Over the weekend, Republican presidential candidate Donald Trump insisted that he could eliminate the national debt, which currently stands at around $19 trillion, “over a period of eight years.” Upon hearing this, most people would think that Trump planned to cut spending or hike taxes. However, Trump plans to cut taxes, which suggests that he had to be proposing enormous spending cuts. If spending cuts began rapidly enough to fulfill Trump’s promise of eliminating our $19 trillion debt, the “very massive recession” that is currently just another of Trump’s fantasies would become a very real possibility.

Trump, however, has something else in mind besides (or at least in addition to) spending cuts as a strategy for eliminating our national debt. Trump’s plan is a relatively new twist in D.C. policy debates: selling government assets.

This plan, while truly stupid, is a useful reminder about how limited and silly our budget deficit debates are in D.C. 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 D.C. 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. First, though, it will help to examine the conventional ridiculous featured in Trump’s plan.

First, there is the $19 trillion debt number that Trump references. Anybody who tells you the national debt is $19 trillion is simply fear-mongering. This $19 trillion number is the gross national debt, which includes debt issued to government accounts (in practice, this means debt held by the Social Security Trust Fund). According to the Congressional Budget Office (CBO), this debt “does not directly affect the economy and has no net effect on the budget.” What matters for future taxpayers is the net debt (i.e., the debt held by the public), which CBO’s most recent measure puts at about $13 trillion in 2015. $13 trillion should be a big-enough number to sound scary, but D.C. budget fear-mongers can never resist going for the even higher (though irrelevant) $19 trillion.

Read more

Yesterday, Zack Beauchamp updated a piece he had written a while back that claimed Bernie Sanders’ trade agenda could prove ruinous to the world’s poorest people. I think Beauchamp really overstates this, for a couple of reasons.

First, 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.

Second, the evidence marshalled on behalf of trade liberalization’s positive benefits for development is entirely about the benefits of unilateral, domestic liberalization. That is, the benefits a country gains from cutting its own tariffs, and not about the ease of access that they have to the U.S. market. This evidence is completely silent on the benefits of access to the U.S. market. Economic theory teaches that the benefits of unilateral liberalization completely dwarf those of market access, and there is not much evidence to suggest that this theory is wrong.

Read more

A rule requiring investment advisors to act in the best interest of clients saving for retirement was released today despite a six-year campaign to weaken or kill it. Secretary of Labor Thomas Perez and his staff deserve enormous credit for persevering.

The financial services industry made the usual claim that the rule would hurt the people it was supposed to help—essentially, that investors are better off with bad advice than no advice. It also told Congress the rule would be unduly burdensome, while assuring investors there was nothing to worry about, as Senator Elizabeth Warren and Representative Elijah Cummings pointed out.

Let’s hope the financial industry was lying to investors, not Congress, because the rule should have an impact on its bottom line. The only problem is that it doesn’t go far enough. A financial advisor can now be sued for recommending a higher-cost mutual fund over a similar but lower-cost fund without disclosing that he or she is working on commission—a practice that was perfectly legal until today. But the rule doesn’t require that he or she provide information about low-cost index funds and similar investments, even though the original draft rule pointed out that the prevailing view in the academic literature was that such a passive investment strategy was optimal.

It’s unlikely that investors could successfully sue advisors simply for steering them to higher-cost asset classes, as long as the investments are generally considered suitable for people saving for retirement (mutual funds or annuities, for example, and not shares in racehorses). But the mutual fund and insurance industries succeeded in having this spelled out in the final rule and eliminating a safe harbor for broker-dealers offering “high-quality low-fee products… calibrated to track the overall performance of financial markets.” The list of other changes is worth reading and perhaps worrying about, though they may matter little in practice and simply allow the administration to demonstrate its responsiveness while giving lobbyists something to show for their expensive efforts.

Read more

The Department of Labor (DOL) is about to release a final rule that will require overtime pay for millions of salaried employees who currently can be required to work long hours for no more pay than they receive for a 40-hour week. This will give them either more money or more time with their families or for themselves.

But the overtime rule naturally makes some employers unhappy, since they can currently get 60 hours of work from many employees for only 40 hours of pay. Even some non-profit human service providers, which for the most part are not even covered by the Fair Labor Standards Act (FLSA), oppose DOL’s updated rule. This might be because they don’t understand the law, but that misunderstanding hasn’t stopped them from paying for and publishing the first of what will likely be a wave of spurious reports and cost estimates of the new rule.

An association of community providers serving people with intellectual and developmental disabilities (the American Network of Community Options and Resources, or ANCOR) commissioned a “study” by a company called Avalere to estimate the impact of the proposed overtime rule on its member agencies. Sadly, Avalere’s report is little more than a collection of baseless assumptions adding up to an absurd result. Neither the survey questions, nor the actual responses, nor the response rate were included in Avalere’s report.

