The Congressional Budget Office’s new 10-year Budget and Economic Outlook, released this morning, is truly the bearer of bad news. Compared with CBO’s previous outlook, released last May, spending over the next decade is projected to fall, revenues are projected to dramatically fall, and economic growth is projected to plummet.

On the spending side, a combination of policy changes and slower projected economic growth has led to a downward revision of $594 billion in projected outlays over the next decade. And on the other side of the ledger, projected federal revenues have decreased by $1.4 trillion, all due to newly anticipated slower GDP growth and lower inflation (not to mention a further $200 billion decrease in revenues due to technical corrections). The result is almost a $1 trillion increase in federal deficits over the next ten years.

As this morning’s CBO numbers make clear, economic growth is the largest driver of federal revenue, and hence, the key to bringing down deficits. In the short-run, spurring more growth through fiscal policy is easy from an economic perspective—allow the budget deficit to rise to finance spending that spurs aggregate demand in our still demand-starved economy, fostering a full recovery from the Great Recession. In the longer run, improving overall productivity and growth is key. As the CBO report states, “if the growth of real GDP and taxable income was 0.1 percentage point higher or lower per year than in CBO’s baseline projections, revenues would be roughly $270 billion higher or lower over the 2015-2024 period.”

So how did we get in such dire straits regarding growth?

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For years, health and labor economists have studied the inefficiencies created by the fact that most Americans under 65 get health insurance through their job. One potentially large inefficiency is “job lock”—people making decisions to take and/or keep a particular job because without it, they wouldn’t have affordable health insurance. The research literature tells us that job lock occurs among workers who would otherwise be entrepreneurs, those who would rather retire, and full-time workers who would rather work part-time, as well as for a host of other reasons.

The value of the employer-sponsored health insurance system is two-fold (and please bear with the oversimplification). First, it pools risk and charges the same price for workers within an organization regardless of their or their dependents’ health status. Second, it’s far better than what’s historically been offered in the individual health insurance market (e.g. denied policies, excluded conditions, discriminatory pricing, etc.). Enter the Affordable Care Act, which has now established state-based health insurance exchanges that significantly reform the individual insurance market and make it possible for many workers and their families to find affordable health insurance coverage outside the employment-based market.

Which brings us to today. The Congressional Budget Office released its Budget and Economic Outlook, and, in Appendix C, one can find an expanded discussion of the labor market effects of the Affordable Care Act.

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The U. S. Senate is about to vote again on providing unemployment compensation for millions of jobless people who are still looking for work after exhausting their regular state unemployment benefits, which usually happens after 26 weeks. The emergency program, which had been in place since the recession hit in 2008, expired at the end of last year. More than 1.6 million people who would have gotten some help have been cut off, left without the income they desperately need to pay their bills and put food on the table. The Senate is expected to vote tomorrow on a brief, three-month extension.

Senators in several states with very high shares of people who have been jobless for more than six months have not signaled which way they will vote: Sen. Kelly Ayotte in New Hampshire (31.6% of the unemployed are long-term), Sen. Rob Portman of Ohio (34.6% of the jobless are long-term), Sen. Ron Kirk of Illinois (41.3% of the unemployed are long-term), and Sen. Dan Coates of Indiana (29.1% of the unemployed are long-term). The unemployment rate in Illinois (8.6%), in Indiana (6.9%), and Ohio (7.2%), is above the national average.

Even though weekly unemployment insurance benefits average less than $300 a week, they make a huge difference to families that might otherwise have no income at all. They can also have a powerful, positive impact on the economy. EPI’s Heidi Shierholz and Lawrence Mishel estimate that continuing the full program of emergency long-term unemployment compensation would have supported more than 300,000 jobs in 2014. The much-reduced program the Senate will debate tomorrow will affect far fewer workers and have a smaller, but still positive impact on jobs and the economy.

A blog post by researchers at the Federal Reserve Bank of New York has been making the rounds today, arguing that much of the decline in the employment to population ratio (EPOP) since the Great Recession began is actually reflecting changing demographics of the workforce. The researchers (Samuel Kapon and Joseph Tracy) argue that the overall U.S. EPOP in recent years should have been expected to fall relatively rapidly simply because so many U.S. workers were reaching typical retirement ages and were voluntarily leaving paid work. Given this, they claim that the overall EPOP is a misleading labor market indicator if it’s large fall and subsequent non-recovery is taken as evidence that a demand shortfall continues to keep aggregate demand further beneath the economy’s productive potential than other labor market measures—like the overall unemployment—are currently indicating.

I don’t think this is right.

First, as Matthew Klein has noted on Twitter, the same reasoning doesn’t apply if we just look at the EPOP for prime-age working adults—those between 25 and 54. It seems hard to imagine why lots of these workers would be voluntarily retiring starting right at the beginning of the Great Recession. And yet this measure shows the same sharp decline and subsequent very slow recovery as the overall measure.

