April 26, 2024

Economix Blog: Nancy Folbre: The Best States to Grow Up In

Nancy Folbre, economist at the University of Massachusetts, Amherst.

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

Newborn children can’t choose the states in which they grow up any more than they can choose the size of their parents’ bank accounts. But voters in every state choose how much to spend on public programs benefiting children, with telling results.

Today’s Economist

Perspectives from expert contributors.

The Foundation for Child Development’s new report on state-level differences in the Index of Child Well-Being – a broad quality-of-life indicator based on 25 indicators – shows enormous variation, as does another set of indicators known as Kids Count, developed by the Annie E. Casey Foundation.

In states near the top of the list, like Connecticut, New Jersey and Utah, the successes have been celebrated. States in the South and Southwest generally rank lower, with New Mexico, Mississippi, Louisiana, Nevada and Arizona at the bottom.

Those, like Newt Gingrich, who believe, that less fortunate children lack a work ethic might point to regional differences in moral character. But evidence suggests that regional differences in willingness to pay taxes, sometimes called “tax morale,” are at work.

States that rank low on the Index of Child Well-Being are those less willing to tax adults to invest in children.

Analysis of state differences by William O’Hare, Mark Mather and Genevieve Dupuis points to the positive impact of per-pupil spending on education, higher Medicaid child-eligibility thresholds and higher levels of Temporary Assistance to Needy Children benefits on child well-being.

Average public spending on children varies far more across states than spending on the elderly, who receive benefits primarily through the federal government. Higher state and local spending, in turn, often requires higher state and local tax rates.

Children can’t vote, so adults must vote for (and pay for) higher taxes on their behalf. Calculations of economic self-interest probably play a role. Parents currently raising children gain more directly from public spending on them. State policy makers know that investments in their future work force can pay off, yielding higher state income (and tax revenues) in the future.

But levels of trust and concern for others also affect willingness to pay taxes, just as they affect people’s willingness to contribute to charities or tithe to a church. Unfortunately, as the political scientist Robert Putnam asserts, racial and ethnic diversity tends to weaken social solidarity.

Children are directly affected. Research by the economists Alberto Alesina, Reza Baqir and William Easterly, among others, shows that racial and ethnic diversity tend to undermine support for public spending on education and other services at the municipal level.

Other research indicates that the causal linkages are complicated. Levels of segregation, interaction and political representation all have an impact. The political scientist Daniel Hopkins shows that a sudden change in the racial and ethnic composition of a community may have a particularly divisive effect.

But some institutions – and political jurisdictions – do a better job of coping with these stresses than others do. Professor Putnam points to the success of policies adopted by the United States armed forces to bring recruits together and build their trust for one another.

As a previous Foundation for Child Development report by Donald Hernandez and Suzanne E. Macartney emphasizes, immigrant children in the United States are geographically concentrated in a few states where they remain economically and socially vulnerable. The new analysis of state differences shows that African-American and Hispanic children have lower levels of well-being than white children. The higher the percentage of children in a state who are minorities, the lower the state’s index of child well-being.

But demography is not destiny. Some states with large numbers of immigrants and minority children, like New Jersey, New York and Illinois rank fairly high, while others, like Texas, Florida and California, rank quite low.

More detailed research on the success stories among states promoting child well-being might reveal strategic innovations in efforts to overcome differences and build strong political coalitions.

We need a strong care ethic as well as a strong work ethic. Both can strengthen tax morale and lead to public investments that make children happier, healthier and more productive in their future jobs.

Article source: http://feeds.nytimes.com/click.phdo?i=f1bf6621592bb62d9fe9fe16d58a7812

Greece Sets Conditions on Debt Rollover

ATHENS — Greece said Friday it might only go ahead with a bond swap plan that is a critical part of its second bailout if at least 90 percent of private creditors who hold government bonds participate.

The July 21 bailout plan would see banks and other financial institutions give Greece easier repayment terms on its bonds.

However, in return, Greece has to fund an expensive collateral arrangement, which will secure the remaining value of the bonds and would cost the country about €42 billion, or $60 billion, until 2020.

The Athens Stock Exchange on Friday posted extracts of a letter sent by the government to foreign finance ministers saying that Greece “shall not be obliged to proceed” unless it could get at least 90 percent of its eligible bonds swapped or rolled over. It also said 90 percent of that must be bonds maturing between June 30, 2011, and Aug. 31, 2014.

“If these thresholds are not met, Greece shall not proceed with any portion of the transaction” if it determines — along with international partners such as the eurozone and International Monetary Fund — that the total contribution of the private sector is insufficient for the July 21 agreement to work, the letter said.

It said the participation of the private sector needed to have a positive impact on its debt sustainability, or its ability to repay its overall debt load of some €340 billion.

Greece had previously said it was seeking 90 percent participation, or €135 billion, but the figure had been set as a target rather than a condition.

The letter was sent to foreign finance ministers asking for help in determining which institutions in their countries hold Greek bonds maturing through the end of 2020.

According to initial estimates, the bond swaps and rollovers were meant to save the Greek government some €37 billion by 2014, reaching a total of €54 billion by 2020. However, much of those savings would be eaten up by the cost of the collateral, so a lower participation could quickly eliminate the benefits.

The Institute of International Finance, a financial sector lobbying group that has been leading the discussions on private sector involvement with the Greek government, has said that the estimates are based on a participation of 90 percent of Greek bondholders.

However, in recent weeks, speculation has mounted that Greece may fall short of that target.

Amadeu Altafaj-Tardio, a spokesman for the European Commission, the European Union executive, said discussions with Greece’s private creditors were “ongoing.”

“We have no reason to think that the figure will be far from” the 90 percent estimate, he said.

Debt-strapped Greece has been relying on rescue loans from euro zone countries and the International Monetary Fund since last year. It was granted a first, €110 billion bailout in May 2010 but still needed to get a second rescue deal worth a further €109 billion last month. The €109 billion figure is dependent on a strong participation of the private sector.

In return for the rescue loans, the country has pledged to tame its budget deficit, aiming for a target of 7.5 percent of gross domestic product this year from 10.5 percent in 2010. It has imposed a series of austerity measures, including higher taxes and cuts to public sector pay and other spending, and introduced more measures this year.

The talks with banks and other financial companies is just one of the aspects of the July 21 deal that is running into potential troubles.

Euro zone states, which will be funding the majority of the second €109 billion bailout, are also locked in talks about a Finnish demand to get collateral to secure its contribution to the bailout.

Senior officials from euro zone finance ministries were discussing the issue Friday in the hopes of finding a solution that would not endanger the overall bailout deal. Four other euro zone countries have demanded equal treatment if Finland is given collateral

Speaking in parliament, the Greek finance minister, Evangelos Venizelos, said he was confident a solution would be found, and said the calls for equal treatment by other countries “doesn’t turn against Greece. It turns in favor of the unity of Europe.”

Article source: http://feeds.nytimes.com/click.phdo?i=a06d1e996630421d8068d3ea6545e4ef