In a year of professional sports lockouts, teacher strikes, and disappearing Twinkies, we’ve heard a lot about the “labor dispute.” The phrase implies unreasonable labor demands and stalled collective bargaining negotiations and has frequently provided cover for businesses that have failed to adapt to changing economic conditions. The Hostess bankruptcy is the latest example of workers bearing the blame for years of bad management and myopic business strategy. The language used to describe these events is indicative of the vilification of workers —from Detroit, to Irving, Texas, to Washington, D.C. Yet, in so many of these cases, labor is neither the provocateur nor the problem.

When Hostess executives (who recently treated themselves to 30–300 percent pay increases) proposed a plan to slash employee compensation by 30 percent, it wasn’t in response to labor demands. When the workers refused to accept management’s proposed compensation cuts, it was resistance to extortion, not a labor dispute. Employees sticking together to protect the compensation they’d earned, following recent sacrifices to the tune of at least $110 million, wasn’t “big labor” picking a fight or wanting more. Read more

In a recent blog post, we made the point that the debate over the “fiscal cliff/obstacle course/austerity crisis” is fixated on the too-modest goal of avoiding outright recession in the coming year, rather than actually pushing the U.S. economy back to full economic recovery. This latter goal—actually ending the economic slump that began with the Great Recession in late 2007—is obviously politically unrealistic (which, by the way, should be sign one of just how deranged D.C. policymaking has become), but we should be clear that it’s the right thing to do.

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

The U.S. economy has already forfeited literally trillions of dollars in national income by not pushing the economy back to full health after the Great Recession. Knock-on effects of this policy failure include damage to future potential income from economic “scarring;” to put it simply, allowing productive economic resources (both people and capital) to sit idle and atrophy is exceptionally inefficient. A less important knock-on effect of this continuing slump is that it will predictably cause future projected budget deficits to balloon. Yet far too many self-proclaimed deficit hawks among D.C. policymakers seem strangely unconcerned about this particular driver (continued economic weakness and unemployment) of future budget deficits, and too many are instead advocating near-term fiscal contraction that will further delay recovery.

The U.S. economy is running $973 billion (5.8 percent) below potential economic output—what the economy could produce with higher (but noninflationary) levels of employment and industrial capacity utilization. Cumulatively, these output gaps imply that the U.S. has forgone roughly $3.6 trillion of national income over 2008—2011, projected to hit $4.6 trillion by the end of 2012.

Moreover, the Congressional Budget Office’s (CBO) economic baseline shows output gaps persisting into 2018: Under current law, another $3.5 trillion worth of cumulative output gaps are projected over 2013–2017. These forecasts are likely overstated in the near term, as Congress probably won’t actually allow all the fiscal contraction baked into current law to actually come to pass. Still, CBO’s current economic forecast indicates a decade-long economic slump, in which the United States will forgo $8.1 trillion of national incomeRead more

Here’s some of the interesting content that EPI’s research team browsed through today:

• “Obama must push for another extension of unemployment insurance” (Washington Post)
• “Poor management, not union intransigence, killed Hostess” (Los Angeles Times)
• “Tax Time: Why we pay” (New Yorker; subscription)

Zachary Goldfarb wrote an interesting piece on President Obama’s commitment to fight rising economic inequality as president. Lots of it rings true—the president has indeed expressed concerns about rising inequality and many of his policy initiatives (particularly the coverage expansion included in health reform) will indeed do much to ensure that rising inequality no longer provides as daunting a barrier to low– and middle-income households’ living standards growth.

What’s consistently depressing in the inequality debate as waged around D.C. politics, however, is the telescoping of the debate into being all about tax rates and educational attainment.

Goldfarb repeats a piece of ossified conventional wisdom in his piece, writing, “The data show that rising inequality is largely the result of a changing economy that handsomely rewards people with better skills or credentials—a college education—and leaves people with a basic education at a disadvantage.”

This just isn’t right. Check out how wages for college graduates have fared in the past decade. Read more

Warren Buffett wrote a great New York Times op-ed in which he illustrated the ridiculousness of the claims that higher tax rates on the rich will cause them to forego profitable investments. As he points out, the decline of tax rates on the rich over the last few decades have only served to further fuel their skyrocketing incomes at the expense—rather than to the benefit—of everyone else.

