Ezra Klein

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Playing with Medicare and Social Security

I retired recently from a white collar, management, high stress job at the age I have always expected to retire, 65.  I think I can say that my retirement was a cause of envy among many of my co-workers who are just as tired and stressed as I was but have many years before they can retire.  As I said to my former staff members at lunch the other day, you don’t realize how tired you are until you retire.  And even then it takes time to de-stress.  So I can imagine if I were working a job that was physically demanding (and maybe also stressful) and how it would make me feel if I knew I had to work until 67 or 70 to get any kind of benefits which is where many Republicans (and some Democrats) want us to end up.  I don’t think that some of the corporate CEO’s and elected officials understand this which is why this piece by Ezra Klein caught my eye.

I’ll be clear: Raising the Medicare eligibility age makes no sense. It cuts federal health-care spending but raises national health spending, which is what really matters. It doesn’t modernize the system or bend the cost curve. It doesn’t connect to any coherent theory of health reform, like increasing Medicare’s bargaining power, increasing competition in Medicare, ending fee-for-service medicine, or learning which treatments work and which don’t. I’m not opposed to cutting Medicare — quite the opposite, actually — but this is a particularly brain-dead way to do it.

Its importance in the negotiations is attributable to the fact that raising the age at which Americans can receive Medicare and Social Security has a weird, symbolic power in Washington. As House Minority Leader Nancy Pelosi puts it, the eligibility age is “a trophy” that Republicans can bring back to their base. Though the policy is deeply unpopular with voters, it’s quite popular among Republican elites.

Klein floats this idea

If it’s age increases that the political system wants, there’s a better way to do it. Ezekiel Emanuel, who advised the Obama administration on health care and now works with the Center for American Progress, calls it “graduated eligibility,” and it would link the age of eligibility with lifetime earnings:

Here’s how it would work. People in the bottom half of the lifetime earnings distribution would become eligible for normal retirement benefits at age 65 for Medicare and 66 for Social Security, just as they are today. But people in the next quarter of the lifetime earnings distribution would become eligible for the respective programs at 67 and 68, and those in the top quarter would become eligible at 70 and 71. All eligibility ages would increase over time, as they are scheduled to now.

This makes sense on a few different levels. For one thing, a favorite argument for raising the age at which benefits begin is that seniors live longer today than they did when these programs began. But those gains aren’t equal: Richer seniors live six years longer than poorer seniors, on average. “Graduated eligibility” accounts for that fact.

This does make a certain amount of sense, but I still worry about those who work physically demanding jobs like construction.  I’m not even sure about the scheduled age increases for full benefits.  Maybe we should lower ages at the bottom, leave the middle, and raise it even highter at the top.

I remembered that I heard somewhere that the average retirement age is 62 and went looking for confirmation.  I found this story in the Financial Advisor from April 2012.

More than one third of pre-retirees (35%) surveyed think they will never retire, an increase from 29% in the 2009 survey. Only one in 10 pre-retirees thinks they will retire before age 60. Half of pre-retirees say they will wait until at least age 65.

In reality, 31% of retirees quit work before age 55, 20% before age 60, and another 10% before age 62.

“There is a major disconnect between when people say they plan to retire and when they actually do,” the survey says. Some of it may be because of health problems or because they are downsized. “Many who lose jobs in their 50s and 60s experience more difficulty finding new employment,” the survey adds.

The survey was taken of 800 pre-retirees and 800 retirees, ages 40 to 80. It is the sixth survey of this type taken by the Society of Actuaries since 2001.

So there is also a disconnect between the proposals on age eligibility and what people so in real life.

I am worried that we are going to end up with a policy that has very bad unintended consequences.  I saw Nancy Pelosi in an interview a few nights ago when she said she hadn’t seen how raising the Medicare age was going to create savings.  She said, “Show me the money.”  I would go further and say, I don’t think that anyone has done the math and I can only hope that the President, Democrats in Congress and maybe some Republicans will do the math first.

Photograph:  Alex Wong

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About that Gallup poll

The most recent Gallup Daily Tracking polls have Mitt Romney up by 6 or points.  When I saw that I almost had a heart attack!  I mean how can that be when President Obama has a lead in all those individual state polls.  Then last night I read Nate Silver’s FiveThirtyEight blog post Gallup vs. the World and I calmed down.  I know that Romney supports are probably convinced that Nate manipulates everything so that Obama comes out ahead, but somehow I doubt that and you might want to actually read the post.  Silver begins

The Gallup national tracking poll now shows a very strong lead for Mitt Romney. As of Wednesday, he was ahead by six points among likely voters. Mr. Romney’s advantage grew further, to seven points, when Gallup updated its numbers on Thursday afternoon.

The Gallup poll is accounted for in the forecast model, along with all other state and national surveys.

However, its results are deeply inconsistent with the results that other polling firms are showing in the presidential race, and the Gallup poll has a history of performing very poorly when that is the case.

