The Ryan Budget Is an Affront to Economics and American History

A few years ago, when the unemployment rate was near its peak, two Swedish economists, Stefan Eriksson and Dan-Olof Rooth, conducted an experiment. They wanted to find out just how hard it was to get a job if you’d been unemployed for a long time. They sent 8,466 fictitious job applications to employers across Sweden. They varied the number of months that each “applicant” had been unemployed. For some, it was a matter of days. For others, several months. Then they waited for the employers to call them back for interviews.

Overall, one out of every four job “applicants” received an interview. Unsurprisingly, it was higher for high-skill jobs and lower for low-skill jobs. What was more significant was the effect of unemployment on the fictitious resumes.

Eriksson and Rooth found that unemployment didn’t matter if it lasted less than six months. Applicants who had been unemployed for the past six months were just as likely to receive an interview as applicants who just quit their job yesterday. If they had been unemployed for nine months or more, however, they were 20 percent less likely to get an interview, even if they had the same work experience, education, and other qualifications as everyone else.

In the United States right now, over 3 million people have been looking for work for nine months or more — and that doesn’t include the millions more who gave up searching because they couldn’t find anything.

Eriksson and Rooth have mostly confirmed what we already knew, but their experiment adds more specific and more reliable evidence to the overwhelming conclusion that these people need our help. Fortunately, another paper, published alongside Eriksson and Rooth’s, proves that we can help them.

While Eriksson and Rooth were sending out job applications, Emi Nakamura and Jón Steinsson were reading military procurement forms.

Both economists at Columbia University, Nakamura and Steinsson were trying to figure out what effect the federal government has on the economy when it increases its spending. They found a database at the Pentagon that summed up all large military purchases in every state in the U.S. from 1966 to 2006. It wasn’t exactly an experiment, but it was close enough.

The danger in estimating the effects of government spending is that it’s hard to tell whether states had faster economic growth because they received more funding — or whether they received more funding because they happened to enjoy faster economic growth. With military purchases, Nakamura and Steinsson knew they didn’t have that problem. States don’t receive military contracts based on the state of their economy. The two are usually independent.

Nakamura and Steinsson compared military spending in each state with subsequent economic growth over the course of four decades, and they found that a 1 percent increase in government purchases resulted in a 1.5 percent increase in income per person in that state.

Then they calculated the effect on the national economy. When the Federal Reserve couldn’t lower interest rates any further — the situation we’re in now, known as the “zero lower bound” — Nakamura and Steinsson found that a 1 percent increase in government purchases resulted in at least a 1.7 percent increase in national income per person.

In other words, the federal government can stimulate the economy and create jobs, and the resulting increase in income will far exceed any cost to the taxpayers.

Budget ProposalsLike Eriksson and Rooth, Nakamura and Steinsson aren’t telling us something we don’t know, but they are giving us another valuable piece of evidence that our government is headed in the wrong direction.

At a time when the long-term unemployed need more support, our government is giving them less. The leadership of both parties have agreed to shrink the federal budget drastically over the coming decade, and now Paul Ryan, the Republican chair of the House Budget Committee, has issued a new proposal that will cut the budget even further, to the point where most programs that support the unemployed will be half the size that they were during the Reagan administration, relative to the size of the economy.

This is a cruel, counterproductive path we are on, and that is not a statement of mere opinion. It is the inescapable conclusion of data-driven, cutting-edge economic research based on real-world evidence and the accumulated lessons of American history.

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This op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.

A Most Cruel, Cynical Duo

In reaction to today’s news that Mitt Romney has chosen Rep. Paul Ryan as his running mate, I’m reproducing my op-ed from April on Ryan’s claim to fame — his budget proposal:

Do you think the government should spend less money on Medicare? On Medicaid? On education? On aid to the poor? On veterans’ benefits?

If you’re like most Americans, your answer to all of these questions is, “No.”

According to a recent poll, less than a quarter of Americans want the government to cut spending on these programs. Even the majority of Republican primary voters are opposed to such reductions.

Yet House Republicans recently passed a budget that significantly reduces spending for all these programs. And those same Republican primary voters are most supportive of the one candidate who has publicly endorsed this budget: Mitt Romney.

Clearly, most Americans have no idea what Romney and the author of the budget, Republican Congressman Paul Ryan, stand for.

Ryan’s budget slashes spending from almost everything except Social Security and defense. Of the $5.3 trillion he wants to eliminate over the next decade, $3.3 trillion comes from programs that benefit low-income Americans: Medicaid, Pell Grants, food stamps, job training, school lunch, etc.

Seriously, school lunch. Evidently, Paul Ryan and Mitt Romney believe that the richest country in the history of the world can’t afford to provide its children with one decent meal a day.

Yet we can afford to pay the average millionaire an extra $265,000 per year. That’s how much more they’d earn if Ryan’s tax cuts became law.

Millionaires would get a raise of 12.5 percent on their after-tax income. The middle class would get a raise of less than 2 percent.

Is there an epidemic of suffering millionaires that I’m unaware of? Are they unable to pay their health insurance? Their student loans? Their mortgages?

No. Those are middle-class problems.

And they’ll become bigger problems if Ryan’s budget becomes law. Fewer Pell Grants will result in a lot more student debt, and less funding for the Affordable Care Act will rescind affordable health insurance for upwards of 30 million Americans.

Economists expect unemployment to remain high for several more years. Ryan’s solution is to fire thousands of federal employees.

Our veterans are suffering from record levels of post-traumatic stress disorder after multiple tours of duty in a war that most Americans no longer support. Ryan’s solution is to dishonor their sacrifice by skimping on their health care.

