The Washington Post does well today with a nice plain-English look at a contemporary conundrum:
The U.S. government debt is rising inexorably, according to the conventional wisdom in Washington, and the political system is too paralyzed to take unpopular actions to rein it in. Privately, many policymakers take it as a given that the situation will change only when the nation faces a Greek-style fiscal crisis.
But apparently nobody told the people who lend the U.S. government money. On Friday, they were willing to hand over their cash to the Treasury for 10 years for 3.3 percent interest, a level so low it implies they consider the United States among the safest investments in the world. Collectively, those investors — think mutual funds, pension funds and foreign central banks — could lose hundreds of billions of dollars if they’re mistaken and the United States has a debt crisis.
The Post’s Neil Irwin does a good job of explaining the many elements of this apparent paradox, including the inside-the-Beltway view that “serious efforts at reducing the deficit will come only when a crisis moment, such as steeply higher borrowing rates, forces the issue,” and the fact that the European debt crisis has so far—and against expectations—”led to an influx of money into the United States, driving rates down further.”
So what are bond market investors thinking? They are looking around the world in search of a safe place to park cash, and the United States seems like the safest — or perhaps the least unsafe.
It’s a smart piece, and a good reminder of the value of noticing what’s going on, especially when it’s not what you’d expect.
—The Center for American Progress does the business press a favor, posting a new comparison of House and Senate versions of financial reform.
As the CAP piece points out, Rep. Barney Frank, who’s running the conference committee, wants to get it all sorted out this month, so now is the time to pay attention.
—Meanwhile, at ThinkProgress, Jamelle Bouie takes aim at Robert Samuelson’s recent column, in which he complains about the Obama administration’s attempt to revise the government’s definition of poverty, used to calculate the poverty rate.
Samuelson points out that, “Although many poor live hand-to-mouth, they’ve participated in rising living standards. In 2005, 91 percent had microwaves, 79 percent air conditioning and 48 percent cellphones.”
Bouie’s reply:
With microwaves, air conditioning and cell phones, it’s clear that poor people aren’t nearly as poor as we think they are! I mean, it’s not as if poverty is concentrated in the nation’s two warmest regions — the South and the West — where air conditioning is a necessity, and it’s not as if cell phones are a cheaper alternative to landlines, and critical to navigating the world of low-wage service jobs. I guess you could call microwaves luxuries, but even that’s ignoring the fact that [they] are for more likely to consume frozen and prepared foods that need microwaving.”
This isn’t an argument that’s going to go away any time soon. As Bruce Bartlett notes in a post that helpfully reviews the history of this wonky debate:
The official definition has been largely unchanged since the 1960s and a variety of experts on the left and the right have suggested improvements. The central problem, historically, is that all reforms proposed by conservatives would tend to lower the official poverty rate, while those proposed by liberals would tend to raise it. This has led to a long-term détente between both sides to maintain the status quo.
—The FT’s Gideon Rachman reviews the recent—and widening—debate over how we measure human well-being.
As Rachman writes, Nicolas Sarkozy, the French president, has sponsored a commission “to re-examine ideas of human well-being” and, last September, the Stiglitz report “questioned the idea that gross domestic product is an adequate measure of human well-being. It insisted that other aspects of life, such as health, education, family life and the environment, must also be given due weight.” The move for a new way of looking at things is gaining steam in Britain, too.
I don’t know how you can argue that snip was the main crux of Samuelson’s argument. This was a far better summation:
The poverty threshold reflects the amount estimated to meet basic needs. By contrast, the supplemental measure embraces a relative notion of poverty: People are automatically poor if they're a given distance from the top, even if their incomes are increasing. The idea is that they suffer psychological deprivation by being far outside the mainstream. The math of this relative definition makes it hard for people at the bottom ever to escape "poverty."
His argument is that since the cost of both staples and luxury items have declined in relative terms more “poor” people can afford them. It’s a difference in looking at poverty in relative or absolute terms.
It almost makes me think you didn’t bother to even read Samuelson’s article, relying on the brief quotation from Jamelle Bouie (the only one both of you cited) for inclusion.
#1 Posted by Mike H, CJR on Tue 1 Jun 2010 at 05:22 PM
Mike,
I did read all of Samuelson, and didn't suggest that quote was a summary of his argument. But the argument he's making isn't new. I was mostly interested in Bouie's reply to that odd line, which is why I started the post with it.
#2 Posted by Holly Yeager, CJR on Tue 1 Jun 2010 at 05:49 PM
First, read the link to the supplemental calculation article:
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/02/AR2010030202316.html
Note what it says:
"Under a "Supplemental Poverty Measure" announced by the Commerce Department, the government is augmenting, but not replacing, the formula that determines how many people are considered to be in poverty, taking into account a wider range of expenses and income to try to create a truer portrait of which Americans are financially fragile.
The old definition, developed in the mid-1960s using data from a decade earlier, was based on the cost of food and a family's cash income. The new one, acknowledging that food has become a smaller share of poor families' costs, will also consider expenses such as housing, utilities, child care and medical treatment. In gauging people's resources, the new method will include financial help from housing and food subsidies, in addition to money from jobs and cash assistance programs."
In other words, the old standard used a single metric to establish poverty, food, but that metric has deflated because of the prevalence of processed food with subsidized inputs. This has the effect of reducing the family food budget, but at the cost of a diet lacking nutrition containing unhealthy substances. Regardless, that cost is no longer an accurate measure of economic well being because it has not kept up with general inflation.
The supplemental measure is multi-metric. It takes into account things like health insurance and pharmaceutical costs which have risen well above rates of inflation. If these things are necessities, and they are, which you cannot afford then you cannot meet your basic needs.
And there are good reasons for using a new metric and it has nothing to do with immigration (Samuelson is pathetic by the way. Just thought I'd mention). For one, we need something to account for the stagnant wage growth over the last 30 years (the last 10 especially). If you use a single metric that is not in line with inflation, you are getting an inaccurate reading of the poverty rate.
Maybe you can afford food, but the gas you need to get to work comes from the credit card. Your income cannot support that basic need. Which brings us to... we need something to account for the near zero, sometimes negative, savings rate.
When income cannot support life necessities, households rely on debt to supplement their needs. Sure, consumer goods have gotten cheaper through Chinese labor and Walmart distribution, but transportation, education, rent, etc.. has not. Many families rely on two to four incomes, part time jobs, to make ends meet. The time away from home incurs costs in care and food expenses. A family can be above the poverty line by the standard definition and still be under water due to the expense it takes to maintain 12 hour days at two jobs. And that water can be very expensive when the tap is low income tailored credit cards.
The way Samuelson views this is "[t]he new indicator is a "propaganda device" to promote income redistribution by showing that poverty is stubborn or increasing". Why? Because the guy heard it from some Heritage think tank douchebag and has to repeat it, like a good parrot should.
Meanwhile:
http://bigpicture.typepad.com/comments/2007/02/household_cash_.html
"Stephanie goes on, is that the households with the cash (and assets) "are not the ones with the debt." Rather, alas, the top 1% of householders hold 30% of the assets and 7% of the debt, while the bottom 50% hold a mere 6% of assets but a burdensome 24% of the debt."
They may have a microwave and a flatscreen walmart tv, but they might not have health insurance or a pension a
#3 Posted by Thimbles, CJR on Wed 2 Jun 2010 at 12:53 PM