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

Breakthrough in Kansas-Missouri Border War

by Kenneth Thomas

Breakthrough in Kansas-Missouri Border War

Via @goodjobsfirst, we learned Friday that Kansas Governor Sam Brownback had made a major response to Missouri’s proposed jobs truce in the Kansas City region.

As regular readers may recall, studies have shown that more than $200 million has been spent moving jobs back and forth across the state border in the Missouri and Kansas counties surrounding Kansas City. This is to create 0 new jobs. Despite this being perhaps the country’s second-largest border war after the New York City area, Governors Jay Nixon (D-Missouri) and Brownback (R-Kansas) in December 2012 both told New York Times reporter Louise Story, on camera, that they had no plans to end the incessant job piracy.

Nevertheless, in July 2014, Nixon did an about-face, signing a bill from the majority-Republican legislature to end the availability of state subsidies to be used for such job poaching. Unlike the voluntary no-raiding agreements I have discussed on previous occasions (Council of Great Lakes Governors, NY-NJ-CT, Kansas-Missouri, and even Australia’s Interstate Investment Cooperation Agreement), this has the force of law. The four counties making up Kansas City would be completely barred from using state subsidies to give relocation subsidies to companies in four bordering Kansas counties, if Kansas passes comparable rules.

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Pet Peeve: An America that Sees Only Itself

by Peter Dorman (from Econospeak)

Pet Peeve: An America that Sees Only Itself

This is a small but typical example: the New York Times today ran a story about frictions in the switch to embedded-chip credit cards.  The process has been bumpy, and retailers think the banks and payment processors have been exploiting them, while the processors blame the retails for dragging their feet.  I don’t know anything at all about this, but one thing I do know is that the same transition occurred years ago in Europe.  You’d think a reporter delving into this topic would contact sources in Chipland, so our experience could be compared to theirs.  Maybe we could learn something that would help us sort out the tangle of charges and countercharges (so to speak).

But no.  Not a single word about the world beyond our borders.

I see this all the time.  People fulminate about the role of money in politics and the sins of Citizens United but pay no attention to the various forms business influence takes in other developed countries with a variety of campaign finance laws.  We can have a big debate about the economics of Bernie Sanders’ proposal to make public higher education tuition-free without so much as a glance at the many countries where that has been a reality for decades—one of which is right over the border to the north.

The problem isn’t American exceptionalism, it’s American self-absorption.

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Bear with me, AB readers. No pun intended. (OK, well sort of a pun intended.)

Regular AB readers know that from time to time I post links to web pages concerning animal welfare matters, including special-event donation request links, and so here’s another one, which I received in an email this afternoon.  And here’s the sort-0f pun intended.

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Worstall’s Malignant Lump

In an op-ed at the New York Times yesterday, Nick Hanauer and Robert Reich made the following observation:

In a cruel twist, the longer and harder we work for the same wage, the fewer jobs there are for others, the higher unemployment goes and the more we weaken our own bargaining power. That helps explain why over the last 30 years, corporate profits have doubled from about 6 percent of gross domestic product to about 12 percent, while wages have fallen by almost exactly the same amount.

According to Tim Worstall, Hanauer and Reich committed a lump-of-labor fallacy. Worstall objected specifically to their claim that raising the income cap for the overtime premium would force employers to either pay higher wages or hire more workers. Worstall’s objection is that the employer’s demand for labor will not remain the same if the cost of that labor goes up.

To be precise, Worstall’s assertion is one version of the fallacy claim complex. It happens to be the version refuted by Maurice Dobb in 1929. As Dobb pointed out, workers are concerned with how much compensation they receive in return for the amount of effort required of them and not simply in the aggregate amount of employment in the economy. Working longer hours for less pay is not a bonanza for the workers even if it does lead to more aggregate hours worked in the economy as a whole.

But again, Worstall’s fallacy claim is but one version of a complex of claims, some of which contradict each other. I addressed this perplexing proliferation of claims in my contribution to Working Time: International trends, theory and policy perspectives. Refute one of the bogus fallacy claims and a substitute will immediately pop-up to take its place!

It is not easy to unpack what is going on inside the fallacy claim because its persuasive strategy is based on a “house of mirrors” effect. Whether disingenuously or unwittingly, fallacy claimants commit yet another version of the fallacy they attribute to others. Their error, though, is embedded in the perfect competition, perfect information, full employment, ceteris paribus abstractions of the standard equilibrium model of supply and demand. The name given to this set of abstractions by those who mistake them for a description of reality is “economics.” When “economists” commit this vulgar error it is regarded by Worstall & Co. as an infallible maxim.

Now, it is conceivable that some of those accused of committing the lump-of-labor fallacy may indeed assume the proverbial “fixed amount of work to be done” or whatever. There can be bad arguments for a good cause. But, as A.C. Pigou pointed out in his refutation of the ubiquitous fallacy claim, “If it were a good ground for rejecting an opinion that many persons entertain it for bad reasons, there would, alas, be few current beliefs left standing!”

