Would A Soda Tax Make Us Healthier?

Image Source: Flickr user poolie under a CC license.

Food columnist Mark Bittman had a big, graphics-filled article in this weekend’s NY Times arguing that taxing soda can prevent obesity. He claims that a 20% increase in the price of sugary drinks (soda, fruit drinks, sports drinks) would reduce consumption by 20% and prevent 1.5 million people from becoming obese in the next decade. Money raised through the tax could be used to subsidize the price of healthy food, making it cheaper, and support programs that promote good eating and exercise.

One problem with his argument? When a product becomes more expensive, most people don’t just eliminate it completely from their lives; instead, they substitute something similar but less costly. In other words, if sugary drinks are taxed, consumers aren’t just going to give them up and walk around chugging water all day. Most likely, they will switch to diet drinks (the taxes proposed by Bittman and others apply only to sugary, caloric drinks).

But if we can encourage people to switch from high-calorie to diet drinks that’s a good thing, right? Unfortunately, no. Recent studies have shown that diet soda is linked to obesity and associated health problems like diabetes and high blood pressure. It’s not yet clear whether diet soda itself causes weight gain or whether consuming diet soda is just a sign of an overall poor diet. Either way, taxes that incentivize people to switch from sugary drinks to diet ones, without changing the rest of their diet, won’t do much to curb obesity. Furthermore, research on a proposed soda tax in Illinois showed that many obese people have already substituted diet drinks for sugary ones, so a soda tax wouldn’t affect them much.

I think Bittman has the right idea: we should consider more carefully how prices, availability, and other incentives shape the way people eat, and what role government does or can play in structuring these incentives. Taxing soda might not be a bad step, but I don’t think it will be the cure-all Bittman suggests.

On the upside, the article was accompanied by a cool-looking interactive timeline that shows landmarks in the development of our current high-fat, high-sugar, highly-processed American diet.

Bad Food? Tax It, and Subsidize Vegetables
The New York Times // Mark Bittman // July 23, 2011

Drug Courts Offer An Effective Alternative For Reducing Drug Use And Crime

Drug abuse drives a significant share of the crime in this country: 1 in 5 people in prison are incarcerated for a drug offense, 20 – 25% of prisoners incarcerated for all types of offenses report being on drugs when they committed their offense, and 15 – 20% of prisoners say they committed their crime to get money for drugs.

When drug users commit crime, is the best response incarceration or treatment? The nation’s 1400 drug courts operate on the philosophy that for some offenders, closely supervised treatment for their underlying substance abuse problems is the most effective way to keep them from committing more crime. A major new study by my former colleagues at the Urban Institute, along with researchers at RTI International and the Center for Court Innovation, finds that drug court participant engage in less drug use and criminal activity than similar offenders who follow a traditional criminal justice path.

In jurisdictions with drug courts, offenders who meet certain criteria – less serious offenses, less extensive criminal histories, diagnosed substance abuse problems – are offered the option to participate in the drug court program instead of a traditional, more punitive process. Those who choose to participate receive drug treatment, counseling, close supervision, and frequent court hearings and drug testing in lieu of incarceration.

The new study tracked 1800 offenders – 2/3 of whom participated in drug courts and 1/3 who served as a comparison group – in 29 jurisdictions over two years. Key findings from interviews with participants 18 months into the study include:

  • Report using any drugs in the previous year: 56% of drug court participants vs. 76% of comparison group.
  • Report using serious drugs in the previous year: 41% of drug court participants vs. 58% of comparison group
  • Tested positive on a drug test administered by researchers: 29% of drug court participants vs. 46% of comparison group
  • Report committing a crime in the previous year: 40% of drug court participants vs. 53% of comparison group
  • Self-reported number of criminal acts in the previous year: 43 for drug court participants vs. 88 for comparison group

Most of these findings are based on study participants’ own reports of their behavior, which can be unreliable, so the researchers also analyzed official criminal justice records. They found that 52% of drug court participants were re-arrested over two years, compared with 62% of the comparison group (this finding, however, was not statistically significant).

