Sunday, November 20, 2011 5:19:34 AM
Paul Ryan’s solution to inequality helps the rich, does nothing for poor
By Greg Sargent
Posted at 11:38 AM ET, 11/18/2011
Yesterday Paul Ryan released a very serious looking report [ http://budget.house.gov/UploadedFiles/CBOInequality.pdf ] entitled: “A deeper look at inequality.” Ryan’s effort — a rebuttal to that recent CBO report [ http://www.cbo.gov/doc.cfm?index=12485 ] on growing inequality that got so much attention — was applauded by conservatives as an important contribution to the debate.
Since Ryan has a widespread reputation as a serious fiscal thinker, I thought I’d ask Tim Smeeding, an expert on inequality at the University of Wisconsin, to evaluate his report.
Smeeding’s verdict: Ryan’s effort is only “half serious,” fails to prove its argument about inequality, and doesn’t offer any policy prescriptions that would fix the problem as Ryan himself defines it.
Smeeding focused on several core Ryan arguments that are central to his overall case. First, Ryan claims critics are wrong to push for tax hikes on the rich, arguing the tax system has grown more progressive in recent years. “The share of the federal tax burden borne by the top 1 percent increased dramatically,” Ryan writes.
But Smeeding says this is a typical fallacy committed by those who oppose progressive taxation. Even if it’s true that the tax burden of top earners has gone up, that’s because their incomes have gone up, and have in fact gone up at a faster rate than their tax rate, meaning they now pay a smaller percentage of their overall income in taxes.
“At the very top, income doubled or tripled in the time period he’s talking about. Of course their taxes went up,” Smeeding says. “But their taxes increased by much less than their share of total income. Their after tax income grew by more than their pre-tax income.”
Ryan claims the real problem exacerbating inequality is not income disparity, but the lack of mobility of those at the bottom. Smeeding agrees with Ryan that mobility is key. But Ryan then argues that rather than try to promote equality through redistributive taxation, we should instead “promote upward mobility, increase broadly shared economic growth, and ensure that more and more Americans are able to freely earn their success.”
Smeeding, however, rejects this as a false choice. He says we can simultaneously make the tax system more progressive while also pursuing policies that enhance mobility. Indeed, Smeeding argues that those goals are two sides of the same policy coin — they are linked. The goal of raising taxes on the rich isn’t merely to promote equality by redistributing wealth. Rather, it’s about generating more revenue to invest in policies that enhance the mobility Ryan hopes to achieve.
Smeeding adds that there are no policy prescriptions in Ryan’s report that would actually enhance mobility.
“How do you increase mobility at the bottom? You provide low income families the tools to compete in a 21st Century economy,” Smeeding says. “Create revenue to invest in the mobility of kids from poorer backgrounds — improve early childhood education, improve schools, improve chances of success, lower the cost of college. He misses the whole point about mobility, which is about increasing educational and economic opportunity.”
Ryan also calls for tax reform policies to promote “growth.” But Smeeding argues that even if those policies worked, growth has historically benefited the wealthy more than everyone else, and that Ryan’s prescriptions would do nothing to safeguard against that.
“In the past 10 or 15 years, virtually all of the growth has gone to the top five percent,” Smeeding says. “If we manage somehow to increase economic growth again, Ryan’s policies offer no guaratee that we wouldn’t experience the same thing.”
Smeeding said he agreed with some stuff in Ryan’s report, such as the need to cut government health care assistance for middle income and high income elderly people. But overall, Smeeding said: “His prescriptions would help the rich, and there’s nothing here that helps the poor.”
© 2011 The Washington Post (emphasis in original)
http://www.washingtonpost.com/blogs/plum-line/post/paul-ryans-solution-to-inequality-helps-the-rich-does-nothing-for-poor/2011/11/18/gIQAbt1OYN_blog.html [with comments]
===
Delusions Of Mobility
Paul Krugman
November 18, 2011, 12:45 pm
Greg Sargent [ http://www.washingtonpost.com/blogs/plum-line/post/paul-ryans-solution-to-inequality-helps-the-rich-does-nothing-for-poor/2011/11/18/gIQAbt1OYN_blog.html (above)] sends us to Paul Ryan’s latest — an attempt to debunk the CBO report on income inequality. As usual, Ryan makes me think of Ezra Klein’s old line about Dick Armey: he’s a stupid person’s idea of what a smart person sounds like.