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The best measure of labor market recoveries: March 2016 update

by New Deal democrat

The best measure of labor market recoveries: March 2016 update

In my opinion the best measure of how average Americans are doing in an economic expansion isn’t jobs, and it isn’t wages per hour.  Rather, it is real aggregate wage growth.  This is calculated as follows:

  • average wages per hour for nonsupervisory workers
  • times aggregate hours worked in the economy
  • deflated by the consumer price index

This tells us how much more money average Americans are taking home compared with the worst point in the last recession.

Why do I believe that this is the best measure of labor market progress?  Let me give you a few examples.

First, compare an economy that creates 1 million 40 hour a week jobs at $10/hour, with an economy that creates 2 million jobs at 10 hours a week at $10/hour.  If we were to count by job creation, the second economy would be better.  But that’s clearly  not the case.  The second economy is paying out only half of the cold hard cash to workers as the first.

Next, let’s compare two economies that both create 1 million 40 hour a week jobs, but one pays $10/hour and the other pays $12/hour.  Clearly the second economy is better.  It is paying workers 20% more than the first.

Finally, let’s compare two economies that create 1 million 40 hour a week jobs at $10/hour.  In the first economy, there are 3% annual raises, but inflation is rising 4%.  In the second, there are 2% annual raises, but inflation is rising 1%.  Again, even though the second economy is giving less raises, it is the better one — those workers are seeing their lot improve in real, inflation-adjusted terms, whereas the workers in the first economy are actually losing ground.

In each case, the economy creating more jobs, or more hourly employment, is inferior to the economy  that pays more in real wages to its workers,  In other words, the best measure of a labor market recovery is that economy which doles out the biggest increase in real aggregate wages. In short, at the end of the analysis, people generally work not for hours, and not for jobs themselves, but for the cold hard cash that is put in their pockets.  That’s why I believe that real aggregate wage growth is the best measure of a labor market recovery.

With that introduction, here are real aggregate wages for the entire past 50 years: IMPORTANT NOTE:  This graph shows *aggregate* real wages.  It is not divided by households or per capita, so this measure doesn’t try to convey how much improved individuals’ lots might be.  It conveys how much more income has become available to the middle/working class as a whole.

For that, we can divide by population to see real wage growth per capita:

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Finance Committee acts/doesn’t act on important Tax Court, Social Security, and HHS Appointments

Linda is returning to blogging again.  Welcome back.   Dan

by Linda Beale

Finance Committee acts/doesn’t act on important Tax Court, Social Security, and HHS Appointments

As the Senate Finance Committee continued work on its markup yesterday, it approved several important nominees for positions in the Social Security Administration and in the Tax Court, but failed to move forward the nomination of the current Acting Deputy Director of Health and Human Services to position of Director.

Elizabeth Copeland and Vik Stoll were reported favorably as nominees for position as a Tax Court judge.

  • Elizabeth Copeland was nominated on May 1, 2015 by President Obama.  She graduated with honors from the Univeristy of Texas in 1986 and then worked as an auditor for several years before studying law at the University of Texas and receiving her J.D. in 1992.  She was an attorney-advisory to U.S. Tax Court Judge Mary Ann Cohen in 1992-93, and then joined the law firm of Oppenheimer, Blend, Harrison & Tate in 1993.  In 2012, she moved with others from Oppenheimer to become a partner at Strasburger & Price LLP.  Her practice has been in the tax controversy area, and she has been an active member of the ABA Tax Section and the State Bar of Texas, chairing the State Bar’s Section of Taxation in 2013-14.  She received the Janet Spraegens Pro Bono Award from the ABA Tax Section in 2009
  • Vik Stoll was nominated on November 5, 2015 by President Obama.  He is a University of Missouri Law School graduate who started work with a boutique tax firm in Kansas City in 1979, doing tax controversy work.  He stayed there as the firm expanded into a 500 member firm (Stinson, Leonard & Street).  During that time, he worked on a range of tax matters for small businesses and individuals.  He left that firm in 2009 to become Director of Collections in Jackson County.

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The new parsimony

– by New Deal democrat

The new parsimony

I came across the below graph showing that relationship of average household net worth with average debt vs. the personal savings rate from the NY Fed last week (h/t The Conversable Economist):

The important point was that the relationship has changed since the Great Recession.  Even though there has been a big increase in average household net worth thanks in particular to the rebound in house prices, the personal savings rate remains elevated compared with its prior history.

This is evidence of something President Obama said during a recent interview, namely, that “Some people are still recovering from the trauma of what happened in 2007-2008,”

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Sanders beat Trump in NY by over 200,000 votes

New York primary results: track the votes live

Raw numbers are funny. But Trump’s admittedly massive victory tonight over his rivals doesn’t even mean he could deliver his own State in November.

This works both ways. I am feeling the Bern but understand that his relative massive wins in the Mountain West don’t mean much in the final analysis. Neither Bernie or Hillary is going to carry Wyoming or Idaho.

My point? It is on the top of my head. And a reason I have a hard time finding hats that fit right. Or left. Or center.

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