EPI has posted items recently on both the individual mandate and the employer mandate contained in the Affordable Care Act (or the ACA, or Obamacare). The summary version of these posts is simply: individual mandate, good; employer mandate, potentially flawed, not operative yet.

The longer versions follow.

On the individual mandate, we noted that it makes health reform more efficient than it would be without any such anti free-rider provision. And since the GOP hates efficient health reform, they have predictably made attacking it a center-piece of their, um, “strategy” in the most recent fiscal showdown.

On the employer mandate we noted two things. First, the claim that there has been a large shift towards part-time work since the passage of the ACA is just not true. Sure, some employers have cut hours in recent years, but the overall trend is toward a decline in the share of workers who are involuntarily part-time. Second, this failure to see any discernible shift towards part-time work makes sense given that the employer mandate in the ACA has been delayed for a year—meaning that employers will pay no penalty before 2015.1 Of course, this fact doesn’t mean that no employers are cutting hours while falsely blaming the ACA.

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A stunning reminder that elite opinion is far from where it needs to be on wages is a Washington Post editorial from last month recommending a minimum wage of just $8.00 in 2015, up from the $7.25 level set in 2009. The Post’s editorial board, in fact, argued that a full-time, full-year worker should earn an income that is two-thirds of the poverty line for a family of four—a level set in 1959. The poverty line, however, is fixed only by inflation and does not reflect any general improvements in overall living standard. So, while economic productivity has more than doubled since 1959 (it rose 150 percent in fact), what we consider a poverty income has remained the same. In effect, the Washington Post’s editorial board is saying a low-wage worker should earn one-third less than a poverty-level income based on living standards two-thirds of a century earlier. Note that $8.00 in 2015 is a wage roughly nine percent less (inflation-adjusted) than what a low-wage worker (at 10^th percentile) earned in 1973, despite the fact that low wage workers are far more educated and productive now than then.

Given the shutdown of the federal government, the September employment and unemployment figures were not released as scheduled. With no new data, it is useful to step back and look at the broader employment situation.

Regardless of what happened in September, we know roughly where the labor market is based on prior months’ data, and it’s not good. The labor market needs to add more than 8 million jobs to get back to the pre-recession unemployment rate, and at the growth rate we’ve seen for the last few months, we won’t fill that gap before the end of the decade. The unemployment rate has decreased substantially since its peak of 10% in the fall of 2009, but the vast majority of that decrease has not been because unemployed workers have found work. Instead, the unemployment rate declined because millions of jobless workers simply stopped looking for work, or never even started, because job opportunities are so weak (and if a jobless worker is not actively seeking work, they are not counted as unemployed). The weak employment situation has translated into very weak wage growth, since employers simply do not have to pay sizeable wage increases to get and keep the workers they need when workers do not have other options.  In other words, we have an anemic recovery due to an ongoing shortfall in demand, and the US labor market remains depressed.

For more on the effects of the shutdown, a blog post from EPI Policy and Research Director Josh Bivens provides some useful perspective on its macroeconomic impact in the context of a weak, fragile recovery.

Most Americans can be forgiven if they have lost the thread of today’s debate over the government shutdown—it has shifted radically in a pretty short time. Just a few weeks ago, the budget debate was primarily over the automatic spending reductions, known as sequestration. The administration and most congressional Democrats want to cancel the sequester for the next two or three years to keep fiscal policy from dragging too heavily on the still-fragile recovery. The Congressional Budget Office projects that canceling the sequester for 2014 could increase GDP by 0.2 percent to 1.2 percent, and employment could be 300,000 to 1.6 million higher. Republicans, on the other hand, want the sequester to remain in place (though they do want a special carve-out to keep it from cutting defense as heavily as its projected to in 2014). They also want to reduce mandatory spending (a category dominated by Social Security, Medicare and Medicaid, though which also includes a number of other income support programs like unemployment insurance). House Republicans have already voted for a five percent reduction in spending on SNAP, the nation’s most important nutrition program for low-income adults and children.

