2011 - %3, May

As Need Grows, States Slash Welfare Benefits

| Fri May 20, 2011 9:58 AM EDT

The recession and record unemployment levels have sent thousands of families seeking public assistance to put food on the table. But as the need for help has grown, by as much as 20 percent in some states in recent years, many cash-strapped states are slashing benefits for the poor, who weren't getting too much help to begin with. A new study by the nonpartisan Center for Budget and Policy Priorities finds that states are making huge cuts to the Temporary Assistance for Needy Families(TANF)  program, or what used to known as welfare, leaving the vast majority of poor families with no place to turn.

According to CBPP, in at least seven states, TANF serves just 10 extremely poor families out of every 100. And those who receive benefits are about to get far less cash. The state of South Carolina, which saw its TANF caseloads grow by 30 percent between December 2007 and December 2009, recently cut benefit levels by 20 percent, so that a family of three now receives only $216 a month, down from $270 a month.

The reasons for the drastic cuts are fairly simple. Welfare used to be an entitlement program that responded quickly to dips in the economy. The budget went up automatically with the need, and decreased when the economy got better and people were able to go back to work. But in 1996, thanks to Republicans in Congress, including then-House Speaker Newt Gingrich, and Democratic president Bill Clinton, welfare became a block grant. That meant the federal government gave the states a fixed amount of money every year, and removed many of the strings attached so that the states could spend the welfare money more freely. The idea was sold as one that would turn the states into laboratories of innovation, where they would move lazy, poor single mothers from welfare dependency to work. Critics, including Clinton administration officials who quit when Clinton signed the bill, warned that the block grant would lead to great suffering and hardship among poor families that would disproportionately affect children during a recession.

As it turned out, lots of women left the welfare rolls during the late 1990s, when unemployment fell to record low levels, and states diverted a lot of the extra TANF money to other programs that often had little to do with helping poor families. Republicans declared it a huge victory. But now that the economy has hit the skids, the real impact of the "reform" is starting to become clear. The federal TANF block grant hasn't been increased in 16 years despite the economic downturn. Thanks to inflation, its real value has fallen 30 percent, a budget cut that would have been politically impossible had Republicans proposed it outright.

The block grant is sneaky that way. Which is one reason that Republicans, urged on by conservative groups like the Koch brothers-funded Americans for Prosperity, are promoting a block grant conversion for Medicaid, the health care program for the poor. Turning Medicaid into a block grant would mean that Republicans wouldn't even have to propose budget cuts because they'd happen automatically thanks to inflation, as the value of the block grant decreased over time, regardless of demand. But given how welfare "reform" is turning out for the country's neediest, Democrats might want to think twice before embracing this sort of "innovation.

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Obama's Middle East Mandate?

| Fri May 20, 2011 9:07 AM EDT

A speech on the Middle East was destined to ruffle feathers and spur a rush of insta-analysis and insta-complaining. And that's what happened with President Barack Obama's address on Thursday. For Obama's GOP foes, the speech, of course, had to mark nearly the end of the world—or, perhaps literally, given Israel's role in the Book of Revelation. (Anyone notice the speech came days before the Day of Judgment?) NBC News' First Read daily newsletter this morning included a useful summation of the over-the-top response. It notes that, once again, Republicans are trying to turn a middle-of-the-road Obama position into a sign of the apocalypse. Don't they get tired of that? (That's a rhetorical question.) Here's First Read's take:

*** Throwing Israel under the bus? For longtime chroniclers of the Middle East peace process, the most surprising part of President Obama’s speech yesterday was the reaction to his call for the eventual Israel-Palestine borders to be based on the 1967 lines. Israeli PM Netanyahu said it was "indefensible." Romney fired off this statement: "President Obama has thrown Israel under the bus. He has disrespected Israel and undermined its ability to negotiate peace.” Pawlenty followed by saying it was a “mistaken and very dangerous demand." Why was this reaction surprising? Because, as the Atlantic’s Jeffrey Goldberg writes, the 1967 lines have been the basic Middle-East-peace idea for at least the last 12 years. "This is what Bill Clinton, Ehud Barak and Yasser Arafat were talking about at Camp David, and later, at Taba. This is what George W. Bush was talking about with Ariel Sharon and Ehud Olmert."