Making the highest income households pay a fair share of taxes is important for the principles of fairness itself: the concept of vertical equity stipulates that tax burdens should be proportionate to a taxpayer’s ability to pay, so as income rises, so too does the share of income paid in taxes (and thus effective tax rates). As my colleague Andrew Fieldhouse calculates, very high-income households start to see their effective individual income tax rate start to fall, as the preferential treatment of capital gains and dividends undermine the basic tenant of our progressive income tax that effective tax rates should rise with income. This implies the burden of taxation is being shifted from those best able to pay to those more burdened by higher effective taxation.

But it’s not just about fairness—raising taxes on the rich produces a lot of revenue, which we can then use to create jobs and Read more

The Washington Post lead editorial today claims that the chained CPI-U is a better measure of the inflation facing the elderly than the current estimate of consumer prices used for that purpose. The editors argue that using the chained CPI-U is therefore not just an effective way to get substantial budget savings from a major entitlement program, but also a fair way to do so.

If the current COLA is set too high because it is calculated using a measure that systematically overstates inflation, then we ought to change it. But in fact, it doesn’t. Contrary to the Post’s assertions, the chained CPI-U and the current unchained version probably understate inflation for the elderly and disabled because the mix of goods and services they purchase is much more heavily weighted toward medicine and health services, where inflation is very high, than it is for younger consumers. In addition, elderly and disabled beneficiaries spend a greater share of their incomes on necessities like rent and utilities, and are therefore less able to substitute cheaper goods and services in response to price increases.

It is possible that Alan Simpson and Erskine Bowles didn’t know this when they recommended Read more

There is a widely held view in Washington that if employers don’t like the labor force they find in their area, they should be able to replace the locals with foreign workers. If people who live and work where a business is located aren’t willing to work for however little a business owner wants to pay, the business should be able to resort to “guest workers,” foreign workers who are permitted to work only for that employer while they are in the U.S. and who have to leave as soon as the employer has finished with them.

The Washington Post, for example, recently announced that any comprehensive immigration reform would have to give businesses “timely access to adequate numbers of seasonal and agricultural workers.” Francisco Ordonez, a McClatchy News reporter, spoke to Republican leaders who say that if immigration reform is going to happen, “Democrats have to stand up to unions and support an expanded guest-worker program, including some non-agriculture jobs.” The unemployment or underemployment of 15 percent of the U.S. labor force apparently isn’t enough to provide “adequate numbers.” Read more

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

• “The biggest challenge to immigration bill may be guest workers” (Kansas City Star)
• “Boehner: Deficit talks must be broadened to include … Obamacare” (Washington Post)
• “The Morning Plum: Dems shouldn’t agree to ‘temporary’ fiscal cliff solution” (Washington Post)
• “U.S. Deficit Shrinking At Fastest Pace Since WWII, Before Fiscal Cliff” (Investor’s Business Daily)
• “Law School Admission Testing Plunges” (New York Times)
• “Family Becomes Focal Point in Fight to Lower Prison Phone Rates” (ColorLines)

This post originally appeared on Dissent Magazine’s website

By now it’s well known that Papa John’s Pizza CEO John Schnatter is claiming—or threatening—that compliance with the Affordable Care Act would force him to reduce employee hours or raise prices. This was one of a number of post-election “job-creator” tantrums based on the curious belief that President Obama’s re-election (and the continuation of his policies) had somehow changed the political and regulatory landscape.

Schnatter was quickly skewered for his inflated estimation of the ACA’s burden—he claimed it would increase prices 10 to 14 cents—which Forbes calculated to be about one-half of 1 percent of the chain’s operating expenses—or between 3.4 and 4.6 cents per pizza. With Papa John’s charging $1.50 for each extra topping, this is about the cost of a single slice of pepperoni on a large pizza (if we assume a generous portion of 30 pieces of pepperoni per pizza).

But, more important, in the big picture the best way to think of the ACA is that it is providing a mandate (with admittedly small and not particularly sharp teeth) that deters  low-road employers like Papa John’s from continuing to shirk responsibilities to their employees. Read more

Here’s a sampling of links that EPI’s research team found insightful today:

• “What Are Conservatives Getting Wrong About The Economy? (Douthat Reply Edition)” (Rortybomb)
• “Understanding President Obama’s Revenue Targets” (TaxVox)
• “Budget crisis calls for focus on entitlements and revenue” (Washington Post)