Jeff Madrick has a good review of Bill Clinton’s new book in the New York Times. The punchline of the review is that Clinton doesn’t offer much except for very cautious (Clintonesque?) proposals to combat the current jobs crisis and instead mostly highlights his own own efforts at bringing the federal budget deficit into balance in the 1990s while calling for this to again become a focus of economic policy.

This desire to return to the 1990s when the economy was generating much better (though bubble-fueled) outcomes is understandable, if misguided. But this desire helps illustrate a quick and dirty test that should be used to grade anybody’s policy prescriptions for combating the current jobs crisis: Are they just re-packaging policy ideas that they think would be a good idea anytime, or do they recognize that the economy’s exceptional troubles today require exceptional measures?

If it’s just re-packaging, you can generally discard them as serious solutions to the jobs crisis. So, when GOP members of Congress put out a “jobs plan” that relies on tax cuts and blocking regulation – it’s fair to ask when are they not in favor of tax cuts and deregulation? After all, if the exact same policies that they think are good ideas when the unemployment rate is 4 percent are also the only ones offered up to spur job creation when the unemployment rate is closer to 9 percent, doesn’t this imply that nothing special needs done about job creation today?

Take EPI, on the other hand. We don’t urge Congress every single year to pass hundreds of billions of dollars of debt-financed fiscal support. We do urge Congress to do this when the unemployment rate is historically high – because utterly boring textbook macroeconomics says that this is the proper medicine to treat an economy with very large amounts of productive slack, even after the Federal Reserve has exhausted traditional recession-fighting tools.

There are, obviously, more long-running policy debates that we have strong opinions on – we think the minimum wage should be raised and indexed to keep its value from eroding over time, and we think labor law should be reformed to allow willing workers to form unions. We don’t, however, claim that enacting these “perpetuals” are things that will yank down the overall unemployment rate in the next two to three years. They’re good policies for boosting the long-run economic performance of low- and moderate-income households, but they’re not serious job creators, per se. So, when simple job creation becomes a top priority, we put other things on top of that particular to-do list.

Also, we’re generally in favor of more public investment, in good times or bad. There’s a good reason for this – public investment has been lagging in recent decades and aids long-run economic performance. But even here we recognize different economic environments – when the unemployment rate is historically high and the economy needs spending power, we argue that public investments should be debt-financed. If the unemployment rate fell to very low levels even while the public capital stock needed upgrading, we’d argue that the case for financing these investments with taxes makes more sense (actually, for very high-return investments, one can imagine a case for debt-finance either way, but we wouldn’t argue for debt-finance on job creation grounds if the economy was performing well).

The figure below will help us recap: a good quick-and-dirty test for how sensible somebody’s top policy prescriptions for job creation are is  simply asking if they were arguing for the exact same policies at point A (i.e., before the Great Recession) and point B (i.e., at very high rates of unemployment). If so, these policies probably are not going to do much for jobs.

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The monthly unemployment rate published by the Bureau of Labor Statistics measures the number of workers who are not working and looking for work – that is, the unemployed – out of the total number of people who are either working or looking for work in a given month. But this understates the number of people who experience unemployment during any longer period, since someone who is employed in one month may become unemployed the next, and vice versa.

Yesterday, BLS released its report on “over-the-year” employment and unemployment in 2010, which measures (among other things) the share of the workforce who experienced unemployment at some point during 2010. The report finds that 15.9 percent of the workforce was unemployed at some point last year, much higher than the average monthly unemployment rate in 2010, which was 9.6 percent.

The figure shows the average monthly unemployment rate and the over-the-year unemployment rate. Using the ratio of the over-the-year unemployment rate to the average monthly unemployment rate in 2010 (the latest data available), the over-the-year unemployment rate for 2011 and 2012 are projected. According to the data, we can expect that 14.9 percent of the workforce – more than one in seven workers – will be unemployed at some point next year.

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It doesn’t have to be this way.  The number of people experiencing unemployment – and the scars this unemployment causes to careers, families, and communities – could be considerably reduced with substantial additional stimulus spending to generate jobs.