Greg gives us a thorough takedown by Tim Smeeding, who really really knows his inequality stuff. I’d just add that Ryan repeats the familiar line about how we have vast income mobility, so that the picture given by static inequality comparisons is misleading.
But as I’ve pointed out [ http://krugman.blogs.nytimes.com/2011/11/03/millionaire-for-a-day/ ], the CBO report itself takes that argument on and refutes it. Multi-year measures of inequality, it turns out, aren’t much lower than single-year measures. How is that possible, when many people change income quintiles? Because they’re usually moving short distances on the income scale. A lot of people move from, say, the top of the second quintile to the bottom of the third quintile or vice versa — but such moves are trivial in terms of their true income position. Big moves, jumping more than one quintile, are much less common; yet it’s those big moves people have in mind when they talk about ,mobility.
And in the end, Ryan’s answer is that we need strong economic growth, the kind that we get by cutting taxes on the rich. Because that’s why the Clinton years were an economic disaster and the Bush years so prosperous.
© 2011 The New York Times Company
http://krugman.blogs.nytimes.com/2011/11/18/delusions-of-mobility/ [with comments]
===
Paul Ryan’s inequality plan increases inequality
Rep. Paul Ryan(R-Wis.) is chairman of the House Budget Committee.
(Joshua Roberts - BLOOMBERG)
Posted by Ezra Klein at 09:00 AM ET, 11/19/2011
Paul Ryan’s 15-page response [ http://budget.house.gov/UploadedFiles/CBOInequality.pdf ] to the Congressional Budget Office’s inequality report [ http://cbo.gov/doc.cfm?index=12485 ] can be summed up in two sentences: Inequality isn’t a problem. But if it is a problem, then the ideas I’ve been pushing all along will solve it.
And I applaud him for it.
For one thing, it’s important for Republicans to join the conversation over inequality. This is more evidence that Occupy Wall Street, whatever its eventual fate, has forced the political system to pay attention to issues it was previously neglecting.
Ryan’s paper also makes some good points. He emphasizes the CBO’s finding that government transfers are more regressive than they were 30 years ago and that that’s largely due to Medicare and Social Security taking up a larger portion of the federal budget and spending a fair amount of their money on wealthy seniors rather than poorer households. If you worry about equity — either between rich and poor households or between different generations — you should worry a lot about the unchecked growth of Medicare and the structure of Social Security. We can and should do better.
But more broadly, Ryan’s paper tries to create a false choice between reducing income inequality, encouraging economic mobility and accelerating growth. Toward the end, Ryan actually says the debate over inequality breaks down into two groups:
1. Is the problem simply that some households make more than others, in which case policymakers should be focused on closing this income gap by any means at their disposal, indifferent as to whether government policies aimed to close relative inequality result in lower absolute levels of income?
2. Or is the problem that incomes for households in the middle- and lower-quintiles are not rising fast enough, in which case policymakers should focus first and foremost on creating the conditions for income growth and job creation? If there actually is anyone out there who believes we should be focused on closing the income gap no matter the cost to growth, I’ve never met them. Conversely, there actually are people who focus on what they think to be pro-growth policies without heed to the income gap. People like, say, Paul Ryan.
In 2010, the Tax Policy Center released a detailed analysis [ http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=2682&DocTypeID=2 ] of the tax provisions in Ryan’s Roadmap for America. If you were in the top 1 percent, they found, Ryan’s plan would save you $350,000 a year. If you were in the middle of the income distribution, it would cost you $152 a year. And if you were in the bottom 20 percent, it would cost you $393 a year. That would undoubtedly increase inequality.
