Congressional Republicans are set to release the final version of their tax bill this evening. Pending more details, the final bill coming out of the conference committee looks increasingly like the Senate version of the bill, which makes Republican tax priorities clear. Most of the individual provisions in the bill are temporary, and the exceptions to this actually raise taxes on households—by tying tax brackets to a new, lower inflation rate and reducing the number of people receiving help buying health insurance through the Affordable Care Act. The end result for the Senate bill was that on average, households making under $75,000 would see a tax increase by 2027 according to the Joint Committee on Taxation.

On the other hand, the changes for corporations, such as lowering the corporate tax rate and shifting to a “territorial” tax system, are permanent. Since changes benefiting corporations are the only policies deemed worth keeping by Republicans (besides those that raise taxes on most families), it bears repeating that these cuts will not trickle down to typical workers, and arguments to the contrary are not credible.

The typical first argument peddled is that U.S. corporations are taxed at disproportionately high rates and this hurts U.S. workers through some vague notion of “competitiveness.” As we’ve detailed, “competitiveness” is a meaningless term and the evidence doesn’t support the idea that cutting corporate tax rates will help typical American workers. There is no international evidence that corporate tax cuts boost investment (which could potentially lead to higher wages), nor is there any evidence on the state-level that corporate tax cuts boost wages.

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Yesterday, the National Labor Relations Board (NLRB) made it more difficult for millions of workers to join together and form a union, by overturning its joint-employer standard established in 2015’s Browning-Ferris Industries case.

It is hard in today’s economy to bargain for higher wages or better working conditions, especially if your direct employer doesn’t really make those decisions. Under President Obama, the NLRB tried to make it easier for employees by holding each employer responsible when they co-determine what a worker’s wages, hours, and working conditions will be. In yesterday’s decision, the Trump NLRB decided to make it harder than ever.

The NLRB’s latest decision is bad law resulting from a bad process. Ordinarily, before overturning major precedent, the Board invites the public to comment by filing amicus briefs. However, this time, they did not, and instead announced this reversal with no warning or notice. President Trump’s appointees to the Board were so keen to respond to the demands of the franchising industry, which wants a rule that franchisors like McDonald’s aren’t responsible unless they exercise direct control over a franchisee’s labor relations, that they reversed the joint-employer standard in a case where the standard wasn’t even an issue, and where the public had no opportunity to weigh in.

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The Bureau of Labor Statistic’s released its employment situation report for November this morning, which had the economy adding 228,000 jobs and the unemployment rate holding steady at 4.1 percent. Labor force participation among prime-age workers, those 25-54 years old, increased slightly, while the prime-age employment-to-population (EPOP) ratio hit its highest point in this recovery. Meanwhile, year-over-year nominal wage growth is stalled at 2.5 percent, below where it should be and with no sign of inflationary pressures to weigh on the Federal Reserve’s decision whether to raise rates later this month.

Given the weather-related volatility this fall, it’s useful to provide some context on the topline employment growth figure. Over the last three months, average job growth was 170,000, while over the last six months, job growth averaged 178,000. An increase of about 90,000 is enough to keep up with population growth—so by any measure, smoothed or not, the economy is pulling more people off the sidelines and into the labor force. Even if the unemployment rate simply holds steady, absorbing more and more would-be workers at this point of the recovery is a sign of a healthy economy well on its way to full employment. There is no reason to think that much of the remaining slack, particularly among prime-age workers, won’t continue to be soaked up in a steadily improving economy.

The prime-age EPOP hit a high water mark this month, rising 0.2 percentage points, to 79.0 percent. The overall EPOP—including those above age 55 and below age 25—fell ever so slightly (0.1 percentage points). Unfortunately, this drop is due to losses among young workers, rather than older workers voluntarily retiring. While these differences are certainly important to note, I’d argue that the prime-age EPOP is a better measure of overall labor market health. In a stronger economy, we would expect a larger share of this population to be gainfully employed. As you can see in the figure below, the prime-age EPOP has now comfortably passed the low water mark of the last two business cycles, but still has a way to go before hitting full employment levels.

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The headline distributional numbers for the Senate tax plan from the Joint Committee on Taxation (JCT) attracted much attention because they showed that households making under $75,000 would actually see a tax increase on average in 2027. Many have noted that the House bill is not as bad on this score, with the JCT analysis showing that “only” households earning between $20,000 and $30,000 will face a tax increase on average in 2027.

But behind the ostensibly better House distribution score is a major catch—low- and moderate-income households will face tax increases unless corporate tax cuts trickle down to them in the form of higher wages, which historically has not happened when corporations receive large tax cuts. The individual income taxes low- and moderate- income households pay through withholding on their paychecks and on tax forms each year will certainly increase by 2027.

