Jonathan Chait Cohn tells us that public-sector employees are the new welfare queens. Quite: any time you try to talk about the fiscal plight of state and local government, you get spittle-flecked denunciations of unions and their crazy pay packages.

So, how much truth is there to this? State and local employees are paid more, on average, than private-sector workers — about 13 percent more, according to this analysis by John Schmitt. But as Schmitt shows, that’s an apples and oranges comparison: state and local workers are much better educated and somewhat older than private-sector workers, and once you correct for that the comparison actually seems to go the other way.

I think the easy way to think about this is to realize that about half of state and local workers are teachers and academic administrators — which means that they’re college-educated, at minimum. And think about it: how many ambitious young people do you know saying, “My goal in life is to become a high school teacher — that would put me on easy street”?

Yes, firefighters and police get pretty generous pay packages; they also pull people from burning buildings.

And here’s a point I haven’t seen made: even if you believe that the age-and-education-adjusted calculations are wrong, and public employees do get paid somewhat more than they “should”, how big a deal is that? I went to the Census state and local finance data, and got this picture of the composition of non-federal government spending:

U.S. Census Bureau

A few percent either way in workers’ compensation would not make a big difference to state and local spending. This is a phony issue.

Of course, so were the welfare queens.

Update: A number of commenters have alluded to large unfunded pension liabilities. Two points: first, the fact that state and local governments haven’t been making large enough contributions to pension funds says nothing, one way or the other, about whether workers are overcompensated. Bear in mind that, as Cohn notes, many government employees don’t get Social Security. Second, a “trillion dollar liability” needs to be placed in context: state and local governments spend $2.8 trillion per year. Compare the pension liability with total spending over, say, the expected remaining lifetimes of those workers, and it’s a real problem but not inconsistent with my point that these compensation issues have been grossly overstated.

Should it bother me that throughout Ian McDonald’s Brasyl, units of Brazilian currency are described as reis, when I know, as an old Latin American crisis hand, that the plural of real is reais?

Reading Jon Hilsenrath’s column today, I was initially a bit skeptical about this assertion:

When Japan fell into deflation in the 1990s, Mr. Bernanke, then a Princeton professor, urged the Bank of Japan to set an objective of 3% to 4% inflation. The reason: With interest rates pinned at zero, rising inflation would mean that the real cost of borrowing, which is nominal interest rates minus inflation, would be falling. In theory that would spur demand.

I knew that I had pushed that option (pdf); I was less sure that Bernanke had, since he often focused more on quantitative easing. But Hilsenrath is right: Bernanke did say that, in a paper poignantly titled Japanese Monetary Policy: A Case of Self-Induced Paralysis? (pdf). Here are some relevant passages:

A problem with the current BOJ policy, however, is its vagueness. What precisely is meant by the phrase “until deflationary concerns
subside”? Krugman (1999) and others have suggested that the BOJ quantify its objectives by announcing an inflation target, and further that it be a fairly high target. I agree that this approach would be helpful, in that it would give private decision-makers more information about the objectives of monetary policy. In particular, a target in the 3-4% range for inflation, to be maintained for a number of years, would confirm not only that the BOJ is intent on moving safely away from a deflationary regime, but also that it intends to make up some of the “price-level gap” created by eight years of zero or negative inflation.

…

BOJ officials have strongly resisted the suggestion of installing an explicit inflation target. Their often-stated concern is that announcing a target that they are not sure they know how to achieve will endanger the Bank’s credibility; and they have expressed
skepticism that simple announcements can have any effects on expectations.

…

With respect to the issue of inflation targets and BOJ credibility, I do not see how credibility can be harmed by straightforward and honest dialogue of policymakers with the public. In stating an inflation target of, say, 3-4%, the BOJ would be giving the public information about its objectives, and hence the direction in which it will attempt to move the economy. (And, as I will argue, the Bank does have tools to move the economy.) But if BOJ officials feel that, for technical reasons, when and whether they will attain the announced target is uncertain, they could explain those points to the public as well. Better that the public knows that the BOJ is doing all it can to reflate the economy, and that it understands why the Bank is taking the actions it does. The alternative is that the private sector be left to its doubts about the willingness or competence of the BOJ to help the macroeconomic situation.

