Unemployment remains far too high, and the culprit is clearly deficient spending in the economy. Yet, a full-throated call for aggressive Keynesian remedies for this (i.e., something like another Recovery Act) is far from the top-shelf item on the agenda. Instead, most policy attention in the race centers on which candidate would more rapidly reduce projected budget deficits—a policy maneuver that, in the next couple of years, would be all but guaranteed to lead to higher unemployment rates. This move away from a defense of Keynesian cures for high unemployment started a long time ago and has codified by the 112th Congress (Jan. 2011–present), when federal budget policies pivoted sharply toward austerity.

Republicans have clearly led the charge away from Keynesianism, vociferously decrying the increase in budget deficits since the Great Recession began and demanding a dollar of spending cuts for every dollar increase in the statutory debt ceiling. Democrats have (generally) been more ambivalent—calling for (and passing) some fiscal support while often rhetorically privileging deficit reduction over other policy goals. Given this partisan pattern, it’s somewhat unexpected to hear some commentators speculate that a Mitt Romney administration Read more

Yet another right-wing organization is attacking public employees and their pay. This time, it’s Citizens Against Government Waste, a corporate front for tobacco companies, defense contractors, Microsoft, and anyone interested in contracting out government services. Today, they issued a report card at the National Press Club that purports to grade states on public employee pay and argued that overpayments are the cause of unfunded pension liabilities.

These claims are bunk, and study after study has rebutted similar claims. If anything, public-sector workers, most of whom have college degrees or higher, are somewhat underpaid compared to comparable private-sector workers. EPI collected a series of such reports in Jan. 2011, but this has also been the finding of research from the Center for Retirement Research at Boston College, the National Institute on Retirement Security, and the Center for Economic and Policy Research.

The CAGW paper also addresses public employee pension plans. Why are these plans underfunded? The biggest single reason is the stock market collapse of 2007–09. Read more

EPI’s recently released The State of Working America, 12th edition, explains in detail how the past 10 years have been a “lost decade” of income growth for the bulk of American families. How has this played out at the state level? Last week’s release of the American Community Survey (ACS) provides excellent data with which to see these trends by state.

According to the ACS, from 2000 to 2011, real median household income—i.e., adjusted for inflation—declined in 41 out of 50 states across the U.S. Figure A illustrates this change. The dark blue bars represent 2011 median household income values. The grey sections show what household income was in each state in 2000. (The light blue sections are the rare instances of median income growth.)

As the figure shows, household incomes rose in only a handful of states in the west-north-central region where the shale gas boom has been driving growth, and in the region surrounding Washington, D.C (which some attribute, in part, to growth in the lobbying industry). Of the 41 states where household incomes fell, 13 states had declines greater than 10 percent, with Michigan (-18.9 percent), Georgia (-14.7 percent), and Mississippi (-13.7 percent) experiencing the largest declines.Read more

The most pressing economic challenges facing the United States remain stubbornly high unemployment and underemployment rates, a legacy of the Great Recession that began at the end of 2007 and from which the labor market has yet to fully—or even largely—recover. In today’s liquidity trap environment, and with further depreciation of the dollar seemingly unlikely, economic growth and employment overwhelmingly hinge on fiscal policy in the near term.

Both President Obama and Republican presidential nominee Mitt Romney contend that they have plans to accelerate job creation, but their two approaches are diametrically opposed. Relative to current budget policies, Obama is essentially proposing to temporarily increase federal spending and give tax credits for employers expanding payrolls to boost employment (i.e., the American Jobs Act, or AJA, provisions that have stalled in the House of Representatives) and raise taxes on upper-income households. Romney is proposing to cut both federal spending and taxes—overwhelmingly for upper-income households—by capping federal outlays at 20 percent of gross domestic product (GDP) while reducing corporate income and individual income tax rates, as well as repealing the estate and alternative minimum taxes (AMT) in entirety. Timothy Noah prognosticates in The New Republic  that, “If any of Romney’s tax stimulus remained [after possible “base-broadening” and legislative sausage-making], it would be erased by cuts in government spending. … At this point it’s fair to conclude Romney’s machinations would actually be worsening the economy.” Read more

Two new studies find that unemployment at older ages may shorten life and that the gap in life expectancy between less and more educated workers is widening. Though neither result may seem surprising, the first is at odds with some previous research, while the second reinforces earlier findings but provides shocking new statistics—notably the fact that the least educated white women have seen their life expectancy at birth fall by five years since 1990, as highlighted in a recent New York Times article.

