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.

Staying in Afghanistan Is a Recipe for More Terrorism

Global Opposition to U.S. Drone StrikesBarack Obama is daring the terrorists. He’s standing in their front yard. He’s calling them out.

Of course, that’s not how it’s reported. “U.S. ‘nowhere near’ decision to pull all troops out of Afghanistan,” was the understated Reuters headline. Under negotiation is an agreement keeping 8,000 to 10,000 American troops in Afghanistan “through 2024 and beyond.” Also on the table are night raids and drone strikes that Afghan President Hamid Karzai refuses to allow.

This is madness. “If the job is not done,” said the Russian ambassador to Kabul, “then several thousand troops…will not be able to do the job that 150,000 troops couldn’t do.”

The only thing worse than the hopelessness of this plan is the backwardness of it. In an effort to prevent terrorism, we are continuing the very thing that creates terrorism: our presence!

Al Qaeda “has been precise in telling America the reasons [it’s] waging war on us,” according to CIA analyst Michael Scheuer, who tracked Osama bin Laden from 1996 to 1999. “None of the reasons have anything to do with our freedom, liberty, and democracy, but have everything to do with U.S. policies and actions in the Muslim world.”

In his book Dying to Win: The Strategic Logic of Suicide Terrorism, political scientist Robert Pape analyzed every known case of suicide bombers from 1980 to 2005. He found that “what nearly all suicide terrorist attacks have in common is a specific secular and strategic goal: to compel modern democracies to withdraw military forces from territory that the terrorists consider to be their homeland.” Specifically, he discovered that “al Qaeda is today less a product of Islamic fundamentalism than of a simple strategic goal: to compel the United States and its Western allies to withdraw combat forces from the Arabian Peninsula and other Muslim countries.”

The Obama administration can’t pretend that it doesn’t know this fact. In 2004, the Pentagon concluded that “American direct involvement in the Muslim World has paradoxically elevated the stature of and support for radical Islamists, while diminishing support for the United States to single-digits in some Arab societies. Muslims do not ‘hate our freedom,’ but rather, they hate our policies. [In] the eyes of the Muslim world, American occupation of Afghanistan and Iraq has not led to democracy there, but only more chaos and suffering.”

Firsthand accounts confirm these conclusions. British journalist Johann Hari interviewed former Islamic militants who had since rejected jihad. He probed them, in independent interviews, about what made them join the cause in the first place. “Every one of them said the Bush administration’s response to 9/11 — from Guantanamo to Iraq — made jihadism seem more like an accurate description of the world.” One of them put it this way: “You’d see Bush on the television building torture camps and bombing Muslims and you think — anything is justified to stop this. What are we meant to do, just stand still and let him cut our throats?”

New York Times reporter David Rohde saw this attitude up close when the Taliban held him hostage for seven months. Looking back on his captors, he remembered, “Commanders fixated on the deaths of Afghan, Iraqi and Palestinian civilians in military airstrikes, as well as the American detention of Muslim prisoners who had been held for years without being charged.”

BBC journalist Owen Bennett-Jones found the same reaction in his research on the drone strike that killed Taliban leader Hakimullah Mehsud earlier this year. “Although many Pakistanis were happy that Mehsud was no long threatening them,” Bennett-Jones reports, “their relief was outweighed by the thought that the US’s use of drones in Pakistan was an unacceptable breach of sovereignty and a national humiliation.” The result was “a wave of sympathy in the country” for Mehsud and his fellow terrorists.

“As I travelled around the Middle East during the Arab Spring,” writes Bennett-Jones in this week’s London Review of Books, “the word that most often cropped up in the slogans in various capitals was not ‘freedom’ – the one the Western media recognised and highlighted – but ‘dignity.'”

These are the sad facts of a desperate region. We do not condone their violence, but we must understand their motives.

American troops, night raids, and drone strikes in Afghanistan will only make it easier for terrorists and insurgents to recruit angry young men to fight and die for their cause. By extending the occupation into perpetuity, we are not stopping terrorism at the source, as President Obama would have us believe. We are multiplying their ranks. We are taunting and humiliating them. We are endangering our nation.