Read more

Yesterday, the Treasury Department took laudable regulatory action to discourage corporate inversions, a tax evasion maneuver where U.S. multinational corporations merge with much smaller foreign corporations in order to move the corporation, on paper, to a lower-tax country. As Treasury Secretary Jack Lew notes, “After an inversion, many of these companies continue to take advantage of the benefits of being based in the United States—including our rule of law, skilled workforce, infrastructure, and research and development capabilities—all while shifting a greater tax burden to other businesses and American families.”

The new Treasury rules make it harder for companies to access some of the tax benefits of corporate inversions. If the shareholders of the old U.S. parent company end up owning more than 60 percent of the new merged foreign company, then many tax benefits obtained by inverting will be clawed back by Treasury. Today’s rule changes strengthen this provision by excluding the stock of the foreign company attributable to assets acquired from an American company in the three previous years. The upshot is that the ability of foreign companies to engage in serial inverting is reduced.

To see how this works, consider the recent example of Pfizer’s proposed inversion with Allergen. In 2014, Treasury issued a Notice to limit the tax breaks associated with an inversion to companies whose original shareholders owned less than 60 percent of the new merged foreign firm. Pfizer therefore structured its inversion so that its current shareholders would own 56 percent of the newly merged foreign company. However, Allergen is a serial inverter, being the result of numerous mergers with American companies over the past 3 years. With the new regulatory guidance, it looks likely that the Pfizer-Allergen inversion will no longer meet the appropriate threshold. The new regulatory action means that foreign firms cannot simply use a string of acquisitions to increase their size and avoid inversion thresholds.

Read more

The plans to raise the minimum wage to $15 in California and New York are ambitious and welcome at a time when the eroding value of the federal minimum wage means more and more working families can afford less and less. California’s minimum wage would reach $15 in 2023 for all employees and in 2022 for those in firms with more than twenty-five employees. New York’s plan would raise the minimum wage to $15 by 2018 in New York City and by 2022 in the City’s suburbs and on Long Island. The minimum wage upstate would rise to at least $12.50, with the possibility of then going higher. These increases are significantly larger in scope than what has been typical of recent federal and state minimum wage hikes. Furthermore, both proposals would raise the wage floor to levels relative to the wages of typical workers that have not been the norm for at least three decades.

The fact that these proposals are outside the bounds of recent experience does not automatically make them ill-conceived. Moving beyond the timidity of most recent minimum wage hikes is exactly what is needed if we are to undo decades of falling wages and deteriorating living standards for the lowest-paid third of America’s workforce.

The Berkeley Labor Center estimates that 5.6 million workers—or the entire bottom third of the California workforce—would benefit from the California increase (excluding those already helped by various city initiatives). EPI’s analysis estimates that 3.2 million workers, or 37 percent of the New York workforce, would benefited from a statewide increase to $15, although the number affected by the current proposal would be less, given the smaller wage hike in the upstate region.

Read more

Looking ahead to Equal Pay Day later this month, five top female U.S. soccer players made headlines for filing a case against U.S. Soccer for wage discrimination. Even while they have received far higher honors in soccer fame than the men’s national team, the players contend that they earn as little as 40 percent of their male counterparts. For example, the players claim that a men’s U.S. soccer player can earn as much as $8,166 extra for a win at an exhibition game—a women’s player, meanwhile, receives as little as $1,350 extra for winning a similar match.

While this case is high profile, the fact is that the gender pay gap exists across occupations and throughout the economy and that gaps between men’s and women’s pay can add up to a substantial amount over time. Equal Pay Day is April 12 this year because it marks how far into 2016 women would have to work to earn the same amount that men earned in the 2015. Depending on factors like occupation, race, and education level, though, this date could stretch far beyond April 12 for many women.

In 2015, the typical woman’s hourly pay was only 83.3 percent of the typical men’s hourly pay. That means that the median woman earns about 83 cents on the man’s dollar. At the bottom of the wage distribution, pay is relatively more equal, as the minimum wage, though low by historical standards, still provides a wage floor that ensures working people earning it are paid at the same rate. The gap at the top of the wage distribution, meanwhile, is much larger because men disproportionately hold jobs in higher paying occupations, which tend to reward excessive work hours (though longer work hours do not necessarily translate to higher per hour productivity). Additionally, women are more likely to be perceived as less dedicated to their careers, regardless of whether they work the same hours as their male counterparts, (i.e. gender discrimination), which can lead to huge losses in earnings over the course of their careers in the form of forgone promotions and pay raises.

