Voices of the Near Poor

When the Census Bureau this month released a new measure of poverty, meant to better count disposable income, it began altering the portrait of national need.

The new method, called the Supplemental Poverty Measure, was designed to add in many of the things the old measure ignored, like the hundreds of billions the needy receive in food stamps and tax credits. At the same time, it subtracted the similarly large sums lost to taxes, medical care and work expenses.

One surprising difference with the new measure, outlined in an article today, was the 51 million people with incomes less than 50 percent above the poverty line. That category, sometimes called “near poor,” was 76 percent higher than the official account, which was published in September. (The portion of people under the poverty line, meanwhile, increased by just 5 percent in the new measure.)

About a fifth of the people who appear near poor in the new measure are lifted out of poverty by benefits the old measure ignores, like food stamps and tax credits. But more than half were pulled down into near poverty from higher income levels by taxes, medical costs and work expenses like child care and gas. Taken together with people under the poverty line, a full third of Americans – or about 100 million people – live in poverty or in the economically vulnerable area just above it.

In Washington and its suburbs, the near poor are people with incomes between $31,693 and $47,539 for a family of four with a mortgage. Reporters talked to people in the Washington area this week with incomes in this category. They spoke of the knife-edge quality of their lives, in which one unexpected bill could knock them off balance. Many owned the usual trappings of middle-class life – cars, houses, cellphones and air-conditioners. But payments on those possessions were juggled, often unsuccessfully, depending on the unpredictable tides of their incomes. None saw themselves as poor. Most saw themselves as part of the middle class. But they focused on how hard they had to struggle to remain there.

Here are some of their stories:

Debra Jeje earned about $31,000 last year as a secretary in an emergency room in a hospital in Washington. She struggles to pay her bills, which come to about $2,300 a month, including groceries. She sells Mary Kay make-up for extra income. Gas, health insurance premiums and taxes put Ms. Jeje just above poverty line.

“What stresses me out most is payday,” said Ms. Jeje, who is 50 and has one son living with her. “I don’t have any extra money left over. My salary is less than my bills.”

Her job, she said, pays too little.

“We’re on the front lines,” she said. “There’s stress and headaches and ups and downs in the emergency room. You really feel that you’re worth more.”

Bille Allison, a health care worker with two children, earns $39,000 a year drawing blood at a doctor’s office in Maryland. She qualified for the earned income tax credit last year, bringing her income to $42,000. But work expenses dragged her down. She pays $500 a month for day care for her 4-year-old daughter, $100 a month for bus and train fare to get to work, and $200 a month for health insurance – bringing her income down to about $32,000. Some months she is able to save enough for game tokens and a meal at Chuck E. Cheese for her daughter. Other months she can only afford to pay half her bills. She was turned away from the food stamps office because her income was too high.

“I tried everything, and it’s like, nope, you make too much,” said Ms. Allison, who is 42 and divorced. “They tell you you have to work to get help, but then you work, and you still can’t get help.”

Jennifer Bangura works at Georgetown University Hospital as a cashier. Together with her husband, a driver for a catering company, their family income is just under $50,000, enough to pay a mortgage of $800 on a house she purchased in 1992. But after taxes, medical costs and the gas to get to work, they slip into the category of near poor. Their situation has been made worse by a second mortgage, taken out several years ago to raise money for their daughter’s college tuition. The monthly payment shot up to $2,200, an amount she says is now untenable.

“It’s killing me,” said Ms. Bangura, who is 50 and originally from Jamaica. She said she has been making payments for years and that “to lose it now would tear me apart.”

Jessie Adams, a floor refinisher and his wife, a secretary, together earn about $49,000 – too much to qualify for the earned income tax credit and food stamps, but too little to live without worrying about finances. Taxes and monthly subway commuting costs bring them down into the area of near poor. They own electronics – two flat-screen TVs and an Xbox game console for their 10-year-old – but cannot afford a car or a down payment on a house. Mr. Adams has not taken his family out on a weekend for five months.

“It shouldn’t be like this,” he said. “Two people working full time in the house, we should be able to save, to take a vacation. But it ain’t like that. It just ain’t like that.”

Podcast: European Debt, Bank Fees and Beats Headphones

New governments have been installed in Italy and Greece and Greek debt restructuring is under way, but European credit markets remain shaky.

One cause may be the questions that are being raised about the status of credit default swaps that were bought as insurance in the event of a Greek default, Gretchen Morgenson says on the new Weekend Business podcast.

In her column in Sunday Business, she says that not all the holders of Greek bonds have agreed to take a “voluntary” discount, or haircut, on the debt. Some of them bought credit default swaps that, they believed, provided insurance in the event of a Greek default. If that insurance provides solid protection, then it may not be in their interest to agree to a reduction in the value of their bonds. But the usefulness of the credit default swaps isn’t entirely clear in this situation, adding another layer of difficulty to resolving the Greek crisis.

In a separate discussion, Richard Thaler, the behaviorial economist, says that while business executives realize that they shouldn’t allow their companies to become the butt of jokes on late-night talk shows, many of them don’t seem to know how to act on that principle. A case in point, he says, is the recent controversy over Bank of America’s decision to impose a fee for use of its debt cards — a fee that was later scrapped. In the Economic View column in Sunday Business, he writes that customers tend to be outraged when businesses appear to be “gouging” them. And people may get that impression when businesses begin to charge for services that had previously been free.

In another conversation on the podcast, David Gillen and Andrew Martin talk about the pricey Beats headphones being purveyed by Dr. Dre, the hip-hop artist, in a new business venture.

You can find specific segments of the podcast at these junctures: Gretchen Morgenson on European debt (27:05); news headlines (18:05); Beats headphones (14:32); Richard Thaler (7:25); the week ahead (1:49).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

The Sharp Increase in the Food Stamps Program

Casey B. Mulligan is an economics professor at the University of Chicago.

The poor economy is not the only reason that safety-net programs are spending more. The food stamp program is another example of a safety-net program that is significantly more costly than it was before the recession began.

Today’s Economist

Perspectives from expert contributors.

The Department of Agriculture’s food stamp program, now known as the Supplemental Nutrition Assistance Program, or SNAP, provides money to low-income households for the purpose of buying food, often in conjunction with cash assistance programs. Adjusting for inflation, the program spent more than twice as much in 2010 as it did in 2007, before the recession began.

Perspectives from expert contributors.

The Department of Agriculture found that the food-stamp spending increase “is likely attributable to the deterioration of the economy, expansions in SNAP eligibility, and continued outreach efforts.” Of particular relevance for the SNAP program is the fact that the poverty rate increased 18 percent, to 153 per thousand in 2010 from 130 per thousand Americans in 2007.

