The annual Social Security and Medicare trustees’ reports will be released today, prompting the usual scaremongering enabled by a widespread misunderstanding of how these programs operate and what deficits mean. As is always the case, it is helpful to separate out analyses of Social Security from Medicare, as they are different institutions facing very different challenges.
Globalization and secular stagnation make a sustained, coordinated fiscal expansion necessary for restoring growth to the global economy. Current politics in both the Unites States and Europe make this impossible in the short run. This means it’s likely to be a long time before we have a decent global economy, and that’s a real problem.
James Sherk at the Heritage Foundation has written a piece claiming that there has been no gap between growth in productivity and growth in pay. It’s written largely as an attempted debunking of our work, but since there’s not actually any bunk in this work, the attempt fails.
Today’s decision by the Federal Reserve to keep interest rates unchanged was the right one. There is no sign in the economic data that a durable acceleration in inflationary pressures is brewing and needs to be stopped by the Fed beginning to slow the economy.
Since the late 1970s, American economic growth has been slow and unequal relative to the period after World War II. This suggests that there was very little payoff to overall growth from rising inequality, and that there will be no growth penalty from strong efforts to check or reverse inequality. In fact, far from being in direct conflict, faster overall growth and progressive redistribution are likely complementary. What is even clearer is that an agenda that explicitly confronts rising inequality will unambiguously raise living standards growth for the bottom 90 percent. Actually, such an agenda is necessary for securing decent living standards growth for these households.
Some policy makers and observers have urged raising interest rates in June. Proponents argue that some inflation measures show faster growth than the Federal Reserve’s preferred measure and that a potential bubble in the commercial real estate market justifies a rate increase. Ultimately, both arguments hinge on thinking that too-slow growth in real estate construction should be solved by raising rates. Here’s why that is not convincing.
Salaried workers not eligible for overtime often do not receive “current wages” for hours worked in excess of 40. Instead they often earn nothing. That is, a worker was paid a salary based on a 40-hour work week, but was then forced by employers to put in 45 or 50 or 55 hours of actual work with no additional compensation. If such a worker has the hours they’re forced to work cut from 45 to 40 but keeps the same weekly pay, then it is really silly to label this an increase in “underemployment,” and no economist worth their salt would do this.
Federal budget season came and went this year without any budget proposal hitting the floor of the U.S. House of Representatives.
Weak data had convinced many that the Federal Reserve was unlikely to raise interest rates in June, but in recent days multiple Fed policymakers have suggested that an increase should be on the table in the near future. What’s unclear is why.
Mother Jones’ Kevin Drum seems to dislike a New York Times article calling job prospects for young high school graduates “grim.” Along the way, he directs an odd bit of unprovoked snark at us:
I don’t know how EPI measures unemployment, but the federal government measures it in a consistent way every single month.
Raising interest rates is a poor strategy for managing asset bubbles. Low interest rates did not cause the housing bubble of the early 2000s and higher interest rates would have been ineffective at preventing it. To deflate an asset bubble interest rates would have to be raised to levels that would cause enormous damage to the labor market. Fortunately, the Federal Reserve has numerous tools besides rate increases that would be more effective and inflict less collateral damage on the nonfinancial side of the economy.
Neil Irwin wrote a piece on productivity growth in the New York Times that’s making the rounds. It’s a good piece, definitely worth reading.
The Bureau of Economic Analysis reported this morning that gross domestic product (GDP), the broadest measure of economic activity, grew at just a 0.5 percent annualized rate in the first quarter of 2016.
It's been pointed out to me that yesterday’s blog post about a story by NPR’s Chris Arnold targeted too much ire at Arnold himself rather than the phenomenon he was reporting about. I think that’s probably right, and so I apologize to him for that. I was using Arnold’s story as a jumping off point for a discussion of a larger issue, and should have made that more clear. I do think my larger points about the substance of the topic under debate hold.
Trade agreements in recent decades have not been simple good-faith exercises in trade liberalization. Instead, they have exposed some American workers to fierce international competition while locking in rules that expanded protections for others.
The House GOP budget resolution that passed out of committee would double down
on such severe cuts, and yet it couldn’t even get a majority in a Republican-controlled House because it doesn’t call for large enough cuts. Or, to put it just as accurately, it failed because too many in the Republican caucus decided that it wouldn’t do quite
enough damage to the economy. That’s the real story here.
Robert Waterman, Compliance Specialist
Wage and Hour Division, U.S. Department of Labor
Room S–3510, 200 Constitution Avenue NW.
Washington, DC 20210
Re: Proposed Department of Labor (Wage and Hour Division) Rule on Establishing Paid Sick Leave for Federal Contractors (RIN 1235–AA13)
While it has received plenty of deserved scorn, we shouldn’t lose sight of the fact that about half of the ridiculousness of Trump’s overall debt plan actually just mimics pretty conventional DC budget wisdom. The other half brings a new kind of ridiculousness to the table, but these new proposals come with a grain of useful insight embedded in them.
Only an expansive reading of some of Sanders' rhetorical excesses would lead one to think he would pursue policies that radically restricted the access to U.S. markets currently enjoyed by our poorer trading partners’ exports. It is not an uncommon reaction to criticisms of today’s global trade regime to assume that this market access would clearly be significantly reduced if this status quo
were overturned, but that’s far from obvious.
An ambitious national investment in early childhood care and education would provide high societal returns. American productivity would improve with a better-educated and healthier future workforce, inequality would be immediately reduced as resources to provide quality child care are progressively made available to families with children, and the next generation would benefit from a more level playing field that allows for real equality of opportunity.
EPI’s Josh Bivens spoke with “Marketplace” about the need for the Federal Reserve to hold off on raising interest rates amid sluggish wage growth.
Since 2011, the Economic Policy Institute Policy Center (EPIPC) has provided advice and technical analysis of the annual budget proposal of the Congressional Progressive Caucus (CPC).
All eyes will be on the Federal Open Market Committee (FOMC) today as they decide whether or not to follow up December’s interest rate hike (the first since 2006) with another.
The Labor Department reported this morning that 242,000 jobs were added to the U.S. economy in February, up from 172,000 in January.
Data on employment and unemployment in February will be released this coming Friday by the Bureau of Labor Statistics. Notably, this is the last jobs official jobs data we’ll get before the Federal Reserve meets in two weeks to decide whether or not to follow up December’s quarter point interest rate increase with another rate hike.
Testimony of EPI Research and Policy Director Josh Bivens before the U.S. House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law hearing on the impact of Federal rules on the economy.
EPI’s Josh Bivens spoke with public radio’s “Marketplace” about how hourly wages have remained stagnant despite a gradually improving economy.
http://www.epi.org/files/2016/radio-2016-01-29-josh-bivens.mp3From time-to-time, EPI contributes segments for broadcast on Workers Independent News. In February 2016, EPI Communications Director Liz Rose interviewed Research and Policy Director Josh Bivens.
In an interview with public radio’s “Marketplace,” EPI’s Josh Bivens spoke about consumer spending and GDP.
The stakes in how we interpret recent signs on weak productivity growth are huge. If productivity growth is simply a given, and cannot be boosted by further efforts to close the aggregate demand shortfall, this means we’re actually much closer to full employment than otherwise, and, it means that the level of wage growth consistent with a fully healthy economy is closer to 3 percent than 4 percent. And since wage growth is now running around 2.5 percent, we’re getting close to this long-run wage target and hence close to hitting the inflation barrier—that is, crossing the line into economic overheating that will cause prices to rise faster than the Fed’s 2 percent target.