On Wednesday, the Washington, DC, City Council passed the Large Retail Accountability Act (LRAA), a bill that will require large retail corporations—specifically businesses with more than $1 billion in sales and retail locations of at least 75,000 square feet—to pay their workers a minimum wage of $12.50 per hour. The bill’s passage may only be a temporary victory for proponents, however, as there is speculation that DC Mayor Vincent Gray may veto the bill now that Walmart, the primary target of the bill, has said that they will cancel construction of three planned stores in the District if the legislation becomes law.

It’s hard to view Walmart’s threat to scuttle the three stores, made literally the day before the Council vote, as anything but outright bullying by the largest and one of the most profitable corporations in the world. Walmart has alleged that the bill unfairly singles them out, although a few other retailers—Macy’s, Costco and Home Depot—would also be affected by the bill. But Walmart does deserve special scrutiny because of their unique track record in driving out smaller retail businesses, depressing wages (pdf), and siphoning off public tax dollars.

To be clear, Walmart is not the only big-box retailer that has shut down smaller competitors, but Walmart’s market dominance in many regions, and their role as the largest private employer in the United States, gives them a unique ability to affect living standards for significant segments of the population. Unfortunately, their typical wages are abysmally low. The minimum wage of $12.50 required under the LRAA is just below the average wage of Walmart employees nationwide: $12.67 per hour. And when companies like Walmart don’t pay sufficient wages for workers to make ends meet, the American taxpayer picks up the tab. In nearly every state where it operates, Walmart has more employees on Medicaid than any other company. In some states, its employees are also the largest groups of food stamp and other cash assistance recipients.

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A recently concluded trial highlights how weaknesses in the country’s guestworker programs can facilitate human trafficking. Last week, a federal jury convicted Kizzy Kalu, a Denver-area man, of “89 counts of mail fraud, visa fraud, human trafficking and money laundering.” While both progressives and conservatives have complaints about the Senate immigration bill, it’s important to point out that the Senate took an important step forward in terms of new rules that would protect vulnerable foreign workers like the ones recruited by Kalu from abroad through guestworker programs.

The workers Kalu recruited thought they were coming to the United States to work full-time at an American university as “nurse instructor supervisors” through the H-1B guestworker program, which allows U.S. employers to hire workers from abroad for occupations requiring at least a college degree. But Kalu lied to the government and the foreign workers, and with disastrous results. According to the Department of Homeland Security (DHS), the university that was supposed to be the employer “existed largely in name only and had no genuine need for nurse instructor supervisors.” Thus, the workers had no jobs, and had to look for work on their own (although Kalu would not even let them travel freely). H-1B workers are legally required to be paid a “prevailing” wage, but the workers who were able to find jobs ended up working in nursing homes (not as instructors) earning less than the prevailing wage. Some were not able to find a job at all. On top of that, Kalu required the workers to pay him “between $800 to $1,200 per month or face deportation” and required them to sign employment contracts specifying the workers would owe Kalu “$25,000 if they left his employment.”

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It looks like House Republicans are at it again. With another deadline for a congressional vote to raise the debt ceiling looming this fall, recent reporting confirms that House Republicans are strategizing on how to best hold hostage the full faith and credit of the United States in return for even more spending cuts. (Note: The CBO reports that congressional action on the debt ceiling will be necessary sometime in October or November, after the Treasury has exhausted its full arsenal of extraordinary measures to stay under the current debt limit, which is just under $17 trillion.)

Recall that in August 2011 the GOP threatened sovereign default in order to force their agenda—dollar for dollar spending cuts in exchange for their votes to raise the debt ceiling, a habitually pro forma vote (see Table 7.3 for a record of how many times the debt ceiling has been voted on). President Obama ultimately capitulated to this bribe, signing the Budget Control Act (BCA) in exchange for a debt ceiling increase and thus solidifying our country’s pivot from prioritizing post-recession job creation policies to instead pushing policies of austerity. That debt ceiling showdown and the legislation it generated has not only stymied our recovery, but additionally led to a slew of other bad stuff, including the downgrading of our credit rating and the implementation of one of the worst pieces of fiscal legislation to come out of the Obama Administration: sequestration and the discretionary spending caps.

