Robert Samuelson argued this past Sunday that lack of confidence is a factor holding the economic recovery back – pointing to low rates of consumer spending and business investment as evidence. One hears (or a variant – that it’s “uncertainty” holding back the economy) a lot, so it’s important to note that there’s no evidence for it.

Larry Mishel has shown that the argument that business uncertainty about regulation and taxation is holding back the recovery has no evidence behind it. One thing he could’ve added to this is the fact that capacity utilization rates – think of them as the employment rate of the nation’s capital stock rather than its labor force – remain very low – 77.3 percent in August, compared to a non-recessionary average of 80.8 percent between 1979 and 2007.

The uncertainty argument is supposed to be about firms not wanting to make commitments to future costs – so they eschew investment and long-term hiring. But, as Larry’s paper shows, they’re not eschewing investment (equipment and software investment is currently actually outperforming the last three recoveries). Firms are also not using their current stock of productive inputs – the incumbent workforce and plant and equipment – at anywhere near full capacity. What does uncertainty have to do with not working your current workers as many hours per week as you did before the recession or running your factories as long?

What would keep businesses from working their labor force as hard as they did pre-recession or running factories at the same pace? Lack of demand – the other (and actually convincing) explanation for why the recovery remains so sluggish.

Samuelson (and others) also points to consumers’ lack of confidence as inhibiting recovery – and this could, in theory, be the cause of weak consumer spending. Of course, the $8 trillion reduction in wealth erased by the housing bubble’s burst could explain this as well (and does a much better job of it).

Further, it’s important to note that today’s levels of consumer spending and saving do not look obviously “too low” by any measure. The jump in personal savings from just about 1.5 percent of disposable income in 2005 to over 6 percent by the end of 2008 was a large driver of the recession – households, seeing themselves much less wealthy because of the housing bubble’s burst decided to stop spending so much and this was a key driver of the downturn. But, a 6 percent personal savings rate may just be the appropriate one for households that don’t see their assets inflated by stock or housing bubbles. From 1979 to 1996 (right before the stock market bubble really reached absurd levels) the personal savings rate averaged 7.6 percent.

So, is behavior by today’s consumers really about excessive “fear?” Not obvious to me. And is today’s corporate behavior evidence of excessive risk-aversion, or of just poor sales?

Again – the traditional Keynesian diagnosis of deficient demand is old and has gotten boring to many. But it has the virtue of actually being correct. Today’s sluggish economy simply needs more spending (and government is the only sector likely to provide it in the near-term), not pep talks.

All the talk about the supposed need to cut Social Security hasn’t had a noticeable impact outside the Beltway, where support for the program remains strong across demographic and political lines. A survey commissioned by the Institute for Women’s Policy Research and the Rockefeller Foundation found that 61 percent of women and 54 percent of men support increasing Social Security benefits. That’s perfectly rational, considering that benefits replace a shrinking share of pre-retirement earnings even without additional cuts.

While women and Democrats show the strongest support for social insurance programs, even Republican men oppose Social Security and Medicare cuts. And contrary to the stereotype that people care only about themselves and aren’t willing to pay for government programs, when surveyed about taxes the most enthusiastic response was to the following statement: “I don’t mind paying Social Security taxes because it provides security and stability to millions of retired Americans, the disabled, and the children and widowed spouses of diseased workers.” Roughly nine in 10 women (88 percent) and eight in 10 men (82 percent) agreed with that sentiment, even more than the majority who said they didn’t mind paying Social Security taxes because they knew they themselves would receive benefits when they retired.

The Great Recession and bursting of the housing and stock market bubbles has only strengthened support for social insurance programs, which is not surprising since we tend to take such programs for granted until we really need them. Only 37 percent of women and 44 percent of men now expect to maintain their standard of living in retirement, whereas a majority of both women and men thought their retirement savings had been adequate before the recession (they were probably wrong, but that’s another story). This doesn’t just reflect generalized anxiety: while the share of respondents who worried about ending up in a nursing home increased only modestly since 2007, the share who worried about not having enough money to live on and not being able to afford health care in retirement jumped markedly, as did the share worried about Social Security being cut back or eliminated (63 percent of women and 54 percent of men are now worried about Social Security cuts, up from 55 percent of women and 41 percent of men in 2007).

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In light of this afternoon’s cloture vote in the Senate on China’s currency bill, I think it would be helpful to go over why the bill is so important. Simply put, unlike most bills that proponents claim are about “job creation,” this one actually is. Since it entered the World Trade Organization in 2001, China has engaged in massive intervention in currency markets, buying U.S. dollar-denominated assets to boost the value of the dollar and keep their own currency artificially cheap. This acts as a subsidy to U.S. imports from China, and it raises the cost of U.S. exports — both to China and to every country where U.S. exports compete with goods coming from there.