At least two eligibility expansions have occurred since the recession began: work requirements were lifted from April 1, 2009, through Sept. 30, 2010, and monthly income limits were 10 percent higher in the 2010 fiscal year than they were in the 2007 fiscal year, an increase about twice the rate of inflation over that period.

In addition, the American Recovery and Reinvestment Act increased maximum benefits by 13.6 percent, and the minimum benefit increased in October 2008. Increasingly, potential program participants have been given the opportunity to apply for benefits on the Internet.

The declining economy alone, under the previous rules, would have raised the spending on food stamps by 18 percent. But the revised provisions, enacted largely in response to the recession, are responsible for a greater share of the increase. The following table breaks down the program’s spending growth into three components: deterioration of the economy, relaxed eligibility rules and increased maximum benefits.

The top row of the table is actual program spending for 2007 and 2010, adjusting for inflation and population. The second row of the table estimates the program’s hypothetical spending growth with 2007 eligibility rules, by assuming that real spending per capita increased since 2007 only in proportion to increases in the poverty rate, plus the 13.6 percent benefit increase of the American Recovery and Reinvestment Act. The last row assumes that real spending per capita increased only with the poverty rate. Under either scenario, the hypothetical spending increases are significant but well less than half of the actual spending increases.

Over all, the table suggests that most growth in spending on SNAP is due to changes in eligibility rules and increases in payments per eligible person. The program’s spending would certainly have grown if benefit rules had remained as they were in 2007, but much less than it actually did. And those more generous provisions are now likely to be here to stay, even if the conditions that prompted them abate.

An Edge in Science Among the Foreign-Born

I’ve previously written about the wage advantage — as well as the simple likelihood of finding and holding onto a job — that comes with a bachelor’s degree in science, technology, engineering or math.

The study in that case concluded that many American technology and scientific companies are forced to recruit from abroad.

But they can also hire from the foreign-born population currently in the United States. According to a new Census report, a much higher proportion of foreign-born residents 25 or older with bachelor’s degrees earned their degrees in science, technology, engineering or math — the STEM fields — than native-born holders of bachelor’s degrees.

The Census report looked at a broader range of degrees than usually considered when defining STEM fields. Majors analyzed by the Census authors, Christine Gambino and Thomas Gryn, included computers, math, statistics; biology, agriculture and environmental science; physical and related sciences; psychology; social sciences; engineering; and multidisciplinary sciences.

Among the foreign-born bachelor’s degree holders, 46 percent had majored in a science or engineering field. That compares with 33 percent of native-born college graduates. One-third of all residents with a B.A. in engineering are foreign-born.

Of the 4.2 million foreign-born residents who have science- or engineering-related bachelor’s degrees, 57 percent came from Asia, while 18 percent came from Europe and 16 percent from Latin America. Immigrants from India produced the largest number of college graduates in science and engineering, followed by Chinese-born immigrants.

Like American-born women, foreign-born women are generally less likely to major in STEM fields. While 51 percent of foreign-born college graduates were women, women represented only 37 percent of those with science or engineering degrees.

Tackling Income Inequality

Laura D’Andrea Tyson is a professor at the Haas School of Business at the University of California, Berkeley, and served as chairwoman of the Council of Economic Advisers under President Clinton.

The Occupy Wall Street protesters have focused attention on rising income inequality in the United States, and they are right to do so.

Today’s Economist

Perspectives from expert contributors.

Income and wealth disparities have reached levels not seen in the United States since the Roaring Twenties. And the concentration of income and wealth contributed to the speculative excesses that brought on the 2008 financial crisis (see Robert Reich’s “Aftershock” and Raghuram Rajan’s “Fault Lines”).

Perspectives from expert contributors.

According to a recent report by the Congressional Budget Office, rising income inequality is a long-term trend that began in the late 1970s and strengthened during the last two decades. The report confirms the protesters’ belief that the rising gap between the income of the top 1 percent and the income of everyone else is a major factor behind escalating inequality.

In the last 20 years, inequality has been largely a story of a small elite – not just the top 1 percent, but the top 0.1 percent – pulling away from everyone else in every source of household income: labor income, capital income and business income.

The top 1 percent’s share of national income has also been rising in most other advanced industrial countries, but it is by far the largest and has grown the most in the United States (see Jacob Hacker and Paul Pierson’s “Winner-Take-All Politics”).

Why have incomes of those in the top 1 percent soared? Their occupations provide some clues. From 1979 to 2005, nonfinancial executives, managers and supervisors accounted for 31 percent of the top 1 percent, medical professionals for 16 percent, financial professionals for 14 percent and lawyers for 8 percent.

Together, executives, managers, supervisors and financial professionals accounted for 60 percent of the increase in the top 1 percent’s income, with a widening compensation differential between those in the financial sector and those in other sectors of the economy after 1990.

Superstar athletes, actors and musicians, often portrayed among the super-rich, accounted for about 3 percent of the top 1 percent from 1979 to 2005, far less than the less glamorous people (mostly men) who lead and advise America’s businesses.

Researchers have identified several reasons for the rapid growth in incomes for the occupations that make up most of the top 1 percent, including “winner take all” technical innovations that have changed the labor market for superstars in all fields; increases in business size and complexity; a growing premium for highly specialized skills; changes in the forms of executive compensation, including the rise of stock options and weaknesses in corporate governance; and the increasing size of the financial sector.

All of these factors have played a role, but there is no definitive evidence on their relative significance.

Growing inequality in labor compensation played a major role in increasing income inequality between the top 1 percent and the rest of the population from 1979 to 2007. Over the period, however, both the growing inequality in business income, including income from small firms, partnerships and S corporations, and in capital income in the form of dividends, interest and capital gains, as well as the rising share of these forms of income in household income, played a more significant role, especially after 2000.

According to the Congressional Budget Office, from 2002 to 2007 more than four-fifths of the increase in income inequality was the result of an increase in the share of household income from capital gains, with the remainder the result of an increase in other forms of capital income.

Capital and business income are much more unevenly distributed than labor income and have become more so over time. Capital gains income is the most unevenly distributed — and volatile — source of household income.

The top 0.1 percent earns about half of all capital gains, and such gains account for about 60 percent of the income of the top 400 taxpayers.

Large cuts in federal tax rates on capital and business income have been very beneficial to the top 1 percent over time. In 1978, a Democratic Congress and a Democratic president reduced the top tax rate on most long-term capital gains to 28 percent from about 35 percent. It was reduced again to 20 percent in 1981 and then raised back to 28 percent in 1987, where it remained for a decade.

