The National Labor Relations Board Now Has All Five Members
Now that the Senate has confirmed the appointments of a full slate of members of the National Labor Relations Board (the quasi-judicial body that decides labor relations cases and protects the right of workers to organize unions), the 18-month long fight over the president’s nominations looks ridiculous. Despite precipitating a mini constitutional crisis over the president’s right to make recess appointments, and coming close to the parliamentary equivalent of nuclear war in the Senate, the end result is little different than if the Senate had simply confirmed President Obama’s original nominees. On the other hand, a lot of damage has been done along the way.
For those who haven’t followed closely, Senate Republicans filibustered the nominations of two Democrats, Sharon Block and Richard Griffin, who strongly support the National Labor Relations Act’s mission of encouraging collective bargaining. They were targeted because Republicans sought to demonize the Board and President Obama over a case involving Boeing’s decision to open new facilities in South Carolina. In that case, the NLRB filed a complaint against Boeing because company officials had described the decision to locate the plant in South Carolina as punishment for the Machinists union’s exercise of its legally protected right to strike. Even though no Board member ever ruled on the case, which Boeing and its union eventually settled, Sen. Lindsay Graham and others made it a cause celebre and fabricated an election campaign story that President Obama was trying to prevent investment in right-to-work states like South Carolina. Sen. Graham even suggested that the NLRB should be put out of business.
Deficit Reduction: It’s Not the Economy, Stupid
For the past three years, Washington policymakers have been fixated on reducing budget deficits. And currently, short- and medium-term deficit projections have plummeted, due both to changes in legislation as well as revisions due to technical factors. In May, for example, the Congressional Budget Office revised the deficit projections that it had released in February, reducing its fiscal year 2013 deficit projection by 24 percent, or $200 billion. Similarly large reductions apply in each subsequent year, reducing the ten-year cumulative deficit estimate by $618 billion. As a consequence of smaller deficit projections, the CBO anticipates that the federal debt held by the public will be 73.6 percent of GDP by 2023—1.5 percentage points less than it is this year, and more than four percentage points less than CBO’s previous forecast for 2023.
Both the revised longer-term outlook and the unexpectedly rapid reduction in the near-term deficit have prompted some to change their tone on the urgency of further deficit reduction. Earlier this week, the Center for American Progress brought together a panel of experts to discuss the shifted outlook and what it means for debt-reduction policies in the current climate.
Detroit’s Pension Problems: Not as Bad as They’re Portrayed
Detroit’s emergency manager, Kevyn Orr, claims Detroit owes $3.5 billion (pdf) to its public pension funds. This is more than five times the $640 million the funds’ actuaries estimated in 2011,1 (pdf) vaulting pensioners into the ranks of the city’s major creditors, which isn’t a good place to be. It also contributes to Orr’s claim that Detroit owes a total of $18 billion—half to retirees and workers—and that bankruptcy is the city’s only recourse.
Despite obvious socioeconomic explanations for Detroit’s woes—the Great Recession walloped a city already suffering from deindustrialization and a flight to the suburbs—it sounds plausible that Detroit’s wounds are partly self-inflicted. After all, this is a city whose former mayor can’t seem to stay out of jail. And there’s certainly a history of elected officials around the country neglecting pension contributions to avoid raising taxes to pay for public services. So the idea that Detroit lowballed its obligations to workers and retirees has the ring of “truthiness,” to borrow Stephen Colbert’s phrase.
But pension obligations don’t blow up in your face like airbags, and politicians can’t make reputable actuaries like Gabriel Roeder Smith cook the books. When politicians want to save money by shortchanging pensions, they just don’t contribute what the actuaries tell them to contribute. This may be irresponsible, but it’s fairly transparent.
The Next Federal Reserve Chairperson
Some months ago it became known that Federal Reserve Chairman Ben Bernanke was likely to step down as the end of his second term of appointment drew near. Initially, Federal Reserve Vice-Chair Janet Yellen appeared the favorite to succeed Bernanke, but now it seems as though Larry Summers has become the Obama administration’s preferred candidate. Summers’ candidacy raises grave political and policy concerns.
The case for Larry Summers rests on claims that he is a seasoned, crisis-tested, and known policy maker. His experience includes a stint as treasury secretary in the late 1990s and a stint as director of the National Economic Council from 2009-2011, where he oversaw the stimulus and recovery program. He is also a known quantity on Wall Street, where he has earned millions in speaking and consulting fees. Add in his academic credentials as an economics professor at Harvard, and Summers appears to be a model candidate – experienced in government and trusted by financial markets.
But digging deeper, the flaws begin to show. Many critics have pointed out that Summers led the charge for financial deregulation in the 1990s. Worse yet, he opposed updating regulation to deal with financial innovation, as exemplified by his opposition to derivatives regulation in 1998.
What to Watch on Jobs Day
Expectations for July’s employment report, which will be announced on Friday, are for yet another month of tepid growth. In fact, it is likely that job growth in July was even slower than it has been in recent months. This is bad news for the economy, considering that even if the 196,000 average job growth of the last three months kept up, it would still take more than five years to close the 8.3 million jobs gap in the labor market.
