Economy

Life at the Bottom

Flickr/Sport Suburban
Flickr/SportsSuburban A female cashier at the McDonalds in Spokane, Washington. T he release of 2012 minimum-wage data last Wednesday—which shows that the number of minimum-wage workers has fallen but is still higher than any period since 1998—has underscored the importance of making good on Obama’s pledge of raising the federal minimum wage from $7.25 to $9 an hour. As many have pointed out, women stand to benefit disproportionately from the increase: Two-thirds of the country’s roughly 1.6 million minimum-wage workers are women. Perhaps unsurprisingly, the data show that work at the bottom of the pay scale tends to be highly segregated by gender—the three largest occupational groups, making up 67 percent of minimum-wage jobs, are 65 percent female—and includes jobs historically performed by women such as child care and home health services. According to experts, the problem is twofold: While essential, businesses tend to underpay for these types of work, a problem compounded by the...

Hello to 236,000 New Jobs

Economic Policy Institute
There are two things you can say about the recovery: It's slow, and it's remarkably durable. Even with the collapse of fiscal stimulus, the shocks of austerity, and a dysfunctional government, we've seen sluggish growth with just enough to bring down unemployment. And at times—such as the winter between 2011 and 2012—there were signs it was speeding up. If today's jobs report is any indication, the recovery is—again—speeding up. The economy created 236,000 jobs last month, the largest gain since November, and the second largest gain in over a year. Unemployment edged down to 7.7 percent from 7.9 percent, and average hourly earnings were up 0.2 percent. It should be said that part of the decline in unemployment owes itself to a smaller workforce—the household survey shows unemployment down by 300,000, but employment up by only 170,000. The overall employment-to-population ration is unchanged at 58.6 percent. Even still, this is a good report. Jobs are up significantly in construction...

When Public Is Better

Flickr/Mirsasha
L ong before we thought of founding The American Prospect in 1989, I came to know Paul Starr through a prescient article titled “Passive Intervention.” The piece was published in 1979, in a now-defunct journal, Working Papers for a New Society . As Paul and his co-author, Gøsta Esping-Andersen, observed, the American welfare state is built on terrible, even disabling compromises. Progressives often lack the votes to pass legislation to deliver public benefits directly. So they either create tax incentives or bribe the private sector to do the job, thus inflating a bloated system. “The problem is not too much government activism,” they wrote, “but too much passivity.” Their two emblematic examples were housing and health care. In housing, tax advantages became an inflation hedge for the affluent and drove up prices. Low-income homeownership programs, run through the private sector, had huge default rates. In health care, the political compromises necessary to enact Medicare excluded...

Few Waves in California

Flickr/msun523
Flickr/msun523 Cuts on overtime for customs inspectors at the Port of Long Beach in Long Beach, California, may hinder its ability to process cargo. I f the sequester had come to California 25 years ago, its effect would have been catastrophic. Today, its effects are decidedly less draconian. Nonetheless, California has a considerably less robust economy than that of the late '80s, and the sequester will cool off the state’s already tepid recovery. In considering the effects of the sequester, the difference between the California economy of 1942-1992 and its economy today is critical. For the half-century beginning with the attack on Pearl Harbor, California was the centerpiece of the American defense industry. Southern California in particular was a home base for much of the aviation industry even before World War II, but wartime and Cold War spending built up aviation and then aerospace to the point that they employed more Californians than any other industry. When the Cold War...

A Tale of Two Filibusters

Gage Skidmore / Flickr
Gage Skidmore / Flickr Today has been an interesting day for filibusters. This morning, the Senate filibustered President Obama's nomination of Caitlin Halligan to the DC Circuit Court of Appeals. Halligan isn't unqualified and she isn't a radical. Her only offense is that Obama wants her for one of the most important courts in the country. As such, Republicans successfully filibuster her nomination, by a vote of 51 to 41. Sixty votes are needed to break a filibuster and move to a final vote. Shortly after this vote went down, Senate Majority Whip Dick Durbin announced his intent to reintroduce filibuster reform, perhaps frustrated by the Halligan nomination and the general approach of the GOP, which is to filibuster anything that might provide an advantage to President Obama: “We have tried at the beginning of this Senate session to avoid this kind of filibuster confrontation. The last several years we have had over 400 filibusters — a record number of filibusters in the Senate,”...

