Kids are expensive

This is not a health policy post, just an observation from my life.

The New York Times reported that fertility rates are declining in America.

Americans are having fewer babies. At first, researchers thought the declining fertility rate was because of the recession, but it kept falling even as the economy recovered. Now it has reached a record low for the second consecutive year.

Because the fertility rate subtly shapes many major issues of the day — including immigration, education, housing, the labor supply, the social safety net and support for working families — there’s a lot of concern about why today’s young adults aren’t having as many children.

The Times asked the young adults who have fewer kids than they want why. The biggest reason (64%) was that childcare was too expensive. Most of the top responses were some variation on the simple fact that kids are expensive.

They are expensive even when you don’t take them to a baseball game where they want popcorn.

I have two kids. Both are out of daycare. The two of them were in daycare concurrently for two years straight and then my youngest was in daycare by himself for another three years. Paying for daycare was the biggest financial challenge that we have faced, it was a bigger challenge than me being out of work for almost all of 2010.

When my wife and I decided that we wanted to start trying for kid #2, we had a long series of discussions as to how we would handle childcare. We used a community based non-profit daycare for our daughter when we were both working and she was an only child. Its price point for full time care was below the Pittsburgh regional average. The two year overlap between our daughter and kid #2 both needing daycare and the first day of her kindergarten scared the ever living shit out of us. We were both doing okay in our careers. We were both employed at salaried positions, and probably a tad underemployed as this was still during the recovery from the Great Recession.

We had two major options conditional on us having kid #2. The first option was to suck it up, acknowledge that we would be broke and in debt and keep both kids in daycare. The other choice was for us to flip a coin to see who would stay home for two years. We figured that, after accounting for bus passes, work clothes and other job related expenses, one of us would be working solely for daycare expenses for two years. The upside of both of us working is that it would not leave another hole in our resumes, as we were reaching a point where careers either launched or flat-lined.

We decided to be broke. We put both kids in daycare. I went to referee every soccer game that my knees allowed. It was a close call. We lucked out. We made it through those two years and both of our careers were able to launch. Those launches would not have occurred if one of us was out of the labor force.

We also joked that at least paying for college would be easy. California University of Pennsylvania is a state school where I refereed too many games. It is a perfectly decent mid-tier school. In 2018, its tuition and fees for in-state students is less than what I was paying for my son’s infant year of daycare in 2013.

College is far less scary financially than daycare. The biggest difference between college and daycare is financing. I have access to relatively easy/cheap credit for college through the federal college loan programs. I am still paying off a chunk of grad school and will do so for another decade at 2.875%. My kids won’t get the same interest rate but we will be able to finance a year of college at a reasonable interest rate for ten to fifteen years. Daycare required payment in full for the upcoming month by the 28th of the current month every single month. We were paying effectively college tuition in cash every month.

The other, far more important challenge for financing daycare versus college is income life cycle. As cohorts, income tends to increase with age through middle-age and then stabilizes for a while. In less fancy terms, people are far more likely to make more money in their thirties than in their twenties and then they’re also more likely to make more money in their forties and fifties than in their thirties. If there was cheap financing that could shift financial burdens through time like student loans, this would not be a big deal. Daycare has no ten year financing option to shift burdens to better times.

Instead, it is a massive cash outlay at a point in one’s life when the odds of having a lot of cash available is fairly low. Helping my kids pay for college is going to be easy compared to daycare as we are likely to be earning more in nine years when my oldest will be a freshman than we are earning now and we can spread her expenses out over several years. We can also save money with seriously valuable and socially non-productive tax advantages to pre-pay a part of college unlike with daycare.

So when we, as a society, tie so many benefits to work and then tell young adults that they have to come up with state school tuition to pay for daycare in cash, some young adults look at the problem of working and raising kids as an impossibility and therefore they don’t have kids or as many kids as they would want.



What’s going on in Texas

I am not a lawyer, so please don’t take any of the following as informed legal analysis.

The Trump Administration has decided to argue that the $0 penalty individual mandate is unconstitutional and therefore community rated guaranteed issue requirements are unconstitutional as they are non-severable from the mandate. That would destroy the individual market reforms of the ACA.

