Huffington Post reports a recent floor speech where Sen. Elizabeth Warren (D-Mass.)  condemned the notion that we ought to be cutting back on Social Security benefits rather than expanding them:

“Sen. Elizabeth Warren (D-Mass.) recently joined the push to increase Social Security benefits, saying the program can be kept solvent for many years with “some modest adjustments.”

“The suggestion that we have become a country where those living in poverty fight each other for a handful of crumbs tossed off the tables of the very wealthy is fundamentally wrong,” Warren said in a Senate floor speech on Monday. “This is about our values, and our values tell us that we don’t build a future by first deciding who among our most vulnerable will be left to starve.”

She added, “We don’t build a future for our children by cutting basic retirement benefits for their grandparents.”

I agree with Warren: It’s morally wrong to cut Social Security benefits when seniors are already struggling and the generations coming behind us will have fewer pensions and lousier savings in their 401(k)s, if they have any savings at all.  We are a wealthy nation, but our wealth is being shifted away from the majority and into the pockets of a smaller and smaller slice of upper income earners and rich families.  As EPI’s State of Working America reveals, from 1983 (when the last major Social Security reform was enacted) through 2010, the wealth of the bottom 60 percent of Americans actually declined.  Even as the nation’s wealth increased by 63 percent, the bottom 60 percent of families were made poorer because a range of policies froze their wages, shipped their jobs overseas, lowered the minimum wage (after adjustment for inflation), and indebted them by raising the price of education.

Further, as much as I agree with Sen. Warren on the merits and understand why she felt the need to push back on the “grandparents vs. grandchildren” framing, I don’t think she went far enough in her argument here—because it is actually the grandchildren who are really the most at risk. Maya MacGuineas and Alan Simpson pretend that if we don’t cut “entitlements” (earned benefits) like Social Security now, we will somehow bankrupt our grandchildren. So their solution is….to cut the grandchildren’s income. Raising the retirement age for the generations coming behind us means cheating them, cutting their benefits when we should be raising taxes now to fund their future benefits.  They are the ones who will lose the ability to retire while they can still enjoy it. They are the janitors, cashiers, factory workers, construction workers, and nurses’ aides who will be forced to work even longer in physical jobs or see their benefits cut to levels even closer to poverty. Already, the average benefit is just a little more than the poverty threshold, $14,760 vs. $11,490.

Besides being morally wrong, cutting Social Security is economically incoherent. As EPI has shown repeatedly, retirement insecurity is growing and essentially every “leg of the retirement stool” besides Social Security is failing American workers and retirees. In short, the next generations will need a strong Social Security system more than ever. If they are to have what they need, Social Security must be expanded, not cut back. Its funding must be shored up by scrapping the cap, the arbitrary limit that lets the top earners escape taxation on salaries over $113,700 a year, while the bottom 90 percent pay on every nickel they earn. Additional benefits will require higher payroll taxes, but those taxes will be a fair price for better financial security for the elderly. For some details on this, see Monique Morrissey’s presentation at the National Academy for Social Insurance from earlier this year.

The debate over “secular stagnation” started by Larry Summers and Paul Krugman continues on. Contributions from Jared Bernstein, Dean Baker, and Daniel Davies are worth reading (as are plenty I’m missing, for sure).

The root question being discussed is whether or not the shortfall in aggregate demand that drove the Great Recession and continues to depress the U.S. economy (and other advanced economies) is something that will afflict us for a long time, and if so what to do about it.

Historically, the prospect of demand shortfalls lasting a decade is not something that worried macroeconomists. The general assumption was that economies were pretty resilient, and so long as the Federal Reserve cut short-term interest rates as downturns loomed, recessions would be short and recoveries rapid. And for recessions in the U.S. before 1990, that seemed borne out by the data. Yet the last three recoveries have been slow—and each one slower than the last. And the recovery following the 2001 recession really only happened when an enormous asset bubble in housing pumped hundreds of billions of dollars of demand into the economy, and even with this enormous (and ephemeral) boost, the recovery was still anemic. Hence the concerns over “secular stagnation,” or, demand shortfalls that linger on for a long time.

Yesterday’s addition to all of this, from the BBC, discusses an implicit debate between Krugman and Joseph Stiglitz about whether or not the inequality is a key influence depressing demand and making recovery so hard.

