Month: May 2013

GOVERNMENT AUSTERITY DEBUNKED

ABSTRACT: The argument for government austerity was largely built on two economic theories, both of which have been debunked recently by academia and reality. First was the theory that if government debt exceeded 90% of economic activity, then economic growth would be sharply lower. The second was that cutting spending in a depressed economy would create jobs.

 

The study the first was based on was dramatically discredited when an error was discovered in the Excel spreadsheet used to calculate its findings. Furthermore, the link highlighted between government debt and slow economic growth does not indicate that government debt causes slow growth; it could just as likely be the reverse.

The second theory was based on another academic study that was refuted by a 2010 study by the International Monetary Fund, which used better data. And finally, real life experiences in the US and Europe have not borne out what the austerity advocates predicted or promised.

Despite this debunking of the rationales for austerity, there hasn’t been any change in policies or political rhetoric in the US. The US austerity movement appears to be driven by small government ideologues who are using the economic crisis as an opportunity to push for cuts in social programs they’ve always opposed. There also appears to be an issue of class hiding behind austerity advocacy. While the years since the Great Depression and of austerity policies in Washington have been hard on the middle and lower classes, for the well off they’ve been pretty good. So, perhaps it shouldn’t be a surprise that the wealthy and political elites keep pushing austerity policies despite the lack of support from theory or reality.

FULL POST: The argument for government austerity – reducing the deficit by cutting spending and perhaps raising taxes – was largely built on two economic theories, both of which have been debunked recently by academia and reality. First was the theory that if government debt exceeded 90% of economic activity (measured by gross domestic product [GDP]), then economic growth would be sharply lower. The second was that cutting spending in a depressed economy would create jobs.

The first, on the danger of government debt, was based on a 2010 study by two Harvard economists, Reinhart and Rogoff, “Growth in a Time of Debt.” Despite significant controversy about it, its finding of a tipping point for reduced economic growth when government debt hit 90% of GDP was presented as fact by politicians and media arguing for the need for austerity. [1]

This study was dramatically discredited when an error was discovered by Thomas Herndon, a Ph.D. student at the University of Massachusetts, Amherst, in the Excel spreadsheet Reinhart and Rogoff used to calculate their findings. An error in one of their formulas had excluded data from Canada, New Zealand, and Australia, all of which had experienced strong economic growth in periods of high government debt. [2] (Reinhart and Rogoff have acknowledged the error.) This explained why other researchers, using similar data, hadn’t been able to replicate their findings. As Reinhart and Rogoff’s work was scrutinized, it was also criticized for omitting data and using questionable statistical procedures.

Furthermore, the link they highlighted between government debt and slow economic growth does not indicate that government debt causes slow growth; it could just as likely be the reverse, that slow growth leads to higher government debt. Indeed, the latter is clearly what happened in Japan in the early 1990s when government debt grew after the economy collapsed. [3]

The second theory, that cutting spending in a depressed economy would create jobs, was based on another academic study. It was refuted by a 2010 study by the International Monetary Fund (IMF), which used better data. The IMF study found that austerity reduced job growth instead of accelerating it as the original study and austerity promoters claimed. [4]

Finally, real life experiences in the US and Europe have not borne out what the austerity advocates predicted or promised. In the US, government debt and a bit of stimulus did not produce high interest rates and a shrinking economy. Most recently, the austerity measures adopted in March – namely the sequester’s budget cuts – are clearly causing jobs to be cut, with no signs of resultant job creation. Meanwhile, most of Europe is in recession despite consistent application of the austerity medicine for the last four years.

Despite this debunking of the rationales for austerity, there hasn’t been any change in policies or political rhetoric in the US, and little in Europe. This suggests that the austerity movement is not based on research and reality, but on ideology.

The US austerity movement appears to be driven by small government ideologues, given that the push for budget cuts continues unabated. These ideologues are using the economic crisis as an opportunity to push for cuts in social programs they’ve always opposed. They’ve seized on the austerity theories from academia as justification for their actions, and aren’t letting go of them even when they have been soundly discredited. [5]

There also appears to be an issue of class hiding behind austerity advocacy. The wealthy in the US regard the deficit as the most important problem we face and favor solving it by cutting spending on health care and Social Security. The middle and lower classes, although they see the deficit as a problem, view unemployment as a more important problem and want to see spending on health care and Social Security increase. [6] Given the political power of the wealthy elites, it’s not surprising to see policy bending to their preferences. While the years since the Great Depression and of austerity policies in Washington have been hard on the middle and lower classes (high unemployment, incomes that aren’t keeping up with inflation, home values that haven’t recovered to 2008 levels), for the well off they’ve been pretty good (incomes growing faster than inflation, corporate profits and stock prices surging). So, perhaps it shouldn’t be a surprise that the wealthy and political elites keep pushing austerity policies despite the lack of support from theory or reality.