Take Care has the legal argument and demolition:

In the government’s brief, the Trump DOJ makes two arguments. (A) The individual mandate, which the Supreme Court upheld in NFIB v. Sebelius, is unconstitutional; and (B) because the mandate is unconstitutional, the most important provisions of the Affordable Care Act should also be struck down, on the ground that they are not severable from the now-unconstitutional mandate.

The first of these arguments is excruciatingly stupid, but has the complementary virtue of being irrelevant on its own…

To this we say: Whatever. We’re law professors, and not even we can get worked up about the difference between “do it, or pay the price, which is zero” and “do what you want…”
there are actually instances where severability doctrine is capable of generating clear answers to obvious questions. The easiest case—hard to imagine, but stay with us—would be if Congress actually passed a piece of legislation that eliminated, as a formal or practical matter, one provision of a law, but left the rest of that law in place. In that case, the reconstruction of Congressional intent would be straightforward: What Congress wanted was a law without that provision.

But that is exactly what Congress did in the tax bill, with respect to the Affordable Care Act. And that is what makes the Justice Department’s argument so transparently dishonest.

Yeah, this is dumb.

As a reminder, Jonathan Adler was one of the prime proponents of the “Moops” argument that tried to get subsidies tossed for citizens of states using Healthcare.gov. He thinks this is a bullshit argument.

It is a bullshit set of arguments that are being made in bad faith. And usually that would be enough. But since this is related to the ACA and the district judge is very conservative, we’re may be riding this out for a while as it gets appealed up and down the chain multiple times.

On a pragmatic basis, this introduces uncertainty into the market. Insurers hate uncertainty. They respond to it in one of two ways. They can either run like hell from the market or they can jack up their premiums to incorporate the risk that mid-contract they have to operate under a different regulatory regime.

On a political level, this highlights the popular parts of the ACA (community rating and no denial of coverage for pre-exisiting conditions) just as the election season heats up.



Now On to the Next Phase of the Looting

Pete Peterson might be dead, but the GOP quest to gut Medicare and Social Security marches on:

The financial future of the part of Medicare that pays older Americans’ hospital bills has deteriorated significantly, according to an annual government report that forecasts that the trust fund will be depleted by 2026 — three years sooner than expected a year ago.

The report, issued Tuesday by a quartet of Trump administration officials who are trustees for Medicare and Social Security, reveals that policy changes ushered in by the president and the Republican Congress are weakening the financial underpinnings of the already-fragile insurance program.

According to the report, less money will be flowing into the hospital-care trust fund in part because the tax law passed this year will cause the government to collect less in income taxes. In addition, lower wages last year will translate into lower payroll taxes.

As revenue slips, hospital expenses will increase, the report says. A senior government official who briefed reporters on it said that part of that increase is because the tax law will, starting next year, end enforcement of the Affordable Care Act’s requirement that most Americans carry health insurance. As a result, hospitals are predicted to have more uninsured patients, in turn requiring the Medicare program to pay more for such uncompensated care.

Literally everything the Republicans are doing is a direct attack on the American people.



Back to the phones

You know what to do — call your Senators and let them know your thoughts.



No, Virginia, Tax Giveaways To The 1 % Don’t Work

Just a check in on the astonishing economy building super duper special magical powers of GOP TAX CUT POTION™.

Spoiler: it works just as well as the utter, don’t-let-the-pointy-heads-at-the-FDA-f**k-up-a-good-thing  quackery Orrin Hatch has spent so long protecting.

The latest by Dean Baker:

The ostensible rationale for the big cut in the corporate tax rate that was at the center of the tax cut is that it will lead to a flood of new investment.

Since the outlines of the tax cut had been known since September, businesses had plenty of time to plan how they would respond to lower tax rates. If lower rates really produce a flood of investment we should at least begin to see some sign in new orders once the tax cut was certain to pass.

The January report showed orders actually fell modestly for the second consecutive month. The drop occurs both including and excluding volatile aircraft orders. While this is far from conclusive, it is hard to reconcile with the view that lower taxes would lead to a flood of new investment.

Remarkably, these new data have gotten almost no attention from the media. Both the NYT and the Washington Post ran an AP story that just noted the drop in passing. Doesn’t anyone care if the tax cut works?

As everyone who wasn’t a Republican and or a CEO said, the tax bill was a sham, a way to transfer yet more wealth from labor to capital, from most of us to a very few, already hugely rich.

