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Social Security in Three Graphs

For years, Social Security has been known as the ‘third rail’ of American politics: any legislator that touches it risks ending his political life. President Franklin D. Roosevelt designed it this way. Workers pay into the Social Security program via payroll taxes and, in return, expect the program to provide for them when they retire or if they become disabled.

As a result, voters are usually very wary of any changes to the Social Security program. This has protected Social Security from lawmakers who might have wanted to scuttle the program, but it has also made it difficult to reform. Unfortunately, Social Security’s current budgetary trajectory is unsustainable. If lawmakers want to preserve the Social Security program, they should act now to bolster its financial health.

This blog post will examine the Social Security program in three graphs. It will briefly discuss the program’s history, describe the program’s funding structure, and then examine the program’s financial health. Finally, this post will conclude that, given that Social Security’s costs will likely rise faster than its revenue for the foreseeable future, legislators must raise revenue, pare back benefits, or employ some combination of the two in order to meet its obligations to elderly and disabled Americans.

GRAPH 1

The first graph depicts how the number of workers covered by Social Security, and therefore the number of workers paying into the program, has changed from year to year. As you can see, Social Security grew rapidly in its early years, mainly due to Congress expanding the types of workers that the program covers.

When President Franklin D. Roosevelt signed the Social Security Act in 1935, it only covered commerce and industry workers under the age of 65. Congress and President Roosevelt marginally expanded coverage four years later by eliminating the age limit and adding covered workers’ families to the program, but it was not until the 1950s that the federal government began to expand the program in earnest. Presidents Harry S. Truman (in 1950) and Dwight D. Eisenhower (in 1954 and 1956) extended Social Security coverage to agricultural workers, the military and other uniformed services, and to certain state and local government officials (as long as the government in question opted into the program).

Also, in 1956, Eisenhower established Social Security Disability Insurance, which expanded the scope of the Social Security program to include providing benefits to disabled covered workers. Two years later, he extended these benefits to disabled workers’ dependents, as well.

You can see these large expansions clearly in this first graph. Subsequent presidents extended Social Security to other workers, such as to federal and non-profit employees, but the number of active workers paying into Social Security has, on average, grown at a slower rate since the 1950s. This is significant, as the number of workers paying into Social Security at any given time greatly affects the program’s financial viability.

To understand why, we’ll take a look at how the government funds Social Security. It does so in two main ways, through:

  • Tax revenue (roughly 88 percent of current Social Security receipts); and
  • Interest income (roughly 12 percent of current Social Security receipts).

Workers and employers pay the majority of these taxes (96 percent) through payroll taxes.[1] The remaining 4 percent of tax revenue comes from income taxes levied on retirees’ Social Security benefits. Any tax revenue that comes in above what the government needs to pay out to Social Security beneficiaries gets put into the ‘Social Security Trust Fund.’ The government uses this excess ‘Trust Fund’ revenue to buy special U.S. Treasury Bonds from itself and to accrue interest as a second source of revenue for the Social Security program. Additionally, the government can redeem these special bonds at any time, if the Social Security program needs more revenue.

For now, though, we’ll focus on tax revenues. Consider the fact that around 85 percent of Social Security’s total annual revenue comes from payroll taxes that covered workers and their employers pay. This makes Social Security’s finances sensitive to the number of covered workers in the system at any given time. More covered workers means more people paying into the system; less covered workers means fewer people paying in.

This is not necessarily a problem, as long as the money that covered workers and their employers pay into the system still covers retirees’ benefits, as it has for most of Social Security’s existence. However, consider what might happen if the number of retirees grows faster than the number of workers helping pay for their benefits. In this case, Social Security will end up taking in less money than it needs cover their costs because there will not be enough workers to support the number of retirees drawing down Social Security benefits.

The second graph, which shows year-over-year percentage change in the number of covered workers and beneficiaries, illustrates this exact scenario.

GRAPH 2

As we can see, the number of covered workers grew robustly from the 1960s through the 1980s, as the ‘baby boom’ generation started entering the workforce.[2] For much of this period, the numbers of workers and beneficiaries grew at roughly similar rates; at some points, the number of workers grew faster, at other points the number of beneficiaries did.

However, starting in the late 2000s, we see the growth rate of workers and beneficiaries diverge. The growth rate of beneficiaries rises and stays consistently higher than that of covered workers as the baby boom generation retires and the much smaller succeeding generations take their place in the workforce.

Another common way to understand this demographic shift is by thinking about the worker-to-beneficiary ratio. This measures how many covered workers there are in the Social Security system for each single beneficiary, and it can give us a rough idea of how many covered workers contribute to the costs of one beneficiary. Since the 1960s, this ratio has equaled three or four covered workers to for each individual Social Security beneficiary. Within a decade, this ratio is projected to decrease to two workers for every one beneficiary. With the growth of the retiree population outpacing that of the covered workers, Social Security’s financial health with continue to suffer.

The second graph also demonstrates the effect the economy has on Social Security’s financial health. As discussed, payroll taxes constitute the vast majority of Social Security funding. The more workers employed, the more payroll tax Social Security takes in; the higher workers’ wages, the higher Social Security’s revenue. During recessions, however, a fall in business activity can cause employers to lay off workers and withhold raises. When this happens, Social Security’s payroll tax revenue drops — although, unless Congress legislates otherwise, its payouts to beneficiaries remains constant.

The graph illustrates the relationship between Social Security receipts and the economy by showing that the number of covered workers slows or even shrinks (that is, the percentage change becomes negatives) when the economy enters a recession. At the same time, the number of beneficiaries often continues to rise (or even begins to rise at a faster rate). A slow economy and a difficult job market can push unemployed workers who may have otherwise stayed in the labor force for another few years into early retirements. When faced with slim job prospects, they retire and draw upon their Social Security benefits for income. The longer an economy remains sluggish, the stronger one would expect this effect to be.

If a worker is too young to retire, unemployment and slow economic growth can push her or him onto the Social Security Disability Insurance (SSDI) rolls, as well. Congress created SSDI to provide assistance to disabled workers, but tough economic times (and loosened SSDI eligibility criteria) can encourage healthy workers to apply after they have exhausted their unemployment benefits and become discouraged about their prospects of finding a job. A slow economy can also encourage injured workers who otherwise might have found a job that accommodated their medical needs to join the SSDI rolls too. This further increases the number of Social Security beneficiaries and decreases the number of covered workers.