Between 2007 and 2010, China invested nearly $450 billion per year in Treasury bills and other foreign exchange reserves to keep its own currency cheap. In the year ending June 30, 2011, China’s purchases of foreign exchange surged to nearly $730 billion, and its total holdings reached $3.2 trillion, as shown in the figure below. Roughly $2.2 trillion (70 percent) of China’s foreign exchange reserves are held in Treasury Securities and other dollar denominated assets.

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The best estimates arethat the Chinese currency, known as the yuan (also known as the Renminbi, or RMB), is undervalued by approximately 28.5 percent, relative to the dollar.  China’s currency manipulation has compelled others to follow similar policies in order to protect their relative competitiveness and to promote their own exports. Hong Kong, Malaysia, Taiwan, and Singapore have currencies that are undervalued by 27.5 percent to 38.5 percent against the dollar.

In The Benefits of Currency Revaluation I showed that full revaluation of the yuan and other undervalued Asian currencies would improve the U.S. current account balance by up to $190.5 billion, increasing U.S. GDP by as much as $285.7 billion, adding up to 2.25 million U.S. jobs over the next 18-to-24 months, and reducing the federal budget deficit by up to $857 billion over 10 years. This change to the current account balance would also help workers in China and other Asian countries by reducing inflationary overheating and increasing workers’ purchasing power.  Revaluation is a “win-win” for the global economy.

As an advocate for education policies to help children living in poverty narrow the achievement gap, I, like many others, tend to think of the Bronx, Newark, and East St. Louis as epicenters of stubborn rich-poor and white-Black achievement gaps. But the Great Recession has put millions of children living in suburbs and even in the bucolic “heartland” of America in dire educational straits. And as a recent New Yorker article illustrates, this reality has been festering for a decade, with origins long before the housing and economic busts of the past few years.

So-called education reformers and the “experts” on whom they rely point to unions, lazy teachers, and uninspired principals as the culprits. Yet, 50 years of rigorous evidence make clear the vicious impact of poverty and its various familial stresses on student well-being. This body of research is backed in real time by the inability of No Child Left Behind, Race to the Top, and other policies focused on standards-and-accountability measures to substantially narrow the gaps.

George Packer’s assertion that since September 11, “the country’s problems were left to rot” is all-too clearly played out in Mount Airy, N.C., the town that inspired Andy Griffith’s Mayberry. This American small town is indeed, Packer says, typical, but not in any ideal way. Rather, Surry County’s job losses have spread since 9/11 from former textile workers to veterans newly back from multiple tours in Iraq and Afghanistan. Packer concludes ominously that “You were your kids’ hero when you went, but three years later, when you might be losing your home or you’re impoverished, you might not be your kids’ hero anymore.” Long-term unemployment, unstable housing, insufficient food and stressed-out home environments also mean that you won’t be the same parent or teacher anymore. Mayberry, welcome to the Bronx.

Over at the American Enterprise Institute blog, James Pethokoukis responds to my recent paper, Regulatory uncertainty: A phony explanation for our jobs problem, and blog post. I presented evidence that trends in investment, private-sector job growth, unemployment, and work hours were not inferior in this recovery compared to other recent job-challenged recoveries. That is, I noted that this recovery fares well relative to the recoveries under George W. Bush and George H. W. Bush. If you look at what employers are doing rather than what trade associations are saying, you would see that uncertainty about regulations and taxation has not impeded job growth. What we are seeing is what you expect given the slow growth in GDP.

What was especially curious to me is that Pethokoukis has no counter-argument or data other than, “But go ahead and contrast the Obama recovery, instead, to the Reagan recovery where private sector jobs grew 9.9 percent during its first two years.” Really, that’s it. The whole evidence that uncertainty is holding back jobs is that job growth in the Reagan recovery was a “V” recovery. Actually, the first two years of the recovery starting in Nov. 1982 was 9.4 percent, but what’s 0.5 percent job growth between friends? How does 7.2 percent private-sector job growth in the Gerald Ford-Jimmy Carter recovery fit into his story?

Pethokoukis is scrupulous enough to note that I do provide a good reason for the better job-performance in the Ronald Reagan recovery – that recession began with the short-term policy rates controlled by the Federal Reserve at 19 percent! There was plenty of room to use conventional monetary policy to get the economy moving. This time, the economy entered recession with these rates just over 4 percent. Oh, and the fact that this recession was caused by a financial crisis – something that research has shown again and again produces much slower recoveries.

