Economy

How to Raise Americans' Wages

AP Images/Paul Beaty
O nce upon a time in a faraway land—the United States following World War II—workers reaped what they sowed. From 1947 through 1973, their income rose in lockstep with increases in productivity. Their median compensation (wages plus benefits) increased by 95 percent as their productivity increased by 97 percent. Then, abruptly, the rewards for greater productivity started going elsewhere—to shareholders, financiers, and top corporate executives. Today, for the vast majority of American workers, the link between their productivity and their compensation no longer exists. As economists Robert Gordon and Ian Dew-Becker have established, the gains in workers’ productivity for the past three decades have gone entirely to the wealthiest 10 percent. The portion of the nation’s economy that went to workers’ pay and benefits—which had held remarkably steady from 1947 through 1973 at 66 percent or 67 percent—last year fell to a record low of 58 percent, while profits reached a postwar high...

Tesla, Car Dealers, and Anti-Competitive State Laws

Shoppers at a Tesla showroom in Amsterdam, where such things are legal. (Flickr/harry_nl)
You may not realize it, but car dealers wield an unusual amount of political power in this country. That's partly because they're located in or near pretty much every community everywhere, and also because they're highly organized and clever about using their influence. One of the ways they've done so is get laws passed in state after state making sure that the model under which they operate—one in which independent dealers sell cars, but car companies themselves don't—is the only thing allowed by law. In fact, laws making it difficult or downright illegal for car companies to sell their products directly to customers are on the books in 48 states. This absurd state of affairs hasn't gotten much attention until recently, when Tesla decided it wanted to open its own dealerships to sell people cars. Among the places it has done this is New Jersey, where the company had opened two stores. But earlier this week, the New Jersey Motor Vehicle Commission passed a rule requiring that all auto...

What Is Left?

A response to Harold Meyerson

I was not surprised by the substance of Harold Meyerson’s criticisms of my recent Harper’s essay (“ Nothing Left: The Long, Slow Surrender of American Liberals ,” March 2014). I have known for some time that he and I disagree fundamentally on the reasonable scope of a political left in the United States and, correspondingly, whether one actually exists and/or how to go about building one as an effective social and political force. I was somewhat disappointed, however, at the tired hook to which he tethered his criticism. He characterizes me as viewing the political scene “from space” or a “stratospheric height" which leads me to miss crucial details on the ground. That’s just dismissiveness masquerading as evaluation. I could characterize him as limited by the myopic perspective of the inside-the-Beltway crowd, which renders him incapable of seeing the patterns that those details form and reflect. No doubt, each of us would be to some extent correct about the other, but that doesn’t...

The Inequality Puzzle

A new study shows there's been no decline in intergenerational poverty in the last 30 years, but it doesn't tell the whole story.

Flickr/DonkeyHotey
Flickr/DonkeyHotey I n January, a team of prestigious economists published an authoritative study showing that there had been no decline in intergenerational mobility during the past three decades. The paper, by Harvard’s Raj Chetty and three colleagues, using some 40 million Internal Revenue Service records, found that if you were born in the bottom fifth of the income distribution in 1980–1982, you had about the same chance of moving to the top quintile (about 1 in 12) as someone born at the bottom 30 years earlier. This result was surprising. In recent years, the ability of the affluent to pass along class advantage has intensified in countless ways. Young people from wealthy families are more likely to get into elite colleges and less likely to finish college hobbled with debt. Parents can subsidize unpaid internships useful for networking. The children of the affluent can get help with starter homes, in districts with excellent public schools. And when (grand) children come, they...

Piketty’s Triumph

Three expert takes on Capital in the Twenty-First Century, French economist Thomas Piketty's data-driven magnum opus on inequality.

Courtesy of Fondation Jean Jaurès
I n the 1990s, two young French economists then affiliated with the Massachusetts Institute of Technology, Thomas Piketty and Emmanuel Saez, began the first rigorous effort to gather facts on income inequality in developed countries going back decades. In the wake of the 2007 financial crash, fundamental questions about the economy that had long been ignored again garnered attention. Piketty and Saez’s research stood ready with data showing that elites in developed countries had, in recent years, grown far wealthier relative to the general population than most economists had suspected. By the past decade, according to Piketty and Saez, inequality had returned to levels nearing those of the early 20th century. Last fall, Piketty published his magnum opus, Capital in the Twenty-First Century , in France. The book seeks to model the history, recent trends, and back-to-the-19th-century future of capitalism. The American Prospect asked experts and scholars in the field of inequality to...

