by Bruce Webb

Regular readers of Angry Bear will be familiar with bond trader turned blogger Bruce Krasting and his, can we say non-standard conclusions about Social Security solvency. Well he is at it again today under the provocative title of SSTF - Steve Goss’s Bombshell – What Could it Mean?. SSTF means Social Security Trust Fund, Steve Goss is the Chief Actuary of Social Security, and I am going to tell you what it could mean. Below the fold (because the answer is 'not much' and I hate to waste the screen space.

More below the fold...

originally posted at Economist's view by Mark Thoma

Stiglitz and Bilmes: The True Cost of the Iraq War

Joseph Stiglitz and Linda Bilmes:

The true cost of the Iraq war: $3 trillion and beyond, by Joseph E. Stiglitz and Linda J. Bilmes, Commentary, Washington Post: Writing in these pages in early 2008, we put the total cost to the United States of the Iraq war at $3 trillion. This price tag dwarfed previous estimates, including the Bush administration's 2003 projections of a $50 billion to $60 billion war.

But today, as the United States ends combat in Iraq, it appears that our $3 trillion estimate (which accounted for both government expenses and the war's broader impact on the U.S. economy) was, if anything, too low. For example, the cost of diagnosing, treating and compensating disabled veterans has proved higher than we expected.

Moreover, two years on, it has become clear to us that our estimate did not capture what may have been the conflict's most sobering expenses: those in the category of "might have beens," or what economists call opportunity costs. For instance, many have wondered aloud whether, absent the Iraq invasion, we would still be stuck in Afghanistan. And this is not the only "what if" worth contemplating. We might also ask: If not for the war in Iraq, would oil prices have risen so rapidly? Would the federal debt be so high? Would the economic crisis have been so severe?

The answer to all four of these questions is probably no. ... [...continue reading...]

There are some costs -- the harm that something like torture does to our collective sense of morality for example -- that I have no idea how to evaluate.

Mark Thoma

by Tom aka Rusty Rustbelt

HEALTH CARE: Nursing Shortage Issues

As Labor Day approaches it is a good time to think about health care labor issues, some good news, some bad news.

A phenomena many of us have noticed over the years (hard to exactly quantify though) is that recessions pull nurses back into the labor market. Nurses (about 94% female) often have husbands or significant others who lose jobs or hours.

Also, some of the staffing pressure is off at the hospital level because elective procedures are down and that takes pressure off the nursing staffing.

Recessions are not the desired means of correcting the shortage though.

My files on the shortage go back at 20+ years, and amazingly little progress has been made during that time.

There are some new and expanded programs, but a big problem now is the lack of nursing faculty. Unlike many PhD qualified professors, nursing professors are in big demand for management positions, usually in hospitals and health systems. So we are cannibalizing our own nursing pipeline.

University nursing programs are labor intensive, resource intensive and not nearly as prestigious as producing more MBAs, lawyers and economists.

While universities will get into bidding wars over top flight business, science or law professors, the willingness to play in the nursing salary market seems muted (perhaps if nursing was 94% male???).

The shortage will persist; the average age of RNs is climbing, the boomer nurses are heading for the exit while the boomer patients are becoming seniors, clinical skill requirements are accelerating, tighter reimbursements leave providers with less flexible budgets, and at times up to half of all licensed nurses are not working in direct care nursing - - all which seems to be a perfect storm.

We can send a man to the moon, but we can't figure out how to solve this problem in a country where lots of people need new careers (and yes, lots of people are not suited for nursing). Maybe when we have to shut a lot of hospitals?

Tom aka Rusty Rustbelt

For years we have been regaled with scary, scary numbers about how Medicare's projected unfunded liability was in the TENS OF TRILLIONS. And sure enough if you consulted the Medicare Report and examined the actuarial projections for Medicare Part A you would find that number. But a funny thing happened with the 2010 Report and is shown in the data table above: the 75 year number is down to $6.9 trillion, a big number but only 0.5% of projected GDP over that period, and the infinite future number is actually a $600 billion SURPLUS.

