Relevant and even prescient commentary on news, politics and the economy.

Democrats Win One

The US Federal Government isn’t shutting down. Also it seems that Republicans almost totally caved to Democrats in the deal

Kelsey Snell at the Washington Post

Schumer and House Minority Leader Nancy Pelosi (D-Calif.) boasted that they were able to force Republicans to withdraw more than 160 unrelated policy measures, known as riders, including those that would have cut environmental funding and scaled back financial regulations for Wall Street.

Democrats fought to include $295 million to help Puerto Rico continue making payments to Medicaid, $100 million to combat opioid addiction, and increases in energy and science funding that Trump had proposed cutting. If passed, the legislation will ensure that Planned Parenthood continues to receive federal funding through September.

Manu Raju and Ted Barrett at CNN

In the proposal, there are no cuts to funding for Planned Parenthood, a demand from Democrats.
Funding for the National Institute of Health is increased by $2 billion and there is additional money for clean energy and science funding.

Negotiators also agreed to make a permanent fix for miners health insurance and to provide $295 million for Puerto Rico Medicaid. There is also disaster aid package that includes funding for California, West Virginia, Louisiana, North Carolina. There is increased funding for transit infrastructure grants and to fight the opioid epidemic, and year-round Pell Grants were restored.

Also no money for the wall.

Note that Democrats fought (and won) for the people Trump falsely claimed he would represent — for miners, Opioid adicts (now very many are rural Whites) Louisiana, West Virginia and North Carolina. Republicans, who are only populists during election campaigns, tried to deregulate Wall Street.

This looks like a (half year) budget better than I could have hoped.

Bullies fold when challenged, and Donald Trump is a pathetic negotiator.

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The new Robert’s Supreme Court

Linda Greenhouse of the NYT comments:

A Supreme Court quiz: Who offered this paean to judicial restraint: “If it is not necessary to decide more to a case, then in my view it is necessary not to decide more to a case”?

That was nearly 11 years ago, only eight months into his tenure. It was before Citizens United erased limits on corporate spending in politics, before Shelby County v. Holder eviscerated the Voting Rights Act, before Chief Justice Roberts swung for the fences in the Parents Involved case to bar formerly segregated school districts from trying to preserve integration through the use of racially conscious student assignment plans. (Only Justice Anthony M. Kennedy’s separate concurring opinion in that 5-to-4 decision retained some leeway for school districts looking for strategies to prevent resegregation.)

And now we have Trinity Lutheran Church v. Comer, a case argued last week that presents the question whether a state that provides grants to schools for upgrading their playground surfaces can constitutionally disqualify a church-run nursery school from eligibility because of its religious character.

“Having eight was unusual and awkward,” Justice Alito said, according to The Journal article. “That probably required having a lot more discussion of some things and more compromise and maybe narrower opinions than we would have issued otherwise, but as of this Monday, we were back to an odd number.”

That’s a bold statement that hardly needs translation, but here’s mine anyway: We’ve got our mojo back. Consensus? That was so 2016. And the Roberts court in 2017? Now it begins.

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Gibberish

by Sandwichman

Gibberish

Repeat after me: The world is not a zero-sum game. Technology often creates more jobs than it destroys. The number of jobs in the economy depends on how much people are spending and investing. High-skilled tech workers grow the economic pie by boosting productivity, encouraging more investment and increasing entrepreneurship. Economists call this “the lump of labor” fallacy.

Jennifer Rubin, WaPo

Trump and right-wingers who have never heard of the lump-of-labor fallacy seek to construct a false narrative to explain real hardship caused by a whole variety of issues, including automation, a skills mismatch and education inadequacy. We would hope the poll is a positive sign that Americans grasp that “the world is not a zero-sum game where natives must lose out in order for immigrants to gain — or vice versa.”

Isabel Sawhill, Brookings Institute

One problem is that when people look at the labor market, they often come to the wrong conclusion. They see well-paid jobs in manufacturing or elsewhere disappearing. They conclude that there are simply not enough jobs to employ everyone who wants to work. Their implicit view of the world is that there are a fixed number of jobs and that it will be impossible to supply everyone with a reasonable livelihood. Economists call this “the lump of labor” fallacy. This way of thinking is a fallacy because the number of jobs in the economy depends on how much people are spending and investing, that is on the total demand for goods and services.

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Waldmann Vs Waldman (finally)

I am generally very very impressed by Paul Waldman at the Plum line blog (for one thing I admire the lack of Ego he demonstrates by writing for a blog subtitled “Greg Sargent’s take from a liberal perspective). Waldman is reliably brilliant (so is Sargent).

Now finally I find something he wrote with which I disagree. In the generally excellent “President Trump Appoints Tax Fairy to Key Economic Post” Waldman wrote

The point isn’t that tax increases help the economy and tax cuts hurt it, but rather that tweaking the tax code has very little effect at all. You might get a modest economic bump from tax cuts, but it won’t ever create enough growth to pay for them, as Republicans always insist their next tax cut will do. Democratic economists know this, which is why they don’t think changing the tax code — even in a progressive direction — is a particularly urgent priority.