Both demographic and economic forces collided during the Great Recession. The recession began in 2007 and turned into a full-blown financial crisis in 2008. The subsequent recovery has been especially sluggish. The second graph shows a large loss of covered workers during this period. It also shows that the number of beneficiaries grew faster than at any other time since the 1970s, in part because workers retired early and applied for disability. The year 2008 did not just feature the financial crisis, it also marked the first year baby boomers could seek early retirement — and faced with a dim economic outlook, many did just that.

This situation — slower growth in tax revenues and faster growth in benefit payouts — has begun to threaten Social Security’s financial health, as we can see in the third graph.

 GRAPH 3

Since 2010, Social Security has cost the government more than it takes in through tax revenues, forcing the government to rely on both tax revenues and interest income. Although interest income has helped cover the total program cost as tax revenues have dipped below required payouts, using interest income to cover the difference can only be, at best, a short-term solution to the long-term financial sustainability of the program.

If the government continues to operate Social Security in a way that ensures tax revenues are lower than the program’s costs, its corresponding interest income (which is generated from interest on U.S. Treasury bonds — which, in turn, comes from other taxes that the government levies) will continue to dwindle. With the current revenue structure unable to support the program’s costs, the government will be forced to cover the shortfall by cashing in the U.S. Treasury bonds it holds in the Social Security Trust Fund. Eventually, if revenues do not rebound, both the Trust Fund and the interest income it generates will run out and the government will be unable to cover all of its Social Security liabilities through annual program revenues alone.

As it stands, the Social Security Trustees Report projects that without significant changes, the Social Security Trust Fund could run out by 2033.[3]

This government has faced this situation before: the last time Social Security tax revenues fell below program costs was in 1983. In response, President Ronald Reagan and the Congress shored up Social Security’s finances by increasing the payroll tax rate, increasing the retirement age, and bringing more workers into the Social Security system, among other things.

As the third graph shows, Social Security’s financial trends were heading in the wrong direction in the early 1980s. The 1983 Social Security reform boosted the program’s revenue, which allowed it to both cover its annual expenses and bulk up the Social Security Trust Fund.[3] However, the late 2000s saw the Social Security program’s revenue fall, for reasons discussed earlier (the Great Recession and demographic shifts). Revenues have already begun to recover and grow again, but so have the program’s expenses. Social Security’s costs seem likely to continually outpace its revenues going forward, as the number of beneficiaries receiving payouts grows quicker than the number of covered workers paying into the system.

Unless the government acts to restore Social Security’s financial stability (or the economic and demographic situation improve drastically), the government may be unable to fully meet its Social Security obligations in the coming decades. The Social Security Trustees Report estimates that, over the long term, Social Security’s shortfall will be about 4 percent of future taxable payrolls, or 1.4 percent of GDP. Congress and the president will have to decide whether they want to cover this shortfall by raising taxes, cutting benefits, or employing some combination of the two. They will also have to decide whether they want to act now to shore up the program or continue to let its finances deteriorate.

President Roosevelt considered Social Security the crown jewel of his New Deal agenda and he expected it to become a lasting American institution. To that end, he recognized the important role payroll taxes play in sustaining the program, both financially and politically. By requiring workers to pay part of their paycheck into Social Security in return for promised future pension benefits, Roosevelt ensured the program’s survival. Workers would now expect that, after paying into Social Security for years, they would receive their pensions when they retired.

As Roosevelt said, “with those taxes in there, no damn politician can ever scrap my Social Security program.” The president shrewdly designed the Social Security program in a way that blocked future politicians from ending it through the legislative process — but not, it seems, from ending the program by doing absolutely nothing at all.

 

NOTES

[1] In 2011 and 2012, the federal government attempted to stimulate the economy through, among other things, a ‘payroll tax holiday‘ that temporarily cut the payroll tax rate workers pay by 2 percentage points (from 6.2 percent to 4.2 percent). In order to cover this temporary cut, Congress reimbursed the Social Security program through the general fund. After several extensions, the payroll tax holiday expired at the end of 2012.

[2] The ‘baby boom’ describes the high birth rate that the U.S. experienced in the immediate post-World War II period. Many Americans returned home from the warfront and began to start large families. The resulting rise in the U.S. birth rate can be seen in the graph below.

[3] Total bond holdings in the Social Security Trust Fund started to decrease in the 1970s and 1980s, when the program’s costs were greater than its tax revenues. The Trust Fund then rebounded after President Reagan and Congress reformed the Social Security program and raised its income in 1983. Today, Social Security faces a similar situation: Social Security’s tax revenues have fallen below its costs. Unless this situation changes, the Trust Fund may run out by 2033, as seen in the graph below.

 

FURTHER READING

2013 OASDI Trustees Report,” Social Security Administration, 2013.

Scott, Christine. “Social Security: What Would Happen If the Trust Funds Ran Out?” Congressional Research Service, 21 October 2013.

Nuschler, Dawn & Sidor, Gary. “Social Security: The Trust Fund.” Congressional Research Service, 4 June 2013.

Nuschler, Dawn. “Social Security Primer.” Congressional Research Service, 17 June 2013.

Report of the National Commission on Social Security Reform (Greenspan Commission).” Social Security Administration, January 1983.

The 2013 Long-Term Budget Outlook.” Congressional Budget Office, September 2013.

Meyerson, Noah & Dacey, Sheila. “How Does Social Security Work?” Congressional Budget Office, 19 September 2013.

Meyerson, Noah & Topoleski, Julie. “Medicare and Social Security Payroll Taxes and Benefits for People in Different Birth Cohorts.” Congressional Budget Office, 20 September 2013.

Morton, William R. “Social Security Disability Insurance (SSDI) Reform: An Overview of Proposals to Reduce the Growth in SSDI Rolls.” 29 April 2013.

Social Security Issue Briefs, U.S. Department of the Treasury.

The Social Security Act of 1935.” Social Security Administration.

