The second installment of the Netflix original series, House of Cards, became available recently to the delight of binge watchers everywhere. In the backdrop of Frank Underwood’s (played by Kevin Spacey) uncompromising assent to power is a very relevant debate about trade policy with China. Specifically, one of the primary sources of tension between the two countries is the U.S.’ contention that China artificially keeps the value of their currency down to gain an advantage in trade. Defining currency manipulation is an ongoing debate, but Bergsten and Gagnon laid out their own criterion and found China to be one of the “most significant currency manipulators.” The effort to label China a currency manipulator falls by the wayside in Underwood’s duplicitous schemes to push his own personal agenda, but China’s currency manipulation has real effects on trade, and the United States can take real actions to reduce the trade deficit and create jobs. In fact, EPI’s Robert Scott just released a paper which found that ending currency manipulation across 20 of the most prominent practitioners (including the linchpin, China) would create between 2.3 million to 5.8 million jobs in the United States over the next three years.

So how is “currency manipulation” defined?  Bergsten and Gagnon categorize a country as a currency manipulator if it meets the following four criteria:

• They held federal exchange (FX) reserves that exceed six months of goods and services imports.
• They maintained a total (global) current-account surplus between 2001 and 2011.
• Their total FX reserves grew faster than their GDP between 2001 and 2011.
• They have gross national income in 2010 of at least $3,000 per capita, the median among 215 countries ranked by the World Bank (this criterion excludes low-incoming developing economies).

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It is remarkable that until this week, no American politician has had the guts or vision to speak out against one of the most destructive trends in our troubled labor market—the scourge of illegal unpaid internships. But thank goodness for Hillary Clinton, who, as reported by Politico, “spoke passionately about millennials, blasting businesses that take advantage of unpaid interns.”

The Fair Labor Standards Act makes most unpaid internships in for-profit businesses illegal because the so-called internships are usually nothing more than employment, with no special educational purpose or structure and no pay. The U.S. Department of Labor has made clear that interns must be paid at least the minimum wage unless the business that hires them meets six criteria:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

According to the National Journal, Clinton, who was addressing an audience at UCLA, “warned there is a “youth unemployment crisis” created by the weak economy they inherited, and stressed the need for more opportunities such as paid job training. She decried—to applause from the audience—businesses that have “taken advantage” of young people with unpaid internships.”

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Growing trade deficits have cost US workers millions of jobs over the past two decades, (these were good jobs in manufacturing industries).  Currency manipulation by more than 20 countries, of which China is by far the largest, is the single most important reason why U.S. trade deficits have not decisively reversed.  Currency manipulation lowers the value of foreign currencies, relative to the U.S. dollar, which acts like a subsidy to their exports, and a tax on U.S. exports to China and every other country where the U.S. competes with the exports of currency manipulators.

In an era of fiscal austerity, ending global currency manipulation is the best way to reduce trade deficits, create jobs, and rebuild the U.S. economy, as shown in Stop Currency Manipulation and Create Millions of Jobs.   Eliminating currency manipulation would reduce the U.S. trade deficit by between $200 billion and $500 billion in three years. This would increase annual U.S. GDP by between $288 billion and $720 billion and create 2.3 million to 5.8 million jobs. About 40 percent of the jobs gained would be in manufacturing.

Ending currency manipulation would not require any government spending – a key political virtue during this time of Congressional gridlock. In fact, it would reduce the federal budget deficit by up to $266 billion dollars per year as the extra economic activity and employment it creates boosts tax revenues and reduces safety net spending. Ending currency manipulation would create jobs in every state, with gains from 8,200 jobs (2.64 percent of total employment) in the District of Columbia to 687,100 jobs (4.18 percent of employment) in California. Ending currency manipulation would likely create jobs in every Congressional District, with gains of up to 24,400 jobs (7.05 percent of employment) in the 17^th District in CA.

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The Atlantic’s Derek Thompson wrote a great review of Claudia Goldin’s latest work on closing the wage gap at the upper level of the distribution. Goldin postulates that the final steps to closing the gender wage gap begin at the top rungs of the income distribution. Goldin examines MBA graduates’ earnings over their life span, and finds that the wage gap would start to close if firms didn’t have an incentive to disproportionately reward individuals “who worked long hours and who worked particular hours.” Men may be more able to choose to work long hours in a way that women, particularly in their first 10-15 years of work, may not choose to do for any number of reasons (most obviously: having kids), and whoever is willing to work these longer hours (usually men) gets disproportionately rewarded. To close the gap, Goldin calls for changes to the way jobs are structured—in short, greater work time flexibility.

While Goldin’s analysis is currently my favorite analysis for understanding gender wage inequality at the top—and I applaud her call to give high wage professionals more autonomy and encourage more flexible work schedules—her analysis doesn’t solve the question of how to close the wage gap for the majority of American workers, those who earn low- and middle-wages. (I’m also skeptical of the idea that there aren’t substantial incentives among those in power to keep the structure of high wage professions as it is or that work time flexibility will be enforced by companies even if it’s created.) For the majority of women, gender wage gaps are one way that women get the raw deal, but it is not the only way.

