“Better Pay Now”: Let’s Give It A Try For The Person On The Other Side Of The Cash Register
’Tis the season to be jolly — or, at any rate, to spend a lot of time in shopping malls. It is also, traditionally, a time to reflect on the plight of those less fortunate than oneself — for example, the person on the other side of that cash register.
The last few decades have been tough for many American workers, but especially hard on those employed in retail trade — a category that includes both the sales clerks at your local Walmart and the staff at your local McDonald’s. Despite the lingering effects of the financial crisis, America is a much richer country than it was 40 years ago. But the inflation-adjusted wages of nonsupervisory workers in retail trade — who weren’t particularly well paid to begin with — have fallen almost 30 percent since 1973.
So can anything be done to help these workers, many of whom depend on food stamps — if they can get them — to feed their families, and who depend on Medicaid — again, if they can get it — to provide essential health care? Yes. We can preserve and expand food stamps, not slash the program the way Republicans want. We can make health reform work, despite right-wing efforts to undermine the program.
And we can raise the minimum wage.
First, a few facts. Although the national minimum wage was raised a few years ago, it’s still very low by historical standards, having consistently lagged behind both inflation and average wage levels. Who gets paid this low minimum? By and large, it’s the man or woman behind the cash register: almost 60 percent of U.S. minimum-wage workers are in either food service or sales. This means, by the way, that one argument often invoked against any attempt to raise wages — the threat of foreign competition — won’t wash here: Americans won’t drive to China to pick up their burgers and fries.
Still, even if international competition isn’t an issue, can we really help workers simply by legislating a higher wage? Doesn’t that violate the law of supply and demand? Won’t the market gods smite us with their invisible hand? The answer is that we have a lot of evidence on what happens when you raise the minimum wage. And the evidence is overwhelmingly positive: hiking the minimum wage has little or no adverse effect on employment, while significantly increasing workers’ earnings.
It’s important to understand how good this evidence is. Normally, economic analysis is handicapped by the absence of controlled experiments. For example, we can look at what happened to the U.S. economy after the Obama stimulus went into effect, but we can’t observe an alternative universe in which there was no stimulus, and compare the results.
When it comes to the minimum wage, however, we have a number of cases in which a state raised its own minimum wage while a neighboring state did not. If there were anything to the notion that minimum wage increases have big negative effects on employment, that result should show up in state-to-state comparisons. It doesn’t.
So a minimum-wage increase would help low-paid workers, with few adverse side effects. And we’re talking about a lot of people. Early this year the Economic Policy Institute estimated that an increase in the national minimum wage to $10.10 from its current $7.25 would benefit 30 million workers. Most would benefit directly, because they are currently earning less than $10.10 an hour, but others would benefit indirectly, because their pay is in effect pegged to the minimum — for example, fast-food store managers who are paid slightly (but only slightly) more than the workers they manage.
Now, many economists have a visceral dislike of anything that sounds like price-fixing, even if the evidence strongly indicates that it would have positive effects. Some of these skeptics oppose doing anything to help low-wage workers. Others argue that we should subsidize, not regulate — in particular, that we should expand the Earned Income Tax Credit (E.I.T.C.), an existing program that does indeed provide significant aid to low-income working families. And for the record, I’m all for an expanded E.I.T.C.
But there are, it turns out, good technical reasons to regard the minimum wage and the E.I.T.C. as complements — mutually supportive policies, not substitutes. Both should be increased. Unfortunately, given the political realities, there is no chance whatsoever that a bill increasing aid to the working poor would pass Congress.
An increase in the minimum wage, on the other hand, just might happen, thanks to overwhelming public support. This support doesn’t come just from Democrats or even independents; strong majorities of Republicans (57 percent) and self-identified conservatives (59 percent) favor an increase.
In short, raising the minimum wage would help many Americans, and might actually be politically possible. Let’s give it a try.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 1, 2013
“Another Media Black Eye”: John Boehner Inadvertently Exposes Sloppy Media Coverage Of Obamacare Costs
House Speaker John Boehner loves to tell stories about people getting a raw deal from Obamacare. This week, he decided to tell one about himself.
As you may recall, Obamacare treats members of Congress and their staff differently from other working Americans. Thanks to a provision added to the law by Charles Grassley, the Republican Senator from Iowa, certain Capitol Hill workers can’t get insurance like other federal employees—i.e., via the Federal Employees Health Benefits Plan. Instead, they must get coverage through one of the new Obamacare exchanges. For many, that means enrolling through the District of Columbia exchange.