While serving as President Clinton’s national economic adviser, I led a study by his economic team of the likely effects of reducing the rate. We concluded that a cut would decrease future tax revenue, would contribute to rising inequality and would not increase saving and investment as its advocates asserted. Despite these warnings, in 1997 the president agreed to cut the rate to 20 percent, as part of a budget compromise with the Republican Congress.

Then, with Democratic support, President Bush reduced the tax rate on capital gains and other forms of capital income to a record low of 15 percent in 2003. Under the “carried interest” provisions of United States tax law, this rate also applied to fees earned by hedge fund and private equity managers, a rapidly rising cohort within the top 1 percent.

As a result of these changes, along with President Bush’s across-the-board cuts in income tax rates, federal taxes as a share of household income fell for the top 1 percent. Over all, the Bush tax cuts were the largest — not only in dollar terms but also as a percentage of income — for high-income households and increased the concentration of after-tax income at the top. Far from curbing escalating inequality, the Bush tax cuts exacerbated the problem.

While the federal tax code is still progressive, its progressivity has eroded, with a significant percentage of the richest now paying a much lower tax rate than the merely rich and the middle class. (Warren E. Buffett pays a lower tax rate than his secretary because most of her income comes in the form of wages that are subject to both federal income tax and the payroll tax while most of his income comes in the form of capital gains and dividends that are taxed at 15 percent and that are not subject to the payroll tax.)

A credible plan to reduce the long-run deficit requires a significant increase in revenue. Polls indicate that the majority of Americans, like the Wall Street protesters, believe that higher taxes on the rich are warranted both to reduce the deficit and to contain mounting inequality. I agree.

Restoring the top income tax rates and capital gains and dividends tax rates to their levels under President Clinton, as President Obama has repeatedly proposed, would be useful first steps. Taxing some carried interest as ordinary income would make the tax system more efficient and curtail outsize compensation in the financial sector. Adding a progressive consumption tax would augment revenue while encouraging saving and discouraging spending on luxury goods, both by the very rich and by those down the income ladder struggling to keep up.

The majority of Americans, like the Wall Street protesters, also believe the corporate tax rate should be raised. I disagree.

For reasons I discussed in an earlier Economix post, I believe that this rate should be reduced – a position advocated by both President Obama and former President Clinton in his new book. Raising tax rates on capital gains and dividends to the levels under President Clinton would curb the growth of income for the top 1 percent and could finance a substantial cut in the corporate tax rate that would bolster wages and job opportunities for American workers.

United States of Hunger

CATHERINE RAMPELL

Dollars to doughnuts.

Casey Mulligan noted Wednesday on Economix that United States spending on food stamps had skyrocketed since the recession began. A new Census Bureau report provides a look at just how big the program has become. Last year, more than one in 10 families received food stamps, with some states having significantly higher participation rates. In Oregon, the share was nearly one in five.

Dollars to doughnuts.

Here’s a map showing what share of families in each state received these benefits to help them buy food:

In Oregon, 17.8 percent of families received food stamps, officially known as Supplemental Nutrition Assistance Program (SNAP) benefits, the highest rate in the nation. Oregon was followed by Tennessee (17 percent) and Michigan (16.9 percent).

The state with the lowest SNAP participation rate was Wyoming, with a rate of 6.2 percent. The next-lowest rates were in New Jersey (6.8 percent) and California (7.4 percent).

I must admit I’m a bit puzzled by some of these numbers. I would have expected California’s food stamp take-up rate, for example, to be much higher, since its unemployment rate is 11.9 percent, the state is broke, and so many cities there suffered from housing busts.

I did a quick scatterplot showing the relationship between median household income and food stamp take-up rates, and the relationship is relatively weak:

The relationship between unemployment rates and food stamp take-up rates was even weaker:

Of course, there are a lot of variables not at all reflected by unemployment and median income figures, such as inequality and state safety net programs.

All the Single (Old) Ladies

I sometimes hear women in New York lament that there are many more single gals than single guys around. To that I say: Just wait until you turn 90.

A new Census Bureau report finds that there were 457,155 men and 1,304,615 women over the age of 90 from 2006 to 2008. That’s almost three women for each man, not counting the younger singles they could pair with.

That works out to a lot of single female nonagenarians (and centenarians). Of men over 90, 42.9 percent are married. The share for their female counterparts is 6.3 percent.

Reader Feedback: Why American Migration Might Be Falling

CATHERINE RAMPELL

Dollars to doughnuts.

In response to my post Tuesday on the record low level of migration in the United States last year, an astute reader referred me to a recent paper in The Journal of Economic Perspectives on this subject.

Dollars to doughnuts.

The study — by Raven Molloy, Christopher L. Smith and Abigail Wozniak — notes that the drop in mobility has been going on since the 1980s, and so should not be attributed to the recent downturn. Based on statistical analysis, it also argues that the trend seems to be unrelated to “demographics, income, employment, labor force participation, or homeownership.” Americans are, however, still more likely to move than Europeans, for unknown reasons.

The authors are unsure why migration rates have been falling so steadily in the United States. They suggest a few possible theories, including:

Any other theories, readers?

American Migration Reaches Record Low

CATHERINE RAMPELL

Dollars to doughnuts.

The share of Americans who move their homes in a year has reached a record low, the Census Bureau reported today.

Dollars to doughnuts.

From spring 2010 to spring 2011, just 11.6 percent of the people moved residences, the lowest rate since the government began keeping track of migration in 1948. The difference between that rate and the 2009 rate of 12.5 percent was not statistically significant, but it was a far cry from its heights in the mid-20th century. From 1951-52, for example, 20.3 percent of Americans moved.

The record low moving rate was primarily driven by a drop in the share of people moving from one home to another within the same county.

Many economists are much more concerned, however, by the low share of Americans who are moving between counties and between states. Declines in this type of migration have been partly blamed for continued high levels of unemployment: stuck in underwater homes they cannot sell, many unemployed workers are unable to move to areas where there are more job opportunities.

Among the people who moved within the same county, 18.6 percent did so for job-related reasons; among those who moved between counties, 35.8 percent followed job opportunities.

Of the 6.7 million people who moved between states, the most common migrations were:

Many Americans have stayed put for their whole lives, regardless of economic ups and downs. As of 2010, 59 percent of Americans lived in the state where they were born. The state with the highest percentage of residents who were born there is Louisiana, at 78.8 percent, followed by Michigan (76.6 percent), Ohio (75.1 percent) and Pennsylvania (74 percent).

Nevada, by contrast, had the most outsiders, with less than a quarter (24.3 percent) of its residents born in the Silver State.

Here’s a map, provided by the Census Bureau, showing states by their share of native-born residents:

Prosecutions for Bank Fraud Fall Sharply

CATHERINE RAMPELL

Dollars to doughnuts.