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On July 1, North Carolina pulled the safety net out from under the long-term unemployed. Workers in the state with the nation’s fifth-highest unemployment rate will now be eligible for only 19 weeks of unemployment compensation benefits. This is shortest duration of any state, and is well below even the pre-recession standard of 26 weeks. Furthermore, North Carolina’s politicians have disqualified their own state for over half a billion dollars in free federal unemployment aid—and all because they were determined to slash the weekly benefits provided to the unemployed.

North Carolina’s policymakers have made it clear that they have little empathy for the suffering created by the state’s stagnant labor market, which has left 8.8 percent of its workforce without a job. But if policymakers think that they can further disadvantage job seekers without damaging North Carolina’s prospects for economic recovery, they’re dead wrong. As Paul Krugman writes, the move to slash unemployment benefits is a huge mistake on both humanitarian and economic grounds.

The unemployment benefit slashers demonstrate a fundamental misunderstanding about how aid to the unemployed helps the economy. First and foremost, unemployment assistance helps workers and their families keep their heads above water in the event of a job loss until they can find another job. That’s the “private” benefit. But secondly, there are benefits that we all share when the government assists job seekers. Unemployment compensation is an extremely effective means of economic stimulus, because that compensation puts money directly in the hands of people who are most likely to spend it immediately. That’s the “public” benefit: such spending props up local economies at times (like now!) when the economy is suffering from a massive shortfall in aggregate demand.

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Two weeks ago, Senators Baucus and Hatch, respectively the chairman and ranking minority member of the Senate Finance Committee, sent a “Dear Colleague” letter to solicit input on which tax expenditures to keep in the tax code. They are proposing a “blank-slate” approach for tax reform—eliminate all tax expenditures from the tax code and then add in the ones that can be justified. It’s a positive development that the senators aren’t constraining the initiative to be revenue neutral, but what sounds like a novel and fresh approach to tax reform that broadens the tax base and simplifies the tax code, both laudable goals, will likely obtain neither.

My guess is the “blank-slate” approach to tax reform is doomed to failure. 100 senators, backed by thousands of lobbyists, are all but guaranteed to come up with a plan as complicated as the current tax code. Perhaps serious tax reform is not in the cards for the 113^th Congress.

Tax expenditures are tax credits, tax deductions, and exclusions embedded in the tax code, which reduce a taxpayer’s tax liability; they are often referred to as loopholes. According to the Joint Committee on Taxation, there are over 200 tax expenditures affecting individuals, and they are estimated to reduce Fiscal Year 2014 tax revenues by $1.1 trillion. “Broadening the base” refers to the elimination or reduction of these expenditures, and is held up as the gold standard for tax reform. Depending on who you ask, increased revenue from broadening the base should be used to reduce tax rates, reduce deficits, or increase expenditures on education, infrastructure and the social safety net.

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The New York Times obituary for Douglas C. Englebart, identified as the “Computer Visionary Who Invented the Mouse,” is fascinating reading, in part because Englebart, an Oregon farm boy, was in many ways the father of modern networked computing. Beginning in the early 1960s, he put together a team of engineers and computer scientists, funded by the federal government, that developed a prototype for most of the computer tools we all take for granted today. He unveiled them at a conference in San Francisco in December 1968, which “set the computing world on fire.” In the words of the Times obituary:

“Dr. Engelbart was developing a raft of revolutionary interactive computer technologies and chose the conference as the proper moment to unveil them.

For the event, he sat on stage in front of a mouse, a keyboard and other controls and projected the computer display onto a 22-foot-high video screen behind him. In little more than an hour, he showed how a networked, interactive computing system would allow information to be shared rapidly among collaborating scientists. He demonstrated how a mouse, which he invented just four years earlier, could be used to control a computer. He demonstrated text editing, video conferencing, hypertext and windowing.”

Englebart was a visionary, but his ground-breaking work was not supported by venture capital and his innovations were not the result of the private market or corporate enterprise. His innovations were not spurred by the prospects of incredible income and wealth, all lightly taxed. Rather, the work was funded and organized by a visionary bureaucracy in the U.S. government. As the Times describes it, “during the Vietnam War, he established an experimental research group at Stanford Research Institute (later renamed SRI and then SRI International). The unit, the Augmentation Research Center, known as ARC, had the financial backing of the Air Force, NASA and the Advanced Research Projects Agency, an arm of the Defense Department.”