And there’s good evidence that increasing inequality is, ultimately, bad for growth. Over at the International Monetary Fund, Andrew Berg and Jonathan Ostry recently published a paper [ http://blog-imfdirect.imf.org/2011/04/08/inequality-and-growth/ ] looking at the relationship between inequality and growth across the world. In a sense, they were testing Ryan’s proposition exactly. “Some dismiss inequality and focus instead on overall growth — arguing, in effect, that a rising tide lifts all boats,” they write.
Berg and Ostry found that “high ‘growth spells’ were much more likely to end in countries with less equal income distributions.” Moreover, “the effect is large .?.?. closing, say, half the inequality gap between Latin America and emerging Asia would more than double the expected duration of a ‘growth spell.’?” And it was robust: “Inequality seemed to make a big difference almost no matter what other variables were in the model or exactly how we defined a ‘growth spell.’?”
Ryan also plumps for his Medicare reforms as a solution to inequality. As you’ll remember, his budget proposes converting Medicare into a voucher system where seniors would be given a check and sent into a regulated private market to purchase insurance. The plan saves money because the check would grow at the rate of inflation, while health-care costs often increase three times faster than inflation, so, quite quickly, the check would cover only a small portion [ http://www.washingtonpost.com/blogs/ezra-klein/post/cbo-looks-at-ryancare/2011/03/28/AFhweLlC_blog.html ] of an individual senior’s costs.
For rich seniors, this wouldn’t much matter. They could easily afford the cost of private insurance. For middle-income seniors, or lower-income seniors, it would be a disaster. Ryan offers them some subsidies, but not nearly enough. The cost of coverage would quickly outpace the resources many of them have to pay for it.
I mention this because Ryan’s paper emphasizes the difference between “absolute” and “relative” inequality. “A century ago,” Ryan writes, “the average American lived a life that was dramatically different, in terms of what he or she could experience and obtain, from an elite like Rockefeller. In many important respects, the difference between ultra-elites and average Americans is less pronounced today.”
But that difference is less pronounced in large part because of programs like Medicare, which ensure that poor and middle-class seniors have access to health care of similar quality to that of richer seniors. So where Ryan’s analysis suggests the need to means-test Medicare and control health-care costs to ease inequality, the core of his health-care plan, the very plan he touts in the conclusion to his paper, would dramatically increase absolute health-care inequality for seniors.
So it’s good that Ryan has started thinking hard about inequality. But it would be better if he thought harder about what policy could do to address it, or at least to avoid making it dramatically worse.
© 2011 The Washington Post
http://www.washingtonpost.com/blogs/ezra-klein/post/paul-ryans-inequality-plan-increases-inequality/2011/08/25/gIQApXqLZN_blog.html [with comments]
===
Sign The 99 Percent Are Winning: Even Ayn Rand Fan Paul Ryan Is Complaining About The Top 1 Percent
By Zaid Jilani on Nov 17, 2011 at 4:25 pm
99 Percenters nationwide have been engaged in raucous protests for two months now, seeking to call attention to income inequality and other social injustices that have enriched the top 1 percent at the expense of the rest of us.
Today, House Budget Committee Chairman Paul Ryan (R-WI) — a hard-right congressman whose political inspiration [ http://swampland.time.com/2011/06/03/paul-ryans-ayn-rand-problem/ ] was ultra-right ideologue Ayn Rand — released a report offering an analysis [ http://budget.house.gov/UploadedFiles/CBOInequality.pdf ] of the nation’s growing income inequality.
It’s a sign that the 99 Percent are having an impact, forcing even staunch conservatives to address income inequality. Ryan’s report bemoans the country’s growing inequality and even highlights the huge growth of income among the top 1 percent, using the following chart from the Congressional Budget Office:
While the report does go on in other sections to blame the wrong culprits for income inequality and in other ways downplay income inequality altogether, the fact that a congressman who gets his political inspiration [ http://www.facebook.com/video/video.php?v=1191939045695 ] from Ayn Rand — who targeted altruism itself [ http://aynrandlexicon.com/lexicon/altruism.html ] as evil — is now forced to openly talk about the problem of income inequality is a huge victory for the 99 Percent.