Second, a key piece of the method used by Kapon and Tracy to estimate the “trend” EPOP actually answers the question that should be answered by the data. This is how they describe one aspect of their method for constructing the trend:

“… we adopt the normalization that over the thirty-one years in our data sample any business-cycle deviations between the actual and the adjusted E/P ratios will average to zero.”

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After two years of debate and foot-dragging, the House and Senate have finally agreed on a farm bill—one that comes with a ten-year price tag of $956 billion. Despite being widely referred to as “the farm bill,” most (almost 80 percent) of the spending in the Agriculture Act of 2014 (its official name) is actually for nutrition programs. And most of that 80 percent goes to fund the Supplemental Nutrition Assistance Program (SNAP, also known as food stamps).

This isn’t to say the other $200 billion in the farm bill—the sections that more closely relate to actual farms—is not worth commenting on. It is. Among other controversies, a vastly disproportionate share of crop insurance subsidies —which were significantly increased in the bill—accrues to the largest (and richest) farm operators.

The big controversy within the bill, however, is the $8.5 billion cut from SNAP over the next decade. The cuts come from a tightening of the eligibility and benefit rules. Many of these are small-bore: prohibiting deducting the costs of medical marijuana when determining a household’s discretionary income and thus its level of SNAP benefit, disallowing households with large lottery or gaming winnings from receiving SNAP benefits, ensuring violent ex-felons receive benefits only if they follow the terms of their parole, and so on. (CBPP has an excellent rundown of such provisions.)

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Since the end of the Great Recession, Maryland’s economy has slowly healed. The state has gained back all of the jobs lost in the downturn, and Maryland’s unemployment rate of 6.1 percent is down significantly from its high of 8.0 percent in early 2010. Yet despite this improvement, there are still considerable challenges facing Maryland workers and families. Population growth since December 2007 means that the state needs to create more than 180,000 jobs just to get back to the unemployment rate preceding the recession.1 Furthermore, wages have fallen significantly for the majority of Maryland workers, particularly for low-wage workers—real wages at the 20^th percentile declined by a nation-leading $1.24 since 2009. Raising Maryland’s minimum wage would combat these downward wage trends and put much-needed money in the pockets of low-income workers who are likely to spend that additional income right away. Given current economic conditions, where tepid consumer demand is holding back employment growth, this additional consumer spending would provide a modest, but meaningful boost to Maryland’s economy.

The Maryland Minimum Wage Act of 2014 (SB 331 and HB 295), similar to a proposal we analyzed last year, would raise Maryland’s minimum wage from the current $7.25 per hour to $10.10 per hour by 2016. It would also increase the tipped minimum wage from 50 percent to 70 percent of the full minimum wage, and index both wage rates to rise automatically with the cost of living. The data show that this proposal would improve the well-being of thousands of working families in Maryland, while injecting almost half a billion dollars into the economy.

Download the PDF version of this analysis

This analysis provides an overview of the economic impact and demographic details of the workers who would benefit from the proposed increase in the minimum wage, examining their gender, age, race and ethnicity, educational attainment, work hours, family composition, and other characteristics. It also details the estimated economic activity and job-creation impacts that would result from raising the Maryland minimum wage to $10.10.

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In his State of the Union Address, President Obama said that because “ninety-eight percent of our exporters are small businesses, new trade partnerships with Europe and the Asia-Pacific will help them create more jobs.” This suggests that small businesses will benefit most from trade, but that is not the case. In fact, two-thirds of U.S. exports are generated by multinational companies (domestic and foreign) operating in this country, as shown in the figure below. These massive firms also generated more than two thirds of U.S. imports and an even larger share of the job-destroying U.S. goods trade deficits.

And therein lies the not so hidden underbelly of international trade and investment deals that the president has consistently refused to discuss: job displacing imports. A surge of imports from low wage countries has driven down wages for working people in the United States. In fact, imports are responsible for 90% of the growth in the college/noncollege wage gap since 1995.

Those same multinational companies were the biggest supporters of trade and investment deals with Mexico, Korea and China, deals that have cost U.S. workers nearly four million jobs in the past two decades. Now, the multinationals are demanding that the president complete trade deals with nearly a dozen countries in Asia and Latin America (the TPP), and a new trade and investment deal with Europe (the TTIP) that will open our markets to goods made by millions of low wage workers in Eastern Europe.