Not all drug court systems are equally successful. One of the study’s key findings is that the engagement of drug court judges plays a significant role in participants’ success. Judges who interact with participants, show interest and enthusiasm, and make participants feel respected and fairly treated produce better outcomes. The study also found that drug courts work well for all types of offenders, but particularly those who are more frequent drug users or more serious criminals at the start of the program. Unfortunately, these types of offenders are often excluded from participating in drug court programs, when in reality they may see the most benefit.

Drug courts attempt to deal directly with a root problem – addiction – rather than just the symptoms of criminal and anti-social behavior it engenders. This study suggests drug court programs may have hit on the right approach.

The Multi-site Adult Drug Court Evaluation (Pre-Production)
Urban Institute, RTI International, Center for Court Innovation // Shelli B. Rossman, John Roman, Janine M. Zweig, Michael Rempel, Christine Lindquist // July 2011

Disclaimer: I used to work for the Justice Policy Center at the Urban Institute, though I have no connection with this particular study.

Infographics: Visualizing The Deficit & Proposed Solutions

Two cool debt ceiling/deficit-related infographics caught my eye today.

The first, by the Center for American Progress, shows the percentage of savings that would come from tax increases under various proposals to address the deficit, including those offered by Obama, the Gang of Six, and the Simpson-Bowles Commission. It backs up the assertion of Paul Krugman and other commentators that Obama has already given a lot to anti-tax Republicans and what he is now offering is actually right-of-center.

The second infographic, from this weekend’s NY Times, shows how our two most recent presidents contributed to the deficit. Policy changes under Bush cost $5.07 trillion while those during Obama’s tenure added $1.44 trillion (projected over ten years). To be fair, Obama’s term isn’t over yet and so far he has increased spending at roughly the same rate as Bush: on average he has added $580 billion in spending for each year of his term, compared to $630 billion a year under Bush. Much of Obama’s new spending, however, was in response to the economic crisis and I think it’s clear that he doesn’t plan to continue increasing spending at the rate we saw during his first two years in office.

Source: The New York Times, July 24, 2011

African Americans Face Higher Unemployment, But It’s Not Unique To The Recession

The current unemployment rate among African Americans, 16.1%, is twice that of whites, 7.9%. Even when you control for differences in educational attainment, gender, and age between the two groups, rates are significantly higher among blacks. Unemployment among African Americans with a college degree? 1.8 times the rate among whites with the same level of education. Among African American women? 1.9 times that of white women. You get the (depressing) picture…

This troubling 2:1 ratio isn’t unique to the Recession. According to a new report from the Center for American Progress (CAP), “The black unemployment rate tends to be about double that of whites, regardless of the economic climate.” The unemployment rate when the Recession was just beginning at the end of 2007, for example, was 8.4% among African Americans, 2.1 times the rate among whites (4.1%).

Source: Center for American Progress, "The Black and White Labor Gap in America," 2011.

While the Recession has forced a greater share of African Americans into unemployment (an increase of 8 percentage points versus 4 for whites), the size of the overall disparity has remained the same. Black and white unemployment rates are both about double what they were when the Recession started: the current rate among African Americans is 1.92 times what it was at the end of 2007; for whites the ratio is 1.98.

The CAP report provides some evidence that African Americans may be experiencing the phenomenon known as “first fired, last hired” that has been seen in other recessions. White unemployment rates have dropped slightly (by 0.4 percentage points) since the recovery officially began in mid-2009, while black unemployment has continued to grow (up 1.3 percentage points).

While all of this data is disturbing, one figure in particular caught my eye. The latest national unemployment number – 9.2%  that has people freaking out? That was the exact unemployment rate among African American men in 2007, before the Recession began.

The Black and White Labor Gap in America: Why African Americans Struggle to Find Jobs and Remain Employed Compared to Whites
Center for American Progress // Christian E. Weller, Jaryn Fields // July 25, 2011

(Note: I didn’t discuss the unemployment rates for other racial or ethnic groups because the CAP report focuses on blacks and whites. In case you’re curious, the current rate among Asians is 6.8% and among Hispanics of all racial backgrounds is 11.5% (these are the only two other racial/ethnic groups BLS reports separate statistics for).)

Taxes – What’s A Fair Share?