*** The ’67 borders have become the new individual mandate: So in that respect, you could compare the 1967 lines to the individual health-care mandate or cap-and-trade -- ideas that weren’t really controversial before Obama proposed it. Also, note the difference between the tough Romney/Pawlenty statements and GOP Sen. Marco Rubio’s. In his statement, Rubio began by praising the president, and then he said this on the ’67 borders: "Unfortunately, the President’s reference to Israel’s 1967 borders marks a step back in the peace process, as the U.S. must not pre-determine the outcome of direct negotiations between Israelis and Palestinians." That’s a fair point -- Obama was negotiating publicly in his speech by mentioning the borders. But it’s hard to see how the president was throwing Israel "under the bus" when he also used his speech demanding that the eventual Palestinian state be "non-militarized" and questioning the Hamas-Fatah agreement. "How can one negotiate with a party that has shown itself unwilling to recognize your right to exist?” Obama asked. That's a "get out of negotiations" card for Israel, but apparently no one heard THAT? A truth about people who are passionate about this Middle East debate: They only hear what they don’t like.

Has any GOPer yet said that Obama is proposing a "death panel" for Israel? Well, don't suggest this talking point to Sarah Palin. She just might use it.

Eco-News Roundup: Friday May 20

| Fri May 20, 2011 6:24 AM EDT

Blue Marble-ish news from our other blogs.

Fact Free Nation: GOP attack on health care waivers ignores key facts.

Cut Ballot: Circumcision will be on the San Francisco ballot.

Green Alert: Anti-terrorist watchdogs still have their eye on Greenpeace.

Keeping Pace: Medicare costs outpace wages, GDP, and yes, even taxes.

White Coats: Doctor shortage, and solving it, used as political ploy.

Corny: Corn sugar lobbyists inspire a cheeky commercial.

Just Say Yes: GOP hopeful Jon Huntsman says he believes in climate change.

 

 

 

Taxing the Rich

| Fri May 20, 2011 5:00 AM EDT

Riffing off a Karl Smith post about whether higher taxes destroy the incentive to work (answer: probably not, and the economic literature backs him up), Ezra Klein says:

Republicans argue — and there’s some evidence to back them up — that the rich are more sensitive to tax rates than the middle class or the poor....It’s why they worry much less about extending unemployment benefits than about protecting the rich from tax increases. Both policies make people poorer. But future economic growth doesn’t depend on the poor. It depends on the rich.

The problem is that there’s not much evidence backing this view.

I got into an email conversation with a conservative blogger about this last week, and among other things he said that the research on ETI had persuaded him that raising tax rates on the rich was bad for the economy. ETI stands for elasticity of taxable income, and it's a measure of how much income goes down when tax rates go up. I didn't pursue the conversation because I'm hardly an expert in the ETI literature, but I thought it was an odd thing to hang his hat on because what little I do know suggests that higher tax rates have very little effect on the economy.

So here's what I know. Last year I read a review of ETI research written by Emmanuel Saez, Joel Slemrod, and Seth Giertz. I'm not familiar with Giertz, but both Saez and Slemrod are pretty honest guys, so I figured their paper would provide an evenhanded look at what the ETI research indicates. Their conclusions were far from rosy. First, they suggested that the ETI literature of the past two decades varies so widely that it can't really be considered very reliable yet. Second, they make clear that incomes can decline for several reasons, and most of the reported income drops in the wake of tax increases are related to tax fiddling, not actual economic deterioration. From the paper:

While there are no truly convincing estimates of the long-run elasticity, the best available estimates range from 0.12 to 0.40. At the approximate midpoint of this rate — an ETI of 0.25 — the marginal excess burden per dollar of federal income tax revenue raised of 0.195 for an across-the-board proportional tax increase, and 0.339 for a tax increase focused on the top one percent of income earners.

....While there is compelling U.S. evidence of strong behavioral responses to taxation at the upper end of the distribution around the main tax reform episodes since 1980, in all cases those responses [are related to] timing and avoidance. In contrast, there is no compelling evidence to date of real economic responses to tax rates....If behavioral responses to taxation are large in the current tax system, the best policy response would not be to lower tax rates, but instead broaden the tax base and eliminate avoidance opportunities to lower the size of behavioral responses.

In other words, when taxes go up on the rich, they do report lower incomes. But that's mostly because they're fiddling with the tax code to report lower incomes, not because they're actually earning any less. If that's the case, we can draw a few conclusions:

  • We should reduce high-end tax loopholes so that the rich have fewer options for moving income around solely to optimize their taxes.
  • If we do that, modest increases in marginal rates on the rich will have very little impact on their taxable income.
  • And even if we don't, this sort of tax avoidance presents us with nothing worse than a mechanical issue of properly estimating tax receipts. Aside from the small inefficiency of paying tax accountants for lots of useless work, raising tax rates doesn't have a negative effect on the economy and has little or no effect on the actual incomes of the rich.

