A Minimum Wage Increase Will Not Kill Jobs
As the nation grapples with a jobs crisis and unemployment hovers near 9 percent, it is easy for policy makers to forget the plight of those who work but earn very little. There are about 4.4 million workers earning the minimum wage or less, according to government statistics. This amounts to about 6 percent of workers paid by the hour. They need a raise.
Today, a worker laboring 40 hours a week nonstop throughout the year for the federal minimum wage could barely keep a family of two above the federal poverty line. Though it rose to $7.25 an hour in 2009, up $2.10 since 2006, the minimum wage is still lower than it was 30 years ago, after accounting for inflation. It amounts to about $1.50 an hour less, in today’s money, than it did in 1968, when Martin Luther King Jr. and Robert Kennedy were killed, Richard Nixon was elected president and the economy was less than a third of its present size.
The minimum wage has many opponents among big business and Congressional Republicans. In Nevada, the Las Vegas Chamber of Commerce is pushing to repeal the state’s minimum wage, a whopping $8.25 an hour. Representative Darrell Issa, the California Republican, has proposed a bill in the House that would effectively cut the minimum wage in states where it was higher than the federal threshold by allowing employers to count health benefits toward wages.
Opponents argue that raising the minimum wage would inevitably lead to higher unemployment, prompting companies to cut jobs and decamp to cheaper labor markets. It is particularly bad, the argument goes, to raise it in a weak labor market. Yet with unemployment likely to remain painfully high for years to come, this argument amounts to a promise that the working poor will remain poor for a long time.
What’s more, we know now that the argument is grossly overstated. Over the past 15 years, states and cities around the country have rushed ahead of the federal government to impose higher minimum wages. Economists analyzing the impact of the increases on jobs have concluded that moderate increases have no discernible impact on joblessness. Employers did not rush off to cheaper labor markets in the suburbs or across state lines for a simple reason: that costs money too.
The most recent research, by John Schmitt and David Rosnick at the Center for Economic and Policy Research, found that San Francisco’s minimum wage jump to $8.50 in 2004 — well above the state minimum of $6.75 — improved low-wage workers’ incomes and did not kill jobs. An even bigger jump in Santa Fe, N.M., the same year — from $5.15 to $8.50 — had a similar effect.
Despite evidence to the contrary, businesses and Republicans may keep pushing against the minimum wage — using the jobs crisis now to clinch their argument. They should be disregarded, because their argument is wrong and the United States is too rich to tolerate such an underclass.
By: Editorial, The New York Times, March 25, 2011
Spending Cuts, Jobs, Growth: The GOP Austerity Delusion
Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.
What do these events have in common? They’re all evidence that slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong.
It’s too bad, then, that these days you’re not considered serious in Washington unless you profess allegiance to the same doctrine that’s failing so dismally in Europe.
It was not always thus. Two years ago, faced with soaring unemployment and large budget deficits — both the consequences of a severe financial crisis — most advanced-country leaders seemingly understood that the problems had to be tackled in sequence, with an immediate focus on creating jobs combined with a long-run strategy of deficit reduction.
Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms: any savings achieved at the front end are partly offset by lower revenue, as the economy shrinks.
So jobs now, deficits later was and is the right strategy. Unfortunately, it’s a strategy that has been abandoned in the face of phantom risks and delusional hopes. On one side, we’re constantly told that if we don’t slash spending immediately we’ll end up just like Greece, unable to borrow except at exorbitant interest rates. On the other, we’re told not to worry about the impact of spending cuts on jobs because fiscal austerity will actually create jobs by raising confidence.
How’s that story working out so far?
Self-styled deficit hawks have been crying wolf over U.S. interest rates more or less continuously since the financial crisis began to ease, taking every uptick in rates as a sign that markets were turning on America. But the truth is that rates have fluctuated, not with debt fears, but with rising and falling hope for economic recovery. And with full recovery still seeming very distant, rates are lower now than they were two years ago.
But couldn’t America still end up like Greece? Yes, of course. If investors decide that we’re a banana republic whose politicians can’t or won’t come to grips with long-term problems, they will indeed stop buying our debt. But that’s not a prospect that hinges, one way or another, on whether we punish ourselves with short-run spending cuts.
Just ask the Irish, whose government — having taken on an unsustainable debt burden by trying to bail out runaway banks — tried to reassure markets by imposing savage austerity measures on ordinary citizens. The same people urging spending cuts on America cheered. “Ireland offers an admirable lesson in fiscal responsibility,” declared Alan Reynolds of the Cato Institute, who said that the spending cuts had removed fears over Irish solvency and predicted rapid economic recovery.
That was in June 2009. Since then, the interest rate on Irish debt has doubled; Ireland’s unemployment rate now stands at 13.5 percent.
And then there’s the British experience. Like America, Britain is still perceived as solvent by financial markets, giving it room to pursue a strategy of jobs first, deficits later. But the government of Prime Minister David Cameron chose instead to move to immediate, unforced austerity, in the belief that private spending would more than make up for the government’s pullback. As I like to put it, the Cameron plan was based on belief that the confidence fairy would make everything all right.