© 2011 Center for American Progress Action Fund
http://thinkprogress.org/special/2011/11/17/371629/sign-99-percent-are-winning/ [with comments]
===
(linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=68391201 and preceding and following
By Greg Sargent
Posted at 11:38 AM ET, 11/18/2011
Yesterday Paul Ryan released a very serious looking report [ http://budget.house.gov/UploadedFiles/CBOInequality.pdf ] entitled: “A deeper look at inequality.” Ryan’s effort — a rebuttal to that recent CBO report [ http://www.cbo.gov/doc.cfm?index=12485 ] on growing inequality that got so much attention — was applauded by conservatives as an important contribution to the debate.
Since Ryan has a widespread reputation as a serious fiscal thinker, I thought I’d ask Tim Smeeding, an expert on inequality at the University of Wisconsin, to evaluate his report.
Smeeding’s verdict: Ryan’s effort is only “half serious,” fails to prove its argument about inequality, and doesn’t offer any policy prescriptions that would fix the problem as Ryan himself defines it.
Smeeding focused on several core Ryan arguments that are central to his overall case. First, Ryan claims critics are wrong to push for tax hikes on the rich, arguing the tax system has grown more progressive in recent years. “The share of the federal tax burden borne by the top 1 percent increased dramatically,” Ryan writes.
But Smeeding says this is a typical fallacy committed by those who oppose progressive taxation. Even if it’s true that the tax burden of top earners has gone up, that’s because their incomes have gone up, and have in fact gone up at a faster rate than their tax rate, meaning they now pay a smaller percentage of their overall income in taxes.
“At the very top, income doubled or tripled in the time period he’s talking about. Of course their taxes went up,” Smeeding says. “But their taxes increased by much less than their share of total income. Their after tax income grew by more than their pre-tax income.”
Ryan claims the real problem exacerbating inequality is not income disparity, but the lack of mobility of those at the bottom. Smeeding agrees with Ryan that mobility is key. But Ryan then argues that rather than try to promote equality through redistributive taxation, we should instead “promote upward mobility, increase broadly shared economic growth, and ensure that more and more Americans are able to freely earn their success.”
Smeeding, however, rejects this as a false choice. He says we can simultaneously make the tax system more progressive while also pursuing policies that enhance mobility. Indeed, Smeeding argues that those goals are two sides of the same policy coin — they are linked. The goal of raising taxes on the rich isn’t merely to promote equality by redistributing wealth. Rather, it’s about generating more revenue to invest in policies that enhance the mobility Ryan hopes to achieve.
Smeeding adds that there are no policy prescriptions in Ryan’s report that would actually enhance mobility.
“How do you increase mobility at the bottom? You provide low income families the tools to compete in a 21st Century economy,” Smeeding says. “Create revenue to invest in the mobility of kids from poorer backgrounds — improve early childhood education, improve schools, improve chances of success, lower the cost of college. He misses the whole point about mobility, which is about increasing educational and economic opportunity.”
Ryan also calls for tax reform policies to promote “growth.” But Smeeding argues that even if those policies worked, growth has historically benefited the wealthy more than everyone else, and that Ryan’s prescriptions would do nothing to safeguard against that.
“In the past 10 or 15 years, virtually all of the growth has gone to the top five percent,” Smeeding says. “If we manage somehow to increase economic growth again, Ryan’s policies offer no guaratee that we wouldn’t experience the same thing.”
Smeeding said he agreed with some stuff in Ryan’s report, such as the need to cut government health care assistance for middle income and high income elderly people. But overall, Smeeding said: “His prescriptions would help the rich, and there’s nothing here that helps the poor.”
© 2011 The Washington Post (emphasis in original)
http://www.washingtonpost.com/blogs/plum-line/post/paul-ryans-solution-to-inequality-helps-the-rich-does-nothing-for-poor/2011/11/18/gIQAbt1OYN_blog.html [with comments]
===
Delusions Of Mobility
Paul Krugman
November 18, 2011, 12:45 pm
Greg Sargent [ http://www.washingtonpost.com/blogs/plum-line/post/paul-ryans-solution-to-inequality-helps-the-rich-does-nothing-for-poor/2011/11/18/gIQAbt1OYN_blog.html (above)] sends us to Paul Ryan’s latest — an attempt to debunk the CBO report on income inequality. As usual, Ryan makes me think of Ezra Klein’s old line about Dick Armey: he’s a stupid person’s idea of what a smart person sounds like.