This all makes sense to me. After all, we've already run a sort of destruction test on this. During the 50s, top marginal rates were around 90%, and if high tax rates on the rich harm the economy then the tax rates of the 50s should have literally brought the United States to its knees. But even with heroic efforts, you can't make the case that those tax rates were anything more than a tiny drag on the economy. And if 90% rates produced only a tiny drag, then the effect of moving from, say, 35% to 40% would be literally too small to measure. Conservatives may claim to believe that they oppose higher tax rates on the rich because they'd be a disaster for the economy, but the evidence suggests something far less: namely that it would be a minor disaster for the rich. The rest of the economy would do just fine.

Front page image: alancleaver_2000/Flickr.

We're Still at War: Photo of the Day for May 20, 2011

Fri May 20, 2011 5:00 AM EDT

Paratroopers from the 82nd Airborne Division participate in the Division Review May 18, 2011 at Pike Field, Fort Bragg, N.C. The review is part of All-American Week 2011, in which active duty and veteran paratroopers celebrate the unit’s storied legacy.

Chart of the Day: Arctic Sea Ice

| Thu May 19, 2011 10:11 PM EDT

From the Arctic Sea Ice Blog, this chart shows the extent of (what else) Arctic sea ice by month since 1979, with trend lines drawn in. On current trends, the Arctic will be entirely ice-free in September by about 2016, and will be ice-free year-round by the early 2030s. Probably nothing to worry about, though. Who needs ice, anyway?

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Did ICE Intentionally Mislead?

| Thu May 19, 2011 6:00 PM EDT

Yesterday, Rep. Zoe Lofgren (D-Calif.) called again for an immediate investigation into whether Immigration and Customs Enforcement intentionally misled local authorities as to whether they could opt out of the controversial immigration enforcement program, Secure Communities. In late April, Lofgren asked ICE to investigate the program for misleading statements surrounding their opt-out policy. "I believe some of these false and misleading statements may have been made intentionally, while others were made recklessly, knowing that the statements were ambiguous and likely to create confusion," Lofgren wrote. In return, she received a promise from Acting Inspector General Charles Edwards that a review of Secure Communities, otherwise known as S-Comm, would begin at the start of the 2012 fiscal year. In a letter she sent out on May 17, Lofgren states that an investigation into the program is "pressing," and that the review should begin immediately (see "Lofgren Letters" at the end of this article for all documents).

Obama's Yawn-Inducing Outrage

| Thu May 19, 2011 4:54 PM EDT

Today President Obama stunned the world by saying this:

The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps, so that secure and recognized borders are established for both states.

The New York Times reports that Israeli prime minister Benjamin Netanyahu "reacted icily." The American right wing, by contrast, has been sent into a near frenzy. You'd think it was the end of the world.

This is one of the reasons why the Israel-Palestine issue is so difficult to deal with for those of us who haven't followed its every nuance for the past 30 years. I mean, this has been the basis of every peace negotiation in the Middle East for the past three decades, hasn't it? Most recently it was the basis of Wye River, Camp David, and Taba. Whether it was stated in precisely that way or not, every proposed deal has involved two states, with borders to be negotiated based on the facts on the ground that Israel has so assiduously built up since 1967. In other words, "the 1967 lines with mutually agreed swaps."

And yet, for some reason, actually saying what's been obvious for decades sends everyone into a tizzy. All because of some minuscule change in wording that, to ordinary ears, means nothing.

Somebody help me out here. Pretend I'm five years old and you have to explain things in words of one syllable. Why is Obama's formulation worthy of anything more than a yawn, let alone widespread outrage?

Hurry Up And Wait for the Rapture

| Thu May 19, 2011 4:06 PM EDT

In case you've been out of the loop because your town isn't plastered with signs foretelling the End of the World, some portion of the population believes that the Rapture is coming this Saturday, May 21, at 6 p.m.

I've assumed that this is a small but particularly vocal group—and fairly well funded, given the number of billboards and buses they've plastered in major metropolitan areas like DC and San Francisco. Many people (myself included) have been having a good time mocking these predictions of the pending apocalypse.

But as some of my favorite godless heathens over at the Center for Inquiry pointed out today, most Americans differ with the May 21sters only on the question of when the rapture is going to occur, not if. A total of 41 percent of Americans think Jesus Christ is returning by 2050—that's 23 percent who say he is "definitely" on his way back and 18 percent that say he's "probably" coming soon.

In the South, a full 52 percent of those polled predicted that JC's return is imminent. Those figures come from a June 2010 poll from the Pew Research Center for People & the Press.

"It's a sobering thought that well over 100 million Americans believe Jesus is on his way—the date just may not have been penciled in yet," said CFI President and CEO Ronald A. Lindsay in a press release Thursday. "It’s both disturbing and unfortunate that so many still cling to what can only be described as a fairy tale."