After adjusting  for household size, the income of households headed by adults 65 and older was 13 percent lower than that of households 35 and under, according to a new Pew report. (The gap is much larger when seniors are compared to households headed by adults in their peak earning years, which begs the question of why the authors chose to compare seniors with a group that includes not just young people starting their careers but also many students.)

What’s the title of this report? “The Old Prosper Relative to the Young: The Rising Age Gap in Economic Well-being.” That’s right, those oldsters are raking it in, once again.

How do the authors come up with a title like that, given the facts? In what’s become a familiar refrain, they focus on the fact that seniors, while they still have lower incomes, are not as far behind as they used to be, especially since the economic downturn walloped young people. O-kay! They also cite a lower official poverty rate for seniors, completely ignoring the fact that a new poverty measure that takes into account  higher out-of-pocket medical costs for seniors shows they have a poverty rate slightly higher than that of working-age adults, even with the help of Social Security and Medicare.

They also cite seniors’ higher net worth, implying that seniors who’ve paid off their homes and socked away some money in a 401(k) are better off than younger people, though the real story is that these savings aren’t nearly enough, even if they sucked every last penny out of their homes to pay for retirement. (In 2009, the median net worth of households aged 57-66 was roughly four times this group’s median annual income, according to the Federal Reserve’s Survey of Consumer Finances. Even with Social Security, pensions, and other income, that’s not enough to maintain the same standard of living through retirement.)

This is a familiar story, but in a new twist to the old ageist refrain, the Pew report also bops seniors for working longer. Well, that’s refreshing. We usually hear that older workers are lazy and retire too soon.

I was shocked to discover today just how far the pendulum has swung in terms of American public opinion on immigration. The new United Technologies/National Journal Congressional Connection Poll revealed that 62 percent of Republicans – the group most likely to oppose “illegal” immigration and the presence of unauthorized migrants in the U.S. – now support allowing “those who have been here for many years and have broken no other laws to stay here legally.” Among Democrats, support is at 72 percent, which means a great majority of Americans from both major political parties are now strongly in favor of a legalization program to solve the problem of irregular migration. Among all respondents, support was 67 percent.

Of the 62 percent of Republican supporters, 43 percent want to deport those who have only been in the United States for a short period of time, and 19 percent favor allowing all unauthorized migrants to stay as long as they have broken no other laws and commit to learning English and U.S. history. With such vast bipartisan support, is now the time is to finally implement a legalization program for the unauthorized population?

Perhaps the American public has finally realized that deporting 11 million people – 8 million of whom are exploitable workers with no labor rights – is simply not rational or feasible. Such action would shrink the economy and tear families apart. And it would unfairly blame and punish the migrants themselves, when others share the blame. Just before 9/11, deportations were less than half as common as they are today (and six years before that, there were almost 90 percent fewer deportations), and employer sanctions were a rarity. For decades, employers lured unauthorized migrants to the U.S. with job offers, while Congress and the president looked the other way when it came to enforcement. Government policies also played a role. Enactment of the North American Free Trade Agreement (NAFTA) in 1994 was perhaps the single biggest factor causing the increase in irregular migration.

Thus, the government, employers and migrants should equally share the blame, and any solution must be rational and humane – but also deter future flows of unauthorized migrants. The necessary solution is clear, and really quite simple, and the language used in the UT/National Journal poll suggests some of what’s required.

First, the government can motivate unauthorized residents to come forward by offering legal status to those who can prove they have not committed crimes other than residing in the U.S. without proper authorization, and then require them to pay any unpaid taxes, learn English and take courses in U.S. history. The other key step in the process will be determining how long the unauthorized migrant has resided in the country, and their level of attachment to the labor market. I would argue if you’ve been working continuously in the country for three years, you’ve cemented your place in the U.S. labor market and should be allowed to stay. If a majority disagrees that three years is long enough, a compromise should be negotiated.

The UT/National Journal poll does not specify exactly how many years they meant when asking if respondents would support legalization for those who have been here for “many years.” A new report estimates the length of time the unauthorized population has resided in the country, which gives us an idea of how many people could qualify for this legalization program based on the number of years ultimately required. Only 15 percent of unauthorized migrants have been here less than five years, while 63 percent have been in the country for 10 years or more, and 35 percent have been here for at least 15 years. This tells us that the vast majority of unauthorized migrants are not recent arrivals, and are therefore likely to be well integrated into the labor market because they are unable to access almost any part of the social safety net (i.e., they have no other choice but to work).