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The drumbeat of doom-and-gloom about American education continues. The latest entry is a June report by the Council on Foreign Relations, warning that the “real scourge of the U.S. education system–and its greatest competitive weakness–is the deep and growing achievement gap between socioeconomic groups that begins early and lasts through a student’s academic career.”

Every industrialized country has an achievement gap between higher and lower-class children. In the United States, we have a similar and overlapping gap between whites and blacks. These gaps have narrowed, but not much, because both races have posted remarkable gains in recent generations.

Consider this: black achievement has improved so much that in elementary school mathematics, blacks now perform better than whites did only a generation ago. Improvements have been less great but still substantial for black elementary and middle schoolers in reading and for black 12^th graders in both math and reading. White students have also improved in this time, however, so the gap remains.

The Council on Foreign Relations acknowledges that American student achievement is “higher than ever,” but says gains have been small. In fact, gains have been quite large, and for disadvantaged students, have outpaced gains in comparable industrial countries. One country with which we are typically and unfavorably compared is Finland. Yet although Finland’s scores remain high, achievement of its disadvantaged students has plummeted in the last decade, while that of comparable U.S. students has surged.

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The Organization for Economic Cooperation and Development (OECD) and the World Trade Organization (WTO) have reported that significant portions of China’s exports to the United States contain non-Chinese value added, including some small fraction of parts and materials originating in the United States. The OECD and WTO have proposed new estimates of trade in value-added (VA), a measure of trade that is net of foreign value-added. They claim that “China’s bilateral trade surplus with the United States shrinks by 25% on a value-added basis, reflecting the high level of foreign-sourced content in Chinese exports.” But, my new EPI report shows that the OECD-WTO analysis is “fundamentally flawed and should not be used in anti-dumping or other types of fair trade cases.”

The OECD-WTO analysis suffers from at least three critical flaws:

• The OECD-WTO analysis fails to account for rapid technological change and the fact that China is rapidly moving up the value chain and increasing the domestic content of its exports.
• The OECD relies, in part, on flawed Chinese data on its own trade flows. Estimates developed in the EPI report show that China’s global trade surplus was 117 percent to 250 percent (i.e., 2 to 3.5 times) larger than reported by China in the 2005-2009 period.
• The OECD-WTO estimates do not accurately reflect the flow of Chinese exports coming into the United States through third countries. China became the world’s largest exporter in 2006, and roughly half of its exports are intermediate products and transshipped goods. As a result, the United States absorbed $54.2 billion to $77.9 billion per year in additional, indirect imports originating in China and imported from the rest of the world between 2005 and 2009 that were not reflected in the OECD estimates. When indirect imports are included, U.S. VA trade with China exceeds conventional measures of the gross bilateral trade deficit in this period.

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Happy Fifth of July. Here’s what we read this week:

• War on the Unemployed (New York Times)
• The Fall of the American Worker (The New Yorker)
• Upgrade or Die (The New Yorker)
• Instituting Economic Cooperation in a Noncooperative World (Center for American Progress)

There are not enough thumbs-up graphics on the internet to show how much I agree with and how important I think this Paul Krugman blog post is. He goes through all of the obvious indicators signaling that the economy is far from healed from the Great Recession, as well as all of the puzzling ways policymakers seem determined to ignore this, and ends with:

“I guess what I’m saying is that I worry that a more or less permanent depression could end up simply becoming accepted as the way things are, that we could suffer endless, gratuitous suffering, yet the political and policy elite would feel no need to change its ways.”

We said much the same thing in the introductory chapter to State of Working America, 12th Edition published last Labor Day:

“We should be very clear about the danger of this complacency in the face of elevated unemployment. It’s not simply that full recovery to pre-recession health will come too slowly—though this delay alone does indeed inflict a considerable cost. Instead, the danger is that full recovery does not come at all. Nations have thrown away decades of growth because policymakers failed to ensure complete recovery. Japan has been forfeiting potential output—trillions of dollars’ worth, cumulatively—for most of the past 20 years. Recent research (Schettkat and Sun 2008) has suggested that the German economy operated below potential in 23 of 30 years between 1973 and 2002 because monetary policymakers were excessively inflation-averse. Lastly, U.S. economic history provides the exemplar of what can happen to a depressed economy when policymakers fail to respond correctly: The level of industrial production in the United States was the same in 1940 as it was 11 years before.”

And today’s jobs-numbers, while a nice mild boost above recent trends, really don’t change this assessment at all.