Other national polls show a race that is roughly tied on average, while state polls continue to indicate a narrow advantage of about two points for President Obama in tipping-point states like Ohio. The forecast has Mr. Obama as a narrow favorite in the election largely on the basis of the state polls. (You can read my thoughts here on the challenge of reconciling state and national poll data.)

Our database contains records from 136 distinct pollsters that have released at least one state or national survey at some point in this election cycle. Of those, 53 are active enough to have issued at least one survey since Oct. 1.

With so much data to sort through, it will usually be a counterproductive use of one’s time to get overly attached to the results of any one particular poll. Whether you look at the relatively simple averaging methods used by Web sites like Real Clear Politics, or the more involved techniques in the FiveThirtyEight forecast, the Gallup national tracking poll constitutes a relatively small part of the polling landscape.

After a lengthy explanation of how the data is used (I have to say it is long, but readable) Silver says

Over all, the Gallup daily tracking poll accounts for only about 3 percent of the weight [for the FiveThirtyEight calculation] in this stage of the calculation. The national tracking polls collectively, including Gallup, account for only about 10 percent of it. Most of the weight, instead, is given to the state polls.

Silver also recounts the history of the Gallup tracking polls (they have often missed the mark) and concludes

It’s not clear what causes such large swings, although Gallup’s likely voter model may have something to do with it.

Even its registered voter numbers can be volatile, however. In early September of this year, after the Democratic convention, Gallup had Mr. Obama’s lead among registered voters going from seven points to zero points over the course of a week — and then reverting to six points just as quickly. Most other polling firms showed a roughly steady race during this time period.

Because Gallup’s polls usually take large sample sizes, statistical variance alone probably cannot account these sorts of shifts. It seems to be an endemic issue with their methodology.

To be clear, I would not recommend that you literally just disregard the Gallup poll. You should consider it — but consider it in context.

The context is that its most recent results differ substantially from the dozens of other state and national polls about the campaign. It’s much more likely that Gallup is wrong and everyone else is right than the other way around.

Then this afternoon my other favorite wonk, Ezra Klein, also weighed in.

According to Real Clear Politics, Mitt Romney is, on average, up by one point in the polls. According to both Nate Silver and InTrade, President Obama has a better-than-60-percent chance of winning the election. I think it’s fair to say that the election is, for the moment, close.

But not according to Gallup. Their seven-day tracking poll shows Romney up by seven points — yes, seven — with likely voters. But he’s only up by one point with registered voters.

It gets weirder: Dig into the poll, and you’ll find that in the most recent internals they’ve put on their Web site  — which track from 10/9-10/15  — Obama is winning the West (+6), the East (+4), and the Midwest (+4). The only region he’s losing is the South. But he’s losing the South, among likely voters, by 22 points. That’s enough, in Gallup’s poll, for him to be behind in the national vote. But it’s hard to see how that puts him behind in the electoral college.

If Gallup is right, then that looks to me like we’re headed for an electoral college/popular vote split. Last night, I spoke with Frank Newport, editor-in-chief of Gallup, to ask him if I was missing something. He said I wasn’t. “That’s certainly what it looks like,” he says.

But Newport was cautious in interpreting his numbers. Gallup’s poll cheered Romney supporters because it showed Romney gaining ground even after the second debate. But Newport didn’t see it like that. Remember, he warned, it’s a seven-day poll. “I think we’re still seeing leftover positive support for Romney and I don’t think we’re seeing impact yet from the second debate,” he says.

It turns out the Gallup’s likely voter model includes a measure of enthusiasm which might explain why the large swings and the differences from the other polls.  Nate Silver is right:  it is the likely voter model.  He is probably also right when he said on the Daily Show that we tend to follow polls much too obsessively.  But I can’t help myself.

And if you support Obama you can take comfort in the figures posted late last night on FiveThirtyEight:  Obama 291.6 electoral votes with a 70.6 chance of winning.

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Explaining the new jobs numbers

The number of jobs added grew again in September reflecting the slow but steady growth and unemployment dropped below 8% for the first time since January 2009, the month President Obama took office.  Republicans, including Jack Welsh the former CEO of General Electric, are going to argue that the Bureau of Labor Statistics somehow cooked the numbers to help the President. Ezra Klein explains why this couldn’t be the case.

We’ve hit that moment in the election when people begin to lose their minds. Case in point, within minutes of the jobs report, Twitter filled with Republicans claiming the books were somehow cooked, the numbers aren’t real, etc.

Let’s take a deep breath. Jobs reports are about the economy, not about the election. Confusing the two leads to very bad analysis.

This is a good jobs report in a still-weak economy. The 114,000 jobs we added in September aren’t very impressive. The revisions to the last two months, which added 86,000 jobs to the total, were much more impressive. Those revisions also suggest that September’s jobs could get revised up — or, of course, down. So be careful about reading too much into that number. Still, these are, at best, good, not great, numbers.