Meanwhile, the employment report contains a whole host of indicators above and beyond the job creation and unemployment numbers, which can give clues about where the economy is headed. For instance, in June average hourly wages increased by 10 cents, the largest monthly increase in over 4.5 years. That sizeable increase, however, was likely an anomaly and is unlikely to be repeated. The high unemployment of the last five plus years continues to exert strong downward pressure on wage growth. 
New Study Documents Serious Labor Rights Violations at Apple’s Second Largest Supplier
Over the past year, discussion of the conditions faced by workers in Apple’s supply chain has focused almost exclusively on what changes have, or have not, occurred at certain factories of its largest supplier, Foxconn. In light of the deplorable working and living conditions faced by Foxconn employees, many of which persist despite some reports to the contrary, that discussion is warranted. But it only covers part of the story: less than one-fifth of the workers in Apple’s supply chain are employed at the three Foxconn factories receiving the most public scrutiny. An illuminating new report and a video by China Labor Watch (CLW) underscore that labor rights violations would likely be found to be even worse if one were able to get an in-depth view of Apple’s entire supply chain.
The CLW study examined three Pegatron factories with more than 70,000 workers combined. Pegatron is Apple’s second largest supplier, and CLW gathered information by placing undercover investigators at the factories. The study describes 86 labor rights violations, including relying on scurrilous dispatch labor companies that exploit placed workers, widespread hiring discrimination, the significant misuse of underage workers and pregnant women, low wages, forced and uncompensated overtime, and harsh working and living conditions. It discusses 17 specific commitments in Apple’s supplier code of conduct that Pegatron violates.
Does a Grand Bargain Have to Include a Bad Bargain?
According to various media outlets, President Obama will propose, in a speech today, changes to the corporate income tax “so long as the initial revenue generated goes toward job creation.” Increasing corporate tax revenue to fund job creation, infrastructure improvements, and strengthening U.S. manufacturing is very welcome news. The not so welcome news is he is proposing a revenue-neutral corporate tax reform with a one-time corporate tax revenue increase by granting a tax break on foreign earnings of U.S. corporations. The proposed tax break appears to be a low tax on all $2 trillion of deferred foreign earnings. This one-time revenue increase will be used to pay for job creation and infrastructure improvements.
U.S. corporations are holding almost $2 trillion overseas. This income is not subject to the U.S. corporate tax until it is brought back to the U.S. or “repatriated”—this loophole is known as deferral. A common misperception is the firms will pay 35 percent of the repatriated earnings to the federal government. However, because of various deductions and other loopholes (some legitimate, some not), the multinational ultimately pays considerably less to the government. Also, the corporations get a credit for foreign taxes paid. This deferral of taxes on overseas profits is one of the costliest corporate tax loopholes, reducing tax revenue by up to $50 billion per year.
Social Security is the Most Effective Anti-Poverty Program in the U.S., In One Chart
Tomorrow, the U.S. House Committee on the Budget is holding a hearing on the progress of the War on Poverty. While the United States is still slowly recovering from the worst recession since the Great Depression, fortunately this time around government safety net programs have been in place to keep more people from falling into poverty. The Supplemental Poverty Measure (SPM) shows the strength of the government to mitigate the incidence of poverty.
As the figure below shows, Social Security is, by far, the most effective anti-poverty program in the United States. Without Social Security, an additional 8.3 percent of Americans, or over 25 million more people, would fall below the SPM poverty threshold. Refundable tax credits, such as the Earned Income Tax Credit, kept 2.5 percent, or nearly 8 million Americans above the SPM poverty threshold. Other programs such as SNAP (food stamps), unemployment insurance, Supplemental Security Income, and housing subsidies also have a significant impact on the ability of families to stay afloat.
Source: http://www.census.gov/hhes/povmeas/methodology/supplemental/research/Short_ResearchSPM2011.pdf
President Obama Recognizes the Economic Demands of the “Unfinished March”
In a recent New York Times interview, president Obama reminded readers that “there was a massive economic component” to the 1963 March on Washington for Jobs and Freedom. He added, “When you think about the coalition that brought about civil rights, it wasn’t just folks who believed in racial equality. It was people who believed in working folks having a fair shot.”
EPI has been using this 50th anniversary year of the march to make the same point. Our Unfinished March project highlights the fact that most of the marchers’ demands, demands with big economic impacts for working folks, were not achieved. The marchers’ demands for full employment, a living wage, adequate and integrated education, and decent housing have yet to be realized.
The video from our recent Unfinished March symposium can be seen here. Our Unfinished March publications can be found here. Register at the site to be updated about future publications and events.
What We Read Today
Here’s what we read today. Read anything interesting lately? Share it in the comments.
- Fast Food, Low Pay (New York Times)
- The Affordable Care Act: A Hidden Jobs Killer? (CEPR)
- Bronx Carwasheros Latest to Win Union Voice (AFL-CIO)
- Proof Of Politics: Indiana Fudges Truth On Health Exchange Rates To Make Obamacare Look Bad (Forbes)
- Big Data Analysis Adds to Guest Worker Debate (New York Times)
- In Climbing Income Ladder, Location Matters (New York Times)