Paul Ryan: A Poor Man's Savior of the Poor

AP Images/Charlie Neibergall
AP Images/Charlie Neibergall W isconsin Republican Paul Ryan, chair of the House of Representatives Budget Committee, spent the fall touring poor neighborhoods in an effort to rebrand the GOP as the true saviors of the poor. It was both an effort to mark the 50 th anniversary of Lyndon B. Johnson’s War on Poverty, and to salve the wounds his party felt after its 2012 presidential candidate Mitt Romney put on a monocle and proclaimed the nation to be full of moochers while giggling maniacally over vichyssoise at a fancy dinner party. (OK, he didn’t do that, but he did do this .) Monday, Ryan released a report on the federal programs meant to help low-income Americans. He means it to be a critique of most of those programs, and use the report as a platform from which to argue for reform. If his previous budgets are a guide, he wants to turn most federal programs into block grants for the states. If our history with welfare reform tells us anything, block grants would mean funding for,...

The Home Mortgage Business, Where Cheaters Always Seem to Prosper

AP Images/Carlos Osorio
O cwen is a little company with a dream: to become the nation’s largest mortgage servicer. If they weren’t so uniformly terrible at mortgage servicing, they might even achieve that goal. And while state and federal investigations, multi-billion-dollar fines, and legal threats would seemingly throw a wrench in most companies’ high-minded plans for success, Ocwen is different. Because in America, rank incompetence need not impede a corporate quest, at least not in the financial services industry. As cracks in its public image continue to surface, Ocwen is attempting to pull off one of the most brazen schemes in recent memory: getting what amounts to a cash advance for the very work they can’t seem to do properly. Let’s take a step back. Ocwen is the biggest of a group of “non-bank” servicers, which don’t originate loans themselves. They merely handle the day-to-day accounting of loans for other owners, usually big institutional investors—collecting monthly payments, making decisions on...

Walking on Ukrainian Eggshells

AP Images/Darko Bandic
At times, you have to wonder where Europe’s strategic and economic sense has gone. Consider Ukraine, most of whose citizens clearly wish to become Ukrainian-European and have their country join the European Union. Some of whose citizens died for that this week. Until this week, however, Europe was doing all it could to repel them. Last autumn, Ukrainian President Viktor Yanukovych bitterly disappointed his compatriots by backing off his promise to sign an association document with the EU. The conventional wisdom is that he succumbed to Russian pressure—after all, it’s Russia that supplies Ukraine with its oil and gas. But Russian President Vladimir Putin was also offering Ukraine $15 billion, while the EU was offering it nothing, and telling Yanukovych that any real progress in integrating his country into the Union would depend not only on cleaning up Ukraine’s notoriously corrupt government but also on imposing austerity conditions on its already economically-beleaguered citizens...

How Big Banks Are Cashing In On Food Stamps

AP Images/Rich Pedroncelli
AP Images/Rich Pedroncelli T he Agricultural Act of 2014 , signed into law by President Obama last Friday, includes $8 billion in cuts to the Supplemental Nutrition Assistance Program (SNAP) over the next decade. One way the bill proposes to accomplish these savings is by reducing food stamp fraud. When the new farm bill is enacted, many of America’s hardest working families will experience cuts in services and have trouble putting food on their family’s table. But there will be major gains for an industry that most Americans might not expect: banking. Banks reap hefty profits helping governments make payments to individuals, business that only got better when agencies switch from making payments on paper—checks and vouchers—to electronic benefits transfer (EBT) cards. EBT cards look and work like debit cards, and by 2002, had entirely replaced the stamp booklets that gave the food stamp program its name. SNAP is the most well-known program delivered via EBT, but they also carry...

Just How Much Do Republicans Hate Unions?

The VW plant in Chattanooga. (Photo courtesy of Volkswagen USA)
If you ask Republicans about their antipathy toward unions, they'll say that letting workers bargain collectively reduces a company's ability to act efficiently in the marketplace. If you knew anything about business, the market advocates will patiently explain, you'd understand that unions, with all their rules and conditions and strike threats, only make it harder for the company to make its products. Let management make decisions about things like wages and working conditions, and the result will be higher profits and more jobs, which will benefit everyone. In almost all cases, the corporation agrees; after all, union workers always earn better wages than their non-union counterparts, and they give power to the employees, which no CEO wants. What most people probably don't realize is that this inherently hostile relationship between management and unions isn't something that's inherent in capitalism. In fact, in many places where there are capitalists making lots of money,...