Federal prosecutions for financial institution fraud have tumbled over the last decade, despite the recent troubles in the banking sector, according to a new analysis of Justice Department data by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University.

Dollars to doughnuts.

This category can refer to crimes committed both within and against banks. Defendants include bank executives who mislead regulators, mortgage brokers who falsify loan documents, and consumers who write bad checks. (Here are some recent cases of bank fraud prosecutions.)

During the first 11 months of the 2011 fiscal year, the federal government filed 1,251 new prosecutions for financial institution fraud. If that pace continues, TRAC projects a total of 1,365 prosecutions for the fiscal year. That’s less than half the total a decade ago.

The decline in these new cases stands in contrast to the government’s broader approach to federal criminal prosecutions. Federal prosecutions for other crimes have grown tremendously, with the number of total new prosecutions filed for all federal crimes nearly doubling over the last decade:

The Balanced Budget Amendment Delusion

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of the coming book “The Benefit and the Burden.”

This week the House of Representatives will take up a balanced budget amendment to the Constitution. An idea that has been kicking around for ages, it has never overcome the hurdle of needing a two-thirds approval vote in both houses of Congress. (After which it would not require the president’s signature but would need to be ratified by three-quarters of the states to take effect.)

Today’s Economist

Perspectives from expert contributors.

The concept of balancing the budget annually is a bad idea but not an unreasonable one. However, the idea of mandating a balanced budget through the Constitution is dreadful. And the proposal that Republican leaders plan to bring up is, frankly, nuts.

Perspectives from expert contributors.

The Founding Fathers took the necessity of balancing the federal budget to be self-evident – with no need to mandate it because economic circumstances severely constrained the government’s ability to spend more than taxes covered.

The memory of the hyperinflation of the War of Independence was fresh, and people were rightly concerned that deficits would lead to the printing of money to cover budgetary shortfalls, restarting inflation. Moreover, the domestic capital market was virtually nonexistent during the early years of the republic, and all Americans were wary of borrowing from abroad unless absolutely necessary.

Consequently, the budget was usually balanced for the nation’s first 150 years, except during wartime, and strenuous efforts were made to pay down the debt as soon as hostilities ended. This budgetary norm didn’t change until the 1930s, when economic stagnation and widespread deprivation made balancing the budget impossible. Also, the economic theories of John Maynard Keynes became popular and argued that large deficits would be necessary to restore growth.

Conservatives view the adoption of Keynesian economics as original sin, opening the door to a vast expansion of government. Instead of being paid for with politically unpopular tax increases or spending cuts, new spending programs were to a large extent financed with seemingly costless deficits. The economist James Buchanan called this “fiscal illusion.”

He had a point. We would have less spending if its tax cost was fully apparent. If people knew their taxes would go up or they would lose government benefits whenever spending increased, we would have a lot less spending.

Unfortunately, conservatives intentionally destroyed the remnants of the implicit balanced budget constraint in the 1970s so they could cut taxes without having to cut spending at the same time. Finding enough spending cuts to pay for big tax cuts would have doomed their efforts, so they concocted a theory, “starve the beast,” to maintain a fig leaf of fiscal responsibility.

Under this theory, deficits are intentionally created by tax cuts, which puts political pressure on Congress to cut spending. Thus, cutting taxes without cutting spending became the epitome of conservative fiscal policy. Unfortunately, it didn’t work.

We gave starve-the-beast theory a test during the Reagan administration, but as I have shown previously, when push came to shove, Reagan was always willing to raise taxes rather than allow deficits to get out of control.

We gave starve-the-beast theory another test during the George H.W. Bush and Clinton administrations. They both raised taxes and, according to the theory, this should have caused spending to rise, because tax increases feed the beast. But they didn’t. Spending as a share of the gross domestic product fell to 18.2 percent in 2000 from 22.3 percent in 1991, according to the Congressional Budget Office.

We gave starve-the-beast theory another test during the George W. Bush administration. Taxes were slashed, but spending rose – again, the exact opposite of what the theory said should have happened. The economist Bill Niskanen asserted that the result was not surprising because the Republican position on taxes effectively reduced the tax cost of spending.

Nevertheless, conservatives like Grover Norquist insist that starve-the-beast theory works, which is why they relentlessly push for still more tax cuts despite the obvious failure of previous tax cuts either to stimulate economic growth or restrain spending, and oppose even the most trivial tax increases no matter how big the deficit.

Historically, one problem conservatives had with a straightforward balanced budget requirement was a concern that it might lead to tax increases. It would also make further tax cuts more difficult to achieve.

Today, most conservatives support a constitutional requirement that will only restrain spending but make tax increases effectively impossible, while continuing to permit tax cuts regardless of the deficit. This is the essence of the “balanced budget” amendment that Republicans plan to vote on.

The amendment reported by the House Judiciary Committee in June would limit federal spending to 18 percent of “economic output” (whatever that is) without a three-fifths vote in both the House and Senate and would require a two-thirds vote to raise taxes. The latter requirement is even more stringent than it appears because it applies to the full membership of both houses, not just the percentage of those present and voting. Taxes, on the other hand, can be cut with a simple majority vote.

Space prohibits a full discussion of all the technical problems with this poorly drafted amendment. A July 8 report from the Congressional Research Service does a good job of going through some of them.

These include the fact that gross domestic product is nowhere defined in law, nor could it be because it is a continually evolving concept; 18 percent of G.D.P. is a totally arbitrary figure that couldn’t be achieved this year even with the abolition of every federal program other than Social Security, Medicare, national defense and interest on the debt, because the deficit is twice as large as total nondefense discretionary spending.

Outlays would actually have to be well below 18 percent of G.D.P. in practice because future spending is held to 18 percent of the previous fiscal year’s G.D.P., and there is no practical way of enforcing the amendment through the federal courts. For more details, see my July 11 article in Tax Notes magazine.

The truth is that Republicans don’t care one whit about actually balancing the budget. If they did, they would want to return to the policies that gave us balanced budgets in the late 1990s.

The crucial one was higher taxes, which virtually all Republicans opposed in 1990 and 1993, and budget controls that prevented tax cuts unless offset dollar-for-dollar with cuts in entitlement programs, which Republicans abandoned in 2002 so they could cut taxes without constraint.

Of course, no Republican favors such policies today. They prefer to delude voters with pie-in-the-sky promises that amending the Constitution will painlessly solve all our budget problems.

Long Road Ahead for Most American States

Michigan, Nevada and Rhode Island will probably have to wait another six years before they are back to the number of jobs they had before the recession struck, according to economists at IHS Global Insight.