As the end of the 2013 fiscal year approached not a single appropriations bill had been passed. While both the House and the Senate passed budget resolutions this year, the Republican leadership in the House refused to allow a conference committee to reconcile differences between the two to proceed. Given the failure to pass an appropriations bill, a continuing resolution (CR) was needed to temporarily fund the government or the government would shut down. On the first day of the new fiscal year, the government shut down because no CR had been enacted.

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One of the more baffling messages in the current debate over the economy and “Obamacare” is the hue and cry over the trend in part-time employment. The fact is that since the end of the Great Recession, the trend in part-time employment has been down, not up. The black line in the chart below shows the share of part-time workers in the labor force. The light blue region shows the level of workers who are part-time due to economic reasons. The navy blue region show the level of workers who are part time due to “non-economic” reasons (health, child care responsibilities, etc.). The vertical bars denote recessions, from peak to trough.

During the past two recessions part-time employment clearly increased, while such employment was either flat or falling after the end of the recessions. (Note that the official end date of a recession is the point at which the economy stops getting worse. It does not mean the economy has recovered yet, and the current economy clearly has not.)

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In a post on Wonkblog from yesterday morning, Dylan Matthews has an excellent interview with Michael Linden, a budget expert at the Center for American Progress. It’s definitely worth reading—not least for Linden’s correct (and therefore deeply depressing) point that in terms of discretionary spending, “We’ve already essentially adopted the Ryan budget.”

But, the simplistic Keynesian in me demands I disagree with something Dylan says about the influence of fiscal policy in the current economy:

“In 2009 it was easy to see how the multiplier on government spending, the GDP bang for the buck, would be pretty high. There were a lot of unused resources in the economy that government spending could spring into action. But during good economic times, the multiplier should be around 0. Obviously, we’re somewhere in between now, but where on the spectrum do you think we are?”

This is actually all pretty correct until that last sentence, particularly the “somewhere in between now”. Linden makes a very good empirical rebuttal to this by noting that today’s output gap is much, much closer to where it was in 2009 than zero, and, even this current output gap may well understate how much slack actually exists, since CBO has been steadily marking down potential output for reasons that may reverse if the economy recovered (see figure below from the famous DeLong/Summers fiscal policy paper).

I suspect Dylan knew he was heaving a softball question here, because he certainly knows there’s a lot of slack remaining in the economy. But it is important to note that the larger economic logic in his question isn’t quite right. Values of the multiplier really aren’t linear like that. If the multiplier on UI benefits in an economy with an output gap (a measure of economic slack) of 7 percent is 1.5 and the multiplier on these benefits in an economy with an output gap of zero is zero, this does not imply that the multiplier on these when the output gap is 3.5 percent is 0.75. I wish it did work like this, as it would make macroeconomic projections much easier.

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Last year’s U.S. Supreme Court’s decision in Arizona v. U.S. left only a narrow opening for states to pass and enforce immigration-related legislation. Nevertheless, the enactment of immigration-related state laws and resolutions in 2013 increased by 83 percent compared with the first half of 2012. California has been a leader, passing numerous laws that would benefit immigrant workers and protect labor standards for U.S. workers. Despite extensive media coverage of the TRUST Act and two other bills—one that would grant “domestic workers” overtime pay (which became law last week) and another permitting unauthorized immigrants to obtain drivers’ licenses—four others would protect the labor and employment rights of California’s unauthorized immigrant workers and temporary foreign workers (“guestworkers”). If Governor Jerry Brown signs these four bills, the new laws will ameliorate some of the worst abuses immigrants suffer, including human trafficking, wage theft, and employer retaliation against workers who organize or report illegal acts to authorities. Comprehensive federal immigration reform that protects vulnerable foreign workers from abuse remains a longshot in the near-term, so these are welcome developments for the state with the largest population of immigrants.