Bull Market for Stocks, Bear Market for Workers

Flickr/Michael Aston
Today the Dow Jones Industrial Average rose above 14,270 — completely erasing its 54 percent loss between 2007 and 2009. The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then. Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains sky-high. Why is the stock market doing so well, while most Americans are doing so poorly? Four reasons: First, productivity gains. Corporations have been investing in technology rather than their workers. They get tax credits and deductions for such investments; they get no such tax benefits for improving the skills of their employees. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits. Second, high unemployment itself. Joblessness all but eliminates the bargaining power of most workers—allowing corporations to keep wages low. Public policies that might otherwise reduce unemployment—a new WPA or CCC to hire the...

The Sequester: Now What?

flickr/Penn State news
flickr/Penn State news President Obama gambled that the threat of the automatic sequester of $85 billion in domestic and defense cuts would force the Republicans to accept major tax increases, and so far he is losing the wager. The Republican leadership, which was badly divided over the New Year’s deal that delayed the fiscal cliff, is now re-united around the proposition that Republicans will accept no further tax increases. So the president is left to court individual Republican House members to support loophole closures in exchange for the restoration of some popular domestic and military spending. But for the moment, Republicans got what they wanted—big spending cuts, party unity around no tax increases, and a weakening of a newly re-elected president. For Obama and the Democrats, there are three big risks going forward. First, the sequester slows down economic growth—cutting it in half this year from about 3 percent to 1.5 percent according to the Congressional Budget Office...

The Sequester, Now What?

Flickr/Justin Sloan
President Obama gambled that the threat of the automatic sequester of $85 billion in domestic and defense cuts would force the Republicans to accept major tax increases, and so far he is losing the wager. The Republican leadership, which was badly divided over the New Years deal that delayed the fiscal cliff, is now re-united around the proposition that Republicans will accept no further tax increases. So the president is left to court individual Republican House members to support loophole closures in exchange for the restoration of some popular domestic and military spending. But for the moment, Republicans got what they wanted—big spending cuts, party unity around no tax increases, and a weakening of a newly re-elected president. For Obama and the Democrats, there are three big risks going forward. First, the sequester slows down economic growth—cutting it in half this year from about 3 percent to 1.5 percent, according to the Congressional Budget Office. Obama, more than the...

The Lone Star State Left Out To Dry

Flickr/Jmtimages
When the sequester deadline came and went last Friday, it was hardly a surprise. In Congress, Republicans had repeatedly made clear they would be willing to let enormous cuts to discretionary spending take effect rather than compromise with the White House on raising revenue. But cutting off their nose to spite their face hasn’t quite worked. As it turns out, the GOP may be defacing its figurehead: the State of Texas. The economic impact of the sequester on Texas will be enormous. As a Pew Charitable Trusts study shows, Texas receives 8 percent of its state revenue through federal grants, well above the national average of 6.6 percent. Only South Dakota, Illinois, and Georgia receive a higher proportion. One study from George Mason University showed that Texas is among the top three states that will lose out most as a result of the sequester, both in terms of jobs and GDP. The cuts could cost Texas $16 billion in gross state product—1.23 percent of the state’s GDP—and as many as 159,...

The Once and Future Gov

AP Photo/Eric Risberg
AP Photo/Eric Risberg A merica’s most futuristic governor seems borne back ceaselessly into the past these days. As he shows me around his office on a crisp winter morning, California Governor Jerry Brown points out not just the desk that his father, Edmund “Pat” Brown, used during his own term as governor from 1959 to 1967 but also photos of his grandparents and his great-grandfather, who came to California in the gold rush years. “He knew John Sutter,” Brown says. The only two governors in the past half-century who were native Californians, he points out, were he and his father. At 74, Brown has lost little of the intensity that impressed and occasionally discomfited voters during his first tenure as governor nearly 40 years ago. His outfit—an open-collar shirt under a white pullover sweater, blue jeans—may be West Coast casual, his shaved head may call to mind the Zen monks with whom he’s studied, but Brown’s emotional repertoire does not include laid-back, except when he’s talking...

Euro Crisis Redux

Think sequestration is bad? Things could be turning disastrous in Europe.