This week, Boehner did just that. But, as his advisers later explained to media outlets, the Speaker had trouble. The website had technical problems, they said, and it took hours for Boehner to complete process. When he finally found a policy, he discovered it would cost a lot more. Politico got the full story, including a quote from Boehner spokesman Brendan Buck. “The Boehners are fortunate enough to be able to afford higher costs. But many Americans seeing their costs go up are not. It’s because of them that this law needs to go.” Soon it was all over social media.
But this story turns out to be a lot more complicated than either Boehner or the initial press accounts suggested. In fact, it’s an almost perfect example of how media coverage of Obamacare has failed to provide scrutiny, context or a sense of scale. For one thing, the circumstances of Boehner’s effort to use the D.C. website are a bit murky. Boehner had said he couldn’t get through to anybody on the Exchange’s help line. A spokesman for the exchange challenged that account, telling local NBC reporter Scott MacFarlane that a representative called Boehner’s office, only to be put on hold while patriotic music played in the background. After 35 minutes, according to this account, the representative hung up. It’s impossible to know which account is correct. But if the D.C. Exchange version is right, then, as Steve Benen observes, “Boehner complained about how long the process took, but when he got a call to complete the enrollment process, the Speaker kept the exchange rep on hold for over half an hour.”
In any event, the real issue here is what Boehner will pay for insurance next year—and what, if anything, that says about the law as a whole. It’s true that Boehner’s 2014 premiums will be higher than his 2013 premiums have been. But that’s because of a set of relatively unique factors. They’re a bit hard to explain: Michael Hiltzik of the Los Angeles Times has the full story if you want it. The simplistic version is that Boehner is paying more because he works on Capitol Hill and, at 64, he is relatively old. Unless you, too, work on Capitol Hill and are relatively old, his experience tells you very little about what will happen to you. Among other things, most large employers aren’t dropping coverage and sending their full-time workers into the exchanges. Only the U.S. Congress is—and that’s because of Grassley’s screwy amendment, which was, by all accounts, designed to embarrass the Democrats rather than become law.
Of course, the same factors that will mean higher premiums for older Capitol Hill workers will mean lower premiums for younger ones. An example of somebody benefitting from this dynamic is Drew Hammill, spokesman for House Democratic Leader Nancy Pelosi. Taking into account the employer contribution, he’ll be paying $88 a month for his insurance next year. This year he has paid $186. His story appeared in a Wall Street Journal article about the different heath insurance experiences for different workers on Capitol Hill. The article, by Louise Radofsky, was balanced and fair. It was also the exception. There have been plenty of stories focusing on the older workers paying more, but almost none about younger workers paying less. You could make a case for focusing on the former more heavily: Hardship is bigger news than unexpected good luck. But by such a lopsided margin? That’s hard to justify.
And that pattern, unfortunately, is one we’ve seen over and over in this debate. People giving up their current plans get tons of attention. People getting new coverage don’t. Those Americans paying higher premiums next year have been all over the media. Those Americans paying lower premiums haven’t. There are exceptions. In the L.A. Times, Hiltzik had a terrific article Tuesday about Californians gaining coverage and saving money through California’s exchange. But those articles are hard to find.
Obamacare is a complicated story to tell, with good news and bad news and plenty in between. The media should cover all of it. But for the last few weeks it has mostly told one side of the story—the side that Boehner and his allies want you to hear.
By: Jonathan Cohn, The New Republic, November 26, 2013
“Taking On Too Big To Fail”: Financial Reform Is About To Catch A Second Wind And Elizabeth Warren Is Ready To Ride It
Financial reformers seeking new rules beyond the range of the Dodd-Frank law haven’t had much to cheer about this year. The chances of Congress passing new regulations—OK, passing anything—look bleak, and the Obama Administration wants to simply finish implementing the last set of reforms. But reformers are playing a longer game, biding their time until the conditions are ripe for a dam burst. That could happen sooner than you think. High-profile champions for reform are gradually bending regulators to their will, and a pile-up of big bank abuses have eroded Wall Street’s reputation in Washington. Most importantly, a new report detailing the extraordinary largesse granted banks during the financial crisis, and questioning whether Dodd-Frank would prevent a rerun, could set off a fresh spark.
