For over half a century, the United States has measured income poverty by comparing a family’s income to a standardized dollar amount (a “poverty line”) that varies by family size. For a family of four, this poverty line was initially set at $3,104 in 196

One of the tasks that are keeping economists employed these days is explaining the drop in labor’s share of Gross Domestic Product (GDP). This is supposed to be a major cause of concern since the vast majority of people get most or all of their income from working. 

A wide variety of theories have been put forward to explain the decline. However, there is a big problem these theories; it is not clear that there has been much of a drop in the labor share. 

Much of the decline in shares, before recent revisions, was simply due to an increase in the share of depreciation in GDP. Depreciation is the portion of output that is needed to replace worn-out capital. This is output that is neither profit nor wages; but the greater the depreciation share, other things being equal, the lower will be the labor share.

China passed the United States as the world's largest economy early in the decade.

The latest data on investment, GDP growth, the trade deficit and manufacturing employment all tell us the same thing. When it comes to producing gains for ordinary workers, Trump’s most-touted economic policies have failed badly.

November 1, 2019

Warren's proposal is not the final word. But it is an excellent first draft that provides a basis for future debate.

November 1, 2019

November 1, 2019 (Jobs Byte)

Last week, New York Times columnist Timothy Egan had a piece headlined “Why Doesn’t Mark Zuckerberg Get It?” The piece then goes on to document how Facebook has become a medium for spreading lies and nonsense all over the world, that many ill-informed users have come to believe.

This is what Egan wants Zuckerberg to “get.” While it would be nice if Zuckerberg understood the problems created by Facebook, and took effective measures to address them, the problem with Egan’s piece is that there is no reason to expect that Zuckerberg would get this point.

Zuckerberg is not a political philosopher concerned about the public good. There is a zero evidence he is a deep thinker of any sort. He is a Harvard boy who stumbled into a good idea and had the necessary connections to get very rich from it: end of story.

It is bizarre that so many people look to the country’s billionaires to tell us how the world should be constructed or think that these people have any great insight into such matters. Being a billionaire means that you were successful at getting very rich. There is no reason to believe that billionaires have any more insight into major policy issues than anyone else.

Imagine if we turned to LeBron James, a truly great basketball player, to get advice on how best to deal with global warming. LeBron is a smart guy, but no one would expect him to have special insights into dealing with global warming, in spite of his incredible skills on the basketball court.

In the same vein, why would anyone think that Zuckerberg would know or care about how Facebook should be run in a way that protects democracy? Zuckerberg runs Facebook to make to make money (lots of it), not to promote democracy. The way to fix the problems of Facebook is not to convince Zuckerberg of its harms, the way to fix Facebook is to change the law.

October 30, 2019

October 30, 2019 (GDP Byte)

If the reporters want to yell about how Warren's plan will mean higher taxes, then they have the option to do so, but Senator Warren is talking about matters to real people.

When I first saw Senator Warren refuse to acknowledge that Medicare for All will mean higher taxes, I admired her political skills, but as an economist, I was annoyed at her evasion of an obvious truth. However, on further thought, I realize that she is exactly right and is doing a public service with her simple insistence that costs for most people will go down.

It is true that many people hate taxes and find the idea that they would ever have to pay more for taxes for anything repugnant. But that group is far from a majority of the electorate. Most people approach their tax bill as any rational person would. They want to know what they are getting for their money.

This is why Warren is giving the right answer even though it is angering reporters and political pundits. She is talking about what actually matters to most voters; what will they get for their money?

The reporters are determined to make this a “she will raise your taxes story.” This is an absurd narrowing of the issue. There is no reason that Warren should cooperate with their silly game. She is determined to talk about the substance of the issue, whether or not the reporters want to hear it.

For a larger context, consider how the budget is reported. Reporters routinely highlight the budget deficit and the accumulated debt, as though this is the most important feature of the budget. It is at least implicit in nearly all reporting that the country would be better off with a lower budget deficit.

This is also indicated in their choice of sources. An incredibly high percentage of budget stories in leading news outlets (i.e. the New York Times, Washington Post, and National Public Radio) feature comments from Committee for a Responsible Federal Budget, an organization committed to lower deficits and debt.   

News stories on the budget almost never present the countervailing view, which is endorsed by a growing number of economists, that the budget deficit has generally been too small in the years following the Great Recession. The result has been that growth has been slower than it otherwise would have been, causing workers to be needlessly unemployed.

Let’s unpack the E&Y study. Employment  E&Y touts that the private equity industry supports 8.8 million jobs. You could mistakenly think this means that PE created 8.8 million jobs or that PE increased employment at the companies it took over. That may be