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Globalization and Trade

Latin America and the Caribbean

Friend for the Week: Senator Bob Menendez

The Americas Blog’s friend for the week is none other than Senator Robert Menendez, the Democrat from New Jersey! Currently under federal indictment on bribery and corruption charges, Senator Menendez recently took a break from trashing Venezuela and fighting the administration over its attempts to normalize relations with Cuba and reach a deal with Iran in order to add his voice to the overwhelming majority of Democrats in Congress who criticize “Fast Track,” also known as Trade Promotion Authority.

Late last night, Senators Orrin Hatch (R-Utah) and Ron Wyden (D-Ore.) announced a Senate Finance Committee hearing with just 12 hours notice. The hearing started off this morning with three Cabinet level officials giving testimony, despite the fact that the “Fast Track” bill had not been published. All three said they had not seen the final text of the bill, which in any event was introduced several hours later, at around 2:30 PM this afternoon.

This rushed timeline and lack of transparency was the focus of a statement published by Menendez and signed by half of the Democrats in the Senate Finance Committee:

With millions of jobs on the line, American workers and manufacturers deserve more than a hastily scheduled hearing without an underlying bill. Congress should undergo a thorough and deliberative committee process for debating trade agreements that account for 40 percent of our world’s GDP. And we should be debating a bill that has seen the light of day and contains strong provisions to protect American workers against illegal trade practices like currency manipulation.

During his time for questions, Senator Menendez rightly pressed the U.S. Trade Representative, Ambassador Michael Froman, on his estimate of the net jobs effect of the proposed Trans-Pacific Partnership (TPP). Here is the exchange, taken from a transcript prepared by CQ Congressional Transcripts:

MENENDEZ:

[…] Ambassador Froman, I asked you at our last hearing on the broad question of trade, how many jobs do you expect to be created -- net jobs, I would say, because in every process of trade, there are winners and losers -- net jobs to be created in TPP within the first year, the first five years, the first 10 years?

You didn't give me any figures, and I'm wondering if, at this point, you're in the position to describe what that would be.

FROMAN:

So when the -- the agreement is complete, there'll be a full economic analysis done.

I think the most authoritative analysis right now is probably the one that comes from the Peterson report -- the Peterson Institute that talks about expanding exports when fully implemented by $123 billion a year, adding $77 billion to U.S. GDP and contributing to many more high-paying jobs.

It depends a bit on where you are on the spectrum of full employment. If you're not at full employment, then it adds jobs. If you are at full employment, then it adds better jobs. And so it'll bend a little bit...

MENENDEZ:

So -- so we don't have a number on the jobs? You're talking about just gross?

CEPR / April 16, 2015

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Leaving the Right Way

One of the most underutilized sources for labor market data is the Job Openings and Labor Turnover Survey (JOLTS). The survey provides valuable information on a host of topics, including how and why people leave their jobs.

JOLTS tracks the number of “total [job] separations” that occur in any one month. They break these job separations down into three categories: “quits,” “layoffs and discharges,” and “other separations.” According to the April news release of the February JOLTS data, the “other separations” category includes “separations due to retirement, death, and disability, as well as transfers to other locations of the same firm.”

CEPR and Nicolas Buffie / April 16, 2015

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Charles Lane on Social Security and the False Equivalence of Chris Christie and Elizabeth Warren

Like many other folks connected with the Washington Post, columnist Charles Lane wants to cut Social Security. He used his column today to argue that New Jersey governor Chris Christie and Massachusetts senator Elizabeth Warren want to address the shortfall in Social Security in essentially the same way, but progressives are too dumb to recognize this fact.

"The irony is that the progressive plan and Christie’s plan are equivalent, at least in their very broad financial strokes. Both claim to match Social Security resources and obligations over time, and to accomplish this progressively; that is, with upper-income folks bearing a relatively higher share of the adjustment costs."

