Extraordinary fiscal recovery measures during the COVID-19 pandemic pushed U.S. public debt to levels rivaling its historic highs. Interest rates are significantly higher than they have been in over a decade. Many projections—including near-canonical graphs of debt as a share of gross domestic product (GDP) produced by the Congressional Budget Office—look extremely daunting, with debt ratios skyrocketing over the next few decades. In short, the benefits of measures to reduce budget deficits appear higher than they have in years.

However, without context, these presentations of debt can make the overall fiscal challenge look near-hopeless and create an environment where any measure to reduce debt seems necessary—no matter its other costs.

This post aims to do two things: (1) bring some context to the size of the policy adjustments needed to stabilize the U.S. debt-to-GDP ratio (or just debt ratio); and (2) compare the size of this policy adjustment with plausible efforts to stabilize the U.S. debt ratio using tax increases alone.

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Below, EPI senior economist Elise Gould offers her insights on the jobs report released this morning, which showed 187,000 jobs added in August. Read the full thread here. 

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The minimum wage is a New Deal era policy established initially through the Fair Labor Standards Act of 1938 (FLSA). The original bill set a wage floor, instituted a 44-hour work week, and protected children from prematurely entering the workforce. Since its inception, the FLSA has been amended multiple times, with added exemptions and expansions specifying which groups of workers are covered under different aspects of the law. The latest proposed changes in Congress—the Raise the Wage Act of 2023—would increase the federal minimum wage to $17 per hour.

In light of this new legislation, we take a look back at the 85-year history of the minimum wage, how it differs in states and localities, and how minimum wage laws continue to have implications for racial, gender, and economic justice today.

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Inflation—both overall and core—has been steadily normalizing from its elevated levels of the past two years. Notably, this has happened without any pronounced slowdown in economic growth or any rise in unemployment. In short, the much-discussed “soft landing” seems to be happening. Many have declared this a highly unexpected development that was unforeseen by any economists. This is obviously not true—there have been plenty of us making the case that inflation would indeed likely normalize even without a rise in unemployment.

That said, it has been a highly unusual few years and no economic analyst has called every zig and zag of the inflation debate exactly. Given that this unusual period seems to be ending, it’s a useful time for a retrospective look at predictions I made. This retrospective can be divided into four categories:

• Unambiguously wrong: I predicted a relatively short and narrow burst of inflation, with very little spillover into faster nominal wage growth. Much of this was wrong due to new shocks occurring after this initial prediction, but not all of it.
• Unambiguously right: Higher unemployment was not needed to pull down inflation or even the pace of nominal wage growth.
• Probably wrong: I thought interest rate increases as fast and high as what was done over the past year would have appreciably slowed the economy far more than they have so far.
• Probably right: The role of generic macroeconomic overheating in driving inflation has been far overemphasized. Instead, the evidence is more consistent with a story of extreme shocks causing unexpectedly large ripple effects in the wider economy.
• Totally mixed: What role, if any, did higher interest rates contribute to normalizing inflation?

Below, I’ll say a bit more about each of these.

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The Inflation Reduction Act (IRA) was signed into law a year ago this week. It is widely seen as the crown jewel of the “industrial policy” agenda of the Biden administration. While no piece of legislation is perfect, the full potential of the IRA to deliver a radically better future is often underrated. In this post, we highlight many of the IRA’s huge steps forward and also talk about the unfinished agenda for securing faster, fairer, and greener growth in the U.S. economy.

Put simply, the IRA puts the U.S. on a path where meeting its global climate change commitments is within reach—commitments which would provide a genuine chance at securing a livable planet for future generations if they are kept. At the beginning of August 2022, there was no such path to secure this livable future, but there is now—and that is a mammoth victory.

The IRA was essentially a climate change bill that included extraordinarily important health and tax changes as ride-alongs. If the bill had only included these health and tax policy changes, it would have been eminently worthy of applause. The fact that these changes were essentially side-shows to the IRA’s climate impacts is one clue about how transformative it might turn out to be.

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Economist Larry Summers made waves with highly critical remarks about the Biden administration’s economic policies while attending a Peterson Institute for International Economics event on industrial policy and U.S. foreign policy last month. Although Summers expressed support for the trio of industrial policy bills that the Biden administration has passed—the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act, and the Inflation Reduction Act (IRA)—he strongly criticized the “doctrines” (his word) of the Biden administration.

For now, we’ll set aside the question of whether supporting the administration’s concrete actions but disliking their rhetoric merits this level of blistering criticism. Instead, we’ll point out two things. First, Summers’s description of the aims of these industrial policy bills (and hence the “doctrine” of Bidenomics) is obviously inaccurate. Second, to the degree that the administration really has made an intellectual break with the past (including past Democratic administrations), it’s a welcome and necessary break. This is especially true regarding Summers’s claim that the pre-Trump approach to trade policy is a model that should be restored.

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Below, EPI president Heidi Shierholz shares her insights on the jobs report released this morning, which showed 187,000 jobs added in July. Read the full Twitter thread here. 

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The U.S. Department of the Treasury has released new data on how state and local governments are spending the $350 billion of State and Local Fiscal Recovery Funds (SLFRF) allocated by the American Rescue Plan Act (ARPA), covering expenditures through March 31, 2023. Less than half of the money has been spent: States have spent 45% of the $195 billion they were allocated and local governments have spent 38%, both slight increases from the previous quarter. However, these data do not include most spending decisions made during spring state legislative sessions, which may change the situation somewhat.

Fiscal recovery funds can be used for myriad purposes related to the COVID-19 pandemic and its economic impacts. While the official pandemic state of emergency has come to a close, the economy and public services are still dealing with the negative economic impacts, including a loss of public-sector jobs. We find that the 10 states that have spent the least amount of their fiscal recovery funds have state job vacancies twice as high as the 10 states that have spent the most.

Governments should prioritize rebuilding public services and filling state and local government job vacancies with their remaining funds. Fiscal recovery funds must be obligated (designated for specific uses) by December 31, 2024, and must be spent by December 31, 2026.

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In states across the country, lawmakers are engaged in a coordinated, corporate-backed campaign to weaken child labor protections. One type of protection—minimum ages to serve alcohol in bars and restaurants—has been eroded in seven states since 2021. While lowering the age to serve alcohol may sound benign, it is not. It puts young people at risk of sexual harassment, underage drinking, and other harms.

The restaurant industry is already plagued by labor violations. In fact, it is the industry with the highest incidence of child labor law violations. Laws that lower the alcohol service age will subject more young people, at younger ages, to potentially dangerous working conditions at low wages—all in service of employers’ pursuit of cheap labor.

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