These analysts have projected when each state will likely return to its past peak employment, as shown in the map below:

Across the country, there are 4.7 percent fewer jobs today than there were when the recession began in December 2007. And remember that the United States population has grown in the last five years, so if the economy were healthy there would be more jobs today than there were then. This analysis only models when we’ll be back to square one.

Only Alaska, North Dakota and the District of Columbia have recovered the jobs they lost during the recession. Those places have actually surpassed their previous employment peaks as well.

The Euro Zone Crisis and the U.S.: A Primer

CATHERINE RAMPELL

Dollars to doughnuts.

The potential effect of the euro zone crisis on the United States has been the subject of several recent articles, including Annie Lowrey’s on Saturday. Here’s a primer summarizing the three main channels through which the fiasco across the Atlantic could hurt the American economy: trade, stock markets and (most worrisome) a contagious credit crisis.

Dollars to doughnuts.

1) Trade. There are two ways that a European catastrophe could hurt American exports.

First, it could shrink our customer base in Europe. Europe buys 22 percent of our exports, according to the Bureau of Economic Analysis. If Greece and other countries implode, causing a severe recession in Europe, orders for American products and services would fall.

Second, the crisis could shrink the United States customer base around the world. As investors become more concerned about the stability of the euro zone, they will stop investing in the euro. When there is less demand for euros, the value of the euro gets cheaper. By comparison, the dollar gets more expensive. That makes American-made products more expensive, so American products become less attractive to customers worldwide.

2) The stock market. European stock markets and American stock markets are strongly correlated, as shown by indices for both in the chart below:

Of course, this chart doesn’t show what’s cause and what’s effect. A statistical analysis by economists at Deutsche Bank, however, has found that American markets seemed to drive European markets from the onset of the financial crisis in 2007 to March 2010, and since then the reverse has been true: movements in the European markets seemed to be leading movements in American ones.

Additionally, many American companies depend on revenue from Europe, as you might have guessed from the export numbers noted above. Deutsche Bank analysts estimate that about 15 to 20 percent of corporate revenues of companies in the Standard & Poor’s 500-stock index are generated by Europe. For companies in the materials, energy and tech sectors, the share earned in Europe is even higher.

When these companies do badly, and their shares drop, the pain is felt much more broadly in the United States. Declines in the stock market mean less valuable portfolios for Americans across the country, causing consumers to feel poorer and be less willing to spend money.

This is known as the wealth effect. We saw it when housing values first plunged, leading Americans to realize they weren’t as rich as they thought they were.

3) Debt exposure and a contagious credit crisis. This is the biggest worry, since global financial markets are deeply interconnected.

Europeans owe lots of money to one another — and to other countries — as you can see in this debt graphic. For example, American banks own a lot of French debt, and French banks own a lot of Italian debt. If Italy defaults, French banks are in trouble. If those French banks then default, American banks are likewise compromised. With these banks insolvent (or at the very least illiquid), it becomes harder for American companies and consumers to borrow.

The contagion can also spread rapidly because once one country falls, investors get antsy about the fate of their investments in similarly indebted countries. So investors start selling off those assets en masse too, creating a self-fulfilling prophecy and causing those countries to implode. And so the domino effect continues.

Even just worrying about these types of scenarios can seriously damage financial markets, because people stop lending if they suspect someone major somewhere won’t be able to pay the debt back. Already banks are tightening their lending standards for borrowers who have significant exposure to Europe, according to the Federal Reserve’s latest Senior Loan Officer Opinion Survey on Bank Lending Practices.

Part of the reason the global Great Recession began (and was so devastating) was that healthy credit markets are crucial to the functioning of any economy. If there is a broad tightening of credit, economic activity seizes up as well.

Affiliation, Before and After Scandal

In the wake of the sexual abuse scandal that is roiling Penn State’s football program, some are wondering whether there could be long-term effects on recruiting, donations and the long-term reputation of the university.

Many experts in higher education who have seen other universities weather crises expect the impact of the events at Penn State to fade within a year. But another precedent for how people might react is the aftermath of the sexual abuse scandals that rocked the Roman Catholic Church in the last decade.

A survey by the Pew Forum on Religion and Public Life conducted in 2008 found that Americans who had left Catholicism had done so for many reasons, including unhappiness with the church’s position on abortion or homosexuality, disagreement with teachings on birth control, and the feeling that their spiritual needs were not being met. But the survey also found that about a quarter of those saying they had abandoned Catholicism cited sexual abuse by members of the clergy as a reason for either leaving religion altogether or affiliating with a different denomination.

A new study by Daniel M. Hungerman, an economist at the University of Notre Dame, estimates that the Catholic Church in the United States lost about two million members — or 3 percent of its American membership — because of the sexual abuse scandals, and that donations to other religious groups rose by $3 billion in the five years after the first significant news reports of the abuses.

Using data from the Official Catholic Directory, the General Social Survey (which is conducted by the National Opinion Research Center at the University of Chicago), the Pew Forum and the Southern Baptist Convention, Mr. Hungerman concludes that disaffected Catholics who have cited the abuse scandals as a primary reason for leaving the church have joined denominations that — unlike, say, the Episcopal Church — are not necessarily very similar to Catholicism.

In fact, Mr. Hungerman’s analysis concludes that Southern Baptists, as well as other denominations quite different from Catholicism, have gained a notable number of new members who fled the Catholic Church. “It could be that Catholics came to associate the scandal with some constellation of attributes provided by the Catholic Church, and so defecting Catholics sought out groups with entirely different attributes,” Mr. Hungerman wrote.

The Pew Forum data cited by Mr. Hungerman showed that of those who left Catholicism because of the abuse scandals, 6 percent converted to a Baptist church and 17 percent converted to “other Christian” churches, defined as separate from the “mainline” Protestant denominations like the Methodists, Lutherans and Presbyterians, which drew 8 percent of those Catholics disaffected by the scandals. Only 2 percent joined Episcopalian congregations.

Of course, Catholics may have joined another denomination for entirely different reasons. Instead of making a protest decision, they may simply have changed churches because of geography, the influence of friends, availability of children’s programs and other pastoral services and the atmosphere in a particular community.

In fact, the largest group of people who left Catholicism as a result of the scandals were the 51 percent who were “unaffiliated” with any religion, according to the Pew data. That is very similar to the 54 percent of lapsed Catholics who became unaffiliated simply because they had “drifted away” from their faith.

What Percentage Lives in Poverty?

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst.

Do poor people represent the bottom 16 percent of the population or the bottom 15 percent? The answer matters more than you might think.

Today’s Economist

Perspectives from expert contributors.

The difficulty of measuring economic well-being helps explain why it’s hard for people to figure out what economic percentile they belong to or which public policies would best serve their interests.