When global leaders met in Davos, Switzerland this past January for the annual World Economic Forum, it was not just an opportunity to chatter about the state of the global economy, but also a moment for a collective sigh of relief. The fiscal cliff in the United States had just been avoided, Barack Obama was even able to raise some revenue by letting some of the Bush-era tax rates expire, and the currency crisis in Europe appeared to be on the mend. What a difference a month makes. As another battle over deficits and spending looms in Washington and threatens to pull the U.S. economy back into recession, a far greater worry is the ever-present crack-up of the euro, which would be an economic tsunami to the spring shower of sequestration. It all starts with Italy and the possible return of Silvio Berlusconi. Many thought the media mogul’s long strange trip as Italian prime minister had finally come to end in November 2011 when he resigned after pressure mounted to fix the ballooning...

Virginia, Say Hello to the Sequester

Official U.S. Navy Imagery, Flickr/Jo Naylor
Official U.S. Navy Imagery Tugboats guide the Nimitz-class aircraft carrier USS Harry S. Truman to its new berth at Norfolk Naval Shipyard. V irginia didn't just weather the Great Recession; it thrived. Because of its reliance on federal dollars, the state was insulated from the worst of the economic crisis. At no point over the last five years, for instance, did joblessness reach 8 percent. Its peak was 7.4 percent in January 2010, and since then, it's declined to just 5.5 percent—one of the lowest rates in the country. But that was before the sequester. Every state will lose funding as a result of the $85.4 billion in across-the-board spending cuts, but because of its close ties to Washington and the military, Virginia might see the worst of it. Already, Governor Bob McDonnell has warned the commonwealth risks falling into recession. "The automatic sequestration reductions mandated by the Budget Control Act of 2011 are already having a significant adverse effect on the Commonwealth...

Sequestration Nation and Remembering Robert Kennedy

Flickr/Kemon01
With the sequester now beginning, I find myself thinking about Robert F. Kennedy—and 46 years ago when I was an intern in his Senate office. 1967 was a difficult time for the nation. America was deeply split over civil rights and the Vietnam War. Many of our cities were burning. The war was escalating. But RFK was upbeat. He was also busy and intense—drafting legislation, lining up votes, speaking to the poor, inspiring the young. I was awed by his energy and optimism, and his overriding passion for social justice and the public good. (Within a few months he’d declare his intention to run for president. Within a year he’d be dead.) The nation is once again polarized, but I don’t hear our politicians talking about social justice or the public good. They’re talking instead about the budget deficit and sequestration. At bottom, though, the issue is still social justice. The austerity economics on which we’ve embarked is a cruel hoax—cruel because it hurts those who are already hurt the...

The Maximum Impact of the Minimum Wage

AP Photo/Mike Groll
Cristina Romer, Berkeley economics professor and the former head of President Obama’s Council of Economic Advisers, passed judgment on the merits of raising the minimum wage in Saturday’s New York Times , and in the process made clear why she wasn’t a member of the president’s de facto council of political advisers. She argued, as some mainstream economists do, that the merits of a heightened minimum wage were slight—that it may, for instance, raise prices, offsetting the gain to low-wage workers. The better solution, she argues, is to raise the earned income tax credit (EITC)—the government’s payment to the working poor—and to support universal pre-K education. “Why settle for half-measures,” she concludes (by which she means raising the minimum wage), “when such truly first-rate policies [by which she means the EITC and pre-K schooling] are well understood and ready to go?” Ready to go? Congressional Republicans are rarin’ to increase government spending on the working poor and...

Automatic Stabilizers: There When Congress Isn't

Flickr/JMazzolaa
As we approach sequestration today the dominant narrative continues to be that the huge run-up in the deficit since the Great Recession has been our greatest political—perhaps even a moral—failure. But it isn’t a failure. This is exactly how the system was designed to work if the economy ever saw a downturn on the scale of the 2008 financial crisis. The deficit is collapsing through the same planned process. As the economy recovers, it is falling quickly, down to 7 percent in 2012, and an estimated 5.3 percent in 2013. These are our "automatic stabilizers" at play. Though it sounds vaguely hydrologic or like a bad steampunk creation, it’s straightforward: The economy will naturally suffer from periods of slack demand in which there isn't enough purchasing power in the economy to produce goods and employ all of our resources, including people. Automatic stabilizers then kick into motion in to counteract this. One important automatic stabilizer is the tax code, which has people pay less...

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