The Ink-Stained Wretches of Wall Street

AP Images/Richard Drew
L ast year, upon the 10 th anniversary of the start of the war in Iraq, newspapers and magazines filled with soul-searching essays from journalists rethinking their advocacy of the invasion, documenting lessons learned and errors made. But a few months later, on the 5 th anniversary of the fall of Lehman Brothers, the unofficial beginning of the financial crisis, virtually nobody wrestled with their failure to anticipate the Wall Street wrecking ball. Indeed, to date, no major news organization has apologized for missing the biggest economic story of the decade, and most business journalists defend their profession, arguing that they sounded the alarm about financial industry greed and the makings of a catastrophe. “The government, the financial industry and the American consumer—if they had only paid attention—would have gotten ample warning about the crisis from us,” said Diana Henriques of The New York Times in 2008. Neither she nor her colleagues have really looked back since. As...

Liberals, Conservatives, and the Meaning of Work

Some young Americans getting a good lesson in the dignity of work. (Lewis Hine/Wikimedia Commons)
It isn't often that we spend an entire week talking about a Congressional Budget Office report and its implications, but the one currently occupying Washington's attention—about the effects of the Affordable Care Act on the labor force—is actually pretty revealing. To catch you up, the CBO said that due to the fact that under the ACA people are no longer tied to jobs they'd prefer to leave because they can't get health insurance on the individual market ("job lock"), many will do things like retire early, take time off to stay at home with kids, or quit and start businesses. They projected that these departures will add up to the equivalent of 2 to 2.5 million full-time positions. At first, Republicans cried "Obamacare will kill 2 million jobs!", but when everyone, including the CBO's director, said that was a blatantly misleading reading of what the report actually said, they changed their tune. And here's where it gets interesting, because this debate is getting to the heart of what...

Horrible Bosses

AP Images/John P. Johnson
AP Images/Warner Brothers D o you believe everything your boss tells you? The answer probably depends—if he tells you the Cubs are going to win next year's World Series then maybe not, but if he tells you your benefits are being cut and explains the reason why, you'll probably take him at his word. After all, he's in charge of the business, so he should know. But Tim Armstrong, the CEO of AOL (company motto: "More Than Just Your Grandmother's Email, Really!") must have thought his employees were pretty darn stupid when he told them last week that he was cutting their 401(k) contributions and blamed the change on the Affordable Care Act. He explained in an interview that the company had incurred $7 million in "Obamacare costs," whatever that's supposed to mean, and later complained that two employees who had "distressed babies" had cost the company $1 million each. It's been said many times that once he passed significant health care reform, Barack Obama came to "own" the health care...

Pipeline or Pipe Bomb?

AP Images/The Tyler Morning Telegraph/Sarah A. Miller
Chances are that you missed the State Department releasing the final environmental review of the Keystone XL pipeline last week. You were meant to: it came out on 4pm on the Friday before Super Bowl Sunday. The mainstream media only had a few moments to glance at the executive summary—the report itself is an un-skimmable eleven volumes long—before the news cycle moved onto the big game. But if you live or work in Washington, D.C., and take the Metro , you may well have been assailed for months by Canada's multi-million dollar advertising blitz promoting the pipeline. Commuters are being treated to homey images of happy little girls poking their heads out from behind the American and Canadian flags, side by side, and to awkward slogans like "America and Canada: Standing together for energy independence." The commuters the ads are targeted at are the people involved in deciding whether to approve TransCanada Corporation's application to build a pipeline that would carry up to 830,000...

Frankly Scarlett, You Should Give a Damn

AP Images/Gali Tibbon
O utside of being celebrities and having Jewish mothers, Benjamin Netanyahu and Scarlett Johansson aren't usually thought of having a lot in common. But they've been displaying another shared quality of late: the ability to act clueless about the suddenly snowballing economic boycott of Israeli settlements. To be fair, it's a lot more likely that Netanyahu is the one putting on an act. Johansson sincerely appeared to have little idea about what she was getting into when she agreed to be the straw-sipping poster girl of SodaStream, the Israeli maker of home fizzy-drink devices that produces wares in the industrial park of a West Bank settlement. "I never intended on being the face of any social or political movement… or stance," she said in a press statement responding to criticism of her role advertising the firm. This sounds painfully naïve: Nothing having to do with Israeli settlements in occupied territory comes packaged without a political stance, but Johansson may have noticed...

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