Greg gives us a thorough takedown by Tim Smeeding, who really really knows his inequality stuff. I’d just add that Ryan repeats the familiar line about how we have vast income mobility, so that the picture given by static inequality comparisons is misleading.
But as I’ve pointed out [ http://krugman.blogs.nytimes.com/2011/11/03/millionaire-for-a-day/ ], the CBO report itself takes that argument on and refutes it. Multi-year measures of inequality, it turns out, aren’t much lower than single-year measures. How is that possible, when many people change income quintiles? Because they’re usually moving short distances on the income scale. A lot of people move from, say, the top of the second quintile to the bottom of the third quintile or vice versa — but such moves are trivial in terms of their true income position. Big moves, jumping more than one quintile, are much less common; yet it’s those big moves people have in mind when they talk about ,mobility.
And in the end, Ryan’s answer is that we need strong economic growth, the kind that we get by cutting taxes on the rich. Because that’s why the Clinton years were an economic disaster and the Bush years so prosperous.
© 2011 The New York Times Company
http://krugman.blogs.nytimes.com/2011/11/18/delusions-of-mobility/ [with comments]
===
Paul Ryan’s inequality plan increases inequality
Rep. Paul Ryan(R-Wis.) is chairman of the House Budget Committee.
(Joshua Roberts - BLOOMBERG)
Posted by Ezra Klein at 09:00 AM ET, 11/19/2011
Paul Ryan’s 15-page response [ http://budget.house.gov/UploadedFiles/CBOInequality.pdf ] to the Congressional Budget Office’s inequality report [ http://cbo.gov/doc.cfm?index=12485 ] can be summed up in two sentences: Inequality isn’t a problem. But if it is a problem, then the ideas I’ve been pushing all along will solve it.
And I applaud him for it.
For one thing, it’s important for Republicans to join the conversation over inequality. This is more evidence that Occupy Wall Street, whatever its eventual fate, has forced the political system to pay attention to issues it was previously neglecting.
Ryan’s paper also makes some good points. He emphasizes the CBO’s finding that government transfers are more regressive than they were 30 years ago and that that’s largely due to Medicare and Social Security taking up a larger portion of the federal budget and spending a fair amount of their money on wealthy seniors rather than poorer households. If you worry about equity — either between rich and poor households or between different generations — you should worry a lot about the unchecked growth of Medicare and the structure of Social Security. We can and should do better.
But more broadly, Ryan’s paper tries to create a false choice between reducing income inequality, encouraging economic mobility and accelerating growth. Toward the end, Ryan actually says the debate over inequality breaks down into two groups:
1. Is the problem simply that some households make more than others, in which case policymakers should be focused on closing this income gap by any means at their disposal, indifferent as to whether government policies aimed to close relative inequality result in lower absolute levels of income?
2. Or is the problem that incomes for households in the middle- and lower-quintiles are not rising fast enough, in which case policymakers should focus first and foremost on creating the conditions for income growth and job creation? If there actually is anyone out there who believes we should be focused on closing the income gap no matter the cost to growth, I’ve never met them. Conversely, there actually are people who focus on what they think to be pro-growth policies without heed to the income gap. People like, say, Paul Ryan.
In 2010, the Tax Policy Center released a detailed analysis [ http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=2682&DocTypeID=2 ] of the tax provisions in Ryan’s Roadmap for America. If you were in the top 1 percent, they found, Ryan’s plan would save you $350,000 a year. If you were in the middle of the income distribution, it would cost you $152 a year. And if you were in the bottom 20 percent, it would cost you $393 a year. That would undoubtedly increase inequality.
And there’s good evidence that increasing inequality is, ultimately, bad for growth. Over at the International Monetary Fund, Andrew Berg and Jonathan Ostry recently published a paper [ http://blog-imfdirect.imf.org/2011/04/08/inequality-and-growth/ ] looking at the relationship between inequality and growth across the world. In a sense, they were testing Ryan’s proposition exactly. “Some dismiss inequality and focus instead on overall growth — arguing, in effect, that a rising tide lifts all boats,” they write.