While Lane may see Christie’s proposal to means-test Social Security benefits as being essentially the same as Warren’s plan to eliminate the cap on wage income subject to the Social Security tax, the numbers indicate otherwise. Christie has said that he would means-test benefits on people with income above $80,000 with the idea of phasing out all benefits for people with incomes over $200,000. If we assume that these people have benefits of roughly $30,000 a year (this is a bit less than the average benefit projected for a high income earner in 2025), this means that we would be phasing out $30,000 in benefits over an income span of $120,000 (the difference between the $200,000 end point and the $80,000 start point). That is equivalent to a 25 percentage point increase in the marginal tax rate for retirees whose income falls within this band.

Under the Christie plan, retirees with incomes above $200,000 would see no further cuts than those with incomes of $200,000 since they will have already lost all of their Social Security. This means that those with income of $2 million or even $20 million would face the same income loss as those with income of $200,000. Of course his plan also does not affect at all people who are still working and not collecting Social Security.

There is also the issue of taking away a benefit that workers have paid for. After all, we could means-test interest payments on government bonds, but that apparently does not bother either Christie or Lane. In addition, we are likely to see substantial distortions as upper income retirees find ways to hide income (e.g. buy a condo for winter vacations rather than use investment income to pay for a hotel). But such distortions apparently do not matter to Lane and Christie, even though they are likely to substantially reduce the savings from means-testing.

Dean Baker / April 16, 2015

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Washington Post's Ageist Rant for the Trans-Pacific Partnership

The Washington Post again pushed for approval of the Trans-Pacific Partnership (TPP) in an editorial urging Congress to pass fast track trade authority. Now wanting to waste time with arguments, it jumps straight to ad hominems:

"To the measure’s far more numerous critics on the left, the TPP is yet another corporation-friendly bargain that will destroy American jobs, as the North American Free Trade Agreement, also passed pursuant to fast-track authority, allegedly did.

"These are old anti-trade arguments that aren’t convincing even before you account for the fact that the TPP is about geopolitics as well as economics."

Yeah, well arithmetic and logic are pretty old too, that's probably why they don't get a friendly reception at the Washington Post. Of course the trade deal is in fact corporation-friendly, since that is primarily who is at the negotiating table. They are taking the opportunity to write rules that they expect will increase their profits.

Many of the rules have nothing to do with trade, but rather limit countries' ability to impose various types of consumer and health safety regulation. In fact, some of the most important parts of the deal are explicitly anti-trade, such as the chapter on intellectual property which will strengthen patent and copyright protections. These monopolies obstruct trade and increase costs.

Dean Baker / April 14, 2015

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Michael Gerson Comes Out Against the Wheel

Although he didn't single it out, readers may conclude that it is on his list of outmoded innovations that his "reform conservatives" intend to overcome. He begins his piece by noting Hilary Clinton's campaign announcement then comments inaccurately about progressive Democratic leaders:

"Joe Biden? Jerry Brown? Elizabeth Warren? All fight for Social Security while qualifying for their full checks." (Warren does not turn age 66, and therefore qualify for full benefits, until June.)

The piece continues:

"Democrats today have a geriatric agenda. Equal-pay arguments were avant-garde in 1963. The minimum wage was groundbreaking economic policy in 1938. Democrats propose to increase the payout of a Social Security system created in 1935."

The nature of this argument is more than a bit bizarre. After all, ideas like equality and democracy are pretty old too, would Gerson denounce these also as "geriatric?"

But then we get to the heroes of Gerson's piece. These are people like Senator Marco Rubio and his reform conservative agenda. This agenda accepts the current pattern of inequality, but then offers an expanded income tax credit and payroll tax cuts to help those at the bottom.

How Gerson finds this new is hard to understand. After all, the idea of wage subsidies is more than two centuries old. That isn't an indictment of wage subsidies as a policy, it just means that it is absurd to treat them as new.

The most bizarre part of Gerson's piece is his acceptance of inequality as simply being the work of the market.

Dean Baker / April 14, 2015