Economy

Why Supersized CEO Pay Is the Worst—in Three Charts

Flickr/seadigs
Flickr/seadigs A t the Institute for Policy Studies, we’ve tallied the top 25 highest-paid CEOs for each of the past 20 years. That’s a total of 500 richly rewarded executives—each one of whom made more in a week than average workers could make in a year. We’re told CEOs deserve these massive rewards because they add exceptional “value” to their businesses. They’re getting “paid for performance.” Really? Hmm. Let’s consult the numbers. Institute for Policy Studies Let’s start with the firms that led our nation into financial crisis. Of the 500 places on our annual top-paid lists, 112 are filled by Wall Street CEOs who drove their companies to bankruptcy or bailout in 2008. Richard Fuld of Lehman Brothers made the top 25 highest-paid list for eight consecutive years until his firm’s bankruptcy precipitated the financial crisis. And how about CEOs who end up getting fired? No one could possibly consider them “high performers.” Yet fired CEOs make up another 39 names on the highest-paid...

One Way to End the School-to-Prison Pipeline

Since the Great Recession began in 2007, no one’s had more trouble finding work than low-income Asian, black, and Hispanic male teenagers. That’s the main idea in two recent articles in The Wall Street Journal (available here and here ) that rely on research from Andrew Sum, a professor who produces a remarkable number of papers for Northeastern University’s Center for Labor Market Studies (CLMS). As Ben Casselman, author of The Wall Street Journal articles, notes, working during the summer is not only a way for high schoolers to earn money. People who held jobs in their teens are more likely to graduate from high school, and to be employed and have higher earnings in their early 20s than people who didn’t find paid work during the summer, according to a CLMS paper titled “The Continued Crisis in Teen Employment in the U.S. and Massachusetts.” Also worth noting, in that and other CLMS papers, are connections between jobless teenagers and high-school graduation rates that should catch...

The Socialists Who Made the March on Washington

AP Photo/Eddie Adams
AP Photo, File The Team Assembles “I n 1956, when I was a student at Brooklyn College, Mike Harrington told Tom [Kahn, another Brooklyn College student] and me to go up to this office in Manhattan, on 57 th Street, to work with Bayard Rustin,” Rachelle Horowitz remembers. Harrington (who was to author The Other America , which sparked the War on Poverty), Horowitz, and Kahn were all members of the Young People’s Socialist League, a democratic socialist organization of no more than several hundred members nationally. Rustin, their elder, boasted a longer left pedigree: a brief sojourn in the Communist Party in the ’30s, then—repudiating the Communists and affiliating himself with the Socialist Party—working for socialist A.J. Muste’s Fellowship of Reconciliation; founding the Congress of Racial Equality with fellow socialist James Farmer in 1942; doing time in Leavenworth during World War II for protesting the segregation of the armed forces; traveling to India to study nonviolent...

The High Probability of Being Poor

Late last month, the Associated Press ran a report about economic insecurity that managed to gain some traction in certain parts of the political internet, and since then, again and again in certain relevant debates. The statistical bomb dropped in the first sentence of the report really says it all: Four out of 5 U.S. adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream. To be clear, this figure pertains to the percentage of people facing these problems at least once in their life , not the percentage of people facing them right now . Also, it should be noted that this figure cannot, by itself, be a sign of deteriorating economic security. To show things are deteriorating, you'd have to know whether this figure used to be lower than 80 percent, and we do not know that. Shortly after the AP report blew up, the Wall Street Journal's James Taranto responded with a...

Stop Worrying about Food Stamp "Fraud"

Over at the Weekly Standard blog, Jeryl Bier raised an alarm on Friday about the rise of food stamp (aka SNAP) fraud. The howler in the piece is that although the headline says food stamp fraud is up 30 percent, you soon realize that the fraud rate only rose from 1.0 percent to 1.3 percent. Bier rightly deserves a ding for a ridiculously misleading use of statistics. In response to Bier, Jonathan Cohn points out the misuse of statistics and makes the straightforward case for food stamps . That case is old but worth repeating here: food stamps stabilize households and the economy in bad economic times, pull millions out of poverty, and have very low overhead. Also, the program runs quite well! Beyond Cohn’s takedown, I think we should point out that the kind of food stamp “fraud” Bier is complaining about is not even a problem. The USDA calls the type of fraud in question “trafficking,” and it basically amounts to individually swapping out food stamp dollars for actual dollars. Despite...