Kollmann, Geoffrey. ”Social Security: Summary of Major Changes in the Cash Benefits Program.” Congressional Research Service, 18 May 2000.

 

 

Elections Matter. Redistricting Matters More.

Poor redistricting. Given the tremendous impact redistricting has on all levels of government, voters simply do not tend to give it too much attention.

There are undoubtedly numerous reasons for this. For one, redistricting — the process by which legislators redraw the political boundaries defining what towns and communities they will represent at the next election — just isn’t a ‘sexy’ issue. It deals with technical issues like adjusting districts to account for population shifts and make sure each lawmaker represents about the same number of constituents as his or her colleague. It doesn’t easily lend itself to the types of human interest stories journalists use to pull readers into articles on, say, immigration, war, abortion, and many other high-profile issues.

It’s difficult to put a face to redistricting.

Also, unlike other issues, redistricting is only really pushed into the spotlight once a decade. Although voters have to live with its effects at every election, redistricting is really only brought up in discussion when legislators engage in it, after the U.S. Census information is released. Any disgust or disapproval inevitably dies down soon after, leaving lawmakers with little incentive to reform the system.

Redistricting allows lawmakers to redraw their districts in ways that benefit them. (Image from Governing Magazine's website.)

In fact, not only do lawmakers have little incentive to consider redistricting reform, they actually have every reason to actively oppose it, because reforming redistricting would dilute their own power to choose their constituents by drawing voters in or out of their districts.

For anyone who has watched the American version of the political drama House of Cards, the characters bring up redistricting several times as key to the Democrats’ efforts to hold onto the U.S. House of Representatives. They pin their hopes on a special election for Pennsylvania governor — because without a Democratic governor to oversee Pennsylvania redistricting, the Democrats are sure to lose a number of its U.S. House seats, and thus lose control of the House.

House of Cards is fiction, but the stakes are just as high in real life, as well. It was one of the first things Republicans in Texas did in 2003 once they took full control of the state legislature for the first time since Reconstruction, allowing them to lock down their control. Democrats, knowing full well the power Republicans now wielded, broke quorum and fled the state rather than allow the legislature to meet and redistrict. Eventually, though, the Republican majority passed its redistricting plans, turning the 17-15 Democratic majority in Texas’ U.S. House delegation to a 21-11 Republican majority.

Pennsylvania serves as a reminder of the power of redistricting as well. Pennsylvania Republicans have controlled the redistricting process for decades. Most recently, that control paid off in 2012. Even though Democrats swept every office up for statewide election and received more than half of all votes cast in the state for U.S. House, Republicans not only kept their majorities in the state legislature, they actually gained a U.S. House seat.

After an election in which a majority of Pennsylvanians voted for a Democrat for U.S. House, Republicans still wound up holding a full 13 of Pennsylvania’s 18 U.S. House seats – or about 72 percent of Pennsylvania’s U.S. House delegation.

(It should come as no surprise, then, that Pennsylvania Republicans have also put forward plans in recent years that would distribute electoral votes in presidential elections according to redistricting, rather than popular vote. For instance, if one of these proposals, put forward by PA Senate Majority Leader Dominic Pileggi and Gov. Tom Corbett, had been in place in 2012, Gov. Mitt Romney would have lost the popular vote to President Barack Obama 52 percent to 47 percent — but Romney still would have taken home more electoral votes. Under this plan, Romney would have received 13 electoral vote to Obama’s 7 votes.)

Redistricting has very real effects on both state and national politics. The immigration legislation pending in Congress is a fairly good case study.

Although a rough consensus seems to have formed around immigration reform and the U.S. Senate passed immigration legislation by a healthy and bipartisan 68-32 vote, the bill has stalled in the U.S. House. This seems contrary to the post-2012 election narrative that Republicans are reevaluating their Hispanic outreach efforts, considering Hispanic voters tend to support comprehensive immigration reform. But it makes perfect sense once you consider U.S. House members’ narrow constituency.

After the 2010 midterm elections, Republicans swept into power in state capitols all over the country — just in time for redistricting. House Republicans’ seats are safe. Unlike U.S. Senate and presidential candidates, House Republicans do not have to worry at all about swaying Hispanic voters. Their districts have been specifically designed in a way to ensure they win the general election.

Instead, House Republicans have to worry about other Republicans challenging them in primary elections. As a result, they have to tack harder to the right to avoid offending their base voters and to fend off any primary challengers. That means opposing the immigration reform bill, which is generally unpopular with conservatives. This is not to say passing the bill is impossible, only that it is made much more difficult due to the perverse incentives created via redistricting.

And perhaps that is the hook that journalists need to raise awareness about and put a human face on redistricting — by connecting redistricting to other issues, such as the 11 million undocumented immigrants living in America. At that point, it becomes less about lines on a map and more about the very real impact redistricting has on American families and communities.

FURTHER READING

2013 Legislative Preview Issue Brief: Elections.” Gaudini, Michael; Proft, Lena; & Rocha, J.J. Center for Politics and Governance.

Redistricting Texas: A Primer.” Gaudini, Michael.

The War on Democracy: Gerrymandering in Pennsylvania.” Gaudini, Michael.

Think Off-Year Elections are Unimportant? Think Again.” Gaudini, Michael. Narberth-Bala Cynwyd Patch.

Reforming Redistricting.” Gaudini, Michael. Baines Report.

Republicans Win Fewer Votes, but More Seats than Democrats.” CQ Voting and Elections Collection.

Immigration Reform: Clearing the First Hurdle.” Economist.

What You Should Know About Redistricting in PA,” Gaudini, Michael. Diniverse Major.

Corbett-Pileggi Election Plan Bad For Democracy,” Gaudini, Michael. Main Line Times.

What Would Have Happened in 2012 Under Gov. Corbett’s Election Plan?” Gaudini, Michael. Diniverse Major.

 

The Pileggi Electoral College Plan and 1960

In 1962, after the successive failures of both his presidential and gubernatorial campaigns, a weary Richard Nixon bid the press goodbye:

But as I leave you, I want you to know: just think how much you’re going to be missing. You don’t have Nixon to kick around anymore.