If you were to redesign our tax system from scratch, what would it look like? What would each person’s fair share of the burden be?

Our federal system primarily taxes individuals’ incomes, not their overall wealth. You pay taxes on your money when you earn it and you don’t have to keep paying every year on the things you buy with that income, like real estate and financial investments (though you do have to pay taxes on the capital gains you make when you sell these assets). Local tax systems, which are based mainly on taxing property, work differently – you pay taxes on assets you own, every year, as long as you own them.

What’s interesting is that when you look at how the tax burden is spread across different groups, it reflects the distribution of wealth more closely than it does the distribution of income. The top 5% earn 35% of all income but pay a whopping 59% of all taxes. Sounds unfair, right? Until you consider that this group owns 64% of all the wealth in the country.

Where does this pattern come from? The richest Americans’ share of overall wealth is higher than their share of income because they tend to have a greater portion of their wealth in assets (mainly financial investments, real estate, and business ownership), as opposed to middle- and low-income Americans, who have fewer assets and a greater share of their net wealth in the form of cash income. The wealthy’s share of income taxes is greater than their share of income because our tax system is progressive, meaning the affluent pay a bigger chunk of their earnings in taxes than people in the lower income brackets.

There’s been a lot of discussion lately about whether increasing taxes on the wealthy should be part of the solution to our deficit problems. Let’s assume we stick with an income-based tax system; we can still ask ourselves: Should peoples’ taxes correspond to their share of income or their overall wealth? Do the richest Americans pay too much, or not enough?


Individual Income Tax Rates and Shares, 2008 // IRS

The State of Working America’s Wealth
Economic Policy Institute // Sylvia A. Allegretto // March 23, 2011

Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze
Levy Economics Institute at Bard College // Edward N. Wolff // March 2010

What Does Poverty in America Really Look Like?

What does it mean to be poor in America? Living on the street and eating meals at a soup kitchen? Or in a run-down house or apartment with little furniture inside? The poverty line for 2011 – $22,000 for a family of four or $11,000 for a single person – doesn’t sound like much. But a new Heritage Foundation report on what conditions in low-income households actually look like might surprise you:

  • 43% of low-income households own their own home
  • 73% own a car
  • 98-100% have a fridge, television, stove and oven
  • 78% have air conditioning

In addition, low-income families aren’t that far behind the rest of America in terms of owning non-essential electronics like stereos, computers, DVD players, and even video game systems. Looking at this graph and knowing that one-fourth of Americans have no emergency savings sort of makes you question where everyone’s priorities lie.

But quality of life is about a lot more than whether you have a coffeemaker or dishwasher in your house. Heritage’s purpose with all of this is to call into question our definition of poverty by demonstrating that low-income families in the U.S. are living much better lives, in some ways, than most people in the rest of the world and throughout U.S. history. Extreme material deprivation is no longer very common in the U.S., which is something to celebrate. Instead of taking this to mean that poverty isn’t a problem anymore, we should recognize that our current challenges are less visible and harder to fix, but no less important. What poverty in America really looks like is poor health outcomes, lower life expectancy, reduced educational opportunities, higher rates of crime victimization, and a host of other challenges. In other words, there’s still plenty to be concerned about.

Furthermore, even though the vast majority of low-income families in America aren’t homeless or starving, the number that are is not insignificant. The data Heritage cites in its report show 1 in 68 poor people are homeless on any given night and 6% report instances in the previous 4 months when there wasn’t enough food to eat in their household (more recent USDA statistics show slightly higher rates). In a country with a GDP of $47,000 per capita, which puts us on the worldwide top ten list, the fact that this kind of stuff still exists at all, no matter how rare, is depressing.

Air Conditioning, Cable TV, and an Xbox: What is Poverty in the United States Today?
Heritage Foundation // Robert Rector and Rachel Sheffield // July 18, 2011

How Poor Are America’s Poor? Examining the “Plague” of Poverty in America
Heritage Foundation // Robert Rector // August 27, 2007

NBER Study Finds New Mothers Who Also Work Are More Stressed, Depressed

In news that should come as no surprise to anyone who’s ever raised a child, a new study finds that mothers who were back at work 6 months after their child was born reported higher levels of depression and parenting stress and lower overall health than mothers who were not working. Previous research suggests that juggling the responsibilities of work and parenthood may be challenging for new mothers with male partners in part because mothers, even those who work, devote more of their time to childcare than fathers.