The central mechanism of both versions of the Tax Cut and Jobs Act (TCJA) is easier to see in the Senate bill: permanent tax cuts for corporations, coupled with eventual individual income tax increases for low- and moderate-income households. By 2021, households making less than $30,000 will see individual income tax increases under the Senate tax bill. And the only individual income tax changes that are permanent are the repeal of the individual mandate from the Affordable Care Act (ACA) and indexing tax brackets to a slower growing measure of inflation, thereby pushing people into higher tax brackets more quickly. This means that on average every income category is paying more individual income taxes in 2027 under the Senate tax bill. These tax increases are used to pay for permanent tax cuts for big corporations.

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Tomorrow, the BLS will release the latest numbers on job creation and the labor market. Today, I’m going to take step back and provide some context for what we’ve seen so far this year, as we approach the 10^th anniversary of the beginning of the Great Recession. I’m also going to provide some perspective on the tax bill wending its way through Congress, in light of steady progress in the labor market over the last several years. The bottom line is that (1) contrary to recent economic commentary surrounding the proposed tax cuts in Congress, it is not clear that we have reached genuine full employment yet and significant slack may still remain in the labor market , but (2) if we continue to see solid payroll employment growth in the months to come, we should expect to see continued strong progress in labor force participation, particularly among prime-age workers, and in wage growth—even in the absence of any fiscal stimulus from tax cuts. Any claims that these tax cuts, if they pass, will lead to significant improvement in the labor market or in wages need to be viewed in the context of an already steadily improving economy.

In January 2017, we released our autopilot economy tracker, as a way to set down key benchmarks for the U.S. economy. Think of it as providing a gauge of whether changes to policy are leaving any discernible mark on the economy’s trajectory. We look at where several economic indicators were headed before the year started, and where they would be if those trends simply continued. Take, for example, the prime-age employment to population ratio (EPOP). In the figure below, you can see clearly the progress that has been made over the last several years, and the continuation of that trend through this year with no discernible uptick in the pace of recovery. Steady improvements in the prime-age EPOP since January have tracked our predictions of an economy on auto-pilot fairly well, and we should expect this trend to continue into next year.

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The House and Senate both passed versions of the Tax Cuts and Jobs Act (TCJA) in recent weeks. Both versions of the bill, which must now be reconciled and voted on again, are made up mostly of large, hugely regressive tax cuts that give disproportionate benefits to big corporations and the wealthiest Americans. While the regressivity of these bills by income class has been well-documented by now, we’ve been asked by a number of people about the likely distribution of tax cuts called for by the TCJA across racial groups. A fully fleshed-out and precise estimate of this racial distribution would take lots of time and effort to calculate, but a decent rough estimate can be made pretty quickly if we’re willing to use some plausible proxy data.

However, it is also crucially important to note that congressional Republicans have not just passed versions of the TCJA in recent weeks, they have also passed a budget resolution calling for steep cuts to key programs, in large part because they want this money to finance their tax cuts. Assessing the impact of tax cuts while ignoring likely spending cuts would lead to a radical underestimate of the effect of coming fiscal policy changes on typical Americans’ livelihoods. Given this, we also examine the likely distribution of the burden of financing the TCJA with spending cuts by income class and race.

The Urban-Brookings Tax Policy Center (TPC) has provided estimates of what share of the tax cuts would go to different income groups. The Survey of Consumer Finances (SCF) provides data on the share of households in each of various income groupings that are headed by white, African American, or Hispanic householders. The SCF is uniquely useful here because it has clear income percentile rankings all the way up to the top 1 percent. Merging the TPC and SCF data in this way is not a pure apples-to-apples comparison. The TPC data is arranged by “tax units” while the SCF data is arranged by households (while the SCF calls their unit of analysis “families”, it is much closer to the “household” definition used by surveys like the Census). A tax unit can contain more than one household. But, all this said, there still should be substantial overlap between the two data measures, and the TPC data on tax units should provide a useful overview of the distribution of tax cuts across households.

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On December 2, the State Department announced—and multiple news outlets reported—the decision of the Trump administration to end U.S. participation in the Global Compact for Migration (GCM), a non-binding international agreement that is in the process of being negotiated by 193 member states of the United Nations. The GCM is an attempt to improve coordination and governance on migration, seek new solutions to challenges posed by increased migrant flows, and strengthen the contributions of migrants to sustainable development. Numerous groups working to advance migrants’ rights have condemned the U.S. withdrawal from the GCM process.

The State Department’s statement came on the eve of an important intergovernmental meeting in Puerto Vallarta, Mexico, to prepare the world’s governments for the negotiations during most of 2018. The Trump administration’s statement pointed to the New York Declaration of 2016, which kicked off the process for UN Member States to negotiate a Global Compact, as containing “numerous provisions that are inconsistent with U.S. immigration and refugee policies and the Trump Administration’s immigration principles.” UN Ambassador Nikki Haley further noted that “decisions on immigration policies must always be made by Americans and Americans alone.”