Of course, if Pennsylvania Senate Majority Leader Dominic Pileggi had his way, Nixon might not have spoken those famous words. He would not have had to: if Senator Pileggi had been in charge, Nixon might have beaten John F. Kennedy and become president in 1960.

I am referring, of course, to Senator Pileggi’s ill-conceived Electoral College plan (next session’s version, last session’s plan was defeated). The idea is simple: divide all but two of a state’ Electoral College votes up and award them to the candidates according to the percentage of the popular vote that they won. The candidate that wins the state then gets the extra two votes.

Take the 2012 election, for instance. President Barack Obama won about 52 percent of the popular vote to Governor Mitt Romney’s 47 percent. This gives President Obama 12 electoral votes (10 electoral votes for the popular vote, plus 2 more for winning state-wide).

This would not have changed the outcome of the 2012 election. Indeed, changing Pennsylvania alone might not have altered the outcome of most American elections. But it would have had an effect. For instance, in 2000, President George W. Bush’s margin of victory would have been larger, even though he still would have lost the popular vote.

But to really demonstrate how Pileggi’s system would work, imagine that his plan was in effect in all 50 states. Under this scenario, John F. Kennedy stands a good chance of beating Nixon in the popular vote, but losing to him in the Electoral College.

According to my calculations, the Electoral College votes come in like this:

  • 264 for Kennedy
  • 267 for Nixon
  • 6 Unpledged Electors

Those unpledged electors would have come from the largely Democratic Louisiana and Mississippi. But these states were part of the Southern, conservative wing of the Democratic Party — a wing that was suspicious of Kennedy and that Nixon would successfully court years later. It only would have taken 3 of those 6 to make Nixon president.

Can we say with absolute certainty that Kennedy would have absolutely lost in 1960? No. But it is surely a possibility. And a reason to be wary of any claims that Pileggi’s proposal is somehow fairer than the current system.

FURTHER READING

1960 Presidential Election Results: Pileggi Plan (Excel), Diniverse Major Blog.

Co-Sponsorship Memo, Dominic Pileggi.

Pileggi to reintroduce plan to change Pennsylvania electoral-vote system,” Philadelphia Inquirer.

Corbett-Pileggi plan bad for democracy,” Michael J. Gaudini (Main Line Times). *(This article refers to last session’s Electoral College plan)

What Would Have Happened in 2012 Under Gov. Corbett’s Election Plan?

Last session, Governor Tom Corbett and Pennsylvania Senate Majority Leader Dominic Pileggi unveiled a plan to change how Pennsylvania votes for president. Now that the 2012 election has actually been held, Pennsylvanians can see for themselves how that system would have impacted their votes.

But first, a bit of context. Americans do not vote for president directly. Instead, they vote through the Electoral College. In the Electoral College system, each state gets a number of electoral votes for president equal to their representation in Congress. Pennsylvania has 18 seats in the U.S. House of Representatives and 2 in the U.S. Senate, so therefore it gets 20 electoral votes.

States can choose to decide how they distribute those votes, but most states give all of their electoral votes to the presidential candidate that wins the statewide election. And, for most of American history, that has worked. Four times in the past, however, president have lost the popular vote but won the presidency: John Quincy Adams, Rutherford B. Hayes, Benjamin Harrison, and George W. Bush.

The other key concept to keep in mind here is redistricting. Redistricting is the process by which legislators redraw political boundaries to account for population shifts. After all, people move, are born, and die every day. In order to make sure that elected officials represent about the same number of people, legislators redistrict their state and Congressional seats every 10 years using U.S. Census data. Without this, one official could end up representing several times as many people as another — even though they both only get one vote in Congress.

States redistrict differently. In Pennsylvania, Congressional redistricting is passed like any other bill. The General Assembly writes it and passes it, and the governor signs it. (There is a different system for General Assembly redistricting, but it is not relevant to this discussion.) There are also few prohibitions on how legislators can choose to redraw the political maps. Legislators cannot discriminate against voters based on race, but beyond that they generally have carte blanche.

This means that legislators can — and do — split up blocs of voters to help their party. If one area generally votes for Party X, legislators from Party Y can simply split up that area into numerous districts that each have a Party Y majority. Thus, Party Y maintains control by watering down Party X’s power — a process known as ‘gerrymandering.’

All of this means that whoever controls the General Assembly and the governorship essentially controls the political landscape of Pennsylvania. For the past few redistrictings, that has been the Republican Party. And so, they have drawn Congressional maps that benefit the Republican Party.

Here’s where Governor Corbett and Senator Pileggi’s plan comes in. It would have split Pennsylvania’s electoral votes by giving them to presidential candidates according to which Congressional districts they win. The candidate to win the entire state then gets an additional 2 electoral votes, to make up the difference between electoral votes and Congressional districts. Of course, the Republican Party is drawing those same Congressional districts that they want to use to distribute electoral votes.

So, how would Pennsylvania have fared if this plan was in place for the 2012 election? Well, President Obama won the Pennsylvania popular vote about 52% – 47%. Under the current system, this means Obama got 20 electoral votes. Under Governor Corbett and Senator Pileggi’s plan, however, this means Obama would have gotten 7 votes, while Governor Romney would have gotten 13 votes.

To put it another way: under Governor Corbett’s plan, Obama would have won the popular vote in Pennsylvania, but lost the electoral vote. Fortunately for President Obama, this would not have changed the outcome of the 2012 election. Other presidents would not have been so lucky. Had the Corbett system been in place in 1960, for example, John F. Kennedy would never have become President of the United States.

Elections will always be partisan affairs; what they should not be is undemocratic.

FURTHER READING

Michael J. Gaudini, “Corbett-Pileggi election plan bad for democracy,” Main Line Times.

Michael J. Gaudini, “Gerrymandering undermines democracy in Pennsylvania,” Main Line Times.

Michael J. Gaudini, “Redistricting Texas 2012: A Primer,” Diniverse Major.

Michael J. Gaudini, “What You Should Know About Redistricting in PA,” Diniverse Major.

Pennsylvania 2012 Election Results, CBS News.

 

I Voted For President! Now What?

Americans just do not like to vote.