The chart shows the number of jobs added pretty consistent with previous numbers.  So where is the controversy?

The controversy, if it’s worth using that word, is over the unemployment rate, which dropped from 8.1 percent to 7.8 percent. That’s three-tenths of one percent. That’s what all the fuss is about.

Let’s get one thing out of the way: The data was not, as Jack Welch suggested in a now-infamous tweet, manipulated. The Bureau of Labor Statistics is set up to ensure the White House has no ability to influence it. As labor economist Betsey Stevenson wrote, “anyone who thinks that political folks can manipulate the unemployment data are completely ignorant of how the BLS works and how the data are compiled.” Plus, if the White House somehow was manipulating the data, don’t you think they would have made the payroll number look a bit better than 114,000? No one would have batted an eye at 160,000.

The fact is that there’s not much that needs to be explained here. We’ve seen drops like this — and even drops bigger than this — before. Between July and August the unemployment rate dropped from 8.3 percent to 8.1 percent — two-tenths of one percent. November-December of 2011 also saw a .2 percent drop. November-December of 2010 saw a .4 percent drop. This isn’t some incredible aberration. The fact that the unemployment rate broke under the psychologically important 8 percent line is making this number feel bigger to people than it really is.

Wonkblog posted this chart soon after the numbers were released.

 

The explanation

…the unemployment rate is a function of two things: the number of people
employed, and the number of people in the labor force. But the proportion of
people in the labor force actually went up, suggesting the fall in the
unemployment rate reflects a real improvement, rather than people stopping their
work search…

The Bureau of Labor Statistics looks at the unemployment rate in several ways as Klein explains.

Which leads to another argument: That U6, the broadest measure of labor-market pain, didn’t move, which should make us skeptical of the fact that U3, the normal unemployment rate, did move. That’s just misunderstanding what U6 is.

U6 is not an unemployment measure. It includes part-time workers who want full-time work. So it doesn’t count the increase in part-time work. But every measure of actual unemployment — U1, U2, U3, U4, and U5 — went down. You can see them all here. Again, there’s no mystery.

Klein concludes

This is an encouraging report. What it tells us is that the labor market has been a bit better over the last few months than we thought, and that the recovery hasn’t slowed in the ways we feared. What the response to it tells us is that the election is driving people a little bit crazy.

You can see more charts by clicking the various links.

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The National Debt and the GDP

Being a little behind in reading my email, I just saw this from Ezra Klein.  He suggests you keep this in mind while you watch the Republicans try to push the debt onto the President and the Democrats.

Notice that you can barely see TARP.  It is that dark blue streak that is separating the other two blue parts of the graph.  Even the stimulus is pretty small.

The deficit is pretty easy to understand when you look at it in a graph.  If you reduced the Bush tax cuts for income over &250,000 and worked on the costs of the wars – and didn’t start any new ones – you can really begin to reduce the debt.  Maybe the huge number of people who think the tax breaks for the wealthy should be eliminated understand this better than Mitt and Paul and the rest of their gang.  Certainly they understand this better than Grover Nordquist.

So when you are watching the Republicans in Tampa, remember this chart and thank Ezra Klein.

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Paying a Fair Share or the Buffett Rule

I’ve gotten several email recently from the President, from Elizabeth Warren and from other progressive organizations about the Senate vote on the Buffett rule.  Since I’m pretty sure that Senator John Kerry will vote for the bill and Senator Scott Brown will vote against it, I haven’t called, emailed or written either of them about it.

I have, however,  wondered what the bill actually does.  So thank you to Ezra Klein’s Wonkblog in the Washington Post this morning for his explanation.  The big vote everyone is talking about is actually a bill introduced by Senator Sheldon Whitehouse from Rhode Island.  He explained the bill to Ezra who explains it to us.

In other words: The “Paying a Fair Share Act” doesn’t mean someone making $1,500,000 will pay at least the same percentage of his income in taxes as the average middle-class family. It means he would pay a somewhat higher marginal rate on the income he earns over $1 million — in this case, on the excess $500,000.

Moreover, that higher marginal rate would only reach 30 percent on income over $2 million. Between $1 million and $2 million, the Buffett rule phases in so as to avoid a sharp “tax cliff” at the million-dollar mark.

But would it still raise money to help ease the deficit?

Another misconception: The proposal doesn’t raise $47 billion over 10 years. Or, rather, it does, but only if you use the “current law baseline” that assumes the full expiration of the Bush tax cuts. No one really uses that baseline. If you look at Paul Ryan’s budget, for instance, its appendix tables use a “current policy baseline,” which assumes, among other things, that the Bush tax cuts are extended.

Compared with that baseline, the Paying a Fair Share Act actually raises about $160 billion. Still not enough to solve our deficit problems on its own, but nothing to sneeze at.

So as usual it is a little more complicated than the President makes it sound, but still a good thing to support.