Perspectives from expert contributors.

A difference of one percentage point in the overall poverty rate is no big deal. But the new Supplemental Poverty Measure, or S.P.M., developed by the Census Bureau, which yields the slightly higher overall estimate, shows lower rates of poverty among children and higher rates among the elderly than the traditional measure. An estimate based on a measure similar to the S.P.M. suggests that poverty has increased less over time.

The S.P.M. goes beyond consideration of money income to estimate the value of such in-kind transfers as food stamps, net taxes paid to government (taxes paid less the value of tax credits received), and medical and work-related expenses (such as child care and commuting costs). It also employs a new standard of need, linked to what low-income families actually spend.

Children are the beneficiaries of more of the in-kind transfers measured by the S.P.M. than people over age 65 and have fewer out-of-pocket medical expenses. As a result, they look less susceptible to poverty under the new measure than the traditional one, especially compared with older adults. Safety net programs such as food stamps expanded during the Great Recession.

Any income-based measure that takes such transfers into account is likely to show a smaller increase in poverty resulting from the recession than one that does not. Indeed, a good measure of poverty should register the impact of major public policies.

Unfortunately, the S.P.M. suffers some painful limitations. Like the traditional poverty measure, it understates the relative economic well-being of older adults because it ignores the value of their wealth – which doesn’t count as income although it can reduce or help cover their living expenses.

Also, some low-income families simply can’t afford expenditures on health and go untreated. They are not necessarily better off than similar families who spend money on health, though the S.P.M. might make them appear so.

Shawn Fremstad of the Center for Economic and Policy Priorities effectively details these shortcomings. But like others who acknowledge the S.P.M.’s limitations, including Arloc Sherman of the Center for Budget and Policy Priorities and Heidi Hartmann of the Institute for Women’s Policy Research, he agrees that it provides important new information.

Much depends on how researchers, journalists and public policy makers interpret the measure and how they explain the difficulties of measuring economic well-being.

The in-kind benefits that people receive from government go far beyond those measured in the S.P.M. and include big-ticket items such as spending on public education and Medicare expenditures. Tax benefits range from implicit tax subsidies for employer-provided health insurance to the mortgage-interest tax deduction.

The value of these benefits to individual families is not measured in any comprehensive survey. Both in-kind and tax benefits to the poor are more politically visible, and they phase out rapidly as family income increases above the poverty line, where both federal income and Social Security taxes begin to bite harder.

This differential visibility probably intensifies political resentments that some middle-income working families feel toward the poor.

Yet taking net taxes and work-related expenditures into account shows many families closer to the poverty line than they would otherwise seem. Using the traditional income-based measure, about 36 percent of Americans lived in families with income more than four times the poverty level in 2010. Using the S.P.M. measure of economic well-being, the size of that top group declines to 17 percent.

Major government transfers and benefits are directed at different age groups. As a result, age-based politics now greatly complicates political alignments based on class. Most individuals enjoy large transfers from the government as children (through public education) and as retirees (Social Security and Medicare) paying net taxes only as working-age adults. As a result, voters are often confronted by choices that might help them now but hurt them later, benefit their children or harm their parents.

We are now a demographically diverse population with enormous variation across households in the extent of time devoted to the care of dependents, whether children, individuals with health or disability problems, or the frail elderly. Yet we don’t factor either the costs or the benefits of this work time into estimates of family living standards.

When differences across income groups are extreme and increasing over time — as between the bottom 99 percent and the top 1 percent – they can trump these complexities.

But any political movement that aims to unify American voters must devise strategies to improve their standard of living. Such strategies should be informed by serious efforts to go beyond conventional measures of family income to develop more comprehensive measures of economic well-being.

Podcast: Europe, Pensions, Wealth and Phone Bills

For much of the past week, financial markets have fretted more about Italy than about Greece, which had been the main focus of worries for many weeks.

While the markets were calmer on Friday, the problems in the euro zone were hardly over.

In the new Weekend Business podcast, Floyd Norris, a veteran financial reporter, says that Italy’s sheer economic weight makes its problems quite threatening to the world’s financial system. An impending change in political leadership in Italy and a shift that has already occurred in Greece took some of the financial pressure off both countries temporarily. But the stability of the euro zone remains very much in doubt, he says.

In the United States, a Congressional “supercommittee” has been charged with reducing the fiscal deficit by $1.2 trillion. In a separate conversation in the podcast, and in her column in Sunday Business, Gretchen Morgenson says the committee might want to focus on the taxpayer financing of military contractor pensions, which, she says, are underfunded by some $30 billion. Since defined-benefit pensions have been reduced in other sectors, she suggests, it may be worth considering whether taxpayers ought to bear this burden for defense contractors.

Questions posed by the Occupy Wall Street demonstrations are the focus of the Economic View column in Sunday Business by Tyler Cowen, a George Mason economics professor, who says he has a libertarian and conservative perspective. While he says in the podcast that he’s sympathetic to the demonstrators’ targeting of abuses by the “top 1 percent,” he adds that the crucial distinction ought to be how you earn your money, not how much money you earn. The pursuit of wealth has long been valued in American society, he says, along with a culture of discipline and hard work, and in his view these values ought to be strengthened in the future.

Outrageous cellphone bills have raised the hackles of the Haggler, as David Segal calls himself in his Sunday Business column. On the podcast, he discusses his efforts to adjudicate a bill that amounted to more than $25,000 in long-distance charges plus more than $1,000 in recovery fees.

And Phyllis Korkki and Amy Cortese discuss the response of people in Saranac Lake, a small town in upstate New York, who realized that with the demise of a local store there would no longer be anyplace in town to buy underwear. They started a community-owned store, which sells assorted sundries, with the support of some local shopkeepers, who say that a variety of enterprises are needed to build customer traffic and keep the town’s businesses alive.

You can find specific segments of the podcast at these junctures: Floyd Norris on European debt (34:20); news headlines (25:37); Gretchen Morgenson on pensions (23:22); Amy Cortese on Saranac Lake (18:46); The Haggler on phone bills (13:14); Tyler Cowen on wealth (8:44); the week ahead (1:41).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Equalizing Payments for Medical Care

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

For some time now, health policy makers around the world and the analysts who advise them have been exploring reforms of the methods by which the providers of health care are paid or, as the latter prefer to call it, are “reimbursed” – an unfortunate, mind-altering expression on which I have already commented in an earlier post.

Today’s Economist

Perspectives from expert contributors.

Several papers in the current issue of Health Affairs are devoted to that topic. They include one by me, another by David Miller that addresses large variations in Medicare payments for surgery and one by Peter Hussey about bundled payments for treatments of an entire episode of illness.