The poignant thing is that at this point you could replace “BOJ” by “Fed”, and these remarks would be a completely accurate description of the self-induced paralysis of monetary policy right here in River City.

Tim Duy tells us that

Word on the street is that Fed staff are increasingly frustrated with the lack of action from leadership. Why exactly is Bernanke showing such deference to the more hawkish elements such as Kansas City Federal Reserve President Thomas Hoenig, Dallas Federal Reserve President Richard Fischer, and Philadelphia Fed President Charles Plosser? If you seek more easing, you are not alone. Board staff are increasingly your allies.

I hope that’s right. But things would be very different if only Ben Bernanke were Fed chairman!

For tomorrow’s column.

To new commenters: Long, run-on posts will continue to be deleted as spam. Attack me all you like, but briefly. And either pro or con, no obscenities, please.

I’m saddened but not really surprised by Robert Rubin’s declaration that we don’t need more stimulus. It has seemed to me from early on in this crisis that Rubin and his disciples wanted to believe that this world crisis was something like the 1997-98 Asian crisis, and amenable to similar solutions.

For what the Committee to Save The World did in the Asian crisis was … not much. Some emergency loans to ease liquidity problems, some declarations that they were highly confident, a bit of interest-rate cutting; and once the panic was over, things recovered pretty much on their own.

Hence the view that fiscal stimulus was just an insurance policy, that the big thing was to stop the economy’s headlong descent, and then unemployment would come down mostly of its own accord.

I tried — Lord, how I tried — to get through the message that this wasn’t a safe bet, and that if the initial intervention wasn’t big enough it would be perceived as a failure, and there would be no second chance. Others made the same point. But we never did get through.

And Rubin is still insisting that plan A was right.

Haven’t gotten one of those in a while; I was starting to think I was losing my touch.

No, it’s clearly not serious.

OK, here’s Ryan’s reply. As I predicted, a snow storm of words, dodging the math questions.

Notice that Ryan does not address the issue of the zero nominal growth assumption, and how that assumption — not entitlement reforms — is the key to his alleged spending cuts by 2020.

I also see that Ryan is perpetuating the runaround on revenue estimates. If you read either this article or his original response to the Tax Policy Center, you could easily get the impression that nobody would do a revenue estimate, that CBO said it was JCT’s job, and JCT balked. Even Nate Silver has fallen for this. But read the original response carefully:

The Tax Policy Center analysis covers a 10-year period, but the Roadmap is a long-term plan with spending and revenue projections covering 75 years. As such, the analysis is not consistent with the long-term horizon of the plan. Staff originally asked CBO to do a long-term analysis of both the tax and spending provisions in the Roadmap. However, CBO declined to do a revenue analysis of the tax plan, citing that it did not want to infringe on the traditional jurisdiction of the JCT. JCT, however, does not have the capability at this time to provide longer-term revenue estimates (i.e. beyond 10 years) [my emphasis]. Given these functional constraints for an official analysis, staff relied on its original work with the Treasury Department and other tax experts to formulate a reasonable expected path for long-term revenues given the tax policies in the Roadmap combined with the economic growth projections available at the time.

In other words, Ryan could have gotten JCT to do a 10-year estimate; it just wouldn’t go beyond that. And he chose not to get that 10-year estimate. So it was Ryan’s choice not to have any independent estimate of the 10-year revenue effects.

And bear in mind that the Tax Policy Center critique was five months ago. If Ryan disagreed with the center’s estimates, he could have gone back to the JCT to get a different set of estimates. He never did.

By the way, if you look at the artful way his excuses are constructed — giving the false impression that he couldn’t get a revenue score for love nor money — how is that not flimflam?

Finally, why is Ryan denying that he proposes dismantling Medicare as we know it? Replacing the system with vouchers surely fits that description.

I spend a lot of time criticizing bad actors; so I thought I might take a moment here to praise two journalists who did the right thing.

So: props to Fareed Zakaria, for returning his award from the ADL, and making the case for tolerance.

And props too to Joe Klein, for acknowledging frankly that he sinned by not taking a stand against the Iraq war.