For all of the talk of American democracy and the importance of the ballot, a strikingly small number of eligible Americans show up at the polls each November. Presidential elections, of course, see the largest level of turnout as a percentage of the voting age population. But for many Americans, that is it. The only time they see the inside of a voting booth is in a year that is divisible by four.

Take Pennsylvania, for example. In 2008, when Barack Obama was elected president, about 64 percent of eligible Pennsylvanians showed up at the polls. That was a couple points above the nationwide turnout of about 62 percent.

Just two years later, those numbers were down to 42 percent for Pennsylvania and 41 percent for the United States. That election, significantly, decided which party would control not only the House of Representatives, but numerous state legislatures and governor’s seats. Last year, turnout in Pennsylvania dropped even lower, to 32 percent.

The Keystone State is no outlier; most states see similarly dismal figures. Why, then, is voter turnout so much lower in midterm and off-year elections? To simplify: the president. Or, rather, the absence of a presidential candidate on the ballot. The president is the only official elected nationwide in the United States. Campaigns for the office are fought over high-stakes national and global issues. The media cover the proceedings extensively.

And the perception that there will be relatively high voter participation, possibly reinforced by friendly conversation and media coverage, could have the effect of turning out more voters simply due to social pressure. That is, people go to the polls because they do not want to be the person caught not voting.*

All of this can make presidential elections seem more relevant than off-year or midterm elections. But these latter elections — which generally feature many state and local positions — often have a direct impact on voters’ everyday lives. State and local governments are the ‘boots on the ground.’ They are responsible for keeping your neighborhood safe, paving your streets, picking up your trash, educating your children, providing for poor, zoning your community, and countless other services that affect your daily life. As Hurricane Sandy has recently reminded many Americans, state and local governments also prepare for and respond to natural disasters.

Not only that, but these elections also have far-reaching political ramifications. I wrote about just such a situation in a 2011 election op-ed:

[I]n 2009, only 21 percent of registered Pennsylvanians cast their ballots. The majority of those select few chose Republican candidate Joan Orie Melvin as the next justice of the PA Supreme Court, solidifying a 4-3 Republican majority on the bench.

 

This year, as in the past, the Supreme Court was called upon to choose the tie-breaking member of the commission that redraws the legislative districts in the state every decade. The resulting map was a patchwork of gerrymandering and political protection submitted on a party-line vote in the Republicans’ favor. By carefully designating which group of voters elects which representative, this map will likely dictate the outcome of Pennsylvania’s elections for years.

And it had the potential to dictate the 2012 presidential election, as well. That year, Pennsylvania Republicans (swept into office in a midterm election) introduced a bill that would have changed the way the Commonwealth distributes its electoral votes for president. Instead of following the “majority wins” system that nearly all other states use, this plan would have split its votes according to Congressional districts that the Republicans themselves drew. To put that into perspective, had this system been in place in 1960, Richard Nixon would have bested John F. Kennedy for the presidency.

Midterm and off-year elections can have huge ramifications. Keep that in mind for 2013, and beyond.

FOOTNOTES

*As an aside, Pennsylvania actually has a “Voter Hall of Fame,” where it recognizes those citizens who have cast their ballots every November for 50 consecutive years or more. If you have not gotten started on that yet, now might be a good time.

FURTHER READING

Michael J. Gaudini, “Corbett-Pileggi election plan bad for democracy,” Main Line Times.

Michael J. Gaudini, “‘Like’ the Vote,” Diniverse Major.

Michael J. Gaudini, “Think Off-Year Elections are Unimportant? Think Again,” Narberth-Bala Cynwyd Patch.

United States Election Project: Voter Turnout,” George Mason University.

Voter Hall of Fame,” Pennsylvania Department of State.

‘Like’ the Vote

America had an electoral fraud problem. Voter intimidation was pervasive. Bribery, too, was common. Laws against both were regularly ignored. What Americans needed most was a secret ballot.

Today, many people may take for granted the fact that they are able to cast their ballots in secret, but Americans that lived up until the late 1800s had no such illusions.

“Confidence was shaken in a voting system which made known the contents of every man’s ballot,” declared an 1892 essay on a new Pennsylvania law that established, for the first time in the state’s history, a secret ballot.

The new system, known as the “Australian system” after the country in which it was first implemented in 1856, ensured secrecy and fairness in several key ways. It stipulated that all ballots must be the exact same. It ordered the names of all legally nominated candidates be printed on the ballots. And it required voters to mark their preferences in secret.

The laws combated intimidation and bribery by making it difficult to verify how a person had actually voted. But the laws, which had spread to nearly every state by 1892, had another, unintended side effect, as well.

Voter turnout in the mid to late 1800s had been fairly high, around 70 to 80 percent of the voting age population for presidential elections. In the years after the spread of the secret ballot, that percentage steadily tumbled, finally settling around about 50 to 60 percent.

What happened?

Well, the late 1800s were a period of rapid change in America. Industrialization was quickly changing the country. Immigration increased tremendously and the population exploded, with workers flocking to the nation’s cities. At the same time, reformers focused on “good government” laws, like civil service reform, and attacked political ‘bosses’ and their machines.

All of these societal changes likely had an effect on voter turnout. But so too did the secret ballot.

Voting has long confounded economists, as the act of voting seems to be inherently irrational. The gains — one lousy vote in an election decided by hundreds of thousands — seem small compared to the time and effort spent waiting in line at the polling place.

True, there is also the satisfaction of performing a civic duty, but there is also another important component to why people vote: social pressure. Simply put, people know they are “supposed to vote,” and do not want to be caught otherwise.

A 2008 study of Swiss voter turnout after the adoption of optional postal voting demonstrated this. Postal voting, in which citizens can mail in their ballots, is meant to reduce the costs of voting and increase turnout. Yet in small Swiss communities — the types of places where one might expect voters are more likely to know each other — turnout actually went down. Postal ballots, it seems, may have eliminated the social pressure to be seen at the polls because, well, maybe that person mailed in their ballot.

The opposite also appears to be true. In 2006, researchers sent out several kinds of mailers to Michigan citizens, one of which  promised to publish whether they and their neighbors voted in the next election. They found that those people who thought their voter turnout information would be publicized were more likely to vote.