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Earlier this year, we published an analysis of international test score data in which we showed that these data hide many complex issues, and that glib conclusions regarding the meaning and policy implications of international test data should be avoided. We showed that it is more appropriate to compare student performance across countries by comparing students with similar social class backgrounds, and we showed that comparative information is more useful if it includes test data trends over time as well as levels in the current year. We also presented apparent anomalies in test data (for example, periods in which performance on one international test goes up but performance on another international test, purporting to measure the same subject, goes down, or carelessness in sampling methodology) that should caution analysts from relying too heavily on test score data.

Upon the release of our report, we were attacked by several promoters of the conventional idea that international test data show that American schools are in collapse and are threatening our economic security. Prominent among these was Marc Tucker, president of one of the leading education-scold organizations, the National Center on Education and the Economy. Tucker attacked our report without having bothered to read it, and was subsequently forced to issue an apology for misrepresenting our findings (“We misstated the conclusions presented by Martin Carnoy and Richard Rothstein in the report described in this newsletter. We believe we have stated those conclusions accurately here, and apologize to the authors for the error”).

He apparently didn’t learn anything from this embarrassing episode, because now, two weeks before release of new international test score data, he has again attacked our earlier report, again based on his own misrepresentations of what the report actually says. The occasion of his current critique is Valerie Strauss’ Answer Sheet blog at The Washington Post.

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Yesterday, the Committee for a Responsible Federal Budget released a report entitled “Our Debt Problems Are Very Far from Solved,” which implicitly argues that—despite dramatic drops in our near-term deficits and vast improvements in the medium-term outlook of the federal government’s balance sheets—long-term deficit reduction should remain our top economic policy priority for now.

Concentrating on deficit reduction above all else would be a mistake for a number of reasons: such a focus ignores recent changes in facts about our fiscal outlook; it calls for painful and unnecessary policy changes; and it sets aside the issues that should be our focus, namely returning to a broadly-shared economic growth. To be clear, there are policies that would reduce long-term deficits while helping to meet these other challenges, but there are also policies that would reduce long-term deficits while making these challenges even worse. It matters, a lot, which set of policies we choose. Prioritizing deficit reduction, in and of itself, as the pre-eminent policy goal going forward makes for a much worse debate.

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Admittedly, I don’t read the American Enterprise Institute’s blog very much. Today, however, someone alerted me that they published this post suggesting that minimum wage laws are at least partially to blame for Europe’s employment woes. In it, Dr. Mark Perry presents a table of countries in Western Europe, their country-wide statutory minimum wage, if they have one, and their respective “jobless rates.”1 He then asserts:

“[M]inimum wage proponents… argue that other countries have minimum wage laws apparently without any adverse consequences on employment levels or jobless rates. The empirical evidence from Western Europe seems to suggest otherwise. Labor markets in the group of countries with no minimum wage laws are much healthier and doing much better than the group of countries with minimum wage legislation, measured by the jobless rates in Western Europe.”

To paraphrase, “Look: minimum wage, higher joblessness; no minimum wage, lower joblessness… just saying.” Although this argument has something of a timeless quality to it (pdf), it’s wrong, tissue-paper thin, and not something we would expect from any serious researcher.

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Senate Finance Committee Chairman Max Baucus released his international business tax reform discussion draft yesterday. This is an ambitious and fairly thorough proposal and the Senator is to be commended on offering such a detailed draft with legislative language.

But from the start it fails in one crucial area—revenue. Senator Baucus apparently is looking for additional revenue for short-term deficit reduction, but the international tax reform discussion draft is intended to be long-term revenue neutral (more on this below). Corporate taxes already provide too little revenue; corporate tax revenue, which was about 4 percent of GDP in the 1950s, is equal to about 1.5 percent of GDP today. If corporate tax revenue as a percent of GDP had been at its 60-year average last year, corporate tax revenues would have been 43 percent higher, or about $120 billion. Meanwhile, corporate profits are currently at an all-time high.

Revenue aside (and it’s a big aside), it is difficult to fully assess the policy merits of a discussion draft that offers two options and is necessarily incomplete until the rest of the corporate income tax proposal is released. Nonetheless, I have a few comments, based on what has been released and my reading between the lines.