An estimated 1.85 million unauthorized immigrants work in California, meaning a tenth of the workforce is particularly vulnerable to exploitation on the basis of immigration status. It is difficult for unauthorized workers to enforce minimum wage and overtime laws because employers use the threat of deportation to prevent labor organizing and to keep workers from complaining. Employers can report the undocumented to Immigration and Customs Enforcement, or require them to update or provide documentation for their “I-9” file, or run their name through E-Verify, the government’s electronic employment verification system. This increases the likelihood they’ll be fired and/or deported.

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I have been getting versions of this question a lot. It is very hard to answer with any precision, so, below are some very imprecise thoughts.

First, the shutdown would have to go on for quite a long-time (say at least a month) to affect the trajectory of aggregate macroeconomic statistics like gross domestic product (GDP) or employment growth. For one, the majority of what the federal government spends money on (including the health insurance coverage expansions contained in the ACA!) will not be affected by the shutdown. Transfers payments like Social Security, Medicare, Medicaid, Food Stamps, etc…will continue to flow, as will essential discretionary spending.

Given the relatively restricted scope of the shutdown in terms of government spending, it stands to reason that it would have to go on for a a month or so before there would be enough of a mechanical fiscal drag to start significantly affecting the path of macroeconomic aggregates. A very, very rough back-of-the-envelope estimate would be that the strictly mechanical impact of a month of the shutdown would subtract 0.1-0.2 percentage points off of GDP growth for (fiscal) 2014.* So, if the government shutdown lasts a month and the economy was set to grow 3 percent in 2014 without the shutdown, the mechanical drag from the shutdown would result in actual growth of 2.8-2.9 percent. Of course, if one focused on the effect of the shutdown only in the fourth quarter of (calendar) 2013, it will matter quite a bit more (multiply that 0.1-0.2 by 4, so, a one-month shutdown would reduce fourth quarter GDP growth by about 0.4-0.8 percent, which is not peanuts for a quarterly growth number).

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People wrongly think the economy is like the weather, a natural force outside of our control. So thinking about problems like high unemployment and declining wages leave people feeling hopeless because they seem to result from large historic forces that we can’t affect like globalization.

The truth, however, is that the economy isn’t like the weather: It’s entirely man-made and the rules are set by politics, not God or nature. Globalization is real, but the terms of globalization—the rules for how the internationalization of trade and production operates and affects workers and companies—are set by politicians and the organizations they’ve created through international treaties. We can change those rules and shape globalization so it does less harm to working people in the United States and around the world.

One of those rules changes would prevent companies from manipulating their currencies to make their exports cheaper while simultaneously making goods imported from other countries more expensive. China, Japan, and other countries have done this for years, buying hundreds of billions of U.S. dollars to weaken their own currencies and making it cheaper and easier to export goods to the United States. This strategy has been very successful, and together, China, Singapore, Taiwan and several other countries, including Japan, export hundreds of billions of dollars more to the United States in manufactured goods than we send to them, leaving us with a huge trade deficit that costs jobs and undermines wages here. The Peterson Institute for International Economics estimates that foreign currency manipulation has cost the United States between one million and five million jobs.

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The core argument of the hysterical Republican diatribe against Obamacare is that it will push Americans down a slippery slope into the nightmare of, gasp, SOCIALIZED MEDICINE!! The phrase regularly trips from the lips of GOP reactionaries. Here’s Texas Senator Ted Cruz in his recent 22-hour speech: “Socialized medicine is—and has been everywhere it has been implemented in the world—a disaster. Obamacare–its intended purpose is to lead us unavoidably down that path.” Congressman Marlin Stutzman (R-IND) tells us, “Obamacare is a perfect tool to crush free enterprise and force all Americans into a socialist health care system.”

These mantras are not really about health care. They are conversation-stoppers. They are designed to flood the mind with murky images of indifferent bureaucratic sloth, incompetent if not sadistic doctors and nurses, dingy overcrowded waiting rooms and other grim scenes from a dystopian medical horror movie. The purpose is to convince the public that as bad as our health care system is, real change would make it worse.

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