Anyway, this just seems to confirm to me that there is no “there there” in the economic case that uncertainty about regulation and taxation is holding back job growth. I looked for any analysis that those articulating this view could point to and did not find any. I guess they do not have any over there at AEI.

Presidential candidate Herman Cain has made quite a splash with his “999” plan, but the catchiness of the proposal’s branding belies a subtle attack on low- and middle-income working families (and a not-so-subtle windfall for financiers and businesses).

Along with efficiency, the core principal behind a progressive tax code is one of equity—that the distribution of the nation’s tax liability should take into account one’s ability to pay. In other words, Americans with higher income should pay a higher share of their income in taxes than those with lower income. Mr. Cain’s plan would radically jettison this principle of equity along with the rest of the code.

Mr. Cain advocates a 9 percent tax on each of earned income, corporate income, and consumption. This would entail two changes: (1) a drastic cut in corporate and individual income taxes for high-earners, and (2) an increase in income and consumption (sales) taxes for low- and some middle-income households. Additionally, the proposal would eliminate all taxes on capital gains, dividends, foreign profits, and large estates and gifts (objectively the most progressive federal tax)—again a boon to the highest-income and/or wealthiest Americans. In a second bait-and-switch, the diminished taxes on earned income and corporate income would eventually be swapped for even higher taxes on consumption (the so-called “fair tax”).

Indeed Mr. Cain’s plan is just about diametrically opposed to Warren Buffett’s plea to stop coddling multi-millionaires and billionaires, many of whom pay lower effective tax rates than middle-class households because of the preferential tax treatment of investment income. It is hard to fathom a hedge fund manager paying a higher effective tax rate than a secretary under Mr. Cain’s plan; financiers would be able to receive all of their compensation as tax-free investment income and taxable consumption presumably accounts for a smaller share of income (certainly a smaller share than that of Mr. Buffett’s secretary). The windfall from eliminating investment income taxes would accrue to the top 1 percent of earners, who will pay over 70 percent of all capital gains and dividends taxes in 2011.

In recent congressional testimony, Syracuse University professor and tax expert Len Burman stated that “the biggest loophole is the lower rate on capital gains” and that “tax breaks on capital gains undermine the progressivity of the tax system.” Rebuilding an equitable tax code necessitates curtailing, rather than exacerbating, the preferential tax treatment of investment income over work income. That does not mean equalizing taxes on investment and work income at zero rates while amplifying a flat consumption tax, which would be even more regressive.

Mr. Cain’s tax proposal only makes sense if you believe that the problem with the current tax code is that low- and middle-income households have it way too good, and they should give more of their income to those poor Americans making more than half a million dollars a year.

On Monday, The New York Times released a nice graphic showing the changing trends in state unemployment rates immediately before the recession, immediately after the recession, and today. As my colleague Doug Hall explains in a recent blog post, the graphic highlights the lack of significant job growth for the country as a whole, and the exceptionally dire conditions for 11 states in particular. Eight of these 11 states have actually experienced an increase in their unemployment rate since June 2009: Alabama, California, Florida, Georgia, Illinois, North Carolina, and South Carolina.

To get a better understanding of what’s driving the uptick in unemployment for these eight states, I broke down the changes in total employment by major industry category from June 2009 to Aug. 2011. If you calculate the number of jobs lost in each major industry as a percentage of the total jobs lost for each state—excluding all industries that gained jobs—the numbers are very telling. In five of the eight states (California, Georgia, Illinois, North Carolina, and South Carolina), the largest proportion of jobs lost was in the government sector. In both California and South Carolina, more than half the jobs lost were in government. Alabama, Florida, and Nevada saw their largest job losses in construction, which might be expected given the enormous losses those three states took when the housing bubble burst.

States nationwide have had to deal with severe budget shortfalls, and many state legislatures have turned to massive budget cuts as the cure-all. With so many states struggling to regain jobs lost during the recession, adding public sector workers to the ranks of the unemployed is clearly a step in the wrong direction. Moreover, addressing budget shortfalls through budgets cuts not only decimates the public sector workforce, but it also devastates the private sector. (My colleague Ethan Pollack’s research shows that, “for every dollar of budget cuts, over half of the jobs and economic activity will be lost in the private sector, for a number of reasons,” including the fact that a significant portion of state spending is  on goods and services supplied by the private sector.)

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The Kaiser Family Foundation’s annual survey of employer health-insurance was released yesterday, and it showed a 9 percent increase in premiums for employer-sponsored premiums.

The average family plan now costs over $15,000. Employees kick in just over $4,000 directly, but most economists will tell you that they actually “pay” the remainder in the form of wages that are lower than they would be if this insurance was not provided by their employer. This is, as everybody knows, a staggering cost for most American families. And, while year-to-year changes in premiums may differ from underlying health care costs, the enormous increases in health spending in recent decades can pretty much be explained by these underlying medical costs – so if we want premiums to stop rising so fast, we better do something about these underlying costs.

