady serves as honorary chair. If any one of the companies doesn’t meet its target, all of the companies will be held responsible, White House sources said. The Robert Wood Johnson Foundation, a nonprofit dedicated to improve Americans’ health, also will track the effort’s impact on childhood obesity. A first report is tentatively slated for 2013.
“What the White House is doing is consistent and relentless,” said Marion Nestle, a professor of nutrition at New York University and a frequent critic of the food industry. “The food companies are having their feet held to the fire for making kids fat. That’s awkward. And it is not good for business.”
Eliminating 1.5 trillion calories sounds like a lot. But can it help turn the tide on obesity?
A spokesman for the Healthy Weight Commitment Foundation was unable to put the number in context. Instead, he said the number is designed to eliminate the “energy gap” — the number of calories consumed that are not expended through physical activity. Recent research estimates that gap is approximately 100 calories per day per person, and less for teenagers and children.
Hmmm…. sounds like the First Lady is trying to eliminate the “unsustainable” part of calories (the “energy gap”) just like her husband’s trying to eliminate–with the help of his fiscal commission, that is–the “unsustainable” part of the budget deficit (the part that exceeds growth in the economy).
But I still find myself asking (like any well-conditioned budget policy analyst would) “a trillion-calorie reduction relative to what?–and spread over how many foods or people?–and over what kinds of people?”… How do we evaluate the success of this calorie-reduction portion of the overall campaign to reduce childhood obesity?
Happy Mother’s Day to all moms out there, but especially to my own mother–who has been an inspiration and a source of wisdom and strength for me my whole life! (Sorry to put this up so late in the day, Mom; I know you’re probably going to bed already!)
A few weeks ago I posted on my daughter Allie’s college decision, and in particular the debate between going to in-state UVA and Ivy League Dartmouth. That was before Allie got accepted into Princeton, and before she and her dad decided she would in fact accept her acceptance into Princeton. It wasn’t exactly the careful weighing of costs versus benefits that I wanted to do with her before she made that decision, but I think it was more in keeping with how I once characterized how parents typically decide how to spend money on “investments” in their kids or how family members decide how to spend money on health care for their loved ones: two questions, (1) is there any positive expected marginal benefit, and (2) can I come up with the money, somehow? (not how does that marginal money/cost compare with that marginal benefit).
So for a couple days now I am here at Princeton with Allie for her “Princeton Preview” weekend, hoping to be constantly “WOWed” by everything Princeton has to offer, and hoping that come Sunday I will have decided that yes, the expected marginal benefit is high even relative to the (certain and high) marginal cost. Oh, and I am also doing a lot of searching and begging for aid and any way to pay for it that we can find. Because although our family is not considered “needy,” when it comes to the Princeton price tag, I still think we “need” a lot of help. As the summer comes and the first bill due draws nearer, I’ll keep you posted on how we manage.
Meanwhile, I would love any Princeton alums to tell me all the wonderful ways in which your Princeton education clearly enhanced your lifetime income and any other “values” in your life. Those who disagree, please keep quiet.
April 15, 2010
Dear Mr. President:
With all due respect, I write this open letter to you as an economist and as a mom. Just like parents ought to know where their children are at 10 pm, I think you, Mr. President, ought to know where your tax policy is–emphasis on your–on April 15th. It’s your “baby” now, this complicated thing called the U.S. federal tax system.
For all the complaining you have done on your Senate campaign trail, and then your presidential campaign trail, and now even as President about how unaffordable and unfair and in general not very smart the Bush tax cuts were, why is it that the centerpiece of your–emphasis on your–tax policy thus far is the deficit-financed extension of the vast majority of these very same (not very smart) tax cuts?
Why do you spend over $2 trillion in your budget–the most you spend on any single policy item–on your predecessor’s tax policy, which you repeatedly explain is to blame for the deterioration and unsustainability of our nation’s fiscal outlook? Meanwhile, you took back your own ideas for new tax policy–such as the permanent extension of the Making Work Pay tax credit–because you decided to put higher standards on your own tax cuts and actually pay for them (offset their cost with offsetting revenue increases such as climate change revenues), and Congress (even your own Congress) therefore balked.
I have news for you: you’re in charge now! You aren’t stuck with the (not very smart) Bush tax cuts–not any part of them! You are the one who will have to sign an entirely new piece of legislation in order to keep any part of the Bush tax cuts after this year. You hold the reins. You don’t have to stay on the Bush path. You don’t even have to stay on the Bush tax policy horse. You can switch horses altogether and go down a better path on your better horse.