Finally, once this program is in place, deport and strictly enforce immigration laws against those that do not qualify for legalization, and begin implementing a functional employment verification system to deter future flows of unauthorized migrants (this would need to include a PIN-based system to overcome some of the privacy concerns inherent in E-Verify, as discussed here).

Unfortunately, political decisions and public policy often fail to respond quickly to public opinion and the public’s desires. But this new polling data revealing broad support for a legalization program – when considered in conjunction with data showing the stock of unauthorized residents in the country has reduced by about one million since the recession, and a sharp decline in the annual flow of unauthorized migrants – suggests there hasn’t been a better time to fix this crucial part of our broken immigration system since 1986.

Via Paul Krugman, I see that Politico honored House Budget Committee Chairman Paul Ryan (R—Wisc.) as health care policymaker of the year. Steven Benen nicely expounds the absurdity of this choice, namely that Ryan’s budget would repeal the Affordable Care Act, shift costs to families (rather than curb costs), end guaranteed Medicare coverage, and slash Medicaid funding. In fact, the Congressional Budget Office’s long-term analysis of Ryan’s fiscal year 2012 budget estimated that federal spending on Medicaid—healthcare for the disabled and poor children and seniors—would be roughly halved in the next two decades.

It’s worth adding that health policy experts widely agree the key objective for national health policy is slowing economy-wide health care cost growth. To this point, Ryan’s budget resolution would do more than shift costs—it would actually exacerbate the problem by increasing economy-wide costs. CBO’s analysis showed that Medicare is currently 11 percent cheaper than an equivalent private insurance plan. This efficiency premium compounds with time, as depicted in the figure below. By 2030, Medicare as we know it is projected to be at least 29 percent cheaper than an equivalent private sector plan (relative to CBO’s alternative fiscal scenario for the long-term budget outlook). Replacing Medicare with a voucher negates the economies of scale (and lack of a profit motive) afforded by Medicare.

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Ryan’s plan would accrue budgetary savings by ending guaranteed Medicare coverage, but at the expense of increasing total health costs and only by vastly increasing beneficiaries’ costs. By 2030, the Ryan budget would reduce government expenditure for the average beneficiary by 22 percent but push the beneficiary’s out-of-pocket costs up 127 percent. Extrapolating from CBO’s analysis, Dean Baker and David Rosnick calculate that the Ryan proposal would increase national health care expenditure by $30 trillion over the next 75 years, assuming households purchase Medicare-equivalent plans. A more likely scenario would involve an increase in national health care expenditure and a decrease in the number of Americans receiving adequate health care coverage.

Politico’s award choice cited Ryan’s influence over the Republican presidential candidates and credited him with producing a “starting point” for future health care reforms. Ryan’s budget (specifically its treatment of Medicare) has indeed served as a litmus test for conservative bona fides in the GOP field, but that should be cause for concern rather than celebration among health policy experts. Eliminating Medicare and its associated cost efficiency savings would be a lousy starting point for the next round of health care reform, as it epitomizes penny wise, pound foolish budgeting.

Yesterday on a panel at the Atlantic magazine’s “High-Growth Business Forum” an audience questioner brought out the “you’ve never run a small business” j’accuse again when I made the argument that today’s still-sluggish recovery was not being held-back by regulatory changes. I won’t rehash the argument here – check out this, this, and this to see why regulation has nothing to do with the poor economic performance since the Great Recession began (well, except for the role of financial deregulation in contributing to the policy non-response to the build-up of the housing bubble).

What was odd, though, were the specific examples of burdensome regulations that were brought up in response to some prodding. Nobody (in a very business-friendly audience and panel) seemed particularly eager to go after any specific financial regulations, health care regulations, or environmental regulations. These are clearly the ones that GOP congressional members have in mind when they scream about “job-killers,” but even this audience didn’t seem interested in arguing specifics on them. I guess it turns out that a stable financial system, fairer health system and clean air and water are all actually pretty popular.

