The US government didn’t lose the War on Poverty: it changed sides

I made this observation in comments on a Crooked Timber post, and got some pushback, so I thought I’d take a look back at the data

US Households in Poverty, 1959-2013
US Households in Poverty, 1959-2013

Both the number and the percentage of families in poverty dropped sharply during the 1960s when the “War on Poverty” was being waged actively, and remained near their all-time lows through the Nixon and Carter years until 1979, when the Volcker recession hit, followed by the election of Ronald Reagan. These events can reasonably be said to mark the point at which the government unequivocally changed sides.

The number of households in poverty has risen steadily since then and is now higher than in 1959, the year for which the poverty level was first defined by Mollie Orshansky. The poverty rate has remained consistently higher than in the 1970s, except for a brief deep at the peak of the late-1990s boom.
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A life expectancy of 95 by 2050? This does not mean what you think it means

Among the scary numbers in the Intergenerational Report was the estimate that, by 2050, life expectancy would have risen to 95/96 years, which would seem to imply a huge increase in the number of years spent in retirement. I checked and found that the report gave current life expectancy as 92/93 years, far higher than the 80 or so that is usually quoted. The reason, it turns out is that the standard estimate is done on a “period” basis, using the age-specific mortality rates of the present. The higher estimate is done on a “cohort” basis, taking account of expected future reductions in mortality. More on this here.

A few observations on this point.

* An increase of four years is neither surprising nor alarming. This is doubtless why this comparison ins not made in the IGR.

* In my last post, I noted the use of the obsolete 15-64 category to estimate the working-age population. One possible defence was that this was done in consistency with past practice. But clearly this can’t apply to the (unannounced) shift from the standard period basis to a cohort basis

* More importantly, the 95-year figure is an estimate of the likely life expectancy of children born in 2050, who would reach retiring age some time after 2115. Even the current birth cohort won’t be of pensionable age until near the end of this century.

A cohort measure of life expectancy is more relevant to projections of future pension expenditure than a period measure, though it requires the use of estimates of future mortality. But the relevant cohorts for the purpose of the IGR are those born before 1983 who will be 67 and over in 2050 and will then (assuming no policy change) be eligible for the age pension.

One weird trick that proves the IGR is nonsense

I have a piece in today’s Guardian, written before the release of the Intergenerational Report and making the case that the intergenerational equity problem, as it was conceived in the 1980s and 1990s has already been resolved. Key quote

The resolution of the intergenerational fiscal problem was a major public policy achievement of the reform era of the 1980s and 1990s. But a political class still fixated on the most ideological version of the reform agenda, in which cutting public spending is desirable in and out of season has refused to drop the club of intergenerational equity. The idea that (very modest) budget deficits and public debt levels constitute “robbing our children” remains a staple in calls for “reform”.

Having seen the IGR, there’s a single statistical choice that shows the entire exercise to be worthless. The key issue in all this is whether changes in our demographic structure will create an unreasonable fiscal burden. The Report chooses to summarise this by reference to what it calls the “dependency ratio”, defined as the ratio of people aged over 65 to those aged 15-64.

In what kind of world would this make sense? Essentially, one in which
* Children aged 14 and under cost nothing to raise and required no public expenditure on schools, daycare etc
* Children leave school at 15. After this, they not only support themselves, but contribute to the support of those over 65
* People retire become eligible for age pensions at 65

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Sandpit

A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).

A pig in a poke

I’m doing some work on the proposed Trans Pacific Partnership Agreement, currently being negotiated in secret by diplomats and business representatives from 12 countries. Two facts of interest
(a) Australia’s Trade Minister Andrew Robb is claiming that a final agreement might be reached by mid-March. While this looks over-optimistic, it implies there is a near-final text
(b) Obama has sought “fast-track” negotiating authority, but there is no sign that this is going to happen soon, given that quite a few Democrats oppose the deal outright, and many Republicans are hostile to anything that would give Obama more authority.

The idea of “fast track” is that the Administration cuts a deal and Congress is bound (by having agreed to the fast-track rules) to give it a Yes/No vote, with no amendments. The assumption (I think) is that, if amendments were permitted, they would proliferate to the point where the legislation would fail to implement the agreement with other parties, who might then back out. Of course, the result is that Congress is, in effect, buying a pig in a poke. Given the unlikelihood of an outright rejection of such a massive deal, they have to accept whatever Obama puts before them. The flip-side is can no individual Congressperson has to explain why they didn’t seek protection for whatever local ox might be gored by the deal: they can respond that they had no choice.

My question is: Suppose that the final text is agreed and made public before fast-track authority is granted. What would be the chances of Congress agreeing to a Yes/No vote, and what difference would it make? There are a lot of issues to be raised here about international relations, trade agreements and US politics, none of which I have a clear feel for. So, I’d be interested to hear what others think.