 

[1]       Krugman, P., 4/18/13, “The Excel depression,” The New York Times

[2]       Roose, K., 4/18/13, “Meet the 28-year-old grad student who just shook the global austerity movement,” Daily Intelligencer

[3]       Krugman, P., 4/18/12, see above

[4]       Krugman, P., 5/3/13, “Playing whack-a-mole with expansionary austerity,” The New York Times

[5]       Editorial, 5/5/13, “Blame ideologues, not economists for failed ‘austerity’ policies,” The Boston Globe

[6]       Krugman, P., 4/15/13, “The 1 percent’s solution,” The New York Times

TOXINS IN YOUR BLOOD

ABSTRACT: Did you know that there are most probably dozens of toxic chemicals in your blood? These are likely to include polychlorinated biphenyls (PCBs), dioxins, and pesticides, including DDT, all of which are toxic to humans. We are all test subjects – largely unknowingly – in a huge chemical exposure experiment.

There are roughly 75,000 chemicals in use in the US and only about 500 of them have been tested for health risks. Many of the chemicals found in our blood are long-lasting in the environment and in our bodies. The impacts of the combinations of these chemicals that we all have in our blood have never been looked at.

None of us were asked if it was OK to expose us to these chemicals. Therefore, some people refer to this as “toxic trespass.” These toxins are trespassing in our bodies without our permission. From a common sense perspective, and certainly from a public health perspective, it doesn’t make sense to expose people to toxic chemicals and then engage in a debate about what level of them is safe.

Future posts will address related topics such as how we got to this point, what the possible impacts are, and what we can do about this.

FULL POST: Did you know that there are most probably dozens of toxic chemicals in your blood? These include chemicals from consumer products, plastics, pesticides, flame retardants, and non-stick coatings on cookware, as well as industrial chemicals. We are all test subjects – largely unknowingly –in a huge chemical exposure experiment. Scientists call the total amalgamation of chemicals in your body your “body burden.” [1]

Bill Moyers, as part of his documentary Trade Secrets, had his blood analyzed back in 2001. He was tested for 150 chemicals and 84 were found, including 31 polychlorinated biphenyls (PCBs), 13 dioxins, and at least two pesticides, including DDT, all of which are toxic to humans. His results are typical of what any US residents could expect to find in his or her blood. The only one of the 84 that would have been found in a person’s blood, or even anywhere in the environment, 100 years ago was lead. [2]

There are roughly 75,000 chemicals in use in the US and only about 500 of them have been tested for health risks. On average, twenty new chemicals are introduced each week, generally without testing. Many of the chemicals found in our blood are long-lasting in the environment, i.e., they don’t breakdown readily and aren’t biodegradable. Many are also long-lasting in our bodies, i.e., our bodies don’t have a mechanism for breaking them down or removing them. For example, DDT was banned in the US in 1972 and PCBs in 1979, but they were still in Bill Moyers’ blood in 2001 – and are likely to be in your blood today.

The impacts of the combinations of these chemicals that we all have in our blood have never been looked at. And only a very few of these chemicals have been investigated for their impacts children or babies in utero.

None of us were asked if it was OK to expose us to these chemical. For most of them we have no choice about introducing them to our bodies, because they are in the air we breathe, the water we drink, the food we eat, and the consumer products we use. And although we have some control over the latter two categories, we often don’t know about the chemicals that are present or that we absorb into our bodies, let alone about any potential negative effects. We know that many of these chemicals can be toxic, but we don’t know at what levels or what the risks are of the current levels of them in our bodies.

Therefore, some people refer to this as “toxic trespass.” These toxins are trespassing in our bodies without our permission. [3]

From a common sense perspective, and certainly from a public health perspective, it doesn’t make sense to expose people to toxic chemicals, some of which are known carcinogens, and then engage in a debate about what level of them is safe. We should remove them from our environment to the greatest extent possible, as we did with DDT and PCBs.