Instead, Brink Lindsey of the Kauffman Foundation fingered zoning regulations and occupational licensing. Fair enough – smart people have said that some regulations in these realms seem to be more about rent-seeking than solving market failures. Further, I’m a sucker for arguments that zoning regulations often lead to some very undesirable outcomes. Maybe I just read too much Atrios.

On occupational licensing, though, it’s worth noting first that a group of incumbent business-owners, like many of those in audience, would very likely be against an abandonment of occupational licensing standards – which after all tend to shield incumbents from competitive pressure. And color me cynical, but I’d wager that a policy campaign aimed at reducing occupational licensing will find plenty of rationale for well-paid occupations (doctors, lawyers, accountants) to keep their licensing requirements while dismantling it for lower-paid ones.

Regardless of the specifics, it seems pretty clear that the effect of regulations like these on overall economic growth (as opposed to distribution) is tiny in a macroeconomic perspective. In short, it seems awfully hard to explain the high priority Washington policymakers have put on rolling back proposed regulations based on examples like these (which, by the way, are generally not federal regulations).

And then the anti-regulatory arguments got really silly – with a panel member singling out health inspections at restaurants as overly burdensome and arguing that they were unneeded because restaurants whose food-handling practices make people sick would go out of business as their reputation spread. This seems too obvious to have to say, but apparently it’s not so here goes: it is far from obvious that this “free market” solution is less costly than a regulatory one.

Many regulations are actually about increasing consumer choice by reducing their search costs – seeing a health inspection certificate on a restaurant’s wall is a signal that you don’t have to spend your own precious time researching their record on safety by yourself. And guess what – often just this sort of reasoning turns out to be supported by evidence – a study of a Los Angeles regulation that forced restaurants to display hygiene information to customers led to not just an improvement in restaurant hygiene but also to an increased sensitivity of consumers to differences in restaurant hygiene. In short, it offered information not previously available to consumers and this information led them to make different (and presumably better for them) choices. Oh, and it also led to a sharp drop in hospitalizations related to food-borne illnesses.

So, I still haven’t run a business – but broad-brush jeremiads against the regulatory burden stifling the U.S. economy still don’t really have much of a case.

Unemployment in November dipped to 8.6 percent, its lowest point since March 2009, down from its 10.1 percent recession high in Oct. 2009. The unemployment rate fell because the share of the population seeking work or working—the labor force participation rate—has fallen considerably. We know this because the share of the population employed last month—58.5 percent—is the same as when the unemployment rate peaked. The lack of change in the share of the population employed—known as the employment-to-population ratio—indicates that the growth in employment has only kept pace with the growth of the working-age population. The figure shows the erosion in the labor force participation rate of people age 25 and older by education level over the last two years.

For the 8 percent of the labor force who have not completed high school, there was no real fall in labor force participation as the small decline from 2009–10 roughly offset the small increase from 2010–11. In contrast, labor force participation of those with a high school degree or some college declined by 1.6 percentage points, with the greatest decline occurring in the last year. There was a somewhat smaller but still sizeable 1.3 percentage-point decline in labor force participation of those with a college degree or further education (such as a master’s or professional degree). Thus, this deep recession led to a widespread shrinkage of the labor force that encompasses all but the least-educated workers.

It was exciting to hear the president tell it like it is yesterday. After two years of trying to make nice with the interests that were most responsible for the financial collapse and which are responsible even now for the gridlock in Washington that keeps the economy from moving forward, President Obama told America’s middle class that its future is being threatened by the greed and self-interest of some of the wealthiest people in our nation.

The most important part of his speech in Kansas was probably his attack on the “collective amnesia” that allows some people to continue advocating the Bush administration’s tax cuts for the rich, despite their clear history of failure as a spur to job creation. Obama said:

“Remember in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts for the wealthy in history. And what did it get us? The slowest job growth in half a century. Massive deficits that have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of Americans reach and stay in the middle class — things like education and infrastructure, science and technology, Medicare and Social Security.”

The president pointed out the folly of pursuing the same kinds of failed “you’re on your own” economic policies that got us into the worst recession in 75 years. Weak regulation helped cause the Great Recession. Why would anyone expect the same policies to get us out?

