The supposedly kinder and gentler Medicare voucher proposed this year by House Budget Committee Chairman and Republican vice presidential nominee Paul Ryan (R-Wis.) is less draconian than last year’s version, but still packs a wallop. The voucher shifts costs to seniors because the value of the voucher can’t grow faster than half a percentage point above per capita GDP, and health care costs are projected to grow faster than that. (You can ignore the part about tying the voucher to the second-lowest-cost private plan or, if it’s cheaper, fee-for-service Medicare cost growth—this is just window dressing because overall costs will exceed the “fallback” spending limits.)

The voucher will initially shift around 11 percent of costs ($700) to seniors in 2023, an amount that will grow to 45 percent ($15,700) by 2087 (all figures are in 2012 dollars and rounded to the nearest $100). You can see how this adds up by summing the annual amounts in the table below over life expectancy in retirement. Thus, for example, a 40-year-old female who expects to retire at 65 in 2037 will live to about 2058, during which she will pay roughly $82,800 more for health care.Read more

The emergency unemployment compensation (EUC) benefits that millions of Americans are receiving to help them survive a period of long-term joblessness will terminate on Dec. 31 under current law. If the modest but steady income EUC provides—averaging about $300 per week—is cut off, then families, communities, and businesses across the country will suffer. Jobless workers will struggle to pay their rent and utilities and will reduce spending on discretionary purchases of food, clothing, recreation, and entertainment. Businesses, in response, will hire fewer employees. If EUC is not extended through the end of 2013, the effects on the economy will be serious: Economic activity will be about $56 billion lower than it otherwise would have been1and about 430,000 jobs will be lost—at a time when every job is precious.

So far, I have  heard nothing to indicate that policymakers in Washington are addressing this matter, even though Democratic and Republican leaders are about to close a deal on keeping the government running for the next six months. It would be disastrous for Congress and the president to let EUC expire. Continuing EUC has to be part of the continuing appropriations legislation that congressional leaders are negotiating right now, which will fund existing programs all across the government through March 2013 at current levels. Read more

Republican vice presidential nominee Paul Ryan (R-Wis.) is not a deficit hawk, and has never been a deficit hawk. In the near-term, advocating accelerated deficit reduction is economically detrimental rather than praiseworthy, but in many circles the “deficit hawk” label is bestowed as a compliment upon Ryan for supposedly stabilizing the long-term fiscal outlook. Ryan is  hawkishly anti-government spending, except for defense spending, and he falsely conflates domestic spending with deficits and public debt. But Ryan’s purported concern about the deficit is belied by his proposed $4.5 trillion in unfunded tax cuts and reliance on made-up revenue levels to pad long-term budget projections from the Congressional Budget Office (CBO). This isn’t a secret to budget analysts and economists (e.g., Peter Orszag’s recent piece in the Washington Post), but it regrettably continues to be lost on much of the press and punditry.

Take, for instance, last week’s Leader in The Economist, Paul Ryan: The man with the plan, which praised Ryan as “the first politician to produce a plausible plan for closing the deficit, which he did in April last year.” This is an egregious misrepresentation of fact. Ryan’s fiscal year 2012 budget would not have reached balance until somewhere between 2030 and 2040, according to CBO’s long-term analysis, but even this “feat” was falsely predicated on revenue magically rising to 19 percent of GDP—as Ryan demanded CBO assume. Read more

Today is the 49th anniversary of Dr. Martin Luther King’s brilliant “I Have a Dream” speech, the final speech of the 1963 March on Washington, which was officially titled the “March on Washington for Jobs and Freedom.” That event is obscured by the distance of a half-century, but it’s worth the effort to review the official demands of the march and the economic thinking of King and his allies, A. Philip Randolph of the Brotherhood of Sleeping Car Porters and Walter Reuther of the United Auto Workers. What they wanted for Americans then is still badly needed today—perhaps more than ever.

The March was about civil rights, voting rights and racial equality, but it was also about the need for jobs and for jobs that paid a decent wage. The marchers wanted the federal minimum wage raised nearly 75 percent, from $1.15 an hour to $2.00 an hour. They also called for “A massive federal program to train and place all unemployed workers—Negro and white—on meaningful and dignified jobs at decent wages.”

In 1963, the unemployment rate averaged about 5.0 percent, which looks good compared to today’s 8.3 percent, but King and the other organizers wanted full employment and believed it was the federal government’s responsibility to provide it. Read more

The Affordable Care Act (ACA), called “Obamacare” by opponents and supporters alike, has been maligned and misrepresented countless times over the last few years. The most recent claim—which has turned up in a recent Mitt Romney ad but has been a staple of GOP talking points since the Paul Ryan pick for vice president—is, “You paid into Medicare for years … but now when you need it, Obama has cut $716 billion from Medicare … to pay for Obamacare.” In other words, ACA took money out of the Medicare system for use elsewhere.

This is a pretty big lie. To take money “out of the Medicare system,” one would have to actually divert revenues away from the program. But ACA doesn’t do this at all—instead, it reduces how much Medicare will have to spend over the next 10 years by $716 billion. It does this without actually cutting benefits, instead deriving savings from three areas:

1. Reducing reimbursements Medicare currently makes to hospitals—but by less than the gain hospitals would receive from newly-insured patients  purchasing hospital services in coming decades.
2. Reforming the separate Medicare Advantage program, which was supposed to save money, but ended up being more expensive. Read more

Apple’s key Chinese supplier is Foxconn, made famous by the rash of suicides committed by its employees, who live packed into dorms, far from home, working brutal schedules of overtime (sometimes as much as 80 hours a month, on top of the core 160 hours), subjected to verbal abuse and humiliating punishment by supervisors, and systematically cheated on wages.