Image: Reginald Gray, The Banker, Smoking, 2002.

 

 



We Can Always Use Some Bitter, Cynical, Gallows Humor, So Here’s A Kudlow Post

Larry Kudlow is the pure distilled essence of a Trump appointment, the type specimen of the breed, and the perfect expression of the state of Republican “thinking” on not just economics, but any matter in which actual knowledge and a respect for empiricism might help.

Via Wikipedia, we find he is barely educated, at best, in the fields in which he now works:

Kudlow graduated from University of Rochester in Rochester, New York with a degree in history in 1969. Known as “Kuddles” to friends, he was a star on the tennis team and a member of the left-wing Students for a Democratic Society at Rochester.

In 1971, Kudlow attended Princeton University’s Woodrow Wilson School of Public and International Affairs, where he studied politics and economics. He left before completing his master’s degree.

I’ll admit that Kuddles is kinda cute, but an unfinished masters degree in a policy school is not one you’d usually associate with economics acumen.

He went on to a stellar business career, managing to get fired repeatedly for substance abuse on the job, including a claimed $10,000/month cocaine habit that got him canned from Bear Stearns in 1994. (It’s interesting to note that a frantic effort is underway today to diminish such inconvenient truths on Kudlow’s Wikipedia page.)

Fortunately for Kuddles, he cleans up well, dresses nicely, and can tok gud. So he was able to revive his career as a TV gasbag, with a series of appearances and then shows on CNBC, the network that figured out the markets could be covered like sports teams.

Unfortunately — for the rest of us, if not for the ever-failing-up Kudlow — he’s been wrong about almost every key economic call since Methuselah was in diapers.  He is a Laffer disciple, a supply-sider whose faith that there is no tax that is too low, no plutocrat whose needs must not be served, is impervious to any test of reality.

Consider this:

In 1993, when Bill Clinton proposed an increase in the top tax rate from 31 percent to 39.6 percent, Kudlow wrote, “There is no question that President Clinton’s across-the-board tax increases … will throw a wet blanket over the recovery and depress the economy’s long-run potential to grow.” This was wrong. Instead, a boom ensued. Rather than question his analysis, Kudlow switched to crediting the results to the great tax-cutter, Ronald Reagan. “The politician most responsible for laying the groundwork for this prosperous era is not Bill Clinton, but Ronald Reagan,” he argued in February, 2000.

And this:

Kudlow firmly denied that the United States would enter a recession in 2007, or that it was in the midst of a recession in early to mid-2008. In December 2007, he wrote: “The recession debate is over. It’s not gonna happen. Time to move on. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come”. In May 2008 he wrote: “President George W. Bush may turn out to be the top economic forecaster in the country” in his “‘R’ is for ‘Right'”.

And this:

When Obama took office, Kudlow was detecting an “inflationary bubble.” That was wrong. He warned in 2009 that the administration “is waging war on investors. He’s waging war against businesses. He’s waging war against bondholders. These are very bad things.” That was also wrong, and when the recovery proceeded, by 2011, he credited the Bush tax cuts for the recovery. (Kudlow, April 2011: “March unemployment rate drop proof lower taxes work.”) By 2012, Kudlow found new grounds to test out his theories: Kansas, where he advisedRepublican governor Sam Brownback to implement a sweeping tax-cut plan that would produce faster growth. This was wrong. Alas, Brownback’s program has proven a comprehensive failure, falling short of all its promises and leaving the state in fiscal turmoil.

The reviews are coming in. Via the BBC:

David Stockman, Mr Kudlow’s former boss during the Reagan administration, told the Washington Post in 2016 that Mr Kudlow’s prediction that tax cuts would lead to growth was “dead wrong”. Instead, he said the cuts led to budget deficits.

More recently, he has warned that Mr Kudlow would not be able to rein in the president.

“As much as I love him … Larry’s voice is exactly the wrong voice that Donald Trump ought to be hearing as we go forward,” he told CNBC.

Liberal economist and New York Times columnist Paul Krugman has been sharply critical, noting that Mr Kudlow missed signs of the housing bubble and recession.

“At least he’s reliable — that is, he’s reliably wrong about everything,” Mr Krugman tweeted.