He is demonstrably wrong. I am a Democratic economist and I think that changing the tax code in a progressive direction is a particularly urgent priority.

I think this is just a case of sloppy writing (yeah I know, look who’s typing). By “economists” Waldman means “economists thinking about GDP growth”. This is unfair to economists. Very few of us are obsessed with GDP and, I think, almost none of us are sincerely indifferent to the distrubution of national income (I am guessing that people who claim they are do so because they know their view that the rich should be richer is unpopular).

Many economists who work in public finance are obsessed with the income distribution and, obviously consider changing the tax code their life’s work. There are excellent reasons to suspect that a more progressive tax code would cause dramatically higher welfare.

I have another objection (after the jump)

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It was actually quite amusing to see an article in my provincial newspaper a while back where two sides were arguing about a reduction in the work week, and you could play bingo with the excuses the anti-side used. There wasn’t an original idea in the whole article, as the pro-side was almost apologizing and got one paragraph of the six on offer. – “Salty,” comment at AngryBear.

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The Simpsons on Immigration

A post from 2006 on immigration by Kash Mansori seems timely…

The Simpsons on Immigration

Kash | March 28, 2006 1:31 pm

Simpsons aficionados among you already know that the Simpsons addressed the issue of immigration back in 1996, in the episode “Much Apu About Nothing”. Here’s a summary of the beginning of the episode, thanks to Wikipedia (Btw, I never would have guessed that Wikipedia contains entries on individual Simpsons episodes…)

On an ordinary day, a bear strolls onto Evergreen Terrace. It is quickly subdued by the police, not before accidentally shooting and capturing Barney Gumble. Homer rants about these “constant bear attacks”, even though this is the very first bear Ned has seen in his forty years of living on that street. Homer then leads an angry mob and demands that Mayor Quimby do something about this. Soon, the Bear Patrol is created, a useless organization which even makes use of a B-2 Spirit. Homer then gets just as shocked [as] when he saw the bear when he discovers that taxes have been raised five dollars to maintain the Bear Patrol.

After that, the angry mob returns to the mayor’s office, yelling “Down with taxes! Down with taxes!” The mayor has to do something…

Quimby: Are those morons getting dumber or just louder?

Assistant: [Takes a moment to check his clipboard] Dumber, sir.

Quimby: They want the bear patrol but they won’t pay taxes for it. This is a situation that calls for real leadership. [Opens the door to his office to confront the angry mob.]

People, your taxes are high because of illegal immigrants!

Moe Szyslak: Immigants! I knew it was them! Even when it was the bears, I knew it was them.

Let’s not confuse fiction with reality, though. I certainly can’t believe that politicians in real life would ever raise the issue of immigration to cover up for their failures in other areas of policy, such as taxes, government spending, income inequality, education, health care…

Kash

Postscript: I’ve written in the dialogue from memory, so forgive me if it’s slightly off.

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High Cost of Our Finance Sectors

Via Truthout

Published on Mar 23, 2017
In the March 2017 Taxcast: the high price we’re paying for our finance sectors – we look at staggering statistics showing how the US finance sector is a net drag on their economy.

Featuring:

John Christensen and Alex Cobham of the Tax Justice Network, and Professor of Economics Gerald Epstein of the University of Masachusetts Amhurst. Produced and presented by Naomi Fowler for the Tax Justice Network.

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The Boundless Thirst for Surplus-Labor

September 22, 1956

November 7, 1960

QUESTION. This is from Mr. White, Warren, Mich.

What is your stand on the 32-hour workweek?

Vice President NIXON: Well, the 32-hour workweek just isn’t a possibility at the present time. I made a speech back in the 1956 campaign when I indicated that as we went into the period of automation, that it was inevitable that the workweek was going to be reduced, that we could look forward to the time in America when we might have a 4-day week, but we can’t have it now. We can’t have it now for the reason that we find, that as far as automation is concerned, both because of the practices of business and labor, we do not have the efficiency yet developed to the point that reducing the workweek would not result in a reduction of production. The workweek can only be reduced at a time when reduction of the workweek will not reduce efficiency and will not reduce production.

It’s inevitable… but we can’t have it.

Dick Nixon’s turnaround on the issue of the four-day workweek was epic. His original prediction of  a four-day week “in the not too distant future” came in a prepared speech, not in some unguarded moment of overheated campaign hyperbole. He even disclaimed that his “projections” were not “dreams or idle boasts” but were based on the continuation of President Eisenhower’s economic policies.

Following up on Nixon’s 1956 prediction, United Auto Workers president Walter Reuther responded with a telegram calling on the administration to outline a legislative program to achieve the shorter workweek. Nixon sent a telegram in reply and President Eisenhower endorsed Nixon’s reply in a press conference on September 28.

Nixon’s reply was that “mere artificial legislation” would not accomplish a four-day workweek. What was necessary was “dedicated joint efforts of labor, management, government and research.” For his part, Eisenhower “saw nothing wrong with” Nixon’s answer, which he thought also represented his own view that it would be “wonderful” to have more leisure time, but that “no man can say it is going to come about because I say so.” A month after his first comment, Nixon reaffirmed his expectation of a shorter workweek, based on partnership between government, business and labor.