When labor rights groups in China and Hong Kong exposed these conditions and the New York Times  published a front-page exposé, Apple hired the Fair Labor Association (FLA) to help it improve conditions—and its corporate image. In a public report, Apple committed itself to a broad range of reforms, and has made some headway on several fronts, according to the FLA.

But many observers are skeptical because Apple and Foxconn have put off most of the reforms that would actually cost them some money. The FLA could not, for example, get the companies to agree to comply with Chinese law limiting maximum overtime hours until the summer of 2013, and the companies continue to subject Foxconn workers to 60 hours of overtime per month—nearly twice the amount of overtime permitted by law. The companies also pledged only to study whether the workers were right in their complaints that wages are too low to meet basic needs. And most telling, there is no indication the companies have kept their public promise to pay back wages to the hundreds of thousands of employees Foxconn systematically cheated by working them “off the clock.” Read more

Louisiana politicians have been getting bad advice from their state’s economists about the Department of Labor’s guest worker regulations. Rep. Rodney Alexander (R-La.) posted a story on his website about the supposedly enormous negative impact of a new Department of Labor regulation that would raise the wages of U.S. and foreign workers employed by companies that import H-2B guest workers. Alexander and Sen. Mary Landrieu (D-La.) both voted to block the new wage rule from taking effect.

The outsized impact estimates come from a March 23, 2012 report by three Louisiana State University economists, entitled Economic Impact on Louisiana Agricultural Industries of the Proposed Change to the Wage Methodology for the Temporary Non-Agricultural Employment H-2B Program. A careful look at the report shows that the estimates are certainly wrong.

The report’s authors, Kurt M. Guidry, J. Matthew Fannin, and Michael E. Salassi, assume that if wages increase, net income (sales revenue minus wages) will simply decrease proportionately. Rather than increase prices and pass them along to consumers, or mechanize certain operations to reduce the wage bill, or improve productivity through better hiring, training, or management, seafood companies and landscaping contractors will lose $1 of income for each $1 of higher wages. That is an unreasonable assumption, which the report applies to about a dozen different industries, from agricultural aviation and forestry to hotels and food service. Read more

Republicans in Congress have been engaged in a two-year long assault on the government’s regulatory powers, attacking everything from the Clean Air Act and mercury pollution controls to the National Labor Relations Board’s enforcement powers. Their actions have been directed by business groups like the Chamber of Commerce, which publish seemingly-credible reports with big numbers about regulation’s supposed negative impact on the economy, relentlessly shifting blame away from themselves for the failure of wealthy corporations to create jobs in the United States instead of in China, Mexico and Bangladesh.

The latest installment in this wave of faux reports comes from the Manufacturers Alliance for Productivity and Innovation. Yesterday, they released a commissioned report on the costs of regulation that was so slanted and sloppy it seems like a parody. The authors throw out a bunch of big numbers with no supporting data and then—“extrapolating”—pretend that they can reasonably estimate how much regulations have reduced manufacturing activity. But the fact, of course, is that manufacturing employment has risen  over the last two years—for the first time in a decade—just when the supposed cumulative impact of regulations should have been taking its biggest toll.

The authors acknowledge that they made no attempt to estimate the benefits  of regulation, either to the public in general, workers, consumers, or the industries themselves. Read more

Yesterday, David Brooks channeled a deeply flawed presentation by the Third Way to argue that while the federal government used to spend money on things that improved national “dynamism” it now just spends on “entitlements.”

A word of (very) muted praise for Brooks—he does lament that too much spending goes on tax loopholes, and he’s largely right there.

But, he spends most of his time, and, Third Way spends all their time, arguing that there is something deeply damaging about the fact that federal spending on Social Security, Medicare, and Medicaid is now a bigger part of the budget than public investments. There’s little economic basis for this angst.

You’d have to look hard to find a bigger fan of public investments than me. But, the economic benefits of Social Security, Medicare, and Medicaid are absolutely enormous. They provide a service (insurance against risk, and people value insurance quite highly) much more efficiently than do private-sector providers. Read more

David Leonhardt on the New York Times‘ Economix blog is spurring an interesting conversation about what has caused the slowdown in income growth. Though not explicit, what Leonhardt is asking people to explain is the sluggish growth in median household income since 2000, when incomes for working-age households fell over the 2000–2007 business cycle (the first time in any cycle in the post-war period) and then were battered by the great recession we’re still effectively in. This is what we are referring to in the forthcoming The State of Working America  (out on Sept. 11) as the “lost decade.”

The heart of the matter is the ongoing failure of wages and benefits for typical workers (including those with a college degree!) to see any improvements, even though productivity (the ability of the economy to provide higher pay) has grown appreciably. I want to focus on one issue raised in this discussion, the role of rising health care costs on wage growth, an issue we examine (in the new book) more thoroughly than I have seen before. The issue is the extent to which rising employer health care costs have squeezed wage growth and contributed to rising wage inequality. An earlier paper tackled this issue as well.

The relationship between employer health insurance costs and wages is that employers set the growth of compensation, and when health costs rise, there is simply less compensation available for wage growth. This assumes that higher health spending by employers offsets the possibility of higher wages dollar-for-dollar. (Although this is likely not the case, I will assume it for our purpose here; there is also the issue that there are other benefits beyond health that could provide an alternative to wages in soaking up increased health costs.)

The potential squeeze of health care on wages can be measured simply by examining employer health care costs as a share of total wages; the faster that share grows, the more there is a squeeze on wages. Read more