Morning Must Reads: Government Spending, Top Incomes and adultBasic

Paul Krugman this morning caps off a series of blog posts over the last week with a column comparing government spending in the recovery following the deep 1981 recession and government spending in the recovery following the 2007 recession. The bottom line: the employment situation now would have been much better if the federal government had done more to provide aid to state and local governments.

One way to dramatize just how severe our de facto austerity has been is to compare government employment and spending during the Obama-era economic expansion, which began in June 2009, with their tracks during the Reagan-era expansion, which began in November 1982.

Start with government employment (which is mainly at the state and local level, with about half the jobs in education). By this stage in the Reagan recovery, government employment had risen by 3.1 percent; this time around, it’s down by 2.7 percent.

Next, look at government purchases of goods and services (as distinct from transfers to individuals, like unemployment benefits). Adjusted for inflation, by this stage of the Reagan recovery, such purchases had risen by 11.6 percent; this time, they’re down by 2.6 percent.

And the gap persists even when you do include transfers, some of which have stayed high precisely because unemployment is still so high. Adjusted for inflation, Reagan-era spending rose 10.2 percent in the first 10 quarters of recovery, Obama-era spending only 2.6 percent.

Why did government spending rise so much under Reagan, with his small-government rhetoric, while shrinking under the president so many Republicans insist is a secret socialist? In Reagan’s case, it’s partly about the arms race, but mainly about state and local governments doing what they are supposed to do: educate a growing population of children, invest in infrastructure for a growing economy.

Economist Emmanuel Saez has updated his time series (PDF) on top incomes with new data for 2010, which has just been released by the IRS. Mike Konczal walks you through the new data. The most shocking figure in the new data is the following from Saez:

The top 1% captured 93% of the income gains in the first year of recovery.

The Delaware County Daily Times this morning explores the impact of the end of Pennsylvania's adultBasic program a little over a year ago.

One year after 42,000 working Pennsylvanians lost adultBasic, a state program designed to provide low-cost health insurance for low-income residents ages 19 through 64, many are still struggling to get health care, according to health care access advocates.

“Unfortunately I have heard countless stories over the last year from people across the state unable to gain access to the care they need. It's been especially troubling for people with chronic conditions,” said Athena Ford, spokesperson for the Pennsylvania Health Access Network.

More than 1,700 Delaware County residents relied on adultBasic before the program ran out of money Feb. 28, 2011 and more than 17,400 Delaware County residents were on the waiting list for the low-cost health insurance.

The figure above comes from a new report by John Schmitt, Health-insurance Coverage for Low-wage Workers, 1979-2010 and Beyond (PDF):

The last three decades have seen substantial erosion in employer-provided coverage across workers at all pay levels. Low-wage workers saw the biggest decline in own-employer coverage – about 17.0 percentage points between 1979 and 2010. But, coverage losses were almost as large for workers in the second quintile (down 13.8 percentage points) and the top quintile (down 13.3 percentage points).


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