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

Looking Overseas Gives Us Reasons to Be Thankful for Obamacare

U.S. Adults Are More Likely to Skip Care and Struggle with Medical Bills Than Adults in Peer Countries

This Thanksgiving, a lot of Americans will be giving thanks for Obamacare.

By the end of this month, HealthCare.gov will be able to handle 800,000 users per day, enough to enroll everyone who needs coverage by the end of the year. Meanwhile, the state-run exchanges are reporting “a November enrollment surge,” precisely as the Obama administration predicted. (Massachusetts also experienced a late enrollment surge when they adopted an individual mandate in 2006.) Everyday, we hear new stories about Americans who are saving thousands of dollars on their insurance costs, including House Speaker John Boehner, whose new Obamacare insurance will cost pennies on the dollar of his six-figure income.

And not a moment too soon. Earlier this month, the nonpartisan Commonwealth Fund published the results of their latest survey of eleven industrialized countries, including the United States, where they asked people about their experiences with the health care system in the past year. Their findings are a sad reminder of just how bad the status quo is — and why we demanded health reform in the first place.

Many Americans don’t go to the doctor when they’re sick because they can’t afford it. Many don’t go to the pharmacy or take their medicine. Add it all up, and 37 percent of Americans had some sort of “cost-related access problem” in the past year.

That kind of problem isn’t nearly as common in the Netherlands, where it only affects 22 percent of the population. Or France, where the number drops to 18 percent. Or Canada, where it’s 13 percent. Or the UK, where it’s 4 percent.

Fair enough, you might say. More people have more access, but they also have to wait in line longer, right? Not necessarily.

In fact, in most countries, the majority of the population could see a doctor within a day of their request. The United States placed second-to-last in this category. A quarter of our population had to wait six days or more — a little better than Canada, but far worse than Australia, France, Germany, the Netherlands, New Zealand, and the UK.

But that’s primary care. The United States is known for its specialists, where 76 percent of the population got an appointment in less than four weeks and only 6 percent had to wait two months or more. That’s a heck of a lot better than Australia, where only 51 percent got an appointment in less than four weeks and 18 percent had to wait two months or more. Or Canada, where the numbers are 39 percent and 29 percent, respectively.

But it’s about the same as the Netherlands, where the numbers are 75 percent and 3 percent. And the UK, where they’re 80 percent and 7 percent. And even Germany isn’t far behind, at 72 percent and 10 percent.

So it’s a mixed bag, but we’re certainly not in the lead.

In most countries, it’s a lot easier to get after-hours care than in the United States. Only 35 percent of American doctors have an arrangement to take care of their patients after the office is closed — by far the lowest percentage of all the countries surveyed. In Canada, it’s 46 percent. In France, it’s 76 percent. In Germany, the Netherlands, and the UK, it’s 90 percent or higher.

And the doctors have a lot more problems in the United States, where the paperwork piles up. One in three — 32 percent — reported significant paperwork or payment problems in 2013, compared to 23 percent in France, 17 percent in Germany, 15 percent in Canada, and 4 percent in the UK.

No wonder everyone else is happier with their health care than we are.

Only 25 percent of Americans think their health system works well. In the other countries, that approval rating ranges from 40 percent in France to 63 percent in the UK.

Whereas 27 percent of Americans think the health system needs to be completely rebuilt, that disapproval rating ranges from 12 percent in Norway to 4 percent in the UK.

That’s a lot of numbers, but they all tell the same story: The United States has the most complicated, most expensive, and most frustrating health care system in the industrialized world — and none of that is due to Obamacare, most of which took effect after the survey.

In fact, Obamacare is moving our system closer to our international counterparts. Based on these numbers, I’d say that’s definitely something to be thankful for.

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An abbreviated version of this op-ed was published in Friday’s South Florida Sun-Sentinel. This version was published in the Huffington Post.

My New Book Has Been Published! Just in Time for the Holidays…

Letter to the One PercentAvailable in hardcover from Lulu Press, Inc:

Support independent publishing: Buy this book on Lulu.