One would be remiss to not point out that America’s largest single-payer insurance system (Medicare) actually has done a much better job of controlling health care costs than the private system that provides employer-sponsored insurance. Take the most recent estimates comparing per beneficiary costs in Medicare to costs of comparable benefits in private plans (table 13 here). If these private costs had matched the slower growth rate of Medicare over the past three decades, that $15,000 family plan would cost just over $10,000 today. And most experts think that there’s plenty to be done to even restrain Medicare’s costs. In short, there seems to be a lot of room to figure out how to reduce cost-growth – and very good reasons (about $5,000 worth, in the case of family premiums) to do it.

But, since the point of this post is more raw speculation, it’s also useful to think about the role of rising economic inequality in driving up health care costs. A recent paper in Health Affairs (gated, sorry) by Miriam J. Laugesen and Sherry A. Glied demonstrates that physician salaries (particularly specialists – orthopedists, in their study) are significantly higher in the United States than compared to even those in our rich industrial peers. The authors make the smart point that, “One explanation for the higher incomes of U.S. physicians may lie in the broader U.S. income structure. The share of income received by people in the top 1 percent of the U.S. income distribution far exceeds the corresponding share in the comparison countries.”

The intuition is simply that prospective doctors need to earn more as doctors in the United States in order to keep them from pursuing high-salary careers in finance, law, etc. The broader point is that if doctors are going to be in the upper reaches of the income distribution (which seems fine – they are well-trained, accomplished people), and if policies are pursued that drive vastly disproportional growth in these upper reaches, then this means my insurance premiums are going to get expensive; one person’s income is another person’s cost. This point applies to doctors’ salaries as well as to many other aspects of the medical-industrial complex (pharmaceutical companies, device-makers) and it’s one that we should think about right away when we read the Kaiser report.

The New York Times recently provided a perfect illustration of the dynamics behind the declining marriage rate in its story on Reading, Pa., the city with the highest poverty rate in the country in 2010. It featured the story of Ashley Kelleher, a waitress at an International House of Pancakes, who has been supporting her three children as well as the father of two of them.

“For the past five years, it has been me paying the bills,” she said. Kelleher said she wants to get married someday, but only to a partner who is financially stable. The man she is with now, however, is not.

Social conservatives have looked everywhere for explanations for the decline of heterosexual marriage, everywhere but the American economy. But the research on this issue clearly shows that financially insecure men are less likely to marry.

We can see the relationship between men’s earnings and marriage in the figure below. The figure shows “less money, less marriage,” to quote the authors of a recent report from Pew Social and Demographic Trends. Although the Pew research shows “no significant differences by education or income in the desire to get married,” the less money a male has, the less likely he will actually marry.

For the past 30 years, more and more of America’s income and wealth has been concentrated among America’s rich, leaving less and less for everyone else. With the decline of manufacturing and the decline of unions, men have been particularly hard hit. Half of male workers have experienced stagnating or declining wages over the last 30 years. For Latino and African American men, it is more than half. As a larger share of men are pushed down the earnings scale, their likelihood of marrying declines.

The decline of marriage is a collateral consequence of the growing economic inequality over the last 30 years. If social conservatives want more people to marry, they will need to insist on less economic inequality.

See Reducing poverty and increasing marriage rates among Latinos and African Americans for more on this issue.

Today, the Kaiser Family Foundation and Health Research & Education Trust released their Employer Health Benefits 2011 Annual Survey. It’s full of great charts and graphics about the state of employer-sponsored health insurance premiums, costs to workers, types of plans, and much more.

The top line numbers alone are fairly shocking. Average family health insurance premiums rose from $13,770 in 2010 to $15,073 in 2011, up 9 percent. In 2010, total family premiums had only risen 3 percent, but the leading story then was about how employees were paying an increasing share of the total premium, on average 30 percent for family plans.

To put these numbers in perspective, Kaiser/HRET compares both total health insurance premiums and the portion of premiums paid for by workers to workers’ earnings and overall inflation from 1999 to 2011. Their figure, displayed below, illustrates how premiums have risen over three times faster than workers’ earnings and four times faster than overall inflation.

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Given the high cost of employer-sponsored health insurance, it comes as no surprise that the share of non-elderly Americans with such coverage fell from 2000 to 2010, as shown in the Census data released earlier this month. The combination of a bad economy, general lack of bargaining power among workers, and steeply rising health insurance prices in 2011, as shown in today’s release, will surely lead to lower coverage rates, when the Census data on health insurance coverage comes out next year.