The findings of the NBER study suggest that more generous opportunities for maternity leave and better support for women who return to work soon after their child is born could improve new mothers’ well-being. There is some good news, however, for those who can’t or don’t want to take time off work: the study found that whether or not mothers worked in the months after their child’s birth did not affect the quality of parenting during the child’s early years.

Early Maternal Employment and Family Wellbeing
National Bureau of Economic Research // Pinka Chatterji, Sara Markowitz, Jeanne Brooks-Gunn // July 2011

Clean Economy Employs 2.7 Million Workers, More Than Fossil Fuels or Biotech

Today, the Brookings Institution released a major report on the clean economy, which now provides 2% of all American jobs, more than either the fossil fuel or biotech industries. The clean sector, as the authors define it, spans numerous industries including manufacturing, agriculture, energy, and transportation, and includes all activities, “that produce goods and services with an environmental benefit.”

The Brookings project is one of the first to provide comprehensive, detailed data on the number, location, and type of green jobs available nationwide and to allow for comparisons across regions and localities. I’ll have a post later on where green jobs are located, but for now I want to focus on some highlights from the report about the size and scope of the clean economy.

(1) While clean energy gets the most hype, the jobs are really found in sectors that have been around for a while – waste management/recycling, public transit, and conservation.

The clean economy involves over 40,000 companies engaged in a diversity of activities and spread across sectors and industries, as you can see in the charts above and below. The largest share of green jobs are in fields that have been around for a while – waste management (14% of jobs), public transit (13%), and conservation (12%). Renewable energy, which gets much of the press, accounts for only 5% of the clean economy.

(2) The clean economy is growing, but slowly. Young firms and sectors are experiencing the strongest growth.

The clean economy has grown over the last decade: one-fifth of the 2.7 million green jobs in existence today were created since 2003. From 2003 to 2010, the sector grew at an annual rate of 3.4%, slightly lower than the 4.2% growth of the economy as a whole. But unlike the rest of the economy, the clean sector continued to see strong growth during the Recession, likely due to clean energy subsidies from the stimulus bill.

It is the young firms and sectors that grew fastest in recent years. Four-fifths of the green jobs created since 2003 were in companies founded in or after 2003. Certain cutting-edge clean energy segments – wave/ocean power, solar thermal, and wind energy – experienced rapid expansion, averaging 15 to 20% growth annually.

 (3) “The clean economy offers more opportunities and better pay for low- and middle-skilled workers than the national economy as a whole.”

The green sector has been touted by some political leaders as an industry that can provide opportunities for workers at all educational and professional levels, provided they have the right training. The Brookings study provides some evidence for this claim: median wages in the clean economy are 13% higher than in the economy as a whole and these good-paying jobs aren’t just reserved for highly advanced professionals. Nearly half of green jobs employ workers with a high school degree or less, compared to 37% of jobs in the economy as a whole.

I’ll have another post up soon about where clean economy jobs are located…

Sizing the Clean Economy: A National and Regional Green Jobs Assessment
Brookings Institution // Mark Muro, Jonathan Rothwell, Devashree Saha // July 13, 2011

New RAND Study Shows Proper Mental Healthcare For Veterans Pays for Itself

President Obama’s new policy to send formal condolence letters to the families of active duty soldiers who commit suicide has brought increased attention to the serious mental health challenges our troops face during their service and after they return home. Military suicide rates have reached record highs, nearly doubling in the past decade, and suicide now rivals the battlefield in the number of deaths it causes.

Of the 2.25 million American soldiers who served in Iraq and Afghanistan in the past decade, an estimated 20% report symptoms of PTSD or major depression. Unfortunately, only half of these individuals seek treatment each year and less than a third of those who do receive high-quality care that follows proven therapeutic models (known as EBT or “evidence-based treatment”).