But she hasn’t: British growth has stalled, and the government has marked up its deficit projections as a result.
Which brings me back to what passes for budget debate in Washington these days.
A serious fiscal plan for America would address the long-run drivers of spending, above all health care costs, and it would almost certainly include some kind of tax increase. But we’re not serious: any talk of using Medicare funds effectively is met with shrieks of “death panels,” and the official G.O.P. position — barely challenged by Democrats — appears to be that nobody should ever pay higher taxes. Instead, all the talk is about short-run spending cuts.
In short, we have a political climate in which self-styled deficit hawks want to punish the unemployed even as they oppose any action that would address our long-run budget problems. And here’s what we know from experience abroad: The confidence fairy won’t save us from the consequences of our folly.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 24, 2011
Stop The World, I Want To Get Off: Boehner Agonistes
Suzy Khimm on the dilemma facing House Speaker John Boehner:
The House passed yet another short-term extension of the budget on Tuesday. But John Boehner faced a revolt by 54 Republicans who voted against the bill for not going far enough to slash spending, effectively forcing the GOP Speaker to rely on Democratic votes for the stop-gap measure to pass. As Talking Points Memo’s Brian Beutler explains, the vote now puts Boehner between a rock and a hard place: either he makes concessions to Democrats to pass a final budget, risking provoking greater fury from the tea party right, or he gives in to the GOP’s right flank—risking a government shutdown, as the Democratic Senate is unlikely to pass any bill that guts spending to satisfy hard-line conservatives.
I think Boehner’s problem here is pretty obvious, so there’s no point in belaboring it. The more interesting question is: which way does he jump?
My guess is that he sides with the tea partiers and forces a government shutdown. I don’t have any special insight here, just a feeling that, in the end, the hardcore right holds the whip hand in the Republican Party these days. If this is correct, though, it leads to a second question: how does this end? Obviously Republicans can’t keep the government shut down forever, and eventually this means that Obama will win some kind of compromise and it will get passed by a coalition of Democrats and moderate Republicans. The tea partiers will lose.
Given that this almost has to be the case, wouldn’t it make more sense for Boehner to compromise in the first place and avoid the humiliation of giving in down the road? In a rational world, sure. But in the tea party universe, he can’t. The forces working here will force Boehner into the worst of both worlds: he won’t assert control over the tea party faction from the start, which is bad, and then he’ll end up caving in to Democrats a few weeks or months down the road, which is worse.
But maybe I’m missing something here. Is there some other scenario for Boehner that works out better for him?
By: Kevin Drum, Mother Jones, March 16, 2011
Republican Budget Cuts Will Come Back to Bite Them
Something about the Republican dance with populism these days reminds me of one of those classic Twilight Zone episodes: Aliens come down to earth. They want to help us! (They even have a book called To Serve Man!) Wait a minute … they want to eat us! (It’s a cookbook.) From there things take a decidedly downward turn.
One suspects that Republicans may be in for a similarly demoralizing experience. Here’s why:
When NPR asked Sen. Jim DeMint this week why Republicans were pressing to reduce Social Security benefits (a subject that had long been considered off limits for politicians interested in re-election), he answered, “It is politically dangerous, but I think the mood of the country is different than it has been [at] any time in my lifetime.” The “mood” he’s talking about is the so-called “new populism,” the voter anger expressed everywhere from Tea Party rallies to voting booths in 2010.
When you think of traditional populism, it evokes images of regular people rising up against a remote, usually corporate, elite that’s run roughshod over their rights. Farmers and working people taking on runaway industrialists and robber barons. Traditionally, Democrats have been most receptive to these kinds of appeals. In response, they’ve pushed government to enact programs aimed at protecting those most vulnerable to the predations of more powerful interests.
For the new populists, government is the remote elite. Instead of unsafe working conditions or unfair lending practices, they’re protesting the ills of government spending and overreach, the wasting of taxpayer dollars. And if their efforts undo the kinds of programs that a more traditional brand of populism might embrace—those aimed at helping the less advantaged make their way—so be it. It’s populism Republican style. And Republicans look like they’re going to ride it for all its worth.
But what happens when you start cutting programs that are in and of themselves something of a check on potential populist anger? That’s one way to look at government programs: There’s a need that’s not being addressed, and rather than let it ferment, government, however clumsily, tries to fill the gap. Sometimes the proposed gap filler is ridiculous (Rep. Dennis Kucinich’s “Department of Peace” springs to mind). Other times, it becomes part of the very fabric of our country.
Take public schooling. Public schools reflect a societal judgment that children should have a chance to succeed without regards to wealth or socioeconomic background. To help get them there, we don’t give every kid a million dollars and say “have at it,” we offer them a tuition-free classroom with a curriculum designed to put them on an equal footing with everyone else when they enter the workforce. What they do from there is up to them.
It doesn’t always work out, of course. Some schools are better than others. So are some teachers. But wherever our various debates about education reform end up, public schools reflect a deeply held American value: that there are some public goods (like an educated workforce) that we, as a society, believe are worth individual (taxpayer) costs. That seems to have become lost in the current debate.