“Remember that in those same years, thanks to some of the same folks who are now running Congress, we had weak regulation, we had little oversight, and what did it get us? Insurance companies that jacked up people’s premiums with impunity and denied care to patients who were sick, mortgage lenders that tricked families into buying homes they couldn’t afford, a financial sector where irresponsibility and lack of basic oversight nearly destroyed our entire economy.

We simply cannot return to this brand of ‘you’re on your own’ economics if we’re serious about rebuilding the middle class in this country.”

Unsurprisingly, the right wing media, led by Fox News, wants to take us right back to the kind of Bushonomics that crashed the economy in 2007. Progressive taxation doesn’t sit well with Fox’s high-income anchors, let alone its billionaire owner, Rupert Murdoch. As our friends at Media Matters document nicely, Fox immediately launched a broadside against the president and the notion of tax fairness, misquoting him when it was convenient, and accusing him of class warfare and socialism.

I support raising the top marginal income tax rate to 45 percent — about half the 91 percent top rate under President Eisenhower. President Obama just wants to restore the top rate to its level under President Clinton – 39 percent. If that makes him a socialist, what was Dwight Eisenhower? Could it be that the Commander in Chief of Allied Forces during World War II and two-term Republican president from Kansas was a socialist and a class warrior? Uh… no.

In a speech Tuesday, President Obama issued a damning critique of trickle down economics and a stark defense of social insurance and public investments funded by progressive taxation. The president’s speech in Osawatomie, Kan., addressed the challenges of rebuilding the middle class and tempering income inequality, making the case that doubling down on the supply-side experiment of the last decade will fail the needs of the vast majority.

The president aptly characterized conservative economic policy as a two-pronged approach of cutting regulations and cutting taxes for the wealthy. (Note conservatives’ glaring lack of enthusiasm for refundable tax cuts or even an across-the-board payroll tax cut – tax cuts that would be pretty broad-based.) This is, of course, exactly the economic nostrum being preached by the GOP presidential field and Republican leadership on Capitol Hill. See, for instance, how the tax plans of presidential candidate Rick Perry or House Budget Committee Chairman Paul Ryan (R-Wisc.) belie any concern about income inequality, or how regulatory uncertainty is used as a phony explanation for the jobs crisis.

This supply-side snake oil is peddled on the premise that when the wealthy do well, income gains trickle down to the middle class and everyone benefits from a growing economy. But that hasn’t happened—real median income has sharply decoupled from productivity gains in recent decades (particularly since 2000) and income gains have been incredibly concentrated at the top of the earnings distribution. The president made the following salient point on the supply-side experiment:

“Now, it’s a simple theory… And that theory fits well on a bumper sticker. But here’s the problem: It doesn’t work. It has never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible post-war booms of the ‘50s and ‘60s. And it didn’t work when we tried it during the last decade. I mean, understand, it’s not as if we haven’t tried this theory.” (Emphasis added.)

The record of the Bush-era tax cuts, also invoked by the president, indeed speaks volumes: “Remember in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts for the wealthy in history. And what did it get us? The slowest job growth in half a century.” That and the slowest economic growth, non-residential fixed investment growth, compensation growth, and wage and salary growth. Imagine if we had instead used the $2.6 trillion these tax cuts added to the public debt over 2001-2010 to undertake investments in areas like education, infrastructure, and scientific research—investments that would have produced much better job-growth and that have actually demonstrated high economic returns.

President Obama's speech in Kansas likely resonated with middle-class Americans.

Since the 2001 and 2003 tax cuts didn’t generate much in the way of jobs or incomes, they failed (by miles – or should we say trillions of dollars) to fulfill the mendacious claim often made by conservatives that tax cuts pay for themselves. (Note that this assertion continues to surface despite being flatly rejected by the Bush administration’s own economists.)

Based on this abject policy failure and the clear dysfunction of a tax code that allows a quarter of millionaires to pay lower effective tax rates than middle class families, President Obama made the case for tax reform – including allowing the top individual income tax rate to revert from 35 percent to the 39.6 percent rate implemented by President Clinton (which would still be well below tax rates for most of the post-World War II era).

Since most Republicans will clearly scream about the onerousness of this proposal, it’s worth noting that the optimal taxation literature calls for a steeper schedule of marginal tax rates and a considerably higher top rate than 39.6 percent. In their recent paper on the case for progressive taxation, economists Peter Diamond and Emmanuel Saez peg the optimal top income tax rate at 73 percent, up from 42.5 percent today (taking into account Medicare payroll taxes and average state income and sales taxes). This would imply a top federal marginal income tax rate of 65.5 percent—more than 25 percentage points higher than that proposed by the president. The current top tax rate is “is optimal only if the marginal consumption of very high income earners is highly valued,” note Diamond and Saez.

Of course, the value that policymakers put on the happiness of the very rich is exactly what stands behind the failure to enact job creation measures that would be financed by a surtax on millionaires and the repeated collapse of long-term deficit reduction negotiations because of conservative intransigence over raising more revenue from upper-income households.

I applaud the president for making the case for the progressive alternative against regressive tax cuts as the lodestar of economic policy. America’s low- and moderate income families should, too. As a nation, we cannot afford to double down on the failed, plutocratic pipe dream that is trickle down economics. Another round of tax cuts for the highest-income households will not restore full employment but will exacerbate widening income inequality, blow a bigger hole in the budget deficit, and defund needed public investments and economic security programs. Any policymaker genuinely concerned with the fate of the middle class, inequality and immobility, or the budget deficit, should be focused on rolling back the last round of inequitable and ineffective tax cuts rather than digging us deeper and deeper into a new Gilded Age.

The House of Representatives is poised to vote for the REINS (Regulations From the Executive in Need of Scrutiny) bill today; this would come on top of votes on two bills last week that would also upend the regulatory process.  These efforts are premised on assertions that regulations are greatly damaging the economy, and David Brooks’ op-ed today is another timely reminder that these assertions are inaccurate.  He opens with:

“Republicans have many strong arguments to make against the Obama administration, but one major criticism doesn’t square with the evidence. This is the charge that President Obama is running a virulently antibusiness administration that spews out a steady flow of job- and economy-crushing regulations.”

And closes with:

“They [regulations] are not tanking the economy.”

In between, he cites a few relevant facts to support his view that “regulations are not a big factor in our short-term [economic] problems.” These include the Bureau of Labor Statistics data which show that during the first half of 2011, just 0.18 percent of mass layoffs were due to regulations. EPI President Lawrence Mishel comprehensively addresses the role of regulation and regulatory uncertainty in the economy in Regulatory uncertainty:  A phony explanation for our jobs problems; he arrays a range of economic and survey indicators that demonstrate that it is a lack of demand, and not regulations or regulatory uncertainty, that is behind the painful state of the labor market.

I don’t agree with some of the information and characterizations in Brooks’ article; let me focus on the most glaring omission: he includes no discussion of the benefits of regulation. These can be large, not only in terms of health or safety benefits, but often in terms of economic benefits. Appropriate financial regulations are essential to an economy’s foundation.

Also, I’ve previously shown that two joint EPA/Department of Transportation rules which regulate greenhouse gas emissions from, and establish fuel standards for, various-size vehicles have particularly sizable economic benefits. They produce large savings to drivers in the form of reduced expenditures on gasoline. In 2010 dollars, a conservative estimate of the economic benefits from these two rules amounts from $6 billion to $20.6 billion a year. This range is above the range of estimated compliance costs for all 11 major rules finalized so far by the Obama EPA; that range is $5.9 billion to $12 billion a year.

When health benefits are also considered, the combined benefits of all EPA rules finalized so far under the Obama administration exceed their costs by tens of billions of dollars each year. In 2014, the Cross-State Air Pollution rule alone will save an estimated 13,000-34,000 lives and lead to 820,000 fewer cases of respiratory symptoms.

Brooks is right in concluding that concerns that regulations are behind the economy’s troubles are misplaced, and that’s a step towards a more reasoned and balanced discussion. Let’s hope that next time he goes a step further and discusses the benefits from regulations as well.

(Here is a summary of EPI’s research on the costs and benefits of regulation and a summary of our research on the relationship between employment and regulation.)