Paying It Forward on Student Debt

Chris Ison/PA Wire
AP Photo/Jacquelyn Martin, File N ext month, lawmakers will return to state capitals around the country, and as many as a dozen legislatures could consider a new proposal to tackle the growing student-debt crisis. The plan, dubbed " Pay-it-Forward " by its creator, would allow students to enter college without having to pay tuition upfront: In exchange, they would agree to pay a small and set percentage of their income after college into a public fund allowing the next generation to do the same. Senator Jeff Merkley, a Democrat from Oregon, released a plan Friday that would help provide seed money for pilot programs across the country using this model. Almost all of the new initiatives were inspired by Oregon, where the state legislature passed a bill introducing a Pay-it-Forward scheme unanimously on July 1. Barbara Dudley, an adjunct professor at Portland State University who in 2005 helped co-found the Oregon Working Families Party—a third party that has also been influential in...

The Return of One of the GOP's Dumbest Ideas

Flickr/KAZ Vorpal
Lord help us, is the balanced budget amendment—one of the dumbest policy ideas the right ever cooked up (and that's saying something)—actually back? Only time will tell, but today on the New York Times op-ed page, two prominent conservative economists, Glenn Hubbard and Tim Kane, try to revive it with an argument so unconvincing that I worry it's going to be embraced by every Republican in sight. If you think the sequester was a terrific idea and worked out great for everyone, have they got a deal for you. Hubbard and Kane start by insisting that deficit panic must not be allowed to wane. "We are stuck in a bad and worsening place: sure, deficits strike fear in the hearts of economists and intellectuals, but they don't matter at the ballot box." Haven't we actually cut the deficit by more than half from its 2009 peak? And isn't creating jobs and increasing wages more important? And aren't most "economists and intellectuals" not actually driven to terror by the deficit at the moment?...

Red Wings Give You Bull

Why is a bankrupt city building a new $650 million “hockey arena district” to house the Detroit Red Wings?

*/ AP Photo W hile the state of Michigan appears to have no interest in “bailing out” Detroit, it is giving a substantial boost to the Red Wings, the city’s professional hockey team. Less than a week after Detroit filed for the largest municipal bankruptcy in history, a press conference revealed a deal that will transform 45 blocks of the city with a new hockey arena (or “events center,” as the jargon goes) and a mixed-use entertainment district meant to link two of the city’s healthiest neighborhoods—downtown and midtown. “This is a catalyst project,” Governor Rick Snyder said, according to Crain’s Detroit Business . “This is going to be where the Red Wings are. Who doesn't get fired up in Detroit about the Red Wings? Come on now, the people that are criticizing are people from outside of Michigan. This is something that is important to all of us.” The Red Wings are one of the city’s calling cards most worthy of celebration right now: one of the “original six” teams in the National...

Mortgage Reform: Watch Your Fannie

AP Images/ Manuel Balce Ceneta
AP Images/ Manuel Balce Ceneta Speaking in Phoenix on Tuesday, President Obama associated himself with a bipartisan proposal to slowly get Fannie Mae and Freddie Mac out of the business of backing mortgages. According to the plan, formulated in the Senate, a new federal agency called the Federal Mortgage Insurance Corporation would backstop banks and other private investors against catastrophic mortgage losses, but only after they had run though their own substantial capital first. Obama said, “For too long these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag. It was 'heads we win, tails you lose,' and it was wrong. The good news is right now there's a bipartisan group of senators working to end Fannie and Freddie as we know them. And I support these kinds of reform efforts." It sounds good, but there is reason to worry that this plan would protect the government against losses but at the price...

L.A. Story

The Los Angeles Alliance for a New Economy: a new model for American liberalism?

flickr/AlphaProject
AP Photo/E.J. Flynn T ake a left as you exit the Long Beach Airport, and you’ll pass three acres of greenery named “Rosie the Riveter Park.” The park stands at the southeast corner of what had once been the mammoth Douglas Aircraft factory, where DC-3s, -4s, -5s, all the way up to -10s, were once manufactured, and where, during World War II, 43,000 workers, half of them women, built the B-17 bombers and C-47 transports that flew missions over Europe and the Pacific. World War II and then the Cold War remade Long Beach. Federal dollars funded the Douglas factory, a new naval shipyard, and numerous defense firms. An entire city—the working-class community of Lakewood, which borders Long Beach on the north—was built to house the sudden influx of defense workers. Long Beach became and remains the second-largest city in Los Angeles County. The new jobs paid well; powerful unions represented the workers in the factories and on the docks. Military spending, though, began to decline after the...