An unlikely bipartisan duo, Senators Sherrod Brown and David Vitter, have tried all year to focus attention in Congress on ending “too big to fail,” the perception that large financial institutions will inevitably receive government bailouts if they run into trouble. This allows banks to take on outsized risks with implicit government support, and receive a de facto subsidy, with lower borrowing costs than their smaller competitors, because investors believe a backstopped institution will always pay them back. Brown and Vitter introduced legislation earlier this year to significantly raise capital requirements, which they say will reduce reliance on bailouts by forcing banks to pay for their own losses.
Brown and Vitter commissioned a study from the Government Accountability Office (GAO) to quantify the public subsidy bestowed on banks, which could give them powerful evidence to rally support for their legislation. GAO released the first part of the study last week. It mostly looks backward at the “extraordinary support” given to banks from 2007-2009 to weather the financial crisis, and whether the Dodd-Frank financial reform law ended this tendency toward bailouts. The more controversial part of the study, on how much the government subsidizes big banks considered too big to fail, isn’t due until next year.
But the report still contains some explosive material. It details how banks received trillions of dollars in capital injections, emergency lending and debt guarantees during the financial crisis, offered with more favorable terms than they could have found in the private market, and secured by junk collateral that non-government lenders would never accept. Some debt guarantees given by government agencies to banks were up to 10 percent cheaper than private alternatives, saving the banks billions of dollars. Banks with over $50 billion in assets used the crisis-era programs nearly twice as much as their smaller counterparts. Outside of the broadly available emergency programs, JPMorgan Chase received a $30 billion loan from the New York Federal Reserve (then run by Timothy Geithner) for its purchase of Bear Stearns, and both Citigroup and Bank of America received special direct assistance of $20 billion each. According to a summary released by Brown and Vitter, those three banks, the U.S.’s largest, would have been insolvent without the government support provided during the crisis. Since the biggest banks are even bigger today (the report states that the nation’s four largest banks are $2 trillion larger than they were in 2007), it’s hard to believe that similar support wouldn’t be granted if needed.
Dodd-Frank’s architects claim the law would prevent future bailouts. At least some of the market is convinced it would; the rating agency Moody’s downgraded the debt of major U.S. banks last week, after determining they would not have the advantage of future government support in a crisis (it’s worth noting that rating agencies receive the majority of their funding through the structured finance deals of these same big banks). But the GAO report concludes that Dodd-Frank “implementation is incomplete and the effectiveness of some provisions remains uncertain.”
The best example of this is the Federal Reserve’s Section 13(3) authority, a primary vehicle for emergency lending during the crisis. Dodd-Frank prevents the Federal Reserve from using section 13(3) to assist an individual institution, restricts even broad-based 13(3) programs from lending to insolvent firms, and adds other requirements and limitations. But the Fed has not written any 13(3) regulations yet, nor has it set any time frames for doing so. GAO recommended that the Fed establish a timeline for drafting 13(3) procedures, and the board accepted that recommendation.
The report comes at an interesting moment. Readers of this magazine may have heard of a certain Massachusetts senator named Elizabeth Warren. She has also taken on too big to fail, as an antecedent to her agenda of building an economy that works for ordinary Americans, rather than using them as giant wealth-extraction machines. And Warren has something Brown and Vitter don’t—a national platform, with the ability to shape and transform the national debate. She has already used this power to provoke incremental changes, mostly because regulators would rather be on her side than in her crosshairs. Nobody is better positioned to put this new set of facts from the GAO to use than the Warren wing of the Democratic Party.
To see this attitude change in real time, simply review the Senate Banking Committee confirmation hearings for Janet Yellen, nominated to take over the chair of the Federal Reserve. In 2009, Ben Bernanke sought confirmation for the same position, and when he was questioned about the Fed’s failures in financial regulation before the crisis, he vociferously defended the institution’s actions. Yellen, right in her opening statement, added financial regulation to the Fed’s core responsibilities, along with full employment and price stability—a huge shift. During questioning from Warren, Yellen agreed that the Board of Governors should reinstate regular principals meetings on financial supervision for the first time in 20 years, instead of relegating the decision-making to the staff level.
By: David Dayen, The New Republic, November 21, 2013
“The Rewards Justify The Risks”: President Obama’s Iran Nuclear Deal Could Be A Major Triumph
International agreements last only so long as their signatories support them. Political forces certainly exist here as well as in Iran that oppose the interim agreement that the United States and the five other nations signed with Iran freezing its nuclear program. Agreements like this always contain risks, but in this instance, the rewards are sufficient to justify the risks.