You have the human capital to take these reins and do much better. Your economic team is comprised of some of the world’s foremost experts on tax policy–such as your NEC chair Larry Summers and your CEA member Austan Goolsbee and your OMB director Peter Orszag. If any of them were made fiscal policy “kings of the day,” would they decide that deficit-financed extension of the Bush tax cuts (even if “only” for 95 percent of households) is the best tax policy they could come up with? I suspect not, but just ask them. It is a fun thing to talk around the water cooler about on Tax Day.
I know you made an unfortunate campaign promise on tax policy that you feel bound to–to not raise taxes on any households with income under $250,000. But isn’t it more important to keep your greater (at least implicit) promise to the American people on keeping our economy strong, putting us on a better path (”changing” course), and leaving the nation in decent shape for our kids? You can’t keep both promises, and to me as an economist and as a mom–and I hope to you as our leader and a dad–it’s obvious which one you should abandon.
Happy Tax Day!
Respectfully,
EconomistMom
It’s a question I am asking this week, as my oldest daughter hears about her admission status at the 7 schools she’s applied to–4 of them Ivies, who do not give any merit-based aid. As I tweeted yesterday, she’s received a national merit scholarship of $2500 (one time) to any school she decides to attend, but that is only about 1 percent of the 4-year cost of her going to Dartmouth–which in a money-blind contest she picks as her first choice.
There are big reasons why her dad and I chose to raise our (four) children in northern VA when we first decided to come work in Washington, DC, and two of them are called “U VA” and “William and Mary” (or is that three of them?!)–note their places in this Kiplinger “best value” ranking. She’s gotten into both. As an “Economist” and a “Mom” readers will understand why I find this agonizing.
If you are willing to follow my agony over the next few weeks, I am willing to share…
I am looking for advice everywhere–from Ivy League grads who believe they wouldn’t be where they are today were it not for their Ivy League education, to Ivy League grads who regret graduating with so much debt, to public university grads (like myself) who don’t believe life could have turned out that different had we gone to an Ivy League school instead (and who paid off their small loans rather quickly after graduation).
And naturally I’ve been scouring the internet, which is how I found the ABC News video above with the very bright young man who is the CEO and founder of Unigo.com–a fascinating site that features “insider” info on colleges and which I had never heard of until tonight when I was googling on this very question.
Stay tuned for updates, and feel free to advise!
We’ve been so busy with health care reform and trying to figure out how to “bend the health cost curve” that we’ve almost forgotten about the other federal entitlement program that is on an unsustainable (albeit less severe) fiscal path. An article in today’s New York Times reminds us of that other program, Social Security, with the newsworthy event being a Congressional Budget Office table that reveals the program is expected be in a cash deficit this year–with Social Security benefits paid out expected to exceed Social Security payroll taxes collected. True, the Social Security program only faces one of the two pressures adversely affecting Medicare spending: just the demographic challenge of a rising elderly population relative to the working-age population. And as a result the problem is not as large. Some argue that’s a reason not to worry about it–and not to do anything about it until it’s more certain we’re right at the doorstep of that unsustainable fate.
Not doing anything about Social Security now would be fine if either: (i) we knew what to do with the much bigger challenge of much more rapidly rising Medicare spending (i.e., we knew how to flatten that health cost curve and were really on the way to doing it), or (ii) we didn’t know what to do to close the much smaller Social Security deficit. But the fact is that it’s hard to know how to solve the Medicare problem and relatively easy (mathematically and economically) to solve the Social Security problem. We know how to solve the latter, and I think most Americans in hearing what some of these solutions are (see this NYTimes editorial blog featuring some experts’ ideas), would think they were no big deal. Why, just this week my (very socially-conscious) 17-year old daughter, Emily, brought up the unsustainable fiscal outlook and said she didn’t understand why we don’t just raise the retirement age–which is what both Bill Gale (of the liberal-leaning Brookings Institution) and Andrew Biggs (of the conservative-leaning American Enterprise Institute… ok, perhaps more than leaning, but more on the David Frum story later) recommend in the NYTimes piece. Emily spoke of raising the retirement age as a “no brainer”–and not because I’ve brain-washed her but perhaps because she knows her mom will be working forever anyway just to pay for her and her three siblings’ college educations…
Of course no one likes to work longer, just like no one likes to pay higher taxes or have limits on their subsidized health benefits. But let’s face it: there will have to be more of these things we don’t like, and to me it’s a simple cost-benefit analysis. The relative benefit of doing something we know how to do sooner (reducing the Social Security deficit) seems high in that small, phased-in changes now can save a lot of compound interest going forward. Even if it saves us more money than the size of the (small) Social Security “problem,” that’s a good thing, because chances are really good that our other reforms to the other programs will save us less money than the size of those other (bigger) problems. And any pain associated with these Social Security fixes–such as a gradual rise in the retirement age–seems relatively low and “easy” compared with those other (currently largely uncertain) ways of solving the long-term fiscal challenge which we’ll still be trying to figure out for many, many years to come, and which will have to result in much more fundamental (and ultimately painful) changes to those other programs.