Which brings us to Facebook. If social pressures impact voter turnout, then it would make sense that social media affect it as well. And, in fact, this is exactly what researchers studying the 2010 election reported. On Election Day, Facebook provided an “I Voted” button at the top of users’ news feeds for them to show they had cast their ballots. Some users were shown the pictures of friends who had voted; others were not. By comparing friend data with voter rolls, researchers determined that the first group were more likely to vote in that election.

So go ahead and tweet your followers or update your status this Election Day to let everyone know you voted. You never know who might be watching.

–FURTHER READING–

Charles Binney, “American Secret Ballot Decisions,” American Law Register and Review.

Charles Binney, “The Merits and Defects of the Pennsylvania Ballot Law of 1891.”

Robert Bond, et al, “A 61-million-person experiment in social influence and political mobilization,” Nature.

Stephen Dubner and Steven Levitt, “Why Vote?New York Times.

Patricia Funk, “Social Incentives and Voter Turnout: Evidence from the Swiss Mail Ballot System.”

Michael J. Gaudini, “Election-time reflections on the irrational voter,” Main Line Times.

Alan Gerber, et al, “Social Pressure and Voter Turnout: Evidence from a Large-Scale Field Experiment,” American Political Science Review.

John Markoff, “Social Networks Can Affect Voter Turnout, Study Says,” New York Times.

Voter Turnout in Presidential Elections: 1828-2008,” The American Presidency Project.

 

Church, State, and Contraceptives

Philadelphia Archbishop Charles Chaput recently described the Obama Administration’s move to ensure access to birth control for women as both “dangerous” and “unprecedented.” Fortunately, neither of these charges is true.

The ruling in question requires employers to offer insurance plans that cover the cost of contraceptives. Such laws already exist in 28 states, and have been upheld by state courts. It would appear that there is a very clear precedent for the “unprecedented.” These states’ experiences also reveal that the fear of Catholic-affiliated universities and hospitals suddenly dropping employee health coverage in order to avoid providing contraceptives is unfounded.

Archbishop Chaput also argues that this decision undermines the Constitution by forcing Catholics to “violate our consciences.” But such action is not necessarily unconstitutional. After all, Catholic taxpayer dollars continue to fund the death penalty, an act that likewise violates the Catholic conscience, according to the Vatican. Yet the death penalty is undeniably constitutional.

Furthermore, the archdiocese does not object when the terms involve violating other people’s consciences. It has not come out against the White House Office of Faith-Based and Neighborhood Partnerships, despite the fact that many Americans feel it violates the Constitutional protections of the Establishment Clause. And just last fall, the Pittsburgh Archdiocese sought to use tuition assistance as leverage to convince parents to lobby the state legislature in favor of a school voucher bill. They eagerly supported this bill, ignoring that it explicitly violates Article 3, Section 15 of the Pennsylvania Constitution by providing funds for religious schools.

Also, one should keep in mind that the Obama Administration’s decision does not require any woman to violate her conscience. It does not force anyone to take contraceptives. Rather, it simply makes them more accessible by offering to cover the cost. Contraceptives, it should be noted, is one of the most effective ways to reduce the abortion rate because it addresses a key underlying cause of abortions: unintended pregnancies. It also has additional health benefits, such as reducing the risk of cancer, and is also widely accepted by Catholic Americans. Almost all sexually active Catholic American women use contraceptives, and a solid 58 percent of Catholics Americans believe health insurance should cover contraception.

Finally, it is important to remember that churches, with a specifically religious mission, are exempt from this mandate. The Catholic-affiliated institutions that are not exempt have secular aims, such as health care or education. That they employ and serve people of all different faiths underlines this fact.

With all this in mind, one can probably think of many ways to describe the Obama Administration’s recent ruling on contraceptive coverage – but “dangerous” and “unprecedented” are not two of them.


Governor Corbett Wrong on Food Stamps

In Miguel de Cervantes’ classic novel, “Don Quixote,” the titular character rides off into battle against several windmills he believes to be giant beasts. His hapless sidekick Sancho Panza watches helplessly as the crusader launches his ferocious assault on imagined monsters.

Similar images come to mind when discussing Governor Corbett’s new policy regarding the Supplemental Nutrition Assistance Program (SNAP), more commonly known as food stamps. The Corbett Administration recently announced that it would bar people under 60 with more than $2,000 in savings or other assets (home, retirement benefits, and one car not included) from collecting food stamps. A higher limit would be set for seniors. This was all done under the guise of clamping down on fraud.

Yet a closer examination reveals these vague claims of fraud to be more akin to Quixote’s imaginary monsters than to any real threat to taxpayers. A Department of Agriculture report on how well the states administered their food stamps program shows that no fraud claims were established in 2010. In fact, the costs of agency errors far exceeded that of non-existent fraud, raising the question of whether an asset test could have unforeseen costs. It is widely accepted – except, of course, by the Corbett Administration – that the additional training, paperwork and document verification accompanying this policy change will mean higher administrative costs. An increase in agency errors resulting from the added bureaucracy could have a similar effect.

But the cost is not only monetary. Food stamp usage has increased as a result of the Great Recession and its aftermath, which dislocated workers and wreaked havoc on families’ finances. Yet putting a limit on the amount of savings and assets one can hold punishes people that choose to save for the future, encouraging them instead to deplete their reserves.

The Corbett Administration claims this will stop people from taking advantage of the system. But food stamps are already limited to those with low incomes, and food stamp payments are low enough only to help people, not to provide for them entirely. Pennsylvania ranks in the bottom tenth of the nation as far as average state food stamp payment amounts go – below even Texas. The average monthly benefit for a Pennsylvania household ($262.61 in 2010) would only go so far in covering that average household’s grocery bill. The Department of Agriculture’s estimates that monthly food costs for a family of four range from around $550 to $800 per month, depending on how old the children are. And those estimates are for the spending plans it labels “thrifty” and “low-cost.”

Losing such aid would hurt not only the recipients, but businesses and the economy as well. Food stamps help prop up demand, preserving jobs in grocery stores and the trucking and warehouse services they employ. The spending done by workers in those preserved jobs, in turn, ripples through the economy. Moreover, food stamps are the most effective form of economic stimulus, since they are given to cash-strapped individuals who usually spend them immediately. A Moody’s Analytics study found that food stamps generated $1.73 for every dollar spent.