The moral obligation to provide our soldiers and veterans with proper mental healthcare is strong enough for most citizens to insist it be a high priority, regardless of cost. A new RAND study shows that proper treatment also saves money by reducing the social costs of PTSD and depression among veterans. Though providing EBT to all soldiers who need it is more costly than the alternatives – less expensive, less effective treatment or none at all – in the end it more than pays for itself by increasing veterans’ productivity and ability to support themselves; reducing costs related to suicide; and diverting money wasted on ineffective treatment.

While military leaders have made increasing efforts to prevent suicide, much remains to be done. Providing proper mental healthcare for our troops is one of those rare issues where there is not only widespread agreement about what we should do, but the right choice is also the cost-effective one.

Invisible Wounds, Visible Savings? Using Microsimulation to Estimate the Costs and Savings Associated with Providing Evidence-Based Treatment for PTSD and Depression to Veterans of Operation Enduring Freedom and Operation Iraqi Freedom
Psychological Trauma: Theory, Research, Practice, and Policy
// Beau Kilmer, Christine Eibner, Jeanne S. Ringel, Rosalie Liccardo Pacula // RAND // June 2011
(A brief summary of the study is available here.)

No New Taxes: A Pledge That Isn’t As Simple As It Seems

Like a household whose finances are out of whack, our government can deal with its looming budget deficit in two ways: spend less or earn more. Political leaders are currently negotiating to find the right balance of these two strategies, but several Republicans have threatened to block any plan that involves raising taxes. In our current Congress, all but 7 Republican Senators and 6 Republican Representatives have signed Americans for Tax Reform’s well-known pledge to oppose any and all tax increases (only 3 Democratic Congressmen have signed).

But hewing to a mantra of “no new taxes” can be more complicated than it seems, because the division between taxes and spending isn’t always clear-cut. A significant amount of government spending is hidden in the tax code in the form of tax breaks for certain groups: homeowners making mortgage payments, companies conducting scientific R&D, workers receiving employer-sponsored health insurance, and investors earning capital gains. Altogether, the Treasury Department has identified over 170 preferences that cut taxes for specific taxpayers, activities, or types of income. If these “tax expenditures” were structured as spending programs rather than tax breaks, in 2007 they would have accounted for 17% of federal spending.

What makes these tax breaks different from other parts of the tax system, like differential rates based on taxpayers’ incomes? According to a new article by Donald B. Marron, Director of the Urban-Brookings Tax Policy Center, tax expenditures have the same impact on the economy, government budget, and distribution of income as if the government directly handed out checks to the beneficiaries. Elected officials use the tax system because it’s legislatively easier and politically more palatable to insert a benefit into the tax code than to increase discretionary spending by a comparable amount.

“Because tax cuts often sound more appealing to policymakers and voters than spending increases —  especially in today’s political climate — the temptation to spend through the tax code is enormous.” – Donald B. Marron, “Spending in Disguise”

Unfortunately, politicians find it much more difficult to eliminate a tax break than to cut a comparable spending program. We saw this a few weeks ago when anti-tax Republicans struggled with how to vote on a measure to end tax credits for ethanol producers. Some, like Senator Tom Coburn, saw the credit for what it is – a spending program in disguise – while others stayed true to their promise not to vote for tax increases of any kind and rejected the measure.

Marron suggests that by eliminating or simplifying many existing tax expenditures we can streamline the tax code, decrease government involvement in the economy, reduce the deficit, and maintain or perhaps even lower tax rates. But eliminating tax expenditures won’t be painless. Despite our stereotype of massive corporations receiving huge breaks – see Obama’s latest rhetorical target, accelerated depreciation for corporate jets – only 10% of the revenue lost to tax expenditures benefits corporations. The other 90% of breaks are for individuals, though many deductions disproportionately benefit the wealthy.

Sometimes spending through the tax code makes sense: it may be more efficient, accomplish important policy objectives, or benefit a broad spectrum of taxpayers. In other cases, these approaches can be overly complex and used to hide unpopular programs that benefit a select few. But the biggest problem is when politicians and voters don’t see tax breaks, good or bad, for what they are – a form of spending – and treat them accordingly.

Spending in Disguise
National Affairs
// Donald B. Marron // Urban-Brookings Tax Policy Center // Summer 2011