It often seems to be that the biggest problem we face in our politics, and our media, isn’t lack of expertise; it isn’t lack of generally good intentions; it’s lack of courage — the courage to stand up for what’s right.

But there is courage out there — and it should be honored.

I keep being asked whether a careful look at the CBO analysis of health reform would reveal whoppers comparable to the analysis of the Ryan roadmap. The answer is no.

Menzie Chinn had a good piece on this. A lot of the complaining involves the “doc fix”, the routine increases in Medicare payments required because the law consistently sets those payments too low. But that’s a fundamental logical fallacy. It’s true that the cost of the doc fix isn’t in the CBO score; that’s because it would have happened whether or not health reform passed. It’s not an incremental cost.

What complaints might you make about the scoring? Most of it is completely reasonable — for example, saying that we can save money by eliminating overpayments to Medicare Advantage, and that aid to hospitals that treat a lot of uninsured patients can be reduced once almost everyone is insured. The one thing you might worry about is the projected reduction in fee-for-service payments relative to baseline; achieving that would require that efficiency improvements thanks to evaluation of medical procedures for effectiveness actually materialize.

I think they will, and there’s a good chance that cost savings will be substantially larger than projected. But even if they aren’t, Menzie has it right: even if you discount the entire projected savings from lower payments, you still end up with an almost deficit-neutral bill.

The point is that while you can quarrel with some of the estimates — in both directions! — there’s nothing remotely comparable to counting only the deficit-reducing measures while taking the deficit-increasing measures off the table, or assuming drastic cuts in real per capita spending without a hint of how these are to be accomplished.

A scary but interesting article on how a couple of lost decades are remaking Japanese society for the worse. We’re well on our way to doing similar or worse damage to ourselves.

What Mark Thoma said: Ned Phelps’s declaration that “There are no symptoms of deficient demand, like deflation” is bizarre. Disinflation has been proceeding steadily in the face of high unemployment:

And where did I learn that high unemployment should lead initially to falling inflation, rather than to immediate deflation? I learned it from this guy.

Why would a temporary extension of the high-end Bush tax cuts be a highly ineffective form of stimulus? Coming into this economic crisis, I thought every macroeconomist understood why temporary tax cuts do little to boost demand, especially if those tax cuts are for people with high incomes. But as with so much else, this seems to be one of these economic insights that has been lost in our intellectual Dark Age. So what I thought I’d do is lay out, briefly, the basic logic.

Read more…

Ezra Klein says he agrees with me on my policy critique of Paul Ryan, but denies that he’s a flimflammer.

He’s wrong.

Long ago — basically when I started writing for the Times — I decided that I would judge the character of politicians by what they say about policy, not how they come across in person. This led me to conclude that George W. Bush was dishonest and dangerous back when everyone was talking about how charming and reasonable he was. It led me to conclude that Colin Powell couldn’t be trusted, back when everyone said his UN speech clinched the case for war. It led me to conclude that John McCain was unprincipled and self-centered, back when everyone said he was a deeply principled maverick. And yes, it led me to conclude that Barack Obama was a good man, but far less progressive than his enthusiastic supporters imagined.

And so I don’t care how Paul Ryan comes across. I look at how he has gone about selling his ideas, and I see an unscrupulous flimflammer.

Think about that CBO report: getting the CBO to score only the spending cuts, not the tax proposals, then taking credit for being a big deficit reducer, is simply sleazy. Not acknowledging that the zero nominal growth assumption, not the entitlement changes, is driving that 2020 score is also sleazy. And the whole pose of stern deficit hawk, when you know that there are real questions about whether your plan actually increases the deficit, is phoniness of a high order.

And about that Tax Policy Center report: it has been five months since that came out. Has Ryan tried, at all, to address the concerns the center raised? As far as I can tell, he’s offered nothing but vague assurances of good intentions. Why should we believe him? Because he comes across as a nice guy? So did Bush.

Flimflamming is as flimflamming does. And Paul Ryan shows all the signs.

Digby:

I am definitely naming my next cat after Paul Krugman. And the first mouse he brings in will be named Paul Ryan.