So yeah, we still have this little problem of Social Security, but it’s completely and pretty easily solvable–and so we should be paying attention to it, now.
I was happy to see the front page of the Style section in today’s Washington Post, featuring a story on Senator Al Franken. I first met Al Franken at an annual dinner of the American Enterprise Institute in the mid-to-late 1990s. I was walking down the staircase from the reception to the dinner, and suddenly I noticed he was walking right next to me. I touched his arm (or maybe I slapped it), and said “I know you! You’re, you’re… Al Franken!” And he said “why, yes, I am–and who are you?” And then I told him I was just a lowly tax policy analyst at CBO who had written something that went into an AEI book the prior year, but what was he doing there, and all he told me was that the only reason he was there was because Norm Ornstein of AEI was (and still is?) his good friend. I have to admit, I can’t remember exactly what year that dinner was–but it turned out that at that time Al was working on or just finished his “Rush Limbaugh Is a Big, Fat Idiot” book which included some spot-on discussions about the distribution of the tax burden, which happened to be the issue I was working on for CBO at the same time. (It was the focus of my Ph.D. dissertation as well; here’s the book I eventually wrote with my dissertation supervisor.) I didn’t know about Al’s command of fiscal policy until after the encounter, when I read his book and then over the years another and another, and I was impressed. Not just about how funny he was in these books, but how substantive and insightful and correct he could be in his policy analysis, and his rare talent in disguising the otherwise dry policy analytics as something engaging enough for normal people (not just policy geeks) to read and learn about. That ability to “translate” like that was inspiring to me.
In fact, I was so taken by Al Franken’s books that I had my budding social-activist child, my second daughter, Emily, read his books starting at age 12–as a early middle-schooler. (Emily is the kid who would later be the one accompanying me to the anti-war march in DC and who would eventually become an officer at her high school’s Amnesty International group.) So the second time I met Al was in late 2005, when I took Emily to a book signing (in McLean, VA) for his new “The Truth (with jokes)” book. That’s the two of them in the photo above. We had arrived at the very start, heard Al talk to the group of people mostly way older than me, let alone Emily (who was certainly his youngest fan there), but then I had to take Emily to her basketball game. By the time the game was over and we rushed back to the bookstore fearing we were too late to catch him, it turned out that there were only a few people left in line waiting for their books to be signed, and Emily and I were going to be the last ones to have our book signed and talk with him–so we got some high-quality, individual time with him! I loved how warmly Al greeted and talked with us. (This, even though Emily was sweaty from the bball game!) I explained how I had met him years before, and having heard him talk about possible interest in running for the Senate in 2008 (fans at the book signing had asked him about that), I told him I worked on the Hill on fiscal policy issues and gave him my business card, telling him “if you ever need an economist…” (He never called or emailed me, but I don’t hold that against him and like to think he just couldn’t find me when he needed me, as I’ve moved on since then.)
I’ve been trying to keep up with now-Senator Franken; my ears always perk up when I hear him on the TV that’s normally just background noise for me at home and in my office. I always like what I hear, because Senator Franken shows that mixture of conviction, honesty, intelligence and good humor in how he explains things. So in today’s Washington Post, I was happy to see Post writer Jason Horowitz suggest that not only is Al Franken funny and getting more comfortable about showing that funny side even as Senator Franken, but he’s using his unique talents to show more political courage than your average politician as well. For example:
In early February, Franken rose during a private panel discussion with the Democratic caucus and Axelrod and theatrically declared, “I’ve been in a slow burn” about the administration’s handling of health care, according to several attendees who asked to remain anonymous to discuss the details of a private meeting. He then launched into an extended critique and demanded to know from Axelrod when the president would take a leading role in pushing the issue. According to multiple sources familiar with the proceedings, Axelrod countered that the president had constantly championed health-care reform.
Franken, according to several sources, urged Axelrod to answer his question and aggressively suggested that the administration push the House to pass the Senate’s health-care reform bill. Axelrod replied that if Franken had the names of 218 supportive members of Congress in his pocket, he’d gladly pass them along to House Speaker Nancy Pelosi (D-Calif.). Axelrod added that he doubted Franken did.
Franken then, according to multiple sources, directed his ire toward President Obama.
“When will he apologize for his stupid idea to put these discussions on C-SPAN,” Franken said, according to two sources.
So, Senator Franken: if by chance you feel like speaking up more on fiscal responsibility (which I know you understand and care about), and if you could use some help from an economist on the substance of the issue, I happen to know an economist who could use your help in making the fiscal responsibility messages more compelling to real people–or even just to those people who are your colleagues now. I’m at the Concord Coalition now. Give me a call!
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