The GCM is a historic opportunity to improve the governance of migration. The compact is likely to address issues such as deportations, the rights of child migrants, and labor migration—but no one knows what will be in the final compact because there is no initial first or “zero” draft. In addition, the United States could decide not to support the final text if it fails to improve the status quo, and the GCM will be a non-binding agreement, meaning the United States is not required to comply with it under international law. As a result, Ambassador Haley’s statement that “the global approach in the New York Declaration is simply not compatible with U.S. sovereignty” is misleading.

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Supporters of the Republican tax plan claim that business tax cuts, including cutting corporate tax rates and immediate expensing of non-structure investments will increase U.S. business investment and economic growth.  However, this one-sided analysis ignores the impacts of financing the tax cut package by adding $1.5 trillion to federal budget deficits over the next decade.  Past experience has shown deficit-financed tax cuts are associated with higher interest rates, an overvalued U.S. dollar and growing trade deficits.

A recent report from the Council of Economic Advisors claims that tax cuts and the immediate expensing of equipment (non-structural) investments will reduce the user cost of capital (UCC), “increasing firms’ investment, desired capital stock, and potential output.”  In addition, they claim that lowering the UCC will lead “multinational corporations and foreign capital…to invest in the U.S. economy.”  These arguments could have some merit if the plan were revenue neutral, and financed by closing loopholes and through other tax reforms.  However, domestic and foreign businesses are unlikely to invest in the United States if there is inadequate demand for domestically produced goods.  U.S. manufacturing and other traded goods industries (including agricultural products and other traded commodities) will be hard hit by the Republican tax plan, because it is financed through a large increase in the government budget deficit.  Further, real-world evidence indicates that the UCC facing American corporations is already incredibly low yet business investment remains quite sluggish. In short, the UCC is not a current constraint on American investment, so efforts to reduce it further will miss the point in aiming to boost this investment.

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Chad Aldeman at Bellwether Education Partners tweeted that my recent report on teacher pensions was “frighteningly bad.” Here’s what’s really frightening: a zombie lie about teacher pensions that won’t die.

Attacks on teacher pensions may not rank with global warming or mass shootings on the list of things keeping us awake at night, but they deserve way more attention than they get. Teacher pensions are the single most important tool for recruiting and retaining good teachers, and good teachers are the key to our future in a knowledge economy. Yet Aldeman is trying to mislead people into supporting Kentucky Governor Matt Bevin and others around the country who want to switch teachers to 401(k)-style plans.

Aldeman claims that “most teachers get a bad deal from teacher pensions.” Though my research, and earlier research from UC Berkeley, showed that the vast majority of teachers are well-served by their pensions, this recycled claim appears impervious to counter-evidence. As long as a billionaire with an agenda keeps funding the research, we’ll continue see elaborate variations on the same theme, all of which rely on the same statistical sleight-of-hand.

The average person understands “most teachers” to mean “most teachers teaching today” or at any given point in time. This is a commonsense interpretation, and the one used in my research. Aldeman’s methodology instead counts new teachers as they enter the system, giving them equal weight whether they teach for just one year or for a whole career. As I showed in my paper, even if slightly over half of new teachers leave before becoming eligible for employer-provided benefits, these short-term teachers, some of whom go on to earn pension benefits in different systems, represent only a tiny fraction of the teaching workforce.

Aldeman accuses me of callously ignoring the “lived experiences” of individual teachers to focus on a “snapshot” that ignores “anyone who was once a teacher and is no longer (a teacher).” This is nonsense. Aldeman is no more focused on individual teachers’ lived experiences than I am. He and I rely on the same experience studies based on the same pension participants—including teachers who leave. The only difference is how we weight participants. He gives equal weight to all new teachers who enter the system in a given period, and I give equal weight to all teachers active at any given point in time.Read more

In recent years we’ve used the tradition of arguing with cranky relatives over the holidays to arm people with evidence to bat back silly economic arguments that are made all year long. This year, most dinner table arguments will likely be about Roy Moore, Al Franken, and maybe Russia, and on those, well, you’re on your own.

But if debates do stray to economics, the topic is likely to be the tax bill being pushed by Republicans in Congress and the White House. If this bill becomes law, it would be a terrible shame. But until it does, the debate surrounding it is actually useful. It is by far the clearest sign that the Trump administration, while chaotic and unprecedented in many ways, is utterly conventional when it comes to making economic policy. The highest priority of Republicans in Congress in recent decades has been slashing taxes for rich households and corporations, and the Trump administration has thrown in completely with this effort.

The centerpieces of the bills passed by the House and voted out of the Senate Finance committee last week are large tax cuts for businesses, both corporate and non-corporate. The corporate rate cuts are by far the largest parts of both bills, and the corporate changes are the only parts of the Senate bill that remain permanent—almost all of the changes to the individual code phase out in 2025. Non-corporate businesses—or “pass-throughs”—receive very large cuts in both bills, but because pass-through income is taxed on individual tax returns rather than at the business level, these changes expire in the Senate bill in 2025, along with most other individual changes.

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