Thursday, June 20, 2019 | ePaper
Debates on economic policy in 2019
(From previous issue)
For this reason, we should want a financial sector that is as small as possible for carrying through its function, just as we would want the trucking sector to be as small as possible to deliver the goods in a timely manner.
Over the last four decades the narrow financial sector (securities and commodity trading and investment banking) has more than quadrupled as a share of the economy. It would be difficult to argue that capital is being better allocated or that savings are more secure today than 40 years ago.
This means we have little to show for this enormous expansion of the financial sector. It would be comparable to seeing the size of the trucking sector quadruple with nothing to show in the form of faster deliveries or reduced wastage. Finance is of course also the source of many of the highest incomes in the economy.
These facts make for a strong case for measures that reduce the size of the sector, like financial transactions taxes, reduced opportunities for tax gaming, and increased openness in pension fund and endowment contracts. In any case, it is important to recognize that a big financial sector (as in Wall Street) is bad for the economy, not the sort of thing that we should be proud of.
7) Putting numbers in context
Okay, this is not actually economic policy, but rather reporting on economics. It is standard practice for reporters to tell readers that we will spend $70 billion next year on food stamps or $20 billion on Temporary Assistance to Needy Families (TANF), the federal government's main cash welfare program. Almost no one has any idea what these numbers mean, just that they are very large. The problem is compounded when we get numbers over multiple years, like the $867 billion farm bill, when it is often not even made clear that the spending is over ten years.
This is a serious political problem because when people see really big numbers going to foreign aid, food stamps, TANF, and other categories of social spending, they think this is the bulk of their taxes. In reality, these items are small change in the whole budget. Food stamps are about 1.8 percent of the budget, TANF less than 0.5 percent.
Yes, I know that many people think all their tax money goes to these programs because they are racist and want to believe that all their tax dollars are going to black and brown people who benefit from these programs. But the reality is that many people who are not racist also believe that a grossly disproportionate share of their tax dollars go to social spending of various sorts.
It is difficult to believe that this misperception does not undermine support for these programs. For my part, if I thought that 20 percent of the budget went to TANF I sure as hell would not support the program. If we spent that large a share of the budget on TANF and still had so many people living in or near poverty, it clearly is not a very effective program. Incredibly, the groups that work on these issues in Washington seem completely unconcerned about the reporting on these programs.
The most absurd part of this story is that there is no other side. Everyone in the news business knows that no one has any idea how much money $70 billion for food stamps is or $867 billion over ten years. And, it only takes a few second to add context, like the share of the federal budget or the spending per person or family.
I thought I scored a big victory on this issue when Margaret Sullivan, then the Public Editor of the New York Times, completely endorsed this point in a column. She got the wholehearted agreement of David Leonhardt, who was the paper's Washington editor at the time. I assumed this meant a change in policy, which given the NYT's role in the media hierarchy, would soon be followed by other news outlets. But, nothing changed. We still get really big numbers which are absolutely meaningless to almost everyone who sees or hears them. This can and must change.
Okay, so those are my New Year's resolutions for 2019, I want to change policy debates in these six areas and reporting on budget numbers and other big numbers that are not understandable to the media's audience. Do I have much chance of succeeding? Well, how many smokers will give up cigarettes? How many people will start exercising and lose 20 pounds? I'll do my best and we'll see.
 We can easily deal with the "brain drain" issue. We know the countries these professionals come from. We can compensate for their loss so that they can train two or three professionals for everyone that comes here. This is the sort of compensation that trade economists always talk about, with the winners making payments to the losers.
(Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC).