With headlines like “Boehner drops effort to avoid ‘fiscal cliff’” saturating the Internet today, a little clarification is sorely needed: Speaker of the House John Boehner’s (R-Ohio) so-called “Plan B” may have been many things, but it was certainly not a plan to avoid an austerity-induced  recession in  2013—which is what people should be talking about, anyway, when they refer to “avoiding the fiscal cliff.” The plan would have mitigated less than one-third of the pending fiscal drags from the various components of the fiscal obstacle course (our preferred alternative to the doubly-misleading “cliff” metaphor). For the millionth time: The fundamental challenge facing policymakers is that budget deficits closing too quickly in the next couple of years will kill the anemic economic recovery, so the pace of deficit reduction must be moderated. But Boehner’s failed plan was instead fixated on accelerating the pace of deficit reduction relative to current policy.

Boehner’s Plan B consisted of two bills. The first, the Spending Reduction Act of 2012 (H.R. 6684), which narrowly passed 215-209 yesterday, would replace scheduled sequestration spending cuts for fiscal year 2013 to the Department of Defense budget with deeper sequestration cuts to nondefense discretionary spending as well as a host of mandatory spending cuts, including: Read more

In the interest of cobbling together random listicles to drive traffic to our website continuing our efforts to educate everyone about the good and bad of economic policy and analysis, here’s our list of some of the silliest economic ideas of 2012. There is a strong fiscal theme to these, which is predictable, as the “fiscal cliff” is one of the most written-about, yet least well-understood, economic policy issues in recent memory.

First, all the bad ideas about the so-called “fiscal cliff”:

1. The problem posed by the “fiscal cliff” is one of too much debt
2. The “cliff” is a big monolith that we either go over or we don’t
3. The “cliff” is mostly about the upper-income Bush tax cuts
4. The economy goes over the “cliff” on Jan. 1
5. The debt ceiling is one of the issues that must be resolved in debates about the “cliff”
6. Resolving the “cliff” requires a deal on long-term debt reduction
7. Financial markets will punish us for not striking a grand bargain to defuse the “cliff”

1. You can’t tax the rich enough to make a dent in the deficit
2. Raising the Medicare eligibility age is a good idea for deficit reduction
3. Switching to a “chained” consumer price index to calculate the Social Security cost-of-living-adjustment (COLA) is a technical improvement
4. Contractionary fiscal policy might actually not be contractionary
5. Only defense spending and tax cuts provide a boost to the economy
6. We’ll “turn into Greece” if we don’t reduce deficits

1. The economy’s real problem is a skills gap
2. The Federal Reserve is risking inflation in its efforts to help the U.S. economy Read more

If House Republican leaders John Boehner and Eric Cantor act like Thelma and Louise and drive their convertible over the “fiscal cliff,” some of the only victims in the early weeks of 2013 will be the 2 million unemployed Americans currently receiving Emergency Unemployment Compensation. They will have a hard landing when Congress suddenly cuts them off from the unemployment insurance checks that are temporarily paying their bills and keeping a roof over them and their families.

Unlike in some previous budget fights, the current law says that no benefits will be paid beyond Dec. 28; there will be no phase-down for those who have been unemployed for more than 26 weeks. One week, they receive unemployment insurance—the next, they won’t. And hundreds of thousands of others who would have become newly eligible for EUC in 2013 will receive nothing once their regular state benefits are exhausted.

This will also have an immediate effect on the economy, as both EPI economists Heidi Shierholz and Larry Mishel, and the Congressional Budget Office have shown. Ending $30 billion in EUC payments will remove $48 billion of economic activity from the economy, and take 300,000 to 400,000 jobs along with it.

A number of commentators, including my colleague Algernon Austin, have pointed out that a proposed cut in the Social Security cost-of-living adjustment (COLA) would disproportionately affect blacks and Hispanics. Proponents have countered that blacks and Hispanics are more likely to qualify for Supplemental Security Income (SSI), a means-tested program managed by the Social Security Administration that could be exempted from the COLA cut.

While it’s true that blacks and Hispanics are more likely to qualify for SSI benefits, exempting SSI  from the COLA cut wouldn’t change the fact that blacks and Hispanics still rely on Social Security for a larger share of their incomes than whites. SSI, while a critical lifeline for some, is a much smaller program, representing just 17 percent of the benefits blacks and Hispanics receive from both Social Security and SSI together (calculations are based on tables 3.C7A and 3.C8 in the 2011 Social Security Administration’s Annual Statistical Supplement, which exclude children under 15).

Not only does Social Security represent a greater share of black and Hispanic income, but black and Hispanic beneficiaries tend to be younger than white beneficiaries, with a greater likelihood of receiving disability and survivor benefits (see previously cited tables and this Social Security Administration fact sheet). Disabled beneficiaries and others receiving benefits over long periods face the steepest cuts from the proposed COLA cut. Among retirees, the worst hit will be women across racial and ethnic groups as well as Hispanics, due to longer life expectancies.

The New York Times is reporting that President Obama is backing off his pledge to allow the Bush tax cuts on income more than $200,000 ($250,000 for couples) to expire, instead proposing to only allow the tax cuts on income above $400,000 to expire. Though not quite as bad as House Minority Leader Nancy Pelosi’s preemptive cave last summer in proposing to shift the threshold from $200,000 to $1 million, this is still a really bad idea.

Beyond the revenue loss, it’s simply ridiculous to claim that households making up to $400,000 are “middle class”; as we’ve shown before, even households up to the $200,000–250,000 threshold probably shouldn’t be considered “middle class.” Yes, it’s notoriously hard to pin down an exact definition of “middle class,” but it is clearly intended to characterize households that fall roughly in the middle of the income distribution. Yet, as the below graph shows, all the thresholds mentioned above include households whose income falls well outside the area where most households are concentrated.

This isn’t surprising. More than 87 percent of taxpayers make less than $100,000 a year, according to IRS data, and the average household makes roughly $50,000 a year. This means that households making between $200,000 and $400,000 are making between four and eight times what most American households earn. Stretching the definition of “middle class” to include households with more than $200,000 is to render the term meaningless.

An undercover documentary report recently aired on France’s public television station found disturbing new evidence that the living and working conditions of the factory workers making the iPhone 5 are grim. The new report adds to the overall picture described in Polishing Apple: Fair Labor Association gives Foxconn and Apple undue credit for labor rights progress; optimistic reports that reforms at Foxconn, which assembles the iPhone 5 for Apple, are going swimmingly are entirely premature.

A story on Engadget provides an English summary of the investigation, which can be found in full (but in French). The story reported that at Foxconn’s iPhone 5 factory in Zhengzhou:

• Many workers are living in unfinished dorms that have no elevators, electricity, or running water.
• Eight workers living in dorms with electricity were killed in a fire caused by workers plugging electronic devices into overloaded circuits, according to the reporters’ translation of a safety speech given by a Foxconn supervisor.
• Student workers are still being forced to work there, including Read more

One of the unfortunate side effects of the political dysfunction that has increasingly gripped the nation’s capital is a habit of lurching from one crisis to the next rather than taking time to do a bottom-up assessment of the effectiveness of current policy.

The Bush tax cuts are a great example of this. Republicans want to extend all of the Bush tax cuts, while Democrats generally support extending the tax cuts for only the bottom 98 percent of households. But few end up debating whether these tax cuts are actually optimal policy, and if perhaps a better replacement exists.

This is unfortunate, because the Bush tax cuts are pretty poor policy; in a decade of existence, they have accomplished none of the goals they were intended to achieve. In fact, judging the Bush tax cuts based on their economic impact, distributional impact, and cost, they have been an outright disaster.

Economic stagnation

Under practically any measure, the economy performed exceedingly poorly in the years following the Bush tax cuts. Of the 10 economic expansions since 1949, the economic expansion from 2001 to 2007 ranks last Read more

Here are a few links that EPI’s research team clicked through today:

• “Social Security Checks Enter the Debate” (New York Times)
• “Boehner’s Plan B Fails; Inmates Running Asylum” (New York Magazine)
• “After Recession, More Young Adults Are Living on Street” (New York Times)
• “Study: D.C. third-graders have not improved in math, reading since 2007” (Washington Post)

As my colleagues have shown, the “chained” cost-of-living adjustment for Social Security being discussed between President Obama and House Speaker John Boehner is a cut to benefits. The AARP Public Policy Institute’s report, Social Security: A Key Retirement Income Source for Older Minorities, helps us to think about how this cut might affect different racial groups.

Nearly one-in-five (18.7 percent) of the Hispanic elderly lives in poverty. For African Americans, the rate is one-in-six (17.1 percent) (Figure A). A cut to Social Security benefits runs the risk of significantly increasing these rates.

Latinos and blacks tend to have lower lifetime earnings and this fact results in lower levels of Social Security income. But it is also the case that these groups have less wealth and therefore depend on Social Security more. Figure B shows that roughly one-in-four Latino (25.4 percent) and black (26.3 percent) Social Security beneficiaries rely on Social Security for 100 percent of their income. For these individuals, Social Security cuts will hurt the most.

Although few in the United States have heard about it, Dec. 18 is known around the world as International Migrants Day. It began in part as a way to commemorate and remind governments to adopt the International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families, an international treaty created to protect the basic human rights of those who cross international borders—whether by choice or by force—in search of a better life. But it is also a day to recall the economic contributions of immigrants, by reminding us that most immigrants in the United States are workers—workers who toil alongside their native-born counterparts on agricultural lands, in factories, and in engineering labs. On this International Migrants Day, I am particularly hopeful that positive reforms to our immigration system may soon be enacted—reforms that will benefit and protect both immigrant and U.S. workers alike—thanks to the renewed discussions on comprehensive immigration reform that are taking place among the public, the media, on Capitol Hill and in the White House. And these discussions finally include skeptics, who until recently, considered legalization of the vulnerable unauthorized immigrant population to be unthinkable.

However, my optimism is tempered by the disturbing and uninformed comments being made by traditionally anti-worker sources like Read more