So one could be excused for feeling a bit like Sancho Panza as he watches his leader gallop off full-speed at a windmill. Perhaps Quixote truly believes in the imaginary beasts he seeks to slay, or perhaps he has some inkling of the absurdity of his quest. No matter – the result is the same.


The Ron Paul Presidency You Will Never See

What do the following have in common?

  • Limits on the amount of money corporations can spend on political candidates
  • Government regulations and testing to make sure children’s toys are not contaminated with lead
  • Environmental Protection Agency standards ensuring clean water
  • Laws protecting workers against sexual harassment in the workplace
  • Laws protecting whistleblowing offshore oil workers from retaliatory firing
  • Public schools

The answer? These are all things Ron Paul opposes.

Before I go any further, let me make one thing clear: I respect Ron Paul personally. I think it is wonderful that he has remained true to his principles, and not conveniently changed his views for political gain. I admire his ability to unflinchingly take unpopular stands and break rank with his nominal party (I say “nominal” because although Paul is technically a Republican, it would be more accurate to describe him as a Libertarian). I like that he has brought obscure economic ideas into the public spotlight for debate. And, not for nothing, he also seems to me to be a genuinely honest guy.

So for that, I respect him. Of course, I also think he is generally unelectable and would make an awful president. This is the point at which I expect some people will stop reading and immediately begin pondering ways to decry this post as a vast conspiracy of big business, big government, and the media. But before that happens, let me just ask that this post be judged on its accuracy, rather than any emotional attachments to Paul’s candidacy.

Bizarrely, some Ron Paul supporters point to the fact that Paul was elected to Congress as evidence of his electability, regardless of the fact that he represents a district of only 651,619 Texans. To put that into perspective, that is about 0.2 percent of the United States population.

A more common claim is that his second and third place finishes in New Hampshire and Iowa, respectively, support his electability. Of course, Rick Santorum finished second (or first, perhaps) in Iowa, but I have yet to hear someone tell me with a straight face that they think Santorum is electable, largely for the same reason that I think Ron Paul is unelectable: once the public takes Paul’s views to their logical conclusions, they will shy away.

Perhaps the Santorum comparison is unfair. After all, Rick Santorum’s views are extreme and out of touch with public opinion. Banning abortion under any and all circumstances? Bombing Iran? That’s crazy talk. Any Paul supporter will tell you that he wants to pursue commonsense reforms, like rolling back our overreaching military and cutting a bloated federal government.

Things start to break down when the discussion goes beyond these generalities into specifics. Paul’s libertarian utopianism envisions a country in which private industry self-regulates itself at almost every turn. Should the government ensure that citizens have clean drinking water? Or that every child has access to a public education? Most Americans think so, even if they advocate some sort of reform of the current system. But Paul eschews such things. This is an ideology based not in small, efficient government — but, rather, in no government (or, as close to no government as you can get).

The problem is that following his positions to their conclusions produce grim results in the real world. Unemployment benefits would end for thousands of people, causing a large contraction in demand in the economy, helping derail a fragile economy and causing greater hardship for the unemployed. Failure to raise the debt ceiling (an action against which Paul voted) would have caused enormous turmoil, and the first ever American default, exacerbating, rather than alleviating, the current economic situation. As it happened, the near-failure caused the first ever downgrade in America’s credit rating.

Many Americans agree that the Pentagon should share the sacrifice of spending cuts, but Paul’s advocacy of large-scale shuttering of overseas military bases is dangerously naive. Despite the harsh lesson America has learned about its own limitations over the past decade, it remains the global hegemon, and a stabilizing force. An Economist article notes the possible unintended consequences of military cutbacks in Europe:

The thinking behind the “rebalancing” looks flawed for several reasons. The first is that far from being on oasis of stability, EUCOM’s 51-country region covers some pretty flammable trouble spots, among them Georgia’s border with Russia, Kosovo’s border with Serbia and Turkey’s border with Iraq and Syria. Israel is also within EUCOM. There are less conventional security threats too, from terrorists moving between safe havens to cyber attacks.

The second is that—quite apart from possible flashpoints in its own region—Europe is closer to many of the fights that American forces may be committed to in the future than bases in the United States.

The third is that the new strategy places great emphasis on military-to-military co-operation with other countries. The best way of enhancing that is for American soldiers to train with their counterparts from other nations. General Hertling says that after training, the command’s second priority is to enter into effective partnerships with the many different countries in its region. “By sharing ideas, tactics and procedures,” he says, “you build trust with partners.” During the final readiness exercise before deployment to Afghanistan, the 172nd trained with troops from nine other countries, the same ones, notes the general, whom they would later find themselves fighting alongside.

And that article is talking about President Obama’s comparatively modest rebalancing of American forces. Paul advocates a much larger drawdown, which would inevitably gut NATO, and further weaken our military capacity and lessen global stability.

The thing is, people can get behind the generalities of his platform. They (rightly) do not think we should be overreaching in two simultaneous ground wars. But, more than that, I think people can get behind the Ron Paul persona. Americans love to identify with the underdog and the straight-talker, and Paul has both in spades. His unpolished speaking style has a genuine, endearing feel to it that many Americans take to heart. He’s that kindly old gentleman that could well be your own uncle (albeit, your slightly crazy old uncle).

And, indeed, polls of Republican primary voters show Paul ranks highly in questions about his personal character and human interactions. Voters say he stands up for what he believes in and is honest, and that counts for a something when faith in government (and Congress in particular) has fallen to new lows. Indeed, right now he is polling fairly well among independents.

But throw him in the general election and that will all change. His views will not only be revealed as outside the mainstream, but will also leave him open to attacks from both the right (on defense and social issues) and the left (on economic and labor issues). President Obama’s current edge in the polls when hypothetically matched against Paul would quickly expand.

Yet, for a moment, let us imagine a world in which Ron Paul wins the nomination and the presidency. What then? Well, as president, he would have little control over enacting his particular agenda and would face a Congress that has absolutely no interest in moving his legislation. The right would bristle against his demobilization, while the left would staunchly oppose gutting entitlements like Social Security and Medicare. His average man persona would be of no help in dealing with Washington’s power brokers.