Take another look at what’s underway in Wisconsin. A centerpiece of Gov. Scott Walker’s budget is a $1 billion cut in education funding. That’s a big number that may sound appealing to people worked up about government spending today, but in September when they send their kids to schools with classroom sizes twice as big as a year before, they may begin to remember why they thought it was a good idea to fund education in the first place. Presto! New populists transformed into traditional populists. Only now their target has shifted from Democrats to Republicans. And you can imagine the same phenomenon playing out across a whole host of issues, from Social Security to shared revenue.
Republicans may have momentum on their side at the moment, but there’s a long way to go in the various budget battles playing out across the country. To be sure, Democrats can overplay their hand, too, by opposing any kind of spending restraint.
But one way or the other, populism is sure to play a role in determining how it all turns out. Which strain of populism wins? For Republicans, the answer is kind of like the difference between To Serve Man (they’re helping us!) and To Serve Man (oh wait, they’re eating us). And they had better hope they’ve got it right.
By: Anson Kaye, U.S. News and World Report, March 17, 2011
Sen. Snowe Puts Mainers Out In The Cold To Win Favor From Tea Party
Sen. Olympia Snowe, R-Maine, acted in the best interests of her party's far right, not her constituents, when she voted last week in favor of the federal budget bill. (2009 AP file)
Sen. Olympia Snowe has apparently decided that it is better to bow to political pressure from the tea party movement than to stand up for the interests of Maine.
How else to explain her vote last week for a federal spending measure that would harm Maine’s economy while punishing thousands of Mainers, including seniors, veterans, preschool children, college students and families struggling to keep their oil furnace running?
It turns out that the tea party does not have to defeat U.S. senators to claim their seat. It just has to threaten them. If what Snowe voted for last week becomes law, 700,000 jobs are likely to be lost in Maine and across the country.
This is not according to a Democratic think-tank, but an economic adviser to the presidential campaign of Sen. John McCain, Mark Zandi.
NO TO HEAT ASSISTANCE
Snowe voted to throw tens of thousands of Maine families off of a lifeline that enables them to get through a Maine winter. She voted to cut the emergency energy assistance program — LIHEAP — by 66 percent, literally tossing Maine families out of the program and into the cold.
She voted to undermine services to Maine seniors who benefit from the Medicare program. Payments benefitting seniors who participate in the Medicare Advantage program, for instance, would be suspended, according to Secretary of Health and Human Services Kathleen Sebelius. And Snowe’s vote would create “significant disruption” to providers, suppliers and seniors who use Medicare.
Snowe voted to cut 3,500 positions from the Social Security administration, guaranteeing extended delays in the distribution of basic retirement claims and disability payments. She voted to eliminate 10,000 supportive housing vouchers for homeless veterans.
Sen. Snowe voted to knock 218,000 kids out of the Head Start program and force 16,000 classrooms to close while cutting 1.7 million college students from the Pell Grant program — their lifeline to a college education.
From the seat once held by the environmental champion Sen. Edmund Muskie, Snowe voted to cut land and water conservation, energy efficiency and renewable energy projects, and one-third of the entire Environmental Protection Agency’s budget.
Make no mistake — this was not a vote about doing the difficult but right thing to confront the federal budget deficit.
A sober debate about reining in long-term federal deficits begins by recognizing that the first step to fiscal health is an economy that produces decent-paying jobs.
Jobs fill pockets with money to spend on goods and services that in turn create more jobs. These jobs produce revenue that reduces the federal deficit. You are not serious about fueling a fragile economic recovery when you slash hundreds of thousands of jobs with one vote.
You are not serious about balancing the federal deficit when you support maintaining the Bush tax cuts for the wealthiest of Americans at a price of $2.5 trillion over 10 years — exactly the amount that congressional Republicans want to slash and burn from the federal budget over this same time period.
You are not serious about addressing the federal budget deficit when you repeatedly vote to borrow hundreds of billions of dollars for the war in Afghanistan.
The wars in Iraq and Afghanistan alone account for 23 percent of the federal budget deficit since 2003.
STATE CUTS HURT TOO
The Portland Press Herald’s Bill Nemitz quoted a Portland middle school librarian who drove to the State House in Augusta last week to testify against similar tea party-driven cuts to Maine’s state budget.
Kelley McDaniel described the cuts this way: “It’s not economically sound. It’s not morally sound. And I think you know that. I would be embarrassed to support something so ludicrous — taking from the poor to give to the rich. Maybe you are testing us, checking to see if we, your constituents, are really paying attention, really listening. I hope that’s what’s going on, because the alternative involves me losing faith in representative government, in democracy, and in you, the elected officials.”
Our fragile economic recovery, our kids, college students, seniors, veterans, environment and our health all took a hit on the floor of the U.S. Senate from a senator who was once described as independent.
Sen. Snowe might think that she made a prudent political calculation by bowing to the radical right of her party and placing her political interests ahead of the interests of her constituents. But she needs to know that Mainers are paying attention. And that the seat she is holding is Maine’s U.S. Senate seat. Not the tea party’s.
By: Tom Andrews, Former Maine U.S. Congressman, The Portland Press Herald, March 15, 2011
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