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Speaker of the House John Boehner has just released the Republican Party’s anxiously awaited and very brief “Standards for Immigration Reform.” President Obama and the Democrats, and the Senate generally, have needed a dancing partner to get immigration reform passed, move the country forward, and give it an economic boost by granting legal status and citizenship to the nearly 12 million unauthorized immigrants who are living in the shadows. Although it’s far from a concrete legislative proposal, the Standards released today at least give us a hint of what the Republican caucus might eventually be willing to vote on.

My initial reaction to the Standards can be summed up as, “You’ve come a long way, baby.”

Boehner laid out six specific Standards. Much of it is unobjectionable and looks very similar to what passed in the Senate’s comprehensive immigration bill (S. 744) in the summer. The section titled “Border Security and Interior Enforcement Must Come First” is vague and takes a jab at administrations from both parties for not adequately enforcing immigration laws, and takes a thinly veiled swipe at President Obama by noting that presidents should not be able to “unilaterally stop immigration enforcement.” This of course, ignores the nearly two million deportations the president’s Department of Homeland Security (DHS) has carried out, much to the chagrin of his progressive supporters and immigration advocates. The “Employment Verification and Workplace Enforcement” and “Implement Entry-Exit Visa Tracking System” sections are also vague, but broadly call for E-Verify and entry-exit visa system reforms like those in S. 744. One notable exception is the Republicans’ insistence that the entry-exit system be biometric. (Whether such a system should be biometric was a main topic of contention during the Senate’s debate on S. 744.)Read more

Yesterday morning, I had the honor of participating in a Democratic Steering and Policy Committee hearing, hosted by Leader Nancy Pelosi, in the Cannon House Office Building. Appearing with Lilly Ledbetter—whose story of pay discrimination went all the way to the Supreme Court and ultimately resulted in new legislation in 2009 named after her—and Laura Miu, a psychological counselor, who recently experienced pay discrimination, I was able to share recent research by the Institute for Women’s Policy Research (IWPR), which I lead, and by the Economic Policy Institute (EPI), the think tank that provides the last word on virtually all topics related to American workers. The briefing attracted 20 members of Congress, including Representatives Rosa DeLauro and Robert Andrews, who co-chair the Steering and Policy Committee, and Representatives Donna Edwards and Doris Matsui, who chair and vice-chair, respectively, the Democratic Women’s Working Group. IWPR’s research was originally released in January when it appeared in the latest Shriver Report, A Woman’s Nation Pushes Back from the Brink, produced in partnership with the Center for American Progress. EPI’s research was published as an update in December 2013 of an earlier paper last spring that details the impact of an increase in the minimum wage to $10.10 per hour.

The economic progress women have made in the past five decades is enormous. Women have entered many occupations that had been virtually closed to them, now earn more over their lifetimes, and contribute more to family income and to the economy as a whole than ever before.

But there is still a long way to go. Despite the passage of the Lilly Ledbetter Fair Pay Act of 2009, which makes it easier for women to sue for equal pay—avoiding a similar plight as the bill’s namesake, when she learned she was earning vastly unequal pay near the end of her career—progress toward closing the pay gap has stagnated. Since 2000, the wage ratio has remained around 76.5 percent. If trends of the past five decades are projected forward, it will take almost another five decades—until 2058—for women to reach pay equity.

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The last six months of 2013 saw the headline GDP growth rate reach 3.7 percent. That’s a healthy number. Not gangbusters (we really have seen growth rates over 5 percent for a year or more in previous recoveries where there was slack in the economy comparable to what persists today), but undeniably healthy.

So what’s to be glum about?

Strip out the contribution of inventory investments and exports, and add in (rather than subtract) the value of imports. This is a measure of real “final sales to domestic purchasers,” or, what is sometimes called domestic demand. It’s a measure of how much demand from households, businesses, and governments is growing—and since the economy’s problem remains a huge shortfall of this demand relative to productive potential, it’s a key barometer of health.

Domestic demand growth for the last six months of 2013 was only half as fast as headline GDP growth (1.8 percent).

Key evidence that this slow rate of domestic demand growth is keeping us from making good progress in closing the gap between aggregate demand and potential supply (and closing this gap really should be the operative definition of “full recovery”) is the stubbornness of core price growth—the year over year change in the “market-based” deflator for core (i.e., excluding food and energy) price deflator for personal consumption expenditures was 1.1 percent for the last three quarters of 2013. This is well below the too-conservative target of 2 percent inflation often assumed to be guiding monetary policymakers. In short, this is a clear sign of an economy not climbing rapidly back to full employment.

Are there any reasons to be less glum about 2014? For sure.

The big one is that federal fiscal policy will no longer be actively throttling growth. It knocked nearly a full percentage point off the fourth quarter growth rate. To be clear, fiscal policy won’t aid growth in 2014, instead it will provide a very slight drag rather than an anvil-heavy drag. This is what counts as progress in today’s fiscal policymaking. But, we’ll take what we can, I guess.