Income inequality has triggered protests in the streets and unsustainable household debt. Ryan’s solution is to pay the rich more and the poor less.

“If they can’t afford food or health care, let them die.” That should be Paul Ryan’s motto. Put that on your Mitt Romney bumper sticker.

And don’t think this is hyperbole, because they are dying. According to Harvard Medical School researchers, 45,000 Americans die every year because they lack health insurance and therefore cannot get the necessary care. According to researchers at Columbia University and the Federal Reserve, being unemployed for a year increases your odds of dying by 50 percent. Another year, and it’s 100 percent.

This is a cruel, cynical world we live in where hard-working men and women are tossed aside like road-kill for political gain.

“I’ve always resented the smug statements of politicians, media commentators, corporate executives who talked about how, in America, if you worked hard, you would become rich,” said the great historian Howard Zinn. “The meaning of that was: if you were poor, it was because you hadn’t worked hard enough. I knew this was a lie about my father and millions of others, men and women who worked harder than anyone.”

Indeed they did. This country was built on their broken backs. But Mitt Romney thinks they’re expendable — and when you go to the voting booth in November, he’s counting on you not to notice.

The Cruel, Cynical Lie at the Heart of Paul Ryan’s Budget…and Mitt Romney’s Campaign

Do you think the government should spend less money on Medicare? On Medicaid? On education? On aid to the poor? On veterans’ benefits?

If you’re like most Americans, your answer to all of these questions is, “No.”

According to a recent poll, less than a quarter of Americans want the government to cut spending on these programs. Even the majority of Republican primary voters are opposed to such reductions.

Yet House Republicans recently passed a budget that significantly reduces spending for all these programs. And those same Republican primary voters are most supportive of the one candidate who has publicly endorsed this budget: Mitt Romney.

Clearly, most Americans have no idea what Romney and the author of the budget, Republican Congressman Paul Ryan, stand for.

Ryan’s budget slashes spending from almost everything except Social Security and defense. Of the $5.3 trillion he wants to eliminate over the next decade, $3.3 trillion comes from programs that benefit low-income Americans: Medicaid, Pell Grants, food stamps, job training, school lunch, etc.

Seriously, school lunch. Evidently, Paul Ryan and Mitt Romney believe that the richest country in the history of the world can’t afford to provide its children with one decent meal a day.

Yet we can afford to pay the average millionaire an extra $265,000 per year. That’s how much more they’d earn if Ryan’s tax cuts became law.

Millionaires would get a raise of 12.5 percent on their after-tax income. The middle class would get a raise of less than 2 percent.

Is there an epidemic of suffering millionaires that I’m unaware of? Are they unable to pay their health insurance? Their student loans? Their mortgages?

No. Those are middle-class problems.

And they’ll become bigger problems if Ryan’s budget becomes law. Fewer Pell Grants will result in a lot more student debt, and less funding for the Affordable Care Act will rescind affordable health insurance for upwards of 30 million Americans.

Economists expect unemployment to remain high for several more years. Ryan’s solution is to fire thousands of federal employees.

Our veterans are suffering from record levels of post-traumatic stress disorder after multiple tours of duty in a war that most Americans no longer support. Ryan’s solution is to dishonor their sacrifice by skimping on their health care.

Income inequality has triggered protests in the streets and unsustainable household debt. Ryan’s solution is to pay the rich more and the poor less.

“If they can’t afford food or health care, let them die.” That should be Paul Ryan’s motto. Put that on your Mitt Romney bumper sticker.

And don’t think this is hyperbole, because they are dying. According to Harvard Medical School researchers, 45,000 Americans die every year because they lack health insurance and therefore cannot get the necessary care. According to researchers at Columbia University and the Federal Reserve, being unemployed for a year increases your odds of dying by 50 percent. Another year, and it’s 100 percent.

This is a cruel, cynical world we live in where hard-working men and women are tossed aside like road-kill for political gain.

“I’ve always resented the smug statements of politicians, media commentators, corporate executives who talked about how, in America, if you worked hard, you would become rich,” said the great historian Howard Zinn. “The meaning of that was: if you were poor, it was because you hadn’t worked hard enough. I knew this was a lie about my father and millions of others, men and women who worked harder than anyone.”

Indeed they did. This country was built on their broken backs. But Mitt Romney thinks they’re expendable — and when you go to the voting booth in November, he’s counting on you not to notice.

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This op-ed was published in last Friday’s South Florida Sun-Sentinel.

The Bird and the Wolf

by Norman Horowitz

Last week, Eric Cantor, the No. 2 Republican in the House, denounced the “Occupy Wall Street” protests as “mobs,” and Michael Bloomberg, the Mayor of New York, charged demonstrators with “trying to take away the jobs of people working in this city.”

Cantor’s net worth is approximately $4.8 million. Bloomberg is worth $20 billion.

Cantor spent his childhood at the elite Collegiate School on the Upper West Side of Manhattan, where the annual tuition is $37,500. He then attended George Washington University, where the annual cost is $58,148. He received a Juris Doctor degree from William & Mary Law School, where the annual cost is $52,000. He also holds a Master’s in Real Estate Development from Columbia University, where the annual cost is approximately $54,000.

Bloomberg didn’t have an upbringing as privileged as Cantor’s, but he did attend Johns Hopkins University, where the annual tuition is $40,680, followed by Harvard Business School, where the annual cost is a whopping $84,000.   Continue reading “The Bird and the Wolf”