You thought the gridlock of the past few years has been bad? A Paul presidency would be a million times worse.

Economic liberalization and free trade agreements, which one might hope for from a libertarian candidate, would languish. This seems counter-intuitive, considering Paul’s ideology, but his voting record in Congress (against free trade agreements) shows that the strictures of his views lead him to the belief that free trade results from less government intervention, not from agreements with foreign nations. While wonderful in theory, this, of course, is utterly unrealistic.

Stymied by Congress and his own beliefs, Paul’s biggest effect would be through his appointive and veto powers, the latter of which he would undoubtedly use with relish.  Congress, not up to the task of overriding his vetoes, would sit by helplessly as little to nothing becomes law. The de-stimulative effect of vetoed federal spending would shrink the economy (sorry, no more unemployment benefits for you, never mind that your job search keeps turning up nothing), possibly even pulling it into a double-dip recession, like the austerity-laden Europeans. Courts and federal agencies would be filled with people that believe the job they are being paid to do should not exist in the first place, and that the federal government has little role in anything at all. So, in sum, little would get done, but the effects would be long-ranging.

I appreciate Ron Paul’s character, his dedication, and his role in bringing alternative economic ideas to the public debate (no matter how incorrect I believe that they are). All of that makes him a man that I would love to sit down and have a nice, pleasant dinner with. What it does not make him is a good president.


Balancing Budgets: The Government is Nothing Like a Family

One side effect of the constant bickering over federal debt-related issues is a proliferation of snappy, yet ultimately meaningless, slogans and phrases. “If my family has to balance my budget, the federal government should too” comes to mind. The phrase is short, simple, and scores quick political points by appealing to listeners’ “common sense.” After all, why should the government escape belt-tightening when all of its citizens are forced to make difficult choices with their household budgets?

Yet, as one quickly learns when studying economics, simplistic “common sense” is often wrong. And, given today’s economic circumstances, the family/government budget comparison is dangerously wrong. On one level, it should be obvious that the federal government is really nothing at all like a family, and that this is a comparison of apples and oranges. Imagine trying to fight World War II with a balanced budget. Mobilization and the war effort took high debts from the ongoing Depression and sent gross federal debt skyrocketing past 100 percent of GDP. Top marginal tax rates, above 90 percent, failed to balance the budget — only booming economic growth in the post-war period helped to achieve that.

But put aside the difficulties of comparing two extremely different things for a moment, and focus only on the economic issue at the heart of the comparison: should the federal government be forced to balance its budget during a recession? In a word, no. The explanation is a bit more complicated.

Let’s start off with a quick refresher on Keynesian economics. In a nutshell, John Maynard Keynes, whose book The General Theory of Employment, Interest and Money shaped modern economic thinking, would say that a government should run a surplus during booms and a deficit during busts. That is, it should take in more money than it spends when times are good (raising taxes and cutting spending and the debt), and spend more money than it takes in when the economy tanks (cutting taxes and spending more).

Keynes viewed proper government policy as counter-cyclical, trying to smooth out the economic cycle by putting the breaks on an over-heated economy and speeding up a stagnant one. An economy is powered, essentially, by spending. People use their paychecks to buy goods and services. The money charged for those goods and services help pay for another person’s paycheck. The cycle continues. Savings, too, are channeled into spending, through loans and investments. This further grows the economy as businesses expand and productivity and technological gains are made.

But, during a recession, spending falls precipitously. Businesses lay off workers, and households cut their spending, blowing a huge hole in the economy. If the government were to likewise suddenly balance its budget, it would amplify this damage.

There are two ways a government can balance its budget in any one year:

  1. Cut spending
  2. Raise taxes

Or it can pursue some combination of the two. Either way, these policies would have dragged the economy down deeper into recession, perhaps even into a full-fledged depression, had they been implemented back in 2008, and could derail the economy today.

Consider what would happen if the government cut spending immediately. It will need to lay off government workers (meaning they will have less to spend), halt contracts and projects that help employ private sector workers (meaning they will have less to spend), and cut back on programs that encourage or sustain spending. Social safety nets are a good example — food stamps and unemployment benefits are very stimulative because beneficiaries usually spend the money soon after it is received, generating economic activity.

Tax increases to address budget issues have a similar effect, by taking money out of citizens’ pockets instead of encouraging them to invest and spend to get the economy started again.

The result is that trying to balance a budget during a recession or a fragile recovery can actually lead to greater debt and deficits. This is because the state of the economy dictates how much a government will take in in taxes. When the economy is tanking, the government will take in less money in taxes because of falling incomes. When you have a lower income (due to being laid off, having hours cut, having pay cut, etc…) the amount of money you pay in taxes falls.

If the government tries to deal with this fall in revenue levels by raising taxes and cutting spending, it will send the economy down even further, blowing a new hole in the economy, necessitating further cuts and tax increases, etc…

Tax increases and spending cuts are needed as solutions to address debt and deficit issues once the economy is growing steadily again (and then, cuts should usually outnumber tax increases by a 3:1 or 2:1 ratio), but such austerity during the crisis could drive an economy deeper into a recession or derail a fragile recovery.

We only need to look as far as the Great Depression for evidence of this. The idea that governments should always balance their budgets, and that doing so would spur investment and recovery, was widespread before and during that period. Both President Hoover and President Roosevelt raised taxes early in the Great Depression, hampering economic recovery. Increased spending by President Roosevelt (and, more importantly, the stabilization of the nation’s banks and removing the United States from the gold standard) helped the nation begin a fragile recovery.

However, insistence that America balance its budget led to cuts in spending and tax increases that derailed the economy in 1937, plunging it back into recession. This is especially relevant for Americans today, as we debate deficit reduction.

The best policy options for dealing with the current budgetary outlook would be to sustain short-term tax cuts and well-placed spending increases (like on infrastructure projects and extending unemployment benefits), while also laying out a long-term plan addressing budgetary issues (including future tax increases and spending cuts, but mainly restructuring Social Security, Medicare, and Medicaid to make them more sustainable).

The riskiest and worst policy the government could pursue would be balancing its budget “like a family.”