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In an article in JAMA (The Journal of the American Medical Association), Uwe Reinhardt writes about the improbability of “more skin in the game” as a solution to our health care spending woes. Increasing “cost-sharing” or creating “more skin in the game” are different ways to say that patients can/will/should pay more when they go to the doctor or hospital. It means that patients bear a higher share of medical costs, through higher deductibles, higher co-pays, higher so-insurance, and the like. And, it’s often argued that patients with “more skin in the game” will spend their health dollars more wisely. This was the rationale behind the excise tax on high-priced health insurance plans, a tax to not only raise revenue to pay for health reform but also as a way to thin out health plans, making patients pay more for care.

Reinhardt suggests that inducing patients to shop around for cost-effective health care is “about as sensible as blindfolding shoppers entering a department store in the hope that inside they can and will then shop smartly for the merchandise they seek.” The problem, he argues, is that health care has been historically “delivered behind the secure walls of a fortress that kept information on the prices charged for health care and the quality of that care opaque from public view.”

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At today’s confirmation hearing for prospective Federal Reserve Chair Janet Yellen, Senator Heidi Heitkamp (D-N.D.) asked Yellen about how Fed policy contributes to inequality, and specifically worried that recent Fed policies (ie, quantitative easing) have helped asset owners without doing much to help low- and moderate-income Americans.

There are a couple of things to note about this. For one, Yellen’s answer that faster growth and a better job-market recovery would do a lot to ease inequality was spot-on. The short version is that the Fed can do the most to address inequality by quickly getting unemployment down to very low levels. She specifically noted the episode of the late 1990s when very tight labor markets led to across-the-board wage growth. This is exactly right, and too often under-appreciated.

We noted in The State of Working America, 12^th Edition that even relatively rosy estimates of unemployment reductions imply that the Great Recession and the weak recovery that preceded it could well lead to typical Americans seeing essentially no wage and income growth for two full decades before all is said and done. This is an underappreciated policy catastrophe.

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The uproar over people having their insurance plans cancelled just as the ACA “exchanges” for purchasing insurance  are being set up has been amplified—probably enormously—by the failure of healthcare.gov. It is understandably anxiety-inducing to lose the insurance you have without receiving proper information on an available alternative.

Research done before the exchanges were set-up provided ample evidence that while some young, healthy, higher income people may face higher premiums (for now—but will get a better deal if they make it to the “not so young and healthy” phase of life—yah social insurance!), the vast majority of those in the individual market (and remember the uninsured!) will find better deals in the new system. So, while we have some clear evidence of that fact from states that are operating their own exchanges, people who live in states that refused to set up their own exchanges and free-rode on the federal government’s site don’t have the information yet.  The U.S. Department of Health and Human Services released a useful brief on health premiums in the federally facilitated exchanges for a set of individuals, with factors that could be used to adjust them to all family types. Unfortunately, interpreting the results are out of reach for most Americans and listing the plan features with the premiums would be far more useful. The Kaiser Family Foundation created a handy calculator, which gets closer by incorporating all ages and family types, but doesn’t provide nearly the breadth of information that could be made available.

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Yesterday’s Economic Snapshot showed how women’s and men’s employment prospects have fared in the Great Recession and its aftermath. Women have regained 2.9 million jobs, bringing them back to pre-recession levels, and men have gained 2.7 million jobs, still falling short 1.7 million jobs of their pre-December 2007 levels.

At first glance, it may appear that women are doing better than men. Men lost 3.4 million more jobs in the Great Recession and its aftermath than women—employment among men dropped 8.7% while women only saw a 4.0% drop in employment. By mid-2009, men had lost so many jobs that women’s payroll employment was 50% of the work force for the first time in history. In the recovery, men reversed the trend and gained more jobs than women (4.4 compared to 2.9) but, women still have a smaller jobs gap, 3.6 million compared to 4.4 million for men.

So what’s really going on here? To understand the gender dynamics of employment, it’s crucial to look at the gender breakdowns within industries. The table (an updated version of Table 5.8 from the State of Working America) below shows the distribution of male and female workers across industries and the relative change in male and female employment within their industries since 2007. The industries that have taken the biggest employment hits since 2007—construction and manufacturing, which dropped 22.3% and 12.9%, respectively—also have a disproportionately larger share of male workers than in other industries. Industries that have a larger share of female workers, such as health care and social assistance government, fared considerably better: health care and social assistance employment increased 11.5 percent since December 2007. One story of the Great Recession shows that women fared better than men, as they were disproportionately employed in industries that sustained less dramatic employment drops during Great Recession than industries that were male dominated.

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