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Article Artículo

Quick Lesson on Silliness of Concerns Over Government Debt

In Washington, there are two sure ways to get rich: you can work as a corporate lobbyist or you can work with a Peter Peterson-funded organization and whine about government debt. The Peterson Foundation, along with its allies at the Washington Post and other media outlets, have long worked to fan irrational fears about government debt just as Donald Trump and other demagogues have fanned racism and xenophobia. One small positive of a Donald Trump presidency is that it may provide a teachable moment on the meaninglessness of such fears.

The NYT gives us an excellent lead in with this piece on the need to repair locks and dams on inland waterways. The piece tells us of Trump's plan to spend $1 trillion improving the country's infrastructure, then adds:

"To avoid raising taxes or increasing debt, his plan calls for much of the money to come from the private sector, with a proposed tax credit offered in return. ...

"Even with a tax credit, though, companies building roads or locks would want a return on their investment — most likely in the form of toll collection, said Mike Toohey, president of the Waterways Council, an advocacy group for the river shipping industry."

So let's look at how we are avoiding raising the debt in this story. First, the infrastructure is supported through a tax credit rather than direct spending. If we spent $1 trillion directly then this would add $1 trillion to the debt. We will then have to pay the interest on this debt as long as it is outstanding. (Currently, the real interest rate on government debt is nearly zero, since the inflation rate is almost as high as the long-term interest rate.)

CEPR / November 27, 2016

Article Artículo

How Trump Theft Hurts You: Thoughts to Chew on Over Thanksgiving Dinner

Donald Trump has basically come right out said that he intends to use the presidency to further enrich himself and his family. After refusing to follow long-established precedent and put his assets in a blind trust, he proclaimed, "the president can’t have a conflict of interest."

Of course the president absolutely can have a conflict of interest as speakers of the English language use the expression. If a president owns a large business empire, as does Mr. Trump, there are all sorts of situations where his personal business interests could be in conflict with the country's interests.

For example, he may want favorable treatment from a foreign government for one of his hotels. This may lead him to make concessions to the government in other areas which he would not otherwise do. The same applies to domestic tax policy where he may decide to push tax changes that will help his business interests. There are literally an infinite number of situations where the president can and does have a conflict of interest when he owns a business empire like Mr. Trump.

It is also worth noting that it does not seem as though corruption will be exlcusively a family affair with Mr. Trump. David Dayen has an interesting piece in the Intercept about how Trump may hand billions to his friend and campaign contributor, John Paulson, by reprivatizing Fannie Mae and Freddie Mac. Of course this is just the tip of the iceberg. Trump seems intent on raising political corruption to a new level in his administration. As he is prone to say, it will be yuuge!

Some folks hear about this stuff and think it is just rich people's games that don't affect them. After all, who cares if Trump's hotels are able to pull away business from Hilton or Marriott because he is in the White House? Well, the incredible wealth of Trump and his cronies actually does affect the average worker, although we have to take a small detour to get the full picture.

CEPR / November 23, 2016

Article Artículo

United States

Workers

Millions of Americans Are Still Out of Work

In 2007, before the Great Recession, the unemployment rate was 4.6 percent. The employment rate ? the percentage of all Americans age 16 and older who had a job ? was 63.0 percent. By 2010, the unemployment rate had risen to 9.6 percent, and the employment rate had dropped to 58.5 percent. Since then, a weird thing has happened. Although unemployment has fallen back to 4.9 percent ? just 0.3 percentage points above the 2007 average ? the employment rate has remained stubbornly low.

Looking at the data more closely, it is clear what is driving these seemingly incompatible trends: people are dropping out of the labor force. In order to be counted as unemployed, a prospective worker must have “actively looked for work in the prior 4 weeks.” This means that if someone has been searching for work for a long period of time, but has become dissatisfied with their job prospects and hasn’t applied for any jobs over the past month, he or she is no longer counted as “unemployed.” Instead, that person will be counted as “not in the labor force,” a classification that covers people who are neither employed nor unemployed. The share of the population not in the labor force has risen from about 34 percent in 2007 to over 37 percent today.

If the long-term unemployed drop out of the labor force due to discouragement over their job prospects, employment is a more useful measure than unemployment. However, the overall employment rate doesn’t adjust for the changing age distribution of the population; with more Americans hitting retirement age, we expect employment to fall not because workers have relatively few job opportunities, but simply because people in their sixties, seventies, and eighties prefer retirement to work.

CEPR and Nicolas Buffie / November 23, 2016