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Article Artículo

NPR Does Mind Reading on Overtime Rule, Also Tells Listeners Non-Profits Have Incompetent Managers

NPR had a bizarre piece on the Labor Department's new overtime rules which seemed intended to undermine support for them. These rules would increase from $23,660 to $50,440, the floor under which salaried workers would automatically qualify for overtime regardless of their work responsibilities.

While the piece does present the views on the new rules of Vicki Shabo, the vice-president of the National Partnership for Women and Families, the bulk of the piece is devoted to presenting the views of employers. No workers who will be affected by this rule were interviewed.

The discussion of the employers' perspective begins with this little exercise in mind reading:

"But employers do not believe it would be a windfall for workers. They say they will be forced to cut costs in other ways if the proposed rules take effect as written — and that workers may not like those changes."

Of course NPR reporters don't know what employers "believe," they know what they say. And it is understandable that they would tell a reporter that they don't like the rules because they hurt workers, as opposed to the possibility that the new rules may hurt profits or force a cut in their own pay. Remarkably, two of the three employers whose views are presented in this piece work at non-profits, even though the vast majority of the workers affected are employed by for profit businesses.

Dean Baker / September 16, 2015

Article Artículo

The Elite's Childlike Commitment to Austerity

The landslide victory of left-wing candidate Jeremy Corbyn for Labor Party leader in the United Kingdom has many establishment types bent out of shape. The Blair-wing of the party was literally obliterated, with Corbyn drawing more than four times the votes of his nearest competitor. After giving the country the war in Iraq and the housing bubble whose collapse led to the 2008-2009 recession and financial crisis, the discontent of the Labour Party's rank and file is understandable.

But naturally the elite types are fighting back. In this vein we get a lengthy piece in the New Yorker by film critic Anthony Lane warning us of the evils of Jeremy Corbyn. I will leave for others the discussion of Mr. Corbyn's friends and associates. I am mostly interested in Lane's treatment of Corbyn's economic agenda. He tells readers:

"The national deficit would be erased not through austerity, as practiced by the heinous Conservatives, but through taxes on the rich and by what Corbyn calls 'quantitative easing for people.' This means, we are told, that the Bank of England will print more money: an endearing and almost childlike solution, though not one that has met with unqualified success elsewhere."

First off, "quantitative easing for people" is obviously a political slogan. As such, it is not obviously more silly than "putting people first," or "yes we can." The issue is the substance behind the slogan.

What Corbyn is proposing is directly financing spending by printing money. If that is "childlike" then folks like Paul Krugman have a similar affinity for childlike solutions to economic problems. Just last week, in reference to Japan's continuing economic weakness, Krugman told readers:

"What’s remarkable about this record of dubious achievement is that there actually is a surefire way to fight deflation: When you print money, don’t use it to buy assets; use it to buy stuff. That is, run budget deficits paid for with the printing press."

By stuff, Krugman means things like child care, schools, hospitals, cutting edge Internet, research into clean energy, and other useful items. If the economy is suffering from a lack of demand, the government can directly create it by spending money. And, since the economy is below its potential, it doesn't need tax money to finance this spending, it doesn't even need to borrow, it can simply print the money.

Dean Baker / September 15, 2015

Article Artículo

Economic Growth

Inequality

Workers

FedWatch: Racial Inequality and the Federal Reserve

A little over a month ago, while giving testimony before the U.S. House of Representatives, Federal Reserve (Fed) Chair Janet Yellen weighed in on whether or not monetary policy can be used to fight racial inequality in the economy:

“So, there really isn’t anything directly that the Federal Reserve can do to affect the structure of unemployment across groups, and unfortunately, it’s long been the case that African-American unemployment rates tend to be higher than those of on average among—in the nation as a whole. It reflects a number of different sources of disadvantage that are operative there.”

It’s true that many aspects of the racial divide in employment aren’t affected by monetary policy. The Fed can’t eradicate discriminatory hiring practices, racial inequality in the criminal justice system, or disparities in the quality of public schools. Nonetheless, it’s clear that the Fed can play at least some role in helping to create a more equal society.

The Federal Reserve has a dual mandate to pursue maximum employment and stable inflation. If the Fed were to raise interest rates—as some commentators are urging—it would have the effect of destroying jobs (and increasing the debt) for the sake of lowering inflation. This is despite the fact that inflation has been running below the Fed’s 2.0 percent annual target and is actually falling.

CEPR and Nicolas Buffie / September 14, 2015

Article Artículo

Robert Samuelson on Productivity and Living Standards

Robert Samuelson used his column today to note the weak productivity growth in recent years. The piece tells that there are two ways to improve living standards for the typical person. We can alter the distribution between the top and everyone else or we can increase output. He tells readers that Democrats tend to emphasize distribution while Republicans emphasize productivity. He then points out that redistribution has limits, since it is a one-time story, whereas more rapid productivity growth leads to ongoing benefits.

There are a few points worth making here. First, while Samuelson is right that redistribution is a one-time story over a long period of time it can be a big story. If the typical worker's compensation had kept pace with productivity growth, their pay would be more than 40 percent higher today. For the median worker with an hourly wage around $18 and and hourly compensation around $22 an hour, this would translate into more than $16,000 a year in addition compensation for a full-time full-year worker. This would be real money for most people.

Furthermore, if compensation were to keep pace with even a slow rate of productivity growth going forward, it would mean that workers would see rising living standards on an ongoing basis. In this respect, much of the political elite in the United States has argued that even modest increases in the payroll tax (e.g. 0.1 percentage point annually) would be devastating and not worth considering. If the idea of raising the payroll tax by 0.1 percentage points annually is a huge deal, the prospect of getting ten times as much by addressing inequality must be an incredibly huge deal. So by the logic of our elite, we should think that addressing inequality has enormous implications for living standards, even if we can't do anything to boost productivity growth.