A seminal paper by Christopher J. Ruhm (2000) found that recessions were associated with lower mortality rates, a counterintuitive result confirmed by later studies. Ann Huff Stevens et al. (2011) identified a possible reason: Reduced employment opportunities in the broader labor market appeared to leave nursing homes better staffed, explaining why the pro-cyclical mortality effect was concentrated among seniors.

In other words, while higher unemployment may be associated with lower mortality, this doesn’t necessarily mean working is bad for your health. Later research focusing on workers who lost their jobs (as opposed to economy-wide unemployment rates) found Read more

Ross Douthat, a very conservative New York Times columnist, rarely writes anything—even a sentence—that I agree with. So I was surprised to find myself nodding my head as he pointed out the danger of having a capital region so much richer than the rest of the country that policymakers lose touch with the lives of the people their decisions affect.

Douthat writes that seven of the 10 richest counties in America are in the Washington, D.C. region and that Fairfax, Loudoun and Arlington Counties, all in Northern Virginia, have higher median incomes than every other county in the United States.

To his credit, Douthat does not use this as an opportunity to bash federal employees. Instead, he correctly points out that the big growth in numbers and incomes has come from the private-sector firms that feed off the federal government:

“Whence comes this wealth? Mostly from Washington’s one major industry: the federal government. Not from direct federal employment, which has risen only modestly of late, but from the growing armies of lobbyists and lawyers, contractors and consultants, who make their living advising and influencing and facilitating the public sector’s work.”

Douthat tries to make the concentration of wealth in the capital region into a case for Romney’s electionRead more

Here’s some of the thought-provoking content that EPI’s research team came across today:

• “About the 47 Percent Who Don’t Pay Federal Income Tax: Mitt, Meet Andrea” (Tax Vox)
• “Five Myths About the 47 Percent” (Tax Vox)
• “Labor’s Declining Share of Income and Rising Inequality” (Federal Reserve Bank of Cleveland)
• “Obama vs. Romney on China” (Center for American Progress Action Fund’s Adam Hersh via CNN.com)
• “Small Business and the Expiration of the 2001 Tax Rate Reductions: Economic Issues” (Congressional Research Service)

The National Association of Manufacturers is showing itself to be less a genuine representative of the nation’s manufacturing businesses than a political entity tied to the Republican Party. Despite the evidence that the Obama administration imposed fewer regulations in its first three years than the Bush administration, the NAM complains constantly about the regulatory burden Obama is imposing. In its own words: “New Survey Paints Bleak Picture Before 2012 Elections.”

This is especially surprising since we heard no such complaints at the end of George Bush’s first term.

It begins to look hypocritical and totally political when we consider that each year of the Bush administration resulted in a year-over-year loss of manufacturing jobs, a streak that ended only after Obama’s auto bailout and Recovery Act took effect. Over the last two years, manufacturing employment grew from 11,340,000 to 12,074,000, a gain of more than 700,000 jobs.

Looking at these data, it is hard to conclude that the increasing regulatory burden of the last few years—if there has been an increase, as NAM claims—has hurt manufacturing.

The decline of collective bargaining and the erosion of middle-class incomes in Michigan, an EPI briefing paper published today, finds that the divergence between pay and productivity and the corresponding failure of middle-class incomes to grow is strongly related to the erosion of collective bargaining over the last 30 years in Michigan. Included in the paper is this video produced by Colin Gordon, Professor of History at the University of Iowa:

With the issuance in August of the fuel efficiency and greenhouse gas standards for cars for model years 2017–2025, the Obama administration may have now put forth the last major Environmental Protection Agency rule of its term. Starting with a comprehensive analysis in May 2011, EPI has issued a series of analyses which have found that contrary to much of the political commentary, these rules will be of great benefit to the nation, improving public health considerably without harming the economy or employment.

Altogether, under the Obama administration, 10 final major rules have now been issued by the EPA and three final major rules issued jointly by EPA and the Department of Transportation. To examine one way that the impacts on society of those rules are assessed, I add up their ultimate annualized cost and benefit figures. It bears mentioning that costs and benefits are phased in over time, can jump around for individual rules from year to year, and a considerable portion of the impact of the rules will not occur until five years or more from now. Thus it is best to think of the figures as annual averages over time, but not representative of a particular year.

The table below, using the official government data, indicates:

• The benefits of the finalized Obama EPA rules are valued at $144 billion a year Read more