Oddly this multi-multi trillion dollar turnaround did not result in banner headlines in the NYT or the WaPo, nor did congratulatory telegrams pour into the offices of Nancy Pelosi, Harry Reid and dare I say it Barack Obama from the folk at Cato and Concord that have been weeping bitter, bitter tears about 'intergenerational inequity' and begging us to 'think about the grandchildren'. Because that is not how they roll nor was any of this what the kerfluffle has been about. The fundamental hostility to Medicare among the self-style deficit hawks is not because it is broken, but instead because it works. For them that infinite future $600 billion SURPLUS is terrible, terrible news. Which is why it never made it to the inboxes of Lori Montgomery and Perry Bacon at the WaPo, though you can bet big that any deterioration would have. Funny that.

by Bruce Webb

When I first started paying serious attention to Social Security reporting back in 1997 I was struck by its curious mix of precision and fluidity and how that mix moved from the latter to the former as you went from the data tables to the top line numbers and then on to whatever coverage the Report received by the media. That is by the time the numbers hit the New York Times everything was in declarative mode "The Trustees project the Trust Fund WILL go to Depletion in year X unless taxes are increased by 2.xy%". But when you examine the actual Report in detail you find that 'year X' and '2.xy%' are simply mid-points of a probability distribution. Worse when you examine the Reports on a year over year basis you find that that mid-point changes in ways that can whip the long-term probability tail significantly. Yet in the reporting there is always the unstated assumption that THIS year's data set is closer to projecting the next 75 years than last year's set. And there are pragmatic reasons for that, for one thing we have that extra year of historical data to work with and for another you have to start with something but the downside is that it installs a certain sense of fatalism, that the numbers are what they are and that we are all more or less helpless victims of them. Well the truth is a little different, there are reasons why the mid-point number falls where it does each year and why it changes year over year, and some of those reasons are subject to intervention, we can and do make changes in the present that move those future numbers.

So between changes in policy and variations in the economic inputs the uncertainty going forward simply gets wider and wider both within OAS and DI projections and between them, by the time you get thirty and forty years out you are talking very wide probability bands. Yet the rules of the game are set in a way that we are more or less forced to work with the 75 year projection. Which is frankly a little silly particularly in the case of Social Security where the danger of a fix that is too big is actually greater than one which is too small, something I discussed in number 10 of the original Angry Bear SS series The Danger of Low Cost

The first step towards curing this schizophrenia is in recognizing that it is mostly induced. The economists who fuel the studies that drive the apparent need for Social Security 'reform' are fully aware of the uncertainties but choose to ignore them because the longer time frames allow them to use scarier numbers to urge more drastic solutions. But we don't have to be bound by that, instead we can sit down, examine the models and determine pragmatically when they begin to diverge enough to call for different initial policy choices. If I had to pick a number it would be fifteen years out. By that point each of the three models deployed by the Trustees has reached its ultimate numbers when expressed in percentage form, the Office of the Actuary not deceiving themselves into thinking they can model precise changes to things like productivity on a year to year basis after even year eight or nine. And the Reports give us enough numbers that we could choose 2025 as our planning horizon, but since after ten years the data is only reported at five year intervals going fifteen years out from 2011 or 2012 gets more problematic. On the other hand the Trustees do supply a convenient moving 25 year number, and one where there is already enough variation between the top and bottom of the models to justify drawing the line for planning purposes. See Table IV.B4 below the fold.

More below the fold...

The monthly employment report roughly showed the economy to be still stagnated as the trends that have been in place so far this year continued. Private payrolls increased modestly by some 67,000 jobs. But the drop in census temporary employment caused total nonfarm payroll employment to fall 54,000.


The year over year gain in jobs as reported by both the payroll and the household survey is now near zero.