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In tomorrow’s jobs report, we could well see the headline unemployment rate nudge down to 6.5 percent. This is the threshold at which the Federal Open Market Committee (FOMC) of the Federal Reserve had indicated they may move the short-term policy rates they control up from zero, thereby providing less monetary stimulus to the recovery.

Easing back on this stimulus would be a mistake. The economy remains far from full employment, and the headline unemployment rate is far understating the degree of economic slack remaining in the economy. This is demonstrated by the 5.85 million “missing workers”—potential workers who, because of weak job opportunities, are neither employed nor actively seeking a job. Further evidence can be seen in the 7.7 million “jobs-gap”—the number of jobs needed to restore the labor market to its pre-Great Recession health. Subdued wage and price inflation measures provide yet more evidence. The year-over-year change in the “market-based” core price deflator for personal consumption expenditures fell to 1.1 percent for all of 2013. And just today, data on unit labor costs (a key predictor of inflationary pressures in the economy) indicated that these slightly fell in the last quarter of 2013.

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The President released his fiscal year 2015 budget stating that his goal is “to speed up growth, strengthen the middleclass, and build new ladders of opportunity into the middle class,” all while reducing budget deficits.

There is much to like in the budget proposal. Mr. Obama wants to expand the Earned Income Tax Credit for childless workers, which will encourage work and reduce poverty. He also provides additional funds for child care, education, research, and infrastructure. To pay for this he proposes to eliminate various tax loopholes for hedge fund managers and multinational corporations.

Seeing as how this budget proposal has virtually no chance of outmaneuvering the GOP blockade, its chief value is to demonstrate a vision of America that better addresses the core economic problems of the middle and working classes. And in this vein, the President’s budget could have been better.Read more

Last week my colleague, Rob Scott, published a report highlighting the impact of ongoing currency manipulation on employment in the United States.  In the report, Scott explained that currency manipulation by U.S. trading partners—including China, Denmark, Hong Kong, South Korea, Malaysia, Singapore, Switzerland and Taiwan—distorts trade flows in two ways.  It raises the cost of U.S. exports, and lowers the cost of U.S. imports.

Currency manipulation has cost the U.S. economy millions of jobs, including a disproportionately large share of manufacturing jobs. The impact of these job losses is clearly evident in the Midwest, which suffered significant manufacturing job losses. Further, the displacement of  manufacturing jobs not only meant fewer job opportunities, but also the elimination of unionized jobs that pay family-supporting wages.  Ending currency manipulation would likely lead to significant growth in the American manufacturing sector, a necessary step to begin rebuilding a strong middle class.

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Social Security (and other social insurance programs like Medicare and Medicaid) has significantly helped reduce elderly poverty over the last several decades. The U.S. Census Bureau reported that 15.3 million elderly people would have been in poverty in 2012 without Social Security. That would have meant close to four times more elderly people in poverty. The figure below illustrates how declines in elderly poverty are directly associated with sharp increases in per capita Social Security expenditures—evidence that direct government transfers keep many people from falling below the poverty line.

But Social Security, Medicare and Medicaid—as valuable as they are—do not provide a lavish lifestyle. Most of America’s 41 million seniors live on modest retirement incomes that cover just the costs of basic necessities and support a simple, yet dignified, quality of life. To highlight how official poverty measures may paint too rosy a picture of the living standards of America’s seniors,  my colleague Dave Cooper and I showed nearly half of the elderly population in the United States are “economically vulnerable,” defined as having an income that is less than two times the supplemental poverty threshold (a poverty line more comprehensive than the traditional federal poverty line). A data update to that analysis shows that 47.9 percent of the elderly are economically vulnerable.

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Yesterday, House Ways and Means Committee Chairman Dave Camp (R-MI) released his long-awaited (at least among budget nerds) tax reform proposal. For those used to dealing with GOP fiscal policy proposals in recent years, it was strangely careful and serious. Yet, this proposal still highlighted the excessive importance policymakers attach to “tax reform that lowers rates,” which has been a north star of fiscal policy wonks seemingly since the dawn of time. The idea is that lowering rates will spur economic efficiency, but to make up for revenue lost to lower rates, one must broaden the tax base to which the new, lower rates apply.

Lowering income tax rates, however, reduces revenue so much—especially from wealthy individuals and businesses—that it’s mathematically difficult to make up what’s missing without completely gouging the working and middle classes. This is why Republicans have shied away from the details that would make their top-line tax reform goals work. (They are then pilloried, and rightly so, for ignoring mathematical realities.) It’s easy to lower tax rates; it’s hard to then figure out where the money is going to come from to make up for it. And the payoff in terms of increased growth from all this angst is decidedly modest. Under Rep. Camp’s plan, the federal government would lose more than $1.2 trillion over the next ten years from lower tax rates for individuals and businesses, and another $1.4 trillion by repealing the Alternative Minimum Tax. Here are the good and bad of just some of the provisions that make up for the lost revenue:

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