The economics of the minimum wage

Arin Dube reviews recent research to answer some basic questions:

While we can set a wage floor using policy, should we? Or should we leave it to the market and deal with any adverse consequences, like poverty and inequality, using other policies, like tax credits and transfers? These longstanding questions take on a particular urgency as wage inequality continues to grow, and as we consider specific proposals to raise the federal minimum wage — currently near a record low — and to index future increases to the cost of living.

Read his piece in the New York Times here.

Subsidies that fuel fossil fuels

Worldwide subsidies for fossil fuels amount to a whopping $500 billion annually, according to a new report from London-based Overseas Development Institute:

They are subsidizing the very activities that are pushing the world towards dangerous climate change, and creating barriers to investment in low-carbon development.

 

Read about another tilted playing field here.

Trade deficit or budget deficit: which should worry us?

We hear a lot these days about the U.S. government’s budget deficit. But what we ought to be talking about is the country’s trade deficit, write Jared Bernstein and Dean Baker:

Running a trade deficit means that income generated in the United States is being spent elsewhere. In that situation, labor demand — jobs to produce imported goods — shifts from here to there.

 

Read their op-ed piece here.

The tilted playing field: in public education, some are more equal than others

In his classic novel Animal Farm, George Orwell famously wrote that “some are more equal than others.” Turns out the same is true for public education in the United States. Eduardo Porter’s column in the Times explains why America’s educational playing field is far from level:

The United States is one of few advanced nations where schools serving better-off children usually have more educational resources than those serving poor students, according to research by the Organization for Economic Cooperation and Development. Among the 34 O.E.C.D. nations, only in the United States, Israel and Turkey do disadvantaged schools have lower teacher/student ratios than in those serving more privileged students.

Andreas Schleicher, who runs the O.E.C.D.’s international educational assessments, put it to me this way: “The bottom line is that the vast majority of O.E.C.D. countries either invest equally into every student or disproportionately more into disadvantaged students. The U.S. is one of the few countries doing the opposite.”

Read his piece here.

A view from the top

Bill Gross, managing director of the investment firm PIMCO, urges the 1% to get some common economic sense:

1) Growth depends on investment and investment in part depends on an equitable rebalancing of personal income taxes, capital gains and carried interest.

2) The era of taxing “capital” at lower rates than “labor” should end.

3) Investors in the U.S. and elsewhere must look for investment in the real economy, not share buy-back maneuvers that artificially elevate stock prices.

Read his blog on the “Scrooge McDucks” of the world and the need for real tax reform here.

When the going gets tough, the tough build a new economy

Econ4’s Gar Alperovitz on building the new economy from the bottom up:

Deepening economic and social pain are producing the kinds of conditions from which various new forms of democratization—of ownership, wealth and institutions—are beginning to emerge. The challenge is to develop a broad strategy that not only ends the downward spiral but also gives rise to something different: steadily changing who actually owns the system, beginning at the bottom and working up.

Read more here.

Stirrings of the new economy

A new economy is emerging as the old economy falters, writes Econ4’s Juliet Schor in the New York Times:

[W]hile they are no panacea, the emergent trends of community fabrication, self-provisioning and the sharing economy collectively suggest a future for work in wealthy countries that involves more making, sharing and self-organizing. There may be fewer formal jobs — but a more entrepreneurial approach to making money, one that emphasizes smaller-scale companies and collectively owned enterprises, more sharing, and less spending. As painful as the years since the crash have been, a more resilient, satisfying and sustainable way to work and live could be one beneficial consequence.

Read her op-ed piece here.

The over-supplyside economy

Daniel Alpert explains why the economy ain’t what it used to be:

We are in an age of global oversupply: an oversupply of global labor (hence high underemployment); an oversupply of global productive capacity (hence ultra-low inflation); and an oversupply of global capital (hence low interest rates)….

[O]ne can’t properly understand the financial crisis without appreciating how the rise of the emerging nations distorted the economies of rich countries. And you can’t chart a course to more growth and stability in the developed world without recognizing that many of these distorting forces are still at work. Cheaper credit through monetary easing, for example, doesn’t yield much in an era when cheap capital already exists in abundance.

Can we get out of this mess? We can, but we need a fresh playbook.

Read his Times op-ed piece here.

Guess who’s looting the pension funds of public workers

Matt Taibbi writes in Rolling Stone:

The bottom line is that the “unfunded liability” crisis is, if not exactly fictional, certainly exaggerated to an outrageous degree. Yes, we live in a new economy and, yes, it may be time to have a discussion about whether certain kinds of public employees should be receiving sizable benefit checks until death. But the idea that these benefit packages are causing the fiscal crises in our states is almost entirely a fabrication crafted by the very people who actually caused the problem. It’s like Voltaire’s maxim about noses having evolved to fit spectacles, so therefore we wear spectacles. In this case, we have an unfunded-pension-liability problem because we’ve been ripping retirees off for decades – but the solution being offered is to rip them off even more.

Everybody following this story should remember what went on in the immediate aftermath of the crash of 2008, when the federal government was so worried about the sanctity of private contracts that it doled out $182 billion in public money to AIG. That bailout guaranteed that firms like Goldman Sachs and Deutsche Bank could be paid off on their bets against a subprime market they themselves helped overheat, and that AIG executives could be paid the huge bonuses they naturally deserved for having run one of the world’s largest corporations into the ground. When asked why the state was paying those bonuses, Obama economic adviser Larry Summers said, “We are a country of law. . . . The government cannot just abrogate contracts.”

Now, though, states all over the country are claiming they not only need to abrogate legally binding contracts with state workers but also should seize retirement money from widows to finance years of illegal loans, giant fees to billionaires like Dan Loeb and billions in tax breaks to the Curt Schillings of the world. It ain’t right. If someone has to tighten a belt or two, let’s start there. If we’ve still got a problem after squaring those assholes away, that’s something that can be discussed. But asking cops, firefighters and teachers to take the first hit for a crisis caused by reckless pols and thieves on Wall Street is low, even by American standards.

Read the piece here.

See Taibbi interviewed by Democracy Now! on the Great Pension Fund Rip-off here.

The free market myth

Robert Reich peels away the layers of an ideological onion:

One of the most deceptive ideas continuously sounded by the Right (and its fathomless think tanks and media outlets) is that the “free market” is natural and inevitable, existing outside and beyond government. So whatever inequality or insecurity it generates is beyond our control. And whatever ways we might seek to reduce inequality or insecurity — to make the economy work for us — are unwarranted constraints on the market’s freedom, and will inevitably go wrong. 

By this view, if some people aren’t paid enough to live on, the market has determined they aren’t worth enough. If others rake in billions, they must be worth it. 

Read more here.