The unemployment rate at 9.6% was essentially unchanged and has remained in a range of
9.5% to 9.7% for several months.


The average workweek was unchanged so hours worked increased 0.3% from 99.2 to 99.5. On a smoothed basis the three month growth rate of hours worked slipped to 1.4% versus the recent peak of a 3.7% growth rate in June.

Average hourly earnings growth continued to moderate and average weekly earnings actually ticked down this month. With energy prices and overall inflation weakening this low level of wage growth is generating some modest gains in real earnings. As of last month the year over gain in real average hourly earnings of production and non supervisory
employees was 0.7% and real weekly wage were up 1.6%. While encouraging, by historical norms this is very weak for the first year of a recovery.

More below the fold...

Robert Waldmann

Is going to disagree with Barack Obama and Paul Krugman (alternative title "which one here is not like the others"). Krugman writes and Obama implies that no large stimulus will pass congress.

I think a proposal to send a $500 check to every US citizen containing family would pass congress. In particular some allegedly Democratic Senators (cough Conrad) are arguing for a temporary extension of Bush tax cuts for the rich. My proposal dominates Conrads both as effective stimulus and as popular politics.


Update: However, it is not gonna happen

the top White House spokesman on Thursday said a large spending measure is not being considered.

"Some big, new stimulus plan is not in the offing," White House press secretary Robert Gibbs said.


Note that Sam Youngman at The Hill uses "spending" and "stimulus" as synonyms, supporting the mistaken belief that the ARRA did not include tax cuts for the vast majority of Americans. I almost wonder if no one in the White House considered doing it with just tax cuts. I consider it a no brainer.

update II: this is weird. A trial balloon in the Washington Post. The possible proposal is a payroll tax holiday. I think that is better policy than an income tax rebate, but it is much worse politics. People in the USA are angry and want to soak the rich and especially hate hate hate tax cuts for corporations (proof at pollingreport.com search for "Gallup Poll. April 6-9, 2009. N=1,027 adults nationwide. MoE ± 3."). Somehow the Obama administration is determined that they express their populist rage by electing Republicans.

They will get no political benefit from the bill. If it passes people won't believe that they cut payroll taxes. Only a check in the mail will convince many many US voters that some taxes were cut.

Also an anonymous source has decided to basically assert the false claim that the stimulus bill did not include huge tax cuts

More spending on infrastructure, particularly transportation projects, is also under discussion. But it would be easier for a package composed purely of tax cuts to "avoid the stain of a 'bailout' or 'stimulus' label," said one official familiar with the talks, speaking on the condition of anonymity because the deliberations were private.

Check the quotes. A Obama administration source linked the words "stimulus" and "bailout". I think that's a firing offence. The line must be "This time we will propose only tax cuts as, for some reason, many people didn't notice the huge tax cuts in the stimulus bill." And if the reporter asks for explanation, repeat slowly.

Can anyone there play this game ?
My thoughts based on less solid evidence after the jump.

More below the fold...

Robert Waldmann

Kevin Drum stresses the very sound point that even if part of current unemployment is structural, we should stimulate to get rid of the part which is cyclical. I don't have a serious disagreement and choose to debate his guess as to the level of structural unemployment for the sake of debating.

"The "normal" unemployment level is about five points less than it is today. I wouldn't be surprised if perhaps three of those points are cyclical and two are structural."

He agrees with Annie Lowrey who presents the following analysis

The unemployment is cyclical and structural. Most sectors have suffered from the turndown, but job losses are concentrated in some industries: In residential construction, they are down 38 percent since 2006. (Between Aug. 2007 and Dec. 2009, unemployment in construction quintupled from about 5 percent to about 25 percent.) In health care and education, however, jobs are up.

This analysis is accidental theory. Between the first sentence and the second, there is a theoretical argument that the cycle has the same effect on log employment in each sector. This argument makes no sense. More after the jump.

More below the fold...