Dean Baker / September 14, 2015

Article Artículo

Paul Krugman Carefully Explains Why We Never Had to Worry About the Second Great Depression

We are approaching the 7th anniversary of the collapse of Lehman. As folks recall, this led to a massive financial crisis, with normal interbank lending freezing up, and most of the country's major banks teetering on the brink of bankruptcy. This was when then chair of the Fed Ben Bernanke, along with Treasury Secretary Hank Paulson, and New York Fed bank president Timothy Geithner, ran to Congress and demanded an immediate bailout of the banks, which was known as the TARP. The alternative was economic collapse.

When the House of Representatives shocked the elites by turning down the bailout, in response to a massive outcry against Wall Street across the country, the elites doubled down. Major news outlets like the New York Times, National Public Radio, and the Washington Post started telling us that we would see another Great Depression if the banks didn't get their money. The people who questioned this view were mocked as know-nothings (sort of like the people who warned about the housing bubble before it burst).

Anyhow, as we all know, the House turned around for a voted for a new bill larded with special interest pork, the banks got trillions of dollars in below market interest loans, explicit government guarantees of trillions more in assets, and Treasury Secretary Timothy Geithner's pledge that there would be no more Lehman's, meaning that no matter how badly insolvent a major bank might be, the government would not allow its collapse.

As a result, the major banks are all back on the their feet, the Wall Street honchos are richer than ever, and they are again running around telling us how we should run the economy and the country. (That mostly involves giving them more money.)

Dean Baker / September 11, 2015

Article Artículo

The Crisis of Too Little Land

If you have been worried about the demographic crisis leaving us with too few workers or the technological revolution leaving us with too few jobs, my friend Noah Smith now warns us of the crisis of too little land. The problem is that we have too much money going to owners of land, who are not entirely accurately referred to as "landlords" by Noah.

There are a few problems with this story. First, the trend for an increasing share of income to go to land owners is less clear than he suggests. In the United States (I know Noah is referring to the OECD as a whole, but if the U.S. can be an exception, it's not a law of capitalism) there was no trend for an increasing share of income going to land owners until the eighties. This makes it at least a shorter term story here than the one dating from the 1950s in Europe.

In the U.S. the rise in property values relative to GDP has coincided with a sharp drop in interest rates over this period. This is exactly what we would expect. Land prices rise when interest rates fall, just as the price of a bond or any other asset that provides an annual payout rises. The point is that it is far from clear that we are staring at some inexorable trend.

The second point is the logic of ever rising land prices is far from clear. Yes, there are economies of agglomeration, people benefit from clustering in or near cities. But this has always been true. What has changed is the ability to quickly communicate over long distances has increased enormously. The fact that we have the Internet, while not eliminating the benefits of agglomeration, surely has to reduce them.

Dean Baker / September 10, 2015

Article Artículo

Haiti

Latin America and the Caribbean

World

Political Party that Played Key Role in Bringing about Elections Drops out of Race

Haiti’s internationally backed electoral process was thrown further into disarray yesterday as a leading political party announced its withdrawal from the electoral process. In a press statement, the Vérité platform, closely associated with former president René Préval, said it was pulling out of the elections because it was the primary victim of the August 9 “electoral mess,” and called for a “good” electoral council in order to “run a good election.”

Haiti’s August 9 election was characterized by extremely low voter turnout, with just 18 percent of registered voters going to the polls. Additionally, nearly one-quarter of all votes were never counted due to violence on election day, problems transporting ballots and other issues. In 25 of the 119 races for deputy, elections will need to be re-run due to the scale of irregularities. Over the last month, an increasingly large cadre of candidates has taken to the streets, leading protests against the Provisional Electoral Council (CEP) and a government who they claim has rigged the process.

Also yesterday, INITE, Préval’s former political movement, called on its representative, Ariel Henry to leave the “consensus” government that has run the country since the terms of parliament expired in January. To “remain part of a government that has undertaken and continues this electoral coup of August 9, would be contrary to our principles, our democratic ideals,” the party stated in its letter to President Martelly.

Preliminary results released last month showed Vérité candidates advancing to the second round in 30 of the 85 races that were counted and where no candidate won in the first round, second only to President Martelly’s PHTK. Vérité has mulled the decision to withdraw for some time, as the party’s presidential candidate, Jacky Lumarque, was excluded from participating after originally being accepted. The CEP, after announcing the final list of candidates, kicked Lumarque out of the race because he had been named to a presidential commission under former president Préval and therefore needed a discharge document. Despite a ruling from Haiti’s highest court in favor of Lumarque, the CEP has maintained the exclusion and Vérité has led regular protests for his reentry into the race.

While Vérité has consistently denounced flaws in the electoral process, it has been accused by opposition groups of being close to the governing party and being one of the main benefactors of the recent election. And it’s true; there may never have been an election without the support of Préval.

At least as early as November 2014, senior United States diplomats began to meet with the former president and others deemed to be in the more “moderate” opposition. At the time, with delayed elections still not scheduled and terms of sitting parliamentarians expiring in January, Haiti was engulfed by a growing protest movement calling for the departure of President Martelly and the holding of elections. There needed to be a compromise that would move Haiti toward elections and remove the instability from the streets; Préval, whom the U.S. described as “Haiti’s indispensable man” in a 2009 diplomatic cable published by WikiLeaks, was the one to do it.

Jake Johnston / September 09, 2015