The adamant wording of Nixon’s 1960 dismissal of the idea takes on added resonance in the context of Eisenhower’s earlier caveat that “no man can say it is going to come about because I say so.” Four years later, it “just isn’t a possibility… we can’t have it now. We can’t have it now… [because I say so].”

This wouldn’t be the first time that self-contradiction has appeared in the rhetoric of opposition to shorter work time. The Sandwichman has amassed the world’s largest collection of lame excuses offered by opponents. I assembled 21 of them and sorted them into eight categories having to do with productivity, new consumer wants, unsatisfied needs, labor costs, government policy, self-adjusting markets, history and inevitability, and the devious motives of proponents.

To be kind, the rationales are opportunistic. Mostly, they are jejune partial equilibrium statements invoked as if they were eternal verities. More bluntly, they are mendacious. Every single reason given for not shortening the hours of work is complemented by a contradictory reason for not shortening the hours of work. Damned if you do and damned if you don’t.

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To me the common assertion about health care reform reform and tax reform makes no sense

Various people have argued that Republicans decided to repeal and (very partially) replace Obamacare before moving on to tax reform, because Obamacare repeal (aka the American Health Care Act aka AHCA) would make it easier to permanently cut tax rates. To me this makes less than zero sense. The argument is that, since AHCA includes tax cuts, tax reform would start from a lower base, so it would be easier to write a tax reform bill which doesn’t add to the deficit after 10 years. It is, in fact, necessary that bills not add to the deficit after 10 years for them to be passed using the budget reconciliation process which makes them invulnerable to filibusters.

However, I don’t see how preceding tax cuts make new tax cuts budget neutral. No one has explained how the exact same tax reform bill could be passed using reconciliation if it followed passage of the AHCA but not if it preceded passage of the AHCA. I know of no one who has argued that the CBO score of the effects of tax reform would be markedly different, or even argued that the sign of the change in the score would be favorable.

Rather the argument seems to be that with the AHCA tax cuts and the tax reform tax cuts, rich people will pay lower taxes than with the tax reform tax cuts alone. This is obviously true and has nothing to do with the order in which the bills are signed into law.

Jonathan Chait has been a prominent proponent of the view which makes no sense to me at all.

The next source of money is repealing Obamacare. The connection between the two issues might seem obscure, but it matters technically. The Republican plan to repeal Obamacare would eliminate all the taxes that were raised to help pay for the benefits — about $1.2 trillion over the next decade. This would lower the baseline of tax revenue, meaning that Republicans would need to design a tax code that raises $1.2 trillion less in revenue in order to be “revenue-neutral.” That makes it crucial for them to repeal Obamacare before they cut taxes.

I can cut and paste his argument. I can read it. But I can find no sense in it at all. Yes if taxes have been cut by $1.2 trillion, then a revenue neutral tax reform needs to raise 1.2 trillion less. But nothing whatsoever justifies Chait’s use of the word “before”. I can’t refute his argument, because I can’t detect it.

This matters, because it now turns out that Donald Trump is one of the people who have been convinced (presumably by Paul Ryan not Jon Chait).

“We haven’t failed — we’re negotiating, and we continue to negotiate, and we will save perhaps $900 billion … we have to do health care first to pick up additional money so that we get great tax reform.”

This argument too makes no sense (very much less surprising in the case of Trump than of Chait). For the reconciliation process, money can’t be picked up with one bill and spent on another. Each bill taken alone must not increase the deficit after 10 years. Now reactionaries consider the AHCA to include great tax reform, since it includes reductions in taxes on high incomes. But this doesn’t make further reductions easier. The order in which the bills are passed doesn’t matter.

In fact, the AHCA makes tax reform more difficult. The reason is that the AHCA benefit cuts are even larger than the tax cuts. So the maximum allowed fiscal 2027 deficit would be smaller if the AHCA were law. A bill which combined health care reform reform and tax reform could include even larger tax cuts than simple repeal of the ACA tax increases and be passed using reconciliation.

I honestly don’t get it. I’m sure I’m missing something. I am also sure, 100% sure, that, even if passage of the AHCA were to make it easier for the GOP to pass a tax reform bill, this wouldn’t be because the AHCA includes tax cuts or deficit reduction.

update: minds think alike.

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Prime working age employment up, participation up (finally) – now how about wages?

by New Deal democrat

Prime working age employment up, participation up (finally) – now how about wages?

The March jobs report finishes the first quarter, which make it easier to update some labor participation trends, which, along with wages, has really lagged in this nearly 8 year old expansion.

In order to eliminate the issue of the huge Baby Boom generation retiring, and to a lesser extent college and graduate students, we have some good data on the prime age 25-54 demographic.

Historically, labor participation continues to decline after a recession ends, and picks up after the employment to population ratio does.  Put another way, people come off the sidelines and enter the workforces once the unemployment rate declines significantly.  Here’s the long term trend, comparing the YoY% change in each:

Now let’s zoom in on this expansion:

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