Perspectives from expert contributors.

My paper focuses on the fact that every private health insurer in this country pays different physicians, hospitals and other providers of health care different prices for identical services. The flip side of this practice is that a given provider charges different payers – insurers or patients – different prices for identical health service. Economists call that practice “price discrimination.”

Figure 1 below illustrates this phenomenon from the insurer’s perspective for colonoscopies in New Jersey. Figure 2 shows payments in 2007 by one large private insurer for appendectomies (then code DRG 107) and coronary bypass grafts with cardiac catheterization (code CABG, then DRG 107) in California at what are known as “tertiary hospitals” — those with the ability to support medical specialists in medicine, pediatrics, obstetrics and gynecology, surgery, their subspecialties and ancillary services.

While there evidently is pervasive price discrimination within the private health-care sector, there are also sizable price differentials between public payers on the one hand and private payers on the other. Figure 3 illustrates this phenomenon by means of the so-called payment-to-cost ratio paid to hospitals by Medicare, Medicaid and private health insurers. This ratio is calculated as a fraction of the full costs that hospitals report to have incurred for patients covered by these three payers.

We can see that in many years, hospital report that the two public payers have covered the full cost (including presumably allocated fixed-overhead costs) of the care for the patients covered by these programs. Private payers, on the other hand, pay a sizable margin on top of the full costs of treating their covered clients.

Private health insurers and their principals, private employers, deplore this phenomenon as a “cost shift” from public payers to them. Of course, by similar reasoning, private insurers and individual self-paying patients who pay relatively high prices for given services can lament that they are the victims of a cost shift from private insurers with stronger market power vis à vis hospitals, which enables them to bargain for lower prices for identical services.

Many economists do not buy into this contention, asserting that price discrimination can exist without a cost shift. Explaining how economists arrive at that conclusion goes beyond the limit of this post. Interested readers, however, might consult my previously cited paper in Health Affairs, or, if they are not daunted by more formal economic analysis, read Austin Frakt’s critique of the cost-shift theory.

Whether or not one accepts the cost-shift premise, the question arises of whether price discrimination in health care has served the United States well. On this point, the business school professors Michael Porter and Elizabeth Teisberg have this to say in their book “Redefining Health Care”:

This administrative complexity of dealing with multiple prices [for the same service] adds costs with no benefit. The dysfunctional competition that has been created by price discrimination far outweighs any short-term advantages individual system participants gain from it, even for those participants who currently enjoy the biggest discounts. The lesson is simple: skewed incentives motivate activities that push costs higher. All these incentives and distortions reinforce zero-sum competition and work against value creation.

Similarly, in commenting critically in The New England Journal of Medicine on another study of administrative costs of Canadian and American health care, Henry Aaron of the Brookings Institution offered this preamble to his critique:

I look at the U.S. health care system and see an administrative monstrosity, a truly bizarre mélange of thousands of payers with payment systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird.

Other nations with multiple insurance carriers – for example, Germany and Switzerland – avoid price discrimination in health care through negotiations over prices between regional associations of health insurers and counterpart associations of health care providers, subject to some overall budget constraint informed by macroeconomic conditions (e.g., growth of the payroll on which premiums are based or per capita income). The negotiated prices then apply uniformly to all insurers and all providers in a region (states in Germany and cantons in Switzerland). In the United States, Maryland has operated such an “all payer” system for hospitals for several decades.

An all payer system has the potential to reduce health care costs in several ways, including the discipline of a fee schedule on providers, the schedule to be negotiated with providers on a regional basis, and a reduction in the enormous complexity and high administrative costs of the current system.

If it is desired, an all payer system can also serve as a way to constrain the future growth of health care to some desired path – e.g., with total national health spending growing annually only 0.5 percentage points faster than the growth of the rest of gross the domestic product, rather than the traditional two percentage points faster that prevailed over the last four decades. A two percentage point differential is simply not sustainable.

In my above-cited paper, I advocate an all payer system for the United States to eliminate the pervasive price discrimination inherent in American health care and, to the extent it exists, the much-lamented cost shift. For readers of this blog, Health Affairs has graciously provided access to the paper until Nov. 16. I invite readers to take a look at my argument for an all-payer approach and share with us their reaction to it.

Is Europe on the Verge of a Depression, or a Great Inflation?

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

The news from Europe, particularly from within the euro zone, seems all bad.

Today’s Economist

Perspectives from expert contributors.

Interest rates on Italian government debt continue to rise. Attempts to put together a “rescue package” at the pan-European level repeatedly fall behind events. And the lack of leadership from Germany and France is palpable – where is the vision or the clarity of thought we would have had from Charles de Gaulle or Konrad Adenauer?

Perspectives from expert contributors.

In addition, the pessimists argue, because the troubled countries are locked into the euro, no good options are available. Gentle or even dramatic depreciation of the exchange rate for Greece or Portugal or Italy is not in the cards. As a result, it is hard to lower real wages so as to restore competitiveness and boost trade. This means that the debt burdens for these countries are likely to seem insurmountable for a long time. Hence default and global financial chaos seem likely.

According to the September 2011 edition of the Fiscal Monitor of the International Monetary Fund, 44.4 percent of Italian general government debt is held by nonresidents, i.e., presumably foreigners (see Statistical Table 9), on Page 72). The equivalent number for Greece is 57.4 percent, while for Portugal it is 60.5 percent.

And if you want to get really negative and think the problems could spread from Italy to France, keep in mind that 62.5 percent of French government debt is held by nonresidents. If Europe has a serious meltdown of sovereign debt values, there is no way that the problems will be confined just to that continent.

All of this is a serious possibility – and the lack of understanding at top European levels is deeply worrisome. No one has listened to the warnings of the last three years. Almost all the time since the collapse of Lehman Brothers has been wasted, in the sense that nothing was done to put government finances on a more sustainable footing.

But perhaps the pendulum of sentiment has swung too far, for one simple and perhaps not very comfortable reason.

There is no way to have just a little debt restructuring for Italy. If Italian debt involves serious credit risk – an end to the view that government debt has “no credit risk” and is a “risk-free asset,” with zero probability of default – then all sovereign debt in Europe will need to be repriced downward.

Will Germany will remain a safe haven? Even that is far from clear. According to the I.M.F., gross government debt in Germany will be 82.6 percent of gross domestic product at the end of this year (Statistical Table 7 of the Fiscal Monitor, on Page 70; the net government debt number for 2011, in Statistical Table 8, on Page 71,is 57.2 percent). Reports of German fiscal prudence have been greatly exaggerated.

German policy makers and the German public will not do well in the event of a major sovereign-credit disaster. Credit would tighten across the board. German exports would plummet. The famed German social safety net would come under great pressure.