Available in e-book format from Lulu Press, Inc:

Support independent publishing: Buy this e-book on Lulu.

Available in Kindle format at Amazon.com:

Buy from Amazon.com!

 What It’s All About…

Letter to the One Percent is exactly what it sounds like: a letter to the richest one percent of American households. It is a call to action, a plea for compassion, and a manifesto for the future. It tells the story of their extraordinary success — and how the other 99 percent of Americans missed out. It explains how this divergence caused household income to stagnate, forced millions of Americans into poverty, and triggered the worst financial crisis since the Great Depression. It appeals to the better angels of their nature to bear a higher burden — by paying higher taxes, empowering labor, and cracking down on white-collar crime — in order to reverse the damage done in the past three decades.

No other writer has dared to speak these truths directly to power. Every other mainstream book preaches to the choir. Only Letter to the One Percent is brave enough to challenge the rich to do what the country needs them to do. It is not an attack. It is not class warfare. On the contrary: It is a challenge to end the class war that the One Percent has been winning and the 99 Percent has been losing.

No other political subject is as timely as this one. No other economic trend is as pivotal. From the financial crisis in 2008, to Occupy Wall Street in 2010, to the presidential election in 2012, the divergence between the One Percent and the 99 Percent has been the most talked-about issue in American current events. And yet, no one has synthesized the causes and consequences of it in a succinct, yet comprehensive, book. No one has translated the protests and the politics into the simple pocketbook impact that it has had on the average American household. This is the biggest story of our time, and Letter to the One Percent is the first book to tell it fully, accurately, and unflinchingly.

Advance Praise for Letter to the One Percent

“In just 85 pages, the brilliant young economist Anthony W. Orlando analyzes the events of the past thirty-five years and thoroughly explores the rise of the One Percent at the expense of the rest of us. It is truly a manifesto for the 99 Percent and should be read by every one of us.”

— Reese Schonfeld, founding President and CEO of CNN

Letter to the One Percent is an excellent primer and refresher course on macroeconomics. It helped me understand why the U.S. is experiencing the current economic state of affairs. It is also a compassionate call to action. At first, one may not agree with the basic thesis, but it makes complete sense. I am now a believer and highly recommend this read.”

— Mark Itkin, Co-Head of Worldwide Television at William Morris Endeavor

“Anthony W. Orlando has written a short dossier and critique of America’s descent into a very troubled and vulnerable society. He presents it in the original form of a letter chastising the One Percent for these policy failures and urging them to get hold of themselves and opt for decency and long-run survival. But he also provides a small storehouse of ammunition for the 99 Percent to use in their self-defense.”

— Edward S. Herman, Professor Emeritus of Finance at the Wharton School of the University of Pennsylvania, bestselling co-author of Manufacturing Consent: The Political Economy of the Mass Media

“Anthony W. Orlando has the unique ability to translate complex economic phenomena into everyday, nuts-and-bolts language. He speaks for a brave new generation with a voice that deserves to be heard.”

— Susan M. Wachter, Professor of Real Estate and Finance at the Wharton School of the University of Pennsylvania, former Assistant Secretary of the U.S. Department of Housing and Urban Development

“…this well-researched, carefully cited book is a valuable resource for understanding how the country got in such a perilous position and what can be done about it. Using a clear, authoritative writing style,…Orlando…manages to present an impressive number of facts without overwhelming readers. In particular, the statistics he presents are startling, even for those who closely follow the state of the economy.”

— Kirkus Reviews

Great Nations Pay Their Bills

Great nations pay their bills.

That, I believe, is what this debate boils down to. That is what our founding fathers would tell us if they saw us toying so dangerously with the federal budget and the debt ceiling.

The national debt has always been controversial. The current government shutdown is only the latest episode in a long history of divisive debates over paying the nation’s bills.

Consider, for example, what John Adams’s wife Abigail wrote to her daughter Mary in 1792: “I firmly believe, if I live ten years longer, I shall see a division of the Southern and Northern states, unless more candor and less intrigue, of which I have no hopes, should prevail.”