Indeed in December 2007 – just as the recession was beginning – Mr Kudlow wrote in the National Review: “There’s no recession coming. The pessimistas were wrong. It’s not going to happen.”

It is interesting that Kudlow himself doesn’t seem to disagree with his predecessor on the issue that got Cohn out. From a quick take bylined by him, Laffer and Stephen Moore (another stellar, always-wrong econ public intellectual) here he is on Trump’s tariff announcement:

Tariffs are really tax hikes. Since so many of the things American consumers buy today are made of steel or aluminum, a 25 percent tariff on these commodities may get passed on to consumers at the cash register. This is a regressive tax on low-income families.

I wonder how that squares with the new job. ETA: I know how it squares. It’s already been forgotten. We’ve always been at war with Eastasia.

But that’s just SOP in the circles in which Kudlow travels:  intellectual rigor doesn’t actually matter.  He’s under no obligation to be consistent in any of his pronouncements, and he certainly doesn’t have to be right about anything as long as he provides cover for the true Republican (n.b.: not just Trumpian) policy goal: the transfer of more and more of our society’s wealth to those who are already wealthy — and hence, in the GOP/Rand/Sociopath view of the world, those who are virtuous enough to deserve such riches.

For all of you who’ve wondered why the US can’t be more like Kansas — we may now we get to find out.

Image: Thomas Shields Clarke, A Fool’s Fool,  c. 1887.



Late Night Horrorshow Open Thread: Maybe They’ll Call It ‘Brown Apron’

Mick Mulvaney’s brill idea seems to have evaporated overnight, but Repubs never give up on a proposal that looks like a chance to screw The Undeserving while allowing a little free-market looting… er, “privatization”… of the common treasury. So I figure we’ll soon be seeing sketches of the proposed Versace-designed uniforms for the troops of the ‘SNAP czar’ in charge of seeing those people are humiliated and starved for the crime of being poor:

The Trump administration is proposing a major shake-up in one of the country’s most important “safety net” programs, the Supplemental Nutrition Assistance Program, formerly known as food stamps. Under the proposal, most SNAP recipients would lose much of their ability to choose the food they buy with their SNAP benefits.

The proposal is included in the Trump administration budget request for fiscal year 2019. It would require approval from Congress…

Currently, SNAP beneficiaries get money loaded onto an EBT card they can use to buy what they want as long as it falls under the guidelines. The administration says the move is a “cost-effective approach” with “no loss in food benefits to participants.”

The USDA believes that state governments will be able to deliver this food at much less cost than SNAP recipients currently pay for food at retail stores — thus reducing the overall cost of the SNAP program by $129 billion over the next 10 years.

This and other changes in the SNAP program, according to the Trump administration, will reduce the SNAP budget by $213 billion over those years — cutting the program by almost 30 percent.

Joel Berg, CEO of Hunger Free America, a hunger advocacy group that also helps clients access food-assistance services, said the administration’s plan left him baffled. “They have managed to propose nearly the impossible, taking over $200 billion worth of food from low-income Americans while increasing bureaucracy and reducing choices,” Berg says…

It isn’t clear how billions of dollars’ worth of food each year would be distributed to millions of SNAP recipients who live all over the country, including dense urban areas and sparsely populated rural regions. The budget says states will have “substantial flexibility in designing the food box delivery system through existing infrastructure, partnerships or commercial/retail delivery services.”

Critics of the proposal said distributing that much food presents a logistical nightmare. “Among the problems, it’s going to be costly and take money out of the [SNAP] program from the administrative side. It’s going to stigmatize people when they have to go to certain places to pick up benefits,” says Jim Weill, president of the nonprofit Food Research and Action Center…

According to Dean, from CBPP, the Trump administration wants to trim an additional $80 billion from the SNAP program by cutting off about 4 million people who currently receive food assistance. Most of them live in states that have decided to loosen the program’s eligibility requirements slightly. Under the administration’s proposal, states would no longer be able to do so…

Of course, the biggest beneficiaries of SNAP are American farmers and local food retailers, both of whom need those ‘food stamp moochers’ as paying customers.

For more background, Simon Maloy at Media Matters has a good summary of the “decades of conservative lies about welfare” behind “Trump’s SNAP attack”.

(Fifty-four more excellent questions from Lowrey here.)


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