There is an alternative to a decade of difficult austerity. The Germans could agree to allow the European Central Bank to provide “liquidity” support across the board to the troubled governments.

Many things are wrong with this policy – and it is exactly the kind of moral hazard-reinforcing measure that brought us to the current overindebted moment. None of us should be happy that Europe – and the world – has reached this point.

Among others, the bankers who bet big on moral hazard – i.e., massive government-backed bailouts – are about to win again. Perhaps the Europeans will be tougher on executives, boards and shareholders than the Obama administration was in early 2009, but most likely all the truly rich and powerful will do very well.

But if the German choice is global calamity or, effectively, the printing of money, which will they choose?

The European Central Bank has established a great deal of credibility with regard to keeping inflation at or close to 2 percent. It could probably offer a great deal of additional support – through creating money – without immediately causing inflation. And if the bank is providing a complete backstop to Italian government debt, the panic phase would be over.

None of this is a lasting solution, of course. Europe needs a proper fiscal center – much as the United States needed in 1787 and got under Alexander Hamilton’s policies from 1789. When he became Treasury secretary, the United States was in default and the credit system was almost completely broken. Some centralized tax revenue and control over fiscal deficits are needed.

Silvio Berlusconi stood in the way of all this. Other European leaders would not trust him to tighten Italian fiscal policy. But if he is really gone from power – and we should believe that only when we see it – there is now time and space for Italy to stabilize and, with the right help, find its way back to growth.

Of course, if the European Central Bank provides unconditional financial support to Italian, or other, politicians who refuse to bring their deficits under control, we are heading for another Great Inflation.

Who Rules the Global Economy?

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst.

Most economists today don’t ask who rules the global economy, visualizing it as a decentralized competitive market that cannot be ruled. Yet new evidence suggests that global economic clout is highly concentrated among large interlocking transnational companies.

Today’s Economist

Perspectives from expert contributors.

Three Swiss experts on complex network analysis have recently examined the architecture of international ownership, analyzing a large database of transnational corporations. They concluded that a large portion of control resides with a relatively small core of financial institutions, with about 147 tightly knit companies controlling about 40 percent of the total wealth in the network.

Perspectives from expert contributors.

Their analysis draws heavily on network topology, a methodology that biologists use to good effect. An article in the British magazine New Scientist describes the research as evidence of a global financial oligarchy.

The technical details of economic network analysis are daunting, but the metaphors evoke a “Star Trek” episode: the network is described as a bow-tie shaped “super entity” of concentrated corporate ownership. One cannot help but worry about threats to the safety of the starship Enterprise.

In recent years, research on industrial organization has focused more on corporate strategy than on social consequences. A recent article in the socialist journal Monthly Review, by John Bellamy Foster, Robert W. McChesney and R. Jamil Janna, criticizes both mainstream and left-wing economists for their lack of attention to monopoly power.

Focusing on the United States, they note that the percentage of manufacturing industries in which the largest four companies account for at least 50 percent of shipping value has increased to almost 40 percent, up from about 25 percent in 1987.

Even more striking is the increase in retail consolidation, largely reflecting a “Wal-Mart effect.” In 1992, the top four companies accounted for about 47 percent of all general merchandise sales. By 2007, their share had reached 73.2 percent.

Banking, however, takes the cake. Citing my fellow Economix blogger Simon Johnson, the Monthly Review article notes that in 1995, the six largest bank-holding companies (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley) had assets equal to 17 percent of gross domestic product in the United States. By the third quarter of 2010, this had risen to 64 percent.

Some of these companies have undergone name changes in the process. A graphic published about a year ago in Mother Jones beautifully illustrates their merger history.

Large companies are often able to offer lower prices than small ones because they can take advantage of economies of scale. On the other hand, if their market power reaches a certain level, they can increase prices as much as they like. The consequences of economic concentration for consumers are complicated by more difficult-to-trace impacts on small businesses, American workers and small businesses.

The concentration of economic power at the top distills political power in ways described long ago by the sociologist William Domhoff in his classic “Who Rules America?” The related Web site provides updated information, exhorting today’s “change agents” to conduct social scientific research seriously.

Public concerns about economic concentration are stoked by hard times. Congress authorized a full-scale investigation of the topic back in days of the Great Depression.

Seems like the time has come for a fully international update.

Is Overregulation Driving U.S. Companies Offshore?

CATHERINE RAMPELL

Dollars to doughnuts.

As my colleague Richard A. Oppel Jr. reported on Thursday, Gov. Rick Perry of Texas is arguing that companies are sending work abroad primarily because of overregulation in the United States, and not because labor is cheaper abroad.

Dollars to doughnuts.

“They did not leave to begin with just because they could find cheap labor somewhere,” said Mr. Perry, who is running for the Republican presidential nomination. “That may have been part of a formula, but it is not the reason they left. I would suggest to you they left because they were overregulated, and the cost of that regulation and the tax structure that we have in place in this country is what drove the masses away.”

Is that statement true? Are American regulations so burdensome that they are driving companies abroad?

Certainly the United States tax code is impenetrably complicated, and companies do have to deal with plenty of regulations. But even so, the United States is far friendlier to business than are emerging markets like India and mainland China, according to international analyses of regulatory climates.

For the last nine years, the World Bank has been grading countries on 10 measures of business regulation: getting electricity, enforcing contracts, protecting investors, dealing with construction permits, trading across borders, registering property, resolving insolvency, paying taxes, getting credit and starting a business.

Based on these criteria, these are the top 10 countries where it is easiest to operate a business:

That’s right: The United States comes in fourth.

Hong Kong beats the United States, but mainland China — that bugaboo of American employment protectionists — does not. Instead, China comes in 91st. Despite the higher regulatory burden, American-based multinational companies have increased their employment in China by 161,400 from 2007 to 2008, a gain of about 20 percent, according to the Bureau of Economic Analysis. (The most recent data are for 2008.) In fact, American employment in China rose 77 percent in the prior decade, from 1998 to 2008.

India does even worse, with a ranking of 132nd. Edward L. Glaeser has written for Economix before about India’s struggles with having a stable and transparent regulatory system and public sector.

As they have done in China, American companies have ratcheted up their employment in India by 43,000, or about 13 percent, from 2007 to 2008. From 1998 to 2008, the number of people in India working for American companies rose by 54 percent, according to the Bureau of Economic Analysis.

In another measure of business climate and competitiveness put out by the World Economic Forum, the United States ranks fifth, again ahead of China (26), India (56) and a host of other countries where American companies are adding jobs.

Presumably, then, American companies are not attracted to these places because the business climate is more favorable.