Figure A

The gender wage gap is largest among top earners: Women’s hourly wages as a share of men’s at various wage percentiles, 1979–2015

	10th percentile	50th percentile	95th percentile
1979-01-01	86.7%	62.7%	62.9%
1980-01-01	83.2%	63.4%	64.8%
1981-01-01	88.7%	64.2%	63.6%
1982-01-01	88.9%	64.8%	64.8%
1983-01-01	89.3%	66.5%	62.9%
1984-01-01	87.2%	67.4%	64.1%
1985-01-01	85.8%	67.1%	63.2%
1986-01-01	84.7%	66.9%	66.2%
1987-01-01	83.5%	69.1%	65.8%
1988-01-01	81.5%	71.1%	68.0%
1989-01-01	81.3%	73.1%	71.9%
1990-01-01	83.4%	74.4%	72.7%
1991-01-01	86.8%	74.9%	72.8%
1992-01-01	89.7%	76.2%	73.9%
1993-01-01	90.9%	77.6%	74.4%
1994-01-01	90.8%	78.4%	76.3%
1995-01-01	88.2%	76.7%	76.6%
1996-01-01	87.2%	77.6%	77.0%
1997-01-01	87.0%	79.0%	75.2%
1998-01-01	89.4%	78.2%	76.7%
1999-01-01	87.6%	76.9%	77.0%
2000-01-01	87.3%	78.0%	75.6%
2001-01-01	87.3%	78.5%	75.7%
2002-01-01	89.6%	80.1%	76.2%
2003-01-01	89.4%	81.0%	76.8%
2004-01-01	89.3%	81.8%	75.3%
2005-01-01	88.3%	82.0%	77.2%
2006-01-01	88.8%	82.2%	77.9%
2007-01-01	89.9%	81.5%	77.2%
2008-01-01	90.3%	82.6%	77.0%
2009-01-01	92.3%	81.7%	74.6%
2010-01-01	92.9%	83.3%	76.8%
2011-01-01	93.4%	84.0%	77.9%
2012-01-01	91.7%	82.8%	74.5%
2013-01-01	91.8%	83.4%	76.1%
2014-01-01	90.9%	82.9%	78.6%
2015-01-01	92.2%	83.3%	73.0%

 

ChartData Download data

The data below can be saved or copied directly into Excel.

The data underlying the figure.

Note: The xth-percentile wage is the wage at which x% of wage earners earn less and (100-x)% earn more.

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata

Share on Facebook Tweet this chart

Embed

Copy the code below to embed this chart on your website.

<iframe width="100%" height="460" src="https://www.epi.org?p=101346&view=embed&embed_template=charts_v2013_08_21&embed_date=20260611&onp=104261&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2" frameborder="0"></iframe>

Download image

Gender wage gaps also exist across all levels of education. Even among the most educated workers—those with an advanced degree—large wage-gaps persist, with women making only 73.4 percent of men’s hourly wages. Among those with a college degree, women make 75.2 percent of male earnings. For those with a high school degree, women make 78.3 cents on the high-school-educated man’s dollar.

Read more

A new report by Andrew Stettner, senior fellow at The Century Foundation, brings needed attention to the nation’s troubled unemployment insurance (UI) programs. The report concentrates on crucial financing questions, noting that the lack of UI state reserves prior to the Great Recession led to significant cuts in state programs in recent years, with benefit recipiency rates reaching historically low levels in 2014 and 2015. In particular, Stettner notes that six out of every seven unemployed individuals in the most restrictive Southern states go without benefits, a level that calls into question whether those states still provide meaningful social insurance. At the same time, low reserves continue to threaten a majority of states while we head inevitably toward the next recession. According to the report, only 18 states currently meet recommended trust fund levels.

Stettner recounts the main facts in his overview of recent UI developments, including recent state UI benefit cuts and financing changes. Despite these benefit cuts and financing changes, he reports that state reserves are less than 60 percent of the trust fund reserves found prior to the recent recession. Worryingly, many of the states adopting benefit cuts will remain at low solvency levels when the next recession arrives.

Wayne Vroman, a long-time expert on UI financing at the Urban Institute, has reinforced some of Stettner’s observations on UI financing in a recent report. Vroman has written about UI financing since the 1980s, and this report shows a troubling pattern he has called attention to in recent years. Our 13 biggest states—where about two-thirds of benefits are paid and UI taxes collected—do a remarkably poor job of UI financing. Vroman finds that “program revenue responded more slowly in the 13 big states and their benefits were reduced more when compared with the other states in the state UI system.” Vroman’s more technical approach presents a number of regressions trying to better understand why big states fail to adequately finance their state UI trust funds. While his paper can’t fully explain the big states’ failures, Vroman does identify factors that make UI financing stronger, most notably the indexation of the taxable wage base.

Read more