She wasn’t talking about slavery. She was talking about government debt. And she wasn’t alone.

“With the South filled with debtors and the North creditors,” says the historian Ron Chernow, Thomas “Jefferson feared the country would break apart along sectional lines.”

You have to admit, that really puts things in perspective. Today’s debate may be polarized, but no one seriously expects half the nation to secede because of it. And yet, in the early days of the American experiment, that’s how controversial the national debt was.

After the American Revolution, the new government had a lot of bills to pay. Fighting the mighty British Empire wasn’t cheap. The federal government had racked up $54 million in unpaid bills, and the states owed another $25 million.

There were many in Congress who believed that the government should default on its debt rather than pay the bills. They knew that they’d have to raise taxes to pay the bills, and they believed that taxing and spending were the first steps toward monarchy.

Sounds familiar, no?

George Washington disagreed. During the war, Washington had marveled at the British army’s seemingly inexhaustible supply of money. A great military, he believed, depended on the government’s ability to spend as much as necessary, and that required tax revenue and solid credit — two things that were sorely lacking on the American side.

By the end of the war, investors were fed up with the Americans. The new state governments had refused to collect enough taxes to pay the interest on the debt they had accumulated. The financier Robert Morris warned Washington that investors “who trusted us in the hour of distress are defrauded.” It’s “madness,” he lectured, to “expect that foreigners will trust a government which has no credit with its own citizens.” He begged the federal government to begin collecting taxes to repay their loans.

“With respect to the payment of British debts,” Washington concluded, “I would fain hope…that the good sense of this country will never suffer a violation of a public treaty, nor pass acts of injustice to individuals. Honesty in states, as well as in individuals, will ever be found the soundest policy.”

In other words, when a gentleman gives his word, he honors it. Great nations pay their bills. He did not, however, have an easy time convincing Congress of that.

In his first State of the Union, Washington declared that “an adequate provision for the support of the public Credit is a matter of high importance to the national honor and prosperity.” A few days later, his Treasury Secretary Alexander Hamilton proposed to Congress that the federal government not only raise enough taxes to pay off its debt but also to pay off all the states’ debts as well. Even more controversial, he suggested that they pay the entire face value of the debts, not the low prices that they were currently selling for in the market.

James Madison rose in the House of Representatives to denounce Hamilton’s proposal. It would reward speculators who had purchased the government bonds from hapless war veterans, he argued, and create a dangerously large Treasury bureaucracy.

In the end, Hamilton won, but not before creating many enemies. The investors who stood to gain from his policy lived mostly in the industrial North, while the indebted landowners of the South were suspicious of bankers and their “paper assets.” The debate over Hamilton’s proposal was the beginning of a rift that eventually led to our modern political parties.

Not long after Congress approved Hamilton’s plan, government bonds tripled in value. “The progress of public credit is witnessed by a considerable rise of American stock abroad as well as at home,” boasted Washington.

Still, radical dissenters tried to thwart this goal. In western Pennsylvania, a group of outraged farmers rebelled violently against the new tax the government had placed on whiskey, a product created from their grain. But Washington wouldn’t stand for it. If “a minority…is to dictate to a majority,” he warned, “there is an end put at one stroke to republican government.”

Apropos wisdom for today, wouldn’t you say?

Eventually, the Whiskey Rebellion was quelled, and all the debts were paid off — state and federal — at face value. The American government went on to become the most trusted investment in the world. To this day, it is widely considered the crowning achievement of Hamilton’s career — and one of the most important acts of this new nation.

Our credit is our reputation. It is our word. It is, quite literally, our bond with the investors of the world. To abuse it is not only to invite economic disaster; it is, more importantly, to sever the promise our forefathers made to us and the promise we make to the world. When other nations are in distress, they turn to us. We are the beacon in a sea of uncertainty. We are the deep pockets when all others have gone empty.

We are a great nation. Let’s start acting like it.

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This op-ed was published in today’s Huffington Post. An abbreviated version was published in the South Florida Sun-Sentinel.