Berg and Ostry found that “high ‘growth spells’ were much more likely to end in countries with less equal income distributions.” Moreover, “the effect is large .?.?. closing, say, half the inequality gap between Latin America and emerging Asia would more than double the expected duration of a ‘growth spell.’?” And it was robust: “Inequality seemed to make a big difference almost no matter what other variables were in the model or exactly how we defined a ‘growth spell.’?”
Ryan also plumps for his Medicare reforms as a solution to inequality. As you’ll remember, his budget proposes converting Medicare into a voucher system where seniors would be given a check and sent into a regulated private market to purchase insurance. The plan saves money because the check would grow at the rate of inflation, while health-care costs often increase three times faster than inflation, so, quite quickly, the check would cover only a small portion [ http://www.washingtonpost.com/blogs/ezra-klein/post/cbo-looks-at-ryancare/2011/03/28/AFhweLlC_blog.html ] of an individual senior’s costs.
For rich seniors, this wouldn’t much matter. They could easily afford the cost of private insurance. For middle-income seniors, or lower-income seniors, it would be a disaster. Ryan offers them some subsidies, but not nearly enough. The cost of coverage would quickly outpace the resources many of them have to pay for it.
I mention this because Ryan’s paper emphasizes the difference between “absolute” and “relative” inequality. “A century ago,” Ryan writes, “the average American lived a life that was dramatically different, in terms of what he or she could experience and obtain, from an elite like Rockefeller. In many important respects, the difference between ultra-elites and average Americans is less pronounced today.”
But that difference is less pronounced in large part because of programs like Medicare, which ensure that poor and middle-class seniors have access to health care of similar quality to that of richer seniors. So where Ryan’s analysis suggests the need to means-test Medicare and control health-care costs to ease inequality, the core of his health-care plan, the very plan he touts in the conclusion to his paper, would dramatically increase absolute health-care inequality for seniors.
So it’s good that Ryan has started thinking hard about inequality. But it would be better if he thought harder about what policy could do to address it, or at least to avoid making it dramatically worse.
© 2011 The Washington Post
http://www.washingtonpost.com/blogs/ezra-klein/post/paul-ryans-inequality-plan-increases-inequality/2011/08/25/gIQApXqLZN_blog.html [with comments]
===
Sign The 99 Percent Are Winning: Even Ayn Rand Fan Paul Ryan Is Complaining About The Top 1 Percent
By Zaid Jilani on Nov 17, 2011 at 4:25 pm
99 Percenters nationwide have been engaged in raucous protests for two months now, seeking to call attention to income inequality and other social injustices that have enriched the top 1 percent at the expense of the rest of us.
Today, House Budget Committee Chairman Paul Ryan (R-WI) — a hard-right congressman whose political inspiration [ http://swampland.time.com/2011/06/03/paul-ryans-ayn-rand-problem/ ] was ultra-right ideologue Ayn Rand — released a report offering an analysis [ http://budget.house.gov/UploadedFiles/CBOInequality.pdf ] of the nation’s growing income inequality.
It’s a sign that the 99 Percent are having an impact, forcing even staunch conservatives to address income inequality. Ryan’s report bemoans the country’s growing inequality and even highlights the huge growth of income among the top 1 percent, using the following chart from the Congressional Budget Office:
While the report does go on in other sections to blame the wrong culprits for income inequality and in other ways downplay income inequality altogether, the fact that a congressman who gets his political inspiration [ http://www.facebook.com/video/video.php?v=1191939045695 ] from Ayn Rand — who targeted altruism itself [ http://aynrandlexicon.com/lexicon/altruism.html ] as evil — is now forced to openly talk about the problem of income inequality is a huge victory for the 99 Percent.
© 2011 Center for American Progress Action Fund
http://thinkprogress.org/special/2011/11/17/371629/sign-99-percent-are-winning/ [with comments]
===
(linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=68391201 and preceding and following
Greensburg, KS - 5/4/07
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upon the Right of Election, 1790
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