Part-Time America

AP Images/Matt Slocum
Of the 963,000 jobs created in the past six months, according to the Bureau of Labor Statistics’ (BLS) Household Surveys, 936,000 of them are part-time. That doesn’t mean that just 27,000 of the people hired on to new jobs got full-time work. The total for part-time jobs includes both newly created jobs and formerly full-time gigs that were cut-back to part-time, and the BLS doesn’t pose the questions that would enable it to quantify these two kinds of new part-time jobs. But factoring in both kinds, we do know that the net number of full-time jobs in America has risen by just 27,000 since the end of January. One reason that the number of full-time jobs is so abysmally low is Obamacare’s employee mandate, which stipulated that employers with 50 or more workers either had to provide all such workers who put in at least 30 hours a week with health insurance, or pay a penalty that would help defray the government’s costs for providing subsidized benefits. The administration announced...

The Long Road to a Decent Economy

AP Images/Carolyn Kaster
To underscore a weeklong initiative by President Obama on behalf of rebuilding the middle class, the latest figures on GDP growth, released Thursday, and on job growth, made public Friday, show just how far from a healthy middle class economy we are. Revised figures show that GDP growth fell to a rate of just 1.4 percent in the first six months of 2013, even less than last year’s dismal rate of 2.2 percent. These numbers are not enough to create an adequate supply of jobs, much less good jobs, much less wage growth. And sure enough, when the employment numbers for July were released on Friday, the grim trend was confirmed. Just 162,000 jobs were added in July, and most of them were relatively low-wage jobs. Average earnings actually fell. At this rate it will take another six years to get unemployment back to pre-2008 levels according to the Economic Policy Institute, and more than a decade according to the Hamilton Project. The official unemployment rate dropped slightly, from 7.6 to...

Eternal Summers

AP Photo/J. Scott Applewhite N ow that President Obama has made it clear in a meeting with the House Democratic Caucus that he is standing by his man, what comes next in the Larry Summers/Janet Yellen/Federal Reserve psychodrama? Will Obama damn the torpedoes and pick Summers to chair the Fed? Will he conclude that Summers has too much baggage and give the job to Yellen—or go with a third candidate? What’s clear now is that Obama himself would like to appoint Summers. The lobbying for Summers by the group of Robert Rubin protégés around the president has been internalized by Obama himself. But Obama insists that he still hasn’t made up his mind. In the end, the president’s decision will boil down to two questions. Can Summers be confirmed? And even if he can win confirmation after a hard-fought vote, would the process unearth such messy information that the White House would conclude that it’s best not to try? The letter by 19 Senate Democrats supporting Janet Yellen is probably the...

Young Detroiters Double Down

The American Prospect/Aaron Cassara
Courtesy Margarita Barry Margarita Barry This is the last installment of a four-part series on millennials and the new economy, based on the author’s monthlong road trip with stops in the Rust Belt, Omaha, and Texas. Read the first , second , and third . M argarita Barry was nursing her eight-month-old and browsing the news online when a headline caught her eye: “Detroit Declares Bankruptcy.” Pretty soon, her inbox and Facebook feed were clogged with reports from family and friends sharing the news that Detroit had become the largest U.S. city ever to file for Chapter Nine. Barry, a 28-year-old web designer and entrepreneur who was born and raised on the northwest side of the city, knew it would happen eventually. “It was only a matter of when,” she says. Much ink has been spilled over the infiltration of young, educated transplants to Detroit—a youth hostel here, a craft cocktail bar there, a co-working space downtown purchased for pennies on the dollar. But the bankruptcy hints that...

Strikes, Alliances, and Survival

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Fast-food workers in seven cities are set to walk off their jobs today in one-day actions, escalating what is quickly becoming a nationwide effort to win pay hikes in one of America’s premier poverty-wage industries. Backed by the Service Employees International Union (SEIU), the campaign is succeeding in publicizing the plight of low-wage workers in a growing number of states and cities. How it goes about actually winning higher wages, however, remains unclear. For its part, the AFL-CIO is preparing for its biennial convention this September, at which it will begin to hammer out some kind of formal affiliation or partnership with other, nonunion progressive organizations such as the NAACP and the Sierra Club. There are changes afoot within the union’s Working America affiliate—a Federation-run and –funded neighborhood canvass that has expanded from a purely (and brilliantly successful) electoral operation, building support for progressive Democrats among white working-class swing-...

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