Future posts will address related topics, including:

  • How this plethora of chemicals, including toxins, got into our environment and our blood
  • How regulation is failing to protect us
  • The chemical industry’s and others’ efforts to limit regulation of these chemicals
  • The role of Genetically Modified Organisms in agriculture and food in putting toxins into our bodies
  • The body burden of chemicals in babies’ and pregnant women’s blood
  • Possible impacts of our body burden and toxic trespass, especially on children
  • What’s being done about this and what you can do

 

[1]       Barnett, S., 10/6/11, “What’s your body’s chemical burden, “ The Huffington Post

[2]       Moyers, B., retrieved 5/20/13, “Moyers moment (2001): Toxins in our blood,” http://billmoyers.com/2013/05/17/moyers-moment-2001-toxins-in-our-blood

[3]       Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com

REDUCING INTEREST ON STUDENT LOANS

ABSTRACT: The interest rate on new federal student loans is scheduled to increase from 3.4% to 6.8% in July. Senator Elizabeth Warren (MA) has introduced legislation to give students the same interest rate that the big bank corporations get when they borrow from the Federal Reserve: 0.75%. Warren’s bill highlights the enormous advantages and preferences the federal government gives to large corporations and the contrast with what the government does (or doesn’t do) for students, their families, and 99% of taxpayers in general.

 Student debt exceeds $1 trillion and is a substantial drag on the economy. Some financial experts have warned that the student debt problem has parallels to the housing mortgage loan crisis.

You can become a citizen co-sponsor of Warren’s Bank on Students Loan Fairness Act at http://my.elizabethwarren.com/page/s/studentloans?source=20130516em.

FULL POST: The interest rate on new federal student loans is scheduled to increase from 3.4% to 6.8% in July. Senator Elizabeth Warren (MA) has introduced legislation to give students the same interest rate that the big bank corporations get when they borrow from the Federal Reserve: 0.75%.

Senator Warren’s bill in the Senate (her first) and Representative Tierney’s companion bill in the House would have the Federal Reserve make funds available to the Department of Education for student loans at this low rate for one year, to give Congress time to find a long-term solution to the student debt problem. As she writes, “If the government can float huge sums of money to large financial institutions at low interest rates to grow the economy, surely it can float the money necessary to fund our students, keep us competitive, and grow our middle class.” [1]

In addition to providing some relief to students, Warren’s bill highlights the enormous advantages and preferences the federal government gives to large corporations, in this case the large banks (who crashed our economy). It starkly draws a contrast with what the government does (or doesn’t do) for students, their families, and 99% of taxpayers in general, including homeowners who got little help while the large financial corporations involved with the housing collapse got bailed out.

At a time when the federal government can borrow money at 0.25% for 2 years, under 1% for 5 years, at 2% for 10 years, and roughly 3% for 30 years, [2] it hardly seems fair to be charging students even 3.4%, let alone 6.8%.

Student debt exceeds $1 trillion, which is more than all credit card debt. It is a substantial drag on the economy. (See post of 6/6/12 for more detail.) It depresses spending by students and their families. Because consumer spending is roughly two-thirds of our economic activity, depressed consumer spending slows our economic recovery. And if the default rate on student loans grows, which seems likely given that many students are having a very hard time finding jobs, let alone ones with good pay, the impact on our economy, government, and financial institutions could be significant. That’s why some financial experts have warned that the student debt problem has parallels to the housing mortgage loan crisis. [3]

You can become a citizen co-sponsor of Warren’s Bank on Students Loan Fairness Act at http://my.elizabethwarren.com/page/s/studentloans?source=20130516em.

[1]       Warren, E., 5/16/13, “If it’s good enough for the banks, it’s good enough for students,” Elizabeth Warren for Senate Newsletter

[2]       Bloomberg, 5/17/13, “United States Government Bonds, US Treasury yields,” retrieved from the Internet at http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/

[3]       Zumbrun, J., & Torres, C., 5/7/13, “Bankers warn Fed of farm, student loan bubbles echoing subprime,” Bloomberg

REDUCING GUN VIOLENCE

ABSTRACT: There’s good news and bad news after the recent obstruction by filibustering in the US Senate of a law to reduce gun violence. Information on the votes in the Senate and how to contact your Senators (and Representatives) is below.

Efforts to reduce gun violence are getting unprecedented attention. Four states have recently passed laws targeting gun violence. However, there is a continuing lack of good data and research on gun violence, largely because the gun industry and its supporters have aggressively worked to block government data collection and research, as well as to intimidate private researchers. This inhibits the solving and prevention of crimes, as well as the identification and prosecution of gun dealers who irresponsibly, if not illegally, sell guns, including guns that are used in crimes.

I urge you to contact your Senators and let them know how you feel about this issue, whether you agree with their vote or not. Good legislation, good data and research, and strong enforcement could significantly reduce the 18,000 suicides and 12,000 murders that happen with guns each year in this country. Communication to elected officials by voters – their constituents – is critical to taking advantage of this window of opportunity and achieving change that will reduce the tragedy of gun violence.