While negotiating a final agreement, the current deal stops Iran from using its nuclear facilities to make bombs. It allows the International Atomic Energy Commission to conduct rigorous daily inspections. Daryl Kimball, the executive director of the Arms Control Association, says, “The limits on Iran’s nuclear program are, unequivocally, a major success in reining-in Iran’s nuclear potential and an essential stepping stone toward the negotiation of an even more effective, final agreement.”
The agreement also continues a welcome thaw in American relations with Iran. Some hardliners in Congress like to present America as the wounded party in the longstanding quarrel between the two nations, but that is simply not the case. This August, the Central Intelligence Agency finally unclassified documents that revealed its role in the overthrow of Iranian nationalist Mohammed Mossadegh in 1953. That act, and America’s continuing support for the Shah’s dictatorship, figured prominently in the minds of the Iranian revolutionaries who held American diplomats hostage in 1979.
Iran subsequently supported terrorist acts against Americans, but Americans backed Iraq’s Saddam Hussein, who in 1980 began an eight-year war with Iran that cost the Iranians a million lives. The Bush administration also branded Iran, which had aided America in Afghanistan, part of the “axis of evil” and supported groups that sought to overthrow its government.
A thaw between the governments could ease conflicts throughout the Middle East and even South Asia. Iran could be of immense help in negotiating an end to the war in Syria. (Syria is Iran’s Vietnam. It has already spent billions backing Basher al-Assad.) The Rouhani government could aid the United States in Afghanistan and Iraq. It could help suppress al Qaeda and other Sunni terrorist organizations. It could reduce Saudi Arabia’s sway over world oil prices. And it could remove a real, or imagined, threat to Israel. It’s easily forgotten, but Iran was once Israel’s closest ally in the Middle East. The two nations have an affinity as religious outliers in the Sunni Arab Middle East that could be revived if Israel were to finally recognize the rights of Palestinians.
The main opponents of America reaching an agreement were the Israeli and Saudi governments and organizations and politicians in the United States that are close to the rightwing Netanyahu government in Israel. Netanyahu has compared the agreement to the 1938 Munich agreement that allowed the Nazis to gobble up Central Europe. And Illinois Senator Mark Kirk, who, when he ran in 2010, was the largest recipient of so-called pro-Israel money, compared Obama to British Prime Minister Neville Chamberlain who signed the Munich Agreement. During the last month, Kirk and other Senators pressed for even harsher sanctions on Iran, even though the effect of these would have been to undercut any possibility of an agreement with Iran and leave the United States with no option but war to preventing Iran from acquiring a nuclear weapon.
In the weeks before the new agreement was signed, some opponents began to back down. On October 29, after meeting with senior administration officials, leaders of AIPAC, the American Jewish Committee, the Anti-Defamation League, and the Conference of Presidents of Jewish Organizations reportedly agreed not to press a new sanctions bill while the administration was negotiating the interim agreement with Iran. And in the immediate aftermath, several important critics appear to have moderated their stance. Kirk, while belittling of the Iran’s concessions in the agreement as “cosmetic,” now threatens to bring forth sanctions legislation only if “Iran undermines this interim accord or if the dismantlement of Iran’s nuclear infrastructure is not under way by the end of this six-month period.” That even opens the way to a Kirk backed a final agreement.
The Guardian described the Saudis as maintaining a “discreet silence” about the agreement. Only Netanyahu and other members of his administration have continued to denounce the agreement. Netanyahu called the deal an “historic mistake.” “The Iranian regime is committed to the destruction of Israel and Israel has the right and the obligation to defend itself, by itself, against any threat,” Netanyahu said. “As Prime Minister of Israel, I would like to make it clear: Israel will not allow Iran to develop a military nuclear capability.”
Netanyahu’s statement was uncompromising – even setting as a trigger Iran developing a “capability” and not an actual weapon. It also hyped an “existential” Iranian threat that, if it ever existed, only did so during the term of Mahmoud Ahmadinejad, and then only in Ahmadinejad’s fevered rhetoric, which was meant for domestic consumption. The rhetoric, and so, too, is Iran as a major backer of Hamas. But it is unclear whether Netanyahu is really laying the basis for an Israeli military strike, or simply currying favor with Israeli voters. Israel does not appear to have the military ability to knock out Iran’s nuclear program, although it could certainly reap havoc and start another regional war.
Netanyahu and some American critics of the deal with Iran have compared it to the American agreement with North Korea in 2005, in which North Korea promised to give up nuclear weapons in exchange for economic aid. North Korea subsequently violated the agreement. But a more optimistic comparison would be to the Intermediate Nuclear Forces (INF) agreement that Ronald Reagan signed with the Soviets in 1987.
Conservatives denounced Reagan for the pact. National Review called it “Reagan’s suicide pact.” Henry Kissinger charged that it undermined “40 years of NATO.” But, of course, the treaty turned out to be a prelude not only to more comprehensive arms agreements, but to the end of the Cold War. If the United States is lucky – and luck is always a factor in international affairs – the modest deal that the United States and five other nations signed with Iran could like, the Reagan’s INF treaty, be the beginning of something much larger, more important, and more welcome.
By: John B. Judis, The New Republic, November 24, 2013
“From The Party Of No To The Party Of Oops”: How Republican Intransigence Keeps Backfiring
Exasperated with repeated Republican stonewalling of President Obama’s executive and judicial nominees, Senate Democrats on Thursday went nuclear, striking down two centuries of precedent regarding the chamber’s arcane filibuster rules.
By a 52-48 vote, the Senate voted to allow confirmation of federal judge and Cabinet nominees with a simple majority vote. The move did not, however, change the filibuster rules regarding legislation and Supreme Court nominees.
For Republicans, it was the latest defeat to come as a result of the party’s refusal to engage with their Democratic colleagues on even minor issues. The GOP has earned a reputation under Obama as the “party of no” for its intransigence, which in recent months has proven self-defeating more than once.
Take the filibuster.
For a full year, Senate Majority Leader Harry Reid (D-Nev.) threatened the nuclear option to circumvent Republican inaction. Most recently, Republicans blocked three nominees to the powerful U.S. District Court of Appeals, not because of any qualms with the candidates’ credentials, but merely because they didn’t want Obama filling vacancies on an influential court that tilts conservative.
With the GOP refusing to back down, Reid finally dropped the bomb, ensuring Obama’s nominees could get an up-or-down vote — and, as a bonus, handing liberals a procedural reform they’ve long sought.
“The American people believe the Senate is broken,” Reid said on the Senate floor Thursday, “and I believe the American people are right.”
Outraged Republicans vowed retribution, saying they would use the process to stack future courts in their favor once they’re back in control. Except to do that, they would need to first retake the Senate and White House, which may not be so easy by 2016.
In the meantime, Democrats have a little extra muscle to help Obama staff his administration as he sees fit (which, let’s remember, used to be common practice). That could be immensely important, since House Republicans have shown no interest in dealing with the president on anything substantive like immigration reform.
As New York‘s Jonathan Chait detailed more thoroughly here, “Obama has no real legislative agenda that can pass Congress,” so his “second-term agenda runs not through Congress but through his own administrative agencies.”
With the filibuster tweak, Obama can now more readily advance his administrative agenda — and Republicans allowed that to happen by forcing Reid’s hand on the filibuster. At that point, he didn’t have much choice: Had he set the precedent of allowing the minority party to prevent judicial vacancies from being filled, Republicans would only have been encouraged to do it again.
“Eventually this escalation would have become untenable,” wrote Salon’s Brian Beutler, “and somebody would have had to go nuclear.”
That’s the same argument Democrats made during the government shutdown, another instance of GOP obstinacy backfiring spectacularly. Had Democrats and President Obama acceded to the GOP’s hostage-taking, it would have established a precedent that government shutdowns and threats of debt default were the norm for legislative negotiations.
And by letting Republicans dig in, Democrats reaped the political benefits of seeing the GOP’s approval ratings tank.
The same dynamic could soon play out on health care, too.
ObamaCare face-planted out of the gate, and Republicans have rightly criticized the administration’s extensive failings in implementing it. However, the GOP has yet to offer a credible alternative health-care plan. The party’s playbook for winning the PR battle over the law, outlined Thursday by the New York Times, is heavy on strategy but light on substance.
“Rather than get out of Obama’s path of self-destruction and focus energy on creating and promoting a positive, forward-looking health-care agenda” wrote National Journal’s Ron Fournier, “the GOP has chosen to cement its reputation as the obstructionist party.”
Republicans will keep stepping on rakes if they opt merely for “no” instead of “no, but instead.” And with ObamaCare possibly set to make something of a comeback in the coming weeks, the clock is ticking.
By: John Terbush, The Week, November 22, 2013
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