FULL POST:There’s good news and bad news after the recent obstruction by filibustering in the US Senate of a law to reduce gun violence. (See post of 4/20/13 for more details.) One piece of good news is that some Senators are saying they will continue the effort. Information on the votes in the Senate and how to contact your Senators (and Representatives) is below.

Other good news:

  • Efforts to reduce gun violence are getting unprecedented attention, including coverage in mainstream media
  • The issue is a much higher priority in voters’ minds than it was
  • Elected officials are being asked where they stand on the issue regularly
  • Elected officials who support steps to reduce gun violence are much more comfortable saying so in public
  • Four states have recently passed laws targeting gun violence: Colorado, Connecticut, Maryland, and New York. Others are considering doing so. You may want to check and see if there is such an effort in your state.

Nationally, the broad support for reducing gun violence is clear and its potential political impact has being discussed. For example, in 21 states both US Senators supported the gun background check provision that was defeated by filibuster. Those 21 states have 261 Electoral College votes, out of the 270 needed to elect a President. The 17 states where both Senators opposed the law only have 146 electoral votes. [1]

The National Academy of Sciences published a major report back in 2004, “Firearms and Violence: A Critical Review,” that found that there is a lack of good data and research on this topic. It recommended that the federal government support “a systematic program of data collection and research” (page 3). The report noted that “violence is positively associated with firearms ownership” (page 5) but that the data do not allow a conclusion about whether there is a cause and effect relationship. It stated that in comparisons among countries, “there is a substantial association between gun ownership and homicide” and that “the U.S. homicide rate is much higher than in all other developed countries.” (page 6) [2] Australia has achieved a dramatic reduction in gun violence over the last 6 years. (See post of 4/20/13 for more details.)

Despite this, there is a continuing lack of good data and research on gun violence, largely because the gun industry and its supporters, notably the National Rifle Association (NRA), have aggressively worked to block government data collection and research, as well as to intimidate private researchers. The US Centers for Disease Control and the US Department of Health and Human Services are effectively blocked from spending any money on gun violence research. In contrast, despite the fact that roughly the same number of people die each year in gun violence as in car accidents, the National Highway Traffic Safety Administration spends roughly $125 million per year to study and improve highway safety. As with highway safety, gun safety is a public health issue and should be address as such.

The blocking of the collection and use of gun data inhibits the solving and prevention of crimes, as well as the formulation of effective policies to reduce gun violence. It also inhibits the identification and prosecution of gun dealers who irresponsibly, if not illegally, sell guns, including guns that are used in crimes. [3][4]

Getting back to the gun violence prevention efforts in the US Senate, the vote on the background check provision was 54 in favor (Yeas) and 46 opposed (Nays), but because of the filibuster, 60 votes in favor were needed to move the legislation forward. It was largely a party line vote, with Republicans opposed and Democrats in favor, with the following exceptions: [5]

  • 4 Republicans in favor: Collins (ME), Kirk (IL), McCain (AZ), and Toomey (PA).
  • 4 Democrats opposed: Baucus (Montana), Begich (Alaska), Heitkamp (ND), and Pryor (Arkansas). (Reid [NV] voted “No”, but as a procedural move to allow him to call for reconsideration.)

I urge you to contact your Senators and let them know how you feel about this issue, whether you agree with their vote or not. If you support them they need to hear that, because there is pressure on them from both sides. If you’d like them to change their vote, they should hear that as well. You can find your US Senators’ names and contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm

It wouldn’t hurt to contact your US Representative while you’re at it, although there is no impending action in the House. You can find their names and contact information at: http://www.house.gov/representatives/find/

Good legislation, good data and research, and strong enforcement could significantly reduce the 18,000 suicides and 12,000 murders that happen with guns each year in this country. The attention this issue is finally getting is an important step forward. Communication to elected officials by voters – their constituents – is critical to taking advantage of this window of opportunity and achieving change that will reduce the tragedy of gun violence.

[1]       Green, J., 5/1/13, “A matter of time? Congress failed to act, but the gun control tides are shifting,” The Boston Globe

[2]       Wellford, C.F., et al., 2004, “Firearms and Violence: A Critical Review,” Committee on Law and Justice, National Research Council, National Academy of Sciences

[3]       Bender, M.C., 2/12/13, “Gun lobby blocks data collection by crimefighters,” Bloomberg

[4]       Thacker, P.D., 12/